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Last Post 07 Jul 2013 02:45 PM by  ecrowley
R-12-0032 PETITION TO AMEND ETHICAL RULE 1.15, RULE 42, RULES OF THE ARIZONA SUPREME COURT.
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gtrachtenberg
Posts:

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17 Aug 2012 03:31 PM
    R-12-0032

    Petition to Amend Rule 42, ER 1.15, Rules of the Supreme Court

    Would provide a mechanism for dealing with third party claims against property in the lawyer’s possession belonging to a client (this Petition is an alternative to Petition No. R-11-0024)

    Petitioner:
    Arizona Association for Justice, by:

    Thomas Ryan, Esq. (007724)
    LAW OFFICE OF THOMAS RYAN
    Post Office Box 6430
    Chandler, Arizona 85246
    (480) 963-3333, Fax: (480) (726)-1645
    tom@thomasryanlaw.com

    David L. Abney, Esq. (009001)
    KNAPP & ROBERTS, P.C.
    8777 North Gainey Center Drive, Suite 181
    Scottsdale, Arizona 85258
    (480) 991-7677 (no fax number)
    abney@krattorneys.com

    Geoffrey M. Trachtenberg (019338)
    LEVENBAUM  COHEN  TRACHTENBERG
    362 North Third Avenue
    Phoenix, Arizona 85003
    (602) 271-0183, Fax: (602) 271-4018
    gt@lctlaw.com


    Filed: August 17, 2012

    Comments due May 21, 2013.

    ADOPTED as modified, effective January 1, 2014.
    Attachments
    petergorski
    Posts:

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    08 Sep 2012 08:38 PM
    Peter M. Gorski
    Law Offices of Peter Gorski, PLC
    40 North Central Avenue, Suite 1400
    Phoenix, Arizona 85004
    480-730-1777
    480-305-5974
    pgorski@petergorskilaw.com
    Arizona State Bar No. 009102

    Dear Justices,

    I have read the proposed change to ER 1.15 submitted by the Arizona Association for Justice and am writing in support of Petition R-12-0032.

    The current state of ER 1.15, as written and interpreted:

    (a) creates an ethical-equivalent to a prejudgment attachment without any of the statutory or constitutional protections;

    (b) puts attorneys in a conflict-riddled position of owing dueling ethical and legal duties to clients and third-parties (which are almost always adverse to one another), e.g., Hotel Emps. & Rest. Emps. Int'l Union Welfare Fund v. Gentner, 50 F.3d 719, 721 (9th Cir. 1995) (holding that the imposition of a "dual service" to a client and third party lien claimant violates ethical rules and put attorneys in an "untenable position" of representing dueling interests that are typically adverse); and

    (c) makes clients--particularly clients under financial distress--vulnerable to illegitimate claims.

    The practical and real-world effect of ER 1.15 is that it freezes client funds, but it does so without any established or preliminary legal process. In fact, the ethical rule is triggered merely by "claim[ed] interests" of third-parties, ER 1.15(e), and is broadly applied to all "matured legal or equitable claims." ER 1.15, Comment No. 4. This results in inexorable application of the rule in virtually every setting since no one knows the true definition of a "matured legal or equitable claim" and the Comment warns against attorneys "unilaterally arbitrating" these matters.

    This puts attorneys at odds with their clients, to whom they owe fiduciary duties. The situation is worsened, however, by the Rule and Comment's suggestion that the burden is on these attorneys and their clients to file suit to litigate the existence or scope of alleged third-party claims. The fact is, most injured clients are under financial duress -- after all, tort recoveries only aim to put the victim back to where they were before the tort. This leaves injured clients vulnerable to illegitimate claims against their tort recoveries, often forcing them to make the impossible choice between expensive and time-consuming litigation versus extortive nuisance payments to unscrupulous third-party claimants.

    I have read the examples of illegitimate claims in the Petition and those mirror the types of circumstances I now face in my personal injury practice. This is a problem that has increased substantially over the last 5 to 10 years.

    The proposed change in R-12-0032 strikes a reasonable and just balance between protecting legitimate third-party claims, ensuring conflict-free representation and protecting the public from improper third-party claimants. It should be adopted in full.

    Respectfully,
    Peter M. Gorski
    SSiesco
    Posts:

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    09 Sep 2012 03:17 PM
    Sara Siesco
    Jones|Raczkowski, PC
    2141 East Camelback, Suite 100
    Phoenix, Arizona 85016
    Phone: (602) 840-8787 Ext. 122
    Fax: (602) 840-0425
    E-Mail: ssiesco@azpremiseslaw.com
    Bar Number: 027803

    Dear Justices,

    I am writing in support of Petition R-12-0032.

    The current state of ER 1.15 (1) creates an ethical-equivalent to a prejudgment attachment without any statutory or constitutional protections; (2) places attorneys in a conflicted position owing ethical and legal duties to both clients and third-parties whom may be adverse to one another, e.g., Hotel Emps. & Rest. Emps. Int'l Union Welfare Fund v. Gentner, 50 F.3d 719, 721 (9th Cir. 1995) (holding that the imposition of a "dual service" to a client and third party lien claimant violates ethical rules and put attorneys in an "untenable position" of representing dueling interests that are typically adverse); and (3) exposes clients, particularly clients under financial distress, to illegitimate claims.

    ER 1.15 freezes client funds without any established or preliminary legal process merely triggered by "claim[ed] interests" of third-parties. ER 1.15(e),applies broadly to all "matured legal or equitable claims." ER 1.15, Comment No. 4. This results in an inexorable application of the rule in virtually every setting since no one knows the true definition of a "matured legal or equitable claim" and the Comment warns against attorneys "unilaterally arbitrating" these matters.

    This puts attorneys at odds with the clients to whom they owe fiduciary duties. The situation is worsened by the Rule and Comment's suggestion that the burden is on both attorney and client to litigate the existence or scope of alleged third-party claims. Personal injury clients are often under financial duress. Tort recoveries, after all, only aim to put the victim back to where they were before the tort. These clients are left vulnerable to illegitimate claims against their tort recoveries forcing them to make the impossible choice between expensive and time-consuming litigation versus extortive nuisance payments to unscrupulous third-party claimants.

