Opinion ID: 2638534
Heading Depth: 4
Heading Rank: 1

Heading: Federal and state statutes are ambiguous on the issue of a pro rata reduction of the Consortium's lien, therefore, relevant policy considerations should be applied.

Text: We turn now to the question of whether the Consortium's health care provider lien must be reduced by a pro rata share of the patient's attorney's fees. The Consortium makes a variety of statutory arguments in attempting to establish that its lien is not subject to a pro rata reduction for attorney's fees and costs, but none of the statutes clearly prohibits such a reduction. As the New Mexico Supreme Court reasoned, the ambiguity of statutory provisions requires the court to defer to equitable considerations to determine whether to reduce the lien by a pro rata share. [24] And in Cooper v. Argonaut Insurance, we took equitable considerations into account in our analysis of ambiguous statutory language, looking to the probable legislative intent to conclude that the statute should be read to require proration of attorney's fees to avoid unjust enrichment. The most significant statutory argument raised by the Consortium involves AS 34.35.475. The Consortium maintains that AS 34.35.475(a)(3) directs the attorney to be paid from the gross settlement, with the remaining funds first going to satisfy liens in full and then going to the patient. Alaska Statute 34.35.475 provides: (a) A person or insurer is liable to a hospital, physician, or nurse, in the amount that the hospital, physician, or nurse is entitled to receive, for 180 days after the date of a payment to the injured person, the heirs of the injured person, personal representatives, or the attorney of them, when the person or insurer (1) receives a copy of notice of lien, or the lien is recorded as provided in AS 34.35.460 and 34.35.465; (2) makes the payment after receipt of notice or the recording of the lien as compensation for the injury suffered; and (3) does not pay the hospital, physician, or the licensed special nurse for the reasonable value of the services rendered to the injured person and claimed in the notice of lien, or so much of the value of the services as can be satisfied out of a judgment, settlement, or compromise, after paying the attorney fees, costs, and expenses incurred in connection with it. (b) The hospital, physician, or nurse has a cause of action, during the 180 days, against the person or insurer. (Emphasis added.) The purpose of this statute, as the Consortium admits, is to provide for continuing liability against persons or insurers if, after receiving notice of a hospital lien, they have paid the injured person for that person's injuries but the hospital lien goes unsatisfied. [25] The Consortium interprets the emphasized language in AS 34.35.475 above as implying that the attorney will pay himself off the top of the gross settlement, therefore preventing a claim by the client against a nonclient for a pro rata reduction. In E.R., the Consortium notes that the gross settlement was $95,000, which is enough for attorney's fees ($31,666), costs ($9,261.16), the Consortium's lien ($30,081.65), and $23,991.19 remaining for E.R. However, in Cooper, we determined that similar language in AS 23.30.015(g)dictating that an employee shall pay to its employer out of any third-party recovery all amounts paid by the employer or the workers' compensation carrier insofar as the recovery is sufficient after deducting all litigation costs and expensescould be construed in two divergent ways: (1) requiring a deduction from the amount reimbursed to the employer for litigation expenses attributable to its share of the recovery, a pro rata reduction, or (2) requiring a deduction of all litigation expenses from the total recovery with the remainder going to reimburse the employer. [26] We acknowledged that grammatically the disputed phrase lends itself more to the second construction, but held that the first alternative more accurately conforms to the legislative intent. [27] Therefore, we conclude that, given our previous decision in Cooper, the language of AS 34.35.475 is ambiguous. [28] Upon finding the law ambiguous, we concluded in Cooper that the statute should be read to require proration of attorney's fees to ensure there is not unjust enrichment. [29] In a case quite similar to this one, the New Mexico Supreme Court interpreted a statute entitling a hospital that provided services to an accident victim to assert a lien upon that part of the judgment, settlement or compromise going, or belonging to such patient, less the amount paid for attorneys' fees, court costs and other expenses necessary thereto in obtaining the judgment, settlement or compromise. [30] New Mexico's statute thus contains language similar to that of AS 34.35.475. Because the court determined that the statute was silent on the issue of apportionment of expenses to the lienholder, the court looked to the relevant policy considerations to determine the most equitable result. [31] We agree with the approach followed by the New Mexico Supreme Court: Absent other evidence of legislative intent, the silence or ambiguity of statutory provisions on the issue of apportioning attorney's fees requires us to refer to equitable considerations. The Consortium's second statutory argument involves AS 34.35.455, which also lacks clarity on the issue of apportioning attorney's fees. That statute, entitled Limitation on extent of lien, states: Except as otherwise provided, a lien under AS 34.35.45034.35.480 may not be allowed for hospitalization or the services of a physician or licensed special nurse furnished after a settlement is made by or on behalf of the person causing