450 Mass. 388

Josette Audoire & another1 vs. Clients’ Security Board.

Worcester.

November 8, 2007.

January 10, 2008.

Present: Marshall, C.J., Greaney, Spina, Cowin, Cordy, & Botsford, JJ.

Michael J. Walsh for the plaintiffs.

Christine Baily, Assistant Attorney General, for the defendant.

Cordy, J.

As we discussed in Indeck v. Clients’ Sec. Bd., ante 379, 379 (2008), the purpose of the Clients’ Security Fund (Fund) is to “discharge, as far as practicable and in a reasonable manner, the collective professional responsibility of the members of the Massachusetts bar with respect to losses caused to the public by defalcation of members of the bar, acting either as attorneys or as fiduciaries.” S.J.C. Rule 4:04, as amended, 428 Mass. 1302 (1998). The responsibility for effectuating this *389purpose rests with the Clients’ Security Board (board), which has substantial discretion in determining whether or not to honor, pay, or reject claims for reimbursement. S.J.C. Rule 4:05, § 1, as amended, 440 Mass. 1349 (2004). “All reimbursements shall be a matter of grace, not right, and no client ... or other person [has] any right or interest in the Fund.” Id.

In exercising its discretion to make an award from the Fund, the board may require “any applicant, as a condition of any payment from the Fund ... to enter into such agreements as the Board may direct, including assignments, [and] subrogation agreements.” S.J.C. Rule 4:05, § 4, as appearing in 422 Mass. 1301 (1996).2 The principal question posed in this case is whether the board’s decision to condition a reimbursement award on an applicant’s execution of an assignment agreement is subject to judicial review. We conclude that it is not. We also conclude that the plaintiffs’ complaint, which seeks a declaration that the assignment executed in this case is invalid, fails to state a claim on which relief can be granted and was properly dismissed.

1. Procedural history. On July 10, 2006, Josette Audoire (an applicant for reimbursement) and Michael Walsh (the attorney representing the applicant in civil proceedings against her former defalcating attorney) brought suit against the board in the Superior Court, asserting that an assignment agreement entered into between the board and Audoire was both “void and contrary to public policy” because it was “induced by threat of delayed distribution” and entered into “without advice of counsel”; and invalid because a preexisting contingency fee arrangement between Walsh and Audoire deprived her of the capacity to execute it.

The board moved to dismiss the complaint for lack of subject *390matter jurisdiction and for failure to state a claim on which relief can be granted. The board’s motion to dismiss was allowed “for the reasons expressed in the [board’s] supporting memorandum.”3 The plaintiffs filed a timely notice of appeal, and we transferred the case from the Appeals Court on our own motion.

2. Background.4 On May 8, 2002, Audoire filed a civil complaint against Attorney Shirley Hoak (and her law firm) who had, through a series of fraudulent investment schemes, misappropriated monies from a number of clients including over $200,000 from Audoire.5 A settlement trust was formed to settle claims arising from the misconduct of Hoak and to distribute malpractice insurance proceeds to her former clients. Walsh initially represented Audoire in the civil proceedings against Hoak on a contingency fee basis.6 This representation reached an “impasse” when Walsh sought “some security” for his fees and Audoire elected to participate in the settlement trust (thereby agreeing to dismiss her lawsuit) without notifying him.

*391On December 16, 2003, while the settlement trust proceedings were ongoing, Audoire applied to the board seeking reimbursement of the funds that had been misappropriated by Hoak. In her application, Audoire stated that she was not represented by an attorney. She attached a letter to the application describing her disagreements with Walsh in the civil case, as well as a letter that she had written to Walsh, effectively terminating his services on September 22, 2003.7

On February 6, 2004, the trustee of the settlement trust sent Audoire a claim summary indicating that, as a preliminary determination, he had allowed a total of $203,414 against her claim of $257,622.22, and giving her twenty days to object. Audoire did not object, and the determination became final. Thereafter, Audoire received an initial distribution equal to twenty-five per cent of her allowed claim, or $50,583.50. The trustee also informed Audoire that subsequent distributions, if any, would be insignificant in relation to the amount of the initial distribution.

