CHARLOTTE M. WILSON, Employee/Appellant, v. TWIN TOWN LOGISTICS and BROWN GOFF ADM’RS, Employer-Insurer/Respondents.

The employee’s attorney appeals from the compensation judge’s award of excess attorney fees. We affirm the compensation judge.

On February 4, 2013, Charlotte Wilson, the employee, suffered a work injury to her left arm in a fall. The employee received medical care, wage loss benefits, and rehabilitation assistance. These benefits were paid by the employer’s workers’ compensation insurer, Freestone/Dallas National Premium Co. (Freestone).

In January 2014, the employee filed a claim petition seeking attorney fees and penalties for late payment of attorney fees. On April 28, 2014, the Chancery Court of the State of Delaware issued an order declaring Freestone unsound and staying all actions involving the insurer. Accordingly, the employee’s claim petition was stricken from the active trial calendar by an order issued by OAH on June 2, 2014. Freestone was subsequently declared insolvent.

The employee’s claims were then submitted to the Minnesota Insurance Guaranty Association (MIGA) for payment, but in December 2014, MIGA determined the employee’s claims were not covered. Minn. Stat. § 60C.09. Liability for the employee’s claims thereafter were borne directly by the employer. Minn. Stat. § 176.185, subd. 8a. The employee’s claims were set back on the active trial calendar by an order issued April 29, 2015.

The employee amended the previously filed claim petition in May 2015 to include claims for temporary partial disability benefits from June 1, 2014. The claim petition was amended again in July 2015 to include a request for approval of a cervical MRI scan. In October 2015, the employee amended the claim petition to include claims for penalties for a failure to pay wage loss benefits on a timely basis. Claims were also added for payment of medical expenses, approval of continuing rehabilitation benefits, and payment of outstanding rehabilitation bills.

A hearing was scheduled on the employee’s claims for January 5, 2016, but was cancelled due to a tentative settlement between the parties. No final settlement was reached and another hearing was set.

On July 28, 2016, the matter came on for hearing before Compensation Judge Stacy Bouman. The parties stipulated that the employee was entitled to temporary partial disability benefits, vocational rehabilitation services, and physical therapy. The issues presented to the compensation judge for determination were identified as: 1) penalties under Minn. Stat. §§ 176.221 and 176.225 for late payment of temporary total disability benefits, temporary partial disability benefits, fees for rehabilitation services, and medical bills; 2) reasonableness of treatment by Allina Cambridge Medical Center; and 3) attorney fees. The compensation judge filed her Findings and Order on October 13, 2016, awarding penalties and medical bills. An Amended Findings and Order was served and filed on November 8, 2016. The employer appealed the award, which was dismissed as untimely.

On November 4, 2016, the employee’s attorney filed a Statement of Attorney Fees and Costs. Benefits recovered on behalf of the employee as a result of the compensation judge’s award were identified as $8,871.98 in temporary partial disability benefits, $13,596.97 in penalties, and medical bills of $2,000.00. Attorney fees previously paid were itemized as “$3638 + 2500 (F&O 10/10/16) (not paid as of 11/2/16) . . . .” Counsel claimed $4,493.78 for contingent fees from the penalties and the employee’s benefits awarded by the compensation judge, $2,368.22 as Roraff^[1] fees, and $30,572.00 as excess fees under Irwin,^[2] based on 186.1 hours of time from October 2013 to October 24, 2016, at an hourly rate of $330.00. Reimbursement of fees under Minn. Stat. § 176.081, subd. 7, in the amount of $11,230.20 were claimed, as well as $3,808.08 in taxable costs.

An objection to the claimed fees was filed by the employer. The employer contended that the claimed hours were excessive, that the hourly rate was excessive, and that some of the time itemized in the statement by the employee’s attorney had already been paid. On March 20, 2017, Judge Bouman heard the fee request. Employee’s counsel emphasized the complexity of the issues, particularly regarding the effort required to obtain the employer’s ultimate agreement to pay the benefits owed to the employee. The employer contended that there were was no genuine dispute over the medical treatment or rehabilitation issues. Post-hearing briefs were filed by both parties.

