Appellant, on Appeal from the Franklin County Court of V

IN THE SUPREME COURT OF OHIO

WEST BROAD CHIROPRACTIC, Case No. 2008-1396 consolidated with Case No. 2008-1489 Appellant, On Appeal from the Franklin County Court of V. Appeals, Tenth Appellate District

AMERICAN FAMILY INSURANCE,

Appellee.

MERIT REPLY BRIEF OF APPELLANT WEST BROAD CHIROPRACTIC

James F. McCarthy, III (0002245) Katz, Teller, Brant & Hild 255 East Fifth Street, Suite 2400 Cincinnati, Ohio 45202 (513) 721-4532 Counsel for Appellant West Broad Chiropractic

John P. Lowry (0034595) Boehm, Kurtz & Lowry 36 East Seventh Street, Suite 1510 Cincinnati, Ohio 45202 (513) 421-2255 Counsel for Amicus Curiae, Ohio State Chiropractic Association and Ohio Osteopathic Association

Mark S. Maddox (0029852) Frost, Maddox & Norman Co., L.P.A. 987 South High Street Columbus, Ohio 43206 (614) 445-8888 Counsel for Appellee American Family Insurance

Laura M. Faust (0059494) Jerome B. Wyss (0074337) Roetzel & Andress K4R 2 3 Mg 222 S. Main Street CLERK OF COURT Akron, Ohio 44308 SUPREME COURT OF OHIO (330) 376-2700 Counsel for Amicus Curiae, Ohio Association of Civil Trial Attorneys

I TABLE OF CONTENTS

TABLE OF AUTHORITIES ...... ii

1. ARGUMENT ....:...... 1

Proposition of Law No. I: A person who has been injured in an automobile accident but who has not yet established liability for the accident may assign his/her right to proceeds, either judgment or settlement, in whole or in part, as consideration for medical treatment ...... I

SECOND ISSUE PRESENTED FOR CONFLICT ...... 1

May a person who has been injured in an automobile accident but who has not yet established liability for the accident and a present right to settlement proceeds, but who may have that right in the future, even if the future existence of the proceeds is conditional, assign that right, in whole or in part, to another under Ohio law?...... 1

A. The well-reasoned law of Ohio finds the Assignment valid ...... 1

B. The Assignment transferred only a share of prospective proceeds ...... 2

C. American paid "proceeds" to Norregard and disregarded its obligation to pay consistent with the Assignment ...... 6

D. The Assignment will not hinder settlement ...... 9

E. American distorts the common law of assignments ...... 12

1. Erroneous legal analysis ...... 14

Proposition of Law No. II: R.C. 3929.06 does not preclude an assignee of settlement proceeds from bringing a direct action against a third party insurer, who had prior notice of such assignment, after the insurer had settled with the assignor and distributed settlement proceeds in disregard of that written assignment ...... 16

FIRST ISSUE PRESENTED FOR CONFLICT ...... 16

Does R.C. 3929.06 preclude an assignee of prospective settlement proceeds from bringing a direct action against a third party insurer, who had prior notice of such written assignment, after the insurer distributed settlement proceeds in disregard of that written assignment? ...... 16

II. CONCLUSION ...... 20

CERTIFICATE OF SERVICE ...... 20 TABLE OF AUTHORITIES

Achrem v. Expressway Plaza Ltd. Partnership (1996), 917 P.2d 447 ...... 4,5

Aetna Casualty & Surety Co. v. Hensgen (1970), 22 Ohio St.2d 83, 258 N.E.2d 237 ...... 1

Akron Square Chiropractic v. Creps, Summit App. No. 21710, 2004-Ohio- 198 8 ...... 13, 15

Bernstein v. Allstate Ins. Co. (1968), 56 Misc.2d 341, 288 N.Y.S.2d 646 ...... 5, 15

Builders & Manufacturers Mut. Casualty Ins. Co. (N.D. Ohio 1939), 29 F. Supp. 929, aff'd 118 F.2d 118 ...... 17, 18

Cartwright Chiropractic v. Allstate Ins. Co., Butler App. No. 2007-06-143, 2008-Ohio-263 ...... 13, 18

Charlotte-Mecklenburg Hospital Authority v. First of Georgia Ins. Co. (1995), 455 S.E.2d 655 ...... 4

Chitlik v. Allstate Ins. Co. (1973), 34 Ohio App.2d 193, 299 N.E.2d 295 ...... :... 16

Cincinnati v. Hafer ( 1892), 49 Ohio St. 60, 30 N.E. 197 ...... :...... 13

Costanzo v. Costanzo (N.J. Super. 1991), 590 A.2d 268 ...... 8

Crawford v. Chapman ( 1848), 17 Ohio 449 ...... 13

Davy v. Fidelity & Casualty Ins. Co. (1908), 78 Ohio St. 256, 85 N.E. 504 ...... 3, 9

Fletcher v. Nationwide Mutual Ins. Co., Montgomery App. No. 02CA1599, 2003-Ohio-3038 ...... 18, 19

Hernandez v. Suburban Hospital Assoe. (1990), 319 Md. 226, 572 A.2d 144 ...... 5

In re Musser (W.D. Va. 1982),24 B.R. 913 ...... 5

In re Petry (Bkrtcy. N.D. Ohio, 1986) 66 B.R. 61 ...... 7,15

Inter Ins. Exchange v. Wagstaff (1945), 144 Ohio St. 457, 59 N.E.2d 373 ...... 1

Key v. Vattier (1823), 1 Ohio 132 ...... 3

Knop Chiropractic, Inc. v. State Farm Ins. Co., 2003-Ohio-5021 ...... 7

Leber v. Buckeye Union Ins. Co. (1997), 125 Ohio App.3d 321, 708 N.E.2d 726 ...... 1, 13