    The proposed change in R-12-0032 strikes a reasonable and just balance between protecting legitimate third-party claims, ensuring conflict-free representation and protecting the public from improper third-party claimants. It should be adopted in full.

    /s/ Sara A. Siesco
    alangerman
    Posts:

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    09 Sep 2012 05:12 PM
    Amy Langerman (Az Bar No.: 009174)
    Law Offices of Amy Langerman
    951 Coronado Avenue
    Coronado, CA 92118
    619-437-4579
    619-437-4580 (fax)
    alangermanlaw@aol.com

    Dear Justices:

    I write in support of the proposed changes to E.R. 1.15 authored by Mr. Trachtenberg and Mr. Abney. I echo many of the sentiments raised by the attorneys who have already commented on this proposed change. I write to add a few additional thoughts for consideration.

    For the first 20 years of my career, I handled personal injury, wrongful death, and employment litigation, much of which included claims for health care treatment and ended up resulting in liens by doctors, insurers, and others, seeking to take the proceeds that I had finally recouped, often after years of battle, for a seriously injured victim of tortious misconduct. Those “takers” seemed to become more and more cavalier as the years went by and as insurance companies whittled away at what they were paid under health or other insurance for the care they provided. They wanted more. They had been paid up front, and now wanted more.

    None of these health care providers were governed by the ethical rules that I had to follow. They could say or do pretty much whatever they wanted with impunity. They often would quote to me their view of MY ethical obligations, telling me that I COULD NOT distribute one penny of whatever it was they were holding hostage until and unless my client incurred more costs, more time, more heartache and more trauma from the system that mandated that I hold THEIR money until I filed a lawsuit and I sued to prove that someone’s lien was bogus. I had never before heard of or seen a system that allowed people claiming they were owed money to sit back and do nothing to either prove up their claim or seek a resolution to what they were owed. They got a free ride. They would threaten with the power they wielded. They knew that regardless of how specious their claim was, they could extort something out of the injured and infirm, simply by their bullying tactics.

    I was thrilled to see the original proposal that was submitted to remedy this problem and wrote in support of it. I was disheartened to see the State Bar, through its committee structure, jettison a fair and balanced approach to the solution and one that was properly filed under Rule 28. Instead of allowing the Rule 28 process to complete itself, the State Bar decided to veto the proposition, not because it was wrong, and not because it was unfair, but because it could and because its corporate attorney members and their clients benefit from delay. They threw this back to the committee process that has largely never fairly represented both sides. In the years when I chaired the Amicus Curiae Committee of the Arizona Trial Lawyers Association (1984-2004), I also sat on the Civil Practice Committee (at least for a while), where I saw how the committee structure worked. The committee was not bipartisan nor did it ever attempt to do what was fair or balanced. No matter how many judges or commercial lawyers would join with the underrepresented plaintiff bar, the defense could call out members who showed up only when needed to vote and jettison a proposal. After I successfully used the Rule 28 process to present the rule proposed by a bipartisan subcommittee to amend Rule 35 but that had been vetoed in a party line vote in the committee as a whole, I was “uninvited” on the committee. I relay this experience because once again, the forces that control the State Bar have put a hold on the previous rule to submit one that does NOT resolve the problem and makes the matter worse. It does NOT seek to protect BOTH sides, which is what the State Bar should be doing. Thus, Mr. Abney and Mr. Trachtenberg are once again proposing a solution that protects valid lien holders, is consistent with procedures and rules already in place for “pre-judgment attachments”, and places the onus of proving ownership to funds on the party disputing the matter.

    I support this Proposed Amendment and I support the process of Rule 28. I oppose further efforts to deny the Rule 28 process by relegating rules to committees that DON’T represent all sides of the bar and do NOT present a fair process “for the little guy”. Rule 28 affords those who are interested an opportunity to speak and seeks to place the responsibility of a fair process for ALL parties in the judicial system back in the Supreme Court, where it should be.

    Respectfully, the rule proposed by Mr. Tractenberg and Mr. Abney should be neither controversial nor controverted. It is balanced. It protects the rights of lienholders, even those who are acting illegally, immorally, and improperly by trying to extort money. It gives them the opportunity to prove up their claim and to be paid, IF they are entitled to. But, it no longer puts victims at the mercy of those who used the former process to bully and abuse.

    In conclusion, the proposed rule promotes equity and should be adopted in full.


    Sincerely,
    Amy Langerman
    JeffOstreicher
    Posts:

    --
    10 Sep 2012 03:53 PM
    Jeffrey I. Ostreicher, Esq.
    Jeffrey I. Ostreicher, PC
    333 W. Roosevelt St.
    Phoenix, Arizona 85003
    602-495-9726
    602-495-9706 (fax)
    jeff@jiolaw.com
    Bar No. 005271

    Dear Justices,

    I have read the proposed change to ER 1.15 submitted by the Arizona Association for Justice and am writing in support of Petition R-12-0032.

    The current state of ER 1.15, as written and interpreted:

    (a) creates an ethical-equivalent to a prejudgment attachment without any of the statutory or constitutional protections;

    (b) puts attorneys in a conflict-riddled position of owing dueling ethical and legal duties to clients and third-parties (which are almost always adverse to one another), e.g., Hotel Emps. & Rest. Emps. Int'l Union Welfare Fund v. Gentner, 50 F.3d 719, 721 (9th Cir. 1995) (holding that the imposition of a "dual service" to a client and third party lien claimant violates ethical rules and put attorneys in an "untenable position" of representing dueling interests that are typically adverse); and

    (c) makes clients--particularly clients under financial distress--vulnerable to illegitimate claims.

    The practical and real-world effect of ER 1.15 is that it freezes client funds, but it does so without any established or preliminary legal process.  In fact, the ethical rule is triggered merely by "claim[ed] interests" of third-parties, ER 1.15(e), and is broadly applied to all "matured legal or equitable claims."  ER 1.15, Comment No. 4.  This results in inexorable application of the rule in virtually every setting since no one knows the true definition of a "matured legal or equitable claim" and the Comment warns against attorneys "unilaterally arbitrating" these matters.

