Gurski v. Rosenblum and Filan, LLC

• Citation: 276 Conn. 257,885 A.2d 163
• Decision Date: 22 November 2005
• Docket Number: No. 17426.,17426.
• Court: Supreme Court of Connecticut
• Parties: Walter GURSKI v. ROSENBLUM AND FILAN, LLC, et al.

885 A.2d 163

276 Conn. 257

Walter GURSKI v. ROSENBLUM AND FILAN, LLC, et al.

No. 17426.

Supreme Court of Connecticut.

Argued September 21, 2005.

Decided November 22, 2005.

Frederick L. Murolo, with whom were Karen T. Murolo and, on the brief, Nadine M. Pare and Richard A. Roberts, Cheshire, for the appellants-appellees (defendants).

A. Reynolds Gordon, with whom was Frank A. DeNicola, Jr., Stamford, for the appellee-appellant (plaintiff).

BORDEN, NORCOTT, KATZ, VERTEFEUILLE and ZARELLA, Js.

KATZ, J.

The dispositive issue in this appeal is whether a client may assign a legal malpractice claim or the proceeds from such a claim to the client's adversary in the underlying litigation. The defendants, the law firm of Rosenblum and Filan, LLC, and one of its principals, James Rosenblum (law firm), appeal from the judgment of the trial court, rendered in accordance with a jury verdict in favor of the plaintiff, Walter Gurski.¹ We conclude that an assignment of a legal malpractice claim or the proceeds from such a claim to an adversary in the same litigation that gave rise to the alleged malpractice is against public policy and thereby unenforceable. Accordingly, we reverse the judgment.

The record discloses the following facts and procedural history. On or about May 12, 1994, Gurski filed a voluntary petition for bankruptcy under chapter 11 of the United States Bankruptcy Code, 11 U.S.C. § 1101 et seq. The United States Bankruptcy Court for the District of Connecticut issued an automatic stay of postpetition actions against Gurski's property pursuant to 11 U.S.C. § 362(a). Thereafter, in 1997, Susan Lee commenced an action against Gurski, a podiatrist, for malpractice, alleging that, as a result of Gurski's negligent and careless treatment of her feet in 1995 and 1996, she was permanently injured and required further treatment and corrective surgery.² Gurski notified his insurance carrier, AIG Insurance Company (AIG), which retained the law firm to represent Gurski. Subsequently, by letter dated December 15, 1997, AIG informed Gurski that the action filed by Lee was not covered under his policy and, accordingly, that it no longer would provide a defense or indemnification. The law firm thereafter informed Gurski in a letter dated December 17, 1997, and in subsequent oral communications that, because he had no coverage under the AIG policy, he would need to retain other counsel. In a letter dated July 6, 1998, the law firm notified Gurski that it had filed a motion to withdraw its appearance, that he should plan to attend a court hearing on that motion, and that he needed to retain new counsel. On July 9, 1998, the law firm notified Gurski that the court had scheduled a hearing for settlement discussions in Lee's action on July 22, 1998, and that he should appear at that time. The hearing went forward and, because neither Gurski nor the law firm appeared, the court entered a default judgment against Gurski. In a letter dated August 11, 1998, the law firm notified Gurski of the default judgment, advised him of another hearing scheduled for August 27, 1998, and counseled him to attend that hearing. The law firm repeated therein that it did not represent him and that the court likely would grant its motion to withdraw shortly. By letter dated October 16, 1998, the law firm informed Gurski that the motion to withdraw its appearance was scheduled for October 19, 1998. The trial court, Holzberg, J., granted that motion on October 20, 1998. There is nothing in the record reflecting that Gurski was notified of that decision.³

On November 16, 1998, Gurski received a certificate of closed pleadings notifying him that, on November 12, 1998, Lee had claimed the malpractice case to a hearing in damages. Seeking advice, Gurski forwarded that document to another law firm, O'Donnell, McDonald and Cregeen, LLC (O'Donnell), which responded on December 8, 1998, notifying Gurski that the trial court had granted the law firm's motion to withdraw on October 20, 1998, and advising him to seek other counsel as soon as possible. Additionally, O'Donnell advised Gurski that, because the default judgment in favor of Lee had entered during the period before the Bankruptcy Court granted Lee's motion for relief from the stay; see footnote 2 of this opinion; the court would likely open the default judgment. Despite his efforts to retain counsel, Gurski was unsuccessful, and, because he had not entered a pro se appearance, he was not notified of the December 21, 1998 hearing in damages at which judgment entered against him for $152,000. In January, 1999, after judgment had been rendered for Lee, Gurski retained counsel, who thereafter moved to open the judgment. The trial court denied the motion to open, concluding that "[Gurski] was fully advised of the entry of the default, the hearing in damages and the entry of judgment. Having failed to take reasonable steps to respond to the notice of these proceedings and having failed to demonstrate that he failed to appear because of mistake, accident or other reasonable [cause], the motion to [open] is denied."

