DONALD D. DAVID, Employee, v. BARTEL ENTERS. (NITRO GREEN) and SFM MUT. INS. CO., Employer-Insurer/Appellants.
WORKERS’ COMPENSATION COURT OF APPEALS
OCTOBER 23, 2013
No. WC13-5567
HEADNOTES:
ATTORNEY FEES - RORAFF FEES. The compensation judge did not err in calculating the $13,000.00 attorney fee awarded for recovery of disputed medical benefits without regard to the Irwin factors, pursuant to Cahow v. Brookdale Motors, 61 W.C.D. 427 (W.C.C.A. 2001).
Affirmed.
Determined by: Hall, J., Stofferahn, J., and Cervantes, J.
Compensation Judge: Cheryl LeClair-Sommer
Attorneys: Scott H. Soderberg, Soderberg Law Firm, Minneapolis, MN, for the Respondent. Andrew W. Lynn, Lynn, Scharfenberg & Assocs., Minneapolis, MN, for the Appellants.
OPINION
GARY M. HALL, Judge
The employer and insurer appeal from the compensation judge’s decision “that the employer and insurer shall pay to attorney Soderberg, the sum of $13,000 as an attorney’s fee according to Roraff and Irwin.” We affirm.
BACKGROUND
The employee, Donald David, sustained a low back injury while working for the employer herein, Bartel Enterprises (Nitro Green), on April 13, 2010. The current dispute and litigation concern the amount of attorney fees awarded to the employee’s attorney, Scott Soderberg. The facts of the case are largely undisputed.
The employee underwent surgery for his work injury, which required an extensive hospital stay from December 2011 through early January 2012. The employee filed a medical request in July 2012, seeking payment of medical bills from Abbott Northwestern Hospital in the amount of $372,489.94, from Allina Hospitals and Clinics in the amount of $15,558.00, from Consulting Radiologists in the amount of $1,109.00, and from Ridgeview Clinics in the amount of $209.00. The parties have stipulated that a genuine dispute occurred regarding these medical expenses, which were incurred by the employee with relation to his hospitalization. On July 16, 2012, the employer and insurer filed a medical response indicating that they were already involved with settlement discussions directly with the health care providers regarding the outstanding bills.
The employee’s attorney subsequently notified Abbott Northwestern Hospital of their right to intervene. The employee’s attorney also contacted counsel for the employer and insurer regarding the scheduling of an independent medical examination, discussing a conference that had been scheduled pursuant to Minn. Stat. § 176.106, and requesting further information relating to the medical bills in question.
On September 10, 2012, the employee’s attorney wrote to the employer and insurer’s attorney confirming the terms of a settlement agreement by which the insurer would pay, negotiate, and hold the employee harmless for bills claimed on the medical request. An award on partial settlement was ultimately served and filed on October 11, 2012. The terms of the settlement provided that the employer and insurer would pay Abbott Northwestern Hospital the sum of $221,500.00, Allina Medical Clinic $11,000.00, and Consulting Radiologists $554.50.
The employee’s attorney filed a statement of attorney fees and costs at the end of September 2012. The employee’s attorney was claiming fees in the amount of $36,810.90 as a contingent Roraff fee based upon recovery of medical expenses in the sum of $233,054.50. The employee’s attorney further requested payment of partial reimbursement to the employee according to Minn. Stat. § 176.081, subd. 7. The statement of attorney fees did not include an itemization of hours and legal services provided.
The employer and insurer objected to the statement of attorney fees in a timely manner, asserting that the claimed fee exceeded the maximum fees allowed by Minn. Stat. § 176.081. The employer and insurer argued that a potential claim for other indemnity benefits may be brought for which a fee can be assessed, and they argued that the petition for fees did not attach any documents to support a claim for excess fees. They also argued that the hours were not itemized and that application of the 25/20 formula, in absence of a review of the Irwin factors, was not appropriate and would be an unconstitutional intrusion into the judicial branch’s exclusive authority to regulate attorney fees. The employer and insurer also informed the attorney general and the commissioner of the Department of Labor & Industry that they were challenging the constitutionality of Minn. Stat. § 176.081, subd. 1, as to the application of the formula contained therein against the employer and insurer, pursuant to Irwin v. Surdyk’s Liquor, 599 N.W.2d 132, 59 W.C.D. 319 (Minn. 1999). In the meantime, the case came on before Compensation Judge Cheryl LeClair-Sommer on February 25, 2013. The record of the matter closed on March 4, 2013, following the receipt of briefs from the parties.
