RONALD W. BORGAN, Employee/Appellant, v. BOB HEGLAND, INC., and MINNESOTA WORKERS' COMPENSATION ASSIGNED RISK PLAN/BERKLEY RISK ADM=RS, Employer-Insurer.
WORKERS= COMPENSATION COURT OF APPEALS
JUNE 12, 2002
ATTORNEY FEES - RORAFF OR IRWIN FEES. Where the compensation judge erroneously believed that previously-withheld attorney fees had already been paid to the employee=s attorney, and where the employer and insurer did not dispute payment of contingency fees, the compensation judge=s order is modified to include an order for payment of those fees already withheld from the employee=s temporary total disability benefits.
ATTORNEY FEES - RORAFF OR IRWIN FEES. In determining whether Roraff attorney fees are awardable, Minn. Stat. ' 176.081, subd. 1(a)(1), provides the contingency fee must be presumed adequate. The employee may rebut the presumption by proof that the contingency fee is inadequate to reasonably compensate the attorney for representing the employee in the dispute, applying the statutory guidelines and the seven-factor test set forth in Irwin v. Surdyk=s Liquor, 599 N.W.2d 132, 59 W.C.D. 319 (Minn. 1999).
ATTORNEY FEES - SUBSTANTIAL EVIDENCE. Where the compensation judge specifically stated that the withheld attorney fees Aplus ongoing fees from a flow of benefits, provides a reasonable attorney fee for services provided@ and the compensation judge could not know at the time of the hearing how long those fees would continue, the finding that the contingent fee was adequate and Roraff fees were inappropriate was premature.
Vacated in part and modified in part.
Determined en banc
Compensation Judge: Jennifer Patterson.
MIRIAM P. RYKKEN, Judge
The employee=s attorney appeals the compensation judge=s finding that contingent fees had been paid and that Roraff fees were not appropriate in this case since contingent fees were adequate to provide a reasonable fee for services to the employee=s attorney. We vacate in part and modify in part, and also order payment of partial reimbursement of attorney fees pursuant to Minn. Stat. ' 176.081, subd. 7.
On June 10, 2000, Ronald Borgan, petitioner, broke his ankle while working as a roofer at a private residence with Lance Pearson, uninsured subcontractor, where Bob Hegland, Inc. was the general contractor. On that date, Bob Hegland, Inc., was insured by the Minnesota Assigned Risk Plan, with claims administered by Berkley Risk Administrators Company.
On September 18, 2000, the petitioner filed a claim petition for workers= compensation benefits alleging that both Lance Pearson and Bob Hegland, Inc., were his employers at the time of his injury, naming the Special Compensation Fund as a party, and requesting workers= compensation benefits including temporary total disability from June 10, 2000, and continuing, medical expenses, and a rehabilitation consultation. The alleged employers and the Special Compensation Fund responded, arguing that the petitioner was an independent contractor, not an employee. A hearing was held on January 24, 2001, before Compensation Judge Jennifer Patterson. At the hearing, the parties stipulated that:
If the petitioner prevails in proving he was an employee on June 10, 2000, rehabilitation services will be provided to him and health care treatment of his right ankle provided through the date of hearing will be paid, or reimbursed, subject to the fee schedule, reserving disputes on line items[.]
(Finding 2g, Findings and Order, March 2, 2001.) In Findings and Order served and filed March 2, 2001, the compensation judge found that the petitioner was an employee of Bob Hegland, Inc., but that he was an independent contractor as to Lance Pearson. The compensation judge awarded temporary total disability benefits from June 10 through August 17, 2000, from January 9, 2001, the employee=s surgery date, through the hearing date of January 24, 2001, and ongoing after the date of the hearing, with payment for such benefits to be the responsibility of Bob Hegland, Inc. (employer) and Minnesota Workers= Compensation Assigned Risk Plan (insurer). The compensation judge did not order payment of attorney fees in the Findings and Order. There was no appeal from this decision.
On April 20, 2001, the employee=s attorney filed a statement of attorney=s fees for Roraff fees in the amount of $4,500.00, based on the employee=s litigated claim for medical benefits. The employer and insurer objected, contending that the employee=s claim was not made primarily for medical expenses or services. The employer and insurer contended that at the first hearing on the employee=s claim, they had stipulated that they had no objection to the reasonableness and necessity of medical treatment, and that they also had stipulated if the employee prevailed in his argument that an employment relationship existed, they would provide healthcare treatment, reserving disputes on line items.
