St. Luke’s Magic Valley Reg’l Med. Ctr. v. Luciani (Summary)

HOSPITAL AFFILIATION – ASSIGNMENT OF RIGHTS

St. Luke’s Magic Valley Reg’l Med. Ctr. v. Luciani, No. CV08-30-S-EJL (D. Idaho Sept. 30, 2013)

The United States District Court for the District of Idaho granted in part and denied in part a law firm’s motion for summary judgment in a lawsuit filed by a health system against a law firm for legal malpractice.

The hospital hired the law firm to defend a wrongful termination and False Claims Act action alleging fraudulent Medicare billing by the hospital.  At some point during litigation, the law firm was terminated, and a new law firm hired, to represent the hospital in the litigation.  Then, after the former law firm was terminated, but before the litigation was settled, the hospital was purchased and a new health system created.  The terms of the purchase agreement stated that the new health system would assume the hospital’s liability in the litigation, and also contained a general assignment of all claims against third parties, including legal malpractice claims, known or unknown at the time of sale.

The new health system sued the former law firm for legal malpractice, and the law firm filed a motion for summary judgment, arguing that the legal malpractice claim was not assignable, that assignment of the claim was not valid, and that the new health system cannot prove that any of the damages were proximately caused by the former law firm.

The court held that the hospital’s legal malpractice claim was assignable to the new health system, since the purchase agreement was sufficiently broad to preserve any legal malpractice claims against a third party even if it was unknown at the time the agreement was executed or the closing documents were signed.  Also, the new health system stepped into the shoes of the hospital, so any alleged damages did not have to be incurred prior to the execution of the purchase agreement or closing.  However, the court found that the new health system will not be allowed to recover attorneys’ fees associated with the wrongful termination and False Claims Act litigation, because the duty to defend litigation was not foreseeable or proximately caused by the former law firm’s alleged malpractice.