Lewis v. Lewis, Admx. (1846), 15 Ohio 415 ...... 3

ii Meros v. Rorapaugh (Ct. App. Cuyahoga Nov. 22, 2000), Case No. 77611, 2000 Ohio App. LEXIS 5477 ...... 8

Moore v. Weinberg (Ct. App. S.C. 2007), 373 S.C. 209, 644 S.E.2d 740 ...... 9

P.C., C. & St. L. Ry. Co. v. Volkert (1989), 58 Ohio St. 362, 50 N.E. 924 ...... 3,7

Pancoast v. Ruffin (1824), 1 Ohio 381 ...... 1

Parks v. American Warrior, Inc. (10th Cir. 1995), 44 F.3d 889 ...... 6

Pennsylvania Co. v. Thatcher (1908), 78 Ohio St. 175, 85 N.E. 55 ...... 6,7

Pilkington N. Am., Inc. v. Travelers Cas. & Sur. Co., 112 Ohio St.3d 482, 2006-Ohio-6551, 861 N.E.2d 121 ...... 13

Rancman v. Interim Settlement Funding Corp. (2003), 99 Ohio St.3d 121, 2003-Ohio-2721, 789 N.E.2d 217 ...... 2, 3, 4

Reddy v. Zurich General Accident & Liability Ins. Co., Ltd. (Supp. Ct. N.Y. 1939), 171 Misc. 69, 11 N.Y.S. 2d 88 ...... 9

Richard v. National Transportation Co., Inc. (Mun. Ct. N.Y. 1936), 158 Misc. 324, 285 N.Y.S. 870 ...... 14

Sowers v. Luginbill, 175 Ohio App.3d 745, 2008-Ohio-1486, 889 N.E.2d 172 ...... 12

Yorgan v. Durkin (WI 2006), 290 Wis.2d 671, 715 N.W.2d 160 ...... 11, 12

Ohio Revised Code Section 3929.06 ...... 14, 16, 17, 18, 19

3 POMEROY EQULTY.lUR1SPRUDENCE, Section 1271 (1941) ...... 15

6 Ohio Jurisprudence 3d (2006), Assignments, Section IS ...... 14

Black's Law Dictionary (7th Ed. 1999) ...... 12

Blackstone, Commentaries on the Laws of England IV ...... 3

iii I. ARGUMENT

Proposition of Law No. 1: A person who has been injured in an automobile accident but who has not yet established liability for the accident may assign his/her right to proceeds, either judgment or settlement, in whole or in part, as consideration for medical treatment.

SECOND ISSUE PRESENTED FOR CONFLICT

A. The well-reasoned law of Ohio finds the Assignment valid.

An assignment is a transfer of some right or interest from one person to another, which causes to vest in another the right or interest. Leber v. Buckeye Union Ins. Co. (1997), 125 Ohio

App.3d 321, 332, 708 N.E.2d 726, citing Aetna Casualty & Surety Co. v. Hensgen (1970), 22

Ohio St.2d 83, 258 N.E.2d 237. "An unqualified assignment transfers to the assignee all the interest of the assignor in and to the thing assigned." Leber, 125 Ohio App.3d at 332, citing

Pancoast v. Rujjtn (1824), 1 Ohio 381. "As a general rule, an assignee `stands in the shoes of the assignor ... and succeeds to all the rights and remedies of the latter."' Leber, 125 Ohio App.3d

at 332, quoting Inter Ins. Exchange v. Wagstaff(1945), 144 Ohio St. 457, 59 N.E.2d 373.

Scrutiny of the Assignment manifests Norregard's intent to transfer the expected proceeds from a settlement or judgment for the personal injuries she had suffered on July 6,

2002, to West Broad in exchange for medical treatment and postponement of payment for such

services. The Assignment provided in pertinent part:

I hereby assign my right to receive or collect any check or monies offered for compensation to me by any person for any injury for which I received treatment from West Broad Chiropractic. I HEREBY NOTIFY ANY PERSON, INSURANCE COMPANY OR OTHER RESPONSIBLE PARTY THAT THIS DOCUMENT IRREVOCABLY ASSIGNS MY RIGHT

1 TO COLLECT OR RECEIVE PAYMENT IN ANY FORM AS AND FOR COMPENSATION FOR ANY INJURIES FOR WHICH I RECEIVE TREATMENT FROM WEST BROAD CHIROPRACTIC. YOU ARE DIRECTED HEREIN TO PAY WEST BROAD CHIROPRACTIC DIRECTLY THE AMOUNT OUTSTANDING BEFORE MAKING ANY PAYMENT TO ME.

(Supp. 14) (emphasis added).

A fair and reasonable reading of this document can leave little doubt that Norregard intended to transfer to West Broad only the proceeds from any monetary recovery from the accident that had occuffed on July 6, 2002. Nothing in the Assignment conveyed the personal injury claim itsel£ Nothing in the Assignment conveyed control of the prosecution or settlement of the personal injury claim itself. Under the Assignment, if Norregard did not pursue the personal injury claim, West Broad could do nothing. Instead, Norregard would be personally liable for the outstanding balance for the services provided by West Broad.

