Third District Affirms Decision of the Workers' Compensation Appeal Board (WCAB) Not Requiring Fee Restitution from Worker's Attorneys.
We would like to introduce workers' compensation practitioners to our blog. We examine a recent unpublished decision of interest on a fee restitution request, which was denied by the WCAB and subsequently the Third District Court of Appeal.
In Sutter Memorial Hospital v. WCAB, Case No. C058699 (3d Dist. Nov. 10, 2008) (unpublished), Hospital had stipulated in WCAB proceedings with an injured worker that she had suffered 100% permanent disability as a result of a back injury incurred during her course of employment as an occupational therapist at Hospital. Hospital also agreed to pay workers' Attorneys $69,134 as the reasonable value of their legal services in the WCAB proceeding. Later, Hospital obtained a reduction of workers' permanent disability from 100% to 41% based on sub-rosa films showing that worker over-represented her level of disability. Attorneys were found to have played no part in the over-representations. Worker was ordered to make restitution of $60,092.45, with Hospital also seeking restitution of fees from Attorneys. WCAB found restitution unwarranted based on Attorneys' noncomplicity with worker's over-representations.
The Third District agreed, in a 3-0 opinion authored by Justice Cantil-Sakauye.
After denying a statute of limitations challenge, the appellate panel dismissed the notion that allowing Attorneys to retain 200% of what worker ultimately recovered in workers'compensation was unjust under the circumstances.
Initially, Justice Cantil-Sakauye observed that the right to receive attorney's fees awards for securing compensation for injured workers is vested in the Legislature by the California Constitution, with the Legislature vesting these determinations with the WCAB. (Vierra v. Workers' Comp. Appeals Bd., 154 Cal.App.4th 1142, 1147 (2007).) In turn, Labor Code section 4906 emphasizes that attorney's fees must be reasonable in nature, with the WCAB establishing such fees. (See also Cal. Code Regs., tit. 8, § 10775.)
Under normal circumstances, the Third District did not disagree that the fee award to the Attorneys, usually in the 9-12% range of the worker indemnity, would be excessive because the $69,134 was more than double what the worker ultimately received after having to make restitution. However, a different standard applied under the circumstances. Citing to American Psychometric Consultants, Inc. v. WCAB, 36 Cal.App.4th 1626, 1647 (1995), the Third District found that it would detrimentally impact attorneys' willingness to work these types of cases should they face the specter of disgorgement based on fraud over which they had no control. Justice Cantil-Sakauye put it this way: "… although [Attorneys] were 'enriched' by the payment of attorney fees, they were not 'unjustly enriched' and were therefore entitled to keep what they earned in representing the [worker]. Here, as in American Psychometric, ordering restitution would have a detrimental impact on the workers' compensation system. Attorneys who represent applicants in good faith would be discouraged from taking on workers' compensation cases due to the uncertainty about attorney fees awards." (Slip Opn., at p. 11.)
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