CALIFORNIA ATTORNEY'S FEES

Section 998, Workers’ Compensation: 2/2 DCA Decides § 998 Is To Be Applied Before Lab. Code § 3856 In Determining If 998 Offeror Obtained Postoffer Costs Such That A Workers’ Comp. Fee Recovery Or Lien Is Not Factored Into The Net Judgment Calculus

2/2 DCA Reconciled Two Statutory Schemes In Coming To Its Conclusion.

            In Oakes v. Progressive Transportation Services, Case No. B305535 (2d Dist., Div. 2 Nov. 10, 2021) (partially published; 998 discussion published), a plaintiff employee was hurt by an employee of another company in a rear-end car accident, and plaintiff former employer’s workers compensation insurance carrier paid for various medical treatments.  Plaintiff then sued as defendants both the employee who hit him as well as that employee’s employer for negligence and negligence per se.  Plaintiff, although receiving a positive judgment through a jury trial, had nixed a prior CCP § 998 defense offer, with the question being whether plaintiff employee’s Labor Code section 3856 contingency lawyer fee recovery should be deducted from the judgment to arrive at a new number for purposes of seeing if the 998 offeror beat the judgment.  The 2/2 DCA had to reconcile two schemes, section 998 and Labor Code section 3856.  It determined that section 998 was applied first, which meant that the calculus went this way: (1) jury verdict amount plus plaintiff’s preoffer costs before the 998 offer; and (2) deduction of the defense 998 offer postoffer costs, to arrive in a net judgment amount.  Once that was done, the resulting judgment was in defendant’s favor because the postoffer costs ate up the “gross initial” judgment such that there was no judgment for lawyer contingency fees or employer’s worker’s compensation lien.  Put another way, section 988 took precedence over Labor Code section 3856.

Worker’s Compensation: S.F. State University Lecturer/Workers Comp. Applicant Denied Fees Based On 2014 Amended Version of Labor Code Section 4064(c)

 

Timing Is Everything—Applicant Would Have Recovered Fees Under Pre-2013 Version of Amended Statute.

     For all of our followers, we have one for worker’s compensation practitioners—a category we do not see come up in many appellate decisions (it usually comes up through writ proceedings).

     In San Francisco State University v. Workers’ Compensation Appeals Bd. (WCAB) and Jones, Case No. A141793 (1^st Dist., Div. 3 Sept. 29, 2014) (unpublished), a S.F. State lecturer who was a worker’s comp. applicant representing herself for a time in worker’s compensation proceedings claimed entitlement to attorney’s fees under Labor Code section 4064(c). In a very convoluted chain of events, a worker’s comp judge (WCJ) first granted fees under section 4064, the WCAB deferred consideration of the fee issue until later, the WCJ denied fees in July 2013 (after the 2013 effective date of an important amendment to section 4064), and WCAB awarded applicant fees under the pre-2013 version of section 4064, prompting an appeal by S.F. State University as a writ petitioner.

     Section 4064, before 2013, allowed fees to an unrepresented applicant at the time an application is filed as against employer if the employer filed an application for adjudication, covering fees incurred by the employee in connection with the application for adjudication. (This contemplates that the unrepresented applicant will later retain an attorney, which happened here when a deposition was scheduled.) Effective 2013, the triggering event for fees changed to a situation where an employer files a declaration of readiness. However, the 2013 amendment did apply to pending matters, but could not be used to impact any prior final award of workers’ compensation benefits. In this particular case, employer did file the application for adjudication (which did allow for fees under the pre-2013 statute) but employee filed the declaration of readiness to proceed (which did not allow for fees under the 2013 statute given that employer did not file the declaration).

     So, the dispositive issue boiled down to whether there was a final award that could not be disturbed before the effective 2013 date of amended section 4064. The appellate court vacated the WCAB award of fees to applicant, because the WCAB prior deferment order of the fees ruling meant that there was no such finality and the 2013 amended statute applied, with applicant not entitled to recover fees thereunder because she (not employer) filed the declaration of readiness.

Worker’s Compensation: Worker’s Claim To Recover Fees/Litigation Expenses Did Not Prevail Where Participating Employer During Litigation Process Assigned Lien To Third Party And Worker Did Not Obtain Judgment Exceeding Lien, Although Employer

 

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 (6^th 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.

