Michigan Court of Appeals; Docket # 349942; Unpublished
Judges Letica, FortHood and Gleicher; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Attorney Fee Liens
SUMMARY:
In this unanimous unpublished per curiam opinion, the Court of Appeals reversed the order of the trial court dismissing plaintiff’s claims of statutory and common law conversion and concluding that a charging lien was legally authorized under the facts of this case, which involved a check made payable to both the third-party medical provider of the insured as well as his attorney. In doing so, the Court noted that, taking the facts in a light most favorable to the plaintiff, the evidence suggested that defendant “may have wrongfully deposited the check at issue into his IOLTA account without plaintiff’s authorization.” The Court further held that a charging lien was not legally authorized because the no fault benefits had been paid without contest before defendant became involved in the case.
This case arose from a motor vehicle accident in which Larry Reed was catastrophically injured. Following the accident, he was transported to the plaintiff’s facilities at University of Michigan hospital, where he stayed for a long period of time to receive medical treatment. At the time of the accident, Reed had a valid no-fault insurance policy though American Automobile Association (AAA). Defendant, Victor Valentino, a personal injury attorney, was retained by Reed to assist him with his no-fault insurance claim. Valentino’s retainer for representation included a one-third contingency fee “of the net recovery . . . received through suit, settlement, or in any other manner.” Consequently, Valentino wrote to AAA, asserting an attorney’s lien on the proceeds of the no-fault insurance claim. Plaintiff began sending medical bills to AAA, and AAA began forwarding payments for healthcare expenses to Valentino, using two-party checks listing both plaintiff and Valentino as payees. One of these checks was written for $280,953. Valentino attempted to negotiate with University of Michigan for a reduced amount for payment of Reed’s medical bills, with the intention that defendant would retain the remainder as its attorney fee. University of Michigan indicated that it expected full payment of its bills, and filed a five-count complaint alleging conversion, tortious interference with a contract, claim and delivery, declaratory relief, and injunctive relief. After plaintiff initiated the lawsuit, Valentino sent University of Michigan a check for two thirds of the check written for $280,953, retaining one third as its attorney fees.
University of Michigan appealed to the Michigan Court of Appeals, contending that Valentino did not have a right to the no-fault payments made by AAA because University of Michigan was entitled to those proceeds. The Court concluded that Covenant Med Ctr, Inc v State Farm, 500 Mich 191; 895 NW2d 490 (2017), which held that “the no-fault act does not . . . contemplate allowing a healthcare provider to have a statutory entitlement to no-fault insurance proceeds,” was dispositive. Plaintiff then appealed to the Michigan Supreme Court, which vacated the Court of Appeals’ holding, stating:
Covenant held that a healthcare provider possesses no statutory cause of action against an insurer for recovery of PIP benefits. Plaintiff is a healthcare provider. But the plaintiff is not seeking payment from an insurance provider for no-fault benefits under a statutory no-fault theory. Rather, the plaintiff’s complaint alleges a common-law tort—conversion—against the defendant, an attorney, based on the defendant’s retention of one-third of the funds from a check that was made payable directly to both plaintiff and defendant. Although a healthcare provider has no statutory cause of action against an insurer to compel payment under the no-fault act, the act permits insurers to directly pay healthcare providers on the insured person’s behalf. MCL 500.3112. The insurer did so here. “[I]f an instrument is payable to 2 or more persons not alternatively, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them.” MCL 440.3110(4) (emphasis added). Thus, the plaintiff, as joint payee, had a right to control the funds. Covenant is not dispositive on the question presented here.
On remand, the trial court dismissed University of Michigan’s claims of conversion again, noting that “by placing the funds in his IOLTA account, there was no evidence that defendant ever intended to wrongfully retain any portion of the funds at issue.” However, the trial court also held that “the remand order . . . required it to use a judgement in favor of plaintiff.” Thus, the trial court entered an order requiring defendant to pay the $98,443 that remained in his IOLTA account. Following motions for reconsideration from both parties, the trial court ordered that Valentino could keep the money as an attorney fee for his services.
On appeal, the Michigan Court of Appeals first addressed University of Michigan’s claim that the trial court erred in dismissing its claims of common law and statutory conversion against Valentino. In analyzing this claim, the Court noted that the trial court had based in holdings that University of Michigan’s conversion claim lacked merit because there was “no evidence that Valentino ever intended to wrongfully retain any portion of the funds at issue.” However, on appeal the Court found that the evidence supported that “by placing the money in his IOLTA account, defendant intended to gain an advantage over plaintiff.” Thus, the Court held that “it would seem clear that question of fact sufficient to overcome summary disposition exist as to whether defendant’s act of depositing the jointly-issued check into his IOLTA account consisted acts of statutory and common-law conversion.”
The Court next turned to University of Michigan’s claim that the trial court erred in concluding that a charging lien was authorized under the facts of the case. In analyzing this claim, the Court noted that “[a] charging lien is an equitable right to have the fees and costs due for services secured out of the judgement or recovery in a particular suit,” and “created a lien on a judgment, settlement, or other money recovered as a result of the attorney’s services.” In analyzing this claim, the Court pointed to its prior holding in Garcia v. Butterworth Hosp, 226 Mich App 254; 573 NW2d 627 (1997), which stood for the proposition that “a valid charging lien cannot exist where no-fault benefits were paid ‘without contest, the plaintiff brought [a] no-fault lawsuit only as a precautionary measure, the lawsuit was dismissed before the complaint was ever served, and the insurer and health-care provider actually resolved the matter without the assistance of plaintiff’s attorney.’” The Court noted that, here, there was no lawsuit, and both University of Michigan and the testifying representative of AAA agreed that payment of Reed’s benefits were resolved without defendant’s assistance. Thus, the Court concluded that:
With all of that in mind, the trial court’s reasoning for imposing the charging lien, including that defendant’s services spared plaintiff the expense of litigation, and that it would be unfair to allow medical providers to benefit from such legal services when necessary to secure proceeds, does not comport with the available record. That is, the record does not support the trial court’s conclusion that a charging lien attached to the funds at issue where the funds were payed [sic] voluntarily and independent of the services defendant offered. The trial court thus erred in finding that a lien was authorized under the facts of this case.
