by Raphael Metzger, Esq.

I.          Introduction

Ethical issues often arise in toxic tort cases, which present substantial concerns for counsel.  Ethical issues typically involve due diligence in investigating the merit of claims and defenses; avoidance of conflicts among joint clients; communications with opposing parties, opposing counsel and the court; and settlements, including allocation of settlement funds, indemnity, confidentiality, and resolution of liens.  Additional ethical issues often arise in class and representative actions.

II.        Due Diligence Investigation Requirements

A.        Due Diligence in Investigating Claims and Defenses

Prior to initiating the case, plaintiff’s counsel must conduct a reasonable investigation to determine whether the case has merit.  In making this determination, plaintiff’s counsel should consider whether there is a viable legal theory of liability, whether the plaintiff’s exposure was sufficient to cause the disease, and whether the plaintiff’s disease can causally be related to toxic chemical exposure.  Since medical causation must be proved in every toxic tort case and can only be proved with expert medical testimony, plaintiff’s counsel should consult with a medical expert prior to filing the case to obtain an expert preliminary opinion that the case generally has merit.  Depending on the medical consultant’s preliminary assessment, additional consultations with an industrial hygienist or environmental scientist may also be necessary to establish sufficiency of the plaintiff’s exposure.  The expert medical consultation upon which plaintiff’s counsel relies may either be made for the particular case, or, where plaintiff’s counsel has substantial experience litigating prior similar cases, counsel may rely on expert medical and technical consultations made for prior similar cases in assessing the merit of the case.

Just as plaintiff’s counsel has a duty to conduct a reasonable investigation to determine the merit of the case, defense counsel likewise has a duty to conduct a reasonable investigation in determining the merit of its defenses.

B.        Due Diligence in Investigating the Liability of Defendants and Cross-Defendants

In addition to investigating the merit of the case, plaintiff’s counsel must exercise due diligence in investigating the liability of all potential defendants.  In naming a particular company as a defendant, plaintiff’s counsel must have a reasonable basis to believe that the plaintiff was likely exposed to the defendant’s product.  Plaintiff’s counsel should also ascertain that defendant’s product likely contained toxins which cause or contribute to the disease that the plaintiff has.

Counsel’s investigation should begin with the plaintiff.  If the plaintiff recalls using the defendant’s product, such should establish that the plaintiff was likely exposed to the product.  If the plaintiff did not use the defendant’s product but recalls that it was used in his work area, plaintiffs’ counsel will need to evaluate whether the circumstances of the product’s use was such that the plaintiff would likely have been exposed to it. Volatile liquid chemicals readily evaporate into workroom air and chemicals that are in powder form readily become airborne, such that a plaintiff working in an area where they are used would be exposed to vapors or particles of the chemicals by inhalation.  Where it is not readily apparent that a defendant’s product would become airborne in the plaintiff’s work area, consultation with an industrial hygienist or environmental scientist may be necessary to establish the likelihood of plaintiff’s exposure.

It is not uncommon for the worker to be unaware of the identity of the particular chemical products that he or others used on the job, especially when the plaintiff is a foreign national or immigrant who does not read English or is illiterate.  It is also not uncommon in toxic tort cases for the injured worker to have died before counsel is able to evaluate the case.  When the worker does not know the identity of the products that he used on the job, counsel should show the worker pictures of containers of products which the worker may have used, so that the worker can identify products by recognizing their containers.  When the worker is deceased, counsel should make reasonable efforts to interview co-workers who know what products the decedent used or who can identify them by being shown pictures.  A simple way of obtaining pictures of products potentially used by the worker is by doing a Google Images search for the type of product (e.g. paint thinner, spray adhesive, rubber cement, etc.)

The best source of information regarding the worker’s potential exposure to a particular defendant’s product is usually the employer.  Plaintiff’s counsel may request the employer to arrange a meeting with the worker’s supervisor and the company’s industrial hygienist or safety manager.  If the employer is reluctant to allow its managerial employees to meet with counsel due to liability concerns, plaintiff’s counsel may offer the employer a release of civil liability in exchange for such cooperation.  Since workers generally cannot sue their employers civilly unless the employer fails to secure workers’ compensation coverage, the plaintiff usually will not be relinquishing any viable claims in executing such a release.