On May 30, 2001, the employee=s attorney filed another statement of attorney fees alleging that the insurer had withheld $1,240.00 from temporary total disability benefits but had not yet paid those fees, and claiming up to $13,000.00 in contingent attorney fees. Both attorney fee statements were addressed at hearing on July 16, 2001, before Compensation Judge Patterson. At hearing, the employer and insurer stipulated the employee=s attorney=s hourly charge of $150.00 per hour was reasonable, and that the 29 hours spent by the employee=s attorney prior to the first hearing were reasonable. Also, at hearing the employer and insurer=s attorney agreed that contingent fees were appropriate in this case, and stated that they only disputed the employee=s claim for Roraff fees.
The compensation judge served and filed Findings and Order on September 6, 2001, incorporating by reference her March 2, 2001, Findings and Order. The compensation judge found that the employee=s attorney had provided 30 hours of legal services in this matter, 29 through the hearing, plus an additional hour on post-hearing matters. The compensation judge also found that the primary dispute at the January 2001 hearing was whether the petitioner was an employee or an independent contractor, and that another issue at that first hearing was the petitioner=s entitlement to temporary total disability. The compensation judge confirmed that at the first hearing, the parties had stipulated that the petitioner=s medical treatment would be paid if he were found to be an employee. The compensation judge noted that A[o]ther than obtaining copies of the treatment bills, no attorney hours were put in with respect to the medical bills in addition to the hours required for other issues in the case.@ (Finding 4.)
The compensation judge specifically found:
As of the Attorney Fee Hearing on July 16, 2001, the employee was being paid temporary total disability benefits on an ongoing basis and contingent legal fees through July 16, 2001 amounted to $1,640. Asof July 16, 2001, there was a flow of benefits out of which attorney fees were being held and paid.
(Finding 5.) The compensation judge concluded that the A$1,640 in attorney fees, plus ongoing fees from a flow of benefits, provides a reasonable attorney fee for services provided@ by the employee=s attorney through April 6, 2001, and that Roraff fees were not appropriate. The compensation judge noted in her memorandum that there were no medical issues in addition to the primary liability issue, and that when making her determination that Roraff fees were not appropriate, she took into consideration that reasonableness and necessity of the employee=s medical treatment was not disputed. The employee=s attorney appeals.
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).
In the Findings and Order, the compensation judge found that the employee was being paid temporary total disability benefits on an ongoing basis and that as of the date of hearing, Athere was a flow of benefits out of which attorney fees were being withheld and paid.@ (Finding No. 5.) Apparently based upon her belief that contingent fees already had been paid to the employee=s attorney, the compensation judge did not issue an order for payment of contingent attorney fees. The employee=s attorney argues that the compensation judge erred by failing to address his claim for contingent fees; we agree.
At hearing, the employer and insurer stated their position that ARoraff fees are not appropriate in this case. The only attorney fees that would be appropriate for this case are contingency fees.@ (T. 6.) It appears that the compensation judge relied upon that statement and erroneously believed that the contingent fees withheld by the employer and insurer, from temporary total disability benefits, had already been paid. In fact, on appeal, the employer and insurer state that payment of contingent fees is not disputed, Aalthough they have not yet been awarded.@ We therefore vacate that part of the compensation judge=s findings and order which states that the contingent fees were paid, and modify the order to award payment of the withheld contingent fees to the employee=s attorney.
Partial Reimbursement of Attorney Fees Pursuant to Minn. Stat. § 176.081, subd. 7.
The employee filed two attorney fee petitions, the first for Roraff fees and the second for contingent fees. In the second fee petition, the employee=s attorney included a claim for partial reimbursement of attorney fees pursuant to Minn. Stat. ' 176.081, subd. 7 (Subd. 7 fees), which provides that:
Award; additional amount. If the employer or insurer files a denial of liability, notice of discontinuance, or fails to make payment of compensation or medical expenses within the statutory period after notice of injury or occupational disease, or otherwise unsuccessfully resists the payment of compensation or medical expenses, or unsuccessfully disputes the payment of rehabilitation benefits or other aspects of a rehabilitation, plan, and the injured person has employed an attorney at law, who successfully procures payment on behalf of the employee or who enables the resolution of a dispute with respect to a rehabilitation plan, the compensation judge, commissioner, or the workers= compensation court of appeals upon appeal, upon application, shall award to the employee against the insurer or self-insured employer or uninsured employer, in addition to the compensation benefits paid or awarded to the employee, an amount equal to 30 percent of that portion of the attorney=s fee which has been awarded pursuant to this section that is in excess of $250.
