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Document Automation, lawyers, attorneys, files

Document Automation for Attorneys – A Primer for Newbies

Document automation is often viewed as the holy grail of attorney efficiency.  For those of my colleagues who are completely uninitiated, document automation is the use of a computer system to create or “assemble” a document using a template and data from a source outside of the template.  At its most basic, you can think of document automation as mail merge.  That being said, document automation can be as simple as mail merge, but can also be far, far more sophisticated.

 

What Can I Automate?

Let me give three examples of document automation:

 

Example One – Mail Merge

Most people are familiar with Mail Merge.  It is a function in Word and Word Perfect that pulls names and addresses from a spreadsheet and inserts that information into letters and envelopes.   That way, if you want to send the same letter to 50 different people, you can simply input the addresses into a spreadsheet and have the word processor extract the information from the spreadsheet to assemble 50 different letters and envelopes.

 

Example Two – TurboTax and Bestcase

TurboTax is a great example of more complex document automation.  TurboTax and its competitors have a large library of tax templates.  TurboTax uses a fairly complex interview process to gather information from the user.  TurboTax analyzes the inputted data to determine which template is best for the user, calculates the values to put into those templates, and subsequently, assembles the tax forms.  TurboTax goes an extra step of document management by filing the documents with the IRS for you.  BestCase is very similar to TurboTax, except it is used by attorneys to prepare bankruptcy filings.  BestCase also does some document management by filing the assembled documents with the bankruptcy court for the user.

 

Example Three – Estate Planning

Estate planning is a fairly obvious application for document automation because this area of law relies so heavily on templates.  Some attorneys essentially use mail merge to create simple wills and trusts.  More sophisticated systems are akin to TurboTax in that they take the attorney through a sophisticated interview to gather information about the client, and then print out unique documents based upon that interview.  Many of you may be familiar with LegalZoom.com.  LegalZoom applies a middle ground approach by using a more simple interview, somewhat watered down for non-attorneys, to assemble simple estate planning documents.  A powerful document automation system can create sophisticated interviews and estate plans.

The practical application of document automation is certainly not limited to mail merge and estate planning.  My firm uses a document automation system to gather information about personal injury cases, litigation and probate, and uses that information to create demands, complaints, discovery requests, accountings, and so forth.

Here is the ultimate rule about document automation:  If you can reasonably predict what a document will look like given a standard set of facts, you can automate that document.  Thus, estate plans, basic template motions, letters and so forth work well with document automation.  Unpredictable documents, such as summary judgment motions, are more difficult to automate.  The basic template of an MSJ may be worthwhile to automate, but the a case-specific MSJ would be difficult to automate.

 

What Software Should I Use for Document Automation?

The software utilized will determine the sophistication of the automation.  I will give four examples.

 

The Basic: Microsoft Word

As I mentioned above, Microsoft Word has a Mail Merge function that lends itself to basic automation and document assembly.  Although a programmer could set up pretty sophisticated macros in Word, that is beyond most people.  There are plenty of videos on Youtube about how to use Mail Merge.

The two major drawbacks with Mail Merge are (1) it lends itself primarily to fill-in-the-blank forms and (2) you have to connect Mail Merge to a secondary data source, usually a spreadsheet. This usually means that the secondary data source is in a different format than the Word document.  In other words, you will have to pull the address list, put it in the spreadsheet, and then run the mail merge.  It requires extra steps, but is still faster than doing it all by hand.

 

The Basic/Intermediate: Practice Management Software 

Many practice management systems are jumping on the document automation bandwagon.  Clio is a great example.  In Clio, you can upload a template and program the template to pull data from Clio into the template.  For example, you could add a field in the template for «Client First Name» and have Clio insert the client’s first name1)My syntax may be incorrect, but you know what I mean..  You can conveniently go into the client’s matter in Clio, click a couple of buttons, and the proper document will download onto your computer.  You also do not have to be a rocket scientist to make it work.  You can probably figure it out in an afternoon.

The major drawback with document automation from providers like Clio is that it is not very powerful.  Sure, you can tie data fields from Clio into your templates, but you do not have powerful custom interviews or computations, such as if/then statements.  You may also miss out on powerful Word formatting because you are not using a native Word program.

 

The Advanced: Hotdocs and Competitors

The really exiting automation comes in the form of Hotdocs and its competitors2)As a disclaimer, my law school had a class on using Hotdocs.  I took two semesters of it in law school and have well over 500 hours of programming experience in it.  I am a bit biased..

With Hotdocs and its competitors, you can set up specific and complex interviews to gather information from the user.  You can establish computations to do math or to see if certain criteria are true.  You can then use if/then statements to gather data from the user based on the information that s/he has already entered.  Hotdocs communicates directly with Word or Word Perfect and has a simple programming language that you use directly in the word processor.  That way, Hotdocs creates native Word and Word Perfect documents that maintain the original formatting.  With the simple programming language in Word, you can establish if/then statements to ensure the document you are assembling matches the data you have entered.

