Petition for Writ of Certiorari — Harney & Moore v. Fineberg

OF THE

United States

OCTOBER TERM, 1989

HARNEY & MOORE,

a Partnership and

Davip M. HARNEY,

Petitioners,

VS.

JAY MARK FINEBERG,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE COURT OF APPEAL

OF THE STATE OF CALIFORNIA, SECOND

APPELLATE DISTRICT, DIVISION THREE

Davip M. HARNEY

201 N. Figueroa Street

Suite 1300

Los Angeies, California 90012

(213) 482-0881

Counsel of Record

Of Counsel

THOMAS KaLLay

201 N. FIGUEROA STREET

SUITE 1300

Los ANGELES, CALIFORNIA 90012

(213) 482-0881

BowNE OF Los ANGELES, INC., LAW PRINTERS. (213) 742-0600

QUESTIONS PRESENTED

1. Does a construction of California Business and

Professions Code, section 6146 which precludes a waiver

of the provisions thereof deprive a litigant of the right to

a meaningful access to the courts in violation of the First

Amendment of the Constitution of the United States?

2. Does a construction of California Business and

Professions Code, section 6146 which precludes a waiver

of the provisions thereof violate the due process clause of

the Fourteenth Amendment of the Constitution of the

United States?

3. Does a construction of California Business and

Professions Code, section 6146 which precludes a waiver

of the provisions thereof deprive a litigant of the right of

the equal protection of the laws guaranteed by the Four-

teenth Amendment of the Constitution of the United

States?

LIST OF PARTIES

The parties to the proceedings below were the petition-

ers David M. Harney and Harney & Moore, a law partner-

ship, and the respondent Jay Mark Fineberg.,

il

TABLE OF CONTENTS

QUESTIONS PRESENTED..................-:.

LIST OF PARTISS. 2... ius esos os erie vee ewe

OPINION BELAIW ....cc0h Goi cwes ta Oe eee osu

JURISDICTION |. 5 6400350065 he ee ees

STATEMENT OF THE CASS ... 0.00.0 cewceees

How The Federal Question Was Presented .....

REASONS FOR GRANTING THE WRIT .......

I

STATE COURTS ARE REQUIRED TO DECIDE

PROPERLY PRESENTED FEDERAL QUES-

TIONS, STATE GROUNDS WHICH IN EF-

FECT EVADE FEDERAL LAW SHOULD BE

DISREGARDED... ... «aso Sa ee eae ee eee

I]

A CONSTRUCTION OF SECTION 6146 WHICH

PRECLUDES A WAIVER THEREOF DE-

PRIVES A LITIGANT OF THE CONSTITU-

TIONAL RIGHT TO PETITION THE

GOVERNMENT FOR A REDRESS OF GRIEV-

ANCES AND WOULD FURTHER DEPRIVE

THAT LITIGANT OF THE RIGHT TO BE REP-

RESENTED BY COUNSEL OF HIS OR HER

CHOICE . 2. 0 6 ccs css oa ee ea ee eee

6

il

TABLE OF CONTENTS

Page

Ill

A CONSTRUCTION OF SECTION 6146 WHICH

PRECLUDES A WAIVER THEREOF DE.

PRIVES A LITIGANT OF THE CONSTITU-

TIONAL RIGHT TO THE EQUAL

PROTECTION OF THE LAWS............... 12

ee vo Noa ceensrcecsstecuas i5

APPENDIX A_ Opinion and Judgment of the California

Court of Appeal

APPENDIX B_ Order Denying Review of the California

Supreme Court

iv

TABLE OF AUTHORITIES

Cases

Alderman v. Hamilton (1988) 205 Cal.App.3d 1033

American Bank & Trust Co. v. Community Hospital

qo 8B Le 8 rer eee Ee ee eee Tee

California Motor Transport Co. v. Trucking Unlim-

ited (1972) 92 S.Ct. 609, 404 U.S. 508, 30

ME 2 rer eee eee re er eee

City of Long Beach v. Bozek (1982) 31 Cal.3d 527,

533 vac. 459 U.S. 1095, reinst’d 33 Cal.3d 727 ..

Demorest v. City Bank Farmers Trust Co. (1944) 64

S.Ct. 384, 321 U.S. 36, 88 L.Ed. 526 ..........

Dunn v. Blumstain (1972) 405 U.S. 330, 92 S.Ct.

RA ce Pe eae tla Re RIG Oa ea Far! ret Mah bn AE

Fineberg v. Harney & Moore, 207 Cal.App.3d 1049

ee ee Se ee re Pee et ee CE Ee 1, 5,

Hawthorn v. Lovorn (1982) 102 S.Ct. 2421, 457 U.S.