    This puts attorneys at odds with their clients, to whom they owe fiduciary duties.  The situation is worsened, however, by the Rule and Comment's suggestion that the burden is on these attorneys and their clients to file suit to litigate the existence or scope of alleged third-party claims.  The fact is, most injured clients are under financial duress -- after all, tort recoveries only aim to put the victim back to where they were before the tort.  This leaves injured clients vulnerable to illegitimate claims against their tort recoveries, often forcing them to make the impossible choice between expensive and time-consuming litigation versus extortive nuisance payments to unscrupulous third-party claimants.

    I have read the examples of illegitimate claims in the Petition and those mirror the types of circumstances I now face in my personal injury practice.  This is a problem that has increased substantially over the last 5 to 10 years.

    The proposed change in R-12-0032 strikes a reasonable and just balance between protecting legitimate third-party claims, ensuring conflict-free representation and protecting the public from improper third-party claimants.  It should be adopted in full.

    /s/ Jeffrey I. Ostreicher
    sreed
    Posts:

    --
    10 Sep 2012 06:32 PM
    Steven L. Reed
    O’Steen & Harrison, PLC
    1757 E Baseline Road, Ste 111
    Gilbert, AZ 85233
    Phone: 480-644-1558
    Fax: 480-644-1695
    sreed@vanosteen.com
    Bar Number 006951

    Dear Justices,

    I have read the proposed change to ER 1.15 submitted by the Arizona Association for Justice and am writing in support of Petition R-12-0032.

    The current state of ER 1.15, as written and interpreted:

    (a) creates an ethical-equivalent to a prejudgment attachment without any of the statutory or constitutional protections;

    (b) puts attorneys in a conflict-riddled position of owing dueling ethical and legal duties to clients and third-parties (which are almost always adverse to one another), e.g., Hotel Emps. & Rest. Emps. Int'l Union Welfare Fund v. Gentner, 50 F.3d 719, 721 (9th Cir. 1995) (holding that the imposition of a "dual service" to a client and third party lien claimant violates ethical rules and put attorneys in an "untenable position" of representing dueling interests that are typically adverse); and

    (c) makes clients--particularly clients under financial distress--vulnerable to illegitimate claims.

    The practical and real-world effect of ER 1.15 is that it freezes client funds, but it does so without any established or preliminary legal process. In fact, the ethical rule is triggered merely by "claim[ed] interests" of third-parties, ER 1.15(e), and is broadly applied to all "matured legal or equitable claims." ER 1.15, Comment No. 4. This results in inexorable application of the rule in virtually every setting since no one knows the true definition of a "matured legal or equitable claim" and the Comment warns against attorneys "unilaterally arbitrating" these matters.

    This puts attorneys at odds with their clients, to whom they owe fiduciary duties. The situation is worsened, however, by the Rule and Comment's suggestion that the burden is on these attorneys and their clients to file suit to litigate the existence or scope of alleged third-party claims. The fact is, most injured clients are under financial duress -- after all, tort recoveries only aim to put the victim back to where they were before the tort. This leaves injured clients vulnerable to illegitimate claims against their tort recoveries, often forcing them to make the impossible choice between expensive and time-consuming litigation versus extortive nuisance payments to unscrupulous third-party claimants.

    I have read the examples of illegitimate claims in the Petition and those mirror the types of circumstances I now face in my personal injury practice. This is a problem that has increased substantially over the last 5 to 10 years.

    The proposed change in R-12-0032 strikes a reasonable and just balance between protecting legitimate third-party claims, ensuring conflict-free representation and protecting the public from improper third-party claimants. It should be adopted in full.


    /s/ Steven L. Reed
    ilyalaw
    Posts:

    --
    10 Sep 2012 07:39 PM
    Ilya Elena Lerma, Esq.
    Tidmore Law Offices, LLP
    301 E. Bethany Home Road, Suite B140
    Phoenix, AZ 85012
    (602) 264 1973 (phone)
    (602) 230-7377 (fax)
    ilyalaw@hotmail.com
    Bar No. 019573

    Hon. Justices of the Supreme Court,

    The proposed amendment to E.R. 1.15 authored by Mr. Trachtenberg and Mr. Abney provides clear and necessary guidance to attorneys facing treacherous ethical waters. It further serves to protect the rights of injured parties against unverified and tenuous claims asserted by third parties. I vehemently support the adoption of this proposed language.

    Unfortunately, it is not at all uncommon for third-party providers to assert unsubstantiated or unrelated claims against anticipated personal injury recovery/proceeds. Often, this is done in an unscrupulous attempt to force recovery, compromise or payment where none exists. Other times, it is an ill-prepared (often large, corporate) entity that will arbitrarily and egregiously lay claim to substantial proceeds of recovery because it failed to examine the treatment record to verify validity of the claim. In either case, the client and the attorney are forced to contend with overreaching and wholly unsubstantiated claims to their detriment. Indeed, there is no meaningful prerequisite for the assertion of the claim that triggers the ethical obligation to guard funds for an entity that is NOT the client. The lawyer must essentially act in the interest of the claimed lienholder despite the fact this places the lawyer in direct conflict with the client.

    This matter requires the urgent attention of the Court as it faces the personal injury litigator on a daily basis. The proposed language offers concise guidance in an area that is becoming increasingly problematic for the personal injury practitioner. The proposed amendment does nothing to hinder the legitimate claims of medical providers and further serves to eliminate the conflict of interest specter looming when the attorney is forced to act against the interest of the client. The proposed amendment should be adopted in full and as urgently as possible.

    Respectfully,

    /s/ Ilya E. Lerma
    william.chick@azbar.org
    Posts:

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    11 Sep 2012 12:54 AM
    William S. Chick
    4500 N. 32nd Street, Suite 201C
    Phoenix, AZ 85018
    PHONE (602)954-7975
    FAX (602)954-4629
    william.chick@azbar.org
    State Bar # 003387








    Dear Justices,

    I am writing in support of Petition R-12-0032.

    The current state of ER 1.15 (1) creates an ethical-equivalent to a prejudgment attachment without any statutory or constitutional protections; (2) places attorneys in a conflicted position owing ethical and legal duties to both clients and third-parties whom may be adverse to one another, e.g., Hotel Emps. & Rest. Emps. Int'l Union Welfare Fund v. Gentner, 50 F.3d 719, 721 (9th Cir. 1995) (holding that the imposition of a "dual service" to a client and third party lien claimant violates ethical rules and put attorneys in an "untenable position" of representing dueling interests that are typically adverse); and (3) exposes clients, particularly clients under financial distress, to illegitimate claims.

