Fineberg v. Harney & Moore

• Decision Date: 07 February 1989
• Docket Number: No. B032887,B032887
• Citation: 207 Cal.App.3d 1049,255 Cal.Rptr. 299
• Court: California Court of Appeals Court of Appeals
• Parties: , 57 USLW 2522 Jay Mark FINEBERG, Plaintiff and Appellant, v. HARNEY & MOORE, etc., et al., Defendants and Respondents.

Page 299

255 Cal.Rptr. 299

207 Cal.App.3d 1049, 57 USLW 2522

Jay Mark FINEBERG, Plaintiff and Appellant, v. HARNEY & MOORE, etc., et al., Defendants and Respondents.

No. B032887.

Court of Appeal, Second District, Division 3, California.

Feb. 7, 1989.

As Modified on Denial of Rehearing March 3, 1989.

Review Denied April 26, 1989.

Sanders, Firestein & Janeway, Marshall C. Sanders and Thomas H. Janeway, for plaintiff and appellant

Harney, Drummond, Garza & Packer and Thomas Kallay for, defendants and respondents.

DANIELSON, Acting Presiding Justice.

Plaintiff and appellant Jay Mark Fineberg appeals from the judgment entered in favor of defendants and respondents Harney & Moore and David M. Harney ("Harney") in an action to recover contingent fees in excess of the limit imposed thereon by Business and Professions Code section 6146. The primary question presented by this appeal is whether a client may waive the provisions of the statute. We determine the statute was intended to further a significant public policy and that its protection cannot be waived, and reverse the judgment.

FACTS

Plaintiff engaged Harney to represent him in connection with a medical malpractice action. The parties entered into a fee agreement dated November 23, 1981, which provided, in part:

"2. Client has been advised of the provisions of the California Business and Professions Code § 6146 which, in part, provides as follows:

" 's 6146. Limitations in amount

" '(a) An attorney shall not contract for or collect a contingency fee for representing any person seeking damages in connection with an action for injury or damage against a health care provider based upon such person's alleged professional negligence in excess of the following limits:

" '(1) Forty percent of the first fifty thousand dollars ($50,000) recovered.

" '(2) Thirty-three and one-third percent of the next fifty thousand dollars ($50,000) recovered.

" '(3) Twenty-five percent of the next one hundred thousand dollars ($100,000) recovered.

" '(4) Ten percent of any amount on which the recovery exceeds two hundred thousand dollars ($200,000).

" 'Such limitations shall apply regardless of whether the recovery is by settlement, arbitration, or judgment, or whether the person for whom the recovery is made is a responsible adult, an infant, or a person of unsound mind.

" '(b) ....'

"Client has further been advised that attorneys are unwilling to accept representation herein under the provisions of said California Business and Professions Code § 6146, and client in order to obtain the services of said attorneys and in order to have action prosecuted as desired by client[ ], hereby waives the purported limitations on fees as set forth in said California Business and Professions Code § 6146, and hereby agrees to pay the fees as set forth in paragraph 3 below.

"3. That as sole compensation for services rendered by said attorneys, the client will pay them 40 percent of any money or property paid, received or collected by action, compromise, or otherwise...."

The medical malpractice action was ultimately settled, one provider paying plaintiff $275,000, and a second provider paying him $25,000. After deducting costs, Harney took forty percent of the recovery in accordance with the fee agreement. Thereafter, plaintiff requested a refund of $26,069.20, representing the amount by which the fee exceeded that permitted by statute. Harney refused to pay, and the present action ensued.

At trial, plaintiff testified he contacted Harney because the firm was recommended to him by his brother, an Arizona attorney. He was advised that the firm would not undertake to represent him unless he waived the protection of section 6146; he was also advised that the firm would bear the expense of properly preparing the case for trial. He conceded he agreed to waive the statutory provisions governing contingent fee agreements, and that he did so because he wanted Harney to represent him. Plaintiff was pleased with Harney's handling of the case, as well as the settlement ultimately reached. However, he claimed Chris Matthews, of Harney, told him the fee would be forty percent if the case went to trial, but only 33 1/3 percent if the matter was settled out of court. He also claimed Matthews told him Harney was confident section 6146 was unconstitutional, and would soon be so ruled by the Supreme Court.

The trial court took judicial notice of the reputation and expertise of Harney and its predecessor firm. Harney proffered evidence establishing that the firm has overhead expenses, exclusive of costs advanced on cases, of $300,000 per month, employs three full time in-house medical practitioners, advances all litigation costs, which in a case such as plaintiff's would generally amount to approximately $20,000, and aggressively pursues its cases, ordering all records and deposing all potential expert witnesses. In the opinion of Harney's legal expert, plaintiff could not have obtained comparable representation for a fee within the limits imposed by section 6146.