The compensation judge found that the employee’s attorney had substantial legal experience in workers’ compensation matters, and he had provided 13.1 hours of legal services on behalf of the employee in the dispute involved. There were no narrative reports, depositions, or independent medical examinations required. The compensation judge found that “the proof that was adduced by Attorney Soderberg was extremely minimal,” but Attorney Soderberg obtained a favorable result for the employee. The compensation judge found that the number of hours provided by Attorney Soderberg “was minimal to moderate, reviewing extensive medical records supplied by the insurer, notifying intervenors, requesting Certification as a Dispute, and filing a Medical Request.” Otherwise, “[t]he responsibility assumed by Attorney Soderberg was minimal since the health care providers and insurer settled the medical treatment expenses and the employee’s attorney was not involved in the negotiation.”
The compensation judge determined that a contingency fee of $13,000.00, “based upon medical treatment expenses under Minn. Stat. § 176.081, subd. 1, is adequate to fully compensate the employee’s attorney for his legal services.” The compensation judge found that the $13,000.00 attorney fee was being assessed as a contingency fee assessed upon the value of medical expenses paid by the employer and insurer to the health care providers. Pursuant to the ruling in Cahow v. Brookdale Motors, 61 W.C.D. 427 (W.C.C.A. 2001), the compensation judge stated that she was awarding the $13,000.00 attorney fee on a contingency basis, without regard to the reasonableness of the fee. The compensation judge also determined that $13,000.00 adequately compensated the employee’s attorney for the legal services related to the medical dispute and that an award of fees greater than $13,000.00 was not warranted pursuant to Irwin.
DECISION
The facts of this case are largely undisputed, and “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).
Minn. Stat. § 176.081, subd. 1(a)(1), as it applies to the employee’s case, provides that attorney fees for obtaining medical benefits are to be calculated based on 25% of the first $4,000.00 and 20% of the next $60,000.00 of medical benefits awarded. In Irwin v. Surdyk’s Liquor, the Minnesota Supreme Court held that it was unconstitutional to prohibit deviation from the statutory maximum fee of $13,000.00 in cases where the resulting attorney fee would be inadequate to reasonably compensate the employee’s attorney. 599 N.W.2d 132, 141-42, 59 W.C.D. 319, 334 (Minn. 1999). In such cases, courts should consider the reasonableness of the fee involved based on a number of factors, including “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.” Id. at 142, 59 W.C.D. at 336.
In Cahow v. Brookdale Motors, 61 W.C.D. 427 (W.C.C.A. 2001), the sole dispute had been over medical expenses, and the employee’s attorney was not seeking more than the $13,000.00 statutory maximum fee. Id. at 437-38. This court held that the employee’s attorney was entitled to attorney fees, pursuant to the 25/20 formula in Minn. Stat. § 176.081, subd. 1(a), without application of the Irwin factors. Id. at 438. Thus, Cahow indicated that the Irwin factors may not be applied to reduce the otherwise available statutory fee. Id.; see also Shamp v. Daybreak Foods, No. WC04-144 (W.C.C.A. June 25, 2004) (holding that pursuant to Cahow and the statute, the employee’s attorney is entitled to attorney fees that are calculated using the 25/20 formula as applied to the ascertainable value of the disputed treatment, without regard to the Irwin analysis).
Here, the compensation judge determined that “under the analysis of Cahow, Attorney Soderberg is entitled to an attorney fee based upon the contingency fee method of calculating the fee and it is not necessary to justify the fee on the basis of the services rendered.” In other words, the compensation judge strictly applied the 25/20 formula to the total amount of medical bills involved, and she determined that the employee’s attorney was not entitled to excess fees beyond the $13,000.00. Therefore, in reliance on the precedent established in cases such as Cahow, she did not apply the Irwin factors to the fees paid up to the $13,000.00 maximum established in Minn. Stat. § 176.081, subd. 1.
The employer and insurer raise a constitutional challenge to Minn. Stat. § 176.081, subd. 1, as it was interpreted by the Workers’ Compensation Court of Appeals in Cahow. They argue that said interpretation is a violation of the separation of powers clause of the Minnesota Constitution, and they argue that the Cahow case should not prevent the compensation judge from making a finding as to the reasonableness of attorney fees below $13,000.00. They argue that application of the 25/20 statutory formula to attorney fees that are equal to or less than the $13,000.00 statutory maximum, without analysis of the Irwin factors, intrudes on the court’s authority and obligation to make a determination of attorney fees. Ultimately, the employer and insurer argue that the Supreme Court, in Irwin, invalidated the mechanical application of the 25/20 formula in Minn. Stat. § 176.081, subd. 1, as it is applied to the fees awarded against an employer and insurer in the resolution of a medical dispute. A statutory constraint or mandate, they argue, is a violation of the “fairness” required in evaluating and awarding attorney fees as well as the judiciary’s exclusive power to regulate such a fee.
As the employer and insurer properly recognize, this court lacks jurisdiction to address the constitutionality of statutes. See Irwin, 599 N.W.2d at 139-40, 59 W.C.D. at 330 (citing Minn. Stat. § 175A.01, subd. 5; Hagen v. Venem, 366 N.W.2d 280, 283 (Minn. 1985)). Therefore, we will not address the employer and insurer’s constitutional arguments, but we do acknowledge them in order to preserve them for further proceedings, if any.
