Court Opinion

ID: 8484569
Source: CourtListenerOpinion
Date Created: 2022-11-17 17:04:56.221728+00
Date Added: 2024-06-11T16:49:54.595014
License: Public Domain

138 Nev., Advance Opinion       71
                       IN THE SUPREME COURT OF THE STATE OF NEVADA

                CHRISTOPHER BEAVOR, AN                                 No. 81964
                INDIVIDUAL,
                Appellant,
                vs.                                                         FILE
                JOSHUA L. TOMSHECK, AN
                                                                            NOV I 0 2027
                INDIVIDUAL,
                                                                        EUZ
                Respondent.                                           CLEM'                 URT
                                                                      BNI
                                                                            11EF DEPUTY CLERK

                           Appeal from a district court order granting summary judgment
                in a legal malpractice action. Eighth Judicial District Court, Clark County;
                James Crockett, Judge.
                           Affirmed in part, reversed in part, and remanded.

                E. Brent Bryson, P.C., and E. Brent Bryson, Las Vegas; Cohen Johnson,
                LLC, and H. Stan Johnson and Ryan D. Johnson, Las Vegas,
                for Appellant.

                Olson, Cannon, Gormley & Stoberski and Max E. Corrick, II, Las Vegas,
                for Respondent.

                BEFORE THE        SUPREME      COURT,     HARDESTY, STIGLICH,                   and
                HERNDON, JJ.

                                                OPINION

                By the Court, HARDESTY, J.:
                           In this appeal, we are asked to decide whether the proceeds
                from a legal malpractice claim may be assigned to an adversary in the same
                litigation that gave rise to the alleged legal malpractice.            We have
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                previously held that the assignment of a legal malpractice claim is
                prohibited as a matter of public policy. See Tower Hoines, LLC v. Heaton,
                132 Nev. 628, 635, 377 P.3d 118, 122 (2016); Chaffee v. Smith, 98 Nev. 222,
                223-24, 645 P.2d 966, 966 (1982). Allowing a client who is damaged by his
                or her attorney to assign the malpractice claim to a third party threatens
                the integrity of the highly personal and confidential attorney-client
                relationship and creates an incentive for the client to file a malpractice
                claim against the attorney and sell it to the highest bidder, even if the claim
                lacks merit.
                               At issue in this case is the assignability of the proceeds from a
                legal malpractice action, rather than the action itself.         We limit our
                consideration of this issue to the specific context presented in this case—the
                assignment of proceeds to an adverse party in the underlying litigation from
                which the alleged malpractice arose. Because such an assignment would
                allow parties to use legal malpractice claims as a bargaining chip in
                settlement negotiations, as occurred here, we conclude that public policy
                prohibits an assignment of proceeds from a legal malpractice claim to an
                adversary in the underlying litigation. For this reason, the district court
                properly invalidated the assignment at issue. However, we also conclude
                that an invalid assignment does not, by itself, preclude an injured client
                from pursuing the legal malpractice claim where the assignment has been
                set aside. Thus, we affirm in part and reverse in part the district court's
                order granting summary judgment, and we remand this matter for further
                proceedings consistent with this opinion.
                                    FACTS AND PROCEDURAL HISTORY
                            This dispute began when Yacov Hefetz loaned $2.2 million to
                Toluca Lake Village, LLC, to fund the purchase of property. The loan was
                secured by appellant Christopher Beavor's personal residence in a guaranty
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                         agreement. Toluca Lake filed bankruptcy, and Beavor did not repay the
                         $2.2 million loan.    Hefetz sued Beavor for breaching the guaranty
                         agreement. The jury returned a verdict in favor of Beavor.
                                     After the verdict, Hefetz hired a new attorney, H. Stan Johnson,
                         and filed a motion for a new trial.      Beavor also hired a new attorney,
                         respondent Joshua Tomsheck, who filed an opposition arguing only that
                         Hefetz's motion for a new trial was untimely. The district court concluded
                         that the motion was timely and granted a new trial because Beavor did not
                         substantively oppose Hefetz's arguments. Beavor did not timely appeal this
                         ruling.   The lawsuit proceeded, and Tomsheck withdrew as Beavor's
                         attorney. Later, Beavor sent a letter to Tomsheck informing him that he
                         might file a legal malpractice claim based on Tomsheck's allegedly deficient
                         performance. Beavor hired another attorney and filed a motion to dismiss
                         Hefetz's complaint, which the district court granted.     We reversed for
                         reasons that do not affect the analysis in the instant appeal. See Hefetz v.
                         Beauor, 133 Nev. 323, 331, 397 P.3d 472, 478 (2017).
                                     On remand, Hefetz and Beavor reached a settlement agreement
                         to dismiss the litigation. In addition to settlement payments in the amount
                         of $300,000, Beavor agreed to prosecute his legal malpractice claim against
                         Tomsheck and to "irrevocably assign [ 1 any recovery or proceeds" from that
                         claim to Hefetz. To effectuate the assignment, Beavor agreed that he would
                         sign a conflict waiver to allow Johnson—Hefetz's attorney—to represent
                         him regarding the legal malpractice claim. The parties agreed that Hefetz
                         would pay Johnson to prosecute Beavor's claim. Beavor further agreed that
                         he would provide Johnson with all documents relating to Tomsheck's
                         representation and do nothing intentional to impair the value of any
                         recovery. The agreement, however, provided that Beavor would retain the

