Case Brought A Split In Decision—Majority Found Labor Code Section 3856(c) Applied To Deny Recoupment To Worker For Fee/Expenses, While Dissent Found Section 3856(b) Applied So As To Allow Worker Some Fee/Litigation Expense Recovery.
Roman Catholic Bishop of Monterey, CA v. Mansfield, Case No. H038222 (6th Dist. July 11, 2014) (unpublished) is an interesting fees/litigation expense case arising in a worker’s compensation context. In fact, the unpublished opinion drew very well reasoned majority and dissenting opinions in a context dealing with how much does an employer have to actively prosecute a matter—during the litigation process or to judgment—in order to decide whether a dispute falls within Labor Code section 3856(b) or section 3856(c).
What happened here was that employer sued a driver hitting employer’s employee who was driving a car in the course and scope of her employment, and employer also sued father for negligent entrustment, with the object of the suit being the employer’s pursuit of recovering worker’s compensation benefits paid to employee. Employee joined in the litigation as an intervenor four years later, with employer settling with son and father for $12,500 but assigning to them the worker’s comp lien claim of a little over $24,000. Employee proceeded to trial against both father and son, but garnered a little over $16,000 in damages. Employee moved for post-trial attorney’s fees and litigation expenses under section 3856(b), arguing that the full amount of the judgment should not be offset by employee’s $17,309 fee bill, leaving the employee the net winner, and entitling the employee to attorney's fees. Defendants buying the worker’s comp lien opposed, arguing that an employee is only entitled to recovery fees under section 3856(c) when the judgment is greater than the employer’s lien (which it wasn’t). The lower court sided with defendants, denying any fee/expense recovery to employee. An appeal ensued.
The appeal pitted sections 3856(b) and 3856(c). Section 3856(b) allows priority to the employee’s attorney’s fees and costs over both the employer’s lien and employee’s remaining net damages award where the employee’s attorney is entirely responsible for obtaining the third-party recovery. In contrast, section 3856(c) also prioritizes attorney’s fees over both the employer’s compensation setoff and the employee’s damages award, but contemplates involvement of both employer and employee in securing recovery against the third-party and results in recovery as measured by the benefit realized by each party (with (c) not helping employee because employee obtained a judgment less than the lien assigned to the defense).
With respect to section 3856(b), the crucial issue was interpreting what was meant by “prosecuted by the employee alone.” The majority argued that this meant the entire litigation process, while the dissent opined it meant who prosecuted the matter to ultimate judgment. Both opinions looked at “active participation” cases, but the real crux came to this: prosecuted to what juncture? The majority found the case was prosecuted by both employer and employee, so subdivision (c) applied—employer was far from a “tag along” unlike cases finding there was no employer prosecution where employee did all the heavy lifting. The defense, however, saw things differently because it was only the employee who prosecuted the case to judgment in light of the fact employer was no longer a party to the action when the judgment was obtained. Because a employee’s attorney can still recover fees from the liened portion of a judgment where the lien has been assigned to a third party, subdivision (b)--according to the dissent--should allow for fee/litigation expense recoupment.