Practice and Procedure | The Better Chancery Practice Blog

Further on the Changing Landscape of Legal Fees

January 10, 2014 § 1 Comment

The subject of limited scope representation has been touched on here. Limited scope affects fees, but even more to the point is that the construction of legal fees is undergoing a metamorphosis in reaction to changing economics.

The following is from a 2013 ABA publication …

The Great Recession has ushered in an era of alternative fee arrangements, according to a recent article in GPSolo magazine. Every year, more clients and lawyers experiment with AFAs, and some skeptics become converts.

A recent report by Altman Weil shows that in 2009 only about 20 percent of the lawyers surveyed thought that nonhourly billing had become a permanent trend within the profession. By 2012 that number had increased to 80 percent.

The report went on to observe that AFAs were being employed by almost all firms responding to the survey. Yet a substantial number of these firms also reported lower profitability when using AFAs. This suggests that law firms and clients have not yet figured out how to turn AFAs into win-win propositions. If they do not, for financial reasons alone, it is likely that firms will embrace AFAs only if required by clients.

In this economy, at least for the short term, it appears that law firms will be forced to agree to alternative fee arrangements if clients demand those arrangements. Indeed, because of client interest, almost half of the firms surveyed by Altman Weil reported a year-to-year increase in the amount of nonhourly billing, as measured as a percentage of revenues.

As a result of the change in dynamics, law firms and clients have created numerous alternatives to the billable hour when pricing legal services. The most common are outlined below:

Contingent fees. This “old standby” has long been an alternative for hourly billing. A contingent fee is dependent on the results obtained. This obviously requires a clear understanding of what the results are. In personal injury cases, this determination is usually easy. It is a percentage of the amount recovered for the injuries sustained by the client. In other types of cases, however, defining successful results can be problematic.
Reverse contingent fees. A reverse contingency allows for compensation based on an avoidance of exposure to liability. Although in some cases it may be difficult to determine the amount of exposure escaped, it is not impossible. Most lawyers know how to place a value on their cases, and defense counsel relying on both personal knowledge and public reports of damage awards in their jurisdiction have become adept at assessing the likelihood of both liability and the amount of damages.
Fixed fees and flat fees. A fixed or flat fee is the price that a firm charges no matter how many hours its lawyers spend on a matter. A fixed fee may be the total fee for the engagement or may apply to discrete components of a matter, such as fixed fees for discovery, pretrial motion and the actual trial.
Blended rates. Blended hourly rates apply to all hours billed on a matter. The blend includes the lower rates of associates and the higher rates of partners. Unlike capped fees or fixed fees, it does not provide the client with budgeting predictability.
Percentage fees. A popular alternative fee arrangement is the percentage fee, either constant or graduated, and based on the amount of the transaction. Some courts allow fees to be determined by the value of the estate being probated. The fees for many bond issues are likewise determined by the percentage of the amount of bonds sold.
Combined approaches. Many alternative fee arrangements combine various approaches. Some firms create fee schedules based on a low blended hourly rate plus a contingency. Other firms base their fees on all the factors set forth in the ABA Model Rule of Professional Conduct 1.5. Alternative fee arrangements may even include an amount retrospectively set, based on the value received by the client.

GP Solo is a publication of the Solo, Small Firm and General Practice Division.

Some of these fee arrangements, such as contingent and percentage fees, have only limited applicability in chancery, due to MRPC 1.5(d)(1).

The article seems to imply that these “alternative” billing arrangements are interim, during the economic downturn, and that the old practices will be restored when prosperity is restored. I’m not so sure. Everyone likes to save money, and legal clients are not exempt from that desire. As new fee arrangements come into play, clients will become accustomed to leaner, more efficient, more economical legal practices and fees. It will be hard to return to the old ways.

Adapt and survive. Lawyers who cling to the old ways will be eclipsed by those who are willing to adopt more efficient ways of doing business. Lawyers who proudly proclaim that they don’t even know how to turn on a computer, and who rely on high-overhead staff to do work they could easily do themselves, will not be competitive in this 21st-century environment. Clients don’t want to pay the higher tariff for 19th-century-style representation when 21st-century technology affords cost-saving possibilities. Thus the pressure for what the article calls “alternate” fee arrangements, but what I would refer to as the new reality.

