ROXANNE HAYES, as parent and natural guardian of NICOLE HAYES, a minor, Employee, v. PETER L. KORMANIK and TWIN CITY FIRE INS. CO., Employer-Insurer/Appellants.

 

WORKERS= COMPENSATION COURT OF APPEALS

MAY 23, 2005

 

No. WC04-301

 

HEADNOTES

 

ATTORNEY FEES - RORAFF FEES.  The compensation judge properly applied the Irwin factors to evaluate the employee=s attorney fee claim.  Fees in cases involving medical disputes are not limited by the 25/20 formula contained in Minn. Stat. ' 176.081, subd. 1, if the statutory fee would not reasonably compensate the employee=s attorney for time spent on medical issues.

 

Affirmed.

 

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

Compensation Judge:  Jeanne E. Knight

 

Attorneys:  Kenneth N. Potts, Minneapolis, MN, for the Respondent.  Adam S. Wolkoff, Eagan, MN, for the Appellants.

 

 

OPINION

 

DEBRA A. WILSON, Judge

 

The employer and insurer appeal from the judge=s award of Roraff ^[1] fees.  We affirm.

 

BACKGROUND

 

The minor employee was working for Peter L. Kormanik [the employer] on October 5, 2002, when she sustained a work-related injury to her right shoulder.  The employer and insurer admitted liability for the injury and paid temporary total disability benefits and medical expenses.  The employee subsequently incurred medical expenses with St. Cloud Hospital in the amount of $2082.80 and with Meeker County Memorial Hospital in the amount of $342.00.  The employer and insurer initially declined payment of those bills.

 

Roxanne Hayes, as parent and natural guardian of the employee, eventually discussed payment of the medical bills with the claims adjustor for the employer and insurer, and a stipulation for settlement was prepared by the insurer=s attorney.  The stipulation called for a full, final, and complete settlement of the employee=s claims, including future medical expense claims, in exchange for payment of the outstanding medical bills.  The stipulation was sent to Ms. Hayes, who then sought the services of attorney Kenneth N. Potts.  Mr. Potts reviewed the stipulation and advised the employee and her mother not to sign the stipulation as written.  Thereafter, Mr. Potts obtained authorizations and medical records, corresponded with counsel for the employer and insurer, and filed a claim petition seeking payment of the medical expenses along with approval for an MRI.  The claim petition was mailed on March 11, 2004, and, on March 12, 2004, Mr. Potts received a voice mail from the employer and insurer=s attorney, indicating that the employer and insurer would pay the outstanding bills.  Mr. Potts then submitted a motion to dismiss the claim petition.

 

On April 7, 2004, Mr. Potts submitted a statement of attorney fees, seeking a fee in the amount of $2,497.50^[2] and costs in the amount of $78.91.  The employer and insurer objected, claiming that attorney fees were not payable because medical expenses were not in dispute.  When the matter proceeded to hearing on August 30, 2004, counsel for the employer and insurer contended that any fee to which Mr. Potts might be entitled would be limited by the statutory 25/20 formula, set forth in Minn. Stat.'176.081, subd. 1, application of which would yield a fee of $606.20.  Mr. Potts responded by asserting that he had the option to claim attorney fees either on an hourly basis or on a contingent fee basis.  In findings and order on attorney fees filed on October 28, 2004, the compensation judge awarded Mr. Potts attorney fees and costs as claimed.  The employer and insurer appeal.^[3]

 

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), summarily aff=d (Minn. June 3, 1993).

 

DECISION

 

The employer and insurer contend that the judge=s attorney fee award exceeds the fee allowed under Minn. Stat.'176.081, subd. 1, and the cases of Cahow v. Brookdale Motors, 61 W.C.D. 427 (W.C.C.A. 2001) and Shamp v. Daybreak Foods, No. WC04-144 (W.C.C.A. June 25, 2004).  We disagree.

 

Minn. Stat.'176.081, subd. 1(a)(1), provides that attorney fees for obtaining medical benefits are to be calculated based on 25% of the first $4,000 and 20% of the next $60,000 of medical benefits awarded.  In the case of Irwin v. Surdyk=s Liquor, 599 N.W.2d 132, 59 W.C.D. 319 (Minn. 1999), the Minnesota Supreme Court held that it was unconstitutional to prohibit deviation from this statutory formula where the resulting fee award would be inadequate to reasonably compensate the employee=s attorney.  The court went on to state that, in determining a reasonable attorney fee, consideration should be given to Athe 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.@^[4]  Id. at 139, 59 W.C.D. at 336.

 

Subsequently, the Workers= Compensation Court of Appeals issued its decision in Cahow, a case in which the sole dispute had been over medical expenses and the cost of the medical expenses was ascertainable.  This court held that, in such a situation, the employee=s attorney was entitled to attorney fees under the 25/20 formula in Minn. Stat. ' 176.081, subd. 1(a), without application of the Irwin factors.  However, there had been no claim in that case that the statutory fees were not adequate to compensate the employee=s attorney.  Cahow stands for the proposition that the Irwin factors may not be applied to reduce the otherwise available statutory fee.  The Shamp case is consistent with Cahow.  Counsel for the employer and insurer has misinterpreted Cahow and Shamp as limiting attorney fees to the 25/20 formula in cases where the only issue is entitlement to medical benefits and the cost of said benefits is ascertainable.  In fact, Irwin applies in those situations if the statutory fee is inadequate to reasonably compensate the attorney for his services.

 

The compensation judge made an implicit finding that the contingent fee was inadequate when she found that Mr. Potts= billing rate and time spent on the case were reasonable.  On appeal, the employer and insurer have not contested any of the judge=s factual findings as to the Irwin factors.  Having found that the judge properly considered the Irwin factors in reaching her decision on fees, we affirm the judge=s findings in their entirety.^[5]