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decided: August 11, 1983.


Appeal from the Order of the Administrator of the Arbitration Panels for Health Care in case of Carmello Marquez, a minor, by Dionisia Marquez, his guardian v. Hahnemann Medical College and Hospital of Philadelphia et al., No. M76-00009.


Harry Lore, for petitioners.

Gwendolyn T. Mosley, Deputy Attorney General, with her, LeRoy S. Zimmerman, Attorney General, for respondents.

Judges Blatt, Williams, Jr. and Craig, sitting as a panel of three. Opinion by Judge Williams, Jr.

Author: Williams

[ 76 Pa. Commw. Page 295]

This case comes before the Court on appeal by the attorney-petitioners from an order of the Administrator for Arbitration Panels for Health Care (Administrator) directing the said attorneys to relinquish certain disputed funds relating to the settlement of a medical malpractice action. This Court must now determine the constitutionality of Section 604(a) of the Health Care Services Malpractice Act (Act),*fn1 which regulates the fees received by plaintiffs' attorneys in such actions.

[ 76 Pa. Commw. Page 296]


In 1977, petitioners commenced a medical malpractice action*fn2 before the Administrator on behalf of a minor through his guardian. Before a panel was selected, the litigants settled. Pursuant to a properly promulgated regulation*fn3 then in effect, petitioners applied to the Court of Common Pleas for leave to compromise the action for the amount of one million dollars ($1,000,000), and for approval of attorneys' fees of one-third of that settlement figure. Pa. R.C.P. 2039(a)*fn4 mandates court approval of agreements entered into by the guardian for counsel fees. By approving the settlement and the agreements between petitioners and the guardian for counsel fees, the court of common pleas permitted recovery of counsel fees in excess of that authorized by Section 604(a) of the Act.

In addition to the approval of the court of common pleas, the petitioners were required by Section 307(b)

[ 76 Pa. Commw. Page 297]

*fn5 of the Act, 40 P.S. § 1301.307(b), to seek the approbation of the Administrator, who initially declined to approve the settlement as proposed because the attorneys' fees were in excess of those permitted under Section 604(a). The Administrator subsequently approved that portion of the fee allowed by the Act, contingent upon counsel's placing in escrow, pending final resolution of the matter, the disputed portion of the fee, a sum of one hundred ten thousand six hundred ten dollars and seventy-seven cents ($110,610.77).

The Attorney General then filed a petition on behalf of the Administrator, by which he sought to modify the common pleas court order granting distribution of the settlement funds, and requesting that the sum in the escrow account plus the interest thereon be paid to the guardian of the estate of the injured minor. The common pleas court denied that petition, concluding that Sections 604(a) and 307(b) of the Act were inconsistent with Pa. R.C.P. 2039, which governed the procedures to be followed. The court therefore suspended the said sections of the Act.*fn6

[ 76 Pa. Commw. Page 298]

That order was appealed to this Court, which vacated same, opining that the common pleas court lacked jurisdiction to entertain the petition filed under Pa. R.C.P. 2039 to obtain approval of the medical malpractice settlement.*fn7 Marquez v. Hahnemann Page 298} Medical College and Hospital of Philadelphia, 56 Pa. Commonwealth Ct. 188, 424 A.2d 975 (1981). Shortly thereafter, the Administrator ordered, inter alia, that the petitioners transmit the escrowed monies to the guardian of the minor's estate. It is from that order that petitioners have presently appealed. As predicted by Judge MacPhail in his incisive concurring opinion in Marquez, supra, the issue of the constitutionality of Section 604(a) is now before us.


Petitioners assert that Section 604(a) of the Act contravenes the due process and equal protection clauses of both the United States and Pennsylvania Constitutions by identifying the parameters of contingent fees payable to plaintiff's attorneys in malpractice actions. They further maintain that the said section violates the constitutional principle of separation of powers by usurping that duty of the Commonwealth judiciary to supervise and regulate both the practice of law and those attorneys' fees, contingent or otherwise, which may reasonably be charged as an adjunct of such practice.