The compensation judge filed her Findings and Order dealing with the attorney fee claim on May 15, 2017. The compensation judge found that there were genuine disputes over benefits amounting to $27,164.34. The judge found that the employee’s attorney had previously been paid $3,638.00 for fees in 2014, was paid Roraff fees of $2,500.00 after the October 2016 hearing by agreement of the employer, and had been paid an additional $5,071.01 for contingent fees as a result of the July 2016 hearing. The total amount of attorney fees previously paid to the employee’s attorney was $11,209.11. The compensation judge awarded employee’s counsel “$3,000.00 as and for a combination of Roraff/Heaton fees and excess fees.” The employee’s counsel appeals the award of attorney fees.

On appeal, the Workers’ Compensation Court of Appeals must determine whether “the findings of fact and order [are] clearly erroneous and unsupported by substantial evidence in view of the entire record as submitted.” Minn. Stat. § 176.421, subd. 1(3). Substantial evidence supports the findings if, in the context of the entire record, “they are supported by evidence that a reasonable mind might accept as adequate.” Hengemuhle v. Long Prairie Jaycees, 358 N.W.2d 54, 59, 37 W.C.D. 235, 239 (Minn. 1984). Where evidence conflicts or more than one inference may reasonably be drawn from the evidence, the findings are to be affirmed. Id. at 60, 37 W.C.D. at 240. Similarly, findings of fact should not be disturbed, even though the reviewing court might disagree with them, “unless they are clearly erroneous in the sense that they are manifestly contrary to the weight of evidence or not reasonably supported by the evidence as a whole.” Northern States Power Co. v. Lyon Food Prods., Inc., 304 Minn. 196, 201, 229 N.W.2d 521, 524 (1975).

Contingent attorney fees for recovery of monetary benefits are presumed to be adequate for the recovery of rehabilitation and medical benefits. Additional fees may be assessed against the employer and insurer for the recovery of medical benefits only if the attorney establishes that the contingent fee is inadequate to reasonably compensation the attorney for representing the employee in the medical or rehabilitation dispute. Minn. Stat. § 176.081, subd. 1(a)(1). The employee has the burden of establishing entitlement to Roraff fees. Alden v. Mills Fleet Farm, 70 W.C.D. 523 (W.C.C.A. 2010). Further, where the attorney fee requested is in excess of the statutory cap on fees, the compensation judge must consider the request in light of the factors set out in Irwin. Engren v. Majestic Oaks Golf Club, 76 W.C.D. 403 (W.C.C.A. 2016). Those factors require consideration of the statutory guidelines on fees, and “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, 599 N.W.2d at 142, 59 W.C.D. at 336.

In this matter, the compensation judge determined that contingent fees did not adequately compensate the employee’s attorney and that excess fees in the amount of $3,000.00 were appropriate. This finding was not disputed by the employer. The employee appeals the award of excess fees, asserting that the amount was unreasonable, not supported by the record, and constituted an abuse of discretion. We disagree.

The compensation judge’s award of excess fees is properly supported by specific findings on the Irwin factors.

On the amount involved factor, the compensation judge found that the amount in dispute at the time of the July 28, 2016, hearing was “approximately $27,164.34,” consisting of $3,421.94 in medical bills, $8,871.98 in wage loss benefits, $13,596.97 in penalty claims, and $1,273.45 in vocational services. (Finding 11.) This finding was not appealed.

The compensation judge found that the employee’s attorney was an experienced practitioner in workers’ compensation. (Finding 19.) The compensation judge determined the “employee’s attorney and his staff took full responsibility” for securing the employee’s benefits. (Finding 20.) Neither of these findings were appealed.

The compensation judge found that, “The nature of the claims and the proof required was not particularly complex or unusual.” (Finding 21.) The compensation judge noted the stay imposed by the Delaware court and stated that, “While this particular workers’ compensation case was complicated by the stay, the issues presented were not complex or technically difficult.” (Finding 21.)

