QUESTION PRESENTED

Whether the Legal Services Corporation (LSC) Act or LSC’s regulations prohibit clauses in medical-legal partnership (MLP) contracts between recipients and health care providers that limit recipients from suing the MLP health care partner on behalf of clients.

BRIEF ANSWER

No.  Neither the LSC Act nor LSC’s regulations prohibit such restrictive clauses.

BACKGROUND

Adverse social circumstances such as domestic violence, hunger, and poor housing conditions negatively affect the health of low-income Americans.  Many health-related problems involve legal issues.  MLPs embed attorneys at a healthcare facility where the attorneys work directly with a health care team.  Attorneys train clinicians to screen for and identify patients with unmet legal needs and refer the patients to on-site attorneys in the partnership.  Attorneys employ their legal expertise to resolve specific problems for individual patients through consultations, brief advice, and extended legal representation.  This allows the health care system to “disrupt the cycle of returning people to the unhealthy conditions that would otherwise bring them right back to the clinic or hospital.”  Nat’l Ctr. for Medical-Legal P’ship, https://medical-legalpartnership.org (click on “The Need”) (last accessed October 25, 2018).  There are more than 330 MLPs operating in 46 states involving over 146 legal aid programs and 53 law schools.  Id. (click on “The Partnerships”).   

Arrangements for an MLP are typically made by a legal services provider and a health care provider.  The details of those arrangements, generally memorialized in a written agreement, reflect the judgments of the parties as to what will benefit their organizations and the clients and patients they serve. 

Some MLP contracts contain restrictive clauses providing the health care partner assurance that it will not be sued by its MLP counterpart on behalf of a shared client-patient.  Restrictive clauses may take many forms, including the following examples:

• [Recipient] will not represent any client in any future matter involving [health care partner] as an adverse party relating to the provision of health-related services.
• [Recipient] will not handle or be involved in any way in medical malpractice cases or lawsuits against [health care partner] or other cases in which the client is adverse to [health care partner], or use any information obtained from work with the MLP in a medical malpractice case or other case adverse to [health care partner].
• [Recipient] will not represent any client in any future matter involving [health care partner] as an adverse party resulting from medical malpractice.
• [Recipient] will not represent any client involving [health care partner] as an adverse party which relates to the provision of health-related services by [health care partner].

APPLICABLE LAW

All LSC recipients face the challenge of determining what clients and cases to take, given that legal needs in every service area far outstrip available resources.  The LSC Act and LSC’s regulations give recipients the responsibility for setting case priorities.  The LSC Act requires that “recipients, consistent with goals established by the Corporation, adopt procedures for determining and implementing priorities for the provision of such assistance, taking into account the relative needs of eligible clients for such assistance . . . .”  42 U.S.C.A. § 2996f (a)(2)(C).  An LSC regulation directs recipients to consider eleven factors when establishing case priorities, including: 

(3) The population of eligible clients in the geographic areas served by the recipient, including all significant segments of that population with special legal problems or special difficulties of access to legal services; . . . (5) The availability of another source of free or low-cost legal assistance in a particular category of cases or matters; (6) The availability of other sources of training, support, and outreach services; (7) The relative importance of particular legal problems to the individual clients of the recipient; (8) The susceptibility of particular problems to solution through legal processes; [and] (9) Whether legal efforts by the recipient will complement other efforts to solve particular problems in the area served . . . .

45 C.F.R. § 1620.3(c) (“Priorities in Use of Resources”).  By establishing case priorities, recipients effectively decide to deny service to potential clients with cases falling outside of the prioritized categories.  Consistent with these provisions, LSC does not require recipients to take certain categories of cases, leaving it to recipients to set case priorities.

Restrictive clauses in MLP agreements, such as those quoted above, effectively prioritize the cases referred by the health provider partner over those cases subject to the restrictive clauses.  Those clauses preclude recipients from representing clients adverse to the grantee’s MLP partner in specified categories of cases – those relating to “health-related services” or in “a medical malpractice case or other case.”  LSC regularly reviews the case priorities set by its recipients and is not aware of any recipients that have identified medical malpractice as a priority.  This is because, at least in part, private attorneys are typically willing to take medical malpractice cases having a reasonable likelihood of success on a contingent-fee basis.  Part 1609 of LSC’s regulations—Fee-Generating Cases—is designed to “ensure that recipients do not use scarce legal services resources when private attorneys are available to provide effective representation.”  45 C.F.R. § 1609.1(a).  Other cases related to health services, such as payment disputes, fall within the priorities (such as consumer debt) established by some, but not all, recipients.

ANALYSIS

Neither the LSC Act nor the LSC regulations prohibit the types of restrictive clauses quoted above in MLP agreements.  To the contrary, the LSC Act and LSC regulations give recipients the responsibility for setting case priorities.  See 42 U.S.C. § 2996f(a)(2)(C); 45 C.F.R. § 1620.3(c).  Insisting on a restrictive clause in an MLP agreement is the health care partner’s prerogative, and there is nothing improper in its doing so.  Where a potential health care partner proposes such a clause, a recipient must make a case priority decision as to what is more valuable for its client community—benefits created by the MLP or benefits flowing from potential cases in which recipients might represent clients against the health care provider.  LSC has no legal basis for advising grantees to accept or reject such clauses.

Moreover, we are not aware of any other statute, regulation, or ethical rule that would render the clauses in question illegal or improper.  The American Bar Association Model Rules of Professional Conduct do not prohibit these types of clauses, including the Model Rules governing Conflicts of Interest (Rules 1.7 & 1.8), Respect for Rights of Third Persons (Rule 4.4), Professional Independence of a Lawyer (Rule 5.4), and Restrictions on Right to Practice (Rule 5.6).

LSC recognizes that MLPs are highly effective vehicles for providing collaborative health and legal services and encourages the creation and maintenance of them.  To the extent a restrictive clause is included in a proposed MLP agreement, recipients should understand what implications the clause may have on potential clients before entering into the agreement.  Recipients should carefully review MLP agreements for the types of restrictive clauses discussed above and ensure that its staff members are aware of the restriction to prevent the recipient from accepting a client in violation of the MLP contract terms.

RONALD S. FLAGG

Vice President for Legal Affairs and General Counsel