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COA says receiver can pursue drunk driver’s claims against her lawyers

The family of a woman killed in a 2013 drunk driving accident in Chatham County has won a major victory in its efforts to a collect a $4.3 million verdict handed down against the at-fault driver. The North Carolina Court of Appeals has instructed the trial court to appoint a receiver to pursue potential legal claims the driver may have against her insurer and its lawyers, after she refused to take any action to pursue those claims herself.

Julie Haarhuis (pronounced har-house) died after being hit by a car driven by Emily Cheek. Universal Insurance Company insured Cheek’s vehicle and determined that the value of Haarhuis’s claim exceeded the limits of her $50,000 policy. Haarhuis’s estate agreed to release its claims against Cheek in exchange for $50,000, so long as Universal paid within 10 days.

Universal failed to respond to the offer in time. (Haarhuis’s lawyers, in their brief, say that Universal’s attorney neglected to note the offer period in the settlement demand.) It proved to be a costly mistake, as a Chatham County jury awarded the large verdict in Haarhuis’s favor in 2016. So far, however, the estate has been unable to actually collect on the judgment.

Haarhuis asked the trial court to appoint a receiver, arguing that Cheek possessed property in the form of unliquidated legal claims against Universal and its law firm, Burton, Sue & Anderson, for their actions in causing her to be encumbered with the judgment. (Court records did not explain why exactly Cheek is refusing to pursue those claims.)

Superior Court Judge Elaine O’Neal denied the motion, but on Sept. 18 the Court of Appeals unanimously reversed, saying that O’Neal had abused her discretion in failing to appoint the receiver.

Judge Valerie Zachary, writing for the court, said that given the equitable considerations present in the case, the trial court should have appointed a receiver. The facts of the case suggested that Cheek would have potential claims against Universal and its firm—though it will ultimately be up to the receiver to decide what claims, if any, to pursue—and there were no countervailing reasons why it would be improper to appoint a receiver, Zachary said. She noted that there were no other apparent means by which Cheek could satisfy the judgment against her.

“It is alleged that Universal and Burton are indebted to defendant as a result of acts in connection with the underlying litigation in the instant case, and that the proceeds of the claims could be used to satisfy plaintiff’s injuries if defendant were to pursue them. Nevertheless, defendant refuses to do so, despite the fact that pursuit of the claims could benefit both parties,” Zachary wrote. “If the receiver is able to prosecute defendant’s claims to fruition, [she] would be relieved of the burden of the judgment against her.”

Zachary said that O’Neal had also erred by allowing lawyers for Universal and its attorneys to participate in the hearing by opposing Haarhuis’s motion for appointment of a receiver. Since Haarhuis sought to have a receiver appointed to pursue legal rights belonging Cheek, Cheek was the aggrieved party in the dispute. Because Universal and its attorneys are potentially Cheek’s debtors, their interests are actually quite antagonistic to hers, and so they had no standing to object to the motion, Zachary wrote.

Judge Richard Dietz wrote a concurring opinion saying the ruling was compelled by state law, but implicitly criticizing the choices made by legislators.

“The appellees also argue, compellingly, that it is bad policy to permit a receiver to take a debtor’s personal injury claim against a third party, prosecute it, and give the proceeds to creditors,” Dietz wrote. “The most common beneficiaries of this statute are not sympathetic individuals like Mr. Haarhuis, who lost his wife in a tragic accident—they are banks, debt collectors, and other businesses that frequently seek to enforce money judgments against low-income debtors who have no other assets besides their personal injury claim against a third party.”

Leto Copeley and Drew Culler of Copeley Johnson & Groninger in Durham represented Haarhuis.

“This is a straightforward decision in which the court applied black letter law and precedent,” Copeley said of the ruling in an email, while declining to comment further.

Walter Burton and Stephanie Anderson of Burton, Sue & Anderson in Greensboro and Charles Ivey of Ivey McClellan in Greensboro represented Cheek. Cheek’s attorneys could not be reached for comment on the ruling.

This is not the first time the Court of Appeals has handed down a major decision stemming from the dispute—last year it ruled that pretrial questions designed to suss out prospective jurors’ attitudes toward boozy driving did not unfairly prejudice Cheek at trial. (Cheek conceded liability; the trial was solely on the question of damages.)

The 21-page decision is Haarhuis v. Cheek (Lawyers Weekly No. 011-282-18). The full text of the opinion is available online at nclawyersweekly.com.

Follow David Donovan on Twitter @NCLWDonovan

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