At its August 19, 2004, meeting, the board voted to make an award to Audoire in the amount of $152,560.50, the difference between the claim recognized by the settlement trustee ($203,414) and the trust’s initial distribution ($50,853.50).8 As was its practice, the board expressly conditioned the award on the execution of an assignment agreement, which would entitle it to future distributions from the settlement trust (up to the amount awarded by the board).9 The assignment form was mailed to Audoire along *392with notice of the board’s award.10 Audoire signed the agreement on August 27, 2004, returned it to the board, and shortly thereafter received a check in the amount of $152,560.50.

On December 13, 2004, Audoire “reaffirmed” her fee agreement with Walsh, who then continued to represent her “in relation to the Settlement Trust.” On June 7, 2005, the trust notified Audoire that it would distribute $10,993.57 to her as the remainder of the insurance proceeds designated for her claim. The board claimed this distribution pursuant to its assignment agreement with Audoire. Walsh, on behalf of himself and Audoire, objected to these funds being distributed to the board. Walsh and the board agreed to place $10,993.57 in escrow pending the resolution of their dispute, and this action followed.

3. Discussion. When the board exercises its discretion to grant or deny, in whole or in part, a client’s claim for reimbursement, that determination is not subject to judicial review because the claimant “does not have a justiciable or material right to any payment from the Fund.” Indeck v. Clients’ Sec. Bd., ante 379, 385 (2008). We consider the board’s exercise of its discretion to condition an award on the claimant’s execution of an assignment agreement, as integral to the board’s determination of an applicant’s claim, and similarly not a proper subject of judicial review.

Characterizing the execution of the assignment agreement as being “induced by threat of delayed distribution,” that is, the “threat” of having to wait until a legally responsible party, such as the settlement trust, makes a distribution, does not give the plaintiffs’ claim any additional traction. The decision of the board to make an award in advance of what may be a long-delayed distribution is a benefit to which Audoire has no right. Mounting a challenge to the imposition of a condition on that benefit, by characterizing it as a “threat,” is merely a challenge to the board’s underlying decision to impose the condition, a matter not subject to judicial review.

The plaintiffs’ further claim that the assignment is void and *393unenforceable, because it was not secured “through the offices of her attorney” and consequently was “without advice of [her] counsel,” was also properly dismissed. First, the factual allegations set out in the complaint to support this claim are to the contrary. Specifically, the complaint alleges that the attorney-client relationship between Audoire and Walsh reached an “impasse” over the terms of Walsh’s representation, months before Audoire’s application was submitted to the board. The complaint then further alleges that their agreement for representation was not “reaffirmed” by Audoire until December 13, 2004, long after the board made its award to her.11 Second, and more important, the plaintiffs have offered no legal authority for the proposition that, in the absence of misrepresentation, unconscionability, or legally cognizable duress (none of which is alleged), an agreement executed by someone in Audoire’s admitted position and circumstances “without the advice of counsel” is invalid or unenforceable as contrary to public policy. In other words, assuming all of the plaintiffs’ allegations, read favorably to them, are true, they have not set forth a claim that would entitle them to relief. This is fatal to their claim, and the judge did not err in dismissing it.

Similarly, the plaintiffs have offered no authority (and we find none) to support their claim that Audoire lacked the “capacity” to execute the assignment in light of a previously signed contingency fee agreement between her and Walsh.12 If Audoire violated an agreement she had with Walsh (a matter on which *394we express no view), that may provide him with a claim against her, but neither party has alleged a viable claim against the board and the validity of the assignment.

Judgment affirmed.

Audoire v. Clients' Security Board
450 Mass. 388

Case Details

Name
Audoire v. Clients' Security Board
Decision Date
Jan 10, 2008
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450 Mass. 388

Jurisdiction
Massachusetts

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