Whether or not the employer cooperates with plaintiff’s counsel in the investigation of the case, the employer must provide certain exposure records to counsel upon proper request – without the necessity of a subpoena.  Pursuant to federal and state regulations, employers must preserve employee exposure records for thirty years, 29 C.F.R. § 1910.1020(d)(1)(ii), and must provide copies of such records to the worker or the worker’s legal representative within 15 work days of a request for such records made in proper form.  29 C.F.R. § 1910.1020(e)(1)(i). Employers are required to produce exposure records to the worker’s representative whether or not the worker has filed a workers’ compensation claim or a civil case for the toxic injury.

Employee exposure records include material safety data sheets (MSDSs), 29 C.F.R. § 1910.1020(c)(5)(iii), exposure monitoring records, i.e., records which assess concentrations of toxic chemicals in the workplace, 29 C.F.R. § 1910.1020(c)(5)(i), biological monitoring records, i.e., records which assess the absorption of toxic chemicals by body systems (the level of a chemical in the blood, urine, breath, hair, fingernails, etc.), 29 C.F.R. § 1910.1020(c)(5)(ii), and, in the absence of such records, chemical inventory or other records which indicate when and where a chemical was used in the workplace and its identity.  29 C.F.R. § 1910.1020(c)(5)(iv).

For purposes of satisfying counsel’s duty of due diligence in investigating the liability of particular potential defendants, material safety data sheets are the most important records to be obtained, and are the records which employers typically produce to comply with the records access regulations. These records identify the manufacturer of the chemical product, the name of the product, its hazardous ingredients, its known adverse health effects and provides much other useful information as well.  By requesting the employer to provide exposure records “relevant to the worker’s employment,” the employer is obliged to produce material safety data sheets for those chemical products which the employee used or that were used in areas where the employee worked.  By evaluating the Material Safety Data Sheets and any exposure or biological monitoring records the employer produces, counsel can readily satisfy due diligence requirements for evaluating the potential liability of particular defendants.

Just as plaintiff’s counsel has a duty to conduct a reasonable investigation of the liability of particular companies before naming them as defendants in a case, defense counsel has a duty to conduct a reasonable investigation of the liability of potential cross-defendants before suing them as such.

C.         Avoiding Conflicts of Interest

1.         Conflict Issues of Concern to Plaintiffs’ Counsel

Most law firms and attorneys who litigate toxic tort cases on behalf of plaintiffs rarely represent corporate defendants, so plaintiffs’ toxic tort attorneys are unlikely to encounter conflicts of interest between their clients and any defendants.  However, plaintiffs’ counsel must be cautious in hiring attorneys or staff who previously worked for defendants or defense counsel, and must also be careful in associating with co-counsel or local counsel who may have represented defendants in other matters.

The major area of concern for conflicts on the part of plaintiffs’ counsel arises in the context of joint representation of multiple plaintiffs.  While co-plaintiffs in toxic tort cases have interests in common (e.g., prevailing in the case and maximizing recovery), co-plaintiffs often have adverse interests in the allocation of settlements among them.  These conflicts typically do not exist at the beginning of the case, but almost inevitably arise when settlement offers are made by the defense.  Such conflicts may arise between unrelated co-plaintiffs, between members of one family, or in both situations.  Since these conflicts can rarely be resolved when they arise, it is critical for plaintiff’s counsel to anticipate such conflicts at the time representation is commenced, to devise means of resolving such potential future conflicts, and to obtain the written agreement of all clients to the utilization of such means of dispute resolution.

In devising dispute resolution mechanisms, plaintiff’s counsel must at all times abide by the ethical requirement that counsel owes each and every client an undivided duty of loyalty.  This means that counsel cannot attempt to persuade clients of any particular allocation of settlement funds, because in proposing any division of settlement funds, counsel is advocating that no client receive all the funds, while counsel’s obligation is to obtain the maximum share of the funds for every client – a legal impossibility.  Therefore, whenever plaintiff’s counsel represents two or more plaintiffs in any case who are not husband and wife, all plaintiffs should be requested to sign a joint representation agreement.

