In an order entered today, the United States Court of Appeals for the Third Circuit denied U.S. Airways’ petition for rehearing en banc of a panel decision originally entered on November 6, 2011. That decision, US Airways, Inc. v. McCutchen, ___ F.3d ___, 2011 WL 5557411(3d Cir. Nov. 16, 2011), was described in OnLawyering’s  November 30 post “In US Airways, Inc. v. McCutchen, The Third Circuit Says Equitable Defenses Limit The Subrogation Rights of ERISA Plans.” As I suggested there, the decision is a useful weapon for personal injury lawyers and clients facing the subrogation claims of ERISA welfare benefit plans.

It seems likely that the counsel for U.S. Airways will seek United States Supreme Court review of the Third Circuit’s decision. We will have to wait and see what happens. In the meantime, McCutchen remains good law.

Rich

My friend and mentor, Phil Hoff, also a co-founder of our law firm, Hoff Curtis, was featured today on the front page of the Burlington Free Press.

The story, entitled “Biography Chronicles Former Gov. Phil Hoff’s Impact,” describes the background of a new biography, “Philip Hoff: How Red Turned Blue in the Green Mountain State” written by historian Samuel B. Hand and journalists Anthony Marro and Stephen C. Terry.

It tells the story of how nearly 50 years ago, the then 38 year old lawyer became the first Democrat to be elected Governor of Vermont in 109 years, and what he did with it once he got it. It’s fair to say that Phil’s election marked the beginning of sweeping political and social change that have created the modern Vermont so many of us love.

As the article notes, Phil’s “work as lawyer never excited him politics did.” Still, his skills as a lawyer indelibly marked his governorship, as well as his subsequent service as a state senator. And Phil remained active in his profession, among other things leading a study in the 1980′s that restructured the Vermont Bar Admissions process.

Although my political association with Phil Hoff goes back even further (I first met him at age 9 when he and his wife Joan came to my parent’s door in his campaign for Governor!), we’ve been associated in the practice of law for a very long time,  since 1982! It’s been a great friendship, and one that I treasure.

I am delighted to see his political accomplishments, and even his honorable political failures, more firmly ensconced in Vermont history. Ironically one of those failures was his fight to prevent the construction of the Vermont Yankee Nuclear Power Plant. Today, our present Governor, Peter Shumlin, is fighting to close it!

Congratulations Phil!

Rich

Here is a change of pace: A Guest Post from Holly Kearny–

“Everyone knows law school isn’t easy, and becoming a practicing attorney can be just as hard. But did you also know that there are many people who used a career as an attorney as a stepping stone to bigger and better things? To prove it, we have gathered a list of ten people who began life as lawyers.

1. Mohandas “Mahatma” Gandhi – One of the most recognizable and revered names in non-violent change actually had a career as an attorney. He studied law in London and eventually moved to South Africa to practice law. He also began his work in non-violent civil disobedience when he saw the Indian community’s struggle for human rights.

2. Abraham Lincoln – One of the greatest presidents in history, Lincoln was a lawyer before he was president and a politician before he was a lawyer. While serving on the Illinois legislature, Lincoln completed studies to become a lawyer in 1837. He joined a law firm and spent most of his time working there until elected president in 1860. His technique in practicing law was to speak slowly to juries and make his points clearly rather than focusing on the technical aspects of the law.

3. Thomas Jefferson – The third President of the United States and the author of the Declaration of Independence also belongs on the list. He studied law at William and Mary College and was admitted to the Virginia bar in 1767. In addition to law and politics, Jefferson also made accomplishments as an agronomist, musician, scientist, philosopher, author, architect, and inventor.

4. Barack Obama – Our current president used to be a practicing attorney, as many politicians have. He entered Harvard Law School in 1988 to become a civil rights attorney and took a position with the Chicago firm of Miner, Barnhill & Galland. He was also the first black president of the Harvard Law Review.

5. Bill Clinton – Another American President, he too was a lawyer. His degree was earned from Yale University in 1973, where he met his future wife Hillary, who would also become a lawyer. Three years later, Clinton was elected to be the Attorney General of Arkansas, which would be a huge stepping stone in his political career.

6. Robert Louis Stevenson – This famous novelist is from Scotland and is best known for books like “Treasure Island” and “Dr. Jekyll and Mr. Hyde.” As a young man, he wanted to become a writer, but his father pressured him into studying law. He studied at Edinburgh University and was given a license in 1875 but preceded with his desire to become a writer instead.

