By Anne E. McClellan
On March 19, 2013, the Arizona Supreme Court denied review of
State of Arizona, ex rel. David Raber v. Wang, 230
Ariz. 476, 286 P.3d 1085 (App. 2012), ending any possible doubt as to
whether the State of Arizona must reduce its recovery rights under
A.R.S. § 12-962 to account for attorneys’ fees or costs. The State does
not.
A.R.S. § 12-962 provides, in part, as follows:
A. If this state . . . provides medical care and treatment to a person who is injured . . . under circumstances creating tort liability upon a third person, the state . . . may recover from the third person or the injured . . . the reasonable value of the medical care and treatment. …
B. To enforce this right, the state . . . may do the following:
. . .
3. Recover the cost of care from the injured . . . to the extent that such person has received money in settlement of the claim or satisfaction of a judgment against the third party.
A.R.S.
§ 12-962(A)-(B) (emphasis added). The statute is intended to convey to
the State a fiscal benefit not otherwise available under the law, i.e.,
recouping certain medical costs paid by the State health plan in order
to ensure the State can continue to afford to provide health coverage
for its employees.
See 1999 Ariz. Sess. Laws, Ch. 17, §1; Arizona State Senate, Fact Sheet for S.B. 1346.
In
State v. Wang, Hongliang
Wang was injured in a bicycle accident. As an employee of the State,
Mr. Wang’s accident-related medical care was covered by the State health
plan, and the State paid $15,758.26 for that medical care. Mr. Wang
thereafter successfully asserted a claim against the person who caused
the accident and received a $50,000 settlement. Mr. Wang incurred
$16,666 in attorneys’ fees and $250.85 in costs to obtain the
settlement.
Pursuant to A.R.S. § 12-962, the State demanded
payment from the settlement for the $15,758.26 in accident-related
medical care it provided to Mr. Wang. Mr. Wang refused to reimburse the
State, forcing the State to file a lawsuit. Mr. Wang argued that the
State must reduce its recovery under the Common Fund Doctrine.
The
Common Fund Doctrine is an equitable theory that requires apportionment
of a recovery to account for a pro rata share of attorneys’ fees and
costs. The purpose of the doctrine is to compensate counsel for
producing benefits for a class of persons and prevent the unjust
enrichment of those who receive the benefits.
Kerr v. Killian,
197 Ariz. 213, 218, 3 P.3d 1133, 1138 (App. 2000). If the statutory
language clearly defines the right of recovery as being exclusive of
attorneys’ fees and costs, application of the common fund doctrine is
improper.
Hobson v. Mid-Century Ins. Co., 199 Ariz. 525, 531, 19 P.3d 1241, 1247 (App. 2001).
After
the State obtained summary judgment at the trial court level, Mr. Wang
appealed to Division One of the Arizona Court of Appeals. Consistent
with Division Two in
Ariz. Dep’t. of Admin. v. Cox, 222
Ariz.
270, 272, 213 P.3d 707, 709 (App. 2009), Division One held that the
plain language of A.R.S. § 12-962 precludes application of the Common
Fund Doctrine or any other equitable theory requiring reduction for
attorneys’ fees or costs. In the decision authored by Justice Randall
Howe, the Court of Appeals explained that the statute grants the State a
right to recover “the
cost of care” from the injured person “
to the extent that such persons has
received money
in settlement of the claim,” and attorneys’ fees and costs are to be
deducted from a settlement or judgment prior to disbursement to the
injured person, meaning the injured person never “receives” that portion
of the fund.
The
State’s right under § 12–962(A) to recover the reasonable value of the
medical care it has provided, however, is limited by § 12–962(B)(3) “to
the extent that [the] person has received money in settlement
of the claim or satisfaction of a judgment.” (Emphasis added.) As we
have recognized, a person does not “receive” attorneys’ fees under this
statute. By limiting the State’s recovery to the amount that Wang “has
received in settlement” of his tort claim, § 12–962(B)(3) effectively
removes litigation fees and costs from consideration.
Wang, 230 Ariz.
at
¶ 12-14, 286 P.3d at 1087-88. The Court of Appeals therefore upheld
the trial court’s grant of full recovery of the medical costs to the
State.
Arizona law is undeniably clear. When a person covered by
the State health plan is injured because of the negligence of another
and receives a settlement, judgment or other payment for his or her
injuries, the State is entitled to recover the amount it paid for the
injured person’s medical treatment and is not required to reduce its
recovery to share in the injured person’s attorneys’ fees or costs.
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