ERWIN T. TUCKER, Employee, v. PLYMOUTH PLUMBING and GENERAL CASUALTY INS. CO., Employer-Insurer/Appellants.
WORKERS= COMPENSATION COURT OF APPEALS
MAY 25, 2000
ATTORNEY FEES - EXCESS FEES. Pursuant to Irwin v. Surdyk=s Liquor, 599 N.W.2d 132, 59 W.C.D. 319 (Minn. 1999), the $13,000 Aper case@ limit on defense legal fees is unconstitutional, and employers and insurers need not receive approval to pay more than $13,000 in fees for legal services.
Petition for attorney fees dismissed.
Determined en banc.
Compensation Judge: Jeanne E. Knight
DEBRA A. WILSON, Judge
The employer and insurer appeal from the compensation judge=s decision denying their petition for approval of attorney fees exceeding $13,000. We vacate the judge=s decision and dismiss the petition for fees.
On May 24, 1996, the employee sustained a work-related injury while employed by Plymouth Plumbing [the employer], which was then insured for workers= compensation purposes by General Casualty Insurance Company. Litigation ensued, and the employee=s claims against the employer and insurer were eventually settled on a full, final, and complete basis, with the exception of future medical expense claims.
On September 13, 1999, counsel for the employer and insurer filed a petition for attorney fees, seeking approval for payment of $15,062.06 for work performed by the firm, on behalf of the employer and insurer, in connection with the employee=s 1996 work injury. According to the fee petition, controversies in the matter gave rise to the filing of two claim petitions, two rehabilitation requests, a request for formal hearing, a notice of request for retraining, a medical request, two petitions to discontinue, two administrative conferences, one hearing, and two stipulations for settlement. The fee petition also indicated that counsel=s firm had represented the employer and insurer in the matter since September of 1996.
No objection to the fee request was filed by any party. However, in an order issued on November 22, 1999, the compensation judge denied approval of fees in excess of $13,000. The employer and insurer appeal.
STANDARD OF REVIEW
"[A] decision which rests upon the application of a statute or rule to essentially undisputed facts generally involves a question of law which [the Workers' Compensation Court of Appeals] may consider de novo." Krovchuk v. Koch Oil Refinery, 48 W.C.D. 607, 608 (W.C.C.A.) 1993).
Prior to 1992, the Minnesota Workers= Compensation Act contained no monetary limits or provisions concerning attorney fees payable by an employer and insurer. However, in rewriting portions of Minn. Stat. ' 176.081, the 1992 legislature added the following language: AEmployers and insurers may not pay attorney fees or wages for legal services of more than $13,000 per case unless the additional fees or wages are approved under subdivision 2.@ Minn. Stat. ' 176.081, subd. 1(e) (1992) (emphasis added). With regard to legal work performed on behalf of an injured employee, the 1992 amendments provided in part that A[a]ll fees for legal services related to the same injury are cumulative and may not exceed $13,000, except as provided by subdivision 2.@ Minn. Stat. ' 176.081, subd. 1(b) (1992) (emphasis added). Subdivision 2, already in the statute, provided criteria for requesting attorney fees Ain excess of the amount authorized in Subdivision 1,@ Minn. Stat. ' 176.081, subd. 2, and subdivision 5, also already in the statute, delineated principles to be considered in determining so-called excess fees, including the following:
(d) In determining a reasonable attorney fee, important factors to be taken into account are: the amount involved, the time and expense necessary to prepare for trial, the responsibility assumed by counsel, the expertise of counsel in the workers= compensation field, the difficulties of the issues involved, the nature of proof needed to be adduced and the results obtained. The amount of money involved shall not be the controlling factor.
Minn. Stat. ' 176.081, subd. 5(d). Thus, following the 1992 amendments, attorneys for both sides in a workers= compensation dispute were subject to a $13,000 fee limit but could request and potentially receive Aexcess fees@ under the guidelines established by Minn. Stat. ' 176.081, subds. 2 and 5. The 1992 legislation provided no explanation for limiting fees on a Aper case@ basis for employers and insurers but on a Asame injury@ basis for employees, and Aper case@ was not defined.