Ee IE i ie eet et ne ree

Herb v. Pitcairn (1945) 65 S.Ct. 459, 324 U.S. 117,

BO es ees eee tre ogi wee

Kramer v. Union Freed School District (1969) 395

Tey Tes Pa ex kd eK a ke ee ees

Loving v. Virginia (1967) 388 U.S. 1, 87 S.Ct. 1817

McLaughlin v. State of Florida (1964) 85 S.Ct. 283,

2 Be | er eres ar Pee re ee eee

Memphis Nat. Gas Co. v. Beeler (1942) 62.8.Ct. 857,

Bae Soe ee CA BE ko ee Kuen ce es

Powell v. Alabama (1932) 53 S.Ct. 55, 287 U.S. 45,

SUES Bc xa ta Cee enceeta ues s oes

Rinaldi v. Yaeger (1966) 86 S.Ct. 1497, 384 U.S.

BD <cne Kx RARE RRMA SEEMS ERE SSR RS Cea

~~

a)

io 6)

14

8, 14

9

6

i2

TABLE OF AUTHORITIES

CASES

Page

Roa v. Lodi Medical Group, Inc. (1985) 37 Cal.3d

OF RCNA Gwen Se yeh RRR SE ee 3

Shapiro v. Thompson (1960) 394 U.S. 618, 89 S.Ct.

SUMS WS secb ese eh eek oscebaiay an 13

United Mine W. of A., Dist. 12 v. MWlinois St. Bar

Assn. (1967) 88 S.Ct. 353, 389 U.S. 217, 19

PM MOD. soa s lee ca cab bene eee 9,12.13

Walters v. National Ass’n of Radiation Survivors

(1985) 105 S.Ct. 3180, 473 U.S. 305, 87 L.Ed.2d

OMe shee iknehaeeteees eeu eee ne eee 10

Constitution

United States Constitution .................... 9,10

First Amendment ................... i, 5, 6,9, 10.11

Fourteenth Amendment...................... .o.6

Statutes

California Business and Professional Code.

PE, GEO 5 $66 56 RESELLER GT en passim

WONG NES 6 cis od eeu ed eae el ee 7

ORs BERT COMIN 3 a cee eee s

OG. GEETCOE Sock cece ean e oe r ie

United States Code. Title 25, See.1267(3) ....... 2

vl

TABLE OF AUTHORITIES

Page

Textbooks

Nowak, Rotunda and Young, Constitutional Law,

(West 2d ed.) pp. 591, 592 «1.6... ee eee ee eee 14

Tribe. Amencan Constitutional Law (2d ed. 1988),

“Ss ) Swe e ee eee eee ere Ree ede tcl 11

Wright, Miller, Cooper & Gressman, Federal Prac-

tice and Procedure: Jurisdiction, Section 402,

p. 716 (1988 Sup.) ...... eee eee reece eee eee 6

No.

In the Supreme Court

OF THE

United States

OCTOBER TERM, 1989

HARNEY & MOORE,

a Partnership and

Davip M. HARNEY,

Petitioners,

VS.

JAY MARK FINEBERG,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE COURT OF APPEAL

OF THE STATE OF CALIFORNIA, SECOND

APPELLATE DISTRICT, DIVISION THREE

The petitioners Harney & Moore, a law partnership,

and David M. Harney respectfully pray that writ of

certiorari issue to review the judgment and opinion of the

Court of Appeal of the State of California, Second Appel-

late District, Division Three, filed on February 7, 1989

whieh the Supreme Court of the State of California

declined to review by an order filed on April 26, 1989.

OPINTON BELOW

The opinien of the Court of Appeal is reported at 207

Cal.App.3d 1049, and is reprinted in the Appendix hereto,

p. A-1l, infra.

to

JURISDICTION

The judgment of the Court of Appeal of California,

Second Appellate District, Division Three, was entered

on February 7, 1989. The Court of Appeal denied a timely

petition for rehearing on March 3, 1989. Thereafter, on

April 26, 1989 the Supreme Court of California denied a

petition for hearing. The jurisdiction of this Court is

inveked under 28 U.S.C. § 1257(3).

STATEMENT OF THE CASE

Facts

Respondent Jay Mark Fineberg, a film producer, en-

gaged petitioner David M. Harney, an attorney admitted

to the Califernia Bar in 1949, and his firm, petitioner

Harney & Moore, 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: *§ 6146. Limitations in

amount [©] ‘(a) An attorney shall not contract for or

collect a contingeney fee for representing any person

seeking damages in connection with an action for injury

or damage against a health eare provider based upon such

person's alleged professional negligence in excess of the

following limits: *(1) Forty percent of the first fifts

thousand dollars (350,000) recovered.

* *(2) Thirty-three and one-third of the next fifty

thousand dollars (350,000) recovered.

‘(3) Twenty-five pereent of the next one hundred

thousand dollars ($100,000) reeovered.

“*(4) Ten percent of any amount on which the recovery

exceeds two hundred thousand dollars ($200,000).

3

“ ‘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.

Oe vkea

“Client has further been advised that attorneys -are

unwilling to accept representation herein under the provi-

sions 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 limita-

tions 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

in October 1984, one provider paying plaintiff $275,000,

and a second provider paying him $25,000. After deduet-

ing costs, Mr. Harney took 40 percent of the recovery in

accordance with the fee agreement. Approximately a year

afterwards, ' plaintiff requested a refund ultimately deter-

mined to be $26,069.20, representing the ameunt by which

the fee exceeded that permitted by statute. Mr. Harney

refused to pay, and the present action ensued.

