DAVID L. SUNDERLAND, Employee, v. PETERSON SHEET METAL and FEDERATED MUTUAL INS. CO., Employer-Insurer.
WORKERS= COMPENSATION COURT OF APPEALS
JUNE 6, 2000
ATTORNEY FEES - EXCESS FEES. The employee=s attorney is not limited to fees of $13,000.000 for his representation of the employee with respect to his May 6, 1996 work-related injury. The parties agreed that payment of additional fees to the employee=s attorney are to be treated as excess attorney fees. The petition is, accordingly, referred to the Office of Administrative Hearings for a determination of the amount of attorney fees to which the employee=s attorney may be entitled considering the Irwin factors and the employee=s objection.
Referred to OAH for hearing.
Determined by: Johnson, J., Wheeler, C.J., and Pederson, J.
David Sunderland, the employee, sustained a low back injury on May 6, 1996, while working for Peterson Sheet Metal, the employer. The employer and its insurer, Federated Mutual Insurance Company, accepted liability for the injury and paid various workers= compensation benefits, including wage loss and medical benefits.
In 1996, the employee filed two Rehabilitation Requests seeking a change of QRC and a rehabilitation consultation and filed a Medical Request seeking payment of the bill of Dr. David Kretzschmar. The employee also filed another Rehabilitation Request seeking determination of the suitability of a job offered by the employer. In March 1997, the employee filed a claim petition seeking 10 percent permanent partial disability benefits. The matters were consolidated, and the case was heard by Compensation Judge John E. Jansen. In a Findings and Order served and filed October 21, 1997, the compensation judge found the employer=s job offer was not suitable, the employee was entitled to a rehabilitation consultation, the employee had not reached maximum medical improvement (MMI), the request for permanent partial disability benefits premature, and the medical expenses requested were reasonable and necessary. The judge awarded wage loss, medical and rehabilitation benefits and ordered attorney fees withheld from the wage loss benefits. By decision dated May 1, 1998, the Workers= Compensation Court of Appeals affirmed the compensation judge=s award of benefits.
In January 1999, the parties entered into a Stipulation for Settlement which settled all of the employee=s claims against the employer and insurer through the date of the stipulation. In exchange for this settlement, the employee was paid $8,150.00 from which $1,830.00 was withheld for attorney fees. In addition, the employer and insurer paid the employee=s attorney, Mr. John P. Bailey, Roraff  attorney fees of $1,400.00. An Award on Stipulation was filed on January 27, 1999.
In February 1999, the employee filed a second claim petition seeking temporary partial disability benefits from October 30, 1998. A Rehabilitation Request, filed in April 1999, was consolidated with the claim petition. The case was heard by Compensation Judge Peggy A. Brenden on August 3, 1999. In a Findings and Order filed September 14, 1999, the compensation judge awarded temporary partial disability benefits from January 28, 1999 to the date of hearing and ordered the QRC to proceed with retraining options. The employer and insurer appealed to the Workers= Compensation Court of Appeals. Thereafter, the parties entered into a second Stipulation for Settlement. The stipulation provided for a full, final and complete settlement of all the employee=s claims against the employer and insurer resulting from the May 7, 1996 injury, except claims for medical care and treatment causally related to the personal injury. In exchange, the employer and insurer agreed to pay the employee the sum of $68,000.00. From this payment, the employee agreed to pay his attorney, Mr. Bailey, attorney fees of $13,000.00. In the stipulation, the parties Aacknowledged that the payment of attorney=s fees represents payment of additional fees under Irwin and Friedges cases. All parties are aware of the claim for additional attorney=s fees and no party has an objection to the attorney fee claimed.@ (Stipulation for Settlement, p. 7.)
On November 22, 1999, Mr. Bailey filed a Petition for Excess Attorney Fees claiming total attorney fees of $20,218.75. The petition stated Mr. Bailey was previously paid attorney fees of $7,218.75, including contingent fees and Roraff fees. By response dated November 17, 1999, the employee stated he had no objection to the payment of excess attorney fees. In their response filed November 29, 1999, the employer and insurer also stated they had no objection to the payment of excess attorney fees.