 

A Hotdocs example

I use Hotdocs to assemble most of my personal injury documents.  I use the Hotdocs interview to keep track of all of the parties to an injury, along with their insurance companies.  Hotdocs holds information about all of the treating physicians, liens, lien settlements, attorney’s fees, attorney’s costs, and so on.  We use Hotdocs to store the information and help us analyze the case.  Once all of the information is in Hotdocs, we use it to send medical records requests, balance verifications from medical providers, lien reduction request, and so forth.  In the end, we use Hotdocs to print out a final accounting to the client, showing the client how all of the settlement funds were applied and showing the client the net monies s/he will receive.  Hotdocs does all of the math for us, and includes different clauses in the final accounting, depending upon the lien holders and settling parties.

We have programmed Hotdocs to treat medical providers with liens differently than medical providers without liens.  Our program in Hotdocs knows how to handle Medicaid liens and so forth.  The beauty of Hotdocs is that the attorney can program his or her brain into the system, depending on how creative the attorney is and how well the attorney can anticipate likely factual scenarios.

The main benefit of a powerful system like Hotdocs is that it is…powerful.  Hotdocs and its competitors, however, come at a large price.  First, you have to purchase the licenses.  This runs about $800 for a Hotdocs programmer’s license and about $350 for a user.   Then, you have to actually program Hotdocs.  It comes with a blank slate.  You have learn a basic programming language and platform, and then actually program the interviews and Word templates.  It can be very worthwhile, but it is a lot of work, or expensive if you are paying someone else to do it for you.

In the end, if you are thinking about dabbling with document automation, you should probably consider starting with something like Clio’s document automation.  It will teach you the very basic of template building and document assembly.  You will quickly find the limitations of such a system.  At that point, you might consider moving onto a more advanced system like Hotdocs.

Enjoy your experimentation.

Footnotes   [ + ]

1. My syntax may be incorrect, but you know what I mean.
2. As a disclaimer, my law school had a class on using Hotdocs.  I took two semesters of it in law school and have well over 500 hours of programming experience in it.  I am a bit biased.
Car Safety

Supplements to Auto Insurance and Nevada Law

Most folks1)that drive are familiar with how automobile insurance works.  Of those folks, less are familiar with the mechanics of the supplemental offerings, underinsured and uninsured motorist protection and MedPay. The law in Nevada treats uninsured and underinsured motorist protection in a similar manner, but applies a distinction2)with a difference for MedPay.  This post will discuss what these types of supplemental insurances are, and how the law treats them differently.

 

A few insurance definitions

What is underinsured motorist (UIM) protection?

A supplemental option to your liability policy that insures you if you the victim of an automobile accident, and the perpetrator does not have a sufficient amount of insurance to cover the costs of your damages. Many policies cover the driver and members of the driver’s household whether they are in the primary automobile or in the automobile of another.  The terms of the UIM policy differ between companies, and as you will see, it is imperative that you read your policy carefully.

 

What is uninsured motorist (UM) protection?

Similar to UIM, only it insures you in case the perpetrator does not have any insurance at all to cover the costs of your injuries.

 

What is MedPay?

Known as auto medical payments insurance, it is an insurance extension that pays for medical expenses3)the amount is capped if you or household member is injured in an automobile accident. Depending the specifics of the policy4)again, make sure to read it carefully! it may cover you and household members while in other vehicles, while riding public transportation, and even when walking.

 

Nevada law and the above insurance supplements

And you thought these supplemental insurance concepts were simple, eh? Well it is time to go spelunking in the Nevada Revised Statutes (NRS); as it turns out, insurance companies are required by law to offer UIM, UM, and MedPay:

NRS 687B.145  

      2.  Except as otherwise provided in subsection 5, insurance companies transacting motor vehicle insurance in this State must offer, on a form approved by the Commissioner, uninsured and underinsured vehicle coverage in an amount equal to the limits of coverage for bodily injury sold to an insured under a policy of insurance covering the use of a passenger car. The insurer is not required to reoffer the coverage to the insured in any replacement, reinstatement, substitute or amended policy, but the insured may purchase the coverage by requesting it in writing from the insurer. Each renewal must include a copy of the form offering such coverage. Uninsured and underinsured vehicle coverage must include a provision which enables the insured to recover up to the limits of the insured’s own coverage any amount of damages for bodily injury from the insured’s insurer which the insured is legally entitled to recover from the owner or operator of the other vehicle to the extent that those damages exceed the limits of the coverage for bodily injury carried by that owner or operator. If an insured suffers actual damages subject to the limitation of liability provided pursuant to NRS 41.035, underinsured vehicle coverage must include a provision which enables the insured to recover up to the limits of the insured’s own coverage any amount of damages for bodily injury from the insured’s insurer for the actual damages suffered by the insured that exceed that limitation of liability.

