TERESA D. VAUGHN, Employee/Appellant, v. ALLINA HEALTH SYS. d/b/a MERCY MED. CTR., SELF-INSURED/GALLAGHER BASSETT SERVS., INC., Employer-Insurer, and SPECIAL COMP. FUND.
WORKERS’ COMPENSATION COURT OF APPEALS
MARCH 9, 2009
ATTORNEY FEES - EXCESS FEES. Application of the factors set out in Irwin v. Surdyk’s Liquor, 599 N.W.2d 132, 59 W.C.D. 319 (Minn. 1999), and Kahn v. State, University of Minnesota, 327 N.W.2d 21, 24, 35 W.C.D. 425, 429 (Minn. 1982), resulted in a determination that a reasonable contingent attorney fee is $35,000.00 in this matter.
Affirmed as modified.
Determined by: Stofferahn, J., Pederson, J., and Rykken, J.
Compensation Judge: Danny P. Kelly
Attorneys: Thomas D. Mottaz and David B. Kempston, Law Office of Thomas D. Mottaz, Coon Rapids, MN, for the Appellant. Douglas J. Brown and Kris Huether, Brown & Carlson, Minneapolis, MN, for the Repondents.
DAVID A. STOFFERAHN, Judge
The employee appeals from the compensation judge’s award of excess attorney fees. We affirm as modified.
Teresa Vaughn sustained a work injury to her left knee on August 17, 1985, while she was employed by Mercy Medical Center. In 1996, she retained attorney Thomas Mottaz to represent her in connection with the work injury.
Between 1996 and 2006, there were a number of disputes between the employee and the employer on medical or rehabilitation issues. Some of the disputes resulted in administrative conferences before they were resolved, but there were no formal hearings. In 1999, the employer was ordered to pay $685.50 in attorney fees to Mr. Mottaz for his services in obtaining rehabilitation benefits for the employee.
In February 2006, the employer filed a notice to discontinue temporary total disability benefits. In addition to objecting to the proposed discontinuance, the employee filed a claim petition for underpayment of temporary total disability benefits. In 2007, the parties entered into a partial settlement resolving the temporary total disability issues. As a part of the agreement, the employee was paid $31,090.60, from which $6,418.12 was withheld and paid to Mr. Mottaz as attorney fees under Minn. Stat. § 176.081, subd. 1.
The employee had filed a claim petition in August 2006 seeking permanent total disability. That claim was heard by Compensation Judge Danny P. Kelly on October 24, 2007. In his findings and order of December 24, 2007, the compensation judge determined the employee was permanently totally disabled as claimed and awarded her benefits from August 26, 2004. The decision was appealed on certain issues, but the parties reached agreement on those issues and the appeal was dismissed in March 2008.
On March 5, 2008, Mr. Mottaz filed a petition for disputed or excess attorney fees in which he requested a fee of $45,000.00, an amount in addition to fees already paid. Mr. Mottaz attached an Affidavit in which he set forth his experience and expertise, the issues in dispute, and the nature of the proof presented on the issues. He also presented an itemization of time spent on the file by his office between May 1996 and January 22, 2008, showing attorney and staff time of 170.32 hours resulting in a fee of $29,384.90. According to the petition, the total dollar amount for the benefits obtained for the employee was more than 1.5 million dollars in permanent total disability benefits over the employee’s life expectancy of 31.1 years.
The employer filed an objection to the petition for fees and took a position that a fee of $32,000.00 was appropriate based on the time spent on the file.
The petition was heard by Compensation Judge Kelly on June 23, 2008. Compensation Judge Kelly concluded, after application of the Irwin factors, that a reasonable attorney fee was $20,307.22. That amount represented $13,000.00 in addition to the $7,307.22 already paid as of March 5, 2008. Of the amount awarded by the compensation judge, $5,692.78 would be paid under the $13,000.00 cap in Minn. Stat. § 176.081, subd. 1, and $7,307.22 would be excess fees. The employee appeals.
