## Facts

- Gary G. Jones retained attorneys Anthony Irace and Donald Grey Lowry to pursue a personal injury claim arising from a motorcycle accident.
- While that claim was pending, Jones suffered shoulder injuries and sought treatment from Dr. John P. Herzog, who recommended surgery; Jones could not pay at the time.
- On June 14, 1988, Jones signed a letter directing that payment be made directly to Dr. Herzog from the settlement of Jones’s pending personal injury claim to cover the shoulder-treatment bill.
- Dr. Herzog informed Irace and Lowry of the signed letter and treated it as an assignment of settlement proceeds; the attorneys’ office indicated the arrangement would allow payment at the conclusion of the case.
- Dr. Herzog performed the surgery and continued treating Jones for about a year.
- In May 1989, Irace and Lowry obtained a $20,000 settlement for Jones.
- After settlement, Jones instructed Irace and Lowry not to pay Dr. Herzog from the settlement and stated he would pay the doctor himself.
- The attorneys disbursed settlement funds to Jones and other creditors but paid nothing to Dr. Herzog.
- Jones later tendered a personal check to Dr. Herzog that was returned for insufficient funds, leaving Herzog unpaid.

## Issues

1. Whether Jones’s June 14, 1988 letter constituted a valid and enforceable assignment of a portion of future settlement proceeds to Dr. Herzog.
2. Whether enforcing that assignment against Jones’s attorneys conflicted with the attorneys’ professional obligations to deliver funds to their client under applicable bar rules.

## Decision

- The court affirmed judgment for Dr. Herzog.
- The court held the June 14 letter was a valid assignment of a portion of Jones’s recovery in the pending personal injury matter.
- The court held Jones could not revoke the assignment after it became effective; his later instruction not to pay Herzog did not defeat Herzog’s right to the assigned proceeds.
- The court held enforcement of the assignment did not violate the attorneys’ ethical duties because the client was not entitled to the assigned portion once the assignment was made.
- The attorneys, having notice of the assignment, were liable for disbursing the assigned portion to Jones and others instead of paying Dr. Herzog.

## Legal Principles

- A valid assignment exists when the assignor manifests an intent to transfer a right and does not retain control over the right or a power of revocation.
- Formal “words of assignment” are not required; substance and objective intent control.
- Rights to proceeds expected from pending litigation may be assigned if the assignment sufficiently identifies the fund and the intended transferee.
- After receiving notice of an assignment, a party holding or disbursing the relevant funds must protect the assignee’s interest and may be liable for paying the assignor instead.
- Professional rules requiring lawyers to deliver client funds apply only to funds the client is “entitled to receive”; validly assigned proceeds are not the client’s entitlement.

## Conclusion

The court enforced a client’s written direction as a binding assignment of part of anticipated settlement proceeds, imposed liability on attorneys who disbursed those proceeds despite notice, and rejected the claim that professional obligations to the client justified disregarding the assignee’s rights.


Herzog v. Irace, 594 A.2d 1106 (Me. 1991)