Commonwealth v. Huynh

Present: 	All the Justices
COMMONWEALTH OF VIRGINIA, DEPARTMENT
OF MEDICAL ASSISTANCE SERVICES
OPINION BY
v. 	Record No. 001881 	JUSTICE LAWRENCE L. KOONTZ, JR.
June 8, 2001
VIRGINIA HUYNH, AN INFANT, BY HER
MOTHER AND NEXT FRIEND, TIEN HA, ET AL.
FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH
A. Bonwill Shockley, Judge
The dispositive issue in this appeal is whether the
authority granted by Code § 8.01-66.9 to a trial court to reduce
a lien in favor of the Commonwealth for medical services
rendered to an infant injured by the alleged negligence of her
physician permits the trial court to exclude the Commonwealth
from receiving any portion of the infant’s settlement with the
physician.
BACKGROUND
The material facts are not disputed. 	Virginia Huynh, an
infant, suffered permanent, devastating brain damage during her
birth. 	In a subsequent medical malpractice suit brought in
Huynh’s name by her mother as next friend, the physician
attending Huynh’s birth, without admitting liability, agreed to
pay $595,000 to settle the suit.
The Commonwealth, through the Department of Medical
Assistance Services, had paid for medical care received by Huynh
related to her birth injuries because she was a Medicaid

recipient. 	The Commonwealth asserted a lien against the
proceeds of the settlement under Code § 8.01-66.9. 	The amount
of the payments secured by the statutory lien was $144,957.22.
Pursuant to a further provision of Code § 8.01-66.9, Huynh
filed a motion to reduce the Commonwealth’s lien and to
apportion the recovery from her physician between herself, her
attorneys, and the Commonwealth. 	Huynh asserted that, pursuant
to Code § 2.1-127, her attorneys had sought “without success” to
negotiate a compromise of the amount of the lien with the office
of the Attorney General. 	According to the motion, Huynh
expressly sought a “waiver” of the Commonwealth’s lien.
The Commonwealth responded to the motion to reduce its lien
by contending that Huynh’s attorneys had not made a good faith
effort to negotiate a compromise. 	The Commonwealth further
contended that it was willing to consider a compromise of the
amount of its lien if Huynh’s attorneys would accept a
proportional decrease in their 40% contingency fee.
Following a hearing, the trial court entered an order
approving the amount and terms of the infant settlement pursuant
to Code § 8.01-424.1 The order further provided that the trial
court would reduce the Commonwealth’s lien on the ground that
“the equities of this tragic case, the limited funds available
1 The trial court’s approval of the amount and terms of the
settlement is not an issue in this appeal.
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to compensate Virginia Huynh, and the permanent injuries of
Virginia Huynh, require such action.” 	The order then provided
for the disbursal of the entire recovery of $595,000 by first
reducing the amount of the Commonwealth’s lien to “zero,” and
awarding $238,000 to Huynh’s attorneys (representing their full
40% contingency fee), $13,779.30 to these attorneys for
litigation expenses incurred on Huynh’s behalf, and the balance
of $343,220.70 to Huynh. 	Huynh’s portion of the recovery was
divided into two funds; one to purchase an annuity for the sole
benefit of the child, and the other to fund a “Special Needs”
trust established under the applicable law for the benefit of
disabled persons under certain provisions of the Social Security
Act. 	Although apportioning no part of the recovery to the
Commonwealth, the order expressly stated that the Commonwealth’s
claim for medical care provided to Huynh “shall not be
extinguished by the elimination of the lien.” 	We awarded the
Commonwealth this appeal.
DISCUSSION
When the Commonwealth pays for, or provides, medical
services to an indigent person necessitated by a tortious
injury, Code § 8.01-66.9 creates a lien in favor of the
Commonwealth for the amount of those services on any recovery
from the tortfeasor by the injured party. 	Pursuant to Code
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§ 2.1-127, the Attorney General may compromise the amount of the
Commonwealth’s claim.
We have previously recognized that, subject to certain
procedures and limitations, “Code § 2.1-127 has, for many years,
given authority to the Attorney General . . . to compromise,
settle, and ‘discharge’ disputes and claims involving the
interests of the Commonwealth and its institutions.” 	Rector and
Visitors of University of Virginia v. Harris, 239 Va. 119, 123,
387 S.E.2d 772, 775 (1990). 	Thus, under the authority of Code
§ 2.1-127, the Attorney General may reduce or eliminate a claim
of the Commonwealth, and the amount of the Commonwealth’s lien
created by Code § 8.01-66.9 would be reduced or eliminated
correspondingly.