Joint representation agreements typically provide that a settlement offer by any defendant made to all plaintiffs may be accepted on behalf of all plaintiffs upon recommendation by counsel and a majority vote of all plaintiffs, and that the allocation of the settlement proceeds among the plaintiffs will be made by a retired judge to be selected by plaintiff’s counsel at the conclusion of the case.  By obtaining written agreements from all clients before commencing the case, plaintiff’s counsel may rest assured that disputes among plaintiffs will not prevent consummation of settlements, that disputes among clients regarding allocation of settlements will be resolved in a specified manner, and that counsel will not be put in the untenable and unethical position of giving preference to the interests of one client above the interests of other clients.

A problem arises when one or more of the plaintiffs is a minor, because all minors’ settlements must be approved by the court.  Since settling defendants invariably condition the settlement on court approval of the minor’s compromise, a particular amount or percentage of the total settlement must be allocated to the minor at the time of settlement and cannot be deferred until conclusion of the litigation.  In such situations, the joint representation agreement should provide that plaintiff’s counsel may propose to the court an amount to be allocated to the minor from the settlement funds, and that the minor’s share of the settlement shall be whatever amount the court approves as being adequate and in the minor’s interest.

2.         Conflicts of Interest of Concern to Defense Counsel

Most law firms that litigate toxic tort cases on behalf of defendants rarely represent individuals, so toxic tort defense firms are unlikely to encounter conflicts of interest between their clients and any plaintiffs.  However, just as plaintiffs’ counsel must be cautious in hiring attorneys or staff who previously worked for defendants or defense counsel, defense firms must also exercise caution in hiring associates and staff with previous employment in plaintiff’s litigation firms.

Defense counsel typically has greater potential conflicts in representing multiple defendants than do plaintiffs’ counsel in representing multiple plaintiffs.  While defendants generally share a common interest in defeating the case, in most other respects defendants have substantially different interests in toxic tort litigation.  Typically, conflicts among defendants arise because some are manufacturers and some are distributors, some defendants have indemnity agreements against other defendants, some defendants supplied more toxic products than others, some defendants supplied larger quantities of products than others, some defendants believe that their products could not cause the plaintiff’s disease while others do not, some defendants claim that the plaintiff was not exposed to their products while others do not, some defendants have potential punitive damages liability to plaintiffs while others do not, some defendants are desirous of settling reasonably while others want to litigate the case to conclusion regardless of the risks involved, some defendants want to file cross-complaints for contractual or equitable indemnity while others do not, etc.  Given the multiple conflicts between defendants which are ever-present in toxic tort litigation, it is a dicey venture for defense counsel to represent multiple defendants in such cases.

D.        Communications

1.         Communications With Adversaries

Communications among counsel are generally governed by standards of professional and ethical conduct.  As in all complex litigation, courteous and professional conduct in communicating with opposing counsel facilitates efficiency and progress of the litigation.  Thus, Los Angeles Superior Court Rule 7.12(d), Communications With Adversaries, provides:

(1) Counsel should at all times be civil and courteous in communicating with adversaries, whether in writing or orally.

(2) Letters should not be written to ascribe to one’s adversary a position he or she has not taken or to create “a record” of events that have not occurred.

(3) Letters intended only to make a record should be used sparingly and only when thought to be necessary under all the circumstances.

(4) Unless specifically permitted or invited by the court, letters between counsel should not be sent to judges.

Opposing counsel should cooperate in resolving procedural issues, such as the scheduling of depositions, site inspections, and motions regarding common issues; the exchange of discoverable documents and information; in presenting disputed issues to the court; in requesting judicial guidance or resolution of disputes, etc.  Counsel should engage in meaningful discussions to resolve or minimize discovery and other disputes, rather than merely meeting and conferring precedent to filing a discovery motion.

Communication with opposing counsel can be difficult for plaintiffs’ counsel in toxic tort cases, because there are often many defense attorneys representing different defendants.  Nevertheless, scheduling and other routine matters can and should be resolved professionally by counsel without court intervention.  In order for discussions among opposing counsel to be productive, it is critical that all counsel participating in the discussions have full authority to make agreements on behalf of all necessary parties.  This often requires the appointment of a defense liaison counsel by the court and a formal written agreement among all defense counsel approved by the court, establishing the defense liaison’s authority to act on behalf of all defendants and clearly specifying the matters upon which liaison counsel is authorized to act and any limitations to such authority.  Absent such a formal agreement, plaintiff’s counsel cannot meaningfully resolve any disputed matters with defense counsel, because any defense attorney who disagrees with an agreement made by liaison counsel can later disaffirm liaison counsel’s agreements.