In 1995, the legislature amended Minn. Stat. ' 176.081 again, repealing subdivisions 2 and 5 and deleting the reference to subdivision 2 in subdivision 1(b), the provision establishing the $13,000 per injury fee maximum for employees= attorneys. However, subdivision 1(e), establishing the $13,000 Aper case@ maximum for employers and insurers, continued to refer to the now repealed subdivision 2 until 1997, when the legislature finally deleted the obsolete language, leaving subdivision 1(e) to read, simply, Aemployers and insurers may not pay attorney fees or wages for legal services of more than $13,000 per case.@
The 1995 amendments also placed strict limits on fees payable for work performed on an employee=s behalf in connection with a medical dispute - - Roraff fees - - and the supreme court determined, in Irwin v. Surdyk's Liquor, 599 N.W.2d 132, 59 W.C.D. 319 (Minn. 1999), that the absolute statutory limit on such fees was an unconstitutional violation of the doctrine of separation of powers. Id. at 142, 59 W.C.D. at 334. In considering the employer and insurer=s fee petition in the present matter, the compensation judge concluded that Irwin was inapplicable because Irwin Adid not address the limit of fees for representing the employer and insurers@; A[a]s the law currently stands, the employer and insurer=s attorney fee is limited to $13,000 per case.@ The judge therefore denied Athe employer and insurer=s claim for attorney fees in excess of $13,000.@
On appeal, the employer and insurer argue initially that the Aper case@ language contained in Minn. Stat. ' 176.081, subd 1(e), does not limit the fees payable in the present matter because the claimed fees do not exceed $13,000 for any single case or Amatter for trial.@ This argument, which was not addressed by the compensation judge, may have some merit, given the number of pleadings and proceedings associated with the employee=s 1996 work injury. However, as previously indicated, the legislature provided no guidance with respect to its Aper case@ limit on employer and insurers= fees versus the Asame injury@ limit on employees= fees, and we see no reasonable way to develop a Aper case@ definition for employers and insurers that would fairly take into account the nature of workers= compensation practice in this state.
More importantly, perhaps, we think that the compensation judge erred in rejecting application of Irwin to the present matter. It may be true, as the compensation judge reasoned, that the narrow issue in Irwin was the constitutionality of the legislature=s strict limitation on Roraff fees. However, the court=s rationale, and indeed its holding, is equally applicable to the strict $13,000 Aper case@ limit on employer and insurers= fees established by Minn. Stat. ' 176.081, subd. 1(e). As the court stated,
This [statutory] limitation goes beyond merely indicating what the legislature deems desirable. . . . Legislation that prohibits this court from deviating from the precise statutory amount of awardable attorney fees impinges on the judiciary=s inherent power to oversee attorneys and attorney fees by depriving this court of a final, independent review of attorney fees. This legislative delegation of attorney fee regulation exclusively to the executive branch of government violates the doctrine of separation of powers of Minn. Const. art. III ' 1. Accordingly, to the extent it impinges on our inherent power to oversee attorneys and attorney fees and deprives us of a final, independent review of attorney fees, we hold that section 176.081 is unconstitutional.
Id. at 142-43, 59 W.C.D. at 334. Pursuant to Irwin, therefore, the $13,000 limit contained in Minn. Stat. § 176.081, subd. 1(e), is unconstitutional. See also Clark v. Dick's Sanitation, slip op. (W.C.C.A. May 16, 2000) (the $13,000 per injury limit on attorney fees payable to employees= attorneys is unconstitutional pursuant to Irwin).