Workers’ Compensation: 4th District, Division 2 Explains How Attorney’s Fees Come Out Of Lien First

Trial Court Did Not Err In Reducing Worker’s Compensation Lien To Pay Attorney’s Fees

     Plaintiff Collins was an employee of the crew of Hulcher Services, Inc., a contractor hired by railroads to clear tracks and rerail train cars following derailments.  He was severely injured when a block from a Hulcher crane fell on his head, after Hulcher responded to the derailment of a Union Pacific train.  A jury awarded significant damages against Union Pacific, finding Collins to be a “special employee” of the railroad.  Union Pacific appealed, arguing, among other things, that the trial court erred in reducing the worker’s compensation lien to pay attorney’s fees.  Collins v. Union Pacific Railroad Company, E051218 (4th Dist. Div. 2 July 11, 2012) (Ramirez, P.J., author) (certified for publication).

     East bound Union Pacific RR. March, 1943.  Jack Delano, photographer.  Library of Congress.

     Affirming the judgment in full, the Court of Appeal explained, as to the attorney’s fees issue, that the trial court properly reduced the workers’ compensation lien to pay for attorney’s fees. 

     Labor Code section 3856 allows the employer to seek recoupment for benefits paid or owed to the employee, by suing the third party tortfeasor directly, or by asserting a lien against the employee’s tort recovery.  The rationale is that this prevents the employee from obtaining a double recovery by retaining the third party damages and workers’ compensation benefits for the same injuries.  The employer may then assign its right to reimbursement of workers’ compensation benefits paid to plaintiff to the defendant.  Presumably, this occurred here, explaining why Union Pacific did not want attorney’s fees paid from the lien.

     If the employee prosecutes the action alone, then the employee is entitled to reasonable attorney’s fees based upon services rendered by the employee’s attorney in effecting recovery for the benefit of the employee and the employer.  “The trial court did not err in awarding attorney’s fees, payable out of the lien amount.”  

     Practice Tip:  If you have a workers’ comp attorney’s fees issue, we recommend reading the statutes and cases.  Facts, such as the employer’s fault for the injury, will affect recoupment.

Costs/Prevailing Party: Trial Court’s Dismissal Of Case Based On Worker’s Compensation Exclusivity Defense Did Not Deprive It Of Jurisdiction To Award Costs To Prevailing Party

Fifth District So Decides, But Lays Down No Absolute Rule On Subject Matter Jurisdiction Issue.

     Brown v. Desert Christian Center, Case No. F060139 (5th Dist. Mar. 17, 2011) (certified for publication) involved a personal injury that was dismissed on the jurisdictional defense that the involved injuries were within the exclusive province of the worker’s compensation system. Prevailing defendant moved for costs of $7,909.88 (mainly deposition costs), but the lower court denied the request based on the thesis that it lacked jurisdiction to award costs--after all, it found a lack of jurisdiction when dismissing the case.

     The Fifth District reversed the fee denial.

     Although finding that an absolute lack of subject matter jurisdiction might preclude a costs award in the right circumstances (but not reaching the issue), the appellate court found that the trial court did have jurisdiction to determine the exclusivity defense such that costs were in order. The judgment of dismissal carried enough jurisdiction, so to speak, so that the award of costs was a proper incident to the trial court’s power to adjudge the jurisdictional defense in the first instance. Although distinguishing the older case of Gutting v. Globe Indemnity Co., 119 Cal.App. 288, 289 (1931), the Fifth District panel made clear it did not favor the reasoning in this decision.

     We bloggers predict that there will be evolving jurisprudence on this issue.

      Accident case - Union Hospital. Molla Mesuretta, 17 years. Weaver at Sagamore Mill. Worked two years. Laceration and partial evulsion of tip of finger and nail. Hurt September 1915 while cleaning loom in motion. "They all clean when the machine is going." She will always be handicapped. Not able to go back yet. Finger is tender. Nail split and finger tip cit to the quick. Wages $7.50; compensation $4.67. Finger that she needs most in weaving was hurt.  Location: Fall River, Massachusetts.  Library of Congress.

Workers’ Compensation: Recent Article Suggests That WC Premiums Have Gone Up Recently Due, In Part, To Higher Legal Costs

 

Editorial from The Orange County Register So Opines.

     As reported in an August 24, 2010 editorial printed in The Orange County Register’s Opinion section, there is a pending proposal to hike workers’ compensation premiums for businesses up to 29.6% for the “pure premium” rate (the rate businesses pay their insurers for coverage). If approved, it would reflect costs increases between January 1, 2009 and January 1, 2011.

     The editorial goes on to analyze why the premiums may need to go up.

