DAVID T. ADAMS, Employee/Appellant, v. DSR SALES, INC., and UNITRIN/MILWAUKEE INS. GROUP, Employer-Insurer.
WORKERS’ COMPENSATION COURT OF APPEALS
JANUARY 22, 2008
ATTORNEY FEES; THIRD-PARTY LIABILITY - CREDIT; PRACTICE & PROCEDURE - REMAND. The compensation judge did not err by reducing the contingent fee payable to the employee’s attorney on remand by the supreme court for recalculation of the insurer’s credit claim, despite the fact that the insurer had not requested review by the supreme court of the contingent fee issue, and, because the compensation judge based his subsequent Roraff fee award in part on his reduction of the contingent fee on remand, this court would not reverse the contingent fee determination.
Determined by: Wilson, J., Stofferahn, J., and Pederson, J.
Compensation Judge: Jerome G. Arnold
Attorneys: David R. Vail, Soderberg & Vail, Minneapolis, MN, for the Appellant. Daniel A. Lively, Bloomington, MN, for the Respondents.
DEBRA A. WILSON, Judge
The employee’s attorney appeals from the compensation judge’s decision recalculating attorney fees following remand of the matter by the supreme court. We affirm.
On June 23, 2002, the employee sustained injuries when the motorcycle he was riding collided with another vehicle. He later claimed that the injuries arose out of and in the course of his employment with DSR Sales, Inc. [the employer]. At some point he retained Joseph Leoni to represent him in civil proceedings against the other driver involved in the accident, and he also retained David Vail to represent him in connection with his workers’ compensation claim. The employer and its workers’ compensation carrier, Milwaukee Insurance Group, or Unitrin [hereinafter Unitrin], denied primary liability for the employee’s injuries.
In June of 2003, with his workers’ compensation claim still pending, the employee settled his third-party action against the other driver for $100,000.00, which apparently represented that driver’s insurance policy limit. Unitrin, the workers’ compensation insurer, had been aware of the third-party action but was not notified of and did not participate in the settlement negotiations.
Following a workers’ compensation hearing in September of 2003, a compensation judge determined, in part, that the employee’s injuries arose out of and in the course of his employment with the employer and that the employee was entitled to payment of various medical expenses. That decision was affirmed on appeal to this court. Adams v. DSR Sales, Inc., 64 W.C.D. 396 (W.C.C.A. 2004).
The matter subsequently came on for hearing before a compensation judge, again, in August of 2005, for consideration of issues reserved from the previous proceeding, including wage loss claims, causation of the employee’s thoracic condition, and Unitrin’s entitlement to a credit based on proceeds from the third-party settlement. The parties agreed that the employee was entitled to $20,550.00 in wage loss benefits and that Mr. Vail was entitled to a contingent attorney fee of $4,310.00 based on those benefits. Issues included whether Unitrin had received statutorily adequate notice of the third-party settlement negotiations and the amount of the credit, if any, to which Unitrin was entitled, based on the settlement proceeds, pursuant to Minn. Stat. § 176.061.
The compensation judge resolved the issue of liability for the employee’s thoracic condition in the employee’s favor, awarding certain related medical expenses. The judge also determined that Unitrin had not received adequate notice of settlement negotiations in the third-party case and that the entire net proceeds of the settlement were therefore available to Unitrin for credit purposes. The judge made certain other findings regarding benefits already paid by Unitrin, and he ordered Unitrin to pay Mr. Vail $4,310.00 in contingent attorney fees.
On appeal from the judge’s decision, one of the primary issues before this court was the effect, for purposes of Unitrin’s credit claim, of the employee’s failure to notify Unitrin of settlement negotiations in the third-party action, in contravention of Minn. Stat. § 176.061, subd. 8(a). Relying on Womack v. Fikes of Minn., 61 W.C.D. 574 (W.C.C.A. 2001), and Easterlin v. State, 330 N.W.2d 704, 35 W.C.D. 650 (Minn. 1983), this court, by majority decision, concluded that the entire net third-party settlement amount was available to Unitrin as a credit, and we affirmed the compensation judge’s decision on that issue, with certain modifications. The majority also concluded that Mr. Vail was entitled to a contingent fee of $4,310.00, based on the employee’s stipulated entitlement to $20,550.00 in temporary total disability benefits, and that Unitrin could not use its credit to avoid paying the fee. However, the court further held that Unitrin could apply the $4,310.00 fee paid to Mr. Vail as credit against its future liability to the employee. Adams v. DSR Sales, Inc., 67 W.C.D. 59 (W.C.C.A. 2006).
In a dissenting opinion, Judge Stofferahn concluded that no statutory authority existed to penalize the employee for his failure to notify Unitrin of the third-party negotiations, and he would have ordered distribution of the third-party settlement pursuant to Minn. Stat. § 176.061, subd. 6, allowing the employee to protect one-third of those proceeds from any claim by Unitrin, pursuant to Minn. Stat. § 176.061, subd. 6(b). Judge Stofferahn also indicated that he would vacate the award of contingent fees pending determination of just what benefits the employee would finally receive. In tables A and B in the appendix of his dissent, Judge Stofferahn set out two sets of calculations: one which assumed that the employee would reimburse Unitrin for overpayment of past benefits, which would result in a contingent fee of $3,157.79 to Mr. Vail, and one which assumed no reimbursement by the employee, which would result in a contingent fee of $1,734.26. Id.
