May a Personal-Injury Lawyer Charge an Extra Fee for Negotiating a Reduction of Third-Party Liens or Claims?

reducing-costsNo, according to a recent ethics opinion from the Alabama Bar Association. See Ala. State Bar. Assoc., Ethics Op. RO-2015-01 (Oct. 2015).  The “negotiation of a reduction of third party liens and claims is incident to normal personal injury representation.” Such reductions are “[f]requently necessary to reach a settlement,” and are “a routine element of case management.” Therefore, these services are included in the standard contingent-fee arrangement. See id. at p. 3.

Could a lawyer limit the scope of the representation to exclude such negotiations? No, said the committee: “Lawyers may not ethically abdicate their duty to timely address liens attaching to settlement proceeds.” See id. at p. 2. Any such limitation would be “unreasonable” under Rule 1.2, said the committee.

Finally, could a lawyer include a specific term in the lawyer’s contingent-fee agreement to provide for the payment of an additional fee for negotiating lien reductions? No again: such an agreement would amount to “double-dipping,” and be a “clearly excessive fee” in violation of Rule 1.5(a). See id. at p. 4.

In sum:

[W]hile circumstances may exist in which it is permissible for an attorney to . . . . collect a contingent fee for the reduction of medical bills or hospital or subrogation liens or other third party liens or claims to be satisfied out of settlement funds, the Disciplinary Commission is of the opinion they are impermissible in routine contingent fee representation wheere the attorney’s fee is based on the gross settlement or recovery.

Id. at p. 4.

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