Brown v. Omni Remanufacturing

MICHAEL BROWN, Employee, v. OMNI REMANUFACTURING and KEMPER INS. COS., Employer-Insurer/Appellants.

ATTORNEY FEES - RORAFF FEES; ATTORNEY FEES - IRWIN FEES. Where the statutory maximum attorney fee has been paid for work on a post-October 1, 1995, injury, all additional fees for legal services related to that same injury are excess fees and must be computed in light of the seven factors articulated in Irwin v. Surdyk=s Liquor, 599 N.W.2d 132, 59 W.C.D. 319 (Minn. 1999).

The employer and insurer appeal from the compensation judge=s award of Roraff^[1] attorney fees pursuant to Minn. Stat. ' 176.081, subd. 1(a)(1) (1995). We reverse and remand for further consideration.

The facts in this case are essentially undisputed. On December 5, 1998, Michael Brown [the employee] sustained an injury to his lumbar spine in the course of his employment with Omni Remanufacturing [the employer], who on that date was insured against workers= compensation liability by Kemper Insurance Company [the insurer].

The employer and insurer admitted liability for the employee=s injury and commenced payment of workers= compensation benefits. In November 2000, the parties entered into a settlement in which the employee was paid $70,000 in return for a full, final, and complete settlement of all except future medical claims arising out of his injury of December 5, 1998. An Award on Stipulation was issued by a compensation judge on December 7, 2000, and the employee=s attorney, Marvin Gurewitz, received $13,000 in contingent attorney fees for representing the employee, pursuant to the statutory 25/20 formula set forth in Minn. Stat. ' 176.081, subd. 1(a).^[2]

On January 16, 2002, the employee filed a medical request, seeking payment for a surgical procedure recommended by his treating physician, Dr. Eric Flores. Based on an opposing opinion by Dr. Mark Friedland, the employer and insurer refused to authorize the proposed treatment. The issue of the proposed surgery was heard by a compensation judge on April 3, 2002. In a Findings and Order issued April 17, 2002, the judge concluded that the proposed surgery was reasonable and necessary to cure and relieve the effects of the employee=s injury of December 5, 1998, and he awarded the treatment. The judge=s decision was not appealed.

On September 27, 2002, Mr. Gurewitz filed a Statement of Attorney=s Fees in which he sought Roraff fees in the sum of $13,000, based on the 25/20 statutory formula. The claimed fee was based on a recovery of $74,436.94 in medical treatment expenses. Mr. Gurewitz also sought payment of an additional award to the employee under Minn. Stat. ' 176.081, subd. 7. On October 2, 2002, the employer and insurer filed an objection to the claimed fees, asserting that they were unreasonable and excessive.

A hearing on attorney fees was held before Compensation Judge Bradley Behr on January 6, 2003. At trial, the employer and insurer argued that the supreme court=s holding in Irwin v. Surdyk=s Liquor, 599 N.W.2d 132, 59 W.C.D. 319 (Minn. 1999), requires an evaluation of the reasonableness of an attorney fee sought by an employee=s attorney in every case, not only in those where the objective is to obtain reasonable compensation. They contended that the claimed contingent fee in this case was unreasonable and excessive in light of the fact that Mr. Gurewitz had worked only 20.2 hours in connection with the employee=s medical claim.

In a Findings and Order on Attorney Fees issued February 13, 2003, the compensation judge concluded that Minn. Stat. ' 176.081, subd. 1(a) (1995), Aclearly and unambiguously@ provides that attorney fees for obtaining medical benefits are to be calculated pursuant to the 25/20 formula. He concluded further that the supreme court=s decision in Irwin had invalidated the statutory maximum fee but without mandating application of a reasonableness standard in all attorney fee disputes and without limiting an attorney=s right to claim fees pursuant to the statutory formula. Citing this court=s holding in Cahow v. Brookdale Motors, 61 W.C.D. 427 (W.C.C.A. 2001), the compensation judge calculated the fee in this case in accordance with the 25/20 formula and awarded $13,000 to Mr. Gurewitz.^[3] The judge also awarded an additional sum payable to the employee under Minn. Stat. ' 176.081, subd. 7. The employer and insurer appeal.

A[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).

Contingent attorney fees in workers= compensation cases are governed by Minn. Stat. ' 176.081, subd. 1, which provides in pertinent part as follows:

Subdivision 1. Limitation of fees. A fee for legal services of 25 percent of the first $4,000 of compensation awarded to the employee and 20 percent of the next $60,000 of compensation awarded to the employee is the maximum permissible fee and does not require approval by the commissioner, compensation judge, or any other party. All fees, including fees for obtaining medical or rehabilitation benefits, must be calculated according to the formula under this subdivision, except as otherwise provided in clause (1) or (2).