7. John Grisham – He is the best-selling author who can be referred to as the Stephen King of the legal thriller. With books such as “The Firm” and “The Client,” Grisham’s work isn’t all made up. He gets his wealth of legal experience from his education at the University of Mississippi School of Law and his background in practicing criminal law.

8. Geraldo Rivera – Now a political commentator, the former talk show host also has something in common with the above. He graduated from Brooklyn Law School in 1969 and practiced in the civil rights area for Puerto Rican activism. It was when he was interviewed about a case that his career in television began.

9. Jerry Springer – Not to be out done by his talk show hosting counterpart above, Springer also brought a knowledge of the law to daytime television, along with the most recognizable first name after Oprah. He earned a law degree from Northwestern University in 1968 and worked at a Cincinnati law firm. He was elected to city council in 1971 and began a career in broadcasting after.

10. John Cleese – He took performing skills learned in the courtroom to the stage. This lawyer turned actor got his law degree from Downing College in the UK. Instead of practicing, he decided to take a role in Monty Python’s Flying Circus. He would go onto star in major films including the Shrek, Harry Potter, and James Bond movies.”

Holly Kearny manages the site Teaching Degree. Her site helps students find the right college to get a teaching degree.

Thanks Holly!

A new case from the United States Court of Appeals for the Third Circuit,  US Airways, Inc. v. McCutchen, ___ F.3d ___, 2011 WL 5557411(3d Cir. Nov. 16, 2011), represents a bright spot on the otherwise rather bleak horizon for injured plaintiffs trying to negotiate medical liens asserted by ERISA welfare benefit health plans.

During the more than 30 years that I’ve been handling personal injury cases, I’ve seen them become an increasingly complex practice area.  It’s no longer just a matter of investigating the facts, applying a few familiar negligence principles, valuing the claim, and negotiating a settlement. One reason for that has been the growing keenness of those who pay medical bills for injured plaintiffs to recover their costs from third party tortfeasors.

Of course, by attempting to recover those costs from tortfeasors, the payers of claimants’ medical expenses end up competing with injured plaintiffs for limited settlement dollars.

That means that counsel needs to be attentive to these interests lest a successful client end up with a far smaller recovery than expected or, even, with no recovery at all.  Failing to pay attention can end up creating another kind of claim altogether: legal malpractice.

Health insurers have long asserted subrogation interests and experienced plaintiffs’ counsel have often been successful in reducing and sometimes eliminating health insurers’ claims. Two familiar weapons against health insurers have been the “common fund” doctrine and the “make-whole” doctrine.  As applied in this context, the common fund doctrine is the idea that if an insurer benefits from a fund created as a result of the efforts of the injured party to recover damages from a tortfeasor, the insurer should also share in the costs incurred in creating that fund, typically attorneys’ fees and expenses. The “make-whole” doctrine is the idea that the injured party should be made “whole,” that is, reimbursed for all losses, including pain and suffering and lost income, as well as costs, including attorney fees, before the insurer can recover for the costs of its medical insurance by way of subrogation.

But with the adoption of ERISA (the Employee Retirement Security Act of 1974), a new kind of “super” lien began to evolve. ERISA applies to claimants whose medical bills are covered by employer-sponsored self-insured medical plans.

Over the years, plan sponsors have structured increasingly sophisticated plan documents providing that where a tortfeasor is responsible for the plan participant’s injuries, the plan will recover all of its resulting expenses first, even if the amount recovered from the tortfeasor or the claimant’s own insurance is small enough so that recovering “second” means getting nothing at all.

This has led to litigation between ERISA welfare benefit plans and injured participants. While there have been occasional bright spots, the overall course of this litigation has been discouraging for injured plan participants and their lawyers. The trend has been for courts to allow the plans to recover for medical expenses in accordance with the literal language of  the plan document and without reference to common fund and make-whole concepts.

US Airways, Inc. v. McCutchen may well represent an important turn in a more favorable direction for claimants. In that case, the injured plaintiff settled with the tortfeasor, recovering less than the total amount of his attorney’s fees plus the Health Plan’s subrogation claim.  Plaintiff’s counsel put two-thirds of the Plan’s claim into its trust account, “reasoning that any lien found to be valid would have to be reduced by a proportional amount of legal costs.” Id. at ___, *1.