At trial, plaintiff testified that he contacted Mr. Harney

because the firm was recommended to him by his brother.

'Roa v. Lodi Medical Group, Ine. (1985) 37 Cal.3d 920 which

upheld section 6146 against constitutional challenges was decided

February 7, 1985.

* il

4

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

ease for trial. He eoneeded he agreed to waive the statu-

tory provisions governing contingent fee agreements, and

that he did so because he wanted Mr. Harney to represent

him. Plaintiff was pleased with Mr. 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 40 percent if the case went to trial, but

only 33% pereent 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

protfered 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 ease such as plaintiff's would generally amount to

approximately $20,000, anc 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 representa-

tion for a fee within the limits imposed by section 6141.

According to Mr. Harney’s uncontradicted testimony

the maximum settlement value of plaintiff's ease, if han-

dled by a personal injury lawyer who did not specialize in

medical malpractice cases, was $100,000. There was addi-

tional and uncontradicted testimony that it is not eco-

nomieally feasible to conduct a proper practice in the field

of medical malpractice with the fee restrictions imposed

by section 6146. (Section 6146 was revised effective Janu-

ary 1, 1988 to provide for a 25 percent fee for recoveries

between $100,000 and $600,000 and a 15 percent fee for

amounts recovered in excess of $600,000. Although the

Court of Appeal found in its opinion that the fee schedule

now is “more generous’ [207 Cal.App.3d 1049, 1052,

n. 1], there was uncontradicted testimony at trial that it

is not economically feasible to conduct medical malprac-

tice litigation with the fee restrictions imposed by section

6146. [R.T., pp. 33, 45.].)

The foregoing evidence was received in a non-jury trial

in the Superior Court of the State of California. It was in

all of its essential aspects uncontradicted.

How The Federal Question Was Presented

The Superior Court ruled that the fee limitation con-

tained in Business and Professions Code, seetion 6146

could be and was waived and that respondent’s waiver

was knowing and intelligent. Judgment was entered in

favor of petitioners and respondent appealed.

Respondent contended in the California Court of Ap-

peal that public poliey proseribed a waiver of section

6146. Petitioners, in their brief filed in the Court of

Appeal, contended among other things that a construction

of section 6146 which preeluded a voluntary and knowing

waiver of its provisions would violate the due process and

equal protection clauses of the Fourteenth Amendment of

the United States Constitution and would also deprive

litigants of the right to petition the government for a

redress of grievances, and thus violate the First Amend-

ment of the United States Constitution. The Court of

Appeal did not address the constitutional issues raised by

petitioners and held that state publie policy precluded a

waiver of section 6146, In petitioning for review in the

‘

California Supreme Court, petitioners raised the same

federal constitutional issues briefed in the Court of Ap-

peal. However, the California Supreme Court denied re-

view of the Court of Appeal’s decision without an opinion.

REASONS FOR GRANTING THE WRIT

I

STATE COURTS ARE REQUIRED TO DECIDE

PROPERLY PRESENTED FEDERAL QUESTIONS;

STATE GROUNDS WHICH IN EFFECT EVADE

FEDERAL LAW SHOULD BE DISREGARDED

“In most situations it is clear that state courts are

required to decide properly presented federal questions. ”

(Wright, Miller, Cooper & Gressman, Federal Practice

and Procedure: Jurisdiction, § 402, p. 716 (1988 Supp.)

eiting Hawthorn v. Lovorn (1982) 102 S.Ct. 2421, 2428-

2430, 457 U.S. 255, 72 L.Ed.2d 824 [state court must

examine claim that seetion 5 of the Voting Rights Act

renders contemplated relief unenforeeable].) Here, the

Court of Appeal was presented with the contentions,

renewed in the petition for review filed in the California

Supreme Court, that a rule precluding waivers of section

6146 would violate the First and Fourteenth Amendments

of the United States Constitution. We respectfully submit

the Court of Appeal evaded federal law in failing to

address the constitutional claims presented. This a state

court may not do. (Memphis Nat. Gas Co. v. Beeler (1942)

§2 S.Ct. 857, 861, 315 U.S. 649, 653-654, 86 L.Ed. 1090.)

“Even though the constitutional protection invoked be

denied on nonfederal grounds, it is the provinee of this

Court to inquire whether the decision of the state court

rests upon a fair and substantial basis.” (Demorest v. City

Bank Farmers Trust Co. (1944) 64.8.Ct. 384, 388, 321 US.

36, 42-48, 88 L.Ed. 526.) We submit that no such fair and

substantial basis exists in this ease.

The state grounds upon which the Court of Appeal’s

opinion rests are, we respectfully submit, transparently

invalid for it ignores the explicit mandate of California

law making section 6146 subject to waiver.