 3.  An insurance company transacting motor vehicle insurance in this State must offer an insured under a policy covering the use of a passenger car, the option of purchasing coverage in an amount of at least $1,000 for the payment of reasonable and necessary medical expenses resulting from an accident. The offer must be made on a form approved by the Commissioner. The insurer is not required to reoffer the coverage to the insured in any replacement, reinstatement, substitute or amended policy, but the insured may purchase the coverage by requesting it in writing from the insurer. Each renewal must include a copy of the form offering such coverage. (emphasis added)

 

So it is clear5)once we whack our way through all that verbiage that insurance companies must provide an option to Nevada residents to purchase UIM, UM and MedPay supplements to their automobile insurance coverage.  But are there requirements as to how insurance consumers must decline the supplemental coverage? NRS 690B.020 provides guidance in reference to UIM and UM:

 NRS 690B.020  

      1.  Except as otherwise provided in this section and NRS 690B.035, no policy insuring against liability arising out of the ownership, maintenance or use of any motor vehicle may be delivered or issued for delivery in this State unless coverage is provided therein or supplemental thereto for the protection of persons insured thereunder who are legally entitled to recover damages, from owners or operators of uninsured or hit-and-run motor vehicles, for bodily injury, sickness or disease, including death, resulting from the ownership, maintenance or use of the uninsured or hit-and-run motor vehicle. No such coverage is required in or supplemental to a policy issued to the State of Nevada or any political subdivision thereof, or where rejected in writing, on a form furnished by the insurer describing the coverage being rejected, by an insured named therein, or upon any renewal of such a policy unless the coverage is then requested in writing by the named insured. The coverage required in this section may be referred to as “uninsured vehicle coverage.” (emphasis added)

      2.  The amount of coverage to be provided must be not less than the minimum limits for liability insurance for bodily injury provided for under chapter 485 of NRS, but may be in an amount not to exceed the coverage for bodily injury purchased by the policyholder.

 

Ok, UIM and UM policy supplements must be rejected in writing. Additionally, the amount of under-insurance “must not by less than the minimum amounts for liability insurance.” NRS 485.185 provides instruction as to what those amounts are:

 NRS 485.185     

Every owner of a motor vehicle which is registered or required to be registered in this State shall continuously provide, while the motor vehicle is present or registered in this State, insurance provided by an insurance company licensed by the Division of Insurance of the Department of Business and Industry and approved to do business in this State:

      1.  In the amount of $15,000 for bodily injury to or death of one person in any one accident;

      2.  Subject to the limit for one person, in the amount of $30,000 for bodily injury to or death of two or more persons in any one accident; and

      3.  In the amount of $10,000 for injury to or destruction of property of others in any one accident, for the payment of tort liabilities arising from the maintenance or use of the motor vehicle. (Added to NRS by 1979, 1820; A 1981, 18621987, 10901993, 24841995, 27342007, 2049) (emphasis added)

 

So we know that the NRS requires insurance companies to offer UIM, UM and MedPay.  We also know that a customer must reject UIM and UM in expressly in writing, while the statute is silent on how MedPay is to be declined.  Additionally, we know there are statutory minimums for the amount of UIM and UM to be offered6)$15,000 for an individual, $30,000 for two or more persons.

Yet there are more ambiguities to be clarified.  If an insurance company does not have a written declination for MedPay, do they have to pay out under NRS 687B.145? What happens if you have a six-figure UIM policy, but the insurance company includes a non-occupancy exclusion as a term, and you are in an accident while riding in the vehicle of another. Will you be able to recover anything? We will need to examine case law to get clarification.

 

Wingco v. Gov’t Employees Ins. Co. (GEICO)

Wingco determines if a written rejection is necessary for a MedPay policy:

By its terms, NRS 687B.145(3) requires Nevada motor vehicle insurers to offer insureds the option of purchasing medical payment or “medpay” coverage in the amount of at least $1,000. But the statute does not state that the insurer must obtain a written rejection of this coverage. For Wingco to prevail, this court would have to read a written rejection requirement into NRS 687B.145(3) that it does not expressly include7)Wingco v. Gov’t Emps. Ins. Co., 130 Nev. Adv. Op. No. 20 . Mar 27, 2014, page 4. Read the case here

The court goes on to state that because the statute is unambiguous, it is improper to read the written requirement of rejection into the statute8)if the legislature desired insurance companies to obtain a written rejection for MedPay, the statute would say so explicitly.  Because no written evidence is required, the issue of if a consumer was offered MedPay will be one ‘of fact,’ meaning at trial, each side would need to present evidence proving that MedPay was or was not offered9)a fairly expensive option to obtain the statutory minimum of $1,000.

 

Continental Insurance Co. v. Murphy

A written rejection of UIM is necessary per NRS 690B.020(1). In Cont’l Ins. Co. v. Murphy,10)120 Nev. 506, 511, 96 P.3d 747, 751 (2004). Read the case here, the Nevada Supreme Court reaffirmed that a 1st Party Carrier must have a written rejection in order to deny coverage. In that case, the Plaintiff had a $300,000 UIM policy, but was injured while not occupying an insured vehicle. Continental Insurance had a non-occupancy exclusion as part of the UIM policy and denied they had to pay anything. The Nevada Supreme Court held:

(1) There must be a written waiver of UIM, so there non-occupancy exclusion was invalid,

(2) Nevada public policy only requires minimum coverage as determined by the statute.

So while the non-occupancy clause was invalid, it was only invalid as to the minimum coverage. Thus, on a $300,000 UIM policy with a non-occupancy exclusion and no written waiver, the 1st party carrier must provide at least $15,000 in coverage.

So, one last time, it is imperative to read your insurance policy.  The poor folks in the case above thought their $300,000 of UIM followed them no matter how they traveled, but learned that hard way that it was not the case.