In exchange for agreeing to work cooperatively, defense counsel typically ask the court to deem all communications among them privileged pursuant to the “joint defense privilege” and to enter an order stating that cooperative efforts of defense counsel shall not constitute evidence of conspiracy, concerted action, or other wrongful conduct.  However, it is unethical for defense counsel to seek a court order immunizing any conspiracy, concerted action or other wrongful conduct on their part, and it would be wholly improper for a court to bless unlawful or wrongful conduct by defense counsel with a grant of immunity.  It is also questionable whether communications among counsel for co-defendants who do not share a unity of common interests may be privileged under the so-called “joint defense privilege.”  However, to the extent that defense counsel may be required to communicate with each other to select defense liaison counsel and to determine the scope of liaison counsel’s authority, regarding scheduling matters and the preparation of joint discovery and joint submissions to the court, neither counsel nor their clients should be subjected to claims of conspiracy or concerted action.  Therefore, plaintiff’s counsel should agree that although such communications among defense counsel may not be privileged, counsel will not seek to discover or to proffer evidence of such conduct and communications in evidence at trial or otherwise.

Another issue that arises regarding communications among adversaries is the inadvertent disclosure of information to opposing counsel.  It is not uncommon for opposing counsel to be included as a unintended recipient of an e-mail, fax, or letter which contains confidential information.  Counsel should carefully study and abide by the court rules and judicial decisions of the applicable jurisdiction regarding inadvertent disclosure of confidential information to opposing counsel.

2.         Communications Among Counsel for Co-Defendants

Defense counsel should be extremely cautious in their communications with counsel for co-defendants, because today’s ally may be tomorrow’s adversary.  Merely because co-defendants share some common interests in litigation does not mean that they are not adverse or may not potentially be adverse to each other.  “It is the duty of an attorney . . . to maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or client.”  Cal. Bus. & Prof. Code § 6068(e)(1).  Thus, defense attorneys should at all times preserve the confidences and secret of their clients and should not assume their statements at joint defense meetings will be protected.

3.         Communications with the Court

Attorneys must conduct themselves in a professional manner in all communications to the court.  Los Angeles Superior Court Rule 7.12(c), regarding written submissions to courts, provides:

(1) Written briefs or memoranda or points and authorities should not rely on facts that are not properly part of the record.  A litigant may, however, present historical, economic, or sociological data if such data appear in or are derived from generally available sources.

(2) Neither written submissions nor oral presentations should disparage the intelligence, ethics, morals, integrity or personal behavior of one’s adversaries, unless such things are directly and necessarily in issue.

In toxic tort cases, it is not uncommon for counsel to make arguments to the court that are not based on facts in the record. It is also not uncommon in toxic tort cases for defense counsel to attempt to sully plaintiff’s counsel by asserting that the plaintiff’s case has no merit and that by suing a large number of defendants plaintiff’s counsel is engaging in a “shakedown operation” to “extort” money from the multiple defendants in the case.  Such accusations by defense counsel are not only offensive; they are unethical.  When faced with such unethical and unprofessional conduct, plaintiffs’ counsel should not respond in kind, but should clearly inform the court that such accusations are untrue and that it is unethical for defense counsel to make such accusations, because they disparage the morals, integrity and ethics of plaintiff’s counsel.  Plaintiffs’ counsel should remind the court that the only proper forum for such charges is a formal ethics complaint filed with the State Bar and not as an ad hominem attack on counsel in open court.

Counsel should also be cautious to avoid improper ex parte communications to the court.  Counsel should not write letters to the court regarding matters in dispute and should not communicate with the court other by noticed motion or by formal ex parte application.  Thus, Los Angeles Superior Court Rule 7.12(j) says:

(1) A lawyer should avoid ex parte communication on the substance of a pending case with a judge (or his or her law clerk) before whom such case is pending.

(2) Even where applicable laws or rules permit an ex parte application or communication to the court, before making such an application or communication, a lawyer should make diligent efforts to notify the opposing party or a lawyer known to represent or likely to represent the opposing party and should make reasonable efforts to accommodate the schedule of such lawyer to permit the opposing party to be represented on the application.