There is no provision in seetion 6146 which deals

explicitly with a waiver. However, California Business

and Professions Code, section 6147 [Contingency fee con-

tracts] provides that “[f]ailure to comply with any provi-

sion of this section renders the agreement voidable at the

option of the plaintiff and the attorney shall thereupon be

entitled to colleet a resonable fee.” (emphasis added)

(Business and Professions Code, seetion 6147(b).)

Responding to petitioners’ contention that this provi-

sion explicitly authorized a waiver. the Court of Appeal

held:

“Harney also relies on section 6147, requiring, in

subdivision (a), that certain provisions be included

in contingeney fee agreements, and providing, in

subdivision (b) that ‘[f]ailure to comply with any

provision of this section renders the agreement void-

able at the option of the plaintiff, and the attorney

shall thereupon be entitled to collect a reasonable

fee. Among the recitals required by subdivision (a)

are the following: *(4) Unless the claim is subject to

the provisions of Section 6146, a statement that the

fee is not set by law but is negotiable between

attorney and client. [©] (5) If the claim is subject to

the provisions of Section 6146, a statement that the

rates set forth in that seetion are the maximum limits

for the contingeney fee agreement, and that the

attorney and elient may negotiate a lower rate.

Contrary to Harney’s assertion, section 6147 makes

abundantly clear the intent of the Legislature to

preclude contingeney fee agreements providing for

rates in excess of the limits set forth in section 6146;

it is the failure to recite this which renders an agree-

ment voidable under subdivision (b) of section 6147.”

(emphasis added) (Fineberg v. Harney & Moore,

supra 207 Cal.App.3d 1049, 1055.)

By the very terms of the Court of Appeal’s opinion, the

fee agreement in this ease is voidable. It does not recite

that the rates set forth in section 6146 are the “maximum:

limits of the contingency fee agreement.” (Business and

Professions Code, section 6147(a)(5).) The limit set forth

in the fee agreement is 40 percent. The law provides most

unambiguously that in such an event the agreement is

voidable at the option of the plaintiff. (Business ond

Professions Code, section 6147(b).) As if it needed rein-

foreement, the unequivoeal wording of section 6147(b)

making fee agreements voidable has received the gloss of

judicial approval in a recent decision of the California

Court of Appeal. “If a contingeney fee agreement does

not comply with these requirements, it is voidable at the

option of the client and the attorney is then entitled to a

reasonable fee for services performed. (Bus. & Prof.

Code, Section 6147. subd. (b).” (emphasis in original)

{| Alderman v. Hamtilton (1988) 205 Cal.App.3d 1033,

1037.])

We contend that the patent misreading of Business and

Professions Code, section 6147(b) by the Court of Appeal

shows that the purported state grounds for the decision

are neither fair nor substantial. We submit the state

grounds were advanced in order to avoid confronting the

federal constitutional issues raised in a timely manner in

the briefs filed in the Court of Appeal. For this reason,

9

the state grounds are not adequate and independent

(Herb v. Pitcairn (1945) 65 S.Ct. 459, 463, 324 U.S. 117,

125-126, 89 L.Ed. 789) and therefore the federal constitu-

tional questions presented may be addressed by this

Court.

Il

A CONSTRUCTION OF SECTION 6146 WHICH PRE-

CLUDES A WAIVER THEREOF DEPRIVES A LITI-

GANT OF THE CONSTITUTIONAL RIGHT TO

PETITION THE GOVERNMENT FOR A REDRESS

OF GRIEVANCES AND WOULD FURTHER DE-

PRIVE THAT LITIGANT OF THE RIGHT TO BE

REPRESENTED BY COUNSEL OF HIS OR HER

CHOICE

The constitutional right to petition for redress of griev-

anees (U.S. Const., lst Amend.) includes the right of

access to the courts. (California Motor Transport Co. v.

Trucking Unlimited (1972) 92 S.Ct. 609, 612, 404 U.S.

508, 510, 30 L.Ed.2d 642.) This encompasses lawsuits for

monetary compensation for individualized wrongs. (City

of Long Beach v. Bozek (1982) 31 Cal.3d 527, 533 vac. 459

U.S. 1095 reinst’d 33 Cal.3d 727 eiting United Mine W. of

A., Dist. 12 v. Illinois St. Bar Assn. (1967) 88 S.Ct. 353,

356, 389 U.S. 217, 223, 19 L.Ed.2d 426, 431.) Under the

Constitution, the right to petition, which ineludes the

right to institute judicial proceedings, is a fundamental

right. (United Mine W. of A., Dist. 12 v. Illinois St. Bar

Assn., supra 88 S.Ct. 353, 356, 389 U.S. 217, 222, 19

L.Ed.2d 426, 430.) And the right to be represented in a

civil or eriminal proceeding by counsel of one’s choice has

long been reeognized as a fundamental right protected by

the due process clause. (Powell v. Alabama (1932) 53

S.Ct. 55, 64, 287 U.S. 45, 68-69, 77 L.Ed. 159.)

