Stanton v. Rea, 5-11-0187 (Goldenhersh)
Facts: Plaintiff was injured in a car collision and incurred medical bills relating to her treatment. She was uninsured so the bills were unpaid and her healthcare providers filed liens on the proceeds of the lawsuit. The case proceeded to trial and the plaintiff was awarded $13,506.80, plus $3,919.79 in costs. Plaintiff was then required to file a citation action in order to get the defendant’s insurance carrier to pay the judgment, thereby incurring additional expenses totaling $4,501.44. Plaintiff filed a petition to adjudicate the liens asserted by the healthcare providers. Pursuant to the provisions of the Health Care Services Lien Act, 770 ILCS 23/1 to 999 (West 2008), Plaintiff’s counsel reduced the fees to 30%. The trial court divided the funds among attorneys fees, expenses, and lien payments, applying 40% of the amount of the verdict to the payment of medical liens, such that 5 providers accounted for $5,806.02. Given the amount of costs expended, the plaintiff received nothing from the verdict. Plaintiff argued that the trial court should have subtracted the expenses from the judgment before applying the formula from the lien act to determine the health care providers 40%. The trial court rejected the argument and Plaintiff appealed.
Holding: The trial court should have begun its calculations of 40% for the lienholders after payment of attorneys fees and costs necessary in securing the judgment.
Filed In Trial Book Under: Liens; Statutory Interpretation
Commentary: The holding in this case is certainly helpful to plaintiffs in difficult cases where the medical liens exceed 40% of the total verdict or settlement. Sadly, this can occur quite often, particularly when there is limited insurance coverage. To reach this conclusion, the appellate court focused on the general principles of statutory interpretation to conclude that the legislature intended that the plaintiff actually receive 30% of the total settlement in hand after payment of the attorneys lien and health care liens. In order to insure this, the trial court should have begun its 40% calculations after the payment of attorneys fees and costs. It’s interesting that the opinion argues that attorneys fees should be based upon the full amount of the verdict, but that the health care providers should be based on an amount that is calculated after the expenses and the attorneys fees. The rationale for this part of the holding is that health care providers have an advantage over the attorneys in that they have right to pursue the balance of the bills after the lien adjudication, which the attorneys do not. I certainly hope that this case stands up to scrutiny from other courts, but unfortunately it seems as if the 5th District Appellate Court is selectively reading the statute to benefit the interests of the plaintiff and the plaintiff’s attorneys over the health care providers. Just running the numbers from this case in the method suggested by the opinion, it ends up that the attorneys statutory 30% ends up significantly higher than the plaintiff’s 30% and the health care lien holders 40%. I question whether the statute was really meant to be read this way because the Act seems to go to great lengths to allocate the recovery between the three interested parties – plaintiffs, attorneys and health care providers – so that when everyone is accounted for they all add up to 100%; whereas this opinion calls for a much different calculation that in my opinion seems to fall apart when applying the math. For that reason, I doubt that it will be adopted by other trial courts or appellate districts. I hope that I’m wrong and am missing something here. We’ll have to wait and see.
Hess v. Loyd, 5-09-0059 (Spomer)
Facts: An attorney was assigned to work on a medical malpractice file from his firm and after being terminated by the firm attempted to assert a lien on the medical malpractice file. The contract with the medical malpractice client was with the law firm and the attorneys employment contract with the firm specifically stated that clients were those of the firm and not the attorney. The medical malpractice client moved to strike the lien asserted by the former associate which ultimately was appealed and led to 137 sanctions entered against the former associate.
Holding: Rule 137 sanctions were appropriate because the former associates pleading against the client was made for improper purpose (apparently as leverage against his former law firm in a compensation dispute) and was not warranted under the law. Also, a hearing was not required under these circumstances because the unreasonable nature of the pleading was determined on an objective standard and the un-rebutted affidavits of the attorney seeking sanctions was sufficient to determine the award.
Filed in Trial Book Under: SCR 137; Contingency Fee Contract
Commentary: It’s not clear to me what the attorney was trying to accomplish by involving his former client, albeit through his employment with the former firm, in the case. It seems like we are not getting the whole story in the factual recitation. This guy probably feels that he originated the business and was upset with his old firm for not sharing in the fee. This isn’t reflected in the opinion, so it’s only speculation on my part. The former associate really gets beaten up by the appellate court for his actions.
The take away for me is the basic principle that a contingency fee contract must be in writing and can’t be implied, so the fact that the contract is with the law firm, and not the associate, will prevail. Attorneys that work at forms need to either include themselves on the contract or get a written agreement with their employer on how the fee is going to be shared. Also, if you are opposing a fee petition it’s necessary to get some conflicting evidence regarding the amount being sought. Hopefully, this won’t ever come up, but it’s good to keep it in mind.
Howell v. Dunaway, 5-09-0071 /Wendling v. Woolard, 5-09-0072 (Welch)
Facts: A hospital asserts a lien pursuant to the Health Care Services Lien Act and refuses to credit a reduction for attorneys fees pursuant to the common fund doctrine, citing the Supreme Court decision of Maynard v. Parker. The Plaintiff’s attorney files a petition to adjudicate the lien and argues that the more recent Supreme Court case of Bishop v. Burgard controls and that the common fund doctrine applies. The trial court agrees and rules that the hospital must apply the common fund doctrine in order to recover under the Lien Act.
Holding: The appellate court affirms the trial court and holds that the expansive language contained within the Bishop opinion shows that the Supreme Court intended to expand the application of the common fund doctrine beyond that expressed in the earlier Maynard decision to include lienholders under the Lien Act.
Filed in Trial Book Under: Liens; Common Fund Doctrine
Commentary: This is a very well reasoned decision that has been a long time coming. There was simply no reason to ever distinguish between subrogation liens and healthcare provider liens with regard to applying the common fund doctrine. Both of these types of lienholders were benefitting equally from the efforts of the Plaintiff’s attorney, so it was unfair for hospitals to benefit at absolutely no cost to them. The court in this decision was very forthright in its determination that hospitals that choose to merely sit back and wait for their payment pursuant to a lien are unquestionably benefiting from the labors of the attorney that created the fund and therefore, in the event that they do not reduce their recovery to account for the services of the attorney they are improperly freeloading. The court very clearly states “we believe that this expansion of the common-fund doctrine to include lienholders under the Act makes eminently good sense and is supported by logic, case law, and public policy.” You don’t see defintive language like that in many opinions and it is a welcome addition to the trial book. I am a tad bit concerned about the court’s refusal to pass upon the hospital’s arguments that the plaintiff’s counsel could be in conflict with their clients because of the potential exposure to collections by the hospital at a later date. Personally, given the strong language in the opinion, it seems clear that the court is saying to hospitals that if you want the protection of automatic payment from a settlement pursuant to the assertion of a lien then you must be willing to give up a portion to account for the attorneys efforts in collecting the money for you. In otherwords, if you think you can get a better deal from your own attorneys or alternate collection efforts then have at it, just don’t expect a free ride from a lien collection. Needless to say, I agree with their way of thinking and like this case a lot.