In a letter sent to the compensation judge before the second hearing, the employee=s attorney also made a claim for Subd. 7 fees. However, this claim for fees was not raised as an issue at the hearing, nor was this claim addressed by the compensation judge in the Findings and Order. Since we have ordered payment of the withheld contingent attorney fees to the employee=s attorney, and since the employer had denied primary liability and Aunsuccessfully resist[ed] the payment of compensation,@ we also order payment of partial reimbursement of attorney fees, to the employee, pursuant to Minn. Stat. ' 176.081, subd. 7. See Minn. Stat. ' 176.081, subd. 3.
The compensation judge denied the employee=s claim for Roraff attorney fees. In her memorandum, the compensation judge stated:
The employee=s attorney obtained a good result for his client in proving primary liability for a work injury which involved establishing that an employment relationship existed on June 10, 2000. No additional hours were devoted to medical issues because there never were any medical issues in addition to the primary liability question. That is, the employer and insurer did not dispute the necessity or reasonableness of any of the health care treatment the employee received for his ankle and stipulated that the bills would be paid, subject to the fee schedule, once liability was proved. That no additional legal services were necessary to prove up the medical bills was an important factor in the determination that this is not an appropriate case for an award of Roraff fees.
(Memo., p. 6.) The employee contends the compensation judge=s determination of the Roraff claim is legally erroneous. We agree.
The employer and insurer=s primary defense in this case was that the appellant was an independent contractor, not an employee, and was not, therefore, entitled to either wage loss or medical benefits. They conceded that medical benefits were due if the appellant proved he was an employee rather than an independent contractor. Thus, the establishment of entitlement to medical benefits required no separate legal services apart from proof of primary liability for all the claimed benefits. This fact, however, does not mandate a conclusion that Roraff fees are not awardable.
In Peterson v. Everything Clean, Inc., 55 W.C.D. 126 (W.C.C.A. 1996), summarily aff=d (Minn. Aug. 26, 1996), the employee sought wage loss and medical benefits. The employer denied the employee sustained a personal injury during her employment but conceded the medical expenses were reasonable and necessary. Following a hearing, the compensation judge found the employee did sustain a personal injury and ordered payment of wage loss and medical benefits, together with Roraff fees. On appeal, the employer argued the award of Roraff fees was improper because the employee=s attorney provided no separate legal services to prove entitlement to the medical benefits and because the attorney could not separate the total time spent on the claim between the time spent for recovery of wage loss benefits and the time spent on the recovery of medical benefits. This court rejected the employer=s argument, stating:
It makes no difference, under the circumstances of this case, that there was no issue of the reasonableness and necessity of the medical treatment or that the only issue in dispute was primary liability. The critical element was that the contingency fees were so low that but for the possibility of receiving Roraff fees, it would have been difficult for the employee to obtain assistance of counsel.
Id. at 134, as cited in Gerulli v. USX Corp., slip op. (W.C.C.A. Nov. 14, 2000).
Had the sole issue in this case been the employee=s entitlement to medical benefits, there would be no dispute that the employee is entitled to Roraff fees. In a proceeding to recover medical benefits, a successful claimant may be awarded reasonable attorney fees to be paid by the employer and insurer. Roraff, 288 N.W.2d at 16, 32 W.C.D. at 298. There is no legal basis to deny Roraff fees solely because the employee also claims wage loss benefits. Rather, the question is whether the contingent fee is Ainadequate to reasonably compensate the attorney for representing the employee in the medical or rehabilitation dispute.@ Minn. Stat. ' 176.081, subd. 1(a)(1) .
The employer and insurer further argue the case did not involve the litigation of payment of medical bills and the issue of the medical expenses was not of Aprimary importance@ in the case. See Kopish v. Sivertson Fisheries, 39 W.C.D. 627 (W.C.C.A. 1987). Accordingly, they contend the compensation judge=s denial of Roraff fees must be affirmed. We disagree.
In Kopish, this court stated:
The Court cautions that fees awarded under both Minn. Stat. ' 176.081 and Minn. Stat. ' 176.135 from the same cause of action should be only in the most unusual circumstances wherein payment of the medical expenses is of primary importance and where an employee=s attorney would obtain a most unreasonable fee for the services rendered if only Minn. Stat. ' 176.081 fees were granted.
Kopish, at 630. Under Kopish, an employee was entitled to Roraff fees only upon proof that the medical expenses were of Aprimary importance@ and the contingent fee was Amost unreasonable.@ We conclude these requirements of proof have been superseded by subsequent amendments to Minn. Stat. ' 176.081 and the case of Irwin v. Surdyk=s Liquor, 599 N.W.2d 132, 59 W.C.D. 319 (Minn. 1999).