Harney claimed the maximum settlement value of plaintiff's case, if handled by a personal injury lawyer who did not specialize in medical malpractice cases, was $100,000, and that it was not economically feasible to conduct a proper practice in the field of medical malpractice with the fee restrictions imposed by section 6146. ¹

The trial court ruled (1) there was no public policy factor pertaining to the limitations on contingent fee agreements set forth in Business and Professions Code section 6146, and (2) plaintiff waived the protection of the statute, and entered judgment in favor of the defendants.

DISCUSSION

Business and Professions Code section 6146 was enacted as part of the Medical Injury Compensation Reform Act of 1975 ("MICRA"). (Stats. 1975, Second Ex.Sess. 1975-1976, chs. 1, 2, pp. 3949-4007.) MICRA, "a sweeping statute that enacted, amended, or repealed several sections of the Business and Professions Code, the Civil Code, the Code of Civil Procedure, and the Insurance Code" (Hathaway v. Baldwin Park Community Hospital (1986) 186 Cal.App.3d 1247, 1250, 231 Cal.Rptr. 334), was enacted in an extraordinary legislative session called by the Governor in response to "a perceived crisis caused by rapid increases in medical malpractice insurance premiums." (Ibid.) In his proclamation, the Governor called for the Legislature to " 'enact laws which will change the relationship between the people and the medical profession, the legal profession and the insurance industry, and thereby reduce the costs which underlie these high insurance premiums.' " (Ibid.) The Governor asked the Legislature to consider, among other things: " '8 .. Establishment of reasonable limits on the amount of contingency fees charged by attorneys. [p] 9. Elimination of double payments ("collateral sources"); institution of periodic payments and reversionary trusts; limitation of compensation for pain and suffering while insuring fully adequate compensation for all medical costs and loss of earnings; and setting a reasonable statute of limitations for the filing of malpractice claims.' " (Ibid.)

As the Hathaway court observed, "[t]he preamble to MICRA states, in part: 'The Legislature finds and declares that there is a major health care crisis in the State of California attributable to skyrocketing malpractice premium costs and resulting in a potential breakdown of the health delivery system, severe hardships for the medically indigent, a denial of access for the economically Our Supreme Court has upheld MICRA's provisions (1) calling for periodic payment of "future damages" that are $50,000 or greater (Code Civ.Proc., § 667.7; American Bank & Trust Co. v. Community Hospital (1984) 36 Cal.3d 359, 364, 204 Cal.Rptr. 671, 683 P.2d 670), (2) prohibiting "collateral sources" from obtaining reimbursement from medical malpractice defendants or their insurers (Civ.Code, § 3333.1, subd. (b); Barme v. Wood (1984) 37 Cal.3d 174, 180, 207 Cal.Rptr. 816, 689 P.2d 446), (3) limiting damages for noneconomic losses to $250,000 (Civ.Code, § 3333.2, subd. (b)) and permitting a defendant to introduce evidence of benefits a plaintiff has received from a collateral source (Civ.Code, § 3333.1, subd. (a)). (Fein v. Permanente Medical Group) (1985) 38 Cal.3d 137, 158-159, 211 Cal.Rptr. 368, 695 P.2d 665). The court has also held (4) that the statute here in question, Business and Professions Code section 6146, limiting the amount of fees an attorney may collect when representing a plaintiff in a medical malpractice action on a contingency basis, is rationally related to the legislations' legitimate objective and therefore does not violate the due process or equal protection clauses. (Roa v. Lodi Medical Group, Inc. (1985) 37 Cal.3d 920, 931-932, 211 Cal.Rptr. 77, 695 P.2d 164.)

marginal, and depletion of physicians such as to substantially worsen the quality of health care available to citizens of this state. The Legislature, acting within the scope of its police powers, finds the statutory remedy herein provided is intended to provide an adequate and reasonable remedy within the limits of what the foregoing public health and safety considerations permit now and into the foreseeable future.' (Stats. 1975, Second Ex.Sess. 1975-1976, ch. 2, § 12.5, p. 4007.)" (Hathaway v. Baldwin Park Community Hospital, supra, 186 Cal.App.3d at p. 1250, 231 Cal.Rptr. 334.)

In each of these cases, the court recognized that the Legislature's purpose in enacting MICRA was to protect California's health care delivery system by reducing the cost of medical malpractice insurance. (See also Miller v. Sciaroni (1985) 172 Cal.App.3d 306, 309-310, 218 Cal.Rptr. 219.)

In Hathaway, supra, Division One of this court concluded that section 6146 prohibits a trial court from awarding attorneys' fees in excess of the rates provided therein. Hathaway is similar to the present case, in that the clients petitioned...