Footnotes   [ + ]

1. that drive
2. with a difference
3. the amount is capped
4. again, make sure to read it carefully!
5. once we whack our way through all that verbiage
6. $15,000 for an individual, $30,000 for two or more persons
7. Wingco v. Gov’t Emps. Ins. Co., 130 Nev. Adv. Op. No. 20 . Mar 27, 2014, page 4. Read the case here
8. if the legislature desired insurance companies to obtain a written rejection for MedPay, the statute would say so explicitly
9. a fairly expensive option to obtain the statutory minimum of $1,000
10. 120 Nev. 506, 511, 96 P.3d 747, 751 (2004). Read the case here
Portrait of van driver

Seat Belt, Helmet, and Social Costs

If someone were to ask me whether failing to wear a helmet or a seat belt was a contributing factor to an injury, I would tell them “no” and that evidence of the seat belt and helmet should not be admissible.  The idea being that there is a difference between (1) causing an accident and (2) failing to do everything you can to protect yourself from injury, just in case someone else causes an accident.

Generally, it is accepted that evidence of seat belt use is not admissible in trial unless you are suing the manufacturer for an injury related to the seat belt.  Courts around the country go either way on the seat belt defense, but the prohibition of the seat belt defense is codified in NRS 484D.495(4)(b) and (c), which states that not wearing a seat belt:

(b) May not be considered as negligence or as causation in any civil action or as negligent or reckless driving under NRS 484B.653.

(c) May not be considered as misuse or abuse of a product or as causation in any action brought to recover damages for injury to a person or property resulting from the manufacture, distribution, sale or use of a product.

 

Thus, Nevada does not allow evidence of the use of a seat belt, except when the seatbelt manufacturer is being sued under a products liability theory.1)Naturally, it makes sense to let the product manufacturer argue that its product did not cause the injury because the victim was not using the product at the time

Nevada does not have a corresponding helmet admissibility rule, but the principle is the same.  To the extent that courts accept the wisdom of “failure to wear a helmet did not cause the injury, instead the driver that knocked you off the motorcycle caused the injury” then a jury should never know about the helmet.

 

A few (not so) rhetorical questions to consider in reference to a seat belt or helmet

1) Did the failure to use a seat belt or helmet cause the accident?  No. Use (or lack thereof) of a seat belt or helmet had nothing to do with the accident.  The negligence of the defendant caused the accident.

2) Did the failure to use a seat belt or helmet cause the injury?  No, the impact of the victim’s head on the ground caused the injury.  Thus, use or non-use of seat belt or helmet has nothing to do with causation of the accident or the causation of the injury.

​3) Most importantly, did the plaintiff violate the Rule of Avoidable Consequences and fail to mitigate damages by non-use of a seat belt or helmet?  Here people differ.  I agree with the courts that say “no”.  Failure to mitigate the harm of the tort only involves actions taken after the accident.  The decision to not use a seat belt or helmet happens before the tort occurs. Thus, the plaintiff’s requirement to mitigate damages does not apply, unless the plaintiff had the power2)as most 7 year olds think they have to put the seat belt on between the time that the crash was obviously imminent and when the injury was sustained.

4) What about the statutory obligation to use seat belts or helmets?  Interesting question.  To whom does that duty run?  Does my duty to wear a helmet run to the state or society generally3)to decrease public obligation to pay hospital bills, does it run to me, or does it run to the person who hit me?  It does not seem reasonable that I should owe a duty to the person who hit me.  If it does not run to the person who hit me, s/he should not gain the benefit of said duty.

It may seem unfair that a tortfeasor should pay for an injury that could have been avoided by the prudence of the victim.  But which is more unfair?

 

Consider the following scenario:

A 30 year old single mother of two is riding as a passenger on a motorcycle and is not wearing a helmet.  At a stop light, a car rear-ends the bike, ejecting our victim.  She clearly is not at fault for the accident.   She dies as a result of a traumatic brain injury from the accident.  It is likely that she would not have been severely injured if she had been wearing a helmet.  Do we really give the driver of the car a break because the person he killed might have lived if she was wearing a helmet?  Does that really lessen his fault in the accident?  As a society, where is it just to assign the burden of the loss?  On the innocent victim who knows that there is some risk of an accident every time she goes on the road, but does not consent to being hit?  Or on the tortfeasor who actually has committed a wrongful act?

Any simple Coasian4)Read The Problem of Social Cost here analysis would conclude that haphazard driving of the tortfeasor is adding no utility to society, so why should s/he be shielded from liability? Although we would prefer that all folks wear seat belt or helmet, but the primary objective of the law in these instances is to encourage people to drive with prudence, regardless of their fellow road travelers are helmeted/wearing a seat belt.

Footnotes   [ + ]

1. Naturally, it makes sense to let the product manufacturer argue that its product did not cause the injury because the victim was not using the product at the time
2. as most 7 year olds think they have
3. to decrease public obligation to pay hospital bills
4. Read The Problem of Social Cost here
Full moon over the Hofvijver - The Hague, The Netherlands

Service of Process under the Hague Convention

We recently had a wake-up call when trying to sue a Canadian defendant.  Our judge reminded us that we needed to serve the defendant in compliance with the Hague Convention.  We immediately did Google searches on service under the Hague, but came up with conflicting information.  So, we looked for process servers who understood the Hague Convention and could walk us through the process.  The result: highway robbery.  The process servers began quoting us prices between $2000 and $5000 for service.  I was shocked.  This is a far cry from the $50 to $200 I usually pay for service.