10

In the ease at bar, respondent made a deliberate choice

of counsel (R.T., pp. 17, 59) and waived the provisions of

section 6146 in order to retain the lawyers chosen (R.T.,

p. 21) who would not take his case without a waiver of

section 6146. (R.T., pp. 31, 45.) We submit that preclud-

ing a knowing and intelligent waiver of section 6146

would have curtailed in this ease and will eurtail in future

eases the effective exercise of the mght to bring a lawsuit

and thus interfere with the fundamental right to petition

for a redress of grievanees and with the right to be

represented by counsel of one’s choice.

In Walters v. National Ass’n of Radiation Survivors

(1985) 105 S.Ct. 3180, 473 U.S. 305, 87 L.Ed.2d 220,

while upholding against constitutional challenge the $10

limit on fees to be paid an attorney or agent appearing on

behalf of a veteran before the Veteran’s Administration,

this Court suggested that a First Amendment interest

arises in fee limitations in the absenee of a meaningful

alternative forum for the presentation of claims. (473

U.S. at 333-335, 105 S.Ct. at 3195-3197.) There is no

meaningful alternative forum to the civil action filed on

appellant’s behalf by respondents for the litigation of his

medical malpractice claim. Nor is an action for medical

malpractice as “informal and nonadversial as possible” as

is true of veteran’s benefits proceedings at issue in

Walters. (473 U.S. at 323, 105 S.Ct. 3190.) The very

opposite is true; the record in this case shows the value

(and necessity) not only of legal representation but of

erpert legal representation.

That this ease is one of constitutional dimension is

apparent in light of the Walters decision. Apart from

violating specifie constitutional provisions, a judicial con-

struction of section 6146 which precludes its waiver impli-

cates the broad societal interest of assuring the right to a

11

meaningful access to the courts. That a fully informed,

well-advised and even sophisticated litigant should be

free to forego the fee schedule set in section 6146 because

he wants a particular lawyer to represent him is, simply

put, an important constitutional value. As one prominent

commentator has written: “A right to meaningful aecess

to court may also be implicated by denials of adequate

legal representation, and even by denials of the legal

representation of one’s choice.” (Tribe, American Consti-

tutional Law (2d ed. 1988), p. 757.)

This is indeed a ease where no informal alternative to

the usual adversary process is available. A litigant’s

choice of counsel for the only proeeedings which can

vindicate his or her rights should therefore not be

«_reumsceribed.

We contend in this ease that the right to retained

counsel, long recognized in our law, includes the right to

choose counsel believed to be competent and adequate.

The faets of this ease uniquely support this argument: it is

fact, not speculation, that petitioners were competent and

effective and were able to obtain results for respondent

which other lawyers less expert would not have been able

to obtain. Respondent waived section 6146 because he

wanted precisely the result achieved. His right to that

result as well as the right of future litigants to make

sensible choices to achieve similar results is and should

be protected by the Constitution. For this reason, the

opinion and judgment of the California Court of Appeal

should be set aside and litigants should be permitted to

waive the provisions of California Business and Profes-

sions Code, section 6146.

12

Itl

A CONSTRUCTION OF SECTION 6146 WHICH PRE-

CLUDES A WAIVER THEREOF DEPRIVES A LITI-

GANT OF THE CONSTITUTIONAL RIGHT TO

THE EQUAL PROTECTION OF THE LAWS

California Business and Professions Code, section 6146

ereates a class of litigants — those with actions for pro-

fessional negligence against a health care provider — who

do not have the right to retain counsel of their choice.

Litigants in other civil actions continue to have the right

to retain counsel selected by them. That such a class is

actually created by section 6146 is apparent from the

record of this ease. Respondent selected petitioners but

he would not have been able to retain them if he could not

have waived freely and knowingly, as he did, the fee

schedule set forth in section 6146.

The equal protection clause requires “some rationality

in the nature of the class singled out.” (Rinaldi v. Yaeger

(1966) 86 S.Ct. 1497, 1499, 384 U.S. 305, 308-309. )—

“Rationality” is tested by the classification’s ability to

serve the purpose of the legislative rule. (McLaughlin v.

State of Florida (1964) 85 S.Ct. 283, 288, 379 U.S. 154,

191.) We submit that the purpose of MICRA is not served

by precluding a litigant from retaining the attorney of his

or her choice.

In the instanee of the litigants’ class, the standard

against which the elassifieation at bar is to be measured is

not one of rationality alone. The test which applies is the

more exacting “strict serutiny” standard of judicial

review.

As noted, the right to petition, which ineludes the right

to institute judicial proceedings, is a fundamental mght.

(United Mine W. of A. Dist. 12 v. Illinois St. Bar Assn.,

13

supra 88 S.Ct. 353, 356, 389 U.S. 217, 222, 19 L.Ed.2d 426,

430.) The right to a hearing which includes the right to

retained counsel, is also fundamental. (Powell v. Alabama,

supra 287 U.S. 45, 68, 62 S.Ct. 55, 64.) Law making

differentiations between persons exercising fundamental

rights are subject to strict judiciary serutiny and will not

be upheld unless it can be demonstrated that it is neces-

sary to use the classification to promote a compelling state

interest. (Dunn v. Blumstain (1972) 405 U.S. 330, 339-

340, 92 S.Ct. 995, 1001 [travel and voting]; Shapire v.