B. The Assignment transferred only a share of prospective proceeds.

Without a single citation to an Ohio case holding the assignment of prospective proceeds from a settlement or judgment in exchange for medical treatment to be an assignment of a cause of action for personal injury, American argues that the medical-care provider who agrees to be paid from the patient's prospective recovery has taken an assignment of the cause of action itself and undertaken to further her interest in a lawsuit "in exchange for a part of the litigation matter if a favorable result ensues." Raneman v. Interim Settlement Funding Corp. (2003), 99 Ohio

St.3d 121, 2003-Ohio-2721, 789 N.E.2d 217, at ¶10. However, the Assignment did not assign

Norregard's rights to her claim in West Broad which would prevent her "from compromising or settling their controversies." Id. In fact, Norregard retained absolute control of the claim. The

Assignment did not mandate Norregard to make a claim. The Assignment did not condition or limit Norregard's control of the claim. The Assignment did not vest West Broad with any veto

2 over settlement. Instead, the Assignment simply transferred to West Broad a share of her prospective recovery to pay for the chiropractic treatment provided to her for her injuries.

The common law banned the practices of maintenance and champerty because they kept

"alive strife and contention", perverting "the remedial process of the law into an engine of oppression." Blackstone, Commentaries on the Laws of England IV, p. 135; Rancman at ¶10.

This Court long ago stated the "three elements to constitute the offense of champerty: lst. And this is common to all forms of maintenance, the absence of any other interest in the case on the part of the champertor than that arising from his champertous contract. 2d. The assumption by the champertor of all expenses in conducting the case. 3d. A previous agreement for his remuneration from the proceeds of the suit." P.C., C. & St. L. Ry. Co. v. Volkert (1989), 58 Ohio

St. 362, 371, 50 N.E. 924. The hallmark of a champertous contract is any limitation upon the right to compromise or settle the claim with the adverse party. In Key v. Vattier (1823), 1 Ohio

132, 153, the Court succinctly stated:

The stipulation in the contract, on which the opinion and judgment of the court are chiefly predicated, and to which they have directed it to be confined, is that which prevents Vattier from compromising and settling the matters in controversy, without the consent and concurrence of the other contracting parties. This point being considered sufficient, the court forbears to give an opinion on any other.

Likewise, the Court said in Lewis v. Lewis, Admx. (1846), 15 Ohio 415, 716:

A contract with an attorrrey to prosecute a suit containing a stipulation that the party should not have the privilege to settle or discontinue it, without the assent of the attorney, would be so much against good policy, that the court should not enforce it.

The Court was equally explicit in Davy v. Fidelity & Casualty Ins. Co. (1908), 78 Ohio St. 256,

269, 85 N.E. 504:

... the really vital question in all of these cases is this: Does the contract contain an expressed or implied limitation upon the right

3 of the client to compromise and settle his claim with his adversary without the consent of anybody else? When such a limitation appears in the contract, the contract is voidable at the option of the client and its illegality may be pleaded as a defense in any action founded on the contract.

In Rancman, the Court voided a contract making the repayment of funds advanced to a party to a pending case contingent upon the outcome of that case as champerty and maintenance.

Id. at ¶19. Unlike the contract in Rancman, West Broad did not advance any funds to Norregard.

Instead, West Broad provided treatment to Norregard and postponed collection of payment for those services. In exchange, Norregard assigned to West Broad a share in the prospective recovery to pay for that chiropractic treatment. West Broad was not investing in litigation.

Instead, West Broad agreed to refrain from collecting for the value of the services actually supplied to Norregard. Unlike the contract in Rancman, the Assignment did not make payment for the chiropractic treatment contingent upon the outcome of that case. If Norregard realized no recovery, West Broad would still be entitled to be paid for its services. Unlike the contract in

Rancman, the Assignment is not void as champerty or maintenance.

Courts have consistently recognized a real discernible difference between an assignment of a cause of action and control of that cause of action and an assignment of proceeds from that cause of action. In Charlotte-Mecklenburg Hospital Authority v. First of Georgia Ins. Co.

(1995), 455 S.E.2d 655, the Supreme Court of North Carolina held unqualifiedly:

There is a distinction between the assignment of a claim for personal injury and the assignment of the proceeds of such a claim. The assignment of a claim gives the assignee control of the claim and promotes champerty. Such a contract is against public policy and void. *** The assignment of the proceeds of a claim does not give the assignee control of the case and there is no reason it should not be valid.

Id. at 657 (citations omitted). The Supreme Court of Nevada in Achrem v. Expressway Plaza

Ltd. Partnership (1996), 917 P.2d 447, held:

4 ... a meaningful legal distinction exists between assigning the rights to a tort action and assigning the proceeds from such an action. *** When the proceeds of a settlement are assigned, the injured party retains control of their lawsuit and the assignee cannot pursue the action independently. *** Also, the ability to assign portions of the proceeds of the suit allows an injured plaintiff to obtain an attorney through a contingency fee arrangement that allows the plaintiff to pursue the action without being burdened by medical bills associated with the accident.

Id. at 449 (citations omitted). Likewise, Maryland's highest court concluded that the assignment of expected personal injury claim benefits to secure hospital or medical expenses is valid and enforceable. Hernandez v. Suburban Hospital Assoc. (1990), 319 Md. 226, 235, 572 A.2d 144,

148. The Maryland Court found "good reason to enforce such assignments":

As to public policy considerations, ..., we see no danger of champerty or maintenance, nor any other public policy reason to preclude the assignment of expected personal injury claim benefits to secure hospital or medical expenses actually incurred. Indeed, there is good reason to enforce such assignments.