This caused me to research a bit more and carefully read through the provisions of the Hague Convention that govern the service of process.  Hopefully you will find my research beneficial.

 

The Basic Framework of the Hague Convention

Under the Hague Convention, the drafters were concerned about member states being able to use the civil and commercial judicial processes against the citizens of other member states.  The Hague wanted to (1) ensure that service of process was possible and (2) that it would not be abused.  To promote these principles, the Hague enacted the 1965 Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters.  The text can be found here.

Under Article 5 of the Convention, service under the Hague must be under a method that is approved of by the Receiving State, which in my case is Canada.   As a practical matter, your local court will likely also require that service is proper under your requirements.  Thus, service under the Hague Convention likely must comport with the rules of both jurisdictions.

 

Service Through the Hague Convention Authorities

Under Article 2 of the Convention, each member state must set up a “Central Authority” that will arrange service in its jurisdiction.  A list of the Central Authorities can be found here.  Articles 2 through 7 set forth many of the details pertaining to the Central Authority.  In essence, each member state must set up a governmental agency called the Central Authority that will accept service requests and will either serve the papers or have them served.  There is a form that must be filled out properly in duplicate with the papers to be served attached to each duplicate.  A copy can be found here from this webpage. There are also rules about language.  Once the Central Authority receives the form, it must accept the form and perform service, or reject the form with an explanation of why the form is deficient.   Once service has been completed, the Central Authority must provide a certificate of service, or if service was unsuccessful, a certificate of attempted service.

I have read the horror stories about how long it takes to serve through the Central Authorities. According to the Hague’s website, 66% of requests are executed within two months.  That means that 1/3 requests take longer than two months to complete.  In other words, if you are serving through a Central Authority, leave yourself plenty of time for service.

There is a provision under Article 15 of the Convention that seems to state that a judge is free to file a default judgment against a defendant and presume that service was proper under the Hague if

(a) the document was properly transmitted to the correct Central Authority,

(b) at least six months have passed since the transmission of the document to the Central Authority, and

(c) the Central Authority has not issued a certificate even though the requesting party followed the requirements for service.

The plain language of the Hague Convention1)which I have paraphrased seems to say that if the requesting party does everything right and the Central Authority is the party that preventing service by not doing its job, service may be presumed.  I am not sure how that works in conjunction with the local rules of service, but it may work when serving by publication locally.

In the end, service through the Central Authority may be slow, but service will be presumed under the Hague Convention after six months so long as the requesting party has done everything properly.

 

Alternatives to Service Through the Hague Authorities

The Convention also provides several alternatives to service through the use of a Central Authority:

Article 9.  Article 9 allows parties to serve through the use of consular channels.

Article 10.  Article 10 is probably the simplest to use.  Article 10 states that, so long as the receiving member state does not object, judicial offers or parties in the requesting state may send service documents to a judicial officer or “other competent person” in the receiving state for service.  In other words, attorneys in the United States probably may hire a process server in Canada to serve papers or, to be safe, could have a judicial officer (attorney) in Canada arrange for and supervise service.

Article 15.  If you use Article 10 to serve a summons, Article 15 states that default judgment shall not be entered unless (a) the document was served by the method allowed by the receiving state, OR (b) the document was actually delivered to the defendant or to his residence by “another method provided for by this Convention.”   Either way, a judge must allow a defendant proper time to respond to the complaint.

 

Takeaway

Based on the language of the Hague Convention, I am not sure that it makes sense to hire a third-party process server to deal with a Central Authority.  If you are going to go through a Central Authority, allow yourself at least six months for service.  Otherwise, so long as the receiving state does not object, you can simple find a judicial officer “or other competent person” to oversee proper service according to the laws of the receiving state.  The second option seems more efficacious.

Footnotes   [ + ]

1. which I have paraphrased
Cost of health care

Medicaid Liens on Personal Injury Settlements and Awards

Anyone who practices in personal injury for very long faces issues with Medicaid liens.  As a basic framework, Medicaid is a state health insurance program that receives federal funding and is subject to federal law. In Nevada, Medicaid is administered through the Nevada Department of Health and Human Services.  The DHHS allows third party HMOs to manage the healthcare for some Medicaid recipients.  These third-party organizations are known as Medicaid Managed-Care Organizations (MCOs).  Nevada currently contracts with two national for-profit MCOs: Amerigroup Community Care and Health Plan of Nevada, owned by UnitedHealthcare.

Medicaid, and by extensions, MCOs, have a statutory lien on personal injury settlements.  Pursuant to NRS 422.293, Medicaid has a lien against “the right of the recipient [injured victim] to the extent of all such medical costs [paid by Medicaid].”  Under NRS 422.293(4), Medicaid may reduce its lien in consideration of an attorney’s services.  This is a statutory acknowledgment of the Common Fund Doctrine, though it couches the doctrine with the term “may”.  As a practical matter, attorneys would not collect funds if subrogating third parties would routinely ignore the Common Fund Doctrine’s principles.