The US Airways Plan sued under § 502(a)(3) of ERISA, “seeking ‘appropriate equitable relief’ in the form of a constructive trust or an equitable lien on the [amount] held in trust and the remaining [balance] personally from McCutchen.” The United States District Court for the Western District of Pennsylvania agreed, relying on plan language allowing the plan’s subrogation interest to reach “any monies recovered,” and granted summary judgment for the Plan. Id. at___,*1.

The Third Circuit, in an opinion by Circuit Judge Fuentes, reversed. It noted that under ERISA, plan participants can enforce their rights against a plan’s fiduciaries under the plain language of the plan document. Id at­­ ___,*2. Plan fiduciaries, on the other hand, are limited in their rights to recover to injunctive relief or “other appropriate equitable relief.” Id., citing, 29 U.S.C. § 1132(a)(3); Knudson, 534 U.S. at 221; Sereboff v. Mid Atlantic Medical Servs., Inc., 547 U.S. 356, 361 (2006). Citing Knudson and Mertens, the court repeated that “’equitable relief’ must mean something less than all relief.” Id. at ___.*4. It noted that in construing §502, the Supreme Court has stated the word “appropriate” is not superfluous. Id.at ___, *3, citing, Mertens v. Hewitt Assocs., 508 U.S. 248, 257-58 (1993).

The opinion went on to interpret § 502(a)(3) to incorporate not just equitable claims, but also traditional equitable defenses, such as unjust enrichment. Id. at___,*4, citing Cigna Corp. v. Amara, 131 S. Ct. 1866, 1880 (2011), (citing Restatement (Third) of Trusts § 95, and Comment a (Tent. Draft No. 5, Mar. 2, 2009)); see also 4 Palmer, Law of Restitution § 23.18 at 472-74 (‘[T]he principle of unjust enrichment . . . . should serve to limit the effectiveness of contract provisions which in terms provide for reimbursement out of the insured’s tort recovery without regard to whether or the extent to which, that recovery includes medical expense.’)).

The decision allows the common fund doctrine to be considered to determine whether a plan is unjustly enriched by gaining the benefit of an injured party’s effort to recover from a tortfeasor without sharing in the costs of such a recovery.

In the District Court, McCutchen had also argued for application of the “make-whole” doctrine.

The Third Circuit did not decide whether the make-whole doctrine would also be taken into account to mitigate against the literal application of the plain language of plan documents in §502 equitable subrogation claims, as McCutchen did not argue that issue on appeal. But on its face, that same logic suggests that the equitable doctrine of unjust enrichment could permit consideration of the make-whole doctrine as well.

It is by no means clear that McCutchen will stand the test of time. The insurance/third-party administrators’ industry is up in arms about it, and one adjuster to whom I’ve argued the case claims that the decision will be subject to an a motion for reargument, en banc.

In fact, McCutchen’s counsel at Public Justice advises that the time within which reargument can be sought has been extended to December 14. A petition for certiorari seeking U.S. Supreme Court review seems likely. Meanwhile, in the Ninth Circuit, in CGI Technologies & Solutions, Inc. v. Rhonda Rose and Nelson Langer Engle PLLC, Docket Nos. 11-35127 and 11-35128, the same issue, together with the hot question of lawyer liability, has been briefed. Oral argument has not yet been scheduled.

At least for now, McCutchen puts an important weapon in the hands of plaintiffs’ counsel seeking to resolve ERISA subrogation claims. As a practical matter, if McCutchen is upheld, it will reduce ERISA plans to virtually even footing with fully insured plans.

For counsel in personal injury cases on either side of the “v,” this is a development worth watching.

Rich

The point of this series of posts is simply this. We have a huge access to justice problem. We also have a serious problem with legal education: it simply doesn’t actually prepare students to practice law. If every problem is an opportunity, together these problems can solve, at least to a large extent, one another.

Law schools can help their students and the public, by teaching students how to practice law, and in particular, how to serve the needs of low and middle income clients.

Most law students will not — and should not — end up practicing law for an elite law firm. Those law firms serve a narrow range of clients: mostly large corporations and institutions, and few very wealthy individuals.

