On February 3, 2017 a federal Court Judge in Manhattan became the first Judge in New York to dismiss an assigned legal malpractice claim on the ground of "judicial estoppel". A New York building restorer was sued for flood damage to a Manhattan penthouse by the condo owner. The building restorer hired a law firm to defend him and they allegedly were negligent in allowing the penthouse owner to win a default judgment for over $1,000,000. Unfortunately, the penthouse owner couldn't collect his lawsuit winnings because the building restorer had no money or assets. So, under New York law it is perfectly legal for the building restorer to sell or assign his rights to the penthouse owner to sue his lawyers for legal malpractice--because they allegedly caused him to lose the case on default.
Legal malpractice claims can be sold by the losing defendant to a prevailing plaintiff who knows the defendant can't possibly pay off the judgment. I've negotiated the assignment of a future lawsuit as part of a deal to settle a pending lawsuit and it was upheld as lawful by an Appellate Court. As a general rule it is illegal to sell one's right to a lawsuit. However, if the purpose of the assignment or sale of a lawsuit (even a legal malpractice claim) is to facilitate a settlement of another lawsuit, then it is permissible. Home Insurance Company v USAA, 692 NYS 2d 121 (2nd Dept 1999)
The penthouse owner sued his former opponents attorneys. However, in order to succeed in a legal malpractice case the penthouse owner must be able to prove that "but for" the negligence of the attorneys the building restorer would have defeated his flood damage claim. The Court dismissed the case finding that the penthouse owner would necessarily have to argue a position completely contradictory to the position he took in winning the property damage claim against the building restorer. In other words, the Court will not tolerate the penthouse owner claiming in one Court that the building restorer negligently caused damages in a sum exceeding $1,000,000--and thereafter claiming in another Court that the building owner was not negligent and would have won the property damage case. Molina v Faust 1:15-cv-09010