On its face, NRS 422.293 seems to be a lien against the entirety of the settlement, up to the amount paid by Medicaid.  However, in 2006 and again in 2013, the United States Supreme Court held that a state’s Medicaid lien must be limited in proportion to the ratio of medical bills to the total value of the claim if unlimited funds were available.

 

Ahlborn and Medicaid Liens

In 2006, the United States Supreme Court decided the case of Arkansas Dep’t of Health & Human Servs. v. Ahlborn1)547 U.S. 268, 126 S. Ct. 1752, 164 L. Ed. 2d 459 [2006].  Ahlborn had been in a car accident and sustained injuries for which Medicaid paid providers $215,645.30.  Ahlborn sued in state court and later settled all claims for $550,000.00, presumably, for all insurance limits available.  The settlement did not apportion the settlement between categories of damages, such as past medical payments, future medical payments, pain and suffering, lost income, and so forth.  Medicaid did not participate in the litigation. Medicaid attempted to exert a lien against $215,645.30 of the settlement, but acknowledged that the pro-rata value of the medical expenses to the unreduced value of the claim would have been 1/6th, or $35,581.47.  Medicaid and Ahlborn fought over whether Medicaid’s lien should be for the full amount paid or for medical specials proportion of the settlement

The Supreme Court held that, pursuant to Medicaid’s anti-lien provision of 42 U.S.C. § 1396p(a)(1), Medicaid’s lien is limited to the portion of the settlement designated for medical payments.  Thus, if the parties designate that the value of the medical expenses are 1/6th of the settlement, then Medicaid’s lien is limited to 1/6th of the settlement.

The Supreme Court recognized that there was some danger of manipulation of settlement apportionment, but did not view it as an overriding concern.  Naturally, parties should not abuse apportionment.

 

Wos and Medicaid Liens

In 2013, the United States Supreme Court reaffirmed Ahlborn in Wos v. E.M.A. ex rel. Johnson2)133 S. Ct. 1391, 1393, 185 L. Ed. 2d 471 [2013].  In Wos, the Court addressed what happens when the parties to a settlement do not apportion the settlement.  Presumably in response to Ahlborn, North Carolina had implemented a presumption that, unless otherwise specified, a settlement consisted of 1/3rd medical expenses and 2/3rd other categories of injuries.  Thus, Medicaid would exert its lien against 1/3rd of the settlement.  The Wos court held that such a presumption was not definitive, and that a Medicaid recipient must have an ability to challenge the presumption.

 

Application of Ahlborn and Wos in Nevada to Medicaid Liens

Under Ahlborn and Wos, it is clear that a Medicaid lien is limited to the medical portion of the settlement.  Interestingly, there have been no reported cases in the Nevada Supreme Court, the Federal District Court of Nevada or the Ninth Circuit Court addressing either Ahlborn or Wos.  Naturally, the courts would have to accept controlling law, but it is unclear whether any of these courts would interpret these cases in an unexpected way.

The next question is how Ahlborn and Wos interplay with the collateral source doctrine3)the collateral source doctrine, as defined by Black”s Law Dictionary, is known as the principle in which “compensation paid by some source to an injured plaintiff cannot be deducted from the damages a defendant has to pay. The source, such as an insurance firm, cannot be a party to the litigation”. Is a Medicaid lien exerted against the entire medical specials portion of the settlement/judgment, or is the lien limited to the ratio of the actual Medicaid payments to the unreduced value of the case?  At least one federal district court has held that the lien is limited.

 

The Fairness of Ahlborn and Wos

Ahlborn and Wos make sense from a basic fairness principle.  Case valuations involve many different factors, and always involve pain and suffering.  In significant cases, pain and suffering is the largest part of a settlement.  Why should Medicaid, which has an obligation to pay for medical expenses anyway, be able to collect against an injury victim’s settlement for lost income, for property damage, or for pain and suffering?  Ahlborn and Wos provide an equitable result.

 

The Bipartisan Budget Act of 2013 and Protecting Access to Medicare Act of 2014

In 2013, President Obama signed into law an amendment to the Medicaid anti-lien provision that would allow Medicaid to exert a lien against the entire settlement through the Bipartisan Budget Act of 2013.  Needless to say, this amendment is grossly unfair.  As stated above, why should Medicaid be reimbursed out of an injury victim’s recovery of lost income?  It makes no equitable sense.  Nevertheless, the amendment passed and the law changed.  The amendment was originally slated to go into effect October 1, 2014.  In April 2014, Congress passed the Protecting Access to Medicare Act of 2014, which postponed the implementation of the new Medicaid super lien until October 1, 2016.  I have not yet done an analysis on whether the new super lien will apply retroactively to injuries that occurred prior to October 1, 2016.  I sincerely hope that Congress reevaluates the Medicaid super lien and returns to the more equitable and fair application of Ahlborn and Woz.  In the meantime, Ahlborn and Wos apply until October 1, 2016.

