Synergy Blog

Lien Existence & Ethics, Redefined

Some of the most frustrating and murky issues facing attorneys representing injured clients stem from alleged “liens” against settlement proceeds. The Florida Bar’s position on these issues, and the limited laws delineating them, have been ever-shifting and evolving.

Ethical Obligation to Protect Liens

One constant in this otherwise uncertain area, is this: Attorneys representing injured Plaintiffs in personal injury actions have an ethical responsibility to use all reasonable efforts to resolve disputes between clients and known third-party lienholders.

Injury attorneys cannot unilaterally arbitrate such disputes. If a dispute cannot be resolved through negotiation, “the lawyer should consider the possibility of depositing the property or funds in dispute into the registry of the applicable court so that the matter may be adjudicated.” Comment to Rule 5-1.2, Rules Regulating the Florida Bar. The Ethics Committee has stated that an injury attorney should “endeavor to assist his client and the physician in effecting a compromise.” Opinion 67-36, Professional Ethics of the Florida Bar. If such efforts fail, “the lawyer should institute an interpleader action in a court of competent jurisdiction naming his client and the physician as defendants.” Id., emphasis added.

In 2004, issues involving “Letters of Protection” were specifically addressed in Opinion 02-4. The Ethics Committee again reiterated its position that a lawyer “cannot take it upon himself or herself to decide who is entitled to what.” Id. The Committee also reiterated that a lawyer holding disputed funds “should institute an interpleader action.” Id. (citing Opinion 67-36 and Rule 5-1.2). However, an interpleader action is not “the only alternative.” Opinion 02-4. Other options include, but are not limited to, seeking declaratory relief under Fla. Stat. § 86.021 and/or Fla. Stat. § 501.211(1), Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA).

A Wild Ride, from Pintaluga to Staff Opinion 38866

The Florida Bar Ethics Counsel should clarify, once and for all and by written ethics opinion, the Bar’s final position on an attorney’s ethical responsibilities regarding the protection of third-party interests in settlement proceeds. Thus far they have not done so, despite their position seeming to swing radically in recent years.

While advice from the Ethics Hotline is helpful, it is not in writing and cannot be relied upon to definitively protect you. Similarly, even written staff opinions are “advisory” and as such, “are intended to provide guidance to the inquiring attorney and are not binding; the advisory opinion process is not designed to be a substitute for a judge’s decision or the decision of a grievance committee.” Staff Opinion 38866. Only a published ethics opinion can settle the issues surrounding lien rights and the ethical responsibilities flowing therefrom. That said, reports of advice from the Ethics Hotline and staff opinions have been the only guidance on lien issues, since Opinion 67-36 and Opinion 02-4, and form the only basis from which we may attempt to guess the Bar’s position.

For roughly five years (from sometime after August 2013 until August 2018) the Bar’s position on the protection of injury-related medical bills appears to have swung wildly. Starting sometime in 2013, the Bar incorrectly interpreted the Supreme Court’s Consent Judgment in Florida Bar v. Pintaluga (Case No. SC13-1021) to mean all known accident-related medical bills must be protected in trust, whether the provider holds a lien or not. This position was unfounded in law, nor in fact, for several reasons.[1] Most importantly, Pintaluga was not factually square with that issue. In Pintaluga, there was a lien, created by a letter of protection (LOP) signed by the client (the only issue was whether the lien was valid if not also signed by the attorney). Not surprisingly, the lien was held to be valid because it was signed by the client and the attorney was aware of it. Further, the Bar’s entirely novel position that all injury-related bills must be protected regardless of whether liens existed, flew directly in the face of the well-settled Ethics Opinions discussed above, and the robust body of case law delineating hospitals’ rights when they do, and do not, have liens (including the two Supreme Court opinions discussed below).

In August of 2018, Staff Opinion 38866 corrected this misplaced position and clarified that “[i]f the providers have valid legal claims to the funds held in trust” the funds must be protected, but “if third parties do not have valid claims to the funds, the lawyer should disburse the funds to the rightful owner.”  The key words being “to the funds.” The converse, just having a legal claim AGAINST THE PLAINTIFF (i.e., being a mere creditor, having a mere “debt”) does not satisfy this definition, and never has. Third parties must evince legal claims TO THE SETTLEMENT PROCEEDS. Stated differently, there must be a “lien” for an attorney to withhold money in trust against the client’s wishes. Simply put, you must protect “liens” but not “debts.” The litmus test is evidence of some statutory, ordinal or contractual lien. Without it, “the lawyer should disburse the funds to the rightful owner”–i.e., to the plaintiff (upon demand). Arguably, an attorney not only “may” disburse upon demand, she or he “must” release funds to the client absent a lien.

Hospital Liens

Hospital liens have been the subject of much litigation, some of it very recent. Unlike forty other states (and the District of Columbia),[2] Florida has no statewide lien statute. Instead, some Florida counties have liens, while others do not. This distinction has also been in flux between 2009 and 2018. Most Florida hospital lien laws cover all hospitals in the county, while a minority restrict the lien to “public hospitals” or “charitable hospitals.”