The compensation judge also reviewed the itemized statement submitted by the employee’s attorney which showed $32,766.50 in attorneys’ time and $4,544.50 in staff time. The compensation judge found some of the itemized time was excessive, duplicative, and included “secretarial-type services.”^[3] (Finding 22.) The employee argues that the compensation judge erred in not identifying with exactitude how the claimed time was excessive. This court has reviewed the statement, as well. It is a 17-page document with hundreds of entries and we do not believe a detailed finding on each entry is necessary or even reasonable. While time expended by an attorney is a factor to be considered, an attorney is not automatically entitled to payment of all time set out in a fee statement.

Aside from the Irwin factors, the compensation judge’s consideration of the employee’s counsel’s request for excess fees and her resulting findings should be examined in the context of the entire case. Not only did this compensation judge hear evidence on the statement of fees at the March 20, 2017, hearing, but it was this compensation judge who also heard the claims of the employee and the evidence presented at the July 28, 2016, hearing. This compensation judge was well-versed in the employee’s case, and the numerous conferences, hearings, and decisions made. This compensation judge made 43 specific and detailed findings regarding disputes between the parties, dating from 2014 to the present, and included discussion of the actions taken on the employee’s behalf by her attorney. The compensation judge’s factual determinations, application of the Irwin factors, and ultimate award of excess fees, should not be read in isolation.

This court generally gives deference to a compensation judge’s decision as to what constitutes a reasonable fee under the circumstances. Lucking v. EPC Loudon/Cookson Plastic Molding Corp., slip op. (W.C.C.A. Sept. 26, 2001). This court has, in other cases, reversed or remanded for further consideration an award of excess fees even when the compensation judge has properly applied the Irwin factors. In those cases, the award made by the compensation judge was determined by the appellate court to have been an abuse of discretion. Johnson v. VCI Asbestos Abatement, No. WC05-157 (W.C.C.A. Sept. 15, 2005); John v. Suburban Air Conditioning, 62 W.C.D. 285 (W.C.C.A. 2002). An abuse of discretion occurs when a judge makes “an erroneous legal conclusion or a clearly erroneous factual conclusion.” Ansello v. Wis. Cent., Ltd., 900 N.W.2d 167, 173, 77 W.C.D. 721, 729 (Minn. 2017) (emphasis added). We conclude that the compensation judge’s factual determinations and application of the Irwin factors do not rise to the level of clearly erroneous, and therefore, the compensation judge did not abuse her discretion in awarding excess fees in the amount of $3,000.00 under these circumstances.

The decision of the compensation judge is affirmed.

“The essence of a standard of review is that it constitutes the lens through which a tribunal will evaluate a determination of a prior authority.”^[4] The question here is how much deference we will extend to the award of attorney fees when the deficiencies of the compensation judge’s analysis are so great. Because the majority’s opinion does not recognize these deficiencies in the attorney fee award, I respectfully dissent.

Under Minn. Stat. § 176.081, contingent fees are payable to employee’s counsel for obtaining benefits on behalf of the employee. Where the contingent fees payable are inadequate to reasonably compensate the attorney for the representation provided, excess fees can be awarded.^[5] The compensation judge found, and the parties do not dispute, that the contingent fees are inadequate to constitute reasonable compensation and therefore an excess fee award in some amount is appropriate.

In awarding excess fees, the compensation judge must consider the factors set out in Irwin v. Surdyk’s Liquor, “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.”^[6] As set out by the Minnesota Supreme Court, whether the compensation judge applied the appropriate legal analysis is reviewed de novo.^[7] Where the compensation judge performed the correct legal analysis, an attorney fee award is reviewed for an abuse of discretion.^[8]

In this matter, the judge set out all of the Irwin factors in the memorandum attached to the award of attorney fees. While all of the factors are mentioned, there is a need to make adequate findings in support of the award of fees.^[9] The majority states that the compensation judge made 43 findings on the disputes from 2014 to the date of hearing. These findings clearly demonstrate that the employee’s attorney provided reasonable services over two and one-half years to obtain benefits for the employee where ultimately, the insurer became insolvent and the employer offered no substantive defense. The record is clear that the employee would not have received those benefits absent the diligent effort of counsel. In this case, listing the Irwin factors and providing a conclusory statement regarding the discounting of fees does not meet the standard for adequate findings of fact; thus, the factual findings made by the judge do not support that award.

