Molina v. Faust Goetz Schenker & Blee, (S.D.N.Y. 2017) illustrates the difficulty of assignments of legal malpractice cases. To be sure, assignment is permitted. “While legal malpractice claims may be assigned in New York (even to former litigation adversaries), nothing prevents a New York court from applying judicial estoppel to a case where all of its requisite elements are satisfied.” However, there are a number of intellectual hurdles to clear.
In this case, condo owners sued contractor for negligent construction. Condo owner won a default judgment, and the insurance carrier disclaimed coverage for a series of complicated reasons. The contractor (with no coverage) then agreed with the condo owners to sue the contractor’s attorneys, and to turn over the proceeds to the condo owner. So far, so good.
However: “Plaintiff Benny Molina brought this legal malpractice suit against the lawyers who represented him in two related state court actions that culminated in the entry of substantial default judgments against him. But, due to a series of agreements between Molina and the plaintiff-judgment-creditor in one of the underlying actions, Molina sues here as the assignee of the judgment-creditor. Defendants have moved for summary judgment dismissing the amended complaint on several grounds. They rely chiefly on the equitable doctrine of judicial estoppel. The Court agrees that the doctrine applies and holds that Molina, as the judgment-creditor’s assignee, may not take positions here contrary to those his assignor successfully advanced in the state court actions. For that reason, the Court grants defendants’ motion for summary judgment in its entirety without addressing their remaining arguments.”
“In line with many jurisdictions and the federal courts, New York follows the doctrine of judicial estoppel, whereby “a party who assumes a certain position in a prior legal proceeding and secures a favorable judgment therein is precluded from assuming a contrary position in another action simply because his or her interests have changed.”13 The equitable doctrine “rests upon the principle that a litigant should not be permitted to lead a court to find a fact one way and then [*7] contend in another judicial proceeding that the same fact should be found otherwise.”14 Doing so could be viewed as “playing fast and loose with the courts.”15
Equitable in nature, the doctrine [*8] “cannot be reduced to a precise formula or test,”16 but its requirements are well catalogued. The New York Court of Appeals has cited approvingly17 to the United States Supreme Court’s helpful articulation of the factors courts typically consider:
“First, a party’s later position must be clearly inconsistent with its earlier position. Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party’s earlier position . . . . A third consideration is whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.”18
These factors are not “inflexible prerequisites” and do not constitute “an exhaustive formula,” as [a]dditional considerations may inform the doctrine’s application in specific factual contexts.”19 Ultimately, judicial estoppel is invoked at the court’s discretion.20
The somewhat convoluted series of assignments in this case present a twist on an otherwise routine application of the doctrine. Molina brought this suit in his own name, ostensibly to redress the financial harm he allegedly has suffered to due to the alleged negligence of his lawyers in the underlying actions. But defendants argue that Gregory Oyen is the “de facto plaintiff.”21 That is so, they say, because Molina gave away his right to sue in the First Assignment and derives his role as plaintiff here solely from the Second Assignment. Defendants further maintain that Molina, acting on behalf of Oyen, should be precluded from taking positions in this case inconsistent with those Oyen took in the underlying actions, which they contend Molina must do to prevail on either cause of action in the amended complaint. Not surprisingly, Molina opposes the application of judicial estoppel at each point.”