Id. at 235, 572 A.2d at 148. In In re Musser (W.D. Va. 1982), 24 B.R. 913, the Court, applying

Virginia law, affirmed an assignment of potential proceeds to a hospital. In response to the

"public policy" argument, the Court found that the assignment of proceeds was meaningfully different:

The hospitals seek recoveries limited to the value of services actually supplied to the debtors. And the debtors retained complete control over their personal injury cases. The hospitals' rights exist only in the proceeds, not in the debtors' causes of action. The hospitals had no right to proceed against the third-party tort-feasors even if the debtors decided not to pursue their tort claims.

Id. at 921; see also Bernstein v. Allstate Ins. Co. (1968), 56 Misc.2d 341, 343, 288 N.Y.S.2d 646,

649 ("While a claim cannot be assigned, the proceeds of a recovery may be assigned."). As these cases demonstrate, courts have recognized a meaningful difference between an assignment of a cause of action and an assignment of proceeds. In this case, West Broad had only an

5 assignment of proceeds.'

There is a real and fundamental distinction between the assignment of a claim and assignment of proceeds. With the assignment of the claim, the assignee may perpetuate the litigation independent of the assignor. With the assigmnent of proceeds, the assignee is bound to the resolution the assignor realizes. With the assignment of the claim, the assignee may negotiate separately. With the assignment of proceeds, the assignee is bound to the amount the assignor agreed to. As in this case, West Broad had no say in the settlement but could only demand that its name be added as a payee on the check ultimately issued.

C. American paid "proceeds" to Norregard and disregarded its obligation to pay consistent with the Assignment.

Misreading the decision in Pennsylvania Co. v. Thatcher (1908), 78 Ohio St. 175, 85

N.E. 55, American argues that this Court long ago defined "proceeds" as existing only in the possession of the tortfeasor. Consequently, whatever money it paid to Norregard in exchange for

a release discharging any and all claims against it and its insured was not proceeds. (Brief of

Appellee, pp. 3-6). This metaphysical argument can find no basis in this Court's opinion. The

Court in Thatcher simply held that the assignee could not enforce the assignment against the

obligor because the assignee had not given notice of the nature of the interest assigned and had

mistaken his remedy.

In the notice to the obligor, Pennsylvania Co., the assignee, Thatcher, advised that the

assignor "has assigned to me a portion of whatever may be paid in suit or services to be rendered

in connection with such claim." The Court found such notice

American has no standing to challenge the validity of the Assignment as champertous. The existence of a champertous agreement between a plaintiff and a third party does not affect the defendant's obligation to plaintiff. Parks v. American Warrior, Inc. (10th Cir. 1995), 44 F.3d 889, 893. "A defendant cannot cite a champertous agreement as a bar to claims of liability." Id. American, therefore, caimot challenge the Assignment as champertous.

6 merely apprised [Pennsylvania Co.] that [Thatcher] claimed to have an assignment of "a portion of whatever may be paid." It contained no assertion that whatever might be paid should be paid to him or that it might not be paid to his client .... It was not a notice that [Thatcher] claimed an interest in the amount which might be agreed upon by way of settlement before it left the hands of [Pennsylvania Co.], but it was a notice of a claim upon the fund created by payment, ... that is after it should become "paid."

Id. at 189. In other words, Thatcher himself limited his assignment to money paid and not

proceeds to be paid.

Having given notice of an assignment of a claim upon the fund after payment instead of

an assignment of future proceeds, Thatcher also failed to seek the correct remedy.' This Court

explained:

Assuming, therefore, for the purposes of this case ... the contract amounts to an equitable assigmnent of an interest in the proceeds of the compromise, still it must be apparent that [Thatcher] mistook his remedy. This is an action at law against the tortfeasor alone and not a proceeding in equity. It is just such a suit as the court ... declared could not be maintained.

Id. at 188. In effect, this Court simply reaffirmed its decision in Volkert, supra. In Volkert, this

Court acknowledged the enforcement of equitable assignmcnts: "But whatever term is applied to

it, by way of description, the result reached is to give to the assignee a property right in the thing

assigned, a right which is cognizable by and enforceable in a court of equity." 58 Ohio St. at

371. Clearly, Pennsylvania Co. v. Thatcher offers no solace to American.'

2 The Court in In re Petty (Bkrtcy. N.D. Ohio, 1986), 66 B.R. 61, 63 distinguished Thatcher on that basis:

Debtors have n ade a variety of arguments that this assignment is not valid. The cases cited for this proposition, Volkert, supra, and Pennsylvania Co. v. Thatcher, 78 Ohio St. 175, 85 N.E. 55 (1908) state only that no action was maintainable at law, but that one was available in equity. Of course, there is now only `one form of action ... [a] civil action.' Fed. R. Civ. P. 2; Ohio R. Civ. P. 2.

Even the Court of Appeals for the Fifth Appellate District recognized that Thatcher did not announce "a blanket proscription against plaintifPs assignment of prospective judgment proceeds to a legal of medical provider." Knop Chiropractic, Inc. v. State Farm Ins. Co., 2003-Ohio-502 1, at ¶14. The Court concluded that "the holding in that case *** turns on [Plaintiff's] selection of the wrong remedy." Id. (citation oniitted).

