Hendricks v. Novae Corporate Underwriting, Ltd.

SYKES, Circuit Judge.

As a general rule, choses in action are freely alienable. But courts can — and indeed must — refuse to enforce certain contractual assignments on public-policy grounds. In Texas “assignments of choses in action that tend to increase and distort litigation” violate public policy and are invalid. State Farm, Fire & Cas. Co. v. Gandy, 925 S.W.2d 696, 711 (Tex. 1996). The question in this case is whether that public policy prohibits enforcement of a settle-merit arrangement in which the defendant admitted liability, stipulated to an amount in damages, and assigned its claim…