Thompson (1960) 394 U.S. 618, 634, 89 S.Ct. 1822, 1331

{interstate travel]; Kramer v. Union Freed School District

(1969) 395 U.S. 621, 680, 89 S.Ct. 1886, 1891 [voting];

Loving v. Virginia (1967) 388 U.S. 1, 11, 87 S.Ct. 1817,

1823 [marriage |.)

“Business and Professions Code section 6146 was

enacted as part of the Medical Injury Compensation

Reform Act of 1975 (MICRA). (Stats. 1975, 2d 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 Insuranee Code’ (Hathaway v. Baldwin Park

Community Hospital (1986)_ 186 Cal.App.3d 1247,

1250 [231 Cal.Rptr. 334]), was enacted in an ex-

traordinary legislative session ealled by the Gover-

nor in response to ‘a pereeived crisis cause by rapid

inereases in medieal malpractice insuranee premi-

ums.” (Fineberg v. Harney & Moor, supra 207

Cal.App.3d 1049, 1052.)

California courts have held that the Legislature's pur-

pose in enacting MICRA was to protect California's

health care delivery system by reducing the cost of medi-

14

eal malpractice insurance. (Fineberg v. Harney & Moore,

supra 207 Cal.App.3d 1049, 1054.)

We submit that MICRA’s aim of combating the medical

malpractice insurance erises (American Bank & Trust Co.

ve. Community Hospital (1984) 36 Cal.3d 359, 363), when

compared to ‘precedent, is not a “compelling” reason to

curtail the exercise of appellant's fundamental rights. As

one authority has explained, a “compelling” interest is

one “whose value is so great that it justified the limitation

of fundamental constitutional values.” (Nowak, Rotunda

and Young, Constitutional Law, (West 2d ed.) pp. 591,

592.) A erisis in insurance rates does not measure up to

matters of national security, life and death and the

eradication of racial discrimination.

However, even if the interest is “compelling,” and we

do not concede it is, the means chosen must be necessary

to effectuate the compelling objective. The network of

MICRA statutes is so extensive, and the limitation on

recoveries so direct, that a number of voluntary and well-

informed waivers of section 6146 can hardly have a

measurable effect, or any effect, on medical malpractice

insurance costs. Even if all that has been done is not

considered enough to control malpractice insurance costs,

surely there are other less restrictive means of combating

the imsuranee crises than to compel some individuals to

relinquish the fundamental rights to retain counsel of

their choice and the First Amendment right to petition

for a redress of grievanees. In sum, we submit that

precluding a waiver of seetion 6146 would violate the

equal protection clause of the Constitution.

15

CONCLUSION

For the foregoing reasons, this petition for certiorari

should be granted.

Respectfully submitted,

Davip M. HARNEY

201 N. Figueroa Street

Suite 1300

Los Angeles, California 90012

(213) 482-0881

Counsel of Record

Of Counsel:

THOMAS KALLAY

201 N. Figueroa Street

Suite 1300

Los Angeles, California 90012

(213) 482-0881

A-l

APPENDIX A

OPINION AND JUDGMENT OF THE

CALIFORNIA COURT OF APPEAL

Opinion

DANIELSON, Acting P. J. — 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 reeover

contingent fees in excess of the limit imposed thereon by

Business and Professions Code section 6146. (la) The

primary question presented by this appeal is whether a

client may waive the provisions of the statute. We deter-

mine the statute was intenced to further a significant

publie poliey and that its protection cannot be waived,

and reverse the judgment.

FACTS

Plaintiff engaged Harney to represent him in connee-

tion with a medical malpractice action. The parties en-

tered into a fee agreement dated November 23, 1981,

which provided, in part: “2. Client has been advised of the

provisions of whe California Business and Professions

Code § 6146 which, in part, provides as follows: ‘§ 6146.

Limitations in amount [®] ‘(a) An attorney shall not

contract for or collect a contingeney fee for representing

any persons 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 pereent of the

first fifty thousand dollars ($50,000) reeovered.

“*(2) Thirty-three and one-third percent of the next

fifty thousand dollars ($50,000) recovered.

A-2

“*(3) Twenty-five percent of the next one hundred

thousand dollars ($100,000) recovered.

“*(4) Ten percent of any amount on which the recov-

ery exceeds two hundred thousand dollars ($200,000).

“*Sueh limitations shall apply regardless of whether

the reeovery 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.

=

“Client has further been advised that attorneys are

unwiliing to accept representation herein under the provi-

sions 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 elient|], hereby waives the purported limita-

tions 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,

nNre

one provider paying plaintiff $275,000, and a second

provider paying him $25,000. After deducting costs, Har-

ney took 40 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

A-3

Arizona attorney. He was advised that the firm would not

undertake to represent him unless he waived the protec-

tion of section 6146; he was also advised that the firm

would bear the expense of properly preparing the case for

trial. He coneeded 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 40 percent if the case went to trial, but only 33%

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 eases, of

$300,000 per month, employs three full-time in-house

medieal practitioners, advances all litigation costs, which

in a ease 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 representa-

tion 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

lana a ia ai

A-4

eonduct a proper practice.in the field of medical malprae-

tice with the fee restrictions imposed by section 6146.’