Thanks to attorney Marcus D. Evans for the raticle.

The Valuation Date as a Moving Target

January 6, 2014 § 3 Comments

The valuation date for equitable distribution is important to establish, as we have discussed before, here and here, among others. Asset values can fluctuate, significantly affecting the landscape of equitable division.

We’ve also discussed the MSSC holding that the date of the temporary judgement does not necessarily impose a demarcation date for valuation. That date is left to the sound discretion of the chancellor based on the evidence in the record.

The two principles arose together in the COA case of Stout v. Stout, decided December 10, 2013. In that case, Henry and Tracey Stout were before the chancellor on a consent, leaving equitable distribution for the judge’s adjudication. A temporary order had been entered in 2009, and the divorce trial was not held until 2012. In 2009, the marital home’s value was around $30,000 more than its value at the time of the final hearing. The chancellor elected to use the 2012 value, which caused Tracey to receive a smaller share of assets, resulting in an award of alimony.

Henry appealed, complaining that it was error for the chancellor to use the trial-date value as opposed to the temporary-order-date value. He also argued that it was error for the chancellor to use different valuation dates for different assets. Judge Roberts wrote for the majority:

¶15. First, Henry claims that the chancellor improperly valued the marital home at its 2012 value as opposed to its value in 2009 when the temporary order was entered. He claims that due to the incorrect valuation, Tracey received a lower value of assets making it more likely that alimony would be necessary. Two appraisals were done on the home: the 2009 appraisal valued the home at $132,000; the 2012 appraisal valued the home at $105,000. The chancellor used the latter value when assessing the home’s value to Tracey. Henry admits that the chancellor had the discretion to set the dates for valuation of assets, and he cites to no other authority for his proposition that the chancellor is required to use the same date for valuation of all property. In using the 2012 value, the chancellor specifically noted that the house had significantly depreciated, that Tracey had been responsible for the mortgage payments since the separation, and that Henry had abandoned the house. The supreme court has stated that “the chancellor enjoys broad discretion to value property as of any date that, in the chancellor’s view, equity and justice may require.” In re Dissolution of Marriage of Wood, 35 So. 3d 507, 516 (¶20) (Miss. 2010). We can find no case law that a chancellor must use the same date when valuing all the property. Therefore, this issue is without merit.

A few observations:

As important as the valuation date is in an equitable distribution case, I reiterate that I seldom hear any proof as to what date a party wants me to impose, and why. It can make all the difference in the world to your client, yet, if you do not put anything in the record to support a finding favorable to your client, you are leaving it up to the judge’s unfettered discretion. I am not saying that is what happened in this case; we don’t have enough information to tell.
It was enlightening to read that the COA could find no authority for one, global valuation date. I have never been able to divine an answer from the case law on the point either. In most cases, I am presented with valuation dates all over the ballpark. An example might be: a real property appraisal of the marital residence from 2012; IRA statements from June, 2013; personal property appraisal 3 months before the November, 2013 trial; securities account statements dated December, 2012. In a case like that, it seems that the judge has no choice but to use the best information available for the dates provided, unless the judge orders the lawyers and parties to go back to the drawing board, so to speak, to gather some more current info as of a given date.
The most grateful clients are the ones whom you save lots of money. The clients who come to hate you are the ones you cost a lot of money. Valuation of the assets, and making the case for a valuation date favorable to your client’s best interests, are sure-fire ways to save — or make — a lot of money.

Temporary Setbacks, Part II

December 31, 2013 § 1 Comment

Yesterday we visited the subject of temporary hearings in cases where ID is the sole ground. The practice across the state is, well, varied.

What about the manner in which temporaries are conducted?

In this district, we schedule all temporary hearings on a R81 return day. Many are negotiated to a settlement. The ones that do no settle are taken up for hearing in order from oldest filed to most recently filed. Each side is allowed one hour, total, for the presentation of all witnesses and other evidence. One hour is by consensus among bench and bar an adequate time to develop the pertinent proof. We had a chancellor once who limited proof to ten minutes per side, which produced a lot of groaning among the lawyers. I set an expiration date of six months on my orders in hope of promoting movement toward finality.