    ER 1.15 freezes client funds without any established or preliminary legal process merely triggered by "claim[ed] interests" of third-parties. ER 1.15(e),applies broadly to all "matured legal or equitable claims." ER 1.15, Comment No. 4. This results in an inexorable application of the rule in virtually every setting since no one knows the true definition of a "matured legal or equitable claim" and the Comment warns against attorneys "unilaterally arbitrating" these matters.

    This puts attorneys at odds with the clients to whom they owe fiduciary duties. The situation is worsened by the Rule and Comment's suggestion that the burden is on both attorney and client to litigate the existence or scope of alleged third-party claims. Personal injury clients are often under financial duress. Tort recoveries, after all, only aim to put the victim back to where they were before the tort. These clients are left vulnerable to illegitimate claims against their tort recoveries forcing them to make the impossible choice between expensive and time-consuming litigation versus extortive nuisance payments to unscrupulous third-party claimants.

    The proposed change in R-12-0032 strikes a reasonable and just balance between protecting legitimate third-party claims, ensuring conflict-free representation and protecting the public from improper third-party claimants. It should be adopted in full.
    cole@cds-law.com
    Posts:

    --
    11 Sep 2012 09:54 AM

    Cole D. Sorenson
    The Law Office of Cole D. Sorenson PLLC
    1302 W. Camelback Road
    Phoenix, AZ 85013
    602-535-1201 (fax)
    Cole@cds-law.com
    013097

    Dear Justices,

    I have read the proposed change to ER 1.15 submitted by the Arizona Association for Justice and am writing in support of Petition R-12-0032.

    The current state of ER 1.15, as written and interpreted:

    (a) creates an ethical-equivalent to a prejudgment attachment without any of the statutory or constitutional protections;

    (b) puts attorneys in a conflict-riddled position of owing dueling ethical and legal duties to clients and third-parties (which are almost always adverse to one another), e.g., Hotel Emps. & Rest. Emps. Int'l Union Welfare Fund v. Gentner, 50 F.3d 719, 721 (9th Cir. 1995) (holding that the imposition of a "dual service" to a client and third party lien claimant violates ethical rules and put attorneys in an "untenable position" of representing dueling interests that are typically adverse); and

    (c) makes clients--particularly clients under financial distress--vulnerable to illegitimate claims.

    The practical and real-world effect of ER 1.15 is that it freezes client funds, but it does so without any established or preliminary legal process. In fact, the ethical rule is triggered merely by "claim[ed] interests" of third-parties, ER 1.15(e), and is broadly applied to all "matured legal or equitable claims." ER 1.15, Comment No. 4. This results in inexorable application of the rule in virtually every setting since no one knows the true definition of a "matured legal or equitable claim" and the Comment warns against attorneys "unilaterally arbitrating" these matters.

    This puts attorneys at odds with their clients, to whom they owe fiduciary duties. The situation is worsened, however, by the Rule and Comment's suggestion that the burden is on these attorneys and their clients to file suit to litigate the existence or scope of alleged third-party claims. The fact is, most injured clients are under financial duress -- after all, tort recoveries only aim to put the victim back to where they were before the tort. This leaves injured clients vulnerable to illegitimate claims against their tort recoveries, often forcing them to make the impossible choice between expensive and time-consuming litigation versus extortive nuisance payments to unscrupulous third-party claimants.

    I have read the examples of illegitimate claims in the Petition and those mirror the types of circumstances I now face in my personal injury practice. This is a problem that has increased substantially over the last 5 to 10 years.

    The proposed change in R-12-0032 strikes a reasonable and just balance between protecting legitimate third-party claims, ensuring conflict-free representation and protecting the public from improper third-party claimants. It should be adopted in full.


    /s/ Cole D. Sorenson
    ecrowley
    Posts:

    --
    11 Sep 2012 12:27 PM
    Dear Justices,

    I have read the proposed change to ER 1.15 submitted by the Arizona Association for Justice and am writing in support of Petition R-12-0032.

    The current state of ER 1.15, as written and interpreted puts me in the conflict-riddled position of owing dueling ethical and legal duties to my client and third-parties. These duties are almost always adverse to one another and violate ethical rules by putting me in the untenable position of representing dueling interests.

    The practical and real-world effect of ER 1.15 is that it freezes client funds without any legal process. This ethical rule as currently written is triggered by "claim[ed] interests" of third-parties, ER 1.15(e), and is broadly applied to all "matured legal or equitable claims." I do not even know what the true definition of a "matured legal or equitable claim" is and the Comment warns against me "unilaterally arbitrating" these matters.

    This puts me at odds with my client to whom I owe a fiduciary duty. The situation is worsened by the Rule and Comment's suggestion that the burden is on me and my client to file suit to litigate the existence or scope of these alleged third-party claims. The fact is, most injured clients are under financial duress and this leaves them vulnerable to illegitimate claims against their tort recoveries. It forces my client to make the choice between expensive and time-consuming litigation versus extortive nuisance payments to unscrupulous third-party claimants.

    The proposed change in R-12-0032 strikes a reasonable and just balance between protecting legitimate third-party claims, ensuring conflict-free representation and protecting the public from improper third-party claimants. It should be adopted in full.

    Attorney Joseph Silence Bar#012351
    4727 E. Bell Rd. Suite 45 PMB 227
    Phoenix, AZ 85032
    joesilence@gmail.com
    Phone 602-243-9900
    Fax 602-482-0562

    jojenemills
    Posts:

    --
    11 Sep 2012 03:21 PM
    JoJene Mills
    Law Office of JoJene Mills, P.C.
    1670 East River Road, Suite 270
    Tucson, Arizona 85718
    (520) 529-3200
    (520) 529-3113 (fax)
    jmills@jmillslaw.com
    Arizona State Bar No. 10372

    I am writing in support of the R-12-0032, to amend E.R. 1.15. Because this Petition attempts to remedy the same problems as R-11-0024, I repeat my comment to that Petition. These problems have only grown worse since my association’s efforts last year.

