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OK: Assignment of Legal Malpractice Claims Prohibited

Trinity Mortgage Companies, Inc. . v. Dreyer, USDC, N.D. Oklahoma, Jan. 7, 2011

Facts: Dennis Junker filed suit against Trinity and others alleging, among other things, breach of contract, fraud, and conversion. Ultimately, the parties entered into a Settlement Agreement whereby Trinity assigned its right to a claim of legal malpractice against its attorneys to Junker. 

Issues: Was the assignment of Trinity’s claim for legal malpractice valid and enforceable? 

Ruling: No. 

Under Oklahoma law, the assignment of tort claims is prohibited…the Court finds that the Settlement Agreement results in a de facto transfer of such claims…As evidenced by the clear language of the Settlement Agreement, Junker was assigned a fifty-percent ownership interest in Trinity, which provides him with the authority to vote on corporate matters and make decisions insofar as they pertain to this lawsuit. Specifically, Junker has the "sole decision-making authority" with respect to this lawsuit, including the choice of counsel…Further, Junker’s authority is expressly limited to this lawsuit, as he is precluded from making any other corporate decisions for Trinity. Junker’s ownership interest also comes without Junker having to assume any of Trinity’s existing liabilities. Thus, it is clear from the language of the Settlement Agreement that Trinity gave Junker an ownership interest for the specific and sole purpose of permitting Junker to litigate Trinity’s claims against Defendants.

The Settlement Agreement also reflects the fact that Junker has control over the proceeds of this case, as such proceeds will be used by Junker to recover on the $150,000.00 confessed judgment articulated therein…Further, Junker is expressly prohibited from sharing in any other source of income that is potentially developed by Trinity, making this lawsuit his only means to receive money from Trinity…The Settlement Agreement therefore gives Junker control over not only the claims asserted in this lawsuit, but also the proceeds derived therefrom.

The Court held that such an agreement was against public policy, and therefore, void as a matter of law. 

Lesson: The assignment of legal malpractice claims, and arguably even the proceeds therefrom, are prohibited under Oklahoma law. 


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Posted in: Oklahoma