In other districts, I experienced a broad range of ways to approach temporary matters. In some districts, a temporary hearing can consume an entire day. I often wondered in those cases what the difference was between that ordeal and the final hearing. I also wondered where the chancellor found the time.

In many districts, the proof is limited:

One chancellor, now retired, would call the parties and attorneys to the bench, where all stood in reverent silence while the judge examined the parties’ 8.05’s. He seldom had any questions. He would simply say something like, “Okay, the wife will have custody and the husband will pay $250 a month child support. Next case.”
Another judge called the parties to the bench and based his temporary order on a colloquy with the clients with limited input from the attorneys.
In one district the judge allowed only the parties to take the stand. He would interrupt and ask his own questions until he was satisfied that he had a clear picture, then would say he had heard enough, and would direct one of the attorneys to draft an order.

Your experiences, I am sure, will vary. I would welcome your comments about how temporary hearings are handled in your area.

Temporary Setbacks, Part I

December 30, 2013 § 4 Comments

A reader of this blog in N. Mississippi emailed me with an interesting question week before last. He asked whether the following is a common practice in other areas of the state:

I have recently been on the receiving end of opposite counsel filing for divorce on sole ground of Irreconcilable Differences, asking for temporary relief-custody, support, use of home, setting for hearing. I have objected by 12b failure to make a claim for which relief can be granted. We have worked around the 2 cases without necessity of a ruling.

Before proceeding further, I can say that in this district it is a longstanding practice not to allow temporary hearings in cases where the sole ground for divorce is irreconcilable differences. Our thinking is that an ID divorce requires an agreement, either a PSA or a consent, for the court to act, and that absent that agreement no relief is possible. Please note that I am talking only about a complaint on the sole ground of irreconcilable differences, and not: (1) a complaint in which ID is an alternative ground; or (2) where there is a separate count for, say, custody.

The authority of a chancellor in such cases is MCA 93-5-17, which states that “The chancellor in vacation [and presumably during a term] may, upon reasonable notice, hear complaints for temporary alimony, temporary custody of children and temporary child support and may make all proper orders and judgments thereon.”

As far as I can discover, there is no case law on point. Temporary orders are not appealable, so the dearth of decisions is no surprise.

I polled some chancellors to see what the practice is in their districts, and, as one might suspect, the answers are all over the ballpark. Now, before someone opines that “we need to come up with a uniform practice” for temporaries, keep in mind that the statute specifically says that the chancellor “may” grant temporary relief. It has long been the practice that it is discretionary with chancellors whether to allow a temporary hearing at all, and, if so, the form of that hearing (more on that point in Part II). Here is what the various chancellors who responded said:

“No.”
“If they allege and show ‘urgent and necessitous circumstances’ I would allow a temporary.”
“Assuming you are talking about temporary relief relative to custody and support and use of marital home incident thetero, yes we do allow temporary hearings.”
“I do not allow temporary hearings in ID divorces. The statutory premise for ID is agreement on all issues. I do not think you can expand on what the statute allows. I am sure that someone will opine that it could be done statutorily by ‘consent’ but I would counter that with, the issues tried by consent can be appealed, a temporary cannot. As an aside, it seems when you do a temporary in an ID the court may be tipping the scales one way or the other in the negotiations.”
“I have never conducted an actual hearing but I have signed agreed temporary orders incorporating the PSA.”
“[In this district] temp order[s] setting support and custody (at least) are issued in ID divorce cases all the time … to say this is a common practice in our district would be an understatement.”
“I do not allow temporary hearings on ID only complaints. I would sign [an order adopting] a stipulation between the parties …”
“No. Never. No justiciable issue.”

That’s about 20% of the chancellors.

If you wind up with a temporary hearing in an unfamiliar district, you would do well to contact a lawyer there who practices in that court and can let you know what to expect.