7 Likewise, American's reliance upon Meros v. Rorapaugh (Ct. App. Cuyahoga Nov. 22,

2000), Case No. 77611, 2000 Ohio App. LEXIS 5477 is misplaced. In Meros, the attomey, "by virtue of his having rendered professional legal services pursuant to a contingency fee contract

... enjoyed an equitable lien on the funds resulting from the ... [ultimate] judgment for the payment of those fees, and could file an action to enforce that lien." Id. at * 17-18. However, the record contains no reference to notice of this lien to any obligor. Like Thatcher, but unlike West

Broad, Meros' lien was only on the funds paid and not funds to be paid. Consequently, the Court of Appeals limited enforcement of the lien to the funds paid to the client. Here, West Broad has an equitable assignment of proceeds to be paid and gave notice of that assignment to American.

American highlights its out-of-date argument with a quotation from the Court of Errors

and Appeals of New Jersey. (Brief of Appellee, p. 4). However, American does not quote or even cite this Court to the modem case law of New Jersey which recognizes the validity of an

assignment of a right to monies from an expected settlement of an existing tort claim. hi

Costanzo v. Costanzo (N.J. Super. 1991), 590 A.2d 268, 271, the Court held:

The purported assignment in this case was not of an expected settlement fund from an expected tort claim. It was an assignment of a right to monies from an expected settlement of an existing tort claim. The "specific thing" which was intended to be assigned was a sum of money from an identifiable fund arising at a future time as a result of the fulfillment of a condition (a settlement of the tort claim). The right to the proceeds of the expected settlement is therefore assignable.

Clearly, American's reliance upon case law predating the modem enforcement of

assignments of future payments to pay present medical expenses is misplaced. At the time

Norregard signed the Assignment, she had a present right to assign future settlement proceeds.

Such an assignment is not defeated by the fact that the right to receive the money is conditioned

upon the availability of proceeds from the resolution of the claim. Moore v. Weinberg (Ct. App.

8 S.C. 2007), 373 S.C. 209, 644 S.E.2d 740, 746. The Assignment, instead "... attached to the proceeds ... of the claim ..., and became effective, in equity, as soon as the settlement was consummated." Reddy v. Zurich General Accident & Liability Ins. Co., Ltd. (Supp. Ct. N.Y.

1939), 171 Misc. 69, 17, 11 N.Y.S. 2d 88. American's argument that it did not have any

"proceeds" when it settled with Norregard is nothing more than legal legerdemain. If American refused to pay Norregard, could American then defend that breach of contract with the defense that it held no proceeds owed to her? Adoption of such reasoning would eradicate the common law of assigmnents.

D. The Assignment will not hinder settlement.

Citing Davy v. Fidelity & Casualty Ins. Co., supra., American argues that the Assignment will encourage litigation, discourage settlements and ... "increase burdens on tortfeasors' ability to compromise personal injury claims." (Brief of Appellee, p. 6). The specter of such complications has no basis in law or fact. In Davy, this Court held:

While a contract for an attomey's fee contingent upon the amount to be recovered by judgment or settlement is ordinarily valid, yet when such contract contains a stipulation that the client shall not compromise or settle his claim without the consent of the attorney, it is champertous and voidable at the option of the client, and its illegality will avail as a defense in any action against a third party which is based on the contract.

78 Ohio St. 256, syl. 1. The Court found the contingency fee agreement void not because it assigned a portion of the proceeds arising from a tort but because the agreement contained an express limitation upon the right of the client to compromise and settle his claim with his adversary without the consent of the attorney. Id. at 267. Unlike the fee arrangement in Davy, the Assignment contained no such limitation upon Norregard. The language of the Assignment did not limit, restrict, inhibit or condition Norregard's ability to settle her claim. Consequently, the Assignment does not hinder settlement in contravention of Ohio law.

9 Exaggerating the consequences of the Assignment, American suggests that the viability of the Assignment will preclude the tortfeasor or her insurance company from contesting the reasonableness and necessity of medical treatment. In fact, the Assignment will not alter either trial strategy or the dynamic of settlement negotiations. A simple example will illustrate. A soft tissue injury victim in an automobile accident often incurs the following damages: emergency room treatment, follow-up medical treatment, chiropractic treatment and repair to his automobile. The tortfeasor and her insurer can litigate both liability and damages without any limitation from the Assignment. If the tortfeasor or her insurance company engage in settlement negotiations, the issues of liability and damages will inform the negotiation. The interplay of liability and damages will provide the basis for any settlement offer. If liability is contested, then the offer may be less than 40% of the damages. If liability is not contested but damages are contested, the same offer may be made. The Assignment would not alter the assessment of the case and increase or decrease the amount of the settlement offer.

Once the offer is made to the assignor, the assignee has no veto power. The assignor may accept or reject. The assignment does not guarantee the assignee payment of a sum certain.

However, the assignor will remain liable to the emergency room, the treating physician, the treating chiropractor and the automobile repairman. Clearly, the assignment does not alter the dynamic of the tort process. The assignment simply assures the treating healthcare professional that he/she will be paid in exchange for treatment and postponing collection.

In every personal injury lawsuit the plaintiff has presumably received some type of medical treatment for his or her injuries. The payment for that treatment is a component of the damages to be recovered in the lawsuit. If plaintiff has many or costly medical expenses, those expenses will directly impact settlement negotiations. However, the obligation to pay for that

10 care is not void as champertous or a hindrance to settlement. Is the hospital's insistence that it be paid champertous? Is the doctor's demand to be paid a hindrance to settlement? Adopting such reasoning is nothing less than encouraging insurance companies to pay less than what is owed the injured party and leaving the hospital, the doctor, and the chiropractor to pursue additional litigation to recover from the injured party. In other words, this is not about impeding fair settlement, this is about letting insurance companies escape from paying what is owed.