Code § 8.01-66.9 also provides that “[t]he Commonwealth’s
. . . lien shall be inferior to any lien for payment of
reasonable attorney’s fees and costs, but shall be superior to
all other liens created by the provisions of this chapter and
otherwise. 	Expenses for reasonable legal fees and costs shall
be deducted from the total amount recovered.” 	Pertinent to this
appeal, the statute further provides that when the Commonwealth
asserts a lien against the recovery in a personal injury suit,
the trial court “may . . . reduce the amount of the lien[] and
apportion the recovery, whether by verdict or negotiated
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settlement, between the plaintiff, the plaintiff’s attorney, and
the Commonwealth . . . as the equities of the case may appear.”
In Commonwealth v. Smith, 239 Va. 108, 387 S.E.2d 767
(1990), decided the same day as Harris, we held that the effect
of Code § 8.01-66.9 “was to vest in the trial judge, in the
circumstances specified by the statute, the authority, otherwise
vested in the Attorney General . . . by Code § 2.1-127, to
compromise and reduce the Commonwealth’s lien . . . [in order]
to reduce expense and delay, to avoid litigation, and to promote
settlements.” 	Smith, 239 Va. at 112, 387 S.E.2d at 769. 	While
recognizing the similarity between the authority granted to the
Attorney General and that given to the trial judge, in Harris we
held that the trial judge’s authority was limited to
“ ‘reduc[ing] the amount of the lien.’ ” 	239 Va. at 125, 387
S.E.2d at 775. 	This is so because the General Assembly “did not
take the further step of authorizing the judge to ‘discharge’
the Commonwealth’s claim, although [Code] § 2.1-127 vested that
authority in the Attorney General, subject to the appropriate
approvals.” 	Harris, 239 Va. at 124, 387 S.E.2d at 775.
In the present case, the trial court properly recognized
that it lacked the authority under Code § 8.01-66.9 to reduce or
eliminate the amount of the Commonwealth’s claim which was
secured by the lien created by the statute. 	The issue raised by
the Commonwealth in this appeal is whether the trial court
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nonetheless had the authority to “apportion” to the Commonwealth
no part of the recovery against which the Commonwealth had
asserted its lien.2
“The legislative purpose of Code § 8.01-66.9 [is] to secure
to the public treasury such recompense as [may] be found, where
public funds [have] been expended for the treatment of tortious
injuries.” 	Commonwealth v. Lee, 239 Va. 114, 118, 387 S.E.2d
770, 772 (1990). 	However, no language in this statute suggests
that the Commonwealth be permitted to enforce its lien in its
entirety if in a particular case this would result in the
injured party being denied a just recovery for her injuries or
her attorneys failing to receive reasonable compensation for the
services they rendered to obtain that recovery. 	Rather, the
statute expressly directs the trial court to “apportion the
recovery, . . . as the equities of the case may appear.”
In this context, Code § 8.01-66.9 necessarily involves a
case-by-case analysis to ensure that the Commonwealth is
2 During oral argument of this appeal, the Commonwealth
asserted, as it had in the trial court, that Huynh had not “made
a good faith effort to negotiate a compromise pursuant to [Code]
§ 2.1-127” as required by Code § 8.01-66.9 and, thus, was not
entitled to petition the trial court for a reduction of the
Commonwealth’s lien. 	However, the Commonwealth did not assign
error to the trial court’s failure to deny Huynh’s motion to
reduce the lien on this ground. 	Accordingly, we will not
consider this issue. 	Rule 5:17(c); City of Winchester v.
American Woodmark Corp., 250 Va. 451, 460, 464 S.E.2d 148, 153-
54 (1995) (this Court does not consider arguments that are not
the subjects of assignments of error).
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permitted to assert its lien subject to a just recovery for the
injured party and reasonable compensation for her counsel. 	The
statute, however, provides little guidance for determining
whether, or by how much, to reduce the Commonwealth’s lien if
the recovery is inadequate to meet the just claims of all three
parties. 	The only guidance which has been given to assist the
trial court, and this Court on appeal, in determining what
factors should be considered in deciding how, or even whether,
such relief is warranted, is the general doctrine of “the
equities of the case.” 	Accordingly, the ultimate decision is a
matter of sound judicial discretion.
In the absence of express direction from the legislature,
it becomes the province and duty of this Court to provide
guidelines which will assist the trial court in exercising its
discretion to apportion a recovery between the injured party,
the injured party’s attorneys, and the Commonwealth. 	In doing
so, we look to the plain meaning of the language used by the
legislature. 	See Abbott v. Willey, 253 Va. 88, 91, 479 S.E.2d
528, 530 (1997).