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 en-

acted as part of the Medical Injury Compensation Reform

Act of 1975 (MICRA). (Stats. 1975, 2d Ex. Sess. 1975-

1976, chs. 1, 2, p. 3949-4007.) MICRA, “a sweeping

statute that enacted, amended, or repealed several sec-

tions of the Business and Professions Code, the Civil

Code, the Code of Civil Procedure, and the Insuranee

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 pre-

miums.” (Jbid.) In his proclamation, the Governor called

for the Legislature to “*‘enaet laws which will change the

relationship between the people and the medical profes-

sion, the legal profession and the insurance industry, and

thereby reduce the costs which underlie these high insur-

ance premiums. " (Jbid.) The Governor asked the Legis-

lature to consider, among other’ things: “'S.

Establishment of reasonable limits on the amount of

contingency fees charged by attorneys.|€| 9. Elimination

1 r . > . \ . > :

We note that Business and Professions Code section 6146 has

since been amended to permit more generous fees.

A-5

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.’ (Jbid.)

As the Hathaway court observed, “[t|he preamble to

MICRA states, in part: ‘The Legislature finds and de-

clares 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, severs hardships for the medi-

eally indigent, a denial of access for the economically

marginal, and depletion of physicians such as to substan-

tially worsen the quality of health care available to citi-

zens 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 rea-

sonable remedy within the limits of what the foregoing

publie health and safety considerations permit now and

into the foreseeable future. (Stats. 1975, Seeond Ex.

Sess. 1975-1976, ch. 2, $12.5, p. 4007.)” (Hathaway v.

Baldwing Park Community Hospital, supra, 186

Cal.App.3d at p. 1250.)

Our Supreme Court has upheld MICRA’s provisions

(1) ealling for periodie payment of “future damages” that

are $50,000 or greater (Code Civ. Proe., § 667.7; American

Bank & Trust Ce. v. Commumity Hospital (1984) 36 Cal. 3d

359, 364 [203 Cal.Rptr. 671, 683 P.2d 670, 41 A.L.R.4th

233]), (2) prohibiting “collateral sources” from ob-

taining reimbursement from medical malpractice defend-

ants or their insurers (Civ. Code, § 333.1, subd. (b);

Barme v. Wood (1984) 37 Cal.3d 174, 180 [207 Cal. Rptr.

816 [689 P.2d 446]), (3) hmiting damages for

A-6

noneconomie losses to $250,000 (Civ. Code, § 3333.2,

subd. (b)) and permitting a defendant to introduce evi-

dence 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 P2d

164].)

In each of these eases, 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 medica! malpractice insurance. (See also Willer v.

Seiaront (1985) 172 Cal.App.3d 306, 309-310 [218

Cal.Rptr. 219].)

In Hathaway, supra, Division One of this court con-

eluded that seetion 6146 prohibits a tral court from

awarding attorneys’ fees in excess of the rates provided

therein. Hathaway is similar to the present ease, in that

the clients petitioned the court, seeking permission to pay

their attorney one-third of the amount they recovered in

the case, rather than the mueh lower amount preseribed

by the statute, thus essentially waiving the protection of

the statute. (Hathaway v. Baldwin Park Community Hos-

pital, supra, 186 Cal.App.3d 1247, 1249.) Also similar is

Roa v. Lodi Medical Group, Inc., supra, 37 Cal.8d 920,

where the plaintiffs made a contingeney fee arrangement

with their counsel to pay him 25 percent of the amount

A-7

recovered by their minor son for injuries suffered as a

result of negligent treatment and care during his birth.

Following settlement, plaintiffs requested the court to

approve payment in accordance with their agreement,

claiming section 6146 was unconstitutional on due pro-

cess, equal protection and separation of powers grounds.

As the court pointed out in that ease, section 6146 “does

not in any way abrogate the right to retain counsel, but

simply limits the compensation that an attorney may

obtain when he represents an injured party under a

eontingeney fee arrangement.” (Jd. at p.926.) With re-

spect to the Roa plaintiffs’ argument that section 6146 is

invalid “beeause the authorized fees are so low that in

practice the statute will make it impossible for injured

persons to retain an attorney to represent them” (id. at

p.928), the court pointed out that the plaintiffs had made

‘no showing to support their factual claim” (ibid.), and

“{flurthermore, a comparison of the fees permitted by

section 6146 with the fees authorized under ... numerous

[other] statutory schemes noted [in the decision] sug-

gests that section 6146’s limits are not unusually low.”

