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Attorney not liable for client's doctor bills

By: dmc-admin//June 7, 2006//

Attorney not liable for client's doctor bills

By: dmc-admin//June 7, 2006//

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What the court held

Case: Yorgan v. Durkin, Case No. 2004AP1359.

Issue: Can a chiropractor recover his fees from his patient’s attorney, pursuant to an assignment that the attorney did not sign?

Holding: No. Unless the attorney agreed to be bound, the chiropractor cannot recover, even though the attorney had notice of the claim.

Counsel: Becker, John A., Racine, for appellant; Yorgan, Kenneth J., pro se, for respondent.

A chiropractor cannot hold an attorney liable for payment of his client’s bills, where the attorney did not agree to be liable for them, the Wisconsin Supreme Court held on June 2, even though the attorney had notice of the claim.

Sol Hernandez was involved in a car accident and received chiropractic treatment from Dr. Kenneth Yorgan. Dr. Yorgan provided Hernandez with a form entitled “Authorization and Doctor’s Lien.”

The form authorized Yorgan to furnish reports to her attorney, and authorized the attorney to pay Dr. Yorgan directly from any judgment or settlement that may be recovered.

In the form, Hernandez acknowledged that she was fully responsible for the bills, and that payment is not contingent on receiving a settlement or judgment.

The final sentence of the form stated, “I have been advised that if my attorney does not wish to cooperate in protecting Dr. Yorgan’s fees, he will not await payment and will require me to make payments on a current basis.”

Hernandez signed the form, but her attorney, Thomas W. Durkin, never did. During the course of Durkin’s representation of Hernandez, Dr. Yorgan provided Durkin with 13 pages of medical records and included a copy of the form. Ultimately, Hernandez settled the claim with the tortfeasor, and Durkin distributed the settlement proceeds without paying Yorgan.

Unable to recover his bills from Hernandez, Yorgan filed suit against Durkin. Racine County Circuit Court Judge Charles H. Constantine ruled in favor of Yorgan, determining that Durkin had actual notice of the form agreement and was bound by its terms to pay Yorgan.

Durkin appealed, and the court of appeals reversed in an unpublished opinion, concluding that Durkin was not obligated to honor the agreement between Dr. Yorgan and Hernandez because Durkin had not acknowledged or accepted it.

The Supreme Court accepted Yorgan’s petition for review, but affirmed the court of appeals, in a decision by Justice Ann Walsh Bradley. Justice Jon P. Wilcox wrote a concurrence, and Justice Patience Drake Roggensack wrote a dissent, joined by Justice Louis B. Butler, Jr.

The court distinguished the case of Riegleman v. Krieg, 2004 WI App 85, 271 Wis. 2d 798, 679 N.W.2d 857, which involved similar facts, except that the attorney had signed the chiropractor’s form.

The court noted that the form said Hernandez was immediately liable for payment if his attorney did not sign it, concluding that therefore, the assignment thus plainly contemplated that Hern-andez’ attorney might not sign it.

The court reasoned, “These terms of the agreement condition Dr. Yorgan’s offer to await payment on the attorney’s signature. They also indicate that Dr. Yorgan could not have reasonably expected that Hernandez’s attorney would be bound by the agreement without signing it. Similarly, they show that Dr. Yorgan did not reasonably rely on the agreement as to the attorney’s responsibility for payment absent an attorney signature.”

The court further found that Durkin’s receipt of Hernandez’ medical records did not constitute acceptance of the assignment, because the records were not consideration or an independent benefit to Durkin.

Yorgan argued that the provision in the assignment authorizing Hernandez’ attorney to pay Yorgan directly created a duty on Durkin’s part to pay, but the court rejected this argument as well.

The court noted that a client could dispute the amount of the bill, in which case, the attorney could breach his duty to the client if he paid the health care provider.

Even assuming that Durkin did owe a duty to Hernandez to pay Yorgan, the court concluded that no public policy considerations require that Yorgan be able to hold Durkin responsible for breaching that duty.

The court wrote, “Allowing third-party creditors such as Dr. Yorgan to hold liable an attorney with notice of client debt, absent more, may deter attorneys from accepting personal injury cases and negatively impact injured parties’ access to courts.”

Equitable Liens

Finally, the court held that Yorgan did not have an equitable lien against the settlement proceeds.

The elements of an equitable lien are: (1) a debt, duty or obligation owing by one person to another; and (2) a res to which that obligation fastens, which can be identified or described with reasonable certainty. McIntyre v. Cox, 68 Wis. 2d 597, 602, 229 N.W.2d 613 (1975).

In McIntyre, the court noted that the elements are based the Restatement (2d) of Restitution sec. 161 (1937), which provides, “Where property of one person can by a proceeding in equity be reached by another as security for a claim on the ground that otherwise the former would be unjustly enriched, an equitable lien arises.”

The court declined to create an equitable lien for three reasons: (1) it was Hernan
dez, not Durkin, who was unjustly enriched; (2) allowing an equitable lien would circumvent the general rule against attorney non-liability to third parties; and (3) imposing an equitable lien would be inconsistent with the policy of the Legislature, which created narrow lien rights for health care providers, in sec. 779.80.

Accordingly, the court affirmed the court of appeals.

The Concurrence

Justice Wilcox wrote separately, agreeing with the legal analysis, but concluding that an exception should be made when the attorney has actual notice of an assigned between a client a health care provider.

Calling attention to the rules of Profes-sional Conduct for Attorneys, which, although they do not create civil liability, do state that disputed funds should be held in trust until a dispute is resolved, see SCR 20:1.15(d), Wilcox wrote, “when an attorney has actual notice of a purported assignment of settlement proceeds, as in this case, he or she should take the proper precautionary steps suggested by the ethics rules before releasing the funds. Such a rule would help prevent the unjust result of this case.”

The Dissent

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Case Analysis

Justice Roggensack wrote a dissent, joined by Justice Butler, objecting to the majority analysis on almost every issue.

Roggensack found the assignment to be plain and unambiguous, notwithstanding the provision that the attorney must sign it or Yorgan’s bill becomes immediately payable, because it specifically directed the attorney to pay Hernandez’ bill.

Roggensack wrote, “I see no reason why an assignment to obtain chiropractic services should be precluded here, as the need for the medical care arose out of the same accident as did the need for legal services.”

Rejecting the majority’s conclusion that public policy barred enforcement of the assignment against Durkin, Roggensack contended, “Upholding Hernandez’s assignment of proceeds will assist those who are in need of medical care, but are unable to pay for it at the time that it is provided.”

Roggensack further concluded that the elements of an equitable lien were met, focusing on the two elements set forth in McIntyre, rather than the Restatement. Because the two elements were met, the dissent found the lack of unjust enrichment does not defeat an equitable lien.

Finally, Roggensack argued that the general rule against attorney liability to third parties is irrelevant to whether a claimant has an equitable lien against proceeds to a settlement, and concluded that the existence of a narrow statutory hospital lien does not foreclose imposition of a broader equitable lien.

Click here for Case Analysis.

David Ziemer can be reached by email.

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