Delaware CWC Liquidation Corp. v. Martin

• Decision Date: 22 May 2003
• Docket Number: No. 30985, 31113.,30985, 31113.
• Citation: 584 S.E.2d 473,213 W.Va. 617
• Court: West Virginia Supreme Court
• Parties: DELAWARE CWC LIQUIDATION CORP., Formerly Known as Cleveland Wrecking Company, Inc., a Delaware Corporation, Soverign Construction, Inc., a California Corporation, Investment Recovery Services, Inc., a California Corporation, Cleveland Environmental Services, Inc., a California Corporation, Dames and Moore Group, a Delaware Corporation, Cleveland Wrecking Company, Formerly Known as CWC Acquisition Corp., a California Corporation, Who Sue by Their Duly Authorized Assignees, Carlton E. Thornton and Michael R. Jordan, Plaintiffs v. Robert P. MARTIN, Defendant and Daniel J. Garletts, and Laurian Kay Garletts, His Wife, Individually and as Mother and Next Friends of Rachel Christine Garletts, Zachary Donald Garletts and Matthew David Garletts, and Sarah Marie Garletts, Individually, Plaintiffs v. Robert D. Aitcheson, Esq., Defendant.

584 S.E.2d 473

213 W.Va. 617

DELAWARE CWC LIQUIDATION CORP., Formerly Known as Cleveland Wrecking Company, Inc., a Delaware Corporation, Soverign Construction, Inc., a California Corporation, Investment Recovery Services, Inc., a California Corporation, Cleveland Environmental Services, Inc., a California Corporation, Dames and Moore Group, a Delaware Corporation, Cleveland Wrecking Company, Formerly Known as CWC Acquisition Corp., a California Corporation, Who Sue by Their Duly Authorized Assignees, Carlton E. Thornton and Michael R. Jordan, Plaintiffs v. Robert P. MARTIN, Defendant and Daniel J. Garletts, and Laurian Kay Garletts, His Wife, Individually and as Mother and Next Friends of Rachel Christine Garletts, Zachary Donald Garletts and Matthew David Garletts, and Sarah Marie Garletts, Individually, Plaintiffs v. Robert D. Aitcheson, Esq., Defendant.

No. 30985, 31113.

Supreme Court of Appeals of West Virginia.

Submitted March 25, 2003.

Decided May 22, 2003.

Harvey D. Peyton, Esq., The Peyton Law Firm, Nitro, West Virginia, Attorney for Plaintiffs.

Gregory H. Schillace, Esq., Schillace Law Office, Clarksburg, West Virginia, Attorney for Defendant.

Thomas C. Schultz, Esq., Wheeling, West Virginia, Attorney for Plaintiffs.

McGRAW, Justice:

These consolidated cases are before this Court upon certified questions from the Circuit Courts of Putnam and Berkeley Counties, which address the common issue of whether the assignment of a legal malpractice claim is valid and enforceable under West Virginia law, or contrary to public policy and therefore, void. The certified questions, as well as the circuit courts' respective answers to them, are as follows:

1. Is the assignment of a legal malpractice claim contrary to the public policy of the State of West Virginia and therefore void as a matter of law?

Answer of the Circuit Court of Putnam County: No.

2. Should courts determine the validity of the assignment of a legal malpractice claim on a case-by-case basis?

Answer of the Circuit Court of Berkeley County: Yes

3. If an attorney's client who is sued for malicious prosecution settles with the plaintiff under the terms in which the client receives a full release from the malicious prosecution claim in exchange for an assignment to the plaintiff of legal malpractice claims against the client's attorney who filed the prior suit, is the assignment void as against public policy of the State of West Virginia?

Answer of the Circuit Court of Berkeley County: No.

For the reasons explained herein, this Court concludes that, as a matter of public policy, legal malpractice claims are not assignable in West Virginia and that any such assignment is void as a matter of law.

I. FACTS

The underlying facts which precipitated the assignments of the respective legal malpractice claims are vastly different and are outlined below.

Delaware CWC Liquidation Corp. v. Martin

In July 1995, Carlton Thornton and Michael Jordan instituted a civil action against their employer, Cleveland Wrecking Co., under W.Va.Code § 23-4-2, West Virginia's deliberate intention statute. Both men were laid off from their employment shortly thereafter, and, as a result, they amended their original complaints to include claims for wrongful discharge, under W.Va.Code § 23-5A-1 ("[d]iscriminatory practices prohibited").

Meanwhile, Cleveland Wrecking Co. was loaned several million dollars as part of an effort to ease some of its financial problems. For reasons unexplained, as part of the secured transaction, the lending institution failed to perfects its security interest in Cleveland Wrecking Co.'s personal property assets in West Virginia.

Cleveland Wrecking Co. eventually defaulted on the bank loan. A California corporation, "CWC Acquisition Corp.," ("CWC Acquisition") was formed for the purpose of buying Cleveland Wrecking Co.'s debt and security interests from the bank. CWC Acquisition foreclosed on the name "Cleveland Wrecking Co." and ultimately, began operating as Cleveland Wrecking Co. The original Cleveland Wrecking Co., meanwhile, became known as Delaware CWC Liquidation Corp.