     Earlier, in 2004, workers’ compensation reforms were passed in California to curtail rising costs. Central to the reforms was adoption of American Medical Association (AMA) guidelines used by other states to judge the severity of an injury. Although higher medical costs and the economy (laid off people file more claims as they leave) were contributing factors, higher legal costs also are contributing to the proposed surge in rates. Jerry Azevedo reportedly told The Register that two recent cases—Alvaraz-Guzman (Alvaraz v. Environmental Recovery Services and Guzman v. Milpitas Unified School District) and Ogilvie (Ogilvie v. San Francisco)—led to higher legal expenses, because they allowed workers’ compensation attorneys to surmount AMA guidelines. Although the costs data is not broken down, The Register roughly estimates that increased legal fees well could account for nearly half of the increase in costs.

Workers compensation: 

“Union Hospital - Lewis Palmer - 14 years - 455 Peckham St. - Rope hauler in Estes Mill, making mop rope. Began April 25th. Hand cut by rope May 18th. Laid up one month. Wages $4.60 - compensation $4. Goes on Sunday hikes with his crowd. Location: Fall River, Massachusetts.”  Lewis Wickes Hines, photographer.  June 22, 1916.  Library of Congress.

Workers’ Compensation: Attorneys Have Standing To Seek Interest On Attorney’s Fees Award . . .

. . . But The Fees Must Be Requested Before the WCAB or Through Appellate Writ, Not Through Superior Court Civil Proceedings.

     Here is one of the rare appellate cases we review in the workers’ compensation area of the law.

     In Koszdin v. State Compensation Ins. Fund, Case No. B214481 (2d Dist., Div. 7 July 5, 2010) (certified for publication), Justice Zelon—on a behalf of a 3-0 panel—concluded that attorneys representing injured workers in proceedings before the Workers’ Compensation Appeals Board (WCAB) have standing to seek interest on attorney’s fees awarded directly to them by the WCAB. However, here is the additional rub (ah, yes, like Columbo, there is still one more question to consider). 

The rub in this case was that the interest must be included in the WCAB order for purposes of allowing the superior court to entertain the claims for unpaid interest from a jurisdictional standpoint. Otherwise, the attorneys were relegated to seeking redress for unpaid interest before the WCAB or, if appropriate, by filing a writ review petition before the proper appellate court. So, the superior court did not err in dismissing a demurrer by the attorneys with prejudice.

     BLOG UNDERVIEW—The counseling point is obvious, even in this specialized area. Make sure that the order has a specific directive for interest on all awards (fees awards included).

Workers Compensation: No Fees Awardable Where An Employer Or Insurer Disputes A Specific Treatment Request For Applicant Employee Previously Awarded Future Industrial Injury Treatments

California Supreme Court Construes Scope of Labor Code Section 4607.

     Labor Code section 4607 provides that the Workers’ Compensation Appeals Board (WCAB) can assess reasonable attorney’s fees as a cost upon a party who unsuccessfully institutes proceedings to terminate an award of an employee/applicant for continuing medical treatment. The issue before the California Supreme Court was whether section 4607 allowed for fee recovery if a party unsuccessfully challenges a specific treatment request rather than requesting a termination of a future treatment award.

     In Smith v. WCAB, Case No. S150528 (Cal. May 11, 2009) (published), our state supreme court answered “no” to the issue. The statutory language was clear in only covering termination requests, which challenge the continuing necessity for the WCAB’s award of future treatment. By contrast, the specific treatment contest only challenges the reasonableness of the specific sought-after medical care—far different from a termination of care altogether. This result was buttressed by section 4651.3, which authorizes a fee award where an employer unsuccessfully files a petition alleging that an employee’s disability has decreased or terminated. “The fact that the Legislature used both ‘decrease’ and ‘terminate’ in section 4651.3, but only ‘terminate’ in section 4607 suggests that it knew how, if it so chose, to fashion a broader remedy.” (Slip Opn., at pp. 9-10.)

     This was a 7-0 decision authored by Justice Moreno.

Workers’ Compensation: Losing Employer On Appellate Writ Petition Owes Supplemental Attorney’s Fees To Employee’s Counsel

Fifth District So Holds In By-the-Court Unpublished Opinion.

     The only way to review a decision of the Workers’ Compensation Appeal Board is through a writ petition to the appellate court. However, if there is no reasonable basis for a petition brought by an employer, the employer may have to pay a supplemental award of reasonable attorney’s fees to employee’s counsel for having to answer a meritless writ petition. The Fifth District reminded us of this in Sensient Technologies Corp. v. WCAB, Case No. F056325 (5^th Dist. Dec. 30, 2008) (unpublished by-the-court), citing Crown Appliance v. Workers’ Comp. Appeals Bd., 115 Cal.App.4^th 620, 627 (2004).

Workers' Compensation Fee Award: Law Firm Not Required To Make Restitution of Fee Award Where Worker Client Engaged in Fraud, But Law Firm Not Complicit

     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.4^th 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.4^th 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.)