Gilman v. Dalby, 176 Cal.App.4th 606, 98 Cal.Rptr.3d 231 (2009)

Brief Summary
In a dispute that turned on the priority of a medical lien versus an attorney lien, the court held that attorney liens have priority, but that the attorney in this dispute did not have such a lien.

Complete Summary
Plaintiff Kevan Gilman’s business involved paying the medical bills of an injured person in return for a lien against the person’s litigation recovery. Per his usual practice, Gilman would obtain the signatures of both the injured person and the personal injury attorney on the lien. But in this case, the attorney who signed the lien was replaced by defendant Dalby. Dalby was aware of the lien, but never signed it. Because the suit eventually settled for less than Dalby’s litigation costs, the entire recovery went to Dalby. Gilman then sued Dalby for, among other things, breach of fiduciary duty and conversion.

The trial court sustained Dalby’s demurrer as to the breach of fiduciary duty claim and granted Dalby summary judgment on the conversion claim. Regarding the latter, the court relied on alternative grounds. First, Gilman did not have a sufficient interest in the settlement to sue for conversion, and second, because the proceeds were used to cover litigation costs, there was no property for Gilman to recover. Gilman appealed.

The Third District Court of Appeal affirmed the demurrer but reversed and remanded the summary judgment. The court affirmed the demurrer because Gilman failed to allege facts that could establish a breach of fiduciary duty. The only basis for Gilman’s allegation, the court noted, was the fact that Dalby was aware of Gilman’s lien. This fact, according to the court, did not even establish contractual duties, much less fiduciary duties between Dalby and Gilman. The court went on to distinguish cases in which attorneys had agreed to act as a fiduciary (i.e. an escrow agent or trustee) noting that Dalby had agreed to no such role.

The court then reversed the summary judgment based on flaws in both of the trial court’s grounds for decision. First, Gilman had a sufficient interest in the settlement to sue for conversion, the appellate court held, because his lien did not purport to forgo payment if the litigation was unsuccessful. Rather, it granted a right to recover from the settlement proceeds first before seeking payment from the injured person himself. The court did not elaborate on the reasoning behind this holding.

Next, in resolving whether there was any property for Gilman to recover, the court addressed a mixed question of law and fact. The first question was whether, as a matter of law, an attorney lien takes priority over a medical lien. The court noted that this was a matter of first impression and held that an attorney lien for fees and costs (even if later in time) has priority over a medical lien. This holding was based on the premise that medical liens will be more valuable if attorney liens are given priority. Specifically, a medical lien derives its value from the prospect of monetary recovery in litigation, and such recovery would be much less likely if attorneys were discouraged from representing injured plaintiffs by being deprived of the risk hedge inherent in a lien for fees and costs.

The court, however, noted that as a question of fact, Dalby did not have an attorney lien for costs. Therefore Gilman could potentially recover the proceeds at issue and summary judgment was inappropriate. The court further reversed the trial court’s award of prevailing party attorney fees to Dalby, because, upon reversal of summary judgment, Dalby could no longer be considered the prevailing party.

Significance of Opinion
This opinion essentially gives attorney liens for fees and costs “superpriority” over medical liens. Accordingly, personal injury lawyers would be wise to secure such liens.

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.

Register Today for the 8th Annual Law Firm General Counsel Forum: Risk Management in Troubled Times

Presented by Hinshaw & Culbertson LLP, The Hildebrandt Institute and WestLegalEdCenter

Date: December 2-3, 2009

Location

Thomson Reuters
Thomson Hall, 4th Floor
195 Broadway
New York, NY

Who Should Attend?

• Law Firm General Counsel
• Chief Human Resources Directors
• Chief Compliance Officers
• Human Resources Professionals
• Risk Management Partners

Register

Space is limited so register early by contacting WestLegalEdCenter at 1-800-241-0214 or by clicking on the link below. Provide offer code 000000.
http://westlegaledcenter.com/program_guide/course_detail.jsf?courseId=19390351&sc_cid=ws_hild

Topics Include

• Managing opportunities and risks in the current economy
• The evolving role of the general counsel
• Risks of disagreeing litigation services
• Implications of abandoning the hourly fee
• Legal issues surrounding laterals

Fee and Discounts

$1,495 for Law Firm Registration

5,000 for Non-Law Firm and Non-Corporate Law Department Registration (Insurance Professionals: Mention Hinshaw to Receive Law Firm Rate of $1,495)

Receive a 10% discount off the registration fee for all participants if you send three or more people from the same organization to the Forum.

CLE Credit

States have widely varying regulations regarding MCLE credit. Please note that some jurisdictions do not accredit Law Practice Management programs. WestLegalEdCenter is an approved provider in AK, CA, GA, IL, ME, MO, ND, NV, NY, OK, SC, VT and WV. Credit may be applied for in additional jurisdictions upon request and in accordance with state MCLE rules.

REGISTER NOW for the Ninth Annual Legal Malpractice & Risk Management Conference and receive a 10% Early Bird Discount before December 1, 2009

Attend the industry's premier annual event focused on current and important developments in the law and litigation of malpractice claims, legal malpractice insurance and risk management strategies. Each conference panel examines recent case law and significant developments throughout the last year. One and one-half days will be devoted to legal malpractice (March 3-4), and one and one-half days will be devoted to risk management (March 4-5). The conference will be held in Chicago at The Westin Chicago River North Hotel.

Earn up to 15 hours of CLE credit, including up to 6.50 ethics credit!

Conference Topics

Legal Malpractice Sessions (March 3-4)

• Standing to Sue, Privity and Duty of Disclosure
• Litigation/Litigation Attorney
• What's Your Little Secret? They Want to Know
• Judgmental Immunity — A Modern Look at the Legal Profession's Oldest Defense 
• Insurance Coverage Update: The Year in Review – Prior Knowledge Redux and the Definition of Professional Services
• 2009 LMRM Case Updates and Statutory Causes of Action
• Stump the Panel

Legal Malpractice/Risk Management Cross-Over Sessions (March 4)

• The Insurance Marketplace and Considerations
• Who is the Client and Standing to Sue – Successor Entities, Affiliates and Subsidiaries
• Advance Conflict Waivers, Screening and How to Do It

Risk Management Sessions (March 4-5)

• The General Counsel Forum
• Suits for Fees/Mandatory Fee Arbitration
• Risk Management Considerations in Restructuring and Winding-Up Law Firms
• Managing Client and Law Firm Data, and What Gives When Client and Firm Policies Conflict?
• On the Horizon – The Slow Motion Revolution

Registration Fees

$1,300 for the Entire Conference - March 3-5
$925 for the Legal Malpractice Sessions Only - March 3-4
$925 for the Risk Management Sessions Only - March 4-5

Discounts (maximum 15% discount per registration)

Returning registrants receive 5% off the conference price
Multiple registrants receive 15% off when two or more colleagues from the same company register for the conference
Early birds receive 10% until December 1, 2009

For more information, please visit www.LMRM.com or click here to Register Now!