In July 1995, attorney Robert Martin was hired to defend the interests of the new Cleveland Wrecking Co. in the deliberate intention and wrongful discharge litigation involving the company and Messieurs Thornton and Jordan. Ultimately, a jury awarded the pair compensatory and punitive damages totaling approximately $149,500.00. It is Defendant Martin's alleged post-trial negligence which is the subject of the legal malpractice claim later assigned to Thornton and Jordan and which is at issue in the instant certified question from the Circuit Court of Putnam County.

A judgment order in the underlying litigation was entered on April 28, 1998. On May 8, 1998, Defendant Martin, on behalf of his client, the new Cleveland Wrecking Co., served "Defendant's Motion for Judgment Notwithstanding the Verdict or, in the Alternative, Motion for a New Trial." Defendant Martin did not file these post-trial motions with the Circuit Court of Putnam County until May 14, 1998. Defendant Martin was apparently unaware that, effective April 6, 1998, the West Virginia Rules of Civil Procedure were amended to require that the foregoing post-trial motions be filed, and not just served, "no later than 10 days after entry of judgment[.]" W.Va. R. Civ. P. 50(b). See W.Va. R. Civ. P. 59(b) Thus, under W.Va. R. Civ. P. 50(b) and 59(b), Defendant Martin's requests for post-trial relief were not timely filed.

Due to Defendant Martin's failure to timely file post-trial motions, Messrs. Thornton and Jordan, by counsel, obtained a writ of execution, pursuant to which they began levying on and taking possession of motor vehicles and demolition equipment owned by the original Cleveland Wrecking Co. Apparently, the new Cleveland Wrecking Co. had not yet perfected its security interest in these items.

Ultimately, representatives from the new Cleveland Wrecking Co. negotiated a settlement with Thornton and Jordan, which included not only a release of the levy on the company's vehicles and equipment, but also an assignment to Thornton and Jordan of the company's purported legal malpractice claims against Defendant Martin for damages caused by his failure to timely file post-trial motions. As a result of this assignment, Thornton and Jordan filed a Complaint against Defendant Martin. Defendant Martin moved to dismiss the complaint, or alternatively, for summary judgment. Thornton and Jordan filed a cross motion for summary judgment on the issue of Defendant Martin's liability. The circuit court denied the parties' respective motions.

Thereafter, Defendant Martin filed a second motion for summary judgment on the ground that the assignment of the new Cleveland Wrecking Co.'s purported legal malpractice claim against Defendant Martin is not permitted as a matter of law. In an Order entered November 26, 2001, the Circuit Court of Putnam County denied Defendant Martin's motion for summary judgment and ordered that the disputed legal issues related to the assignment of legal malpractice claims be certified to this Court. By Order entered April 16, 2002, the following question was certified to this Court, pursuant to W.Va.Code § 58-5-2 and W.Va. R.App. P. 13:

Is the assignment of a legal malpractice claim contrary to the public policy of the State of West Virginia and therefore void as a matter of law?

Answer of the Circuit Court of Putnam County: No.

Garletts v. Aitcheson

On January 22, 1999, Plaintiff Daniel Garletts sustained severe and permanent injuries when the automobile he was driving was struck head on by a rented automobile being operated by David Lee Donne. At the time of the accident, Mr. Donne's blood alcohol content was .167, which is over the legal limit.

Both drivers were insured by State Farm Mutual Automobile Insurance Co. ("State Farm"). State Farm learned Mr. Donne had been intoxicated at the time of the accident and, according to Plaintiff Daniel Garletts, also determined Mr. Donne was clearly at fault. Plaintiff Daniel Garletts made a claim for the $100,000 limits of liability under Mr. Donne's insurance policy.¹ State Farm offered Plaintiff the sum of $15,000.

Due to the severity of Plaintiff Daniel Garletts' injuries, which includes a brain injury, Plaintiff Daniel Garletts, his wife and four children instituted the underlying negligence and bad faith action. State Farm retained counsel to defend Mr. Donne and Mr. Donne retained separate counsel, Defendant Robert D. Aitcheson, for the purpose of pursuing a counterclaim against Plaintiffs.

Defendant Aitcheson filed a counterclaim against Plaintiffs alleging, inter alia, that Plaintiff Daniel Garletts "carelessly, recklessly and negligently" operated his vehicle left of center causing the subject accident, and seeking $250,000 in damages. Plaintiffs maintain, however, that Defendant Aitcheson "never made a demand for insurance proceeds from State Farm on his client's behalf and he never obtained the statement his client gave to the adjuster for Enterprise Rent-A-Car, in which Mr. Donne basically admitted fault. Mr. Aitcheson could have taken a few minutes to call State Farm's adjuster, but he admits he didn't do that either. Had he done that he could have learned of State Farm's clear liability determination and of the fact that his client was seriously intoxicated [at the time of the accident]." Brief of the Petitioners, p.3. According to Plaintiffs, Defendant Aitcheson failed to conduct any investigation into Mr. Donne's own liability in the accident and failed to attend his client's May 19, 2000 deposition.

On June 12, 2000, Defendant Aitcheson filed a motion to withdraw as Mr. Donne's counsel. On July 7, 2000, the circuit court entered an order dismissing, with prejudice, the counterclaim filed on behalf of Mr. Donne. Thereafter, Plaintiffs amended their complaint to include, among other allegations, the claim of malicious pro...