Network Firm News

Wednesday, November 14, 2012

Ross Todd - The Litigation Daily
After four years of court battles and lobbying in New Hampshire, Nixon Peabody lawyers are set to reap more than $20 million in contingency fees for their role helping medical malpractice policyholders in the state secure $110 million in excess premiums paid to a quasi-governmental insurance fund. In litigation that involved eight discrete actions in various legal and administrative venues, the firm's lawyers succeeded in blocking New Hampshire lawmakers from transferring the excess payments to the state's coffers and in winning the funds back for policyholders.

Last month Merrimack County Superior Court Justice Richard McNamara signed off on a plan to allocate an initial $85 million to a class of about 6,000 healthcare providers. An additional $25 million is being held back to cover potential tax liabilities. On Tuesday, lawyers at Nixon Peabody learned that there were no objections to the Judge's ruling, meaning the distribution of funds will move forward.

"We had no idea when we set out that this odyssey would take four years," said Nixon Peabody's W. Scott O'Connell, who led the effort with partners Kevin Fitzgerald and Gordon MacDonald. As of July, Nixon Peabody had invested more than $4.6 million in firm time to the matters, according to the firm's accounting.

The litigation got underway after then-governor John Lynch announced in early 2009 that he intended to take $110 million of surplus funds from the New Hampshire Medical Malpractice Joint Underwriting Association to help close the state's budget gap. The New Hampshire Legislature then enacted House Bill 2, ordering the $110 million transfer. Lynch signed the bill into law in June 2009 and the transfer was set to occur in July.

Nixon Peabody's Fitzgerald said watching the bill move through the legislature was like "being able to watch a plane crash in progress." The firm had by then contacted existing healthcare clients and agreed to mount a legal challenge to the bill for a contingency fee of 25 percent of any portion of the $110 million returned to policyholders. Given the chance that the firm could block the transfer without winning the funds' release, policyholders agreed to pay the firm a little over $1 million up front. Ultimately, 316 policyholders signed agreements with the firm under these terms.

In June 2009, Nixon Peabody filed a putative class action against the JUA in Belknap County Superior Court, seeking to block the transfer. Less than two months later, Belknap County Superior Court Justice Kathleen McGuire declared the Act an unconstitutional taking under the New Hampshire Constitution and the Fifth and Fourteenth Amendments of the U.S. Constitution. The New Hampshire Supreme Court affirmed McGuire's ruling in January 2010, finding that the legislation unreasonably impaired policyholders' contract rights under the state constitution.

Although blocking the transfer was a significant win, it was just the first in a series of clashes between Nixon Peabody and the firm's adversaries in state government. For a blow-by-blow of what the firm did in the interim--from demanding an accounting from JUA to challenging potential rule changes by the state's department of insurance in administrative proceedings--check out this affidavit submitted by O'Connell over the summer. The ultimate resolution approved by Justice McNamara came after the state legislature--which changed from Democratic to Republican control during the pendency of the litigation--agreed to release the $85 million in excess premiums for the policyholder class.

In signing off on the resolution last month, Justice McNamara wrote that the case "required legal knowledge of insurance law, constitutional law, contract law, health law, standing requirements, equitable remedies, and appellate work." The judge also noted that Nixon's lawyers had succeeded "to the greatest extent possible; 100 percent recovery." Besides the $85 million set to be disbursed under the plan, an additional $25 million is being withheld for payment of possible federal tax obligations. Livingston, however, says he's hopeful that the pending tax matter will wrap up in the coming months and "significant" funds will be released to the policyholders. The firm is also due 25 of any recovery from the withheld tax funds as well, putting the firm's total potential contingency fee between $21.25 million and $27.5 million.

"We look like geniuses today, but the story would be quite different if it ended differently," Fitzgerald said Tuesday. O'Connell added that the JUA was set up to cover New Hampshire medical professionals with high risk profiles and the excess payments go "back directly to those who funded every dime of it--to help that population."

We reached out to the JUA's outside counsel, Daniel Mullen of Ransmeier & Spellman, but didn't immediately hear back.

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