The Office of the Attorney General of Pennsylvania asserts on behalf of the Administrator that since Article III, Section 1, of the Pennsylvania Constitution vests the General Assembly with authority to promulgate the substantive law of this Commonwealth and to enunciate public policy, Section 604(a) of the Act, which limits attorneys' fees, is a valid exercise of extant authority and does not constitute interference with the power of the judiciary. The Administrator additionally contends that the fee limitation of Section

[ 76 Pa. Commw. Page 299604]

(a) is a reasonable response to the problem of rising medical malpractice costs, and thus it furthers the Commonwealth policy of protecting victims of medical malpractice.

We initially note that the existence of contingent fee arrangements is acknowledged by those portions of the Code of Professional Responsibility which govern their provisions. See, e.g., Canon 2, Ethical Consideration 2-20, Disciplinary Rule 2-106(B)(8) and Ethical Consideration 2-17, which collectively impose upon such fee arrangements a requirement of reasonableness, the determination of which depends upon a consideration of "all relevant circumstances." Ethical Consideration 2-18.

The Commonwealth does not here allege that the fee charged by the petitioners in this case, absent the statutory language of Section 604(a), was either unfair, unusual, or unreasonable in this case or cases of this kind, involving a minor plaintiff with serious injuries caused by medical malpractice, nor would we so conclude.*fn8

Of primary importance in this case, however, is the question of the interplay of the legislative and judicial

[ 76 Pa. Commw. Page 300]

    branches in regulating various aspects of attorney conduct. It is well settled that the General Assembly has the power to promulgate substantive law, and through the exercise of its police power may legislate except where such legislation is prohibited. But, as the Administrator recognizes, "(e)ven a statute enacted pursuant to the legislature's police power which furthers a laudable public policy must be struck down if it is found to interfere with another co-equal branch of government."*fn9 It is precisely because we find that Section 604(a) of the Act constitutes an impermissible legislative interference with the responsibilities of the judiciary, a co-equal branch of government, that we must reverse the order of the Administrator.

In its original form, the Act provided for initial compulsory arbitration of medical malpractice claims with the right of appeal de novo to the court. It did not abolish common law malpractice actions for money damages. As the Superior Court noted in Gallagher, supra, in reiterating the unconstitutionality of the language divesting the common pleas court of original jurisdiction of such cases, "(i)t follows from the Supreme Court's holding in Mattos that original jurisdiction in such actions has been retained in the courts of common pleas. . . ." 287 Pa. Superior Ct. at 252, 429 A.2d at 1195. The petition filed under Pa. R.C.P. 2039 for approval of the settlement in this matter was thus properly before the court of common pleas. That court reached the correct result in declining to accord to the Administrator, and Section 604(a) of the Act, legislative ascendance over the procedural rules by which the judiciary governs the professional conduct of attorneys handling malpractice actions.

This issue has been examined previously in the Commonwealth. Petition of Splane, 123 Pa. 527, 16 A.

[ 76 Pa. Commw. Page 301481]

(1889), resolved the issue of whether a writ of mandamus should issue to the judges of the orphans' court directing that they admit Mr. Splane to practice before that tribunal under an act*fn10 of assembly regulating the admission of attorneys to practice. The Pennsylvania Supreme Court described that act as an unconstitutional violation of the separation of powers inherent in the Constitution. To the extent that the act governed the admission, professional conduct, and discipline of attorneys, it was viewed as "an encroachment upon the judiciary department of the government." Id. at 540, 16 A. at 483. Such an encroachment would be viewed by the Court "as a vain attempt by the Legislature to exercise a power which it does not possess." Hoopes v. Bradshaw, 231 Pa. 485, 487, 80 A. 1098, 1099 (1911). "The adoption of rules of court regulating practice therein is certainly as much a judicial function, with which the Legislature may not interfere as is the admission of attorneys. . . ." Id. at 490, 80 A. at 1100. See also, Beckert v. American Federation of State, County and Municipal Employees, 56 Pa. Commonwealth Ct. 572, 425 A.2d 859 (1981) (Separation of powers in the context of the inherent authority of the court to dismiss judicial employees reaffirmed); Ballou v. State Ethics Commission, 56 Pa. Commonwealth Ct. 240, 424 A.2d 983 (1981) (Section 4 of the Ethics Act is an unconstitutional encroachment by the legislature on the Pennsylvania Supreme Court's inherent and exclusive power to regulate the conduct of attorneys). Snelbaker v. State Ethics Commission, 56 Pa. Commonwealth Ct. 270, 424 A.2d 623 (1981); Yost v. State Ethics Commission, 56 Pa. Commonwealth Ct. 250, 424 A.2d 611 (1981).