American also argues that the Assignment adds to the burden of the tortfeasor and her insurance company to settle.° American raises the specter of a frenzied adjustor running about collecting information from hospitals, doctors, clinics and chiropractors. In reality, the insurance company is already provided the information. In any claim for damages, the victim will present the insurance company with the bills from the hospital, treating physicians, and treating chiropractors. As American concedes, the adjustor already negotiates with the healthcare provider in order to facilitate settlement. (Appellee Brief, p. 7). With that infonnation in hand, the insurance company will make an offer of settlement. If accepted, the insurance company need only add to the names of the payee those health care providers who have given notice of an

assignment of proceeds. In this case, West Broad had advised American, "please include West

Broad ... as a named co-endorser on any disbursement check that you issue ...... (Supp. 8). "In

the event that you choose to not pay ... Norregard, you are under no obligation to pay West

Broad ...... (Supp. 8).

Equally disingenuous is American's reliance upon Yorgan v. Durkin (WI 2006), 290

Wis.2d 671, 715 N.W.2d 160. In Yorgan, the Wisconsin Supreme Court struggled to balance the

a While arguing that an assignment would "guarantee" payment and unreasonably interfere with the settlement process, American apparently finds no objection to a "letter of protection" "which assures payment from the proceeds." (Appellee Brief, p. 10).

11 competing duties of an attorney to a client and an assignee of a client. In striking the balance in favor of immunity from liability for the attomey, the Court did so under unique factual circumstances. The assignment specifically vested the assignee with a remedy if the lawyer elected not to honor the assignment. With an existing remedy, the Court chose not to enforce the assignment. Here, American has none of the fiduciary obligations of an attoruey. Additionally, the Assignment does contain the same remedy as in Yorgan. Consequently, the public policy considerations addressed in Yorgan are inapposite. More importantly, a majority of the

Wisconsin Supreme Court actually concluded that an attorney with actual notice of an assignment between a client and a medical care provider who chooses to release the assigned funds without notifying the health care provider may be held liable. Id. at ¶47 (Wilcox J., concurring) and ¶53 (Roggensach, J., and Butler J. dissenting). Yorgan therefore supports enforcement of the Assignment against American.

E. American distorts the common law of assignrnents.

American perpetuates the erroneous reasoning of the Court of Appeals, arguing that

Norregard had only a naked or remote possibility of realizing proceeds. (Brief of Appellee, pp.

10-12). This reasoning is fundamentally flawed! At the time Norregard executed the

Assignment, she had already been in the accident. She had an existing right to prospective proceeds, either in settlement or from ajudgment, for that personal injury claim. "A claim is

`[t]he aggregate of operative facts giving rise to a right enforceable by a court' or a`cause of action."' Sowers v. Luginbill, 175 Ohio App.3d 745, 2008-Ohio-1486, 889 N.E.2d 172, at 132, quoting Black's Law Dictionary (7th Ed. 1999). "The cause of action here accrued on the date of the accident ...." Sowers at ¶33. As of that date, Norregard had a claim against American's insured which could result in proceeds, either in settlement or judgment. "The cause of action

existed at the time the assignment was executed. While the amount of recovery depended upon

12 later proof, the action existed and a share of [the recovery] could be assigned." In re Petry, 66

B.R. at 63.

"In Ohio, Generally (sic), all rights, ad rem and in re, vested or contingent, possibilities coupled with an interest, and claims growing out of and adhering to property, both from contract and tort, may be assigned." Cartwright Chiropractic v. Allstate Ins. Co., Butler App. No. 2007-

06-143, 2008-Ohio-263, at ¶15. From the date of Norregard's accident with the tortfeasor, she owned a claim for damages and the prospective right to obtain payment of pecuniary damages or settlement proceeds. Id. at ¶16; see also, Akron Square Chiropractic v. Creps, Summit App. No.

21710, 2004-Ohio-1988, at ¶11 ("... we have recognized the right of an injured party to assign its rights to claims which they might have pursued under [an insurance policy] as a result of an injured party's injury."). This Court has recognized that right to be a chose in action which is established at the time of the loss and not when reduced to a sum of money due. Pilkington N.

Am., Inc. v. Travelers Cas. & Sur. Co., 112 Ohio St.3d 482, 2006-Ohio-6551, 861 N.E.2d 121, at

¶20.

This Court has also recognized that a chose in action includes "the right to bring in action

in tort and in contract.." Id. The Court reiterated in Cincinnati v. Hafer ( 1892), 49 Ohio St. 60,

65, 30 N.E. 197:

[W]hile ... a`chose in action' is ordinarily understood [to be] a right of action for money arising under contract, the term is undoubtedly of much broader significance, and includes the right to recover pecuniary damages for a wrong inflicted eitlier upon the person or property. It embraces demands arising out of a tort, as well as causes of action originating in the breach of a contract.

Pilkington at ¶20. In Ohio, "[i]t is permissible to assign a chose in action." Leber, 125 Ohio

App.3d at 332, citing Crawford v. Chapman ( 1848), 17 Ohio 449.

Norregard did not assign to West Broad her right to proceeds from any future personal

13 injury claim, but she assigned her right to proceeds from an existing chose in action, her right to recover pecuniary damages for a wrong inflicted upon her person in the accident, which had occurred before executing the Assignment. From that chose in action, Norregard had an existing proprietary interest from which she could realize proceeds from either settlement or j udgment.