Small businesses and not-for-profits, and individuals with moderate and even low incomes, represent the overwhelming mass of potential legal business. Graduates don’t come out of most law school programs equipped to serve clients, least of all moderate and low income clients. But they could. In my last post, Are Law Schools About To Start Teaching Law Students How To Practice Law?, I identified a number of models that are already in use to prepare students for practice.

And on another level, at nearly 20 law schools, courses are or have been taught that address the policies, methods, and barriers to providing access to justice for people of low and moderate incomes. The ABA Delivery Legal Services Committee describes these efforts at its web page, “Teaching Access to Justice.”

It’s not clear where the leadership could come from to change American law schools to really serve these ends. But, should it choose to do so, the American Bar Association’s Section of Legal Education and Admissions to the Bar is in a position to be very influential through the law school accreditation process.

As has been mentioned above, there already a number of law school programs that can help equip students to serve low and middle income clients. In my view, the Section of Legal Education and Admissions to the Bar should foster a spirit of creativity and experimentation to find out just what kinds of programs work best. Then it should modify the accreditation rules to put all accredited law schools on a new and even plane that will permit, or perhaps even require, that law students to be ready to address the legal of the great mass of the market when they graduate.

Rich

My last five posts have been on the same topic: the need to change legal education to add enough practical education to permit law students to start practice at a basically competent level, and by doing so allow some of them improve access to justice by serving the needs of low and middle income clients. In my last post, What’s Legal Education Got To Do With Access to Justice?, I suggested that there is real reason to believe that change is in the wind. Let me tell you what I see.

First, it’s pretty clear that there is significant dissatisfaction with the present system of legal education. For one thing, there has been a rash of class action law suits against law schools alleging that the schools have systematically overstated placement rates for their graduates. Just a month before the ABA Delivery of Legal Services Committee met at the Thomas Jefferson School of Law, Law School Transparency reported that a graduate, Anna Alaburda, had sued the school on a class action basis. According to the post, “Breaking: Class Action Suit Filed Against Thomas Jefferson School of Law,” the complaint alleges that “the law school has engaged in fraudulent and deceptive practices including ‘a practice of misrepresenting its post-graduation employment statistics.’”

Thomas Jefferson is by no means the sole law school to face these claims. In August, Above The Law reported that the Thomas M. Cooley Law School and New York Law School had been sued as well. “Cooley Law and NYLS Hit With Class Action Lawsuits”

Then in October, Above the Law noted that 15 more law schools, including my alma mater, Albany Law School, are being sued:

• Albany Law School (reports rates of between 91% and 97%);
• Brooklyn Law School (reports rates of between 91% and 98%);
• California Western School of Law (reports rates of between 90% and 93%);
• Chicago-Kent College of Law (reports rates of between 90% and 97%);
• DePaul University College of Law (reports rates of between 93% and 98%);
• Florida Coastal School of Law (reports rates of between 80% and 95%);
• Hofstra Law School (reports rates of between 94% and 97%);
• John Marshall School of Law (Chicago) (reports rates of between 90% and 100%);
• Pace University School of Law (reports rates of between 90% and 95%);
• Southwestern Law School (reports rates of between 97% and 98%);
• St. John’s University School of Law (reports rates of between 88% and 96%);
• University of Baltimore School of Law (reports rates of between 93% and 95%);
• University of San Francisco School of Law (reports rates of between 90% and 95%);
• Villanova University School of Law (reports rates of between 93% and 98%); and
• Widener University School of Law (reports rates of between 90% and 96%).

Fifteen More Law Schools to Be Hit with Class Action Lawsuits Over Post-Grad Employment Rates
In fact, whatever the reality is about the accuracy of particular law school placement rates, the litigation reflects a fact that is obvious to law graduates and even to many in the practice of law. There is huge population of recent law graduates floating around who just can’t find jobs in the profession. Many have huge education debts, and most of them are quite capable young people. This represents a huge waste of talent, money, and human potential.

Second, some legal scholars are studying the need for change and suggesting innovative models for reform of legal education. Consider, for example, William Mitchell College of Law Professor, John O. Sonsteng’s book, A Legal Education Renaissance: A Practical Approach For The Twenty-First Century, (Vandeplas Publishing May 22, 2008). Sonsteng argues that using modern teaching and learning techniques, law schools can meet the needs of law students and reduce costs.