The employer and insurer ask this court to revisit the holding in Cahow and similar cases, and they argue that Irwin has invalidated any application of the statute that would preclude a judicial review. See Irwin, 599 N.W.2d at 141-42, 59 W.C.D. at 334 (stating that legislation that prohibits deviation from the statutory formula and impinges on the court’s power to review attorney fees is unconstitutional). This court addressed a similar argument in Cahow and held that:
whether there is an equitable basis for distinguishing between the objective of obtaining a reasonable fee and the objective of paying a reasonable fee is a concern that the legislature did not specifically address in the 1995 amendments [to Minn. Stat. § 176.081], as the 1995 amendments imposed a limit on all attorney fees and removed opportunities for judicial review of attorney fee claims previously provided in Minn. Stat. § 176.081. Neither was this issue raised in Irwin. The supreme court expressly did “not take issue with the actual percentage or dollar limitations adopted by the legislature in Minn. Stat. § 176.081.” Irwin, 599 N.W.2d at 141, 59 W.C.D. at 333. Irwin invalidated the “maximum permissible fee” portion of the statute, but did not invalidate the remaining language of the statute.
Cahow, 61 W.C.D. at 437 (emphasis in original). In other words, Irwin held that it was unconstitutional to prohibit deviation from the statutory maximum fee amount where the resulting fee award would be inadequate to reasonably compensate the employee’s attorney, but Irwin did not invalidate application of the 25/20 formula to attorney fees amounting to the statutory maximum or less. 599 N.W.2d at 141-42, 59 W.C.D. at 334. As such, the remaining language of Minn. Stat. § 176.081, including the 25/20 formula and its application to attorney fees awarded for obtaining medical benefits, remained in effect in the employee’s case.
The employer and insurer also argue that this was not merely an award of a contingent fee such that a review for reasonableness would be unnecessary. Rather, they argue that this is a fee that is not collected pursuant to contract, but it is awarded against an adverse party pursuant to statute. The employer and insurer argue that although the employee and his attorney entered into a standard retainer agreement/contract, which provides in part for a contingent fee based on the 25/20 formula, there is no contract between the employee’s attorney and the employer and its insurer. Therefore, the employer and insurer argue that the fee relationship between the employee and his attorney is distinguishable from the fee relationship between the employee’s attorney and the employer and insurer, which is imposed by statute. Ultimately, the employer and insurer argue that because the employee was receiving a benefit paid pursuant to statute, and because the employee’s attorney was collecting a fee from the employer and insurer pursuant to statute, the 25/20 formula should not apply where there is not a contractual obligation.
Again, this argument goes to the statutory structure created by the legislature to address payment of attorney fees upon recovery of disputed medical benefits. Irwin did not address the potential differences between obtaining attorney fees and paying them. See Cahow, 61 W.C.D. at 437 (citing Irwin, 599 N.W.2d at 141, 59 W.C.D. at 333). Rather, the Irwin case only applies to those cases in which the statutory maximum fee is insufficient to compensate the employee’s attorney. 599 N.W.2d at 141, 59 W.C.D. at 333; Cahow, 61 W.C.D. at 438. Irwin did not invalidate the remaining mandates and procedures of Minn. Stat. § 176.081, and the Supreme Court did “not take issue” with the percentage and dollar limitations adopted by the legislature in Minn. Stat. § 176.081. 599 N.W.2d at 141, 59 W.C.D. at 333. Irwin did not invalidate the remaining portions of Minn. Stat. § 176.081, including the statutory payment structure imposed on employers and insurers, and it is beyond this court’s jurisdiction to do so.
The employer and insurer are effectively asking this court to require an analysis of the Irwin factors in every case involving disputed medical benefits. This could potentially create a significant burden on the Office of Administrative Hearings. In addition, adopting the insurer’s position would affect other portions of the statute and the attorney fee analysis. For example, applying the Irwin factors to every case would effectively invalidate the statute as it applies to all contingent fee cases because the insurer is also obligated to pay fees in those cases pursuant to Minn. Stat. § 176.081, subd. 7, without any Irwin analysis. These types of policy considerations are left to the legislature,[1] and this court does not have jurisdiction to invalidate additional portions of Minn. Stat. § 176.081 beyond those addressed in Irwin, including the attorney fee formula and the payment procedures outlined therein. Therefore, we affirm the compensation judge’s decision to award $13,000.00 in attorney fees pursuant to Minn. Stat § 176.081 without the Irwin factor analysis.
[1] The Supreme Court acknowledged that “the legislature has been vested with wide discretion in making laws and determining issues of public policy, even when those issues involve establishing attorney fee guidelines.” Irwin, 599 N.W.2d at 141, 59 W.C.D. at 333.