Beavor v. Tomsheck , 2022 NV 71 ( 2022 )


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  •                                                    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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    tl'   14747A    c5f4a.
    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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    10}   1,447A
    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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    1(1, 1)47A
    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
    11