Twenty-First Century Fossils

November 27, 2013 § 9 Comments

It’s no secret that lawyers do not reinvent the wheel every time they do a pleading, PSA, will, or other instrument. What happens when a client needs a document in a new matter is that one like it is conjured up from the bowels of the computer hard drive (substitute “Cloud” for hard drive if you need to), the names and personal information are changed, tweaks are made to make it fit the new matter’s particular circumstances, and — voila! — the new document is dispatched into the legal universe to do the task it was designated to do.

This process works quite well as long as the attorney (or staff) is vigilant, but sometimes there are embarrassing glitches.

One obvious problem occurs when not all of the requisite changes are made, creating incongruities that can have consequences ranging from comic to tragic.

The type of problem I would like to address, however, is one that I characterize as “fossilization of the hard drive.” It occurs when lawyers time and again have the same erroneous matter in pleadings, PSA’s, or other documents, and, when (again) brought to their attention the lawyers sheepishly admit the error and promise (again) to fix it. But they don’t. Because that error is saved countless times in other documents on the hard drive, and changing it once does not solve the problem.

A harmless example of what I am talking about is the lawyer in our district whose divorce complaints pled grounds thus: ” … guilty of habitual cruel and inhuman treatment as codiciled in MCA 93-5-1 …” That’s hard to eradicate when it appears in 1,000 other complaints stored — and fossilized — on the hard drive. Every time I called it to his attention, he professed he would fix it. After five years or so, he managed to pull it off somehow.

How do you make sure that, as you catch a flaw in your pleadings, or learn the hard way not to include a particular provision in a PSA, or a case comes down mandating that you change a will provision, that you will get it right next time?

Here is a suggested solution. When you save a complaint, or PSA, or will, always add the month and year when it was done as a suffix to the file name. Example: “Henry PSA 08-13” or “Jackson Divorce Complaint 11-13” or “Reed Tom Will 04-12.” As you refine your pleadings, PSA’s, and probate documents, you save them as the most recent, and then, later, when you need a template, you call up the most recent as the best example that incorporates new innovations and eliminates old errors. That way, the old fossils can repose undisturbed until some 22nd-century legal archaeologist stumbles on them.

There is probably a better way to do this that you have discovered and implemented in the intervening years since I passed on from the practice. If so, you can leave them in a comment or email me.

A Resource for Minors’ Settlements

November 25, 2013 § Leave a comment

The Litigation Section of the Mississippi Bar publishes a newsletter for its members. The November, 2013, issue includes a superb article by Nick Thompson, Esq., an associate at Copeland, Cook, Taylor & Bush in Hattiesburg, entitled “Best Practices for Minors’ Settlements.” Click on the link, and then click on the link to the November, 2013, newsletter.

This is the kind of resource that is extremely useful to lawyers who deal with these matters regularly. I recommend that you print it out and use it.

The Final Word: No Written Agreement = No ID Divorce

November 12, 2013 § 5 Comments

We visited the COA case of Sanford v. Sanford here, back in May of 2012. Sanford is a case where the chancellor allowed the parties to dictate a settlement agreement into the record, accepted it as a final settlement of all issues, and granted an irreconcilable differences divorce.

The COA, in a case I described as a “Shortcut to Failure,” reversed, finding that, since there was no written agreement as required by the statute, the divorce had to be set aside.

But, lo, the MSSC granted cert in the case and took it into its bosom, where it has reposed since, piquing speculation that, perhaps, the Supremes were prepared to take a different tack. After all, if the high court intended to leave the COA decision undisturbed, why grant cert, right?

The speculation grows out of the outlier case of Bougard v. Bougard, 991 So.2d 646 (Miss.App. 2008), which did approve a chancellor’s grant of a divorce based on an announced settlement in open court, without a separate, written agreement. The case goes against a long line of holdings to the contrary, including the most recent, Reno v. Reno, which we posted about here.

So, the COA had reversed Sanford, holding that a written agreement is a sine qua non for an ID divorce. On cert, surely the MSSC pointed a new direction, didn’t they?

Well, in a word: no.

In Sanford v. Sanford, rendered October 31, 2013, penned by Justice Pierce, the high court affirmed the COA, saying that, “Because the requirements of neither [MCA] Section 93-5-2(2) nor Section 93-5-2(3) were completely met here, we affirm the judgment of the Court of Appeals, reverse the judgment of the Chancery Court of Lamar County, and remand the case for further proceedings consistent with this opinion.”

