Should Collectibility Matter?

The Supreme Court of Virginia recently issued its opinion in the case Shevlin Smith v. McLaughlin, 769 S.E. 2d 7 (2015). A copy of the opinion can be found here. The Shevlin Smith decision addressed an interesting issue: is the ability to collect a judgment relevant?

In Shevlin Smith, the plaintiff sued his former malpractice attorneys, whom he had hired to sue his former criminal defense attorneys. The jury awarded the plaintiff a $5.75 million verdict. On appeal, the defendants (the malpractice attorneys) argued that the plaintiff should have been required to prove that any judgment he obtained could have been actually collected from the criminal defense attorneys.

The Supreme Court of Virginia agreed, stating that “collectibility is relevant because a legal malpractice plaintiff’s damages for a lost claim can only be measured by the amount that could have been actually collected from the defendant in the underlying action in the absence of the attorney’s negligence.” Interestingly, however, the Court held that collectibility is an affirmative defense, not an element the plaintiff must prove.

In layman’s terms, this decision means that an attorney sued for malpractice can argue that his/her former client would have been unable to collect any money awarded in a verdict. This argument could defeat the former client’s case. In other words, if the initial person who harmed the former client (i.e., the defendant in the former client’s underlying case) does not have any assets, then the attorney could win the malpractice case even if he/she committed malpractice.

To some, this may seem like a fair result–why should a plaintiff be entitled to recover against her attorneys when she would not have been able to recover against the person that initially wronged her?

The problem, however, with allowing the jury to consider collectibility is that the issue is tangential to the underlying claims. In most cases, the issues are straight forward: did the defendant wrong the plaintiff, and if so, how was the plaintiff damaged? There are numerous rules, cases, and statutes that prohibit the jury from hearing about tangential issues for fear of confusing the decision-making process. We do not want trials to contain mini-trials about tangential issues.

For example, parties are generally prohibited from putting on evidence that their adversaries have bad character and are therefore bad people. Likewise, parties are generally prohibited from informing the jury that there is insurance coverage available in the event a plaintiff succeeds at trial. Again, these issues are prohibited so the jury focuses on the merits of the actual claim.

So why did the Supreme Court of Virginia rule that collectibility is not tangential? It’s tough to say. The Court suggested that entry of a judgment does not guarantee collection, and the plaintiff is entitled to recover damages for “actual injury.”

The problem with this rational is that the express terms of the opinion limit the decision to legal malpractice cases. In other words, the Shevlin Smith case does not make collectibility relevant to personal injury cases. So, why are legal malpractice cases different than other cases? That remains to be seen.

As a practical matter, I think it is unlikely that the Court would allow the jury to consider collectibility in personal injury cases. If it does, it is hard to imagine how the Court would justify keeping insurance out of cases. Given the uncertainty, I do not foresee plaintiff attorneys and insurace defense attorneys rushing the issue to the Supreme Court of Virginia.

It does present an interesting issue to ponder, though: should the jury be allowed to consider collectibility?

Until next time,

Matt Perushek
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