AIn proceedings where a medical benefits dispute is resolved simultaneously with a dispute for monetary benefits, Roraff fees are not allowable unless the disallowance would result in inadequate compensation to the attorney.@ Smith v. City of Sauk Ctr., 578 N.W.2d 755, 756, 58 W.C.D. 209, 211 (Minn. 1998). Thus, the threshold question is whether the contingency fee was adequate, not whether the medical expenses were of primary importance. In determining whether the contingent fee was adequate, the compensation judge must apply the seven so-called Irwin factors. The concept of the relative Aimportance@ of the medical expenses is, however, a consideration encompassed in the Irwin factors. See John v. Suburban Air Conditioning, slip op. (W.C.C.A. Feb. 21, 2002). The second Kopish requirement is that the contingency fee be Amost unreasonable.@ This requirement is directly contrary to Minn. Stat. ' 176.081, subd. 1(a)(1) (1995), which only requires the attorney to prove the contingent fee is Ainadequate to reasonably compensate the attorney.@ Accordingly, we conclude the two Kopish requirements are no longer applicable.
The dissent contends that, under this decision, virtually all cases will become potential Roraff fee cases. We disagree. Ultimately, whether a Roraff fee is appropriate in any given case is an issue which rests in the sound discretion of a compensation judge. AThe statutory scheme for approval of attorney fees assessed against the employer/insurer requires that the determination of a fee >be done with the same care as a determination of any other fact question in the matter= and contemplates factual findings applying the factors set out in Minn. Stat. ' 176.081, subd. 5(d) (1994).@ Smith v. City of Sauk Ctr., 578 N.W.2d at 756, 58 W.C.D. at 211. We caution, however, that a determination of a claim for Roraff/Heaton fees is not merely a matter of multiplying the attorney=s hourly rate times the amount of time spent on the case less the contingent fee awarded. The time reasonably necessary to present the case is but one of the Irwin factors. Rather, a reasonable fee must be determined based on all seven of the Irwin factors.
In further analysis of whether Roraff fees were appropriate in this case, the compensation judge found that the withheld contingent fees, totaling $1,640.00 at the time of the hearing, Aplus ongoing fees from a flow of benefits,@ were adequate to provide a reasonable fee for services to the employee=s attorney, and denied the claim for Roraff fees, citing Kopish v. Sivertson Fisheries, 39 W.C.D. 627 (W.C.C.A. 1987), and Pruitt v. Beck Brothers Carpet Service, 30 W.C.D. 699 (W.C.C.A. 1987). This conclusion is premature in this case.
At the time of the hearing, the employer and insurer were paying ongoing temporary total disability benefits, and were withholding contingent attorney fees from those benefits. Since the compensation judge specifically stated that the withheld attorney fees Aplus ongoing fees from a flow of benefits, provides a reasonable attorney fee for services provided@ and since the compensation judge could not know at the time of the hearing how long those contingent fees would continue, the finding that the contingent fee was adequate and that Roraff fees were inappropriate was premature. In addition, the amount of claimed medical expenses apparently was not presented at the initial hearing and therefore the compensation judge could not have considered that amount when determining the adequacy of the contingent fee. We therefore vacate the finding that the contingent fee is adequate. Should the employee=s stream of temporary disability benefits cease before producing sufficient contingency fees to compensate the employee=s attorney for representing the employee in the medical dispute, the employee is free to seek an award of Roraff fees pursuant to Minn. Stat. ' 176.081, subd. 1, at such time as it may be established that the contingent fee was in fact inadequate.
(Concurring in part and Dissenting in Part)
DEBRA A. WILSON, Judge
I agree with the ultimate result reached by the majority. I write separately, however, to address the issue of Roraff fees in so-called Amixed@ cases -- cases in which an employee=s attorney seeks both contingent fees on monetary benefits and Roraff fees on medical expenses.
The 1995 amendment to Minn. Stat. ' 176.081, subd. 1(a)(1) (1995), reads as follows:
(1) The contingent attorney fee for recovery of monetary benefits according to the formula in this section is presumed to be adequate to cover recovery of medical and rehabilitation benefit or services concurrently in dispute. Attorney fees for recovery of medical or rehabilitation benefits or services shall be assessed against the employer or insurer only if the attorney establishes that the contingent fee is inadequate to reasonably compensate the attorney for representing the employee in the medical or rehabilitation dispute. In cases where the contingent fee is inadequate the employer or insurer is liable for attorney fees based on the formula in this subdivision or in clause (2).
