WALTER W. JOHN, Employee/Appellant, v. SUBURBAN AIR CONDITIONING and CNA/TRANSP. INS. CO., Employer-Insurer.

 

WORKERS= COMPENSATION COURT OF APPEALS

FEBRUARY 21, 2002

                                                                             

HEADNOTES

 

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). As it appears the compensation judge may have applied an improper burden of proof, requiring the employee to prove the awarded contingency fee was Amost unreasonable@ or Agrossly inadequate,@ the case must be vacated and remanded for recon­sideration.

 

Vacated and remanded.

 

Determined by: Johnson, J., Wilson, J., and Pederson, J.

Compensation Judge: Catherine A. Dallner

 

 

MAJORITY OPINION

 

THOMAS L. JOHNSON, Judge

 

The employee appeals from the compensation judge=s finding that the contingency fee was adequate to compensate his attorney for his representation of the employee and appeals the compensation judge=s denial of Roraff^[1] attorney fees.  We vacate the findings and remand the case to the compensation judge.

 

BACKGROUND

 

Walter W. John, the employee, sustained an injury to his right arm on November 3, 1997, while working for Suburban Air Conditioning, the employer.  The nature of the injury was carpal tunnel syndrome for which the employee underwent surgery on April 19, 1999.  The employer and CNA/Transportation Insurance Company admitted liability for the employee=s injury.  The employee=s wage on the date of injury was $705.00.  Following his injury, the employee left his job at the employer and went to work for Room & Board unloading trucks.  The employee earned less money at Room & Board than he did at the employer.

 

In January 1998, the employee retained the Law Offices of Donald F. Noack, Jr.  A claim petition was filed in April 1998 seeking payment of wage loss and medical benefits from the employer and insurer.  The employee also claimed he sustained a Gillette^[2] injury on March 1, 1999 while employed at Room & Board.  On that date, the employee=s wage was $494.47.  In a Findings and Order filed February 20, 2001, Compensation Judge Dallner found the employee did not sustain a Gillette injury at Room & Board.  The compensation judge ordered the employer and insurer to pay approximately two months of temporary total disability benefits and approximately $4,400.00 in medical expenses and denied the employee=s claim for temporary partial disability benefits.  The employee=s attorney was awarded $1,237.26 in attorney fees^[3] from the benefits awarded the employee.  No appeal was taken from these findings.

 

In March 2001, the employee filed a fee petition seeking payment of Roraff fees in the amount of $17,766.50, based on 91.9 hours of legal time and nine hours of paralegal time expended in the preparation for and trial of the case.  In a Findings and Order filed August 14, 2001, Compensation Judge Dallner found the award of attorney fees of $1,688.06 was adequate to compen­sate the employee=s attorneys for their representation and denied the claim for Roraff fees.  The employee appeals.

 

DECISION

 

In her memorandum, the compensation judge cited Kopish v. Sivertson Fisheries, 39 W.C.D. 627 (W.C.C.A. 1987) which held that Roraff fees and contingent attorney fees are con­temporaneously payable only in Athe most unusual circumstances@ where payment of medical ex­penses is Aof primary importance@ and where the contingency fees are Amost unreasonable@ or Agrossly inadequate.@  The compensation judge then went on to state Aunder the particular facts and circumstances of this case, as set forth in detail in the findings of fact above, the contingent fees awarded to Attorney Lund reasonably compensated the employee=s attorney for the services provided and are not >most unreasonable= or >grossly inadequate= in this case where the claim for medical expenses was not of primary importance.@  (Mem. at 6.)

 

On appeal, the employee contends the compensation judge applied an improper legal standard to evaluate his claim for Roraff fees.  The employee argues that in denying his claim, the compensation judge erroneously used factors set forth in the Kopish case and required the employee to prove that medical expenses were of primary importance in the case and to prove the contingency fee was most unreasonable and grossly inadequate.  Accordingly, the employee asks this court to vacate the compensation judge=s findings and remand the case to the compensation judge for further findings.

 

In 1992, Minn. Stat. ' 176.081 was amended to provide:

 

All fees must be calculated according to the [25-20] formula under this subdivision or earned in hourly fees for representation . . . on rehabilitation or medical issues under ' 176.102, 176.135 or 176.136.  Attorney fees for the recovery of medical or rehabilitation benefits or services shall be assessed against the employer and insurer if these fees exceed the contingent fee under this section in connection with the benefits currently in dispute.  The amount of the fee that the em­ployer or insurer is liable for is the amount determined under sub­division 5, minus the contingent fee.