Under bankruptcy law, the judgment in favor of Lee was considered an administrative claim and was not subject to being discharged in Gurski's pending bankruptcy proceedings. Gurski's assets were insufficient to pay both the amount of the judgment in favor of Lee and the payments required under the plan of reorganization that Gurski had filed in the Bankruptcy Court. As a consequence, on October 15, 1999, following lengthy settlement negotiations with Lee, Gurski filed a motion to compromise with the Bankruptcy Court regarding the judgment against him. In an attempt to move his chapter 11 case to confirmation, and because he did not have sufficient funds to liquidate Lee's claim, Gurski proposed a compromise predicated on a legal malpractice claim his bankruptcy estate held against the law firm. Lee agreed, dependent upon specific conditions, to compromise her claim against the estate.⁴ On December 21, 1999, the Bankruptcy Court granted the motion to compromise, subject to the following orders: "(1) [Gurski] may compromise the claim against the [bankruptcy] estate held by [Lee] by assigning to her the estate's interest in a certain legal malpractice claim it holds against the [l]aw [f]irm ... (2) [Gurski] may also grant [Lee] a security interest in said malpractice claim up to the maximum amount of $152,000.00 ... (3) [Lee's] claim against [Gurski] is limited solely and exclusively to any recovery which may be obtained in the malpractice claim up to $152,000.00 and any other claim is hereby ordered expunged ... (4) [t]he estate is authorized to retain special counsel to prosecute the malpractice claim on a one-third contingency fee basis... [and] (5) [Lee's] right to recovery is subject to special counsel's claim for attorney's fees and expenses, all of which shall be submitted to this [c]ourt on appropriate application, notice and hearing." These conditions, in conjunction with the terms set forth in Gurski's motion to compromise; see footnote 4 of this opinion; constitute the terms of the assignment at issue in this appeal.

In accordance with his obligation under the compromise, Gurski commenced the present action against the law firm, alleging that its negligence and breach of contract were a proximate cause of his injury—the $152,000 judgment, plus interest and costs expended in an effort to open the judgment. The law firm filed several special defenses, including a challenge to the assignment as violative of public policy. The law firm also filed a motion in limine seeking to exclude evidence of the assignment as irrelevant and prejudicial. The trial court, Tobin, J., conditionally granted the motion. The legal malpractice action was tried to a jury. At the conclusion of Gurski's case, the law firm moved for a directed verdict, challenging, inter alia, the enforceability of the assignment. In denying the motion, the trial court noted that, up to that point in the trial, there had been no evidence of such an assignment. At the conclusion of the law firm's case, the parties agreed by stipulation that the issue of the assignment would be reserved for decision by the court. Accordingly, pursuant to that agreement, the jury was not told of the assignment.

The jury concluded that Gurski had not breached the standard of care when treating Lee and that the law firm had breached the standard of care when representing Gurski. Accordingly, it returned a verdict in favor of Gurski for $220,318, which included $136,800 in economic damages and $83,518 in interest. Although the only evidence of damages offered during the trial was a judgment against Gurski in the amount of $152,000, the jury determined that the gross economic damages were $177,000, which they reduced by $25,000 based on the estimated costs that Gurski, who was uninsured, would have incurred in defending the underlying medical malpractice action. The jury further reduced the award by 10 percent for Gurski's comparative negligence, resulting in the final award of economic damages of $136,800.

The law firm filed a motion to set aside the verdict and, thereafter, a motion for judgment notwithstanding the verdict, claiming, inter alia, that, as a matter of public policy, it is improper for a party to assign a legal malpractice claim to an adversarial party in the underlying litigation. Therefore, according to the law firm, the verdict on the malpractice claim should not be enforced. In a comprehensive opinion, the trial court recognized and followed the majority of jurisdictions holding that legal malpractice claims are considered personal torts that may not be assigned. The trial court then identified a distinction recognized by some jurisdictions between an assignment of the underlying claim and an assignment of the proceeds from that claim. Following that distinction, the trial court concluded that Connecticut's public policy...