(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).

For the purposes of applying the formula where the employer or insurer is liable for attorney fees, the amount of compensation awarded for obtaining disputed medical and rehabilitation benefits under sections 176.102, 176.135, and 176.136 shall be the dollar value of the medical or rehabilitation benefit awarded, where ascertainable.

(3) The fees for obtaining disputed medical or rehabilitation benefits are included in the $13,000 limit in paragraph (b). An attorney must concurrently file all outstanding disputed issues. An attorney is not entitled to attorney fees for representation in any issue which could reasonably have been addressed during the pendency of other issues for the same injury.

(b) All fees for legal services related to the same injury are cumulative and may not exceed $13,000. If multiple injuries are the subject of a dispute, the commissioner, compensation judge, or court of appeals shall specify the attorney fee attributable to each injury.

In the present case, Mr. Gurewitz sought payment of a contingent fee based on the dollar value of the medical benefits awarded. The compensation judge, finding that the employee=s treatment expenses exceeded $64,000 after application of the fee schedule, awarded a $13,000 fee based on the 25/20 formula set forth in the statute, citing our holding in Cahow, in which we concluded that contingent fees up to $13,000 were presumptively reasonable without regard to the Irwin factors. The employer and insurer do not dispute that Mr. Gurewitz is entitled to a Areasonable fee@ for representing the employee on the treatment issue, but they contend that an automatic award based on the 25/20 formula does not assure a reasonable fee, provides no avenue for judicial review, and is contrary to Irwin. They argue that Cahow was incorrectly decided by this court and that it is the obligation of compensation judges and the WCCA to assure that the attorney fee in every case is reasonable. Accordingly, they request that the judge=s determination be reversed and that the case be remanded for a determination of a reasonable fee pursuant to Irwin. We find this case to be distinguishable from Cahow and decline to reconsider our holding in that case.^[4] However, we nevertheless do reverse the award of the contingent attorney fee in this case, and we remand the matter to the compensation judge for a determination of a reasonable fee under Irwin.

In Irwin, the supreme court held that the statutory limit of a 25/20 contingent fee on the medical benefits awarded was unconstitutional. The court, accordingly, remanded the case to this court for an award of Areasonable attorney fees@ based on the statutory guidelines, the 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 v. Surdyk=s Liquor, 599 N.W.2d at 142, 59 W.C.D. at 335-36. The Irwin court thereby paved the way for claims for attorney fees in excess of the statutory cap, if such fees are necessary to reasonably compensate an employee=s attorney for services provided. See Clark v. Dick=s Sanitation, slip op. (W.C.C.A. May 16, 2000) (the limit on attorney fees of $13,000 per injury established by Minn. Stat. ' 176.081, subd. 1(b), is unconstitutional).

In the instant case, and contrary to what appears to have been the case in Cahow, Mr. Gurewitz has already received $13,000 in contingent attorney fees, in the award issued December 7, 2000. Minn. Stat. ' 176.081, subd. 1(3)(b) (1995), provides, AAll fees for legal services related to the same injury are cumulative and may not exceed $13,000.@ Therefore, the judge=s award in this case exceeded the Amaximum permissible fee@ under the statute. We hold that where the statutory maximum fee has been paid for a post-October 1, 1995, injury, all additional fees for legal services related to the same injury are excess fees and must be determined utilizing the factors enumerated in Irwin. Accordingly, we reverse the award of the contingent attorney fee in this case, and we remand the matter to the compensation judge for a determination in light of Irwin. On remand, the judge may accept additional evidence as necessary.

^[1] See Roraff v. State, Dep=t of Transp., 288 N.W.2d 15, 32 W.C.D. 297 (Minn. 1980).

^[2] Minn. Stat. ' 176.081, subd. 1(a), provides,

A fee for legal services of 25 percent of the first $4,000 of compensation awarded to the employee and 20 percent of the next $60,000 of compensation awarded to the employee is the maximum permissible fee and does not require approval by the commissioner, compensation judge, or any other party.

For purposes of brevity, this will be referred to as the 25/20 formula.

^[3] In Cahow, this court held that, for a post-October 1, 1995, injury, where the only matter in dispute was a medical treatment expense, the employee=s attorney was permitted, at the attorney=s option, to claim a Roraff fee or to request a review of the claimed fee in light of the factors outlined by the supreme court in Irwin. If the employee=s attorney selected the contingency fee method of calculating the Roraff fee, it was not necessary to justify the fee on the basis of services rendered.

^[4] We see no evidence in Cahow that the employee=s attorney in that case had already received any contingent fee prior to his claim for a fee on the medial issue.