DOVER, Del. (Legal Newsline) - The Delaware Supreme Court said last week a law firm's agreed contingent fee must be deducted from a client's recovery before a hospital lien attaches.
In July 2003, Maria Acosta suffered serious injuries as a result of a car accident in Sussex County. Nanticoke Memorial Hospital in Seaford treated Acosta for her injuries, charging her $160,958 for its services.
Because Acosta could not pay the bill, Nanticoke filed a hospital lien.
The Wilmington law firm of Doroshow, Pasquale, Krawitz and Bhaya represented Acosta's interests in a personal injury action arising from the accident.
The contingent fee agreement between Acosta and the law firm provided that the firm would receive 40 percent of any recovery, plus costs.
Nationwide Assurance Company paid $19,671.49 to settle Acosta's claim.
Nanticoke argues that its lien attaches to the entirety of Acosta's recovery.
But the law firm contends that the lien does not attach until the attorney fees have been deducted from a settlement fund.
The Sussex County Superior Court ruled in favor of the hospital.
The state's high court disagreed in an opinion filed Jan. 23, holding that an attorney's charging lien "exists at common law."
Chief Justice Myron T. Steele authored the Court's 20-page ruling.
"Doroshow provided Acosta legal services by representing her and achieving the Nationwide settlement," Steele wrote. "Because Doroshow represented Acosta on a contingent fee basis, the law firm had not been compensated before its work produced the funds. Therefore, Doroshow was entitled to assert an attorney's charging lien against the settlement fund."
The chief justice pointed to the numbers.
The $160,958 in medical charges is significantly higher than the $19,671.49 recovery from Nationwide, which would mean Nanticoke's lien would encompass the entire recovery, he said.
"Therefore, interpreting 'true' as meaning the entire rightful consideration obtained by Acosta would lead to the unreasonable and absurd result of denying Doroshow the compensation for legal services essential to obtaining that recovery," Steele wrote.
"That interpretation runs counter to the rationale for an attorney's charging lien -- that attorneys have a right to compensation for funds recovered by their efforts."
While the Court held that the law firm's charging lien attaches before the hospital's lien, it said it would not address the public policy arguments that should "properly be considered" by the state's General Assembly.
"First, how should Delaware balance the competing interests of the hospital lien and the attorney's charging lien? Second, will the use of hospital liens affect the amount of fees paid by the state for Medicaid? Third, would a system devoid of an attorney's charging lien result in a situation where a class of injured parties would have no incentive to file claims against wrongdoers? Fourth, what are the societal consequences if the party at fault escapes liability from the failure to bring claims?
"These policy questions, and no doubt others, should be debated by the General Assembly," Steele wrote.
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.