 

Minn. Stat. ' 176.081, subd. 1(a) (1992).  This language essentially codified the Roraff, Heaton^[4] and Kopish doctrines.

 

In 1995, Minn. Stat. ' 176.081 was again amended to provide:

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 benefits 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.

 

Minn. Stat. ' 176.081, subd. 1(a)(1).  The amended statute applies only to fee awards for injury dates subsequent to the effective date of the amendments.  Senjum v. Independent Sch. Dist. #625, 55 W.C.D. 656 (W.C.C.A. 1996).

 

In Irwin v. Surdyk=s Liquor, 599 N.W.2d 132, 59 W.C.D. 319 (Minn. 1999), the Supreme Court held that the 1995 amendment to Minn. Stat. ' 176.081, subd. 1(a), which limited fees on medical benefits to a 25/20 percent formula was unconstitutional because such a limitation impinges upon the Supreme Courts inherent power to oversee attorneys and attorney fees and de­prives the court of a final, independent review of attorney fees in violation of the Separation of Powers Clause of the Minnesota Constitution.  The court further stated that in determining what constitutes a reasonable attorney fee in any case, the trial court should consider the statutory guide­lines together with the seven-factor test formerly contained in Minn. Stat. ' 176.081, subd. 5, the so-called Irwin factors.^[5] 

 

In Smith v. City of Sauk Centre, 578 N.W.2d 755, 58 W.C.D. 209 (Minn. 1998), the Supreme Court reversed this court=s affirmance of a decision denying Roraff fees.  The court cited the Kopish case for the proposition that Roraff fees Aare not allowable unless the dis­allowance would result in inadequate compensation to the attorney.@  The court then said the Astatu­tory scheme for approval of attorney fees assessed against the employer/insurer requires that the determination of the fee >be done with the same care as the determination of any other fact question in the matter=^[6] and contemplates factual findings applying the factors set out in Minn. Stat. ' 176.081, subd. 5(d) (1994).@  In Lanhart v. Bureau of Engraving, slip op. (W.C.C.A. May 7, 2001), this court remanded a case directing the compensation judge to reconsider the employee=s request for Roraff fees applying the seven Irwin factors.^[7]

 

Minn. Stat. ' 176.081 provides that the contingency fee recovered on the monetary benefits must be presumed adequate.  This presumption may, however, be rebutted by proof that the contingency fee is inadequate to reasonably compensate the attorney for representing the employee.  The determination of whether the contingent fee is inadequate is made solely by consideration of the statutory guidelines and the seven-factor test set forth in Irwin.  Minn. Stat. ' 176.081, subd. 1(a)(1), does not require the employee to prove the contingency fee was most unreasonable or grossly inade­quate.  Nor does the seven-factor test require an employee to prove the medical expenses were of Apri­mary importance@ to successfully prevail on a claim for Roraff fees.^[8]  Rather, the question is whether the presumption that the contingency fee is adequate to reasonably compensate the attorney has been rebutted.  To make this decision, the trial court must apply the seven-factor test to Adetermine what would constitute a reasonable fee given the facts peculiar to the case, and compare it to the amount of the contingent fee awarded.@  Irwin v. Surdyk=s Liquor, 60 W.C.D. 150 (W.C.C.A. 2000) (Irwin II).

 

The compensation judge did make factual findings applying the Irwin factors.  Con­sidering only the compensation judge=s findings, this court could simply review the denial of the claimed Roraff fees under our abuse of discretion standard.  The compensation judge=s memor­andum, however, suggests the judge may have required the employee to prove the contin­gency fee was Amost unreasonable@ or Agrossly inadequate.@  Such a requirement is contrary to the plain language of Minn. Stat. ' 176.081, subd. 1(a)(1), which requires only that the employee prove the contingent fee is inadequate to reasonably compensate the attorney for representing the employee in the dispute.  Because it is not clear whether the compensation judge applied the proper legal standard, we conclude the best interests of justice require the case be remanded to the compensation judge for reconsid­eration.

 

 

                                                          DISSENTING OPINION

 

DEBRA A. WILSON, Judge

 

I respectfully dissent.  The compensation judge thoroughly considered the record in this matter and made detailed findings applying the factors set forth in Irwin v. Surdyk=s Liquor, 599 N.W.2d 132, 59 W.C.D. 319 (Minn. 1999).  Her denial of Roraff fees was clearly reasonable under the circumstances, and I would affirm her decision.