Opinion ID: 2277535
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Heading: Assignment of Legal Malpractice Claim and its Proceeds

Text: The primary issue in this matter is the purported assignment contained in the settlement agreement. Both parties acknowledge that Kentucky law prohibits the assignment of a legal malpractice claim. Coffey v. Jefferson County Bd. of Educ, 756 S.W.2d 155 (Ky.App.1988). This rule is predicated upon the unique and highly personal nature of the attorney-client relationship. See Associated Ins. Service, Inc. v. Garcia, 307 S.W.3d 58, 63 (Ky.2010). Scott argues that such an assignment occurred here, and that the settlement agreement is therefore void as against public policy. Davis urges, however, that no such prohibited assignment occurred, and that, in fact, merely the proceeds of the malpractice claim were assigned. An assignment is made when the assignor intends to assign a present right, identifies the subject matter assigned, and divests itself of control over the subject matter assigned. 6 Am.Jur.2d Assignments § 82 (2010). Here, the settlement agreement is clear that 80% of the proceeds of the malpractice claim against Scott are assigned to Global. The more complicated question is whether a de facto assignment of the entire malpractice claim itself has occurred. The creation and existence of an assignment is to be determined according to the intention of the parties, which is to be discerned not only from the instruments executed by them, if any, but from the surrounding circumstances. 6A C.J.S. Assignments § 57 (2010). Courts will look to substance, not form, to determine whether an assignment has occurred. 6 Am.Jur.2d Assignments § 83 (2010). See also Power Grocery Co. v. Hinton, 187 Ky. 171, 218 S.W. 1013, 1018 (1920). No particular form is necessary to constitute an assignment. . . . Napier v. Duff, 281 Ky. 779, 136 S.W.2d 1083, 1085 (1939). See also Patterson v. Miracle, 253 Ky. 347, 69 S.W.2d 708, 710 (1934). Both Davis and Global contend that it was their intention to assign merely the proceeds of the malpractice claim against Scott. The surrounding circumstances, however, belie this assertion. By the terms of the settlement agreement, Global selected and retained Davis's counsel in the malpractice action and bore the financial responsibility for the cost of suing Scott. Because Davis is obligated to bring the action, he may not withdraw the suit. Davis is not permitted to settle the malpractice claim without Global's express written consent. Davis agreed to share privileged, attorney-client information with Global. Global retained control over the initiation, continuation and/or dismissal of the malpractice claim. The allocation of the proceeds of the malpractice suit is also troublesome. Because Global receives the lion's share of any judgment80%its interest far outweighs Davis's and renders Davis merely a nominal plaintiff. Also, under the assignment, Global receives a percentage of the damages awarded as opposed to a specified dollar amount. Therefore, its interest is not only in a successful claim, but a claim with the largest judgment possible. This is further indication of Global's ownership of the lawsuit. This level of control over a lawsuit is consistent with an assignment of the entire cause of action, not merely the proceeds of the litigation. See Greene v. Leasing Associates, Inc., 935 So.2d 21, 25 (Fla.Dist. Ct.App.2006) (noting that assignor was not free to control the conduct of the litigation and to accept or reject any settlement offers, in determining that prohibited assignment of legal malpractice claim occurred). See also Kim v. O'Sullivan, 133 Wash.App. 557, 137 P.3d 61 (2006) (prohibited assignment of entire legal malpractice claim occurred where assignee retained complete control over litigation and potential settlement, in addition to entire proceeds of the malpractice claim). The terms of this settlement agreement essentially placed the control of the malpractice suit in Global's hands and rendered Davis's interest merely nominal. Though Global and Davis assert otherwise, what has occurred is an assignment not merely of the proceeds of the claim against Scott, but of the entire claim itself. Kentucky law does not permit an assignment of a legal malpractice claim.