That would appear to put the final, end-stop punctuation to the procedure in which the assembled parties and lawyers try to announce a settlement on the record to obtain an irreconcilable differences divorce. No written agreement = no ID divorce. No written consent = no ID divorce. It’s that simple.

This would also seem to be the last gasp of Bougard.

Some Etiquette Tips for Young Lawyers

October 31, 2013 § 6 Comments

Every chancellor has his or her own preferences about how lawyers should conduct themselves in court. You need to acquaint yourself with your chancellor’s likes and dislikes, and attune yourself accordingly. Some practices, though, are universal. Violate them and you will likely suffer the wrath — or at least the dissatisfaction — of your chancellor. Here they are:

Be on time for court. This is a cardinal rule, and violation can cost you, as spelled out in UCCR (that’s Uniform Chancery Court Rules, for the unitiated)1.05:

“When any civil action has been set for, or adjourned to, a particular day or hour, all officers, parties, witnesses and solicitors whose presence is necessary for the trial shall be present at the time set. Any negligent or willful failure to obey this rule shall be punished by contempt.”

In other words, you’d better have a reason for your tardiness that falls in a category other than negligence or willfulness, or you may pay the price. Tardiness is not only rude and disrespectful of the court, it’s also rude and disrespectful of all the others who are assembled awaiting your late appearance.

Make sure your witnesses understand decorum. UCCR 1.01 says that all proceedings are to be conducted “with due formality and in an orderly and dignified manner.” A trial in chancery is not conducted like a trial in Judge Mathis’s court, although it seems like a significant number of laypeople think so. Tell them to avoid banter and talking to or seeking input from folks in the audience. Advise them to listen carefully to and answer the questions asked, and to behave always in a respectful manner.
Leave the Doberman act at home. No matter what you’ve seen in the movies, it’s not effective in a bench trial to try to treat witnesses like you were an attack dog. There’s no jury to impress. The judge will likely be unimpressed, and may even rebuke you for browbeating the witness. Sure, it’s okay to bear down and press the witness, testing credibility, but UCCR 1.01 says that “Bickering or wrangling between counsel or between counsel and witness will not be tolerated.” It’s a search for the truth, not theater.
Three people talking at the same time makes for a bad record. You have to educate your clients and witnesses not to speak over the questions or statements of others. It’s impossible for the court reporter to records that kind of thing accurately, if at all. And keep that in mind yourself. I have had to tell two lawyers and a witness all speaking at the same time to hush, and then I’ve had to tell them not to interrupt or speak over me while I am trying to set matters straight. We all have a responsibility to make a good record, but that’s impossible when everyone is speaking over one another.
Stand when addressing the court. This is another principle set out in UCCR 1.01. It makes good sense, because it not only shows respect for the court, but it demonstrates for all the laypeople present that this is not like a conversation in the living room; it’s a formal court proceeding.
Speak up. Many judges are as old as I am. That means that they — as did I — likely spent a youth of dissipation listening via headsets to the Rolling Stones with the volume cranked up to the max. As a result, our hearing is not the best. You grew up in an age where every conversation is amplified by some electronic device. Many courtrooms lack those devices, so you have to crank your own, personal volume up.
Fill in the blanks. Never present a judgment or property settlement to the judge with blanks that are not filled in. It wastes everyone’s time, causes confusion, and makes you appear to be unprepared. See UCCR 2.06.
If your case settles, tell somebody. If your case settles, or is rescheduled by agreement, or otherwise is not to be presented for some appropriate reason, notify the court administrator or chancery clerk, or the judge in advance. What would your reaction be if you drove 25, or 50, or 70 miles, only to learn that the trip was entirely unnecessary? What would be the reaction of someone who did that who had the power to hold you in contempt for it? See UCCR 3.12.

I could go on, but I hope you get the picture. Most of you do. Most lawyers, even new ones, grasp the idea of decorum and its importance to court proceedings. It’s a component of professionalism for the practitioner. It’s an element of preserving respect for the court.

