Louisiana Rejects Collectibility Rule in Legal Malpractice Cases

On November 19. 2020, the Louisiana Supreme Court ruled that “proof of collectibility of an underlying judgment is not an element necessary for a plaintiff to establish a claim for legal malpractice, nor can collectibility  be asserted by an attorney as an affirmative defense in a legal malpractice action.” See Elaine Ewing vs. Westport Insurance Corporation, et al. No. 2020-C-00339 (La. Nov. 19, 2020). Further, the court held that evidence of collectibility is not even relevant evidence in a legal malpractice action. In doing so, the court departed from other jurisdictions that have considered the issue.

Elaine Ewing was injured in an automobile accident and retained lawyer Chuck Granger to represent her in a personal injury matter. Granger failed to timely file a petition for damages and the trial court dismissed Ms. Ewing’s suit on an exception of prescription.

Ms. Ewing thereafter filed a legal malpractice action against Granger and his malpractice insurer. In response, Granger sought a partial summary judgment that the “collectibility rule” limited Ewing’s damages to the amount that she would have actually collected from the tortfeasor in the underlying litigation had her claim not prescribed. See Ewing, No. 2020-C-00339 at 4. The defendant in the underlying litigation had testified during his deposition that he would be unable to pay a judgment in excess of the $30,000 policy limit. The district court agreed with the defendant’s argument and limited Ewing’s possible recovery in the legal malpractice matter to $30,000.

The Louisiana Supreme Court reversed and held in a 5-2 decision that collectibility is not relevant to the measure of damages in legal malpractice cases. Ewing, No. 2020-C-00339 at 11. Justice Crain dissented and argued that the court’s decision will create unfair results and bad public policy:

The majority allows the plaintiff to recover a greater amount from the negligent attorney, when the attorney did not cause the plaintiff to lose that amount. This result incentivizes malpractice. Encouraging such claims detrimentally alters insurance rates, increases the cost for attorneys to practice law, and creates a windfall for plaintiffs.

See Ewing, No. 2020-C-00339 at 3 (Crain, J., dissenting).

The State of Louisiana stands alone in the United States in excluding all evidence of collectibility in legal malpractice cases. Most jurisdictions that have considered the issue view collectibility as an essential element of the plaintiff’s legal malpractice case. See Ewing, No 2020-C-00339 at 4. For example, a Florida appellate court recently reduced a legal malpractice verdict from $5,000,000 to $250,000 because the plaintiff failed to prove that the underlying judgment was collectible. See Morgan & Morgan, P.A. v. Pollack, Case No. 2D19-112020 (Fla. Dist. Ct. App. 2 Nov. 6, 2020). Moreover, there is a “growing trend of courts” that have at least made “the issue of collectibility an affirmative defense to be pled and proven by the legal malpractice defendant.” See Ewing, No 2020-C-00339 at 6.

In my view, the Louisiana Supreme Court got it right in concluding that the “collectible amount” in the underlying matter should not be the ceiling for what is recoverable in a legal malpractice action–particularly a ceiling determined as a matter of law through motion practice. However, the court went too far in concluding that collectibility evidence is not even relevant to measuring the plaintiff’s damages at a legal malpractice trial. “Relevant evidence” is “evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.” Louisiana Code of Evidence art. 401. Surely the collectibility of a hypothetical judgment in the underlying case has a “tendency” to prove the monetary loss that the lawyer’s malpractice caused. For that reason, a lawyer-defendant in a legal malpractice suit should be allowed to offer evidence bearing on the collectibility of the underlying claim. Thereafter, the fact finder should be allowed to consider that evidence in determining the monetary loss that the plaintiff suffered as a result of any malpractice. In short, the collectibility of the underlying claim should be relevant but non-determinative evidence bearing on damages.

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