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Kisling, Nestico & Redick, L.L.C. v. Progressive Max Ins. Co.

Supreme Court of Ohio

January 16, 2020

KISLING, NESTICO & REDICK, L.L.C., APPELLEE,
v.
PROGRESSIVE MAX INS. CO. ET AL., APPELLANTS, ET AL.

          Submitted May 7, 2020

          Appeal from the Court of Appeals for Cuyahoga County, No. 105287, 2018-Ohio-1207.

          Kisling, Nestico & Redick, L.L.C., Christopher J. Van Blargan, and John Reagan, for appellee.

          Collins, Roche, Utley & Garner, Richard M. Garner, and David G. Utley, for appellants, Progressive Max Insurance Company, Progressive Southeastern Insurance Company, and Progressive John Doe Companies.

          Reminger Co., L.P.A., and Brian D. Sullivan, urging reversal for amicus curiae Ohio Association of Civil Trial Attorneys.

          Murray & Murray Co., L.P.A., and Margaret M. Murray, urging affirmance for amicus curiae Ohio Association for Justice.

          Kennedy, J.

         {¶ 1} In this discretionary appeal from the Eighth District Court of Appeals, we consider whether an insurer who settles a personal-injury claim with an accident victim has a duty to distribute a portion of the settlement proceeds to the victim's former lawyers pursuant to a charging lien. We hold that an action to enforce a charging lien is an in rem proceeding against a particular fund and that when a matter is resolved by settlement, the fund comes into being at the time the settlement is paid. A discharged law firm cannot call upon the equitable powers of the court to enforce a charging lien against a tortfeasor's insurer when no court action was initiated on behalf of the victim and an out-of-court settlement was paid to the victim. The discharged law firm must instead proceed against its former client for payment. We therefore reverse the judgment of the court of appeals.

         FACTS AND PROCEDURAL HISTORY

         {¶ 2} Darvale Thomas was injured in an automobile accident and hired a law firm, appellee, Kisling, Nestico & Redick, L.L.C. ("KNR"), to represent him. Todd Thornton was the alleged tortfeasor whose negligence caused the accident; his insurer was appellant Progressive Southeastern Insurance Company ("Progressive").

         {¶ 3} On July 10, 2014, Thomas and KNR entered into a contingent-fee agreement that purported to give KNR a charging lien on the proceeds of any insurance settlement, judgment, verdict award, or property obtained on Thomas's behalf. The contract between Thomas and KNR provides:

The Attorneys shall receive as a fee for their services, one-quarter (1/4) of the total gross amount of recovery of any and all amounts recovered, and Client hereby assigns said amount to Attorneys and authorizes Attorneys to deduct said amount from the proceeds recovered. Attorney[s] shall have a charging lien upon the proceeds of any insurance proceeds, settlement, judgment, verdict award or property obtained on your behalf.

         {¶ 4} Negotiations commenced between KNR and Progressive, and Progressive offered to settle the matter for $12, 500. Thomas subsequently discharged KNR. On July 9, 2015, KNR informed Progressive that it had been discharged by Thomas and that it was claiming a lien against any settlement funds paid to Thomas by Progressive. But there was no agreement between Progressive and KNR that Progressive would protect any lien. On July 14, 2015, Thomas settled his claims himself for $13, 044, and Progressive paid the full settlement amount to Thomas. Thomas did not pay KNR the attorney fees and expenses that KNR claims he owes for its work on the settlement prior to KNR's discharge.

         {¶ 5} KNR sued Thomas, Thornton, and Progressive to recover its attorney fees. Regarding Thomas, KNR alleged breach of contract, breach of fiduciary duty, bad faith, quantum meruit, and unjust enrichment. The trial court entered a default judgment against Thomas for attorney fees ...


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