(3) Where the rules permit an ex parte application or communication to the court in an emergency situation, a lawyer should make such an application or communication (including an application to shorten an otherwise applicable time period) only where there is a bona fide emergency such that the lawyer’s client will be seriously prejudiced by a failure to make the application or communication on regular notice.

If counsel nevertheless communicates in writing with the court, counsel must concurrently copy all counsel of record with such.

4.         Communications with Opposing Parties

It is unethical for an attorney to communicate about a case with a party represented by counsel, unless the attorney has obtained counsel’s consent.  Thus, Rule 2-100 of the California Rules of Professional Conduct, concerning Communication with a Represented Party, states:

(A) While representing a client, a member shall not communicate directly or indirectly about the subject of the representation with a party the member knows to be represented by another lawyer in the matter, unless the member has the consent of the other lawyer.

(B) For purposes of this rule, a “party” includes: (1) An officer, director, or managing agent of a corporation or association, and a partner or managing agent of a partnership; or (2) An association member or an employee of an association, corporation, or partnership, if the subject of the communication is any act or omission of such person in connection with the matter which may be binding upon or imputed to the organization for purposes of civil or criminal liability or whose statement may constitute an admission on the part of the organization.

Thus, defense counsel may never communicate with plaintiffs in a toxic tort case without prior consent of plaintiff’s counsel.  However, plaintiff’s counsel may communicate with employees of defendant corporations unless they are officers, directors or managing agents of the corporation.  Plaintiffs’ counsel should, however, carefully study the court rules and judicial decisions of the particular jurisdiction to be sure that communications with particular employees are permissible in that jurisdiction.  Failure to abide by these rules may not only result in disciplinary action by the state bar association, but may also result in disqualification of counsel.

E.         Issues Regarding Settlement

1.         Communication of Settlement Offers

Counsel has an ethical obligation to communicate all written settlement offers to the client.  Thus, Rule 3-510 of the California Rules of Professional Conduct states: “A member shall promptly communicate to the member’s client … all amounts, terms, and conditions of any written offer of settlement made to the client.”  Oral offers of settlement made to the client in a civil matter should also be communicated if they are significant.

To comply with this rule, Plaintiffs’ counsel should send every written settlement offer and a description of every significant oral settlement offer to the client with a letter recommending acceptance or rejection of the offer, with an explanation of counsel’s recommendation.  Counsel should send a copy of the letter to be signed by the client and returned to counsel, indicating the client’s acceptance or rejection of the offer.  By so doing, counsel can document compliance with this ethical requirement and defend against a claim later asserted by the client that counsel failed to communicate a settlement offer.

Defense counsel necessarily have a conflict of interest when they receive a written settlement offer from plaintiff’s counsel, because settlement of the case terminates defense counsel’s work on the case and, hence, defense counsel’s billings to the client.  If plaintiff’s counsel suspects that a defense attorney is not communicating written settlement offers to the defendant or its insurance carriers, plaintiff’s counsel may not direct the settlement offer to the defendant’s general counsel, because general counsel is a managing agent of the defendant.  However, plaintiff’s counsel may ethically communicate the offer to the defendant’s insurance carriers, as they are not officers, directors, or managing agents of the defendant corporation.

2.         Settlement Offers Interfering with Legal Representation

Occasionally, defense counsel will offer to settle a case on the condition that opposing counsel agrees to file no cases regarding the same product or site against the defendant in the future.  Such an offer is unethical, as is shown by Rule 1-500(A) of the California Rules of Professional Conduct, which states: “A member shall not be a party to or participate in offering or making an agreement, whether in connection with the settlement of a lawsuit or otherwise, if the agreement restricts the right of a member to practice law ….”  Recognizing that such an offer is unethical, when a plaintiff’s attorney has developed a strong case against the defendant, defense counsel may offer to settle the case pursuant to the defendant’s agreement to retain plaintiff’s counsel as a consultant for a number of years for a substantial fee.  Such offers are thinly disguised attempts to circumvent the ethical prohibition of restricting the right of plaintiffs’ counsel to practice law and should be viewed as such.