As we stated in Harris, “ ‘Apportion’ is defined: 	‘To
divide and assign in just proportion . . . to allot.’ ” 	239 Va.
at 125, 387 S.E.2d at 776 (quoting Webster’s New International
Dictionary 132 (2nd ed. 1934)). 	Thus, we held that, by this
choice of a precise word, it was apparent “[t]he General
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Assembly, . . . intended that the court would have the power to
determine what portion of the recovery each of the contending
parties would ultimately receive, and to divide and distribute
the recovery accordingly.” 	Harris, 239 Va. at 125, 387 S.E.2d
at 776.
Although we did not address the issue in Harris, or in
Smith or Lee, it is equally apparent that in order to divide and
assign a just portion of the recovery between three parties with
claims to shares of the recovery, the General Assembly could not
have intended for the trial court to wholly disregard the claim
of the Commonwealth in order to benefit the injured party or her
attorneys. 	Accordingly, we hold that a trial court must assign
or allot some portion of the recovery to the Commonwealth.
We recognize, as was asserted by Huynh’s counsel during
oral argument of this appeal, that part of the philosophy
underpinning the policy of making legal services accessible by
permitting attorneys to take cases on contingency is that a fee
collected in an individual case, while appearing excessive in
the abstract, actually represents, in part, compensation for the
risk taken by counsel in undertaking contingent representation
where no recovery may be ultimately obtained. 	Certainly, in
weighing “the equities of the case,” this is one factor the
trial court may consider in determining what compensation is
reasonable for the services rendered to the plaintiff by her
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attorneys. 	Nonetheless, in undertaking a representation of a
tort plaintiff whose recovery would be subject to a statutory
lien under Code § 8.01-66.9, an attorney is presumed to be aware
that her fee may be subject to apportionment under the terms of
that statute.
Although the Commonwealth’s lien is statutorily “inferior”
to any lien for the payment of “reasonable” attorney’s fees, we
further hold that such fees are not immune from apportionment
under Code § 8.01-66.9. 	Rather, in apportioning the recovery,
the trial court is required to determine the reasonable
attorney’s fees after considering the circumstances of the
particular case, including, but not limited to, the efforts
expended in obtaining the recovery for the injured party, the
amount of the recovery, and the amount of the Commonwealth’s
lien against that recovery. 	In making this determination, the
trial court may reduce, but not eliminate, the fee provided for
in the contract for legal services between the injured party and
the attorneys in order to provide equitable portions of the
recovery to the injured party, the injured party’s attorneys,
and the Commonwealth.
Applying these principles to the facts of this case, we
hold that the trial court erred in failing to award some portion
of the recovery to the Commonwealth while providing Huynh’s
attorneys the full amount of their contractual fee. 	This is
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particularly true in light of the fact that both the
Commonwealth and Huynh’s attorneys concede that the portion of
the recovery afforded to Huynh under the trial court’s
apportionment provided her with less than complete relief, and
was inadequate to meet her expected future needs. 	Indeed, the
trial court’s use of a “Special Needs” trust to preserve Huynh’s
share of the recovery was predicated on the inescapable
conclusion that her future medical expenses would rapidly
exhaust the money awarded to her if it were not sheltered in a
manner that would allow her to continue receiving assistance
from the Commonwealth. 	Accordingly, we will reverse the
judgment of the trial court on this issue and remand this case
to the trial court to make an appropriate apportionment.3
In addition to challenging the trial court’s application of
its authority to reduce the Commonwealth’s lien pursuant to Code
§ 8.01-66.9, the Commonwealth also assigned error to the trial
judge’s failure to recuse herself from consideration of this
case. 	Nothing in the record discloses an actual conflict of
3 In light of our holding, we need not address in detail
Huynh’s assertions that the trial court did not reduce the
amount of the Commonwealth’s claim and, thus, that the
Commonwealth may ultimately recover on its claim at her death
under the provisions of the Special Needs trust. 	We simply note
that Code § 8.01-66.9 concerns the Commonwealth’s lien on the
injured party’s present recovery from the tortfeasor and not the
Commonwealth’s ability to ultimately recover on its claim in the
future.
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interest, as defined by Canon 3(E) of the Code of Judicial
Conduct, that would have required the trial judge to recuse
herself. 	Accordingly, we find no merit in this assignment of
error.
CONCLUSION
For these reasons, we will reverse the judgment of the
trial court and remand the case for further proceedings
consistent with the views expressed in this opinion.4
Reversed and remanded.
4 In light of our resolution of the main issue, we need not
address the Commonwealth’s remaining assignment of error.
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