(Emphasis added.) Prior to this amendment, Roraff fees were payable in Amixed@ cases only where Athe payment of medical expenses [was] of primary importance and where an employee=s attorney would obtain a most unreasonable fee@ through payment of a contingent fee on monetary benefits alone. Kopish v. Sivertson Fisheries, 39 W.C.D. 627, 630 (W.C.C.A. 1987). In my opinion, the 1995 amendment to section 176.081, quoted above, was essentially intended to codify the Kopish analysis.1
Contrary to the majority, I do not believe that resort to application of the factors listed in Irwin v. Surdyk=s Liquor, 599 N.W.2d 132, 59 W.C.D. 319 (Minn. 1999), is necessary unless the compensation judge first determines that medical expenses were an important issue. As such, while an award of Roraff fees does not necessarily require a finding that separate or additional work was required to secure payment of contested medical expenses, the judge must determine whether the employee=s medical expense claim was significant in the context of the case as a whole, an issue which does not require a full Irwin analysis. If the medical claim is not significant, no Roraff fee is payable. This question is a fact issue uniquely suited for the compensation judge who heard the case on the merits.2
I remain persuaded that, under the majority=s reasoning, an attorney may expect to receive fees, calculated on an hourly basis and payable by the employer, to compensate him for time spent on all facets of the case, as long as the contingent fee on monetary benefits fails to cover his time and at least some medical expense was recovered, however insignificant. In other words, virtually all cases become potential Roraff fee cases. The statute, however, allows for Roraff fees in mixed cases only if the contingent fee is inadequate to Areasonably compensate the attorney for representing the employee in the medical . . . dispute.@ Minn. Stat. ' 176.081, subd. 1(a)(1) (emphasis added). This language -- central to the question of whether Kopish remains good law -- is simply ignored by the majority. Given this language, I believe that, while application of the Kopish standard has been somewhat softened, in practice, over time, the importance of medical expenses is still a threshold issue in analyzing a Roraff fee claim. I see nothing in the statute or in Irwin to indicate that application of the Irwin factors is required in all cases that just happen to include some medical expense claims. Contra John v. Suburban Air Conditioning, slip op. (W.C.C.A. Feb. 21, 2002). For these reasons, I dissent from the majority=s analysis.
 Roraff v. State, Dep=t of Transp., 288 N.W.2d 15, 32 W.C.D. 297 (Minn. 1980).
 The employee=s attorney explains in his brief that he filed this second petition for attorney fees at the suggestion of a compensation judge who presided at an administrative conference held on May 22, 2001, in order to claim the contingent fees that had been withheld by the employer and insurer but had not yet been paid.
 Minn. Stat. ' 176.081, subd. 3, provides that this court Ashall have the authority to raise the issue of the attorney fees at any time upon its own motion and shall have continuing jurisdiction over attorney fees.@
 See also Hruby v. Signature Flight Support, 52 W.C.D. 191 (W.C.C.A. 1994); Dally v. Con Agra/Peavey Co., slip op. (W.C.C.A. Oct. 18, 2000) (and cases cited therein).
 The dissent suggests the threshold requirement for an award of Roraff fees is proof the medical expenses were significant or of primary importance in this case. Even if we agreed with the proposition, to determine whether the medical expenses were significant would require a compensation judge to utilize the same considerations as contained in the Irwin factors.
 Quoting Minn. Stat. ' 176.081, subd. 5(e) (1994), repealed (further citation omitted).
 On August 15, 2001, after the hearing but before a decision had been issued by the compensation judge, the employer and insurer filed a notice of intention to discontinue benefits. In his appeal brief, the employee=s attorney argues that the ongoing fees from a flow of benefits, as referred to by the compensation judge, ceased pursuant to a discontinuance of benefits as of November 13, 2001. However, this court=s review on appeal is limited to the record as submitted to the compensation judge and therefore we will not consider information obtained post-hearing. Gollop v. Gollop, 389 N.W.2d 202, 38 W.C.D. 757 (Minn. 1986).
1 Interestingly, the Smith case, cited by the majority in support of its analyses, specifically cites Kopish. Smith v. City of Sauk Ctr., 578 N.W.2d 755, 756, 58 W.C.D. 209, 211 (Minn. 1998). While Smith involved application of the pre-1995 attorney fee statute, the supreme court could have taken the opportunity to suggest that Kopish had been superseded by the 1995 amendments. It did not do so.
2 Compensation judges commonly evaluate whether disputes are of primary importance in other attorney fee contexts. See Minn. Stat. ' 176.191, subd. 1; Sundquist v. Kaiser Eng=rs, Inc., 456 N.W.2d 86, 42 W.C.D. 1101 (Minn. 1990).