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Posted on January 6, 2011 by Tom Lawrence

After Sereboff, many of us who practice regularly in this area believed that the “races to the courthouse” to obtain TROs and injunctions post-Knudson were over and that life would return to the “good ole days” of arguing with personal injury attorneys about whether our plan language was sufficient to override the federal common law make-whole rule and/or common fund doctrine in that particular circuit. On December 29, 2010, the Ninth Circuit brought us back to reality.

In AC Houston Lumber Co. Employee Health Plan v. Berg, No. 10-15170, 2010 U.S. App. LEXIS 26599 (9th Cir. Dec. 29, 2010), the Court reversed a summary judgment for the plan, which held that the plan was entitled, as a matter of law, to recover from the portion of the settlement funds that the plan participant’s attorney had disbursed to himself as an attorney fee. The Ninth Circuit reversed because it believed that it’s prior decision in Hotel Employees v. Gentner, 50 F.3d 719 (9th Cir. 1995) controlled.

There, the Ninth Circuit, prior to Sereboff, held that a health plan could not recover from a personal injury attorney unless the attorney himself had agreed to repay the plan. In Berg, one judge dissented on the grounds that Sereboff overruled Gentner.

While I agree with the dissent, I believe there is a simpler way to distinguish Gentner. In Gentner, a health plan was attempting to pursue a claim for breach of fiduciary duty against a personal injury attorney who received settlement funds and disbursed them to his firm and himself. In Sereboff and Berg, on the other hand, the plans were merely seeking to enforce equitable liens against the parties who held the funds.

If this case is not reversed by the Ninth Circuit, en banc — I will check PACER regularly and provide updates as appropriate regarding whether review is sought, etc. — then it is going to become important again, at least in the Ninth Circuit, to be sure that personal injury attorneys sign agreements to hold funds in their trust accounts pending resolution of a lien through settlement or litigation.

In order to maximize health plan savings, this likely means at least a partial return to the approach between 2002 and 2006 of more day-to-day involvement by experienced, national healthcare subrogation counsel in order to ensure that funds are not disbursed without the proper protections in place.

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This entry was posted by cmonfils on Wednesday, January 12th, 2011 at 8:17 pm and is filed under 9th, Subrogation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.