151980044_4c0b142051_zIn the final days of its March term, the Illinois Supreme Court heard oral arguments in McVey v. M.L.K. Enterprises, LLC. McVey poses a question of considerable importance for tort litigation: must attorneys’ fees and costs be deducted from a tort settlement before a lien under the Health Care Services Lien Act is paid? Our detailed summary of the underlying facts and lower court decisions in McVey is here.

McVey arose from an accident in a bar. After the plaintiff settled her lawsuit, a petition to adjudicate liens was filed by the hospital that treated the plaintiff. The trial court awarded the hospital $2,500, declining to deduct the plaintiff’s attorneys’ fees from the settlement before calculating the lien. The Appellate Court reversed.

Counsel for the health care provider began the argument. Counsel argued that despite the Supreme Court’s clear instruction in Wendling v. Southern Illinois Hospital Services that the common fund doctrine doesn’t apply to health care providers, the Fifth District’s decision in Stanton v. Rea allowed attorneys’ fees to be shifted to health care lien holders on the grounds that Wendling only applies to common fund claims. Counsel argued that the statute is plain and unambiguous – if there are lien holders in a settlement, then the lien holder collects 40%. If the lien holders have liens exceeding 40%, then the Health Care Lien Act applies; if not, it doesn’t. If the Act applies, the gross settlement is multiplied by 40%, and the health care lien holder collects that. Thirty percent goes to the attorney, and the balance goes to the plaintiff. Stanton said that the legislature wanted the plaintiff to be guaranteed thirty percent, and for that to happen, attorneys’ fees must be deducted from every share. Justice Thomas asked if deducting costs and fees from every share means at times that the plaintiff gets less money. Counsel responded that the problem with the Fifth District’s decision is that the Court didn’t pay any attention to the Attorneys’ Lien Act. If one looks at the Act, it specifically says that the lien includes fees, costs and expenses. The Attorneys Lien Act specifically references the Health Care Lien Act, and says if that Act applies, the attorneys’ lien is limited to thirty percent, including costs and expenses. If one applies that rule, the plaintiff always gets thirty percent, which is what the statute calls for. Justice Theis said that counsel was suggesting that the costs are included in the 30% share in the statute – then what happens if the client and attorneys have agreed that the client is to bear the costs? Counsel responded that the attorney might have a claim against his or her client, but would not have a lien against the settlement. The attorney would have a contract with the plaintiff to get his or her costs back. Counsel explained that the attorney is entirely separate from the health care provider. The health care provider can’t intervene in the principal case, and therefore, the costs shouldn’t be paid out of the provider’s share, counsel argued. The legislature was clear about its intentions, because it was combatting the risk of a plaintiff getting nothing. The attorney’s expenses in Stanton had nothing to do with the legislature’s intent, counsel argued – the thirty percent share assigned to the attorney includes costs and expenses. Counsel argued that the statute is perfectly clear, and there’s no reason to go beyond the language of it.

Counsel for the plaintiff followed, asking what the courts should do when the party’s costs equal thirty percent. Under the health care provider’s solution, counsel argued, the provider gets 40%, the client gets thirty percent, and the attorney gets nothing. Justice Burke asked what language in the Health Care Act supports the conclusion in Stanton that fees and costs are deducted before the percentages are applied. Counsel answered that there is no express language in the Act, but the Court should reject a literal construction. Justice Thomas said that he understood and could empathize with counsel’s example where the attorney gets nothing. But by definition, a plaintiff’s attorney has already told the client that if the client doesn’t recover, the attorney absorbs costs. So if the case ends in a small settlement, isn’t that a risk the attorney took on from the beginning? Counsel answered that under such circumstances, the case would never be brought – and the only person rewarded is the tortfeasor. That, counsel argued, is an absurd result. Justice Karmeier asked how the court should get to the policy issues if it concludes that the language of the statute is clear that a lien includes fees and costs? Counsel answered that the court rejects a literal reading which leads to absurd or unreasonable results. Chief Justice Garman asked whether the statute was absurd in all circumstances. Counsel answered that in Wendling, the Court had not engaged in a statutory analysis of what the statute meant. The Court didn’t parse the statute or analyze how much each side would get. Counsel concluded by arguing that Stanton and McVey are not outliers. The overwhelming majority of the settlements the Court’s decision would apply to are in the tens, not hundreds of thousands, and if all the costs are assigned to the attorney or client, the attorney or client cannot possibly receive the percentage of the settlement which the legislature intended.

Counsel for the health care provider concluded by arguing that if the tortfeasor is being rewarded by the eventual result, that’s part of dealing with the legal system. Plaintiff is asking the Court to rewrite the statute, counsel argued – and that’s the legislature’s job. The statute is clear: the lien holder receives 40%, the attorney receives 30% and the rest goes to the plaintiff. The only way to accomplish that is to assign the percentages before deducting costs.

We expect McVey to be decided in three to four months.

Image courtesy of Flickr by Till Krech (no changes).