Good Faith Negotiation Obligations When Resolving Pharmacy Liens

James Wong — Founder & Pharmacist, LienScripts | March 29, 2026 | 8 min read

Attorneys have ethical and practical obligations when negotiating pharmacy lien reductions at settlement. This guide covers the good faith standard, common negotiation scenarios, and documentation requirements for lien resolution.

This post is for informational purposes only and does not constitute legal advice.

Good faith negotiation of pharmacy liens is the attorney's obligation to approach lien resolution honestly, transparently, and with genuine intent to reach a fair outcome for all parties — the client, the attorney, and the lien provider. This obligation exists at the intersection of fiduciary duty to the client, professional ethics rules, and the practical reality that pharmacy lien providers are repeat players who remember how attorneys handle their claims.

  • Good faith negotiation requires honest representation of case facts, transparent communication about settlement proceeds, and genuine effort to reach fair resolution
  • The attorney owes fiduciary duties to both the client (maximize net recovery) and professional duties regarding lien obligations (do not improperly reduce or avoid valid liens)
  • LienScripts generates a MERIT (Medication Evaluation & Rationale for Injury Treatment) report for every case, providing pharmacist-signed documentation for demand packages
  • Attorneys who develop a reputation for good faith negotiation consistently receive better terms from lien providers on future cases

[!KEY] Good faith negotiation of pharmacy liens is not about paying the least possible amount — it is about reaching a fair resolution that respects the client's interest in maximum net recovery, the lien provider's legitimate claim, and the attorney's professional obligations.

The Legal Framework

Fiduciary Duty to the Client

The attorney's primary obligation is to the client. In the pharmacy lien context, this means:

  • Reviewing the lien for accuracy and reasonableness
  • Negotiating reductions when appropriate to maximize client net recovery
  • Informing the client of the lien amount and its impact on their recovery
  • Obtaining client authorization before paying the lien from settlement funds

Professional Ethics Obligations

State bar rules impose additional obligations:

  • Honest dealing — The attorney must not misrepresent facts to the lien provider to obtain a reduction
  • Trust account management — Disputed lien amounts must be held in trust until resolved
  • Prompt resolution — The attorney must not unreasonably delay lien resolution to pressure the provider
  • Proper disbursement — Settlement funds owed to lien providers must be disbursed according to the closing statement

Statutory Requirements

Some jurisdictions have specific statutes governing lien resolution. In California, attorneys must comply with the disbursement requirements of Business and Professions Code Section 6106.1 and the trust account rules of Rule 1.15 of the Rules of Professional Conduct.

When Negotiation Is Appropriate

Policy Limits Cases

When the settlement is limited by policy limits and the total liens exceed the available funds, negotiation is not just appropriate — it is necessary. Every lien provider, including pharmacy providers, must accept a proportional reduction.

According to James Wong, PharmD, founder of LienScripts, "Policy limits cases are where good faith negotiation matters most. When there is not enough money to pay everyone in full, the attorney's job is to negotiate a fair allocation — and the pharmacy lien provider who receives an honest explanation and a reasonable proposal will almost always work with you."

Disproportionate Lien to Recovery Ratio

If the pharmacy lien represents a disproportionate share of the settlement (e.g., the lien is 30% or more of the gross recovery), negotiation to reduce the impact on the client's net recovery is appropriate and expected.

Common Fund Fee Deduction

Many lien providers accept a common fund fee deduction — a recognition that the attorney's work in obtaining the settlement benefits the lien provider, and the provider should bear a proportional share of the attorney's fees.

[!TIP] Present the common fund fee argument early in the negotiation rather than as a final demand. Lien providers who understand the basis from the start are more likely to accept it as a legitimate deduction.