Finding Irwin applicable to the $13,000 per case fee limit leaves us with two alternatives for disposition of counsel=s fee petition here. The first alternative is to apply Irwin=s direction, for Roraff fee cases, to determine a Areasonable@ fee for the work performed, considering not only the Astatutory guidelines@ but Athe amount involved, the time and expense necessary to prepare for trial, the responsibility assumed by counsel, the experience of counsel, the difficulties of the issues, the nature of the proof involved, and the results obtained.@ Irwin at 142, 59 W.C.D. at 336. The second alternative is to simply allow the interested parties - - defense counsel and his or her client - - to determine the fee arrangements through mutual agreement. After thorough consideration, we conclude that the second alternative is most consistent with the underlying purpose of the statute.
The supreme court has explained on numerous occasions that the purpose of Minn. Stat. ' 176.081 is, first, to
protect compensation claimants from excessive legal charges which might otherwise severely deplete funds badly needed by the employee and his or her dependents. Second, the statute is designed to insure that attorneys who represent compensation claimants will receive reasonable compensation for their efforts, and is in furtherance of the public policy of this state that injured employees have access to representation by competent counsel knowledgeable of the intricacies of the workers= compensation law.
Kahn v. State, University of Minnesota, 327 N.W.2d 21, 24, 35 W.C.D. 425, 429 (Minn. 1982), citing Rock v. Bloomington School Dist. #271, 269 N.W.2d 360, 363, 31 W.C.D. 64, 68 (Minn. 1978). See also Mack v. City of Minneapolis, 333 N.W.2d 744, 35 W.C.D. 875 (Minn. 1983). Requiring defense counsel to prove entitlement to fees exceeding $13,000 would in no way serve the statutory aim. It is evident that the 1992 and 1995 fee provisions are directed almost exclusively at protecting claimants; aside from the $13,000 per case limit, there are no specific statutory restrictions on defense fees. The lack of defense fee regulation in the remainder of Minn. Stat. ' 176.081, is undoubtably the result of legislative recognition that employers and especially insurers are sophisticated clients well able to protect their interests through arms-length negotiations for legal services. In the rare cases where a dispute over fees for services rendered cannot be resolved through further negotiation, review by the Workers= Compensation Court of Appeals is available pursuant to Minn. Stat. ' 176.081, subd. 3, with further review on certiorari by the supreme court, or the matter may be taken to district court.
Because, under our decision, no approval of the requested fees is required, we vacate the compensation judge=s decision and dismiss the petition for fees.
 Act effective July 1, 1992, ch. 510, art. 2, ' 1, 1992 Minn. Laws 589, 599.
 Act effective July 1, 1992, ch. 510, art. 2, ' 1, 1992 Minn. Laws 589, 598.
 Act of May 25, 1995, ch. 231, art. 2, '' 45, 110, 1995 Minn. Laws 1977, 2036 and 2072.
 This deletion was made in a corrections bill, ch. 7, art. 1, ' 80, 1997 Minn. Laws 21, 55.
 Roraff v. State, Dep't of Transp., 288 N.W.2d 15, 32 W.C.D. 297 (Minn. 1980). Pursuant to Minn. Stat. ' 176.081, subd. 1(a) and subd. 1(a)(1) (1996), all fees, including fees for obtaining medical and rehabilitation benefits, are subject to calculation using the 25/20 formula, based on the dollar value of the benefits awarded, where ascertainable.
 Citing the definition of Acase@ contained in Webster=s Dictionary of the English Language, 1987.
 Litigation often proceeds piecemeal, sometimes with consolidation of unrelated issues, sometimes without. In addition, defense counsel may be retained for advice before any real dispute even arises. If an issue is resolved without any formal proceedings, has defense counsel worked on a Acase@? If two pending matters are consolidated for hearing, is this one Acase,@ or two? How many Acases@ are involved if some claims settle, but others continue to trial?
 The only other provision indicating any legislative interest in defense fees, specifically, is Minn. Stat. ' 176.081, subd. 1(f) (1998), which reads as follows:
(f) Each insurer and self-insured employer shall file annual statements with the commissioner detailing the total amount of legal fees and other legal costs incurred by the insurer or employer during the year. The statement shall include the amount paid for outside and in-house counsel, deposition and other witness fees, and all other costs relating to litigation.