Even if making and accepting such an offer were not unethical, it would be unethical for plaintiff’s counsel to keep the retainer fee paid by the defendant, because an all monies that an attorney receives in settlement of a client’s claim are the property of the client, subject to the attorney’s percentage contingent fee.

A difficult situation arises when defense counsel make an offer to the plaintiff which is conditioned upon plaintiff’s counsel waiving his fee.  While not expressly prohibited by the Rules of Professional Conduct, such an offer is also unethical, because it necessarily interferes with the contingency fee contract between plaintiffs and their counsel.

3.         Agreement to Pay All Liens

Defense counsel often request a provision in the settlement agreement that the plaintiff will pay all liens.  This provision presents an ethical problem for plaintiffs’ counsel, because not all liens are valid.  In particular, a lien is only valid if plaintiff or plaintiff’s counsel has notice of the lien prior to disbursement of the settlement proceeds.  Consistent with counsel’s duty of loyalty to the client, plaintiff’s counsel should not agree to obligate the plaintiff to pay all liens.  Instead, counsel should negotiate language which provides that the plaintiff will either pay or resolve all known liens.  This limits the client’s obligation to address only liens which have been asserted at the time of the settlement, and allows plaintiff the option of negotiating lien reductions or litigating the validity of liens. See, infra.

4.         Indemnity and Hold Harmless Agreements

Defense counsel often request a provision in the settlement agreement that the plaintiffs will indemnify and hold harmless the defendant if any suit is brought against the defendant by others, including the settling plaintiffs, plaintiffs’ heirs, plaintiffs’ assignees, other defendants, and lien claimants.  Defendants and their counsel desire such terms because they want to be sure that in settling the case, the defendant is actually buying its peace.  However, such settlement terms present substantial ethical concerns for plaintiffs’ counsel, primarily because they subject the plaintiffs to potentially unlimited future liability.  Few plaintiffs are sophisticated enough to understand that if someone later sues the defendant regarding the plaintiffs’ claim, the indemnity agreement requires the plaintiff to hire counsel to defend the defendant against such a suit, and to pay any judgment rendered against the defendant.  The problem is exacerbated when the settlement is for a relatively small sum. How, consistent with ethical standards, can plaintiffs’ counsel recommend a settlement to plaintiffs which has the potential of subjecting them to liabilities far in excess of the settlement received?  Plaintiffs’ counsel should therefore attempt to eliminate or minimize indemnity provisions from settlement agreements.  Depending on the amount of the settlement offered, it may be in the plaintiff’s interest to agree to indemnify the defendant for liens asserted by plaintiff’s assignors or heirs, but counsel should attempt to eliminate any obligation for the plaintiff to indemnify the defendant for medical liens and other liens whose assertion plaintiff cannot control.  At a minimum, counsel should negotiate a cap on the amount of the indemnity obligation, which should not exceed the amount of the settlement.

5.         Confidentiality Provisions

Defense counsel commonly request that plaintiff and plaintiff’s counsel agree to keep the settlement confidential.  Confidentiality agreements present several ethical concerns for plaintiffs’ counsel in toxic tort cases.  First, confidentiality provisions prevent the plaintiff and counsel from alerting the public to the hazards of defendant’s toxic product or site, thereby allowing the defendant to harm other innocent victims.  Plaintiffs may be willing to agree to confidentiality (especially if they are paid an extra sum for agreeing to confidentiality) because they often need the settlement to pay for medical and life care needs.  On the other hand, plaintiff’s counsel may want to disclose the settlement as a means of obtaining new clients.  Of course, ethics requires that plaintiff’s counsel place the client’s interest above counsel’s personal interests.  However, confidentiality agreements present other problems.  While personal injury and wrongful death settlements are ordinarily not taxable, confidentiality agreements may render the settlement taxable.  Amos v. Commissioner 47 T.C. 95, 86 T.C.M. (CCH) 663 (2003).  Due to potential adverse tax consequences to the plaintiff, counsel should attempt to persuade defense counsel and defendant to forego confidentiality.  If confidentiality is a deal-breaker, counsel should, at a minimum, negotiate a provision that if the non-taxability of the client’s recovery is ever challenged by tax authorities, the defendant will defend, indemnify, and hold the plaintiff harmless from all adverse tax consequences arising from the confidentiality agreement.  In some cases, insisting on this necessary accommodation to protect the client may prompt the defendant to forego confidentiality.

