Davis v. Scott, __ S.W.3d __, 2009 WL 367219 (Ky. App. 2009)

Brief Summary
An agreement assigning the proceeds from a legal malpractice action was held void as against public policy.

Complete Summary
This malpractice action resulted from litigation between Global Risk Management (“GRM”) and Tim Davis & Associates, Inc. (“Davis”). GRM sued Davis in federal court for violation of a non-solicitation agreement. One of GRM’s principals advised Davis that its violation of the non-solicitation agreement could be pinned on the advice of Davis’ attorney, John Scott. Davis then entered into a settlement agreement with GRM for $300,000, but the settlement was conditioned on Davis pursuing a legal malpractice action against Scott and assigning 80 percent of the malpractice recovery to GRM. Davis then sued Scott in state court in Kentucky.

The Kentucky Court of Appeals affirmed the trial court’s dismissal of the malpractice action on summary judgment. Elaborating on the general rule that assignment of a legal malpractice action is void as against public policy, the appellate court held that this assignment of legal malpractice proceeds was equivalent to assigning the legal malpractice claim.

The court did not wholly disavow the possibility of “clients . . . pursuing their own legal malpractice claims to judgment, and then assigning their judgments . . . .” Id. at *5 (quoting Kommavongsa v. Haskell, 149 Wn.2d 288, 311 (2003)). The court noted, however, that GRM was in “complete control” of the litigation, including but not limited to the selection of counsel. Id.

The court held that dismissal, rather than remand, was the appropriate disposition of the case. Upon remand, the trial court could conceivably have altered or invalidated the settlement agreement. Because this settlement was the product of federal litigation, however, the state court lacked such power.

Significance of Opinion
At least in Kentucky, those who would benefit from the legal malpractice cases of others must proceed with more caution than was shown here.

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