A Rules Gap that Can be a Fool’s Trap

October 16, 2013 § 4 Comments

MRCP 32 (a)(3)(E) allows for the use of a deposition at trial of a medical doctor “for any purpose.” R32(a) says that the deposition may be used ” … so far as admissible under rules of evidence applied as though the witness were then present and testifying… ”

In practice, that language has been applied to excuse medical doctors from personal appearance at trial, allowing their testimony to be presented by video deposition, or by reading into the record in jury trials, or by introduction of the transcribed deposition in bench trials. The deposition of a medical doctor, then, per this rule, has been deemed admissible in evidence as though the doctor were present and testifying, simply because the witness is a medical doctor.

When this amendment to rule 32 was adopted. It was seen as a friendly gesture to the medical profession, a way to encourage testimony of doctors without unduly interfering with their schedules. All doctor testimony henceforth would be via deposition. It was a no-cost win-win.

But, as Lee Corso would say, not so fast my friend.

The deposition of the medical doctor is unquestionably a hearsay statement, so how does MRCP 32(a) mesh with MRE 804(a), which creates the hearsay exception for persons deemed unavailable to testify? If you will read MRE 804(a), it is clear that the mere status of medical-doctorhood does not automatically fit one into any of the six definitions of unavailability set out in subsection (a). Nor does that status automatically fit into any of the hearsay exceptions in subsection (b). It may be that the doctor’s statement could be qualified as an exception under subsection (b)(5), but that would require a finding by the court, after prior notice by the offering party to counsel opposite.

The answer is that the MRE controls. That’s what MRE 1003 states: “All evidentiary rules, whether provided by statute, court decision or court rule, which are inconsistent with the Mississippi Rules of Evidence are hereby repealed.”

This gap between the two rules caught a party unprepared in the case of Parmenter v. J & B Enterprises, Inc., 99 So.3d 207, 219 (Miss. App. 2012), in which the trial judge disallowed the expert testimony via deposition per MRCP 32(a) where there was no proof of unavaiability as defined in MRE 804. The appellant unsuccessfully argued that MRCP 32(a) allowed the introduction. The COA held, to the contrary, that the MRE provision controlled.

Don’t assume that, just because you have gotten that doctor’s deposition, it will automatically be admissible in lieu of the doctor’s personal testimony. To do that, you will still have to prove the doctor’s unavailability as defined in MRE 804. That may be something you can achieve via requests for admission, or by stipulation, or by making a record.

Oh, and don’t overlook (1) that you have to plant somewhere in the record enough proof to satisfy the judge of the doctor’s qualifications to testify as an expert in the first place, and (2) that MRCP 32(a) applies only to medical doctors, not to PhD clinical psychologists. Those were two stumbling blocks for the plaintiff in Parmenter.

A Curveball for Minor’s Settlements

October 9, 2013 § 5 Comments

For those of you who handle minor’s settlements, here is what should be a familiar scenario:

Minor’s arm broken in a car wreck. Insurance company is to pay policy limits of $25,000. Medical bills to the local hospital in amount of $17,500 are to be paid from the proceeds. Minor is to receive balance of $7,500.

Not much to it, right?

Well, there just might be quite a lot to think about after you read Memorial Hospital at Gulfport vs. Guardianship of Proulx, decided by the MSSC on September 12, 2013.

In that case, the minor was injured in a car wreck and the parents were appointed his guardians. They petitioned the court to approve a policy-limits settlement of $50,000. They also petitioned the court to disapprove claims against the proceeds asserted by several medical providers, including Memorial, that totalled more than $80,000. Memorial’s claims alone were $71,000. The chancellor disapproved the claims, and Memorial appealed.

Justice Chandler wrote for a unanimous court, beginning in ¶ 7:

… Memorial has no lien against the funds. Unlike some other states, Mississippi has no statutory hospital lien, nor has this Court recognized a common-law lien under these facts. Indeed, Memorial does not argue that it has a lien, or does it assert a right to recovery through a contract or under an implied-contract theory. It does not assert that it is the beneficiary of an assignment of the settlement proceeds. Memorial cited no authority for its argument at the hearing that it has a right to a pro rata share of the settlement proceeds.