Footnotes   [ + ]

1. 547 U.S. 268, 126 S. Ct. 1752, 164 L. Ed. 2d 459 [2006]
2. 133 S. Ct. 1391, 1393, 185 L. Ed. 2d 471 [2013]
3. the collateral source doctrine, as defined by Black”s Law Dictionary, is known as the principle in which “compensation paid by some source to an injured plaintiff cannot be deducted from the damages a defendant has to pay. The source, such as an insurance firm, cannot be a party to the litigation”
cost bond, nevada, civil procedure

The Mixed-Resident Exception to Nevada’s Cost Bond Rule

In Nevada, as in many other states, foreign plaintiffs are required, upon demand of the defendant, to provide a cost bond of up to $500.  Generally, this is done simply by depositing funds with the court clerk.  This money acts as security for the defendant in case the defendant receives an award for costs.  The theory is that collecting from a foreign plaintiff is more difficult, so foreign plaintiffs 1)meaning plaintiffs that are not residents of Nevada must pay the cost bond.  According to NRS 18.130, if a defendant demands the cost bond and the plaintiff fails to provide it within 30 days of the demand, the plaintiff’s case can be dismissed.  Here is the language of NRS 18.130(1):

 

When a plaintiff in an action resides out of the State, or is a foreign corporation, security for the costs and charges which may be awarded against such plaintiff may be required by the defendant, by the filing and service on plaintiff of a written demand therefor within the time limited for answering the complaint. When so  required,  all  proceedings  in  the  action  shall  be  stayed  until  an  undertaking,  executed by two or more persons, be filed with the clerk,  to the effect that they  will  pay  such  costs  and  charges  as  may  be  awarded  against  the  plaintiff  by  judgment, or in the progress of the action, not exceeding the sum of $500; or in  lieu of such undertaking, the plaintiff may deposit $500, l awful money, with the  clerk of the court, subject to the same conditions as required for the undertaking.

 

How Supreme Court interprets the meaning of the cost bond statute

There is, however, an old doctrine that states that the requirement for a cost bond against foreign plaintiffs does not apply if the lawsuit also has resident plaintiff.  In 1951, the Nevada Supreme Court adopted that doctrine in light of the NRS 18.130. While interpreting the requirements of NRS 18.130(1), the Nevada Supreme Court in Fourchier has expressly held that “[W]here there are several plaintiffs in the action, one of whom is a resident, the rule requiring security for costs from nonresidents does not apply.”  2)Fourchier v. McNeil Const. Co., 68 Nev. 109, 116, 227 P.2d 429, 432 (1951).  The Court even acknowledged the cost bond is not required even when the resident plaintiff is insolvent. 3)Id. When coming to this conclusion, the court examined the language of NRS  18.130(1) and recognized that the mixed-residency rule was not in its language, but the Court held that the mixed-resident rule applied nevertheless.4)Id (stating “we accept the general rule of law as thus enunciated).

The Supreme Court in Fourchier pointed out an important exception to the general mixed-resident rule. In Fourchier, 40 different plaintiffs with 40 wholly different contractual claims joined in a single suit for convenience purposes only. They filed a 160 page complaint with 240 causes of action.5)Id. at 113  Each plaintiff could have filed a separate suit, but chose not to. 6)(Id.) at 114.  Based on that situation, the Court held that when non-resident plaintiffs, for their own convenience, and having wholly separate causes of action, voluntarily join a resident plaintiff in a lawsuit, a court may require the non-resident plaintiffs to file an individual cost bond pursuant to NRS 18.130.7)Id. at 119 (citing and quoting Kearney v. Baptist, 159 A. 405, 406, 10 N.J. Misc. 431. 1932.

The purpose of the mixed-resident exception to NRS 18.130 is to prevent non-resident plaintiffs from having to pay a cost bond when a resident plaintiff is present.  The purpose of the exception to the mixed-resident rule is to prevent non-resident plaintiffs from abusing the system, as the plaintiffs in Fourchier did.

In the end, while Fourchier is old law, it seems to still be good law.  Thus, the non-resident bond requirement of NRS 18.130 does not seem to apply if there is a resident plaintiff.  The exception to the mixed-resident exception may apply if the non-resident plaintiffs have significant, or perhaps completely, unique claims.  That being said, the Supreme Court has not spoken on this matter in almost 65 years.  It is probably a good idea to ask the court for declaratory relief before ignoring a demand for a cost bond in a mixed-resident lawsuit.

Footnotes   [ + ]

1. meaning plaintiffs that are not residents of Nevada
2. Fourchier v. McNeil Const. Co., 68 Nev. 109, 116, 227 P.2d 429, 432 (1951
3. Id.
4. Id (stating “we accept the general rule of law as thus enunciated).
5. Id. at 113
6. (Id.) at 114.
7. Id. at 119 (citing and quoting Kearney v. Baptist, 159 A. 405, 406, 10 N.J. Misc. 431. 1932.
stripping a second mortgage

Stripping a Second Mortgage under a Chapter 20

If you are familiar with the bankruptcy code, you know there is no “Chapter 20” anywhere in the code.  But some attorneys plan for and file so-called “Chapter 20” bankruptcies by filing consecutive Chapter 7 and Chapter 13 bankruptcies.  The basic idea is that the Chapter 7 will discharge any dischargeable debt, while the Chapter 13 can help strip a second mortgage or help create a structured payment for a debt not otherwise handled in the Chapter 7.   The most commonly useful function is to strip the second mortgage.

