Akerly Law Represents Creditors in Bankruptcy Fight Over Ownership of Legal Malpractice Claim

Carrie R. McNair - Associate
Feb 24 2021

Akerly Law, led by its appellate specialist Carrie R. McNair, recently represented a creditor with a complicated appellate bankruptcy issue that was one of first impression for the Sixth Circuit Court of Appeals. At issue, was the ownership of a legal malpractice claim in bankruptcy.

In Church Joint Venture LP v. Blasingame (In re Blasingame), 19-5505 (6th Cir. Jan. 26, 2021), Akerly Law attorneys argued that the Sixth Circuit Court of Appeals should utilize Segal v. Rochelle, 382 U.S. 375 (1966), to determine that a legal malpractice claim owned by the Debtors should be property of the bankruptcy estate because the action leading to the legal malpractice claim occurred prior to the Debtors bankruptcy filing. In Segal v. Rochelle, 382 U.S. 375 (1966), the United States Supreme Court ruled that an intangible claim in property belonged to a bankruptcy estate if it is “sufficiently rooted in the prebankruptcy past” of the Debtor.

While the Sixth Circuit Court of Appeals ruled in favor of the Debtor in this instance, finding in favor of a theory that required the legal malpractice claim to be fully accrued under the relevant state law, Akerly Law attorneys were able to shine a light on a nationwide split in the circuit courts regarding Segal v. Rochelle, which is United States Supreme Court precedent.

OPINION: The Sixth Circuit’s decision was in the context of attorney malpractice and, under Tennessee law, a cause of action does not accrue until every element necessary for relief has arisen. In Blasingame, the damages did not fix until after the bankruptcy case was filed.