Estate of Zaki Jameel Tams v. Auto Club Insurance Association, 332558

Background

Decedent Zaki Tams’s representative (plaintiff) sued Auto Club Insurance Association (Auto Club) over PIP/no-fault benefits; attorney Cochran represented Tams under a contingency agreement.
Auto Club paid certain no-fault benefits to a nonparty medical-payor, HAP, which had its own counsel and intervened/separately recovered benefits.
Cochran sought to collect a contingency fee from the funds Auto Club paid to HAP, asserting an attorney charging lien against those recovered benefits.
Auto Club argued Cochran could not collect fees from monies paid to a separately represented nonparty with whom Cochran had no attorney-client contract.
The trial court awarded fees to Cochran from the payments to HAP; the Court of Appeals reversed and remanded for entry of judgment for Auto Club.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether an attorney may recover fees from funds paid by a defendant to a nonparty medical provider (HAP) via a charging lien	Cochran: contingency agreement with Tams gives right to fee from funds recovered incident to case, including amounts paid to providers	Auto Club: Cochran had no contractual/attorney-client relationship with HAP; American rule/no statute permits shifting fees from a third-party payee	Court: No — attorney cannot recover fees from monies paid to a separately represented nonparty absent contract/statute; charging lien not enforceable against HAP funds here
Applicability of the common-fund exception to allow fee recovery from third-party payees under no-fault act	Cochran: equitable/common-fund principles permit fee extraction from funds benefitting others	Auto Club: common-fund exception does not apply in these no-fault circumstances and no common fund was created	Court: Common-fund exception does not justify fee award here; Miller’s partial reversal forecloses that route
Effect of notice or representation by the medical provider on charging lien enforceability	Cochran: if provider had notice, lien could be enforced against funds	Auto Club: when provider is represented/hired counsel or objects, plaintiff’s counsel cannot take provider’s recovery	Court: Charging lien enforceable against third parties only when third party had notice and did not retain separate counsel; here HAP had counsel, so Cochran not entitled to fee
Whether Michigan’s American Rule and no-fault statutory scheme permit shifting attorney fees to other payees	Cochran: contingency contract should control fee source	Auto Club: Michigan follows American Rule; no statute permits shifting fees under no-fault act	Court: American Rule controls; no statutory/court-rule authority allowed awarding Cochran fees from payments to HAP

Key Cases Cited

Haliw v Sterling Heights, 471 Mich 700 (Michigan Supreme Court) (reaffirming American rule that courts generally may not shift attorney fees without statutory authority)
Plunkett & Cooney, PC v Capitol Bancorp Ltd, 212 Mich App 325 (Mich. Ct. App.) (attorney payment entitlement flows from contract establishing attorney-client relationship)
Dreiband v Candler, 166 Mich 49 (Mich. 1911) (recognizing charging lien as protection for attorney’s contractual right to fees)
Miller v Citizens Ins Co, 288 Mich App 424 (Mich. Ct. App.) (panel applied common-fund rationale to no-fault fee dispute)
Miller v Citizens Ins Co, 490 Mich 904 (Mich. 2011) (Michigan Supreme Court reversed in part; held no common-fund award under no-fault act; insured responsible for counsel fees)
Garcia v Butterworth Hosp, 226 Mich App 254 (Mich. Ct. App.) (rejected Starkey’s equitable/common-fund approach where no statute or rule authorized fee award)
Aetna Cas. & Sur. Co. v Starkey, 116 Mich App 640 (Mich. Ct. App.) (recognized attorney’s charging lien against PIP benefits in that declaratory-judgment context)
Nemeth v Abonmarche Dev., Inc., 457 Mich 16 (Michigan Supreme Court) (describing the common-fund exception to the American rule)