F.         Liens

Plaintiff’s counsel also faces ethical issues regarding liens on the plaintiff’s recovery.  Medicare liens arise by operation of law and must be satisfied regardless whether notice is received from Medicare.  Most other liens require notice to be valid.  Even when notice is provided, liens may still not be valid for various reasons.  To satisfy counsel’s duty of loyalty to the client, plaintiff’s counsel must determine which liens are valid and must be paid and which liens are invalid and should not be paid.  Since determination of the validity of liens usually involves complex legal issues, counsel may need to obtain a judicial determination of the validity of liens in order to determine whether liens should be paid or not.  Many liens may be expunged, stricken or reduced on noticed motion.  These include medical liens already asserted in the client’s workers’ compensation case, medical provider liens seeking more than the amount paid by Medicare, and liens of medical insurance plans. 


1.         Medicare Liens

As previously mentioned, Medicare liens arise by operation of law and must be paid whether or not counsel is aware that Medicare provided medical treatment for the plaintiff.  Indeed, should counsel fail to pay Medicare, MediCal, and other like liens, counsel is personally liable to pay such liens.  Plaintiff’s counsel therefore has a duty to investigate the existence of Medicare liens, determine their existence, ascertain and the amount that will have to be paid from the settlement.  To satisfy this obligation (and to protect oneself from potential unknown liability), plaintiff’s counsel should send a letter to Medicare in every case, requesting a statement of the amount owed.  If Medicare has not paid for any of the plaintiff’s medical treatment, counsel will receive a letter stating such.  Counsel may then rest assured that there is no Medicare lien to be paid from settlement proceeds.  In some cases the settlement will be insufficient to satisfy the Medicare lien.  In such situations, counsel should explain at the time of settlement that the client will not receive any funds from the settlement, so the client will not be disappointed and angry with counsel because the client received no money when some payment was expected.

2.         Medical Providers Who Filed Workers’ Compensation Liens

A medical provider that has filed a lien in the plaintiff’s workers’ compensation action, may not assert a lien in the plaintiff’s civil action.  Cal. Labor Code § 5304; Bell v. Samaritan Medical Clinic, Inc. (1976) 60 Cal.App.3d 486, 131 Cal. Rptr. 582; Fiorito v. Superior Court of Los Angeles County (1996) 61 Cal. Comp. Cases 445.  If the worker’s compensation carrier nevertheless does so, counsel should file a motion to strike or expunge the lien from the civil case.

3.         Medical Providers Who Accepted Payment from Medicare

A medical provider that has contracted with Medicare for payment of medical care services provided to the plaintiff may not attempt to thwart its agreement to accept payment from Medicare as payment in full by attempting to obtain payment for its services directly from the beneficiary.  Olszewski v. Scripps Health (2003) 30 Cal.4th 798.  If a medical lien is received from a medical provider who has accepted payment from Medicare or MediCal, counsel should file a motion to strike the lien.

4.         Medical Liens by Group Medical Insurance Providers

A group medical insurance plan that has paid medical benefits for the plaintiff may also be barred from asserting a lien on the plaintiff’s recovery due to ERISA preemption.  Great-West Life & Annuity Insurance Co. v. Knudson (2002) 534 U.S. 204, 122 S.Ct. 708, 151 L.Ed.2d 635.  But, see, Sereboff v. Mid Atlantic Medical Services, Inc. (2006) 126 S.Ct. 1869.  Where a group medical insurer asserts a lien, a motion may be filed to strike the lien.

5.         Conclusion

Counsel has an ethical obligation to maximize the client’s recovery in the case, which includes exercising reasonable efforts to eliminate or reduce liens which reduce the client’s net recovery.  Counsel should evaluate the validity of lien claims, pay all Medicare liens, seek expungement of invalid liens, and attempt to negotiate reduction of all other liens.

Raphael Metzger is the principal of the Metzger Law Group, a Professional Law Corporation.  The firm concentrates its practice on toxic tort litigation and is based in Long Beach, California.

This article was presented at the 2007 Annual Meeting of the Section on Toxic, Environmental and Pharmaceutical Torts (STEP) of the American Association for Justice (AAJ) and was published in the conference proceedings.