The calculation of a contingent fee for an attorney representing an injured worker is set forth in Minn. Stat. § 176.081. From benefits obtained for the employee, a fee is paid of 25% of the first $4,000.00 and 20% of the benefits thereafter, with a total fee up to $13,000.00. The $13,000.00 limit was made absolute for all claims arising out of one injury by the 1995 amendments to Minn. Stat. § 176.081, subd. 1. The Minnesota Supreme Court found the amended statute violated the doctrine of separation of powers and was unconstitutional. Irwin v. Surdyk’s Liquor, 599 N.W.2d 132, 59 W.C.D. 319 (Minn. 1999). The court held that factors identified in Minn. Stat. § 176.081, subd. 5, which had been repealed in 1995, could be used to determine the reasonableness of a requested attorney fee.
Those factors, now generally referred to as Irwin factors, are: the amount involved in the litigation, 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.
In an earlier decision which considered the question of a reasonable attorney fee, the court noted the public policies behind the attorney fee statute: protecting employees from “excessive legal charges which might otherwise severely deplete funds badly needed by the employee,” but also, providing employees’ attorneys with adequate compensation so that “injured employees have access to representation by competent counsel knowledgeable of the intricacies of the workers’ compensation laws.” Kahn v. State, University of Minnesota, 327 N.W.2d 21, 24, 35 W.C.D. 425, 429 (Minn. 1982).
In viewing the petition for fees filed in this case, the compensation judge applied the Irwin factors. He found the amount of benefits involved to be "substantial" noting that the employee would receive over $26,000.00 a year in benefits and would receive a payment over the time of her life expectancy of over 1.5 million dollars. The compensation judge determined that Mr. Mottaz had assumed normal responsibility for the case and stated that Mr. Mottaz was a highly experience and qualified attorney. The compensation judge also noted the "considerable" time spent by Mr. Mottaz over the 12 years he represented the employee. Finally, the compensation judge concluded that the issues presented were "not particularly difficult" stating that there were no medical depositions and that having two vocational witnesses testify was fairly typical for a permanent total disability claim. The compensation judge found that $13,000.00 in contingent fees would not adequately compensate the employee’s attorney for his representation and that an award of excess fees was appropriate. On appeal, the employee acknowledges that the compensation judge applied the Irwin factors and made findings on these factors. Nevertheless, the employee contends that the compensation judge erred in his application of Irwin and in his conclusions.
The employee argues the award of $13,000.00 in additional fees was arbitrary because nowhere in his decision did the compensation judge provide a rationale for that amount and there was no evidence which identified that figure as a reasonable fee. When this court has reviewed a compensation judge’s award of a reasonable attorney fee, we have not required that the compensation judge provide a formula that was used to calculate the fee. The question in such cases is whether the fee is reasonable. A precise legal definition of that work is no more attainable in an attorney fee case than it is in a case where the primary issue is the reasonableness of a job search. Each case is unique in its facts and a reasonable fee must be considered in light of those facts. On review, we look to the compensation judge who was involved in the underlying action giving rise to the fee request and who is considered to be more familiar with the facts of the case. We need note as well that the employee at no time ever supplied any justification or formula for the $45,000.00 requested fee.
The employee also contends that the compensation judge erred in concluding that the legal issues in the case were "not particularly difficult." In response, the employee points out that the hearing involved six witnesses, including two vocational experts, as well as deposition testimony from a medical expert. The hearing lasted all day and the transcript of the hearing was 417 pages. While this matter may have been "fairly typical" for a permanent total disability case, such a case is far more difficult than most litigation in the workers’ compensation system.
The compensation judge also found that Mr. Mottaz assumed "normal responsibility" in handling this case. On appeal, the employee cites to the all-or-nothing nature of the underlying litigation in that lack of success on the permanent total disability claim would have resulted in the employee receiving no further benefits for wage loss. Mr. Mottaz represented the employee for more than ten years, dealing with a multitude of issues. Much of his representation during this time was part of the preparation and planning that an attorney must do in order to present a successful claim for permanent total disability benefits. We conclude this is evidence of unusual responsibility borne by the employee’s attorney.
We conclude that the compensation judge’s decision does not adequately compensate the employee’s attorney for the services he provided and the benefits obtained for the employee. Accordingly, we modify the compensation judge’s decision to award $35,000.00 in additional fees, $5,692.78 to reach the cap of $13,000.00 and $29,307.22 in excess fees.