Opinion
No. HHD CV-10-6008253S
November 10, 2010
MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT
The plaintiff, State of Connecticut, has moved for Summary Judgment in this action against the defendants who are attorneys practicing law in the state of Connecticut. The lawsuit arises from the settlement of a claim for personal injuries in which the attorneys represented a client who had been the recipient of public assistance. The dispute is as to the reimbursement of funds from the proceeds of a settlement pursuant to a statutory lien.
"In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." Appleton v. Board of Education, 254 Conn. 205, 209, 757 A.2d 1059 (2009). "The party seeking summary judgment has the burden of showing the absence of any genuine issue of material fact, such that the party is entitled, under principles of substantive law, to a judgment as a matter of law." Id.
"In ruling on a motion for summary judgment, the court's function is not to decide the issues of material fact, but rather to determine whether any such issues exist." Nolan v. Borkowski, 206 Conn. 495, 500, 538 A.2d 1031 (1988). "Summary judgment is appropriate only if a fair and reasonable person could conclude only one way, based on the substantive law and the undisputed material facts." Miller v. United Technologies Corp., 233 Conn. 732, 751, 660 A.2d 810 (1995).
Facts
Anthony Sanders was involved in a motor vehicle accident on August 27, 2005. He claimed to have suffered personal injuries as a result of the negligence of another, and retained the defendants as his attorneys to recover damages for those injuries.
Mr. Sanders had been a recipient of public assistance prior to and subsequent to the date of the accident. The State claimed, it had advanced the sum of $38,185.11 to him. The State notified the defendants of its assertion of a statutory lien on the proceeds of Mr. Sanders' recovery as provided in Connecticut General Statute Section 17b-93 and 17b-94. The defendants were aware of the lien.
C.G.S. Section 17b-94 is entitled "State's claim against proceeds of cause of action. Assignment of interest in estate to the state." In relevant part it states that: ". . . the claim of the state shall be a lien against the proceeds therefrom in the amount of the assistance paid or fifty per cent of the proceeds received by such beneficiary or such parent after payment of all expenses connected with the cause of action, whichever is less . . . and shall have priority over all other claims except attorneys fees for said causes, expenses of suit, costs of hospitalization connected with the cause of action . . . physicians' fees for services during any such period as are connected with the cause of action . . . The proceeds of such causes of action shall be assignable to the state for payment of the amount due under said Section 17b-93, irrespective of any other provision of law. Upon presentation to the attorney for the beneficiary of an assignment of such proceeds . . . such assignment shall constitute an irrevocable direction to the attorney to pay the Commissioner of Administrative Services in accordance with its terms . . ."
Subsequently, the defendant advised the State of Connecticut that Mr. Sanders' claim had been settled. A settlement statement was provided to the State indicating that Mr. Sanders was to realize the sum of $5,295.97 as the proceeds of this settlement. A check in the amount of one-half of Mr. Sanders' proceeds ($2,647.99) was sent from the defendant to the State, pursuant to the terms of the lien, with the aforementioned closing statement.
The closing statement provided for reductions from the gross settlement amount for items as permitted by C.G.S. Sec 17b-93 and 17b-94, including claims of certain medical providers. The settlement statement indicated that only one medical bill was paid, an MRI exam which was paid at a discounted rate. All of the other medical expenses listed were followed by asterisks. At the bottom of the closing statement there appeared an asterisk which offered the following explanation: "Items to be paid directly by client per his request. Client will make direct arrangements to pay these providers." Next to that appear Mr. Sanders' initials. The closing statement is signed by Mr. Sanders and the defendant Porzio and is dated November 3, 2009.
Mr. Sanders did not make any payment to any other medical provider.
Discussion:
Simply put, the State's claim is that the payment of funds earmarked for medical expenses directly to Mr. Sanders constituted a payment which effectively increased the net settlement proceeds to Mr. Sanders and avoided the payment of the state's lien upon those funds. The State claims that the defendants are liable to the state for those funds because they have converted them.
"A conversion is an unauthorized assumption and exercise of a right of ownership over property belonging to another, to the exclusion of the owner's right. The essence of the wrong here is that property rights of the plaintiff have been dealt with in a manner which is adverse to it, is inconsistent with its right of dominion, and is to its harm." State v. Blawie, 31 Conn.Sup. 552, 558, 334 A2d. 484 (1974), Coleman v. Francis, 102 Conn. 612; Gilbert v. Walker, 64 Conn. 90.
Courts have previously held that the failure of an attorney to honor a lien or obligation which has been properly asserted constitutes a conversion. State v. Blawie, supra; State v. Angelo, 39 Conn.App. 709 (1995). However, those cases present slightly different questions. In Blawie there was no payment of the lien at all. In Angelo the attorney neglected to inquire as to the amount of the lien at the time of the disbursement of funds from a settlement and consequently reserved an inadequate amount for payment. In each of those cases, judgment was entered in favor of the State.