    The Petition and Comments to this point describe well the terrible dilemma lawyers and personal injury claimants face as a result of “liens” claimed in a myriad of circumstances. These issues are very complex, such that the Arizona Trial Lawyers Association devotes a day-long seminar, every year, to updating current law and practices concerning liens.

    So that the Court has the full picture: personal injury claimants are entitled to fair compensation for all the harm they suffer due to the negligence of another. University of Arizona v. Superior Court, 136 Ariz. 579, 585, 667 P.2d 1294, 1300 (1983). Fair compensation includes past medical expenses. Saide v. Stanton, 13 Ariz. 76, 78, 659 P.2d 35, 37 (1983), Revised Arizona Jury Instructions (Civil) Negligence, Personal Injury Damages 1 “Measure of Damages.”

    The claimant’s medical expenses may have been paid by a third entity, most frequently under a contract for health insurance, but also sometimes by AHCCCS, Medicare, government employee health benefits, workers compensation carriers or others. If the claimant recovers, through verdict or settlement, the third parties MAY have a right to be paid back some of their expenses in paying for the claimant’s medical or other needs. Originally, such claims were invalid as impermissible assignments of personal injury claims. This is because of common law policy that “to require an injured policy holder to return to his insurer the benefits for which he has paid premiums is to deny him the benefits of his thrift and foresight.” Allstate Ins. Co. v. Druke, 118 Ariz. 301, 304, 576 P.2d 489, 492 (1978).

    In addition, some healthcare providers claim a right to “balance bill” against personal injury recoveries. A.R.S. §33-931, et seq. In other words, providers claim a right to recover money for their services above and beyond the amount they agreed to accept under contracts with health insurers, AHCCCS, Medicare, etc.

    There are some statutes that provide this right and a method for determining how much must be paid back in some situations. This is true for AHCCCS (A.R.S. §36-2915), Medicare (42 USC §1395 et seq), workers compensation cases (A.R.S. §2301023). There are other situations in which third parties, especially group health insurers, claim a right to repayment that is valid in only some states, but not others, under federal ERISA law. Then there are the “balance billing” claims. All these situations are referred to in the personal injury practice as “liens.”

    With every lien, there is a gauntlet of questions that must be resolved by the claimant’s attorney in order to adequately protect the client’s rights, i.e. make sure the client does not repay invalid or excessive liens. These questions include: (1) is it a legally valid lien? (2) Are the amounts claimed related to the injury at issue? (3) Will the lien be reduced so that the lien holder pays its fair share of the fees and costs necessary to generate the fund, i.e. the “procurement costs” in the common fund doctrine? See e.g. Lobambard v. Samaritan Health Service, 195 Ariz. 543, 991 P.2d 246 (App. 1998). (4) If the claimant receives less than the claim’s full value, due to inadequate insurance, comparative fault of others or other reasons, is the lien proportionately reduced?

    The unfortunate reality is that a majority of “liens” are sold by health insurers and governments to collection companies. Lawyers must try to resolve the questions above with people who are essentially bill collectors, clerks who have no knowledge, or interest, in questions about validity. They simply keep sending the same demand for payment, over and over again, without acknowledgement of any questions raised.

    The most abusive situations seem to occur with “ERISA liens.” Many years ago, in an attempt to lower health care costs for employers, Congress allowed employers to “self-fund” health benefits for their employees and a vast set of regulations arose for those “self-funded” plans. However, health insurers have used the ERISA statutes to argue than in any group health plan (not just self-funded plans), state insurance regulations, including assignment prohibitions like Allstate v. Druke, were preempted and ALL health plans had a right to a lien. The result is that claimants’ lawyers must request complicated tax returns, insurance contracts and other documents to confirm that THIS plan is indeed a self-funded plan. Then, all the other questions about reduction of the lien remain.

    All these questions must be addressed to Pension Plan Administrators, yet collection attempts come from outside companies who are essentially bill collectors. Despite federal regulations that require them to provide beneficiaries with evidence of the applicable plan, these entities routinely ignore such requests, sometimes for years.

    Your undersigned most recently dealt with a lien claimed by MUZAK against their employee who collected in a medical malpractice case. For two years, in multiple letters, I asked for proof of the validity of the lien. I never got it and it was clear that neither the vendor nor the Plan Administrator was going to respond. This was despite a threat for $64,000 in fines that were due to my client under federal regulations requiring disclosure of the plans. The vendor simply responded repeatedly with the same form letter demanding full payment, for charges that included services unrelated to the medical malpractice claim.

    I do not believe that after two years of research, letters and being ignored (which followed nearly two years of prosecuting a medical malpractice case) that E.R. 1.15 required that I expend significantly more of my client’s money to file a lawsuit, probably in federal court, as either a declaratory judgment or interpleader case. However, some have interpreted the comment to E.R. 1.15 to require that onerous step.

    Entities claiming “liens” carry the burden of proving the validity and accuracy of their debt in any “action” to enforce that debt. That action would also be subject to a statute of limitations, preventing exactly the kind of dilatory tactics we routinely see by alleged lien holders. The burden (including the costs) of initiating such an action legally rests upon the party claiming the debt. If that entity fails to initiate such an action after the claimant denies the debt, then the claimant should assume there is either no valid claim or that the entity chooses not to assert the claim.

    Petition R-12-0032 clears up any confusion about these basic legal principles. The Petition should be granted.

    JoJene Mills
    rhinsch
    Posts:

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    11 Sep 2012 03:41 PM
    Randall A. Hinsch
    Plattner Verderame, P.C.
    316 E. Flower St.
    Phoenix, AZ 85012
    Phone: (602)266-2002
    Fax: (602)266-6908
    rhinsch@plattner-verderame.com
    Bar # 010280


    Dear Justices,

    I have read the proposed change to ER 1.15 submitted by the Arizona Association for Justice and am writing in support of Petition R-12-0032.

    The current state of ER 1.15, as written and interpreted:

    (a) creates an ethical-equivalent to a prejudgment attachment without any of the statutory or constitutional protections;

    (b) puts attorneys in a conflict-riddled position of owing dueling ethical and legal duties to clients and third-parties (which are almost always adverse to one another), e.g., Hotel Emps. & Rest. Emps. Int'l Union Welfare Fund v. Gentner, 50 F.3d 719, 721 (9th Cir. 1995) (holding that the imposition of a "dual service" to a client and third party lien claimant violates ethical rules and put attorneys in an "untenable position" of representing dueling interests that are typically adverse); and

    (c) makes clients--particularly clients under financial distress--vulnerable to illegitimate claims.

