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Legal malpractice claims not assignable

Jennifer Nelson
January 1, 2007
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In an Indiana Supreme Court ruling, the majority of justices held that legal malpractice claims are not assignable and courts cannot require a person to assign his or her chose in action.

In State Farm Mutual Automobile Insurance Co. v. Ruth Estep, Personal Representative of the Estate of Ewing Dan Estep, and Assignee of Rights of James D. Perkins, the high court yesterday reversed the trial court's order during proceedings supplemental forcing James Perkins' assignment of any potential chose in action against State Farm and held invalid any assignment by Perkins against his attorneys.

James Perkins had been ordered by the trial court to assign any cause of action he may have against his insurer, State Farm, to Ruth Estep, the personal representative of the estate of Ewing Dan Estep, who died as a result of injuries suffered from a motorcycle crash caused by Perkins. The estate was trying to recover $615,000 still owed from a judgment against Perkins in a personal injury action initiated before Estep's death.

In the original suit, Perkins retained his personal attorney, Jerry Susong, as co-counsel to Michael Stephenson, who was retained by State Farm. In March 2002, the jury awarded Estep's estate $675,000. The day after the verdict, State Farm paid Perkins' full policy limit of $50,000 to the estate, and the estate initiated proceedings supplemental a month later pursuant to Trial Rule 69(E) against Perkins for the unpaid amount.

Stephenson withdrew that July, concluding he completed his defense obligations under Perkins' insurance policy. Susong continued to represent Perkins. After Stephenson withdrew, the estate sought an order to have Perkins assign to it any cause of action Perkins may have against State Farm. Perkins refused and denied there was basis for any bad faith claims, but the court ordered him to assign to the estate any potential bad faith claims he may have against State Farm.

Perkins assigned to the estate all potential claims, demands, and causes of actions arising from the estate's personal injury claim against him. As a result, the estate sued State Farm in an Illinois court for the uncollected $615,000, alleging State Farm breached its duty of good faith owed to Perkins by not providing a conflict-free defense because Stephenson tried to withdraw his representation of Perkins but was denied. The estate also sued Susong, claming he should have told Perkins that Stephenson had a conflict of interest.

State Farm moved to intervene in the Indiana proceedings supplemental and asked the order compelling Perkins' assignment be vacated. The trial court denied both motions.

The Supreme Court, in a majority opinion written by Chief Justice Randall T. Shepard, concluded just as the court held under Picadilly Inc. v. Raikos, 582 N.E.2d 338, 341 (Ind. 1991), that legal malpractice claims are not assignable. Perkins could file a suit against Susong directly, but he cannot assign this to a third party because such assignments would be harmful to the lawyer-client relationship.

The majority also found the trial court ordering Perkins' forced assignment of his chose in action against State Farm was an error. Perkins can directly sue State Farm or voluntarily assign his chose in action, but he cannot be forced to assign it. Indiana follows the Direct Action Rule that prohibits a third party or judgment creditor from directly suing a judgment debtor's insurance carrier to recover an excess judgment.

In a separate opinion, Justices Ted Boehm and Brent Dickson dissented, noting State Farm should have been allowed to intervene in the proceedings supplemental and that the trial court erred in ordering assignment of Perkins' claims against State Farm.

Justice Boehm wrote that State Farm did not show a cognizable interest under Trial Rule 24(A) to intervene in the proceedings supplemental and does not satisfy all of the requirements under the rule.

Also in his dissent, Justice Boehm wrote that proceedings supplemental courts have a power to compel a judgment debtor to assign the debtor's potential causes of actions against third parties, just as other assets may be compelled to be transferred, so the assignment by the proceedings supplemental court was appropriate even though it was over Perkins' objection. 
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  1. It appears the police and prosecutors are allowed to change the rules halfway through the game to suit themselves. I am surprised that the congress has not yet eliminated the right to a trial in cases involving any type of forensic evidence. That would suit their foolish law and order police state views. I say we eliminate the statute of limitations for crimes committed by members of congress and other government employees. Of course they would never do that. They are all corrupt cowards!!!

  2. Poor Judge Brown probably thought that by slavishly serving the godz of the age her violations of 18th century concepts like due process and the rule of law would be overlooked. Mayhaps she was merely a Judge ahead of her time?

  3. in a lawyer discipline case Judge Brown, now removed, was presiding over a hearing about a lawyer accused of the supposedly heinous ethical violation of saying the words "Illegal immigrant." (IN re Barker) http://www.in.gov/judiciary/files/order-discipline-2013-55S00-1008-DI-429.pdf .... I wonder if when we compare the egregious violations of due process by Judge Brown, to her chiding of another lawyer for politically incorrectness, if there are any conclusions to be drawn about what kind of person, what kind of judge, what kind of apparatchik, is busy implementing the agenda of political correctness and making off-limits legit advocacy about an adverse party in a suit whose illegal alien status is relevant? I am just asking the question, the reader can make own conclsuion. Oh wait-- did I use the wrong adjective-- let me rephrase that, um undocumented alien?

  4. of course the bigger questions of whether or not the people want to pay for ANY bussing is off limits, due to the Supreme Court protecting the people from DEMOCRACY. Several decades hence from desegregation and bussing plans and we STILL need to be taking all this taxpayer money to combat mostly-imagined "discrimination" in the most obviously failed social program of the postwar period.

  5. You can put your photos anywhere you like... When someone steals it they know it doesn't belong to them. And, a man getting a divorce is automatically not a nice guy...? That's ridiculous. Since when is need of money a conflict of interest? That would mean that no one should have a job unless they are already financially solvent without a job... A photographer is also under no obligation to use a watermark (again, people know when a photo doesn't belong to them) or provide contact information. Hey, he didn't make it easy for me to pay him so I'll just take it! Well heck, might as well walk out of the grocery store with a cart full of food because the lines are too long and you don't find that convenient. "Only in Indiana." Oh, now you're passing judgement on an entire state... What state do you live in? I need to characterize everyone in your state as ignorant and opinionated. And the final bit of ignorance; assuming a photo anyone would want is lucky and then how much does your camera have to cost to make it a good photo, in your obviously relevant opinion?

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