February 25, 1993
A lawyer pursuing third-party claims on behalf of a decedent's estate may also represent medical providers seeking payment for services rendered to the decedent, but the lawyer may not represent either client in a dispute concerning the existence or amount of the medical providers' claim.
If the lawyer's fee arrangement with the personal representative covers the lawyer's services regarding establishment of a no-fault or other third-party claim, the lawyer may not also charge the medical providers for that same service without reducing the fee paid by the personal representative.
The medical providers must be notified in writing of the lawyer's contemplated legal action which is likely to benefit the medical providers and given a reasonable opportunity to advise the lawyer whether they wish to pursue their interests in the matter without the lawyer's assistance.
References: MRPC 1.4, 1.5(a), 1.6(b), 1.7, 1.8(f), 1.15(c); R-10; RI-61, RI-150; C-226.
The personal representative of a decedent killed in an automobile accident has retained a lawyer to pursue third-party liability claims arising from the accident. The lawyer's investigation establishes that there exists a valid wrongful death action which could result in third-party liability and a valid no-fault claim. The lawyer has been contacted by medical providers who seek payment from the decedent's estate for services provided to the decedent. The lawyer states that except for the wrongful death and no-fault claims the estate is uncollectible. The lawyer asks whether the medical providers may be charged a fee from any monies collected as the result of the lawyer's efforts.
In C-226 a lawyer's client was in an automobile accident and suffered nonfatal injuries; the lawyer was retained for the specific purpose of collecting no-fault damages. C-226 states in part:
"While the Committee has no authority to express opinions on substantive or procedural aspects of the law, the committee recognizes that the establishment of a lawyer-client relationship is a contractual undertaking. Accordingly, it is fundamental that the lawyer's right to charge a fee for services is founded in the establishment of a lawyer-client relationship.
"It is clearly unethical for a lawyer to charge the hospital a fee for medical payment voluntarily paid by the client's no-fault insurance carrier, under circumstances where no express lawyer-client relationship exists between the hospital and the lawyer.
"However, there is a distinction between benefits 'voluntarily' paid and benefits 'involuntarily' paid. 'Involuntary' is understood to mean a situation where the insurance carrier has denied the rights to benefits after submission of a proper request for payment, and the lawyer is compelled to extend considerable professional service on the client's behalf, which efforts result in the payment of damages by the carrier, including a recovery for expenses incurred by the hospital on the client's behalf.
"In the case of involuntary payment, the hospital assumes the appearance of a third-party beneficiary of the lawyer's time and effort. In this case it would not be unreasonable or unethical to permit the lawyer to charge the hospital a reasonable fee in the absence of an express lawyer-client agreement, provided that the hospital is first notified in writing of the lawyer's contemplated legal action which is likely to benefit the hospital, and the hospital is given a reasonable opportunity to advise the lawyer that it wishes to pursue its interests in the matter without the lawyer's assistance.
"Failure of the hospital to respond to the notice may be interpreted as its acquiescence in the lawyer's representation of the hospital's interests, establishing the lawyer's right to a reasonable fee either on the basis of an employed lawyer-client relationship or a third-party beneficiary theory."
In short, there are circumstances in which a lawyer could charge a fee to the medical providers for helping to collect for services provided to a lawyer's client. Under the facts of this inquiry, however, the medical providers did not approach the lawyer seeking representation, but contacted the lawyer as creditors of the estate demanding that the estate pay the providers for services allegedly rendered to the decedent.
A wrongful death action would typically incorporate all damages sustained by the decedent, including the cost of medical care. The medical providers would place a lien on the wrongful death action proceeds for the amount of the medical bills owed. The lien, if valid, would be paid from the proceeds before they are disbursed to the decedent's beneficiaries. See MRPC 1.15(c), RI-61. The questions that arise in this inquiry are: (1) may a lawyer represent both the decedent's estate and the lienors; and, (2) may a lienor be required to pay a share of the lawyer's fee calculated on the benefit of the lawyer's services to the lienor, or should the personal representative as fiduciary of the estate shoulder the entire fee?
Formal Opinion R-10 establishes that the lawyer in a wrongful death action owes lawyer-client duties to the personal representative as fiduciary. In applying conflict of interest rules, therefore, the interests of the personal representative as fiduciary must be weighed against the interests of other clients, the lawyer's own interests, or any third party. MRPC 1.7 states:
"(a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless:
"(1) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and
"(2) each client consents after consultation.
"(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless:
"(1) the lawyer reasonably believes the representation will not be adversely affected; and
"(2) each client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved."
In the facts presented, the lawyer has investigated the feasibility of a wrongful death action and a no-fault claim. If there is no dispute between the medical providers and the personal representative as to the medical bills, the interests of the personal representative are not "directly adverse" to nor "materially limited" by the interests of the medical providers. MRPC 1.7 would not prohibit the lawyer from undertaking representation of the medical providers.
If there is a dispute as to the existence of a debt or the amount of the debt owed, then there is an adverse relationship between the personal representative and the medical providers. In such a case, the lawyer could not represent the medical providers unless a disinterested lawyer would reasonably believe the representation of the personal representative would not be adversely affected and both clients consent. The facts provided state that the estate is "uncollectible." A successful recovery in the wrongful death action would benefit the estate by increasing its assets, and would benefit the medical providers by creating assets against which the medical providers may claim. A successful claim for no-fault benefits would similarly benefit both the personal representative fiduciary and the medical providers. Any recovery which the medical providers receive necessarily reduces the proceeds available to the estate. But the lawyer's pursuit of the claims would not be affected, would not be less diligent or tactically changed, because of the interest of the medical providers in the expected proceeds. Therefore, a disinterested lawyer could reasonably believe that representation of the medical providers would not adversely affect the representation of the personal representative, and the lawyer may seek the consent of all clients regarding the representation, the sharing of confidences and secrets among the clients [MRPC 1.6(b)], and the charging of the lawyer's fee [MRPC 1.4, 1.8(f)]. The lawyer would not be able to represent the personal representative or the medical providers in any later attempt to resolve the dispute among them regarding the existence or amount of the bill claimed by the medical providers.
Whether or not the lawyer represents the interests of both the personal representative fiduciary and the medical providers in obtaining third-party benefits, may the lawyer nonetheless charge the medical providers a fee? Fee arrangements are covered by MRPC 1.5(a) which states:
"(a) A lawyer shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee. A fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee. The factors to be considered in determining the reasonableness of a fee include the following:
"(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
"(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
"(3) the fee customarily charged in the locality for similar legal services;
"(4) the amount involved and the results obtained;
"(5) the time limitations imposed by the client or by the circumstances;
"(6) the nature and length of the professional relationship with the client;
"(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
"(8) whether the fee is fixed or contingent."
In RI-150, we held that a lawyer may not bill more than one client at full rates for the same time period, but must apportion the time so each client pays a fair share for time actually devoted to that client's matter. If the lawyer's fee arrangement with the personal representative covers the lawyer's services regarding establishment of a no-fault claim, the lawyer may not also charge the medical providers for that same service without reducing the fee paid by the personal representative. The medical providers must first be notified in writing of the lawyer's contemplated legal action which is likely to benefit the medical providers and given a reasonable opportunity to advise the lawyer whether they wish to pursue their interests in the matter without the lawyer's assistance.