Wasenko v The Auto Club Group, et al (COA – PUB 7/20/2023; RB #4613)
Michigan Court of Appeals; Docket #361452; Published
Judges Hood, Shapiro, and Yates; Authored by Yates
Official Michigan Reporter Citation: Forthcoming; Link to Opinion
STATUTORY INDEX:
Limitations on Penalty Attorney Fee Awards for Future Attendant Care and Nursing Care Services
TOPICAL INDEX:
Attorney Fee Liens
SUMMARY:
In this 2-1, published decision authored by Judge Yates (Judge Shaprio, dissenting), the Court of Appeals vacated the trial court’s order regarding a charging lien asserted by Nabih Ayad over future attendant care benefits received by his client, Steven Wasenko. The Court of Appeals held that the trial court erred in resolving a dispute over the language in the contingent fee agreement entered into by Wasenko and Ayad by applying MCL 500.3148(4).
Steven Wasenko suffered catastrophic injuries as a result of a motor vehicle accident that occurred in 2000. After paying Wasenko’s no-fault PIP benefits for almost 20 years, The Auto Club Group (“Auto Club”) accused Wasenko of fraud and cut off his benefits. Wasenko hired Nabih Ayad to file a lawsuit on his behalf against Auto Club, and after two years of litigation, Wasenko and Auto Club reached a settlement of all claims up to July 1, 2021. As part of the settlement, Auto Club also agreed to forfeit its allegation of fraud going forward.
Ayad wrote to Wasenko after execution of the settlement agreement to assert a charging lien on all future payments made by Auto Club for attendant care, to which Wasenko took exception. The contingent fee agreement Wasenko originally entered into with Ayad provided, ‘[a]s compensation for services rendered by attorney Client will pay a fee contingent on any net recovery as follows: One third of the entire recoveries after outstanding debts are deducted[,]’ and also entitled Ayad to a lien ‘upon Client’s cause of action, claim or counterclaim.” The parties dispute, therefore, was over whether ‘the entire recoveries’ included future attendant care payments made to Wasenko, or whether Ayad’s fee was limited to one third of the settlement amount. The trial court ultimately disposed of the dispute by applying MCL 500.3148(4) to determine that Ayad could assert a lien over any attendant care payments made by Auto Club to Wasenko over the course of the ensuing three years. Neither Wasenko nor Ayad were satisfied with that result, so both appealed the trial court’s order.
The Court of Appeals vacated the trial court’s order, holding that MCL 500.3148 concerns only penalty attorney fees assessable against insurers; it has nothing to do with attorney fees recovered by plaintiff’s attorneys against their own clients. The Court thus remanded to the trial court for resolution of the dispute “entirely on contract principles unless it concludes that the contract is unenforceable.”
“To apply MCL 500.3148(4) to cap the amount of attorney fees that plaintiff’s attorneys can recover from their clients in PIP cases under the no-fault act is to pound a round peg into a square hole. When plaintiff’s attorneys recover fees from their clients in PIP cases, that recovery of fees manifestly does not constitute a ‘penalty,’ as contemplated by our Supreme Court. See Ross, 481 Mich at 11. Our decision in Beach v State Farm Mut Auto Ins Co, 216 Mich App 612; 550 NW2d 580 (1996), illustrates the salient distinction between attorney fees recovered from an insurer and attorney fees recovered from a plaintiff’s attorney’s own client in a PIP case under the no-fault act. There, plaintiff sought attorney fees from his insurer under MCL 500.3148(1), but we affirmed the trial court’s denial of all requested attorney fees because the jury had found ‘that no [PIP] benefits were overdue[.]’ Id. at 628. If we applied that same statutory language from MCL 500.3148(1) to Ayad Law’s request for attorney fees, Ayad Law would be entitled to no fees whatsoever from its own client because no portion of plaintiff’s claim for future PIP benefits for attendant care was ‘overdue,’ as required by MCL 500.3148(1). Applying the penalty provision of the statute in that manner makes no sense, so application of the cap on penalty-provision attorney fees prescribed by MCL 500.3148(4) likewise makes no sense. Instead, we are convinced that MCL 500.3148 in all of its subsections applies only to ‘penalty provision’ attorney fees recovered from insurers, rather than attorney fees recovered by plaintiff’s attorneys from their own clients in PIP cases under the no-fault act.
Having decided that MCL 500.3148(4) has no bearing on the amount of attorney fees that Ayad Law can recover from plaintiff for future attendant-care benefits, we have no choice but to vacate the trial court’s award of capped attorney fees to Ayad Law. We must remand the case for additional consideration of Ayad Law’s attorney-fee request under the contract principles that we have laid out in this opinion. Because there is no restriction on the fee agreement imposed by any Michigan statute, the trial court must decide the case based entirely on contract principles unless it concludes that the contract is unenforceable. See, e.g., Evans & Luptak, 251 Mich App at 196 (holding that an ‘ ‘unethical fee agreement’ ’ is unenforceable as a matter of public policy).”
Judge Shapiro dissented, arguing that Ayad’s fee should be limited to one third of the settlement amount and writing, “a contract binding a client to pay 1/3 of the funds needed for his medical care for the rest of his life should be as clear and explicit as possible and not hide behind undefined terms like ‘entire recovery.’ ” Furthermore:
“Even assuming the contract should be read as Ayad urges, and assuming it is enforceable, Ayad has not obtained a recovery for plaintiff beyond the $251,523 that The Auto Club Group paid at the time of settlement for past benefits. The settlement agreement does not require Auto Club to pay future benefits. In fact, it clearly provides Auto Club with the right to dispute any claims arising after July 1, 2021. There is no indication in the settlement agreement that Auto Club waived its future claims regarding fraud,3 and Auto Club explicitly stated on the record it was not forfeiting any future claims of fraud arising after July 1, 2021, which Ayad acknowledged. Any future payments for attendant care services after July 1, 2021, are not part of the ‘recovery’ from the settlement agreement negotiated by Ayad. Thus, Ayad was entitled to 1⁄3 of the ‘entire recover[y]’ from the settlement, i.e., 1⁄3 of $251,523. Any future disputed claims for attendant care services or fraud have not been resolved by the settlement agreement, and therefore do not constitute the ‘entire recover[y]’ as contemplated by the contingency fee agreement.”
