Atkinson Conway & Gagnon is pleased to announce that Bruce E. Gagnon and Christopher J. Slottee have contributed to a new publication, The Law of Lawyers Liability, a collection of articles discussing the state of legal malpractice law in all fifty-states. The Law of Lawyers Liability was produced by the Professional Liability Committee of the American Bar Association, and edited by Merri A. Baldwin, Scott F. Bertschi, and Dylan C. Black. Mr. Gagnon and Mr. Slottee authored the section of the book addressing legal malpractice law in Alaska, including the unique considerations that arise as a result of Alaska’s attorney’s fee law, Alaska Civil Rule 82.
In a recent decision, Mat-Su Regional Medical Center, LLC v. Burkhead, the Alaska Supreme Court held that a patient could not assign their personal injury claim for recovery of her medical expenses to her health-care provider.
In Burkhead, a patient received medical services at a hospital after an automobile accident. During her treatment, she signed two “Consent: Authorization, Assignment, and Acknowledgment” forms in which she ostensibly assigned to the hospital “all rights to or claims for payment against third parties” for the reasonable value of medical services rendered. The hospital subsequently attempted to intervene in the patient’s personal injury lawsuit and filed its own suit against the tortfeasor. In both cases, the hospital sought to recover the expenses it incurred in treating the patient from the tortfeasor directly and pursuant to the patient’s purported assignment.
The Alaska Supreme Court held that the patient’s purported assignment of her personal injury claim to the hospital was not valid. The court explained that
the assignment of personal injury claims is socially problematic given the potential for overreaching when injured assignees bargain away some or all of their rights under the equivalent of at least economic, if not physical or mental, duress. Any benefits potentially derived by expanding the remedies available to mandatory providers of emergency services would seem to be outweighed by the risk that the routine collection of such assignments from emergency room patients would increase the potential for duress and decrease the likelihood of a fully informed assignment.
Id. at 5. As such, and because health-care providers had the ability under Alaska law to file a lien against any recovery by the patient from the tortfeasor, the court refused to recognize the assignment of the patient’s personal injury claim to the hospital:
Given that our legislature has provided an effective, albeit limited, lien remedy, the social ramifications of allowing such assignments, and health care providers' continued ability to collect from their own patients as creditors, we think it should be for the legislature to decide whether to recognize assignments of patients' personal injury claims.Id. at 6.
The Alaska Supreme Court’s decision may have unintended consequences for the subrogation rights of insurers and health-care providers in Alaska. Litigants may attempt to rely on Burkhead to argue that unless a statute expressly assigns all or part of a personal injury claim to the insurer, employer or other entity, any contractual assignment of that right will not be valid.
The Burkhead ruling may also have an impact in legal malpractice cases. The Alaska Supreme Court has not squarely held that a legal malpractice claim may be assigned. It, however, did not disapprove of the practice in Continental Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281, 286 (Alaska 1980) and Bohna v. Hughes, Thorsness, Gantz, Powell & Brundin, 828 P.2d 745, 758 (Alaska 1992) superseded by statute on a different issue as stated in Petrolane Inc. v. Robles, 154 P.3d 1014 (Alaska 2007).
In holding that a patient could not assign her personal injury claim to a health-care provider, the Burkhead court, however, noted that it has “long recognized a ‘general rule of non-assignability of claims for personal injury’ under Alaska law” and that [t]he majority of jurisdictions around the country have similarly declined to recognize the validity of assignments of tort claims for personal injury….” The court’s general disapproval of assignment of personal injury claims could support the argument that the assignment of a legal malpractice claims is not valid, given that a legal malpractice claim is a type of personal injury claim.
A popular form of incorporation that Atkinson Conway & Gagnon often deals with, both in creating them and in structuring deals using them, is the Limited Liability Corporation. There is, however, a nasty little penalty lurking in Alaska’s Limited Liability Company statute that both other practitioners in this state and owners and managers of those LLCs should be aware of.
As with most business forms, members of an LLC have a statutory right to review the books and records of the LLC. What is different about LLCs, is that if a manger or member of an LLC refuses a member’s rightful demand to examine the books of the LLC, that manager or member is personally liableto the demanding member for a penalty in the amount of either $5,000 or 10% of the value of the demanding member’s interest in the LLC, whichever is greater. Consequently, by refusing a rightful demand to review the books and records of an LLC, a manager or member of an LLC runs not only the risk of litigation to compel production of the books but personal liability that, for a highly valued LLC, could be hundreds of thousands of dollars.
So think twice about shooting off that snide letter to your business partner, telling him to go stick his head in the sand when he asks to see the books. You just might get a costly bill in return.
Continue reading for the full statute.
US Supreme Court Limits Banks, Law Firms, and Accountants' Exposure to Aiding and Abetting Liability
In today’s specialized and interconnected business world, banks, law firms, and accountants often find themselves drawn into litigation over financial statements that are either incomplete or false. The Enron and WorldCom cases are great examples of this. In those cases, plaintiffs, often shareholders and creditors, sue law firms, banks, and accountants, alleging that they are liable for their losses because they “aided and abetted” directors and officers who defrauded the company and shareholders. Atkinson Conway & Gagnon has litigated these claims on several occasions in Alaska, both in the course of defending banks and law firms and in representing corporations against accountants that have aided company officers and directors in defrauding the corporation.
This theory of liability, also known as “tortuous assistance of breach of fiduciary duty” can significantly expand the liability of accountants, banks, and law firms, including exposing them to joint and several liability in states that otherwise provide for strict allocation of fault, such as Alaska.
On January 15, 2008, the United States Supreme Court issued an important decision limiting the scope of “aiding and abetting claims.”. Ruling 4 to 3, the United States Supreme Court held that Section 10(b) of the Securities Exchange Act of 1934 did not authorize a private right of action against third parties for aiding and abetting violations of securities law. Instead, plaintiffs who wish to sue banks, accountants and law firms for securities law violations must show that they relied upon an affirmative material misrepresentations by those entities. While banks, law firms, and accountants may be subject to aiding and abetting liability when they have a direct relationship with aggrieved plaintiffs, this is an important decision that limits the liability faced by banks, accountants, and law firms in the shareholder lawsuits that are so often filed when negative financial information is released by corporations.