The Stipulation for Settlement was submitted to the Workers= Compensation Court of Appeals on December 8, 1999. On December 17, 1999, the court issued a Partial Award on Stipulation and Order for Briefing Schedule. This court approved the Stipulation for Settlement, in part, and directed the employer and insurer to pay the employee the sum of $55,000.00 in settlement of the employee=s claims as provided by the stipulation. The employer and insurer were ordered to pay to Mr. Bailey attorney fees of $5,781.25 plus costs. The insurer was directed to retain in its possession the balance of the settlement amounting to $7,218.75 pending further order of the court. Finally, the court allowed any party to file a brief dealing with the issue of payment of attorney fees in excess of the $13,000.00 limit imposed by Minn. Stat. ' 176.081 (1992). No party filed a brief.
On March 30, 2000, the employee wrote a letter to the Workers= Compensation Court of Appeals stating he objected to John P. Bailey=s receipt of attorney fees in excess of $13,000.00. The employee requested the court to release to him the balance of the settlement of $7,218.75 presently held in escrow by Federated Mutual Insurance Company.
Attorney Bailey agreed he was paid $7,218.75 in attorney fees prior to the 1999 Stipulation for Settlement. The 1999 settlement agreement provides for payment of an additional $13,000.00 in attorney fees for a total of $20,218.75. All fees relate to the May 6, 1996 injury. This court previously ordered payment of $5,781.25 in fees to Mr. Bailey. Thus, the employee=s attorney has, to date, received $13,000.00 in attorney fees. Mr. Bailey seeks the additional $7,218.75 in fees provided by the settlement. This request exceeds the limitation on fees imposed by Minn. Stat. ' 176.081, subd. 1(b).
In Irwin v. Surdyk=s Liquor, 599 N.W.2d 132, 59 W.C.D. 319 (Minn. 1999), the supreme court held that Minn. Stat. ' 176.081 (1995) is unconstitutional to the extent it impinges on the inherent power of the court to oversee attorney fees. In Clark v. Dick=s Sanitation, slip op. (W.C.C.A. May 16, 2000) this court held, based on Irwin, that the limit on attorney fees of $13,000.00 per injury established by Minn. Stat. ' 176.081, subd. 1(b) is unconstitutional. Mr. Bailey is not, therefore, limited to attorney fees of $13,000.00 for his representation of the employee relative to the May 6, 1996 personal injury.
Neither Irwin nor Clark resolve the question of how attorney fees, payable by the employee in excess of $13,000.00 per injury, are to be determined. One method is to treat all attorney fees payable by the employee in excess of $13,000.00 per injury as Aexcess fees.@ This approach would require the employee=s attorney to prove entitlement to such fees. Applying the Irwin factors, a compensation judge would decide the attorney=s entitlement to all fees in excess of $13,000.00 per injury. A second method would treat all fees as contingent under the 25/20  formula up to $13,000.00 per case. This approach would permit the employee to enter into a retainer agreement with an attorney providing for payment of attorney fees up to $13,000.00, based on the 25/20 formula, for each case.
We need not resolve that issue in this case, however. Neither the employee, employer/insurer or Mr. Bailey contend the attorney fees requested in this case are based solely on the 25/20 formula. The parties here agreed that payment of attorney fees to Mr. Bailey exceeding $13,000.00 per injury are to be treated as excess attorney fees. This conclusion is clear from the Stipulation for Settlement and from Mr. Bailey=s Petition for Excess Attorney=s fees. The petition specifically states Mr. Bailey is claiming total fees of A$20,218.75 of which $7,218.75 is claimed as excess attorney fees.@ (Pet. for Excess Attorney Fees.) This court must give effect to the intent of the parties in the settlement.
Accordingly, the Petition for Excess Attorney=s Fees is referred to the Office of Administrative Hearings for a hearing on the request for excess attorney fees. The compensation judge shall determine the amount of attorney fees in excess of $13,000.00 to which Mr. Bailey may be entitled considering the Irwin factors and the employee=s objection.
 Roraff v. State, Dep't of Transp., 288 N.W.2d 15, 32 W.C.D. 297 (Minn. 1980).
 Minn. Stat. ' 176.081, subd. 1(b) states: A[A]ll fees for legal services related to the same injury are cumulative and may not exceed $13,000.@
 Prior to its repeal in 1995, Minn. Stat. ' 176.081, subd. 2, provided for what were commonly referred to as excess fees.
 Minn. Stat. ' 176.081, subd. 1(a) provides for fees of 25 percent of the first $4,000 of compensation awarded to the employee and 20 percent of the next $60,000 of compensation. This is the so-called 25/20 formula.