Bad news for plaintiffs’ lawyers – the common fund doctrine does not give them a share of health care liens, the Illinois Supreme Court ruled recently.

The common fund doctrine does not apply to health care liens under the Health Care Services Lien Act, 770 ILCS 23/1 et seq, the Illinois Supreme Court has held. The case is Wendling v Southern Illinois Hospital Services, Nos 110199, 110200 cons, 2011 WL 1085186 (Ill Sup Ct).

Wendling facts, lower-court ruling

Both plaintiffs, Sherry D. Wendling and Nancy J. Howell, were injured in separate automobile accidents and filed personal injury lawsuits against the respective drivers responsible. The hospitals that treated them, both of which were owned by Southern Illinois Hospital Services, filed liens against the proceeds of the lawsuits pursuant to the Health Care Services Lien Act. 

After the plaintiffs reached settlements with the individual defendants, they filed petitions to adjudicate the hospitals’ liens. In their petitions, they alleged that under the common fund doctrine, their attorneys were entitled to additional fees equal to one-third of the amount of the hospitals’ liens. 

The circuit court agreed with the plaintiffs. Holding that the hospitals were responsible for a proportionate share of the plaintiffs’ attorney fees, the court ordered their share of the settlement proceeds reduced by a third. The appellate court affirmed, and the supreme court granted leave to appeal.

The statute and the doctrine

The Health Care Services Lien Act provides that a health care professional or provider who treats an injured plaintiff shall have a lien upon all claims and causes of action of the injured person for the reasonable amount of the provider’s charges. As the court explained, with respect to any individual plaintiff, the statute limits the total of all health care liens filed to 40 percent of the judgment or settlement.

Even after their liens have been satisfied, the providers may continue to seek payment of the unsatisfied amount of their reasonable charges. The statute does not address whether a lienholding healthcare provider is responsible for attorney fees under the common fund doctrine.

The common fund doctrine provides that a litigant or lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney’s fee from the fund as a whole. Its underlying rationale is fairness:  unless the beneficiaries of the fund contribute a fair share to the cost of the litigation, they will be unjustly enriched by the attorney’s services.

Not applicable to debtor-creditor relationships

While courts have applied the common fund doctrine in class action suits, insurance subrogation claims, and wrongful death cases involving an intervenor, Illinois courts have never applied it to a creditor-debtor relationship, such as that between the hospitals and the plaintiffs, the court said.

Recounting the facts relevant to its opinion in Maynard v Parker, 75 Ill 2d 73, 387 NE2d 298 (1979), the court observed that the hospital’s recovery of its charges in that matter did not depend on the creation of the fund. Rather, the charges existed independent of the lawsuit, as did the plaintiff’s obligation to pay those charges out of whatever funds he had available. Therefore, the court held in Maynard that the plaintiff’s attorneys’ services did not unjustly enrich the hospital, and the common fund doctrine did not require the hospitals to contribute to the plaintiffs’ litigation costs.

The relevant facts in Maynard were identical to those in the matter at hand, the court said. The hospitals had no standing to participate in the plaintiffs’ personal injury lawsuits and could not bring independent causes of action against the tortfeasors. The plaintiffs’ attorneys did not obtain the settlements for the benefit of any class other than their individual clients. The plaintiffs and the hospitals were not similarly situated with respect to the lawsuits or the funds and did not share the same interests in the funds.

The common fund doctrine, therefore, was inapplicable to health care liens filed pursuant to the Health Care Services Lien Act. The court reversed and remanded the matter for further proceedings.