Professor Sonsteng is not a lone voice crying in the wilderness. Carnegie Foundation President Lee S. Shulman argued, in releasing the Foundation’s 2007 study, “Educating Lawyers: Preparation for the Profession of Law,” that “[t]he gap between learning to think like a lawyer and being capable of acting like a lawyer, both clinically and morally, is, if anything, greater than it’s ever been before.”

Third, there a number of law schools that are indeed running programs intended to teach law students what they need to know to practice law. Just this fall, New York Law School (one of the defendants mentioned above), announced the initiation of its new first-year skills program, “Legal Practice,” a two-semester set of required courses designed to prepare students for their first legal work experience. The program engages students in work with standardized clients: “trained actors with whom students practice their interviewing, fact-gathering, and counseling skills. This approach is modeled after the ‘standardized patient’ exercises in medical schools.” “New York Law School Launches New Legal Practice Course.”

“Top-Colleges” reports that most of New York Law School’s 15 new faculty hires in the last two years were recruited from the ranks of practicing lawyers to support the new initiative. Law Schools Shift Curriculum: Emphasize Practical Legal Skills. It also reports new practice-oriented initiatives at Indiana University’s Maurer School of Law, at Stanford Law School, and even at the birthplace of the Langdell case method, Harvard Law School.

A few law schools have even gone beyond classroom and clinical instruction, and have established incubator projects to get law graduates up in running in supported solo practices aimed at providing legal services to middle class and poor persons. One such program, CUNY School of Law’s Community Legal Resource Network (CLRN) was the Delivery of Legal Services Committee’s Brown Award winner for 2010. Just this week, The National Law Journal reports that in September of 2012, Pace Law School will join CUNY, the University of Missouri-Kansas City School of Law, and the University of Maryland School of Law, in running incubator programs. “Pace Solo Incubator Will Assist Low-Income Clients.”

These programs aren’t likely to attract large percentages of the extraordinarily academically well qualified undergraduate students who are headed to highly selective law schools in the steep climb to the best judicial clerkships, the most prestigious law firms, and traditional law school academic careers. But those students are a small group to begin with, and even most of them won’t make the grade to the most competitive jobs.

For the vast majority of law students who will be entering the scramble of making a living practicing law in less rarified practice environments, choosing programs that will actually teach how to practice law would seem far more important than choosing a law school with a marginally higher U.S. News and World Report ranking.

Fourth, the organized bar has begun to acknowledge this problem. At this year’s American Bar Association Annual Meeting, a number of resolutions adopted by House of Delegates relate to this problem. Resolution 111A, proposed by the Young Lawyers Division, and co-sponsored by the Law Student Division, calls upon Congress to enact legislation assisting individuals who are experiencing “excessive levels of student debt.” While not limited to law graduates, the resolution certainly addresses a major concern for them, and the report accompanying the resolution notes that most law students need to earn an average of $65,000 a year to repay student loans, but “most law school graduates are unlikely to obtain a salary of $65,000.” The Young Lawyers and Law Student Division also proposed Resolution 111B, calling upon all ABA-Approved Law Schools to report specific post graduation employment data and per credit costs of legal education.

The most interesting of these resolutions was a late resolution, offered by the New York State Bar Association, and adopted without opposition from the Section on Legal Education and Admissions to the Bar (but with apparent skepticism from that quarter). Resolution 10B resolves that the American Bar Association should “take steps” to assure that “law schools, law firms, CLE providers and others concerned with professional development provide the knowledge, skills, and values, that are required of the successful lawyer.” It goes on to urge “legal education providers to implement curricular programs intended to develop practice-ready lawyers including, but not limited to, enhanced capstone and clinical courses that include client meetings and court appearances.” Just what steps are intended is not specified, but I think we know where this resolution is aimed.

Finally, this very weekend, the failure of law schools to teach law students to practice law reached a new pinnacle of public attention. It was featured in the New York Times, which published “What They Don’t Teach Law Students: Lawyering,” on the front page of the Business Section, (and on page A-1 of today’s Times New York Edition).
In describing the present market, New York Times Correspondent David Segal wrote:

To succeed in this environment, graduates will need entrepreneurial skills, management ability and some expertise in landing clients. They will need to know less about Contracts and more about contracts.

Yes, I think change is in the wind. It’s certainly not too early. But I expect this change will take a long time.

Rich