Eagle Mountain City v. Parsons Kinghorn & Harris, P.C.

• Citation: 408 P.3d 322
• Decision Date: 07 June 2017
• Docket Number: No. 20150915,20150915
• Court: Supreme Court of Utah
• Parties: EAGLE MOUNTAIN CITY, Appellant, v. PARSONS KINGHORN & HARRIS, P.C., Appellee. Parsons Kinghorn & Harris, P.C., Third-Party Plaintiff, v. Williams & Hunt, P.C., Third-Party Defendant.

408 P.3d 322

EAGLE MOUNTAIN CITY, Appellant,

v.PARSONS KINGHORN & HARRIS, P.C., Appellee.

Parsons Kinghorn & Harris, P.C., Third-Party Plaintiff,

v.Williams & Hunt, P.C., Third-Party Defendant.

No. 20150915

Supreme Court of Utah.

Filed June 7, 2017

Mark O. Morris, Amber M. Mettler, Douglas P. Farr, Salt Lake City, for appellant.

Stuart H. Schultz, Byron G. Martin, Salt Lake City, for appellee.

Phillip A Cole, Minneapolis, Minnesota, Timothy K. Conde, Lauren A. Shurman, Salt Lake City, for third-party defendant.

Chief Justice Durrant authored the opinion of the Court, in which Associate Chief Justice Lee, Justice Durham, Justice Himonas, and Justice Pearce joined.

Chief Justice Durrant, opinion of the Court:

Introduction¶ 1 Eagle Mountain City (the City) brought this legal malpractice action in its own name, but the district court concluded the action is "tainted in some respect" because it was "born of" an assignment. The court granted summary judgment, dismissing the case without prejudice on the ground that the assignment of legal malpractice claims violates public policy. We reverse. We hold that, even assuming the City assigned its legal malpractice claim, this assignment does not violate public policy.

¶ 2 The City entered into a contractual arrangement with Cedar Valley Water Association (Cedar Valley) to share in any recovery from this legal malpractice action brought against defendant Parsons Kinghorn & Harris, P.C. (Parsons Kinghorn). The parties frame this dispute in terms of whether this arrangement transferred sufficient control over the malpractice claim from the City to Cedar Valley to constitute an assignment. We view things differently. We conclude that the more appropriate question is whether the voluntary assignment of legal malpractice claims violates public policy as a general matter. If it does not, there is no need to determine whether the contractual arrangement in this case amounted to an assignment of such a claim.

¶ 3 We hold that there is a strong presumption that legal malpractice claims are voluntarily assignable, but we do not foreclose the possibility that an assignment in a future case could present such strong public policy concerns that it will be invalidated. We reach this result because the public policy rationales articulated by other courts are largely unpersuasive or inapplicable in our jurisdiction given recent developments in the Utah Rules of Civil Procedure and the Utah Rules of Professional Conduct. With these procedural safeguards in place, legal malpractice claims are presumed to be freely assignable, and the circumstances of this case do not rebut that presumption.

Background

¶ 4 Cedar Valley sued the City in an earlier proceeding (the Well Lawsuit), which ended when the City and Cedar Valley entered into a settlement agreement and a contingent fee agreement (collectively, Agreements). The Agreements contemplated that the City would bring the lawsuit that is now before us—a legal malpractice action—against its former attorneys, Parsons Kinghorn. We first briefly describe the background of the Well Lawsuit, providing details relevant to some of the policy considerations we discuss below. We then describe the district court's grant of summary judgment in this case.

¶ 5 The Well Lawsuit arose out of a contract (the Capacity Purchase Agreement) where the City agreed to purchase a well from Cedar Valley. The Capacity Purchase Agreement provided that the City would have an obligation to remit money to Cedar Valley if certain triggering conditions occurred. Parsons Kinghorn advised the City that the triggering conditions had not occurred, and it accordingly advised the City not to remit any money to Cedar Valley. Cedar Valley sought payment from the City, but Parsons Kinghorn repeatedly advised the City that no payment was due.

¶ 6 In response, Cedar Valley brought the Well Lawsuit against the City. That litigation focused on whether the triggering conditions had occurred, requiring payment under the Capacity Purchase Agreement. Cedar Valley, through its lawyers Snell & Wilmer, advanced one interpretation of the contractual language describing the triggering events, and the City, on the continued advice of Parsons Kinghorn, offered a contrary interpretation. ¹

¶ 7 Shortly before the Well Lawsuit was to go to trial, the City and Cedar Valley entered into a settlement agreement, which incorporated by reference a contingent fee agreement. The Agreements impose conditions on the City's ability to bring this malpractice action and give Cedar Valley certain contractual rights of control over the action. For example, the Agreements provide, in relevant part:

As part of the Settlement Agreement, [the City] has agreed to make demand and if needed file and prosecute a complaint against [Parsons Kinghorn] ... alleging negligence and related malpractice claims ("Lawsuit"), solely on the terms and conditions of this Agreement.

