Monthly Archive for December, 2010

POTENTIAL CONFLICT CREATED BY HOLD HARMLESS AGREEMENTS

Published on December 2, 2010 in Uncategorized. Closed Tags: , , .

The New York City Bar recently issued an ethics opinion advising that it was unethical for a settling plaintiff’s counsel to agree to indemnify and hold harmless an insurance carrier for third-party claims, including conditional Medicare payments, against the proceeds of a settlement.  New York Rule of Professional Conduct 1.8(e) provides as follows:

While representing a client in connection with contemplated or pending litigation, a lawyer shall not advance or guarantee financial assistance to the client, except that . . . a lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter . . .

N.Y. Prof’l Conduct R. 8.4(e)(1) (2010).  The NYC Bar reasoned that a lawyer’s agreement to guarantee a client’s obligations to third-party insurers to induce a defendant to settle amounts to “guarant[ing] financial assistance to the client” in violation of Rule 1.8(e).  The NYC Bar said that a lawyer may not assist a client in meeting his or her obligations to third parties related to the settlement of the lawsuit.  Further, the NYC Bar stated that counsel for defendants may not seek indemnification from plaintiff’s counsel because it would violate Rule 8.4(a).  Pursuant to New York Rule of Professional Conduct 8.4(a), a “lawyer or law firm shall not . . . violate or attempt to violate the Rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of another.”  N.Y. Prof’l Conduct R. 8.4(a) (2010).  

While an ethics opinion does not have the force of law, it can be used to regulate attorney behavior through sanctions and other disciplinary actions.  Because the language of Pennsylvania Rules of Professional Conduct 1.8(e) and 8.4(a) is almost identical to the language of the New York Rules, the Pennsylvania Bar could interpret the rules similarly.    

 

AFTER DISMISSING GOVERNMENT’S MEDICARE RECOVERY ACTION, ALABAMA DISTRICT COURT GRANTS MOTION FOR RECONSIDERATION

Published on December 2, 2010 in Uncategorized. Closed Tags: , , .

After dismissing the government’s lawsuit against attorneys, corporate defendants, and their insurers because the claims were time-barred by the applicable statute of limitations, the U.S. District Court for the Northern District of Alabama granted the government’s motion for reconsideration regarding the alleged $25 million continuing accrual claim.  Based on the court’s suggestion, the government filed a motion for leave to amend its complaint to further clarify the continuing accrual issue with respect to the annual payments provided for in the settlement agreement.  The government alleges that pursuant to the settlement agreement a $275 million settlement fund was placed in an interest-bearing account for distribution to the plaintiffs and $25 million was paid in annual payments beginning in 2004 to the plaintiffs and counsel in the underlying case.  The annual payments were to be paid through 2013.  The annual payments were allegedly funded, in whole or in part, by the defendant insurers.  In its second amended complaint, the government argues that the defendants liability under the Medicare Secondary Payer Act stems from the annual payments.

In its previous opinion dated September 30, 2010, the court found that the longest applicable statute of limitations of six years had expired prior to December 1, 2009, the date the government filed this suit.  As long as the court finds that the allegations pled in the government’s first amended complaint are sufficient to state a claim for a theory of continuing accrual, it appears that the defendants may be liable for the $25 million in annual payments.