Good Faith Negotiation Standards

What Good Faith Requires

  • Truthful disclosure of settlement amount — Do not understate the settlement to justify a lower lien payoff
  • Accurate lien representation — Present the actual lien amount without inflating it to create negotiation room
  • Reasonable basis for reduction request — Every reduction request should have a stated basis (policy limits, proportionality, common fund, prompt payment)
  • Genuine intent to resolve — The negotiation should aim at resolution, not delay
  • Written documentation — All negotiation communications should be in writing or confirmed in writing

What Good Faith Prohibits

  • Misrepresenting the settlement amount to justify a lower payoff
  • Threatening to refuse payment entirely if the provider does not reduce
  • Delaying resolution to pressure the provider into accepting a lower amount
  • Ignoring the lien and disbursing all funds to the client without addressing the obligation
  • Representing to the client that the lien can be avoided when it cannot

As Amar Lunagaria, PharmD, LienScripts' Chief Pharmacist explains, "The attorneys we work with most successfully are the ones who call us before settlement, explain the situation honestly, and make a reasonable request. We negotiate in good faith because they do. The attorneys who try to lowball, delay, or ignore the lien create problems for their own clients."

[!KEY] Good faith negotiation is a two-way street. Attorneys who demonstrate honesty and professionalism in lien negotiations consistently receive better outcomes than those who use adversarial tactics against lien providers.

Common Negotiation Scenarios

Scenario 1: Proportional Reduction

When total liens exceed a reasonable percentage of the settlement, request a proportional reduction from all lien providers:

  • Calculate each lien's percentage of total liens
  • Apply the same reduction percentage to each lien
  • Present the proposal with the full lien breakdown and settlement amount
  • Document all providers' responses

Scenario 2: Prompt Payment Discount

Offer expedited payment (wire transfer within 14 days of disbursement) in exchange for a percentage reduction. This is a legitimate business negotiation that benefits both parties — the provider receives faster payment, and the client receives a lower deduction.

Scenario 3: Disputed Charges

If specific line items on the lien are disputed (non-injury medications, billing errors, pricing questions), negotiate those specific items rather than requesting a blanket reduction. This is the most defensible negotiation approach because it is based on factual disputes rather than financial pressure.

Scenario 4: Low Recovery

When the settlement is significantly below the case value due to liability issues, coverage limitations, or other factors, present the circumstances honestly and request a reduction that reflects the limited recovery. Most reputable lien providers will accommodate low-recovery situations when the facts support it.

Documentation Requirements

Before Negotiation

  • Verify the lien amount and itemization
  • Review the lien for accuracy and identify any disputed items
  • Calculate the lien as a percentage of gross and net recovery
  • Determine the basis for your reduction request

During Negotiation

  • Communicate in writing or confirm verbal discussions in writing
  • State the settlement amount truthfully
  • Present your reduction request with a specific basis
  • Respond to counter-proposals promptly

After Resolution

  • Confirm the agreed amount in writing
  • Process payment according to the agreed terms
  • Obtain the lien release
  • Document the resolution in the case file

How LienScripts Approaches Lien Resolution

The LienScripts platform is designed to facilitate good faith negotiation. Attorneys have real-time access to itemized lien balances, making disputed-item negotiations straightforward. LienScripts negotiates reductions in appropriate circumstances and does not hold up settlements with unreasonable demands.

For more on lien resolution strategies, visit for attorneys.

Related Resources

Frequently Asked Questions

What does good faith require when negotiating pharmacy liens?

Good faith requires truthful disclosure of the settlement amount, accurate representation of the lien, a reasonable basis for any reduction request (policy limits, proportionality, common fund, prompt payment), genuine intent to resolve, and written documentation of all negotiations. It prohibits misrepresentation, threats, delay tactics, and ignoring valid lien obligations.

Can I negotiate a pharmacy lien reduction without bad faith?

Yes. Negotiation is appropriate and expected in policy limits cases, disproportionate lien-to-recovery situations, common fund fee deductions, disputed line items, and low-recovery cases. The key is having a legitimate basis for the request and communicating honestly with the lien provider.

What happens if I dispute the pharmacy lien amount at settlement?

If the amount is disputed, hold the disputed portion in your client trust account until resolved. Do not disburse disputed funds to the client or refuse payment entirely. Negotiate the specific disputed items in writing, and once resolved, disburse according to the agreement. Document everything for your file.