The employee appealed the credit issue to the Minnesota Supreme Court, which essentially adopted the rationale of Judge Stofferahn and remanded the matter for recalculation of the credit in accordance with Minn. Stat. § 176.061, subd. 6. Adams v. DSR Sales, Inc., 727 N.W.2d 139, 67 W.C.D. 75 (Minn. 2007).
On May 25, 2007, the matter came on for hearing before a compensation judge for two purposes: (1) to recalculate Unitrin’s credit in accordance with the supreme court’s instructions; and (2) to resolve a claim for Roraff fees for work performed by Mr. Vail in connection with securing payment of medical expenses in the prior proceedings, including expenses for treatment related to the employee’s thoracic spine injury. At this most recent hearing, Mr. Vail indicated that Unitrin had finally paid the $4,310.00 contingent fee previously awarded by the judge and affirmed by majority decision of the Workers’ Compensation Court of Appeals, and he took the position that that contingent fee award was final because Unitrin had not appealed from that award to the supreme court.
The compensation judge subsequently issued two decisions on the same date, July 19, 2007. In his findings and order on remand, the judge adopted the calculations in Appendix B of Judge Stofferahn’s dissenting opinion, including the calculation setting Mr. Vail’s contingent attorney fee at $1,734.26. Finding that the supreme court’s decision had the effect of reversing the prior order for contingent fees, the judge indicated that Unitrin was entitled to a credit of $4,310.00 against the $1,734.26 fee award and against fees “awarded in the future.” In his decision on Roraff fees, the judge concluded that the $1,734.26 contingent fee was inadequate to compensate Mr. Vail for his work, and he awarded an additional $3,427.50, in Roraff fees, subject to the credit specified in the decision on remand. Mr. Vail appeals.
STANDARD OF REVIEW
On appeal, the Workers' Compensation Court of Appeals must determine whether “the findings of fact and order [are] clearly erroneous and unsupported by substantial evidence in view of the entire record as submitted.” Minn. Stat. § 176.421, subd. 1 (2006). Substantial evidence supports the findings if, in the context of the entire record, “they are supported by evidence that a reasonable mind might accept as adequate.” Hengemuhle v. Long Prairie Jaycees, 358 N.W.2d 54, 59, 37 W.C.D. 235, 239 (Minn. 1984). Where evidence conflicts or more than one inference may reasonably be drawn from the evidence, the findings are to be affirmed. Id. at 60, 37 W.C.D. at 240. Similarly, findings of fact should not be disturbed, even though the reviewing court might disagree with them, “unless they are clearly erroneous in the sense that they are manifestly contrary to the weight of the evidence or not reasonably supported by the evidence as a whole.” Northern States Power Co. v. Lyon Food Prods., Inc., 304 Minn. 196, 201, 229 N.W.2d 521, 524 (1975).
“[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), summarily aff’d (Minn. June 3, 1993).
We note at the outset that neither party disputes the compensation judge’s adoption of Judge Stofferahn’s Appendix B for purposes of recalculating Unitrin’s credit. The only issue before us is whether the compensation judge erred by also adopting Judge Stofferahn’s decision regarding the contingent fee, $1,734.26, payable to Mr. Vail. Mr. Vail argues primarily that the judge lacked jurisdiction to reduce the contingent fee on remand, because Unitrin did not appeal from the Workers’ Compensation Court of Appeals’ majority decision on that issue, and the supreme court did not address it.
We acknowledge that Unitrin did not request supreme court review of this court’s decision as to the contingent fee payable to Mr. Vail. However, because this court specified that Unitrin could take a credit, in the amount of the fee payment, against any future benefits payable to the employee, it is questionable whether Unitrin was really the aggrieved party with respect to the fee award. More importantly, the contingent fee award may reasonably be viewed as part and parcel of the credit calculation. Compare Gibbons v. Weyerhaeuser, 482 N.W.2d 480, 46 W.C.D. 392 (Minn. 1992) (once the award of benefits for permanent partial disability was reduced by the WCCA from economic recovery compensation to impairment compensation, it was incumbent on the WCCA to modify the award of monitoring period compensation in order to provide the appropriate total award for permanent partial disability, despite the fact that the employee did not appeal from the compensation judge’s monitoring period decision).
Apparently adopting the rationale of the majority decision in the prior appeal, Mr. Vail also argues that the judge erred, on public policy grounds, in reducing the contingent fee award. We note, however, that the compensation judge considered the reduced contingent fee of $1,734.26 in evaluating the employee’s Roraff fee claim, concluding that “$1,734.26 . . . is inadequate to reasonably compensate the employee’s attorney.” That is, the judge based his award of Roraff fees in part on his reduction of the contingent fee award. To alter the contingent fee at this stage in the proceedings would not be fair either to the insurer or to the employee himself, given potential future credit issues. Under all of these circumstances, we affirm the judge’s decision on remand.
 See Roraff v. State, Dep’t of Transp., 288 N.W.2d 15, 32 W.C.D. 297 (1980).
 According to the majority decision, “[p]ublic policy dictates that Mr. Vail be paid for his efforts, in that, at the very least, the temporary total disability award . . . in the end reduced the credit available to Unitrin pursuant to Womack.” Adams, 67 W.C.D. at _______. In his dissent, Judge Stofferahn noted that contingent fees “are awarded from the benefits paid to the employee.” Id. at _______.