[ 76 Pa. Commw. Page 302]

The principle of separation of powers is the cornerstone of our democratic form of government. From the historical perspective presented by Hamilton, Jay, and Madison to the present time, it has been, and remains, a vital doctrine determining the structure of both our state and federal systems, and is the statement of the parameters within which each of the branches of government operates. It is this principle which compelled the Supreme Court of Pennsylvania to determine that the Public Agency Open Meeting Law, Section 10 of the Judiciary Act Repealer Act, 42 Pa. C.S. § 1703, was unconstitutional as applied to that Court. See, In re 42 PA. C.S. § 1703, 482 Pa. 522, 529, 394 A.2d 444, 448 (1978), wherein the Court quoted Garrett v. Bamford, 582 F.2d 810, 814 (3rd Cir. 1978), as enunciating that "'the Pennsylvania Constitution gives the state's supreme court exclusive power to establish rules of procedure for state courts' and that 'the legislature . . . is without power to control procedure.'" (Emphasis in original.) The Court went on to firmly reiterate that regulating the bar and disciplining lawyers are judicial functions "protected against legislative incursion, as are, for instance, adjudications issued in traditional adversary litigation." Id. at 530, 394 A.2d at 449.

The provision of the Pennsylvania Constitution which records the power of the Supreme Court to prescribe general rules for admission to and regulation of the bar, Article V, Section 10(c),*fn11 has been held to

[ 76 Pa. Commw. Page 303]

    include "the continuous monitoring of the practice of law." Cantor v. Supreme Court of Pennsylvania, 353 F. Supp. 1307, 1316, n. 21 (E.D. Pa. 1973).

Included in that "regulated" conduct of attorneys which falls well within the ambit of the constitutionally discrete power of the judiciary is the fee charged by lawyers. As early as 1793, the courts of this Commonwealth were addressing such issues. See, Breckenridge v. McFarland, Addison Reporter 49 (1793). More recently, in Schlesinger v. Teitelbaum, 475 F.2d 137, 141 (3rd Cir. 1973), cert. denied, 414 U.S. 1111 (1973), the Federal Appeals Court noted that "in its supervisory power over the members of its bar, a court has jurisdiction of certain activities of such members, including the charges of contingent fees." (Emphasis added.) We conclude that Section 604(a) infringes upon the exclusive power of the courts of this Commonwealth to govern the activities of attorneys relative to their contingent fee agreements, and is thus unconstitutional.*fn12

[ 76 Pa. Commw. Page 304]

We turn finally to the Administrator's argument regarding the similarity of provisions in other statutes -- relating to the payment of compensation for unemployment, job-related injuries, and loss or injury due to crime -- which contain legislatively mandated limitations on the fee to be charged by the claimant's attorney. We find such assertions unpersuasive, for in each of these enactments the general assembly created the remedy, which had not previously existed as a common law cause of action, as did medical malpractice.

Medical malpractice litigation has evoked strong emotions on both sides of the controversy in recent years. The debate in this Commonwealth has been replicated in other states as well. Plaintiffs' attorneys in these cases have been swept into the maelstrom, as it is their fees which have been affected. The Courts of this Commonwealth have the power and authority to examine and approve those fees, as discussed herein, and such regulation cannot be usurped.


And Now, this 11th day of August, 1983, the order of the Administrator in the above-captioned matter is hereby vacated.


Order of Administrator vacated.

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