This case presents a different scenario. The defendants here argue that they have properly paid the funds owing under the terms of the lien after making deductions allowed by the statute. The difficulty is that of the five separate items listed as medical expenses, only one was actually paid. The other four were deducted from the proceeds but not paid at all. Instead, the funds were given directly to the client. It is undisputed by the defendant that those medical providers have not been paid. It is not claimed that they will be paid. Thus the question becomes "Do these funds also become `proceeds' and thus subject to the state's lien?"
The only logical conclusion is to answer that question in the affirmative. The language of the statute is clear; the intent equally so. The statute allows the State to seek recovery of monies it has paid to recipients of aid. In accomplishing the same, the statute allows for payment of attorneys fees, costs, hospitalization expenses and physician's fees. From that adjusted amount, the state claims 50% or the amount paid by the state. ". . . [Sections] 17b-93, 17b-94 and 17b-95 must be read together because they set out a general statutory scheme for reimbursement to the state for public assistance payments that the state has made to or for the benefit of public assistance beneficiaries. Section 17b-93 provides the general rule for reimbursement. Under that provision, subject to certain exceptions stated therein, if a public assistance beneficiary "has or acquires property of any kind or interest in any property, estate or claim of any kind, the state of Connecticut shall have a claim . . . against such beneficiary . . ." General Statutes § 17b-93(a). Thus, the general rule is that the state has a claim for . . . its payments against a public assistance beneficiary who "has or acquires property of any kind." State v. Marks, CT Page 21774 239 Conn. 471, 476, 686 A.2d 969 (1996).
The reading of the statute encouraged by the defendant would allow medical expenses to be deducted from the amount of the settlement and then paid directly to any client who had not provided or authorized a letter of protection. By extension, that logic would allow attorneys to compromise medical bills, and at the same time claim the full amount of those bills as deductions from the proceeds of a claim. There is nothing in the law, common sense or as a matter of public policy that would compel that interpretation.
In this determination, one may look to the Rules of Professional Conduct. In particular, rule 1.15(b) states that "Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. Except as stated in this rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third person shall promptly render a full accounting regarding such property."
Informal Opinion 95-20 engages in an analysis of the rule relevant to this inquiry. In part, it defines what constitutes an "interest" in property, and what "interests" create a duty for a lawyer under this rule. This opinion, as well as a number of others define four categories of "interest" covered by this rule. They are: judgments, statutory or judgment liens, letters of protection, and consensual security agreements. (See Informal Opinion Nos. 01-05, 95-20, 99-41.) It is undisputed that C.G.S. Sections 17(b)-93 and 17(b)-94 create a statutory lien.
The defendants claim that they are obligated, pursuant to the Rules of Professional Conduct, to deliver the proceeds of a claim to a client upon their demand. That premise is generally true. Indeed, the adage that "the lawyer's first duty is to the client" is time-tested and a foundation for the practice of law. However, the rule is not absolute. "[T]he lawyer is constitutionally obligated to deliver the property to the client on demand, despite third party claims to the property, except in three limited situations:
(a) if the lawyer knows of a valid judgment concerning the disposition of the property;
(b) the lawyer knows of a valid statutory or judgment lien against the property, or
(c) the lawyer knows of a letter of protection . . ." Informal Opinion 95-20.
Footnote 3 of Informal Opinion 95-20 explains that knowledge of a lien obligates the lawyer to pay, even over the objection of the client. Further, it states that: "It must be noted, however, that the lawyer should not pay, but merely escrow, funds if there are defenses to the application of the lien that the client could assert."
More directly stated, "A statutory or judgment lien creates a presumptive interest in property, but it is not a final determination of rights to the property. If the client challenges payment of the lien, the lawyer has an obligation to recognize the rights of both the third-party and a client. However, the lawyer `may not unilaterally assume to arbitrate the dispute between the client and the third-party." Comment, Rule 1.15. Therefore, the lawyer must hold the property as a fiduciary, Rule 1.15(a), and encourage a judicial resolution of the competing claims." Informal opinion 95-20.
Rule 1.15, combined with the unambiguous language of Section 17b-94 leads to the conclusion that in this situation, the attorney becomes a "stakeholder of funds against which conflicting claims are outstanding." State v. Blawie, supra, 558.
Conclusion
The defendants are liable to the plaintiff for the sum of $1,917.50 which represents one-half of the unpaid medical expenses improperly deducted from the settlement proceeds and paid to the client. Judgment for the plaintiff is entered accordingly.