....

[The] City and Cedar Valley desire to retain [Snell & Wilmer] to bring the lawsuit against [Parsons Kinghorn]....

[C]ommunications between the jointly represented Clients [the City and Cedar Valley] and Attorney [Snell & Wilmer] are privileged as to third parties but are not privileged as to the Clients which are being jointly represented.

...

In the Settlement Agreement, [the] City and Cedar Valley agreed that after payment of costs, each would receive one-third ... of the recovery, if any, from [Parsons Kinghorn] in the Lawsuit.

...

Clients each agree that [Snell & Wilmer] is entitled to one-third (1/3) of the sums recovered from [Parsons Kinghorn] (including its insurers), after out of pocket costs are first deducted from such recovery.

...

[A]ll costs incurred in connection with the Lawsuit shall be paid by Cedar Valley, but all amount of such Costs shall be first repaid from any recovery received.

...

In the event that [Parsons Kinghorn] and/or its insurer(s) make an offer of settlement to Clients, and they cannot mutually agree on the terms of negotiated settlement of the Lawsuit, then the clients agree to first negotiate in good faith. Failing an agreement then, the parties shall mediate their dispute before a mediator.... In the event the dispute is not resolved by mediation, each of the Clients shall select an arbitrator and the two selected arbitrators shall select a third arbitrator.... The decision of the three arbitrators regarding whether to accept or reject the pending offer shall be binding on the Clients.

¶ 8 The City brought the current lawsuit in its own name in December 2013, pleading legal malpractice under both tort and contract theories. A little more than a year later, in February 2015, Parsons Kinghorn filed a motion for summary judgment, seeking to have the suit dismissed on the ground that the City—through the Agreements—assigned its legal malpractice claim to Cedar Valley and that such an assignment violates public policy.

¶ 9 The district court agreed with Parsons Kinghorn that the Agreements constituted at least a partial assignment of the legal malpractice claim, which the court determined violated public policy. In particular, the district court concluded that, although the Agreements did not "express[ly] assign[ ]" the legal malpractice claim, "it is obvious that the Agreements transfer to [Cedar Valley] a substantial level of control over the litigation decisions and a substantial portion of [the City's] property rights." The court granted summary judgment in favor of Parsons Kinghorn, dismissing the case without prejudice, but attaching certain conditions to the City's ability to re-file. The court ordered that, as a condition of re-filing, the City must "satisf[y] the Court that [the legal malpractice claim] will be prosecuted independently of the settlement agreement. To do so, at a minimum, [the City] needs to establish that its litigation is not controlled in any way by [Cedar Valley], and that [the City] is not represented by attorneys associated with [Cedar Valley.]"

¶ 10 The City appeals. First, it argues that the district court erred in concluding that the Agreements amounted to an assignment of its legal malpractice claim. Second, it argues that its contractual arrangement with Cedar Valley does not violate public policy. We have jurisdiction under Utah Code section 78A-3-102(3)(j).

Standard of Review

¶ 11 The issue on appeal is whether the district court properly granted summary judgment in favor of Parsons Kinghorn on the City's legal malpractice claim. Summary judgment is appropriate only where "there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law."² We "review[ ] a summary judgment for correctness, giving no deference to the [district] court's decision."³

Analysis

¶ 12 We begin by explaining why we need not consider the parties' arguments regarding whether the City relinquished sufficient rights to control its legal malpractice claim that it can be said to have assigned that claim. We instead assume that the City's arrangement with Cedar Valley amounted to an assignment. We then consider the public policy concerns articulated by other courts, concluding that they are unpersuasive in view of the current procedural and ethical safeguards of our legal system. Because we view our system as well-equipped to sort the wheat of these claims from the chaff—whether the action is brought by the alleged victim of malpractice or the victim's assignee—we hold that legal malpractice claims are presumed to be voluntarily assignable. But we leave open the possibility that in a future case such an assignment could violate clearly expressed and compelling public policy concerns and thus be invalid.

I. We Assume the Contractual Arrangement Between the City and Cedar Valley Amounted to an Assignment of a Legal Malpractice Claim

¶ 13 The parties have focused their arguments on whether the Agreements amounted to an assignment of a legal malpractice claim.⁴ We think this approach asks the wrong...