the injury unless the settlement is made within 20 days from the date of the injury. A lien is not allowed for necessary attorney fees, costs, and expenses incurred by the injured person in securing a settlement, compromise, or judgment. (Emphasis added.) The Consortium contends that this statutory language is clear in forbidding an injured person, or that person's attorney, from making a claim on a hospital's liened funds to pay for a portion of attorney's fees and costs. The Consortium asserts that the first sentence of the statute limits the hospital's rights, while the second speaks to the injured person. The Consortium contends that the Legislature was protecting the health care provider's rights by limiting the rights of an injured party to reduce the lien. But the meaning of AS 34.35.455 is far from clear, as E.R. correctly notes. First, section .455 is included in article 12 of AS 34.35, which addresses liens for hospitals, physicians, and nurses; this leads one to the conclusion that whatever language is contained in that statute applies to limitations on hospital liens, not liens by injured parties. Second, the initial language of the enactment, prior to the 1963 amendment, provided that [n]o lien shall be allowed against any sum for necessary attorney fees, costs and expenses incurred by the injured party in securing a settlement, compromise or judgment. [32] E.R. argues that these facts allow for two different interpretations of AS 34.35.455, requiring us to look at the statutory language, history, and purpose. [33] The language of the previous enactment could mean what the Consortium says it does, or it is possible that the purpose of the statutory language is to limit the extension of hospital liens to the attorney's fees and costs incurred by the injured party; in other words, the statute could merely be prioritizing an attorney lien over a hospital lien. Given the language of the previous enactment, and the context, location, and title of the statute, the latter interpretation is more plausible. We determine that the statute is at best unclear, and most likely limits the Consortium's rights, not the rights of the injured parties or their attorneys. In its third statutory challenge to a pro rata reduction of its lien, the Consortium contends that under AS 34.35.450(a) the reduction would leave its lien unsatisfied. In Warden, the Consortium essentially contends that a reduction in its lien, for the purpose of allowing Rehbock to pay more settlement funds to Warden, would leave the lien unfulfilled. The Consortium looks to the language of AS 34.35.450(a), which grants the hospital a lien upon any sum ... obtained by a settlement, and argues that any settlement funds transferred from Rehbock to Warden would still be settlement funds subject to the lien. The Consortium similarly argues in E.R. that the superior court erred in allowing a lien reduction to increase E.R.'s recovery and that Joyner cannot pay more settlement funds to his client by transferring his claim to attorney's fees and costs. The Consortium notes that AS 34.35.450(a) gives it a lien upon any sum ... obtained by a settlement, and that any settlement funds transferred by Joyner to E.R. would therefore still be subject to the Consortium's lien. The Consortium thus essentially argues that a lien reduction would leave its lien unfulfilled and would subject Knowles, the owner of the property on which E.R. was injured, and his insurer to double liability under AS 34.35.475. But in Martinez, the New Mexico Supreme Court has addressed and rejected a similar assertion that pro rata reduction for attorney's fees would leave the lien unsatisfied and still in effect as to the balance due: The Hospital's argument, however, is based on the false premise that the lien is not paid in full. The lien is satisfied from the net proceeds of the settlement or judgment pursuant to the Act. Under our holding today, the Hospital then has a responsibility to pay its proportionate amount of attorney's fees incurred in obtaining the net proceeds, either out of the net proceeds or from some collateral source. In essence, it is as if the Hospital employed an attorney to secure payment from the patient; the Hospital might recover the full amount of the payment but its net benefit would be reduced by legal fees that would not be reimbursed absent a statutory or contractual right to those fees. Thus, there is no deficiency and the lien would not remain in effect. [34] The New Mexico court's reasoning is persuasive and applicable to both Warden and E.R. We determine that the Consortium's lien is satisfied from the net proceeds of the judgment or settlement, and the Consortium has a responsibility to pay its proportionate share of attorney's fees incurred in obtaining the net proceeds. The last statutory challenge we review on the issue of a reduction of the lien by a pro rata share of attorney's fees involves a federal statute. The Consortium claims that 25 U.S.C. § 1621e(c) prohibits state law from prevent[ing] or hinder[ing] the right of recovery of ... a tribal organization under [25 U.S.C. § 1621e(a)], and that reducing the Consortium's lien would violate this statute. We disagree with the Consortium. Reducing the lien would not violate the right of recovery, it would merely influence the amount that can be recovered; more accurately, it would simply require the Consortium to pay the lawyers who implemented its right of recovery. [35] As with AS 34.35.450(a), the situation is analogous to the Consortium filing suit itself, making a full recovery, and then paying its attorneys their feesthe right of recovery would not be hindered, but the attorneys must be paid for their work.