Legal Updates for Lawyers’ Professional Liability - CASE LAW UPDATE

Appeals Court Revives $4M Legal Malpractice Suit After Standing Challenge

William J. Focazio, M.D., et al. v. Joseph S. Aboyoun, Esq., et al., NJ. Super. App. Div., A-3587-22, February 24, 2025
    
Dr. Focazio sued his former attorneys for negligent advice in a failed residential construction project, arguing his attorneys did not warn him about contract pitfalls, which led to large deposits without guarantees that work would progress. He claimed his attorneys misadvised him on the cancellation of a contract and sought damages over $4 million. 

The plaintiff had agreements that assigned portions of his potential legal malpractice recovery to third parties, including the architect and replacement attorneys. In their motion to dismiss, the defendants alleged this was an impermissible assignment of legal malpractice claims. They argued the agreements gave the architect and replacement attorneys a pecuniary financial interest in the result of the malpractice action, and such an arrangement placed the defendants in a prejudiced stance in light of the certain bias of a known integral witness to the litigation. The court granted the defendants’ motion to dismiss for lack of standing because the plaintiff assigned his interest in these matters to third parties, and tort claims cannot be assigned prior to judgment. 

The appeals court found that the agreements did not assign the malpractice claim, only a portion of the recovery, and allowed the malpractice case to proceed. The defense argued that these agreements violated public policy and the Rules of Professional Conduct, claiming they improperly gave the third parties a financial interest in the malpractice case. But the court rejected this argument, reasoning that an assignment of anticipated tort proceeds, as opposed to the tort claim itself, is permissible as long as the injured party continues to prosecute the case in their own name. Thus, the agreements were valid as Dr. Focazio retained control over the litigation and would still recover a significant portion of any damages.  

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