I. Erroneous legal analysis.

American compounds its factual error with a distortion of Ohio assignment law. Citing again to Pennsylvania v. Thatcher, supra., American argues that "a mere naked or remote possibility" cannot be assigned. However, American, like the Court of Appeals, simply ignores

Ohio assignment law. "A present existing right, to take effect in the future on a contingency, may be assigned." 6 Ohio Jurisprudence 3d (2006), Assignments, Section 18. In this case,

Norregard had a present existing right, namely, a cause of action from the accident which had accrued under Ohio law, from which she could realize proceeds in the future on a contingency, either settlement orjudgment. The present existing right to those proceeds can be assigned.

"The existence of the cause of action gave a potential existence to the proceeds; the potential existence of the proceeds gave an equitable existence to the assignment." Richard v. National

Transportation Co., Inc. (Mun. Ct. N.Y. 1936), 158 Misc. 324, 285 N.Y.S. 870, 872.

American confounds the existence of a tort claim with the opportunity to commence an action against the tortfeasor's insurer. Citing R.C. 3929.06, American argues that Norregard had no right at the time of the assignment to bring an action against American ...." (Appellee Brief, p. 11). In fact, Norregard had an existing right against American's insured with the prospective right of recovery when that claim was either adjudicated or settled. R.C. 3929.06 does not create the right to recover proceeds it merely establishes the timing to collect if the claim is tried to judgment.

Today, Ohio courts may enforce both an assignment at law and an equitable assignment,

14 such equitable assignment being completely consistent with longstanding authority and case law that a prospective fund can be assigned before it even exists. In equity, the assignee of an expectancy, possibility, or contingency acquires a present equitable right, which becomes a legal property right over the proceeds of such expectancy, possibility or contingency as soon as they come into existence as an interest in possession. 3 POMERoY EQUITY JURISPRUDENCE, Section

1271 (1941). See also, Bernstein, 56 Misc.2d at 342, 288 N.Y.S.2d at 649:

... when the negligence action was settled, and the settlement fund came into existence, the equitable assignment became a legal assignment. It effectuated a transfer of title to that portion of the fund assigned to the doctor and Allstate was obligated to immediately turn over that portion to him.

Similarly, in In re Petry, supra., the bankruptcy debtor had a personal injury claim arising from a motorcycle accident for which he obtained medical treatment at Cleveland Metropolitan

Hospital (the "Hospital"). In lieu of payment, the debtor executed a partial assignment to the

Hospital of any future insurance settlement from his accident. Confrrming the validity of the assignment, the Court dismissed the debtor's contention that an assignment of possible future proceeds was not valid, as the proceeds did not yet exist:

The cause of action existed at the time the assignment was executed. While the amount of recovery depended on later proof, the action existed and a share of [the recovery] could be assigned ... Debtor [the patient] assigned a share of any proceeds he received for his injuries to Metro [the Hospital], and Metro became the owner of those proceeds once the insurance settlement was reached.

Id. 66 B.R. at 63. As the Court of Appeals in Akron Square Chiropractic succinctly observed:

"Creps' right to assign potential future insurance proceeds arose at the time the accident with

Grecni occurred." 2004-Ohio-1988, at ¶12. Norregard, therefore, did have a "right in being"

when she made the assignment of prospective proceeds to West Broad. The Assignment was

valid and enforceable under Ohio law.

15 Proposition of Law No. II: R.C. 3929.06 does not preclude an assignee of settlement proceeds from bringing a direct action against a third party insurer, who had prior notice of such assignment, after the insurer had settled with the assignor and distributed settlement proceeds in disregard of that written assignment.

FIRST ISSUE PRESENTED FOR CONFLICT

Invoking the Court of Appeals decision in Chitlik v. Allstate Ins. Co. (1973), 34 Ohio

App.2d 193, 299 N.E.2d 295, American argues that R.C. 3929.06 imposes a blanket prohibition upon any suit against a tortfeasor's liability insurance company. (Brief of Appellee, p. 13).

However, American's reliance upon Chitlik is misplaced. Chitlik filed suit against the tortfeasor and the tortfeasor's insurance company, Allstate Insurance, for damages arising from the tortfeasor's negligent operation of her motor vehicle, insured by Allstate. Chitlik joined Allstate

Insurance on the theory that he was "a third party beneficiary of the liability insurance contract between Allstate and its insured...." Id. at 195. The Court affirmed the dismissal of Allstate, reasoning, "... a standard liability insurance policy is not a contract for the benefit of a third person. The contract is made with the intention of benefiting the insured, not someone whom he injures." Id. at 197. Based on that reasoning, the Court held "that personal injury actions must first be brought by the injured party against the alleged tortfeasor." Id. The Court further justified the dismissal of Allstate because "the policy of excluding any reference to the existence of insurance in an action to determine liability for personal injury would be circumvented by permitting the injured person to sue the insurance company and could constitute a prejudicial or harmful effect against the insurer." Id. at 197-198.

Here, however, the rationale in Chitlik does not apply. Norregard has settled her personal

16 injury claims with the tortfeasor's insurance company. American agreed to pay Norregard in exchange for her claims against American and its insured. Just as Norregard could now sue

American to collect these proceeds, West Broad, as Norregard's assignee, may now sue to collect its assigned proceeds. Further, the policy of excluding any reference to the existence of insurance in an action to determine liability for personal injury is not implicated by this lawsuit.