    The practical and real-world effect of ER 1.15 is that it freezes client funds, but it does so without any established or preliminary legal process. In fact, the ethical rule is triggered merely by "claim[ed] interests" of third-parties, ER 1.15(e), and is broadly applied to all "matured legal or equitable claims." ER 1.15, Comment No. 4. This results in inexorable application of the rule in virtually every setting since no one knows the true definition of a "matured legal or equitable claim" and the Comment warns against attorneys "unilaterally arbitrating" these matters.

    This puts attorneys at odds with their clients, to whom they owe fiduciary duties. The situation is worsened, however, by the Rule and Comment's suggestion that the burden is on these attorneys and their clients to file suit to litigate the existence or scope of alleged third-party claims. The fact is, most injured clients are under financial duress -- after all, tort recoveries only aim to put the victim back to where they were before the tort. This leaves injured clients vulnerable to illegitimate claims against their tort recoveries, often forcing them to make the impossible choice between expensive and time-consuming litigation versus extortive nuisance payments to unscrupulous third-party claimants.

    I have read the examples of illegitimate claims in the Petition and those mirror the types of circumstances I now face in my personal injury practice. This is a problem that has increased substantially over the last 5 to 10 years.

    The proposed change in R-12-0032 strikes a reasonable and just balance between protecting legitimate third-party claims, ensuring conflict-free representation and protecting the public from improper third-party claimants. It should be adopted in full.

    Randy Hinsch
    wbacon
    Posts:

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    11 Sep 2012 04:24 PM
    William C. Bacon
    Goldberg & Osborne
    33 N. Stone #900
    Tucson, AZ 85701
    520-879-7165
    Fax: 520-620-3991
    wbacon@goldbergandosborne.com
    State Bar No. 004895

    Dear Justices,

    I am writing in support of Petition R-12-0032 submitted by the Arizona Association for Justice. The proposed changes to ER 1.15 would significantly improve the Rule.

    The present ER 1.15, virtually forces clients to compromise and pay questionable or even illegitimate claims in order to obtain the benefit of their settlement. It also puts attorneys in an untenable position where they owe a duty to third parties whose interest are in direct conflict with their clients.

    The resolution suggested by the present Rule and the Comments, that the burden is on these attorneys and their clients to file suit to litigate the existence or scope of alleged third-party claims, is no solution at all. In any reasonable dispute resolution setting, the burden is on the party making the claim. The present Rule turns this on its head by forcing a client and the attorney to disprove the claim by incurring unreasonable cost and expending additional time. The fact is, most injured clients are under financial duress -- after all, tort recoveries only aim to put the victim back to where they were before the tort. This leaves injured clients vulnerable to illegitimate claims against their tort recoveries, often forcing them to make the impossible choice between expensive and time-consuming litigation versus extortive nuisance payments to unscrupulous third-party claimants.

    The proposed change in R-12-0032 strikes a reasonable and just balance between protecting legitimate third-party claims, ensuring conflict-free representation and protecting the public from improper third-party claimants. It should be adopted in full.

    /s/ William C. Bacon
    simonlaw
    Posts:

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    12 Sep 2012 03:49 PM
    Craig J. Simon, Esq.
    The Simon Law Group
    2141 East Broadway, Suite 113
    Tempe, Arizona 85282
    480-745-2450 phone
    480-745-2454 fax
    craig@simonlawaz.com
    SBN: 018920


    Dear Justices:

    I have read the proposed change to ER 1.15 submitted by the Arizona Association for Justice and am writing in support of Petition R-12-0032.

    The current state of ER 1.15, as written and interpreted:

    (a) creates an ethical-equivalent to a prejudgment attachment without any of the statutory or constitutional protections;

    (b) puts attorneys in a conflict-riddled position of owing dueling ethical and legal duties to clients and third-parties (which are almost always adverse to one another); and

    (c) makes clients--particularly clients under financial distress--vulnerable to illegitimate claims.

    The practical and real-world effect of ER 1.15 is that it freezes client funds, but it does so without any established or preliminary legal process. In fact, the ethical rule is triggered merely by "claim[ed] interests" of third-parties, ER 1.15(e), and is broadly applied to all "matured legal or equitable claims." ER 1.15, Comment No. 4. This results in inexorable application of the rule in virtually every setting since no one knows the true definition of a "matured legal or equitable claim" and the Comment warns against attorneys "unilaterally arbitrating" these matters.

    This puts attorneys at odds with their clients, to whom they owe fiduciary duties. The situation is worsened, however, by the Rule and Comment's suggestion that the burden is on these attorneys and their clients to file suit to litigate the existence or scope of alleged third-party claims. The fact is, most injured clients are under financial duress -- after all, tort recoveries only aim to put the victim back to where they were before the tort. This leaves injured clients vulnerable to illegitimate claims against their tort recoveries, often forcing them to make the impossible choice between expensive and time-consuming litigation versus extortive nuisance payments to unscrupulous third-party claimants.

    I have read the examples of illegitimate claims in the Petition and those mirror the types of circumstances I now face in my personal injury practice. This is a problem that has increased substantially over the last 5 years. Many of my clients are extremely frustrated when these questionable claims delay their settlements.

    The proposed change in R-12-0032 strikes a reasonable and just balance between protecting legitimate third-party claims, ensuring conflict-free representation and protecting the public from improper third-party claimants. It should be adopted in full.
    josephatlaw
    Posts:

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    13 Sep 2012 01:18 PM
    Joseph D'Aguanno
    Harris, Powers & Cunningham, P.L.L.C.
    361 E. Coronado Road, Suite 101
    Phoenix, AZ 85004
    602.271.9344 (p)
    602.252.2099 (f)
    jdaguanno@hpc-lawyers.com
    SBN: 020421

    Dear Justices,

    I am writing in support of Petition R-12-0032. ER 1.15 needs to be amended because its current incarnation creates a conflict of interest - requires competeing ethical and legal duties to clients and third-parties (which are usually adverse to my client). Legitimacy of lien claims has no bearing on the real world application of ER 1.15 since it is triggered merely by "claim[ed] interests" of third-parties.

