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Cogan’s Corner – Fallout of decision will land on plaintiffs

Originally published in the August 25, 2015 edition of the Chicago Daily Law Bulletin.

This article by Michael Cogan from Cogan & Power explains how The Illinois Supreme Court has made it even harder to take tough cases and plaintiff attorneys will be forced to think twice about taking a case with liability challenges.

Fallout of decision will land on plaintiffs

The Illinois Supreme Court just made it even harder to take tough cases—or what some plaintiff attorneys might refer to as “holy cause” cases: Those cases that make us proud to be lawyers serving the proverbial tired, poor and huddled masses, yearning to breathe free.

While our justice system is much maligned, particularly on the criminal side, the contingency fee structure has served as a beacon, allowing victims of personal injury from all socioeconomic backgrounds equal access to our nation’s courts.

Much to my dismay, the court’s decision in McVey v. M.L.K. Enterprises LLC, 2015 IL 118143 (May 21, 2015), and its progeny and the maze that is the Health Care Services Lien Act, 770 ILCS 23/1 es seq., have narrowed the leveled pathway.

Section 10 of the act details in a somewhat convoluted fashion the framework for reducing health-care provider liens following verdict, settlement or award. It provides a formula in which the total of all medical liens may not exceed 40 percent of the verdict or settlement.

No individual provider may receive more than one-third of the plaintiff’s recovery. The attorney’s lien is likewise reduced to 30 percent with the remainder going to the plaintiff.

What comprises the attorney’s 30 percent share was at issues in McVey. Following settlement, the court adjudicated the plaintiff’s health-care provider liens and refused to deduct the attorney fees and costs before calculating the amount available on the hospital lien.

The appellate court reversed, consisted with its decision in Stanton v. Rea, 2012 IL App (5th) 110187, holding that Section 10 requires calculations for health-care liens to begin after the verdict, judgment, award, settlement or compromise is reduced by attorney fees and costs.

The Illinois Supreme Court reversed and ruled that attorney fees and costs should not be deducted from a plaintiff’s total recovery prior to calculating the amount to be awarded for the payment of any health-care lien.

Accordingly, the $7,500 settlement broke down as follows: $2,250 to the plaintiff’s attorney for fees (30 percent of the gross settlement); $2,500 to the hospital on its lien of $2,891.63 (33.3 percent of the gross settlement); and $2,750 to the plaintiff (36.7 percent of the gross settlement).

The litigation costs were $846.66 and went unaccounted for by the court’s calculation. Based on the McVey ruling, the plaintiff’s attorney potentially absorbed the litigation costs, thus netting only $1,403.

Imagine the potential downside for a plaintiff’s attorney if a case goes to trial and lands a low verdict. For instance, if the jury returns a $20,000 verdict, the plaintiff has $15,000 in health-care liens and $5,000 in litigation expenses, and the act is invoked to adjudicate the liens. The attorney could end up with a $1,000 fee ($6,000 (30 percent of $20,000) less $5,000). If the expenses exceed 30 percent of the verdict, the attorney potentially loses money.

The McVey court also relied on Wendling v. Southern Illinois Hospital Services, 242 Ill.2d.261 (2011), to combat the plaintiff’s argument that under the common-fund doctrine her attorneys were entitled to additional fees equal to one-third of the amount of the hospital liens.

The court made quick work of this argument, blaming the plaintiff for asking to improperly shift some of her attorney fees and litigation costs onto the hospital by seeking to have them subtracted from the total settlement prior to the calculation of the health-care services lien. It viewed the injured party’s efforts as self-interested and not for the benefit of the class of the hospital, putting another nail in the coffin of the common-fund doctrine.

The act deals yet another blow in providing that even if a lien, either health care or attorney, is reduced, the injured party is till liable for the full amount of the bill. Section 45 states that the act does not limit the right of a health-care professional or provider, or an attorney, for that matter, to pursue collection, through all available means, of its reasonable charges for the services it furnishes to an injured person.

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If you have been injured in a personal injury or medical malpractice accident, do not hesitate to contact the Chicago accident and injury law firm of Cogan & Power at (312) 477-2500 to schedule a free case consultation, so that we can help you begin the process of recovery as soon as possible. If you cannot come to our offices in downtown Chicago, we will come to you. And because we take cases on a contingency basis, you will not pay any fee unless we get you compensation.