Michigan Court of Appeals; Docket No. 290522; Published
Judges Cavanagh, O’Connell, and Wilder; unanimous
Official Michigan Reporter Citation: 288 Mich App. 424; Link to Opinion 
On November 4, 2011, the Michigan Supreme Court REVERSED in part and AFFIRMED in part; Link to MSC Summary
STATUTORY INDEXING:
Not applicable
TOPICAL INDEXING:
Attorney Fee Liens
CASE SUMMARY:
In this unanimous published opinion by Judge Cavanagh, the Court of Appeals held that an attorney who obtained a settlement for a claimant’s first-party benefits, which the insurer had previously refused to pay, has a charging lien pursuant to the contingency fee agreement the claimant entered into with the attorney and the attorney is entitled to attorney fees pro-rated from the amount recovered for each of the claimant’s medical providers.
The claimant in this case was seriously injured in a rollover accident on September 5, 2007. The claimant’s father owned the vehicle involved in the accident and defendant Citizens was the no-fault insurer. Citizens refused the claimant’s application for benefits and rescinded the policy, claiming that a representation was made that the vehicle would not be used for business purposes and that the representation was false. The claimant then retained counsel, based on a contingency fee agreement, to litigate his right to first-party no-fault benefits. Shortly thereafter, the trial court entered a stipulated order of dismissal, retaining jurisdiction for the sole purpose of settlement of any attorney liens for personal protection benefits. A settlement conference was then held, at which defendant Detroit Medical Center (DMC) objected to an attorney lien, arguing that it did not receive notice of the litigation until after the matter was settled. The court then ordered Citizens to pay the other providers and ordered that those providers were subject to an attorney lien of one-third of their invoices. The DMC moved to intervene as a party-plaintiff under MCR 2.209, arguing that it had provided medical services for the claimant at a cost of approximately $150,651 and argued that the claimant’s attorneys were not entitled to an attorney fee because the DMC had no contingency fee agreement with the claimant’s attorneys. The trial court denied the DMC’s motion to intervene. An evidentiary hearing was then conducted at which the DMC’s Director of Patient Business Services testified that when the claimant was admitted, the DMC did not seek a lien. She also testified that if the claimant was eligible for Medicaid, Medicaid would have paid approximately $1,324 per day. The claimant’s actual bill was approximately $150,000 which was about $3,000 per day for 50 days. In addition, she testified that on the back of the claimant’s Medicaid application, someone had written the names and telephone numbers of the claimant’s attorneys. Therefore, the DMC was aware that the claimant had legal representation. The trial court determined that assuming the DMC was entitled to notice of the claimant’s litigation, it had abundant notice that the claimant was pursuing an action for personal injury protection benefits. Nevertheless, the court determined that the DMC did not take any measures to inform the claimant’s attorneys to cease and desist any efforts on behalf of the DMC. The plaintiff then filed a motion for distribution of no-fault payments, requesting that the court order Citizens to pay plaintiff the full amount owed to the DMC. Plaintiff further requested that the DMC receive only $66,200, the same amount it would have received from Medicaid.
The trial court denied the plaintiff’s request that the DMC be paid $66,200, rather than its bill of $150,660. It also ordered that the claimant’s attorneys were entitled to their one-third contingency fee. The DMC appealed, arguing that the trial court improperly found that claimant’s attorneys were entitled to an attorney fee award to be deducted from payment the DMC earned, because there was no attorney-client relationship between the attorneys and the DMC.
In affirming, the Court of Appeals first found that the attorney-client relationship that entitled the claimant’s attorneys to a fee was the attorney-client relationship that existed between the claimant and the attorneys. The court also found that the claimant’s attorneys were entitled to payment for legal services provided on the claimant’s behalf under the contingency fee agreement that existed between the plaintiff and the attorneys.
The court then noted that the settlement the claimant’s attorneys reached with the insurer created a common fund that would benefit the claimant and his medical providers who had not litigated or pursued their own right to payment. Afterward, the claimant’s attorneys sought to negotiate with the medical providers a reduction in their bills proportionate to the amount of attorney fees the claimant had agreed to pay the attorneys for pursuing the legal action against Citizens. All of the providers, except the DMC, agreed to reduce their payment by one-third. The court rejected the DMC’s argument that it had no contract with the attorneys entitling the attorneys to a contingency fee. In rejecting the argument, the court noted that in Aetna Casualty & Surety Company v Starkey, 116 Mich App 640; 323 NW2d 325 (1982), the court held that an insured’s attorney has a valid attorney’s charging lien against funds recovered. Based on the holding in Aetna, the court declared that the attorneys had a right to be paid for their services from the amount recovered from the insured under the contingency fee agreement the attorneys had with the claimant. Furthermore, the court stated that because the claimant pursued a claim for personal injury protection benefits, the attorneys rightfully had a charging lien against settlement proceeds under the contingency fee contract. The court declared that it would be unfair to allow a medical provider to benefit from the efforts of the claimant without contributing to the cost incurred in securing insurance coverage. In this regard, the court stated:
“Specifically, in Aetna Cas & Surety Co, . . . this Court reversed, holding that the insured’s attorney had a valid attorney’s charging lien against the fund recovered. In particular, this Court noted that Michigan law creates an attorney’s lien - a specific encumbrance - on a judgment or fund, including a personal protection insurance fund that a client has recovered through the professional services of that attorney. . . . Plaintiff’s attorneys had a right to be paid for their services from the amount recovered from Citizens pursuant to their contingency fee agreement with plaintiff. . . . Because plaintiff pursued personal protection insurance benefits through a successful litigation, her attorneys rightfully secured a charging lien against the settlement proceeds - or common fund - pursuant to their contingency fee contract. It would be unfair to allow the DMC, and other medical providers, to benefit from the efforts of plaintiff’s attorneys without contributing to the costs incurred in securing insurance coverage and the common fund.”
