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In the Matter of the Order v. Thomas R. Luciani

January 23, 2013

IN THE MATTER OF THE ORDER CERTIFYING QUESTION TO IDAHO SUPREME COURT. ST. LUKE'S MAGIC VALLEY REGIONAL MEDICAL CENTER, PLAINTIFF-APPELLANT,
v.
THOMAS R. LUCIANI, STAMPER, RUBENS, STOCKER & SMITH, P.S., DEFENDANTS-RESPONDENTS.



The opinion of the court was delivered by: J. Jones, Justice.

2013 Opinion No. 8

Stephen W. Kenyon, Clerk

On Order Certifying Question to Idaho Supreme Court from the U.S. District Court for the District of Idaho, Hon. Edward J. Lodge, U.S. District Judge.

In response to the certified question, the Court held that, "Where a legal malpractice claim is transferred to an assignee in a commercial transaction, along with other business assets and liabilities, such a claim is assignable."

We are asked in a certified question of law from the United States District Court for the District of Idaho (District Court) whether a legal malpractice claim that is transferred to an assignee in a commercial transaction, along with other business assets and liabilities, is assignable. We answer in the affirmative.

I.

FACTUAL AND PROCEDURAL HISTORY

Thomas R. Luciani and his law firm, Stamper, Rubens, Stocker & Smith P.S. (Luciani or Defendants), represented Magic Valley Regional Medical Center (Magic Valley) in defending a wrongful termination and False Claims Act action brought by former hospital employees (the Suter litigation).*fn1 During that litigation, in late December 2005 or early January 2006, Magic Valley faced an impending deadline to respond to a highly unfavorable expert report. In response to this deadline, Magic Valley decided to hire another law firm to represent it, and Luciani was terminated as counsel on or about March 14, 2006.

Before July 1, 2006, Twin Falls County owned Magic Valley. But, in March 2006, Twin Falls County (on behalf of itself and Magic Valley), Twin Falls Health Initiatives Trust, Ltd. (TFHIT), and St. Luke's Health System, Ltd., St. Luke's Regional Medical Center, Ltd., and St. Luke's Magic Valley Regional Medical Center (St. Luke's) entered into a Sale and Lease Agreement for the Creation of a New Health System (Agreement). The Agreement provided for the transfer of Magic Valley's assets*fn2 and liabilities to St. Luke's as follows:

[I]t is the intent of the Parties that all property and interests of the Hospital whether real or personal, tangible or intangible, be leased, sold, assigned, licensed or transferred by [Twin Falls] County and the [Magic Valley] Subsidiaries, as applicable, to [St. Luke's] (including any rights of first refusal, options or claims against third parties by the Hospital and settlements received thereto), whether or not reflected on the Hospital's Balance Sheet and whether known or unknown, contingent or otherwise.

No specific assignment of a malpractice claim was made, but it is undisputed that St. Luke's had knowledge of the Suter litigation and its liability implications, Luciani's representation, and the decision to replace Luciani as counsel. The sale closed on July 1, 2006. St. Luke's thereafter carried the burden of the Suter litigation, ultimately settling with the plaintiffs for $4.25 million and expending approximately $12 million in legal and expert defense expenses. After the transaction closed, Magic Valley no longer existed. Although the transaction was not technically a merger, the operation and management of the center was taken over by St. Luke's, and the Magic Valley management team became the St. Luke's management team, with some minor changes. As the District Court put it, the "Agreement was effectively an asset and liability transfer from Magic Valley to St. Luke's."

St. Luke's sued the Defendants in January of 2008 for legal malpractice in connection with the Suter litigation, seeking approximately $10 million in damages. The Defendants moved for summary judgment, claiming among other things that St. Luke's could not pursue a malpractice claim because any purported assignment of such a claim is invalid in Idaho as a matter of law. Because the case is a diversity action, the District Court stated that Idaho law would be applied to resolve any substantive legal question. The District Court noted that the assignability of a legal malpractice claim in the factual context presented had not yet been squarely addressed by the Idaho Supreme Court and determined that the criteria for certification to this Court, pursuant to Idaho Appellate Rule 12.3, were satisfied with respect to this issue. The District Court therefore determined to certify the assignability question.

II.

CERTIFIED ...


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