ILNews

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. Some are above the law in Indiana. Some lined up with Lodges have controlled power in the state since the 1920s when the Klan ruled Indiana. Consider the comments at this post and note the international h.q. in Indianapolis. http://www.theindianalawyer.com/human-trafficking-rising-in-indiana/PARAMS/article/42468. Brave journalists need to take this child torturing, above the law and antimarriage cult on just like The Globe courageously took on Cardinal Law. Are there any brave Hoosier journalists?

  2. I am nearing 66 years old..... I have no interest in contacting anyone. All I need to have is a nationality....a REAL Birthday...... the place U was born...... my soul will never be at peace. I have lived my life without identity.... if anyone can help me please contact me.

  3. This is the dissent discussed in the comment below. See comments on that story for an amazing discussion of likely judicial corruption of some kind, the rejection of the rule of law at the very least. http://www.theindianalawyer.com/justices-deny-transfer-to-child-custody-case/PARAMS/article/42774#comment

  4. That means much to me, thank you. My own communion, to which I came in my 30's from a protestant evangelical background, refuses to so affirm me, the Bishop's courtiers all saying, when it matters, that they defer to the state, and trust that the state would not be wrong as to me. (LIttle did I know that is the most common modernist catholic position on the state -- at least when the state acts consistent with the philosophy of the democrat party). I asked my RCC pastor to stand with me before the Examiners after they demanded that I disavow God's law on the record .... he refused, saying the Bishop would not allow it. I filed all of my file in the open in federal court so the Bishop's men could see what had been done ... they refused to look. (But the 7th Cir and federal judge Theresa Springmann gave me the honor of admission after so reading, even though ISC had denied me, rendering me a very rare bird). Such affirmation from a fellow believer as you have done here has been rare for me, and that dearth of solidarity, and the economic pain visited upon my wife and five children, have been the hardest part of the struggle. They did indeed banish me, for life, and so, in substance did the the Diocese, which treated me like a pariah, but thanks to this ezine ... and this is simply amazing to me .... because of this ezine I am not silenced. This ezine allowing us to speak to the corruption that the former chief "justice" left behind, yet embedded in his systems when he retired ... the openness to discuss that corruption (like that revealed in the recent whistleblowing dissent by courageous Justice David and fresh breath of air Chief Justice Rush,) is a great example of the First Amendment at work. I will not be silenced as long as this tree falling in the wood can be heard. The Hoosier Judiciary has deep seated problems, generational corruption, ideological corruption. Many cases demonstrate this. It must be spotlighted. The corrupted system has no hold on me now, none. I have survived their best shots. It is now my time to not be silent. To the Glory of God, and for the good of man's law. (It almost always works that way as to the true law, as I explained the bar examiners -- who refused to follow even their own statutory law and violated core organic law when banishing me for life -- actually revealing themselves to be lawless.)

  5. to answer your questions, you would still be practicing law and its very sad because we need lawyers like you to stand up for the little guy who have no voice. You probably were a threat to them and they didnt know how to handle the truth and did not want anyone to "rock the boat" so instead of allowing you to keep praticing they banished you, silenced you , the cowards that they are.

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