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                          right to decide whether he would settle the litigation with Tornsheck. The
                          agreement also required Beavor to execute a confession ofjudgment in favor
                          of Hefetz in the amount of $2 million, which would be recorded should
                          Beavor breach his obligations under the settlement agreement.
                                      Beavor complied with the settlement agreement by suing
                          Tomsheck for legal malpractice. Tomsheck moved for summary judgment
                          on the ground that Beavor impermissibly assigned his claim to Hefetz. In
                          opposition, Beavor argued that the assignment did not violate public policy
                          because he still retained control of the lawsuit and assigned only the
                          proceeds of the action to Hefetz. The district court concluded that the
                          assignment was invalid because Beavor transferred control of the litigation
                          to Hefetz and the assignment was to an adversary from the same litigation
                          in which the malpractice arose. The district court also concluded that the
                          assignment was framed as an assignment of proceeds to circumvent the
                          public policy that would otherwise bar such an assignment. Finally, the
                          district court concluded that Beavor could not reassert his claim against
                          Tomsheck because the assignment was irrevocable. Thus, the district court
                          granted summary judgment to Tomsheck. This appeal followed.
                                                        DISCUSSION
                                      A summary judgment will be affirmed if this court's de novo
                          review of the evidence—viewed in the light most favorable to the
                          nonmovant—shows "that no genuine issue as to any material fact [remains]
                          and that the moving party is entitled to a judgment as a matter of law."
                          Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d 1026, 1029 (2005)
                          (alteration in original) (internal quotation marks omitted).

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II )1 N-17 A    AV)   ,
                  Assigning the proceeds of a legal malpractice claim to an adversary from the
                  same litigation that gave rise to the malpractice claim violates public policy
                              Beavor argues that the district court erred in granting
                  summary judgment against him because our precedents allow parties to
                  assign the proceeds from legal malpractice claims if the damaged client
                  retains control of the litigation and was the party who pursued the
                  malpractice claim.    He contends that he controlled the litigation and
                  previously pursued the claim, so the assignment of the proceeds was valid.
                  Tomsheck argues that legal malpractice claims and the proceeds from such
                  claims cannot be assigned to a former adversary from the same litigation
                  that gave rise to the alleged malpractice. Thus, Tomsheck asserts that the
                  district court properly invalidated the assignment.
                              Our precedents governing the assignment of legal malpractice
                  claims detail the policy concerns associated with such an assignment. In
                  Chaffee v. Smith, we held that "[a] s a matter of public policy, we cannot
                  permit enforcement of a legal malpractice action which has been transferred
                  by assignment . . . but which was never pursued by the original client." 98
                  Nev. 222, 223-24, 645 P.2d 966, 966 (1982).       We explained that "Mlle
                  decision as to whether to bring a malpractice action against an attorney is
                  one peculiarly vested in the client." Id. at 224, 645 P.2d at 966. Later, in
                  Tower Homes, LLC v. Heaton, we held that an assignment of a legal
                  malpractice claim violates public policy because the assignor no longer
                  controls the claim. 132 Nev. 628, 635, 377 P.3d 118, 122 (2016). Relying on
                  the California Court of Appeal's decision in Goodley v. Wank & Wank, Inc.,
                  we explained that allowing the assignee of a legal malpractice claim to
                  control the litigation against the assignor's attorney "embarrass[es] the
                  attorney-client relationship and imperil[s] the sanctity of the highly
                  confidential and fiduciary relationship existing between attorney and
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r( k)   1947A
                client." Id. at 635, 377 P.3d at 123 (quoting Goodley v. Wank & Wank, Inc.,
                133 Cal. Rptr. 83, 87 (Ct. App. 1976)). The Goodley court reasoned that
                allowing the assignment of a legal malpractice claim effectively "convert[s]
                it to a commodity.      [that is] transferred to economic bidders who have
                never had a professional relationship with the attorney and to whom the
                attorney has never owed a legal duty." 133 Cal. Rptr. at 87. This would
                allow legal malpractice claims to be exploited, presenting a plethora of
                "probabilities that could only debase the legal profession." Id. It is our duty
                to prevent a practice that could jeopardize or harm members of the legal
                profession or the public. For that reason, our precedents bar the assignment
                of a legal malpractice c]aim.
                              While this court has previously addressed assignments of legal
                malpractice claims, we have not considered whether the proceeds of such
                claims can be assigned. In other contexts, we have held that the assignment
                of the proceeds of a personal-injury claim, rather than the claim itself, is
                permissible because such an assignment permits the injured plaintiff to
                retain control of the litigation without interference from the assignee. See
                Achrern v. Expressway Plaza Ltd. P'ship, 112 Nev. 737, 741, 917 P.2c1 447,
                449 (1996); see also Reynolds v. Tufenkjian, 136 Nev. 145, 149, 461 P.3d 147,
                151 (2020).    Beavor invites us to allow a damaged client to assign the
                proceeds from a legal malpractice claim if the client retains control of the
                litigation. He asserts that, under this proposed rule, his assignment to
                Hefetz was permissible.
                              To resolve this case, we need not accept Beavor's invitation to
                answer the broader question of whether assigning the proceeds of a legal
                malpractice claim is prohibited in all instances, but instead confine our
                decision to assignments to an adverse party in the underlying litigation. We