Hospital lien laws which were created by special act are unconstitutional under Article III, § 11 of the Florida Constitution. Of the approximately 22 counties which have hospital lien laws, 13 were created by a special act, and 6 more were created by a combination of a special act and a county ordinance. Because the Florida Constitution states “[t]here shall be no special law or general law of local application pertaining to…creation, enforcement, extension or impairment of liens based on private contracts,” hospital lien laws have been challenged as unconstitutional special acts in three cases.[3]

The 1st DCA in Mercury v. Shands found “that chapter 88-539 is a special law which creates a lien based on a private contract between Shands and its patient, in violation of article III, section 11(a)(9), of the Florida Constitution.” The Supreme Court reversed the 1st DCA as to Alachua County, but in doing so articulated a bright line test: liens in counties with county ordinances are constitutional, while liens promulgated ONLY by special act, are not.  Accordingly, counties which have enacted lien laws by county ordinance are not be affected by Mercury v. Shands. In 2017, Lee Memorial resisted the Shands decision, arguing its contracts are “public” (not “private”) and as such, the constitutional test articulated in Shands did not apply.

The Second DCA disagreed, upholding the trial court’s determination that Lee’s liens are unconstitutional. Lee Memorial Health Systems appealed to the Supreme Court, which affirmed the Second DCA, stating:

We agree with the trial court and the Second District that the LMHS Lien Law violates article III, section 11(a)(9) as a special law pertaining to the creation, enforcement, extension or impairment of liens based on private contracts.

However, be careful in “non-lien” counties. Many hospitals, including but not limited to Sarasota Memorial Hospital, are creating liens by contract, at admission. This relatively new but inevitable practice of adding “lien language” to admission contracts has the possible effect of creating liens anywhere, regardless of whether a county has a valid lien ordinance.

Conclusion

Attorneys must protect liens by withholding monies in trust, over the wishes of their clients. Liens can be created by statute (though Florida does not have a lien statute), by county ordinance (in the following eight Florida counties which have them), or by contract (usually, an LOP or similar document signed by a patient and/or attorney, or more recently a hospital admission contract). If no lien exists, lawyers arguably not only “may” but “must” release settlement proceeds upon their client’s demand. The Florida counties with valid hospital liens by county ordinance are:

  • Alachua
  • Bay
  • Brevard
  • Broward
  • Duval
  • Hillsborough
  • Miami Dade
  • Orange

Unless and until county ordinances are passed in other counties, or a statewide lien statute is passed, injury-related hospitals bills in all other Florida counties are not secured by liens.

[1] This position was evinced only by reports of advice from the Ethics Hotline, instructing attorneys to withhold ALL injury-related bills which were included in a demand package. The position was not, to my knowledge, reduced to writing in a staff opinion or otherwise.

 

[2] See Ala. Code § 35-11-370; Alaska Stat. § 34.35.450; Ariz. Rev. Stat. Ann. § 33-931; Ark. Code Ann. § 18-46-101; Cal. Civ. Code § 3045.1; Colo. Rev. Stat. Ann. § 38-27-101; Conn. Gen. Stat. Ann. § 49-73; Del. Code Ann. tit. 25, § 4301; D.C. Code § 40-201; Ga. Code Ann. § 44-14-470; Haw. Rev. Stat. § 507-4; Idaho Code Ann. § 45-701; 770 Ill. Comp. Stat. Ann. 23/1; Ind. Code Ann. § 32-33-4-1; Iowa Code Ann. § 582; Kan. Stat. Ann. § 65-406; La. Rev. Stat. Ann. § 9:4751; Me. Rev. Stat. tit. 10, § 3411; Md. Code Ann., Com. Law § 16-601; Mass. Gen. Laws Ann. Ch. 111, § 70a; Minn. Stat. § 514.68; Mo. Ann. Stat. § 430.230; Neb. Rev. Stat. Ann. §§52-401 & 52-402; Nev. Rev. Stat. Ann. § 108.590; N.H. Rev. Stat. Ann. § 448-A:1; N.J. Stat. Ann § 2a:44-35; N.M. Stat. Ann. § 48-8-1; N.Y. Lien Law § 189; N.C. Gen. Stat. Ann. § 44-49; N.D. Cent. Code Ann. § 35-18-01; Okla. Stat. Ann. tit. 42 §§43 & 44; Or. Rev. Stat. Ann. § 87.555; R.I. Gen. Laws Ann.§§9-3-4 to 9-3-8; S.D. Codified Laws § 44-12-1; Tenn. Code Ann. § 29-22-101; Tex. Prop. Code Ann. § 55.001; Utah Code Ann. § 38-7-1; Vt. Stat. Ann. tit. 18, § 2253; Va. Code Ann. § 8.01-66.2; Wash. Rev. Code Ann. § 60.44.010; Wis. Stat. Ann. § 779.80

 

[3] Palm Springs General Hospital, Inc. Of Hialeah v. State Farm Mutual Automobile Insurance Company, 218 So 2d 793 (Fla. 3d DCA 1969), affirmed, State farm Mutual Automobile Insurance Company v. Palm Springs General Hospital, Inc. Of Hialeah, 232 So. 2d 737 (Fla. 1970); Hospital Board of Directors of Lee County v. McCray, 456 So 2d 936 (Fla. 2d DCA 1984); Mercury Insurance Company of Florida v. Shands Teaching Hospital & Clinics, 21 So. 3d 38 (Fla. 1st DCA 2009).

The Third Thursday webinar Hospital Liens – Cost Transparency, Friend or Foe?, which aired in February is now available here.

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