594 A.2d 1106 (Me. 1991)
In 1988, Gary Jones was injured in a motorcycle accident and retained attorneys Anthony Irace and Donald Lowry to represent him in a personal injury action.1 Jones subsequently dislocated his shoulder twice in incidents unrelated to the motorcycle accident and required surgery.2
Unable to pay for the procedure at the time, Jones signed a letter dated June 14, 1988, on Dr. John P. Herzog's letterhead stating that payment for treatment of the shoulder injury should be made directly from the settlement of his pending claim for the unrelated motorcycle incident.3 Dr. Herzog notified Irace and Lowry of the assignment, and an employee of the firm informed him that the assignment was sufficient to allow the firm to pay the doctor's bills at the conclusion of the case.4 Herzog performed the surgery and continued to treat Jones for approximately one year.5
In May 1989, Jones received a $20,000 settlement in the motorcycle personal injury action.6 He instructed Irace and Lowry not to disburse any funds to Dr. Herzog, indicating that he would make the payments himself.7 The attorneys informed Herzog that Jones had revoked his permission for direct payment and that they would follow Jones's directions.8 They issued a check to Jones for $10,027 and disbursed the remaining funds to Jones's other creditors.9 Jones sent a check to Herzog that was returned by the bank for insufficient funds, and Herzog was never paid.10
Dr. Herzog filed a complaint in District Court against Irace and Lowry seeking to enforce the June 14, 1988 assignment.11 The matter was tried before the court on the basis of a joint stipulation of facts.12 The District Court (Goranites, J.) entered judgment in favor of Herzog.13 Following an unsuccessful appeal to the Superior Court (Cumberland County, Cole, J.), Irace and Lowry appealed to the Supreme Judicial Court of Maine, which reviewed the District Court's decision directly.14
Whether the June 14, 1988 letter constituted a valid and enforceable assignment of settlement proceeds against the attorneys?15
An assignment is valid when the assignor manifests clear intent to transfer the right to the assignee without retaining control or power of revocation.16 Upon notice to the obligor, the fund becomes impressed with a trust that the obligor must honor for the assignee.17 Maine recognizes assignments of future proceeds from pending litigation as valid equitable assignments, including partial assignments.18
Yes. Jones retained Irace and Lowry after his motorcycle accident and later signed the June 14, 1988 letter directing payment from the settlement to Herzog for the unrelated shoulder surgery.19
Herzog notified the firm of the assignment, and an employee confirmed it was sufficient to permit direct payment of the bills.20 Jones received the $20,000 settlement but instructed the attorneys not to pay Herzog.21
The letter gave no indication that Jones retained control over the funds and the services and charges were reasonable and necessary.22 The attorneys had ample notice, so the assignment took effect and impressed the proceeds with a trust that prevented payment to Jones or other creditors.23
The June 14, 1988 letter constituted a valid and enforceable assignment of settlement proceeds against the attorneys.24
Whether enforcement of the assignment would interfere with the attorneys' ethical obligations toward their client?25
Attorneys must honor valid assignments of settlement proceeds. Under the Maine Bar Rules, an attorney must promptly pay funds the client is entitled to receive, but a client who has assigned those funds is no longer entitled to them.26 The rules do not prohibit client assignments of litigation proceeds or require attorneys to honor revocations of valid assignments, and any encumbrance is created by the client rather than the attorney.27
No. Jones assigned the proceeds to Herzog, so he was no longer entitled to receive them under M.Bar R. 3.6(f)(2)(iv).28 The attorneys therefore had no ethical duty to follow Jones's later instruction to disregard the assignment.29 The assignment does not violate M.Bar R. 3.7(c) because the client, not the attorney, placed the encumbrance on the funds.30 Irace and Lowry were under no ethical or contractual obligation to honor the revocation of a valid assignment.31
Enforcement of the assignment does not interfere with the attorneys' ethical obligations toward their client.32