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                  hold, like the Supreme Court of Connecticut in Gurski v. Rosenbluin &
                  Filan, LLC, "that neither a legal malpractice claim nor the proceeds from
                  such a claim can be assigned to an adversary in the same litigation that
                  gave rise to the alleged malpractice." 885 A.2d 163, 167 (Conn. 2005). As
                  the Gurski court determined, the assignment of a legal malpractice claim—
                  or the proceeds of such a claim—to the adversary in the litigation that gave
                  rise to the malpractice "creates the opportunity and incentive for collusion
                  in stipulating to damages in exchange for an agreement not to execute on
                  the judgment in the underlying litigation." Id. at 174; see also, e.g., Skipper
                  v. ACE Prop. & Cas. Ins. Co., 775 S.E.2d 37, 38 (S.C. 2015) ("Were we to
                  permit such assignments, plaintiffs and defendants would be incentivized
                  to collude against the defendant's attorney."); Kenco Enters. Nw., LLC v.
                  Wiese, 291 P.3d 261, 263 (Wash. Ct. App. 2013) (noting that the mere
                  opportunity for collusion, regardless of whether collusion actually occurs,
                  "converts legal malpractice into a commodity").
                              In addition to the potential of collusion, the assignability of a
                  malpractice claim to an adversary carries the risk that the malpractice
                  claim will be used to settle a client's case. As the Indiana Supreme Court
                  warned in Picadilly, Inc. v. Raikos, such assignments "would become an
                  important bargaining chip in the negotiation of settlements—particularly
                  for clients without a deep pocket."       582 N.E.2d 338, 343 (Ind. 1991),
                  abrogated on other grounds by Liggett v. Young, 877 N.E.2d 178 (Ind. 2007).
                  If such assignments were permitted, adversaries could offer financially
                  strapped parties a favorable settlement in exchange for their legal
                  malpractice claims. Id.     Not only could this undermine attorney-client
                  relationships and confidences, but it implicates the same policy concerns
                  discussed by the Goodley court—that a malpractice claim could be turned

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                into a "commodity to be exploited," which would encourage unjustified
                lawsuits against attorneys, increase legal malpractice litigation, and
                ultimately debase the legal profession. 133 Cal. Rptr. at 87.
                            The concerns discussed above apply with equal force when only
                the proceeds of a legal malpractice claim are assigned to the adverse party
                in the underlying litigation. Regardless of whether the client assigns the
                malpractice claim itself or only the future proceeds from that claim to an
                adversary, the result is the same—the adversary will have an interest in
                any recovery frorn the legal malpractice claim. Thus, the same potential for
                turning a legal malpractice claim into a commodity or bargaining chip exists
                when only the proceeds of those claims are assigned, as this case illustrates.
                Here, as part of the settlement agreement between Beavor and Hefetz,
                Beavor had to prosecute his legal malpractice claim and transfer his
                recovery from that claim to Hefetz. Though Beavor did not assign the
                malpractice claim to Hefetz, he agreed to litigate his malpractice claim for
                the benefit of Hefetz, effectively using the legal malpractice claim as a
                bargaining chip.    This is the exact danger Picadilly warned against.
                Because public policy prohibits the assignment of proceeds from a legal
                malpractice claim to the adversary in the underlying litigation, we conclude
                that the district court correctly invalidated Beavor's assignment to Hefetz.1

