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Outsourcing of Lien Resolution – The Florida Supreme Court’s Ruling on 4-1.5

By Jason D. Lazarus, J.D., LL.M., MSCC, CSSC

The purpose of this post is to inform Florida attorneys about the Florida Supreme Court’s rejection of the proposed amendment to Rule 4-1.5.  Before discussing the Florida Supreme Court’s rejection, I first want to give you some background.  In the early part of 2010, an ethics opinion was sought from the Florida Bar regarding a lien resolution attorney charging a reverse contingency fee on reduction of hospital liens.  The ethics opinion issued by the bar concluded it was impermissible because when you add the reverse contingency charged by the lien resolution attorney to the contingency fee charged by the PI attorney, it resulted in too large of a fee overall.  The bar ethics opinion concluded any attorney fee charged by a lien resolution attorney would be too much because PI attorneys customarily resolved the liens as part of the underlying case at no additional fee.  Since the PI attorney is already charging a max fee at 40%, any additional fee would be excessive.  The opinion would have precluded any fee for a lien resolution attorney if the PI attorney was already charging the maximum allowed contingency fee.

The Bar ethics opinion was appealed to the Board of Governors by the requesting attorney.  By rule, that appeal went first to the Board of Governors committee called the Board Review Committee on Ethics.  That review committee then recommended to the entire Board that the ethics opinion should be upheld.  When it went before the entire board, some PI lawyers on the Board of Governors raised some serious concerns about the ruling and its effect.  The ethics opinion was then tabled.  Subsequently, the President of the Florida Bar appointed a special committee to review the issue and propose a rule change to give guidance to the plaintiff’s bar and lien specialists on what was permissible.  The proposed amendment to Rule 4-1.5 came out of that committee.  The Bar approved the amendment and it was sent up to the Florida Supreme Court for approval.  When the rule was discussed at the Florida Supreme Court’s hearings, Floyd Faglie spoke on behalf of the rule.  Based upon the questioning of the Justices, it did not appear they really understood the current state of affairs as it pertained to lien resolution.  Subsequently, the Court opened up the rule to commentary.  There was only one comment filed regarding the rule and it was anti-adoption of the rule.  The comment was made by a plaintiff PI practitioner.

On April 12th, the Florida Supreme Court ruled on the proposed amendment to rule 4-1.5.  Here is what the court said:

“With respect to rule 4-1.5 (Fees and Costs for Legal Services), the Bar proposes new subdivision (f)(4)(E) and related commentary addressing subrogation and lien resolution services in contingent fee cases. This subdivision would provide that a lawyer in a personal injury or wrongful death case charging a contingent fee must include in the fee contract information about the scope of the lawyer’s representation relating to subrogation and lien resolution services; the rule would also provide that some medical lien and subrogation claims may be referred to another attorney for resolution with the client’s informed consent. The Court received one comment addressed to this proposal. After considering the concerns raised in the comment and the discussion at oral argument, we decline to adopt new subdivision (f)(4)(E). Indeed, we take this opportunity to clarify that lawyers representing a client in a personal injury, wrongful death, or other such case charging a contingent fee should, as part of the representation, also represent the client in resolving medical liens and subrogation claims related to the underlying case. Other technical corrections to rule 4-1.5 are adopted as proposed.”[1]

Given all of the foregoing, the question is what now?  The answer is we default back to the rules pre-proposed amendment of 4-1.5.  What complicates matters is the fact that there is a negative outstanding ethics opinion regarding charging fees for lien resolution in addition to a standard maximum PI contingency fee.  In situations where a flat fee is being charged for lien resolution services, the lawyer can absorb the cost or make sure that when combined with the contingency fee that the total fees do not exceed the maximum contingency fee.  Another alternative is that the client can contract with a lien resolution provider or attorney directly to resolve the health care liens and arguably the issue is avoided.  There are problems with the latter approach as it may not completely resolve the conflict created by the Florida Supreme Court’s statements rejecting the proposed amendments to rule 4-1.5 and the negative ethics opinion of the Bar.

What is clear is that the Florida Supreme Court didn’t say that outsourcing of lien resolution to third party specialists was impermissible. The opinion only addressed the proposed amendment of rule 4-1.5 and focused on fees that were permissible related to resolution of medical liens.  So Florida attorneys will have to look to the current rule 4-1.5 and the opinion of the American Bar Association[2] when considering outsourcing of lien resolution. The rejection of the proposed amendments to rule 4-1.5 does not mean that Florida attorneys can no longer seek out third party lien resolution specialists to assist with complex healthcare lien resolution issues.  With the intricacies and nuances of healthcare lien resolution growing at an exponential rate, bringing in experts may be crucial to maximizing the client’s net recovery and preservation of future benefits.  Accordingly, attorneys in Florida must weigh all of these factors when making the decision whether to outsource healthcare lien resolution functions and we encourage this type of analysis.

Synergy’s lien resolution services group remains committed to assisting trial attorneys in the State of Florida.  If you have any questions about these issues, please contact Synergy at 877-242-0022.

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