    ER 1.15 forces attorneys to freeze client fund without any established legal process -- let alone an efficient and equitable process. This puts attorneys at odds with their clients, to whom they owe fiduciary duties. The conflict with the client's interests is exacerbated by the Rule's requirement that the attorneys and their client file suit to litigate the existence or scope of the alleged third-party claim. This is impractical and unfair because most injured clients are under financial duress -- after all, tort recoveries only aim to put the victim back to where they were before the tort. This leaves injured clients vulnerable to illegitimate claims against their tort recoveries, often forcing them to make the impossible choice between expensive and time-consuming litigation versus extortive nuisance payments to unscrupulous third-party claimants. The examples of illegitimate claims in the Petition mirror the types of circumstances I now face in my personal injury practice.

    The proposed change in R-12-0032 strikes a reasonable and just balance between protecting legitimate third-party claims, ensuring conflict-free representation, and protecting the public from improper third-party claimants. It should be adopted in full.

    /s/ Joseph D'Aguanno
    pchancellor@goldbergandosborne.com
    Posts:

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    13 Sep 2012 05:37 PM
    Page Chancellor Marks
    Management Attorney
    State Bar No. 014372
    Goldberg & Osborne
    33 N. Stone, Suite 900
    Tucson, AZ 85701
    520-909-0915

    Dear Justices,

    I have read the proposed change to ER 1.15 submitted by the Arizona Association for Justice and am writing in support of Petition R-12-0032. I help manage Goldberg & Osborne, a large personal injury lawfirm. As a result, I am very involved in lien claims against our clients' personal injury matters.

    The current state of ER 1.15, as written, places lawyers (as myself and others in my Firm) in a conflict position daily. It is unquestionable that the current ER 1.15 creates a duty that hold to my client and to a third party (with very different interest than my client). Our clients are normally very poor, at times, they cannot withstand the fight with lienholders. I am often questioned by clients as to who we represent - the client or the lienholder? This is a very tough question to answer with the current ER 1.15.

    The real-world effect of ER 1.15 is that it freezes client funds. It is extremely hard to determine who holds a "matured legal or equitable claims." We cannot just "guess" or make a determination, even if the third party withholds information or stalls for years, because we are not allowed to "unilaterally arbitrate" these matters.

    Then, we are required to file suit. Again, costing our clients hundreds of dollars and add on the additional time before our clients can receive their money. As written, the ER only protects the large business and not the victim. The victim is set back both financially and with time. In my opinion, this is a problem that has increased substantially over the last 5 to 10 years.

    The proposed change in R-12-0032 strikes a reasonable and just balance between protecting legitimate third-party claims, ensuring conflict-free representation and protecting the public from improper third-party claimants. It should be adopted in full.

    Truly,

    Page Chancellor Marks
    Management Attorney
    Goldberg & Osborne
    33 N. Stone, Suite 900
    Tucson, AZ 85701
    520-909-0915
    rnedwards6
    Posts:

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    14 Sep 2012 10:54 AM
    Robert Edwards
    2150-Third Avenue
    Suite 300
    Anoka, MN 55303
    763-427-1400
    Fax: 888-863-6041
    re@rnelaw.com
    Bar #020813



    Dear Justices;

    Recently I had an experience that was decidedly unpleasant and directly related to the current ER 1.15.

    I was representing an individual in a personal injury case, a rather small claim, and in the middle of that I received a lien notice from the chiropractor who treated the client. Shortly after that I received another lien notice, this one from the State of Arizona. It concerned a significant child support arrearage that my client had incurred. Apparently a division of the state had supported my client's children and now had a lien for back due child support. I spoke to the person who sent me the lien and they informed me that the only thing that could be deducted from the settlement draft was attorneys fees and expenses, and that the chiropractor's lien could not. Based on that conversation, when the settlement check came in I deducted our attorneys fees and costs and then paid the balance to the state. When the chiropractor found out about this he was more than just a little upset. He threatened to file an ethical complaint against me for not honoring his lien unless I paid it out of my own pocket. Rather than deal with the issue, in light of how ER 1.15 is currently written and interpreted, I went ahead and paid the man even though it resulted in a net loss on the case. That is, the amount of his bill was more than the attorneys fees we had collected.

    I heartily endorse the proposed change to ER 1.15 as submitted by the Arizona Association for Justice.

    Respectfully submitted,

    Robert Edwards
    ddiamond
    Posts:

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    17 Sep 2012 12:15 PM
    David J. Diamond
    Goldberg & Osborne
    33 N. Stone Avenue, Suite 900
    Tucson, Arizona 85701
    Phone: 520-909-0909
    Fax: 520-620-3991
    Email: ddiamond40@aol.com
    Arizona Bar No. 010842


    Re. Petition R-12-0032


    Dear Justices,

    I have read the proposed change to ER 1.15 submitted by the Arizona Association for Justice and am writing in support of Petition R-12-0032.

    The current state of ER 1.15, as written and interpreted:

    (a) creates an ethical-equivalent to a prejudgment attachment without any of the statutory or constitutional protections;

    (b) puts attorneys in a conflict-riddled position of owing dueling ethical and legal duties to clients and third-parties (which are almost always adverse to one another), e.g., Hotel Emps. & Rest. Emps. Int'l Union Welfare Fund v. Gentner, 50 F.3d 719, 721 (9th Cir. 1995) (holding that the imposition of a "dual service" to a client and third party lien claimant violates ethical rules and put attorneys in an "untenable position" of representing dueling interests that are typically adverse); and

    (c) makes clients--particularly clients under financial distress--vulnerable to illegitimate claims.

    The practical and real-world effect of ER 1.15 is that it freezes client funds, but it does so without any established or preliminary legal process. In fact, the ethical rule is triggered merely by "claim[ed] interests" of third-parties, ER 1.15(e), and is broadly applied to all "matured legal or equitable claims." ER 1.15, Comment No. 4. This results in inexorable application of the rule in virtually every setting since no one knows the true definition of a "matured legal or equitable claim" and the Comment warns against attorneys "unilaterally arbitrating" these matters.