¶8. Memorial’s position in this case is comparable to that of the hospitals that sought payment of medical bills in McCoy v. Preferred Risk Ins. Co., 471 So. 2d 396 (Miss. 1985), and Methodist Hospital of Memphis v. Guardianship of Marsh, 518 So. 2d 1227 (Miss. 1988). In McCoy, a minor, David James McCoy, was hospitalized after a car accident, and his parents executed an assignment of all liability insurance benefits in favor of the hospital. Id. at 397. Later, the parents disputed the validity of the assignment, and the insurer interpleaded the benefits, which consisted of $20,000 in uninsured-motorist liability benefits and $4,000 in medical benefits. Id. The Court held that the parents had lacked authority to assign the uninsured-motorist benefits due to David. Id. at 397-98. However, because the medical-expense benefits under the policy authorized Preferred to pay all reasonable medical expenses to the entity rendering medical services, the Court permitted the hospital’s recovery of the $4,000 in medical benefits. Id. at 397.

¶9. In Methodist, another minor, Stephen B. Marsh, was injured in a car accident. Methodist, 518 So. 2d at 1228. At the hospital, his mother signed a document entitled “Hospital Lien” in which she agreed to pay Stephen’s medical expenses from any insurance settlement or judgment she recovered. Id. The insurer settled for the policy limits of $25,000 in liability coverage and $2,000 in medical-payments coverage, and the hospital claimed a lien on those funds. Id. This Court rejected the claimed lien on the liability coverage because the mother had no legal authority to execute any document binding Stephen’s estate without prior chancery court approval. Id. (citing McCoy, 471 So. 2d at 396). The Court remanded for a determination of whether the hospital was a direct beneficiary under the medicalpayments coverage and “due these benefits irrespective of any lien or assignment.” Methodist, 518 So. 2d at 1228.

¶10. In McCoy and Methodist, once the assignment or lien was found to be invalid, the hospitals had no further rights against the liability insurance proceeds due the minor, and the claims were denied. McCoy, 471 So. 2d at 399; Methodist, 518 So. 2d at 1228. Memorial does not claim that it has a right to recovery under a lien, an assignment, or a contractual theory. Memorial’s sole argument supporting its claim of a right to the settlement proceeds is that it has a legal duty to seek recovery from any legally liable third party prior to billing Medicaid. This argument does not avail Memorial. The third-party insurers were not legally liable to pay Memorial for the medical bills. McCoy, 471 So. 2d at 397-98; Methodist, 518 So. 2d at 1228. The third-party coverage at issue here was general liability coverage, not medical-pay coverage that reimburses the hospital for medical bills. See McCoy, 471 So. 2d at 397; Methodist, 518 So. 2d at 1228. Memorial does not dispute this basic fact. Because no law entitled Memorial to payment from the settlement proceeds, we affirm the chancery court’s dismissal of Memorial’s claim.

If your minor’s settlements don’t look like what happened in Proulx, you might read it carefully several times and start trying to figure out whether you need to do anything differently.

There are lots of ramifications flowing from this opinion. A few you might want to consider:

Shouldn’t you open a guardianship and publish notice to creditors before presenting the final settlement proposal to the chancellor? I sent some lawyers back to the drawing board several weeks ago to do that very thing in a case remarkably close to what happened in Proulx. Why? Well, it just didn’t seem right to me that the parents could negotiate away their children’s money like that.
If you represent the insurance company in a case where the settlement amount is under the statutory amount required to present to a chancellor, how are you going to advise the parents about all of this when (a) you don’t represent them, and (b) you have an insurmountable conflict of interest that precludes you from advising them?
Why should children be required to pay their own medical bills? And if they should not, don’t the parents have a built-in conflict of interest in serviing as guardians, since they will likely be held responsible via guaranty?
Would Memorial have been successful in its argument if the third-party coverage in this case was med-pay (¶ 10)?

You need to read this case and be ready to discuss it with the next chancellor you go before on a minor’s settlement. That chancellor will likely be ready to discuss it, too.

Where Am I?