Of course, the obvious problem in the Chapter 13 filed on the heels of a Chapter 7 discharge is that the debtor cannot obtain a second discharge if the Chapter 13 is filed within 4 years of the Chapter 7.  Thus, the debtor shouldn’t use the Chapter 13 as a discharge tool.

In the case of stripping a second mortgage, there does not need to be a discharge.  The debt was discharged as to the debtor in the first Chapter 7.  Thus, the Chapter 13 is used to strip the second mortgage, which then becomes a discharged, unsecured debt.

Naturally, creditors disapprove of this strategy.  And several creditors have fought against it.  In the recent Eleventh Circuit case of Wells Fargo v. Scantling, Case No. 13-10558 (11th Cir. June 18, 2014), http://law.justia.com/cases/federal/appellate-courts/ca11/13-10558/13-10558-2014-06-18.html, Wells Fargo argued that a lack of discharge in the Chapter 13 prevented the debtor from stripping the unsecured junior lien holder.  As you can probably guess from my introduction, the debtor in this case had exposed junior lien holders on his property.  Specifically, the property was valued at around $118k and had three lien holders in the following order: (1) $122K (2) $79k and (3) $24k.  As you can see, no equity applied to the second or third liens.

The Eleventh Circuit held that Code Sections 506(a) and 1322(b) allowed the debtor to classify the two junior liens as wholly unsecured liens that could be stripped.  Wells Fargo argued the Section 1325(a)(5) prevented lien stripping without a discharge.  Section 1325(a)(5)(B)(i) provides that the “holder of [an allowed secured claim] retain[s] the lien securing such claim until the earlier of payment of the underlying debt determined under nonbankruptcy law; or discharge under section 1328.”  Clearly the bank was alleging that the strip cannot be finalized until the discharge.

The Eleventh Circuit ultimately held that a Chapter 20 debtor can take full advantage of the benefits of a Chapter 13 (with the obvious exception of receiving a discharge).  The court further held that the operation of Sections 506 and 1322(b) change the nature of the debt, thus disqualifying the debt for protection under Section 1326(a)(5).

The Eleventh Circuit pointed out that there is a split in the courts as to whether a lien strip in a Chapter 20 is allowed.  The court conveniently provided a list of jurisdictions holding each view.  The majority opinion allowing a Chapter 20 lien strip include the 4th Circuit, the 8th Circuit, and the bankruptcy courts of Florida, Maryland, Nevada and California.  However, dissenting opinions in S.D. Florida, S.D. California, and Illinois exist.

A Chapter 20 can be a very useful lien-stripping tool.  If you would like to learn more, please call us to set up an appointment.

What are the main mistakes in bankruptcy?

TRANSCRIPTION OF VIDEO:

The question is, what are the main mistakes that I’ve seen people make that prevent them from getting a discharge? The two most common scenarios that I’ve come across are where people fail to adequately disclose information to either their attorney or to the bankruptcy court, or they fail to appear at their required meetings.

Now, bankruptcy is a good deal and you’re going to be discharging presumably a lot of debt in your bankruptcy case, so it’s important that you play by the rules and it’s important that you disclose everything. The bankruptcy court requires that certain information be disclosed and if you’re in any kind of doubt as to whether or not it’s something that is required to be disclosed or not, err on the side of disclosure and play it safe, so that you can make sure that your discharge order is not going to be jeopardized by failure to include some pertinent piece of information to your bankruptcy case.

It’s also important that you show up to your meetings that are required. Now, by meeting I mean, principally, the 341 meeting of creditors. That’s a meeting that everyone has to attend. So as long as you show up to that meeting and disclose all the information and play by the rules that the court wants to play by, you’re going to receive a discharge order and avoid these common pitfalls.

 

 

Can a creditor block my discharge?

TRANSCRIPTION OF VIDEO

The question is, Can a creditor block my discharge? The answer may be “Yes.” In bankruptcy creditors are provided an opportunity to do what’s called an objection to your discharge. That’s basically a way in which they file an objection with the court, saying that their particular debt should not be subject to the discharge, or in some certain cases that you shouldn’t be allowed to receive a discharge at all. Those cases are pretty rare; but if you haven’t committed fraud, or you haven’t otherwise committed some sort of wrongful injury to the creditor, the chances are very rare that a creditor will actually object to your discharge.

There is a deadline to object to this discharge. In the Chapter 7 case it’s 90 days, roughly, after you’ve filed your bankruptcy case. If they haven’t filed that objection to discharge within that time frame, they’re time-barred, meaning they’ve missed the time frame in which they can file their objection. If they’ve missed that time frame in which to file their objection, then they can no longer file that objection and your discharge will be entered.

Do I have to tell my attorney about all of my assets in bankruptcy?

TRANSCRIPTION

Question is, do I have to tell my attorney about all of my assets in a bankruptcy? The simple answer is yes. You want to tell your attorney about all of your assets. The bankruptcy laws require that you disclose all of your assets, all of your income, all of your expenses and all of your debt.

Now, in order for your attorney to give you proper and adequate advice, your attorney is going to need to know about all of the assets because it’s going to be required that your attorney include all of that information in your bankruptcy paperwork. So err on the side of disclosure and tell your attorney about everything, probably more than he or she wants to hear, and you’ll be in good hands.

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