Section 3929.06 of the Ohio Revised Code does not preclude a direct action against a tortfeasor's insurance company to recover money obligated to be paid in settlement. Instead,

R.C. 3929.06 was enacted to postpone direct actions against the tortfeasor's insurer when liability was disputed until the plaintiff had established the tortfeasor's liability. The legislature did not intend for that section of the Revised Code to preclude a valid equitable assignment

enforceable against an insurance company when it has notice of the assignment and chooses to

ignore it after it becomes obligated to pay settlement proceeds.

"The purpose and intent of the Legislature in enacting this Section [originally] was to

give to the `judgment creditor or his successor in interest,' in the original tort action brought to

recover damages, the right to reach and apply the insurance money to the satisfaction of the judgment, if there be insurance money available." Builders & Manufacturers Mut. Casualty Ins.

Co. (N.D. Ohio 1939), 29 F. Supp. 929, 931, aff'd 118 F.2d 118. In Builders, the Court found

that the predecessor statute was not intended to preclude recovery against an insurance company.

Id. at 932. Specifically, R.C. 3929.06 applies "[i]f a court in a civil action enters a final

judgment that awards damages." R.C. 3929.06(A)(1). Nowhere does the language of the statute

indicate that it is intended to bar claims arising from a pre-judgment settlement. The Court in

Builders explained

When a plaintiff or plaintiffs in the tort action have been paid, and a release has been procured in advance of judgment, such as was

17 done in these cases [], there is no necessity whatever for invoking section 9510-4. * * * [W]hen the claims are satisfied in advance of judgment, then there has been no recovery of a final judgment against a defendant, and hence no right of action under 9510-4.

Id. at 933. Likewise, the Sixth Circuit confirmed that "Section 9510-4 [the predecessor to R.C.

3929.06] requires the application of the proceeds of the insurance to the satisfaction of an existing judgment, and is available only when a final judgment has been entered against the insured." 118 F.2d at 121.

The Court of Appeals in Cartwright similarly explained the scope of R.C. 3929.06:

R.C. 3929.06 is equally inapplicable because Allstate entered into a settlement in this case and Miller never had to file suit against Rice to even determine liability. Allstate's argument does not take into account that this case is not a matter of establishing liability, this is a matter involving settlement. Liability is not an issue of this case, nor does liability need to be established. Allstate entered into a settlement with Miller to extinguish any potential claim she had against its insured, and Allstate as the insurer. The statutory section Allstate cites is only relevant if a lawsuit is necessary to establish liability, and even then it does not prelude a lawsuit against Allstate, it simply requires the lawsuit against Allstate be delayed.

Cartwright at ¶19.

Clearly, R.C. 3929.06 has no application where the insurance company has settled with

the accident victim and became obligated to pay settlement proceeds. In Fletcher v. Nationwide

Mutual Ins. Co., Montgomery App. No. 02CA1599, 2003-Ohio-3038, the Court of Appeals for

the Second Appellate District expressly rejected the argument that the claimant to a settlement

agreement had no right of action to enforce the agreement against the insurer. Fletcher filed a

declaratory judgment action to have the settlement agreement between Fletcher and Nationwide

declared void because it had been fraudulently induced, citing misrepresentations of fact with

respect to the effect of the agreements on Fletcher's uninsured motorist claim against his own

insurer. Nationwide defended, arguing that as a third party beneficiary to an insurance contract,

18 Fletcher had no right of direct action against it. The Court found Nationwide's argument unpersuasive. While Fletcher may have had no right of direct action against the insurance company with respect to his negligence claim against the tortfeasor, that was not the nature of his declaratory judgment claim against Nationwide. "Nationwide is not a third party, but a principal, to the bi-lateral contract of settlement .... The unrelated constraints against third parties seeking coverage from insurers have no application." Id. at 123. Likewise, the unrelated constraints of

R.C. 3929.06 have no application to an assignee, standing in the shoes of the assignor-creditor, seeking to enforce the assignment against the obligor insurance company, who is by contract indebted to pay the settlement proceeds to the creditor.

Norregard never had to file suit against American's insured to determine liability.

American voluntarily obligated itself to Norregard when it entered into a settlement with

Norregard to extinguish "... any and all claims ... Norregard may have against American ...

and/or its insured." (Supp. 10) (emphasis added). Given American's obligation to pay

settlement proceeds to Norregard pursuant to a settlement agreement, both Norregard and West

Broad, as Norregard's assignee, may enforce that obligation to pay the settlement proceeds

through a direct action against American.

19 II. CONCLUSION

Here, the Court of Appeals has adopted a rule that forces parties to litigate, deters timely medical treatment, injects uncertainty into the common law and misreads the Ohio Revised

Code. To rectify this aberration in the law, the Court must reverse the decision of the Court of

Appeals, find that an accident victim may assign future proceeds in exchange for medical care and find R.C. 3929.06 does not bar a direct action against a tortfeasor's insurance company who ignores a valid assignment. This Court should conclude that the Assignment is valid and enforceable against any obligor, including the tortfeasor's insurance company.

Respectfully submitted, d C"A- r A1^^^^01 Vames F. McCarthy, III (00022145) Katz, Teller, Brant & Hild 255 East Fifth Street, Suite 2400 Cincinnati, Ohio 45202 (513)72I-4532 (513) 762-0006 (facsimile) j mccarthy@ katzteller.com

Counselfor Appellant

CERTIFICATE OF SERVICE

I hereby certify that a copy of the foregoing was served via regular United States mail

this 23rd day of March, 2009 upon all counsel of record.

ames F. McCarthy, III ^ . '4

KTBH: 4841-1794-0483, v. I