(Jbid.) The court econeluded that it could not “hold that

the amount of the fees permitted renders the statute

uneonstitutional on its faee.” (Ibid. )

(2) In the present ease Harney attempted to make a

factual showing that the fee limitations in effect at the

time of its representation of plaintiff would preclude

retention by injured persons of adequate counsel. Implicit

in the testimony of both David Harney and his expert is

their assumption either that no lawyer would undertake

representation of medical malpractice plaintiffs under the

statutory fee limitation, or that lawyers engaged in that

practice would lower the standard of representation af-

forded medical malpractice clients because of the fee

limitation. The first of these assumptions is purely specu-

SS

A-8

lative; the second assumes a willingness on the part of

medical malpractice lawyers, as a group, to violate their

duty to their clients. We reject both assur »*tions, and find

no deprivation of the right to counsel by reason of the

statutory provision in question.

(1b) We also reject Harney’s claim that the Legisla-

ture intended to permit waivers of section 6146. We find

nothing in the legislative history of section 6146 to sug-

gest an intent to make the statute voidable. The June 12,

1975, amendment to which Harney refers in its brief,

which was deleted by a further amendment on June 27,

1975, permitted, as had two previous versions of the

statute, contingeney fee agreements containing terms

other than those preseribed by the fee schedule set forth

in subdivision (a) of seetion 6146, but provided that such

a contract “is void unless such contract is approved by the

court in whieh the aetion is pending.” In deleting this

version of subdivision (b) of the seetion the Legislature

did not make such agreements voidable, rather than void;

it is eliminated them altogether.

Harney also relies on section 6147, requiring, in subdi-

vision (a), that eertain provisions be included in contin-

geney fee agreements, and providing, in subdivision (b)

that “[f]ailure to comply with any provision of this

section renders the agreement voidable at the option of

the plaintiff, and the attorney shall thereupon be entitled

to colleet a reasonable fee.” Among the recitals required

by subdivision (a) are the following: (4) Unless the

claim is subjeet to the provisions of Section 6146, a

statement that the fee is not set by law but is negotiabie

between attorney and client. [©] (5) If the elaim is

subject to the provisions of Section 6146, a statement that

the rates set forth in that section are the maximum limits

for the contingency fee agreement, and that the attorney

A-9

and client may negotiate a lower rate.’ Contrary to

Harney’s assertion, section 6147 makes abundantly clear

the intent of the Legislature to preclude contingency fee

agreements providing for rates in excess of the limits set

forth in section 6146; it is the failure to recite this which

renders an agreement voidable uuder subdivision (b) of

section 6147.

Finally, the Legislature expressed its purpose in enact-

ing MICRA, and that purpose is a publie one, i.e., redue-

tion of medical malpractice insurance premiums costs to

ensure continued delivery of quality health eare to the

citizens of this State. “[A] law established for a publie

reason cannot be contravened by a private agreement.”

(Civ. Code, § 3513.)

We conclude there is nothing in the statutory scheme,

or its legislative history, indicating that the Legislature

intended to permit waiver of the provisions of Business

and Professions Code section 6146 by parties to a contin-

geney fee agreement in a medical malpractice case, and

moreover, that such waiver is precluded by Civil Code

see*ion 3513. (See Waters v. Bourhis (1985) 40 Cal.3d

424, 439, fn. 15 [220 Cal.Rptr. 666, 709 P.2d 469];

Shepherd v. Greene (1986) 185 Cal.App.3d 989, 992 [230

Cal.Rptr. 233].)

DECISION

The judgment is reversed. Respondents are to bear

costs on this appeal.

Arabian, J., and Croskey, .J., concurred.

~ «on. Se bd ee.

B-1

APPENDIX B

ORDER DENYING REVIEW

AFTER JUDGMENT BY THE COURT OF APPEAL

2nd Distriet, Division 3, No. BO32887 S009406

IN THE SUPREME COURT OF

THE STATE OF CALIFORNIA

IN BANK

JAY MARK FINEBERG

Vv.

HARNEY & MOORE, ETC., ET AL.

Respondents’ petition for review DENIED.

Mosk, J., is of the opinion the petition should be

granted.

LUCAS

Chief Justice

«

ro

ets Rw oe eee ee

PROOF OF SERVICE BY MAIL

STATE OF CALIFORNIA

5S .

COUNTY OF LOS ANGELES

I am a citizen of the United States and a resident of or

employed in the City ef Los Angeles, County of Los

Angeles; I am over the age of 18 years and not a party to

the within action; my business address is 1706 Maple

Avenue, Los Angeles, California 90015.

On July 21, 1989, I served the within Petition for Writ

of Certiorari in re: “Harney & Moore v. Jay Mark

Fineberg” in tue United States Supreme Court October

Term 1989, N>. , on all parties interested in said

action, by placing three copies thereof enclosed in a

sealed envelope, with postage thereon fully prepaid, in the

United States Post Office mail box at Los Angeles, Cali-

fornia, addressed as follows:

Sanders, Firestein & Janeway

Marshall C. Sanders

Thomas H. Janeway

16530 Ventura Boulevard

Room 600

Eneino, California 91436

All parties required to be served have been served.

I declare under penalty of perjury that the foregoing is

true and correct.

Executed on July 21, 1989, at Los Angeles, California.

of Nordea Neh)

J. GORDON HOOPER