    This puts attorneys at odds with their clients, to whom they owe fiduciary duties. The situation is worsened, however, by the Rule and Comment's suggestion that the burden is on these attorneys and their clients to file suit to litigate the existence or scope of alleged third-party claims. The fact is, most injured clients are under financial duress -- after all, tort recoveries only aim to put the victim back to where they were before the tort. This leaves injured clients vulnerable to illegitimate claims against their tort recoveries, often forcing them to make the impossible choice between expensive and time-consuming litigation versus extortive nuisance payments to unscrupulous third-party claimants.

    I have read the examples of illegitimate claims in the Petition and those mirror the types of circumstances I now face in my personal injury practice. This is a problem that has increased substantially over the last 5 to 10 years.

    The proposed change in R-12-0032 strikes a reasonable and just balance between protecting legitimate third-party claims, ensuring conflict-free representation and protecting the public from improper third-party claimants. It should be adopted in full.

    David J. Diamond
    ecrowley
    Posts:

    --
    17 Sep 2012 03:00 PM
    Gabriel D. Fernandez
    437 W. Thurber Rd. #16
    Tucson, AZ 85705
    Bar #: 016483
    520-293-6255
    Fax: 520-293-3937
    gfernandez@gdflaw.com

    Dear Justices,

    I have read the proposed change to ER 1.15 submitted by the Arizona Association for Justice and am writing in support of Petition R-12-0032.

    The current state of ER 1.15, as written and interpreted:

    (a) creates an ethical-equivalent to a prejudgment attachment without any of the statutory or constitutional protections;

    (b) puts attorneys in a conflict-riddled position of owing dueling ethical and legal duties to clients and third-parties (which are almost always adverse to one another), e.g., Hotel Emps. & Rest. Emps. Int'l Union Welfare Fund v. Gentner, 50 F.3d 719, 721 (9th Cir. 1995) (holding that the imposition of a "dual service" to a client and third party lien claimant violates ethical rules and put attorneys in an "untenable position" of representing dueling interests that are typically adverse); and

    (c) makes clients--particularly clients under financial distress--vulnerable to illegitimate claims.

    The practical and real-world effect of ER 1.15 is that it freezes client funds, but it does so without any established or preliminary legal process. In fact, the ethical rule is triggered merely by "claim[ed] interests" of third-parties, ER 1.15(e), and is broadly applied to all "matured legal or equitable claims." ER 1.15, Comment No. 4. This results in inexorable application of the rule in virtually every setting since no one knows the true definition of a "matured legal or equitable claim" and the Comment warns against attorneys "unilaterally arbitrating" these matters.

    This puts attorneys at odds with their clients, to whom they owe fiduciary duties. The situation is worsened, however, by the Rule and Comment's suggestion that the burden is on these attorneys and their clients to file suit to litigate the existence or scope of alleged third-party claims. The fact is, most injured clients are under financial duress -- after all, tort recoveries only aim to put the victim back to where they were before the tort. This leaves injured clients vulnerable to illegitimate claims against their tort recoveries, often forcing them to make the impossible choice between expensive and time-consuming litigation versus extortive nuisance payments to unscrupulous third-party claimants.

    I have read the examples of illegitimate claims in the Petition and those mirror the types of circumstances I now face in my personal injury practice. This is a problem that has increased substantially over the last 5 to 10 years.

    The proposed change in R-12-0032 strikes a reasonable and just balance between protecting legitimate third-party claims, ensuring conflict-free representation and protecting the public from improper third-party claimants. It should be adopted in full.

    Gabriel D. Fernandez
    Law Offices of Gabriel D. Fernandez, P.C.
    ecrowley
    Posts:

    --
    17 Sep 2012 03:02 PM
    Darren M. Clausen, Esq.
    Clausen and Moore Law Firm
    4578 E. Camp Lowell Drive
    Tucson, Arizona 85712
    Phone: 520-327-7113
    Fax: 520-327-3414
    Email:dclausen@clausenandmoorelaw.com
    Arizona State Bar No. 019427

    Dear Justices,

    I have read the proposed change to ER 1.15 submitted by the Arizona Association for Justice and am writing in support of Petition R-12-0032.

    The current state of ER 1.15, as written and interpreted:

    (a) creates an ethical-equivalent to a prejudgment attachment without any of the statutory or constitutional protections;

    (b) puts attorneys in a conflict-riddled position of owing dueling ethical and legal duties to clients and third-parties (which are almost always adverse to one another), e.g., Hotel Emps. & Rest. Emps. Int'l Union Welfare Fund v. Gentner, 50 F.3d 719, 721 (9th Cir. 1995) (holding that the imposition of a "dual service" to a client and third party lien claimant violates ethical rules and put attorneys in an "untenable position" of representing dueling interests that are typically adverse); and

    (c) makes clients--particularly clients under financial distress--vulnerable to illegitimate claims.

    The practical and real-world effect of ER 1.15 is that it freezes client funds, but it does so without any established or preliminary legal process. In fact, the ethical rule is triggered merely by "claim[ed] interests" of third-parties, ER 1.15(e), and is broadly applied to all "matured legal or equitable claims." ER 1.15, Comment No. 4. This results in inexorable application of the rule in virtually every setting since no one knows the true definition of a "matured legal or equitable claim" and the Comment warns against attorneys "unilaterally arbitrating" these matters.

    This puts attorneys at odds with their clients, to whom they owe fiduciary duties. The situation is worsened, however, by the Rule and Comment's suggestion that the burden is on these attorneys and their clients to file suit to litigate the existence or scope of alleged third-party claims. The fact is, most injured clients are under financial duress -- after all, tort recoveries only aim to put the victim back to where they were before the tort.
    This leaves injured clients vulnerable to illegitimate claims against their tort recoveries, often forcing them to make the impossible choice between expensive and time-consuming litigation versus extortive nuisance payments to unscrupulous third-party claimants.

    I have read the examples of illegitimate claims in the Petition and those mirror the types of circumstances I now face in my personal injury practice. This is a problem that has increased substantially over the last 10 years.

    The proposed change in R-12-0032 strikes a reasonable and just balance between protecting legitimate third-party claims, ensuring conflict-free representation and protecting the public from improper third-party claimants. It should be adopted in full.

    Sincerely,
    /s/ Darren M. Clausen, Esq.
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