Lawyers’ Corner: Attorney Fees in Therapy First v State Farm

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Most personal injury attorneys work on a contingent fee basis. Whether you represent plaintiffs or medical providers, in First Party no-fault litigation, you may promise clients they will pay no attorney fees unless they win. A recent unpublished Michigan Court of Appeals case shows that promise may not always be true.

You may have seen some big name attorneys advertising on television or billboards, “You don’t pay unless we win!” Maybe you have even adopted that idea into your personal sales technique.

Contingent fee agreements are typical among auto accident attorneys. Rather than making their severely injured, and usually cash-strapped, clients come up with thousands of dollars for a retainer fee, plaintiffs’ lawyers take their fees out of the award. It’s a great idea, and it gives every injured client equal access to the courts.

But should attorneys really be promising their clients they won’t have to pay? In Therapy First LLC v State Farm Mutual Auto Ins Co, the Michigan Court of Appeals upheld an attorney fee award against a medical provider plaintiff who lost at trial.

Therapy First LLC provided physical therapy for Roger Bonds who was injured in a motor vehicle accident in Detroit in 2009. In total, Therapy First billed approximately $60,000 in treatments from 2010 through 2012.

But when Therapy First LLC took its case to trial, things did not go as planned. It presented deposition testimony of four treating physicians who prescribed Bonds’ physical therapy, all of whom said the care was reasonable and necessary for his recovery from the 2009 auto accident. But two other witnesses testified at trial that the treatments were unnecessary. These defense medical experts testified that the treatments should have been limited to 4-6 weeks of soft tissue therapy and that extended treatment was “basically worthless.”

The jury believed the defense witnesses who testified at trial. It found that Mr. Bonds had suffered “accidental bodily injury arising out of the accident,” but didn’t believe Therapy First incurred any allowable expenses.

Based on this verdict for the auto insurer, the trial judge ordered the plaintiff to pay $56,152 in attorney fees to the defendant.

Defendants’ Attorney Fees Under Michigan No-fault Law

The Court of Appeals agreed that an attorney fee award is appropriate. MCL 500.3148(2) says:

An insurer may be allowed by a court an award of a reasonable sum against a claimant as an attorney’s fee for the insurer’s attorney in defense against a claim that was in some respect fraudulent or so excessive as to have no reasonable foundation.

The court found that the jury’s verdict indicated it believed Therapy First’s claims were not reasonable. The trial judge also called them unnecessary. Particularly with such a large sum on the line, the fact that the jury awarded no damages suggests the claim was “so excessive as to have no reasonable foundation” under the law.

Attorney Fees for Paralegal Work

The court also considered whether an attorney fees award can include work done by paralegals. In deciding it could, the court read the Michigan No-Fault Act (MCR 500.3148) together with MCR 2.626 which states:

An award of attorney fees may include an award for the time and labor of any legal assistant who contributed nonclerical, legal support under the supervision of an attorney, provided the legal assistant meets the criteria set forth in Article 1, § 6 of the Bylaws of the State Bar of Michigan.

That article includes paralegals who have an ABA approved bachelor’s degree or associate degree in legal assistance or has a certain degree of in-house training. Reading the two rules on the same subject harmoniously, the court determined the plaintiff could be responsible for paralegal fees, as long as their credentials were established.

Evidentiary Hearings on Attorney Fees

Therapy First objected to the defendant’s calculation of attorney fees. It said much of the work was done by paralegals (presumably at a different rate). It also believed that work on other cases may have been included.

When there is a disagreement about the appropriate legal fee, as there was in this case, the court ruled a trial judge must hold an evidentiary hearing to resolve the conflict. The question is whether the billed fee was reasonable. To decide this, the trial judge needed to hold a hearing to determine what services were rendered by whom, and whether those services were reasonable. This would include the defendant providing the credentials for any support staff working on the case.

Advising Clients About Attorney Fees

Attorney fee awards in no-fault cases are a two-way street. The law describes circumstances when plaintiffs and defendants can be required to pay for the work of the other. When a client walks into your office expecting to pay nothing if they lose the case, this possibility could come as a shock. Don’t mislead your clients. Warn them early on that if their case really doesn’t go their way, they may be facing a big bill for attorney fees.

David Christensen is an auto accident trial attorney with over 20 years experience. He and his team at Christensen Law in Southfield, Michigan represent clients from claim through appeal. If your client is facing a difficult auto accident recovery, contact Christensen Law today to schedule a consultation.