                      1We  assume without deciding that the assignment is properly
                characterized here as an assignment of proceeds rather than an assignment
                of the legal malpractice claim. In light of our conclusion, we need not
                determine whether Beavor retained control of the litigation such that he
                assigned only the proceeds of the malpractice claim.
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                Beavor retains the claim against Tomsheck even though the assignment of
                proceeds is invalid
                            Relying on cases from other jurisdictions, Beavor argues that
                even if the assignment of proceeds is invalid, he retains the right to assert
                his legal malpractice claim on his own behalf against Tomsheck. Tomsheck
                argues that we held in Tower Homes that a legal malpractice claim is
                extinguished following an invalid assignment.           We disagree with
                Tomsheck's reading of Tower Homes and join with other jurisdictions that
                recognize that an injured client may pursue a legal malpractice claim
                following an invalid assignment of the proceeds of that claim.
                            In Tower Homes, the bankruptcy court entered an order
                authorizing the bankruptcy trustee to permit a group of creditors to pursue
                Tower Homes' malpractice claim against its former attorneys. 132 Nev. at
                631-32, 377 P.3d at 120-21. The creditors controlled the litigation and
                would receive all financial benefits from the claim. Id. While recognizing
                that bankruptcy statutes permit bankruptcy creditors to bring debtor
                malpractice claims on behalf of the bankruptcy estate under certain
                conditions, this court determined that the creditors were not actually
                bringing a claim on behalf of the estate and thus the bankruptcy court's
                order constituted an impermissible assignment of a legal malpractice claim
                to them in violation of Chaffee, 98 Nev. at 223-24, 645 P.2d at 966. Tower
                Homes, 132 Nev. at 633-34, 377 P.3d at 121-22. The creditors argued that
                "the portion of the bankruptcy court order allowing [them] to retain any
                recovery should be ignored and the proceeds should revert back to the
                estate." Id. at 635 n.2, 377 P.3d at 123 n.2. However, we rejected that
                argument because the creditors "cited no authority to support a remedy that
                would result in rewriting the bankruptcy court's order severing [their]
                rights to the proceeds" from the invalid assignment. Thus, Tower Homes
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                 did not address whether the claim was extinguished, but only whether the
                 creditors could pursue it.
                             In distinguishing Tower Homes, Beavor directs our attention to
                 several persuasive authorities that lead to the relatively straightforward
                 conclusion that Beavor should be able to assert his claim for legal
                 malpractice notwithstanding the invalid assignment.           See generally
                 Kommavongsa v. Haskell, 67 P.3d 1068, 1070-72, 1083 (Wash. 2003)
                 (allowing the injured client to pursue the legal malpractice claim following
                 the invalid assignment of that claim); see also Weston v. Dowty, 414 N.W.2d
                 165, 167 (Mich. Ct. App. 1987) (explaining that an invalid assignment does
                 not warrant dismissal of a legal malpractice claim); Tate v. Goins,
                 Underkofler, Crawford & Langdon, 24 S.W.3d 627, 634 (Tex. Ct. App. 2000)
                 ("[T]he plaintiff's right to bring his own cause of action for [legal]
                 malpractice is not vitiated by [an] invalid assignment."). We therefore hold
                 that a legal malpractice claim is vested in the client, and an invalid
                 assignment, by itself, does not prevent an injured client from pursuing a
                 legal malpractice claim where the assignment has been set aside. For that
                 reason, we reverse the district court's grant of summary judgment on that
                 issue and remand for further proceedings consistent with this opinion.2

                       2Tomsheck    also argues that the settlement agreement provided for an
                 irrevocable assignment of the legal malpractice claim, thus precluding
                 Beavor from pursuing the claim in his own name. Beavor maintains that
                 the settlement agreement contains a severance clause, so any invalid
                 portion of the claim still leaves the settlement agreement intact. We decline
                 to interpret the settlement agreement because Tomsheck is not a party to
                 it.
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                              CONCLUSION
             We hold that neither a legal malpractice claim nor the proceeds
from such a claim can be assigned to an adversary from the same litigation
that gave rise to the alleged malpractice. Thus, we conclude that the district
court correctly invalidated Beavor's assignment to Hefetz. However, we
further hold that a legal malpractice claim is vested in the injured client
and, generally, an invalid assignment of the claim or proceeds does not

warrant dismissal of the legal malpractice claim. Accordingly, we reverse
that portion of the district court's order granting summary judgment, and
we remand this matter for further proceedings consistent with this opinion.

                                           Hardesty

We concur:

     Aie•‘.5c;,0
Stiglich

Herndon

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