For attorney fees, the Minnesota Supreme Court has indicated that an award of attorney fees must be adequate to compensate the employee’s attorney for the representation provided.^[10] The inability to obtain reasonable attorney fees in workers’ compensation proceedings can have a chilling effect on attorneys’ willingness to take on representation of injured employees where employers and insurers cause delay by insolvency.^[11] The chilling effect that inadequate fees can have on qualified counsel undermines the entire workers’ compensation system and impacts the quality of advocacy available to employees.

Having carefully reviewed the billing records provided by employee’s counsel, the amount awarded by the compensation judge is not supported by the evidence in the record or the unappealed findings in the award. The amount awarded is inadequate compensation and this results in an abuse of discretion by the compensation judge.

Due to the insolvency in 2014 of the insurance company on the risk, employee’s counsel was required to bring the employee’s claims directly against the employer and defend against a discontinuance brought at the same time as an automatic stay was imposed. The history of benefit payments to the employee is characterized by lateness and advancement of defenses, all of which required greater effort by employee’s counsel, not lesser. Even when the employer offered to settle the matter on the first scheduled date of trial, that settlement could not be finalized over a period of months and required that the trial go forward at a later date. All of this documented effort, expended over a period of two and one-half years, at the hourly rates found reasonable by the compensation judge, far exceeds the contingent fees paid and the combined Roraff/Heaton and excess fee award of $3,000.00 made by the compensation judge.

By one example, the time spent by employee’s counsel solely for preparation and attendance at the underlying hearing actually conducted in this matter, multiplied by the hourly rate found reasonable by the compensation judge, comes to over $6,000.00.^[12] This amount is double the entire amount of excess fees awarded by the compensation judge. With such a steep reduction, the judge’s factual findings become very important. The findings must support the reasonableness of the reduction and demonstrate that it was not an abuse of discretion.

The primary justification for the degree of reduction in the claimed excess fees is found in Finding 22. The specific reasoning set out by the compensation judge in that finding states: “However, the bill also included time spent solely securing wage loss benefits, penalties, and attorney fees; charges for secretarial-type services; duplicate entries; work that was duplicative in nature; and time that was excessive.” To the extent that time was spent solely for wage loss benefits, penalties, and attorney fees, the contingent fees, totaling at most $11,209.01, are properly directed to those efforts. As that amount was found to be inadequate compensation for the services provided, excess fees are appropriately awarded for the other work performed.

Employee’s counsel expressly maintains that there were no charges billed for secretarial-type services, and at oral argument, the employer and insurer agreed that none of the billings fall under that description. The only work identified as duplicative in nature was the preparation for hearing, which occurred prior to the two scheduled hearings before the compensation judge. Neither of those hearings was resolved prior to the day of hearing and employee’s counsel was obligated to be ready to try whatever issues could be presented, which included a potential defense of lack of causation. Neither of these reasons for discounting the claimed excess fees is supported by the record in this matter. As such, the compensation judge gives no adequate basis for setting the fee awarded to employee’s counsel. Further, Finding 22 fails to state how much of the discount in fees awarded is attributable to these two unsupported reasons. At a minimum, the excess fee award should be vacated and the matter remanded for an increase of the fee award.^[13]

The abuse of discretion standard is employed regularly throughout appellate review.^[14] As the matters to be reviewed under this standard are varied and necessarily fact-specific, the compensation judge’s decision is properly afforded significant deference on review. This deference however, should not prevent this court, under appropriate circumstances, from modifying an excess fee award that is found to be unreasonable, as we did in Vaughn v. Allina Health Systems.^[15]

The employee sought $30,572.00 in excess fees. The compensation judge awarded $3,000.00 without an adequate and reasonable rationale as required under Irwin. As the award of excess fees in this case is outside of the range of reasonableness given the record, I conclude that the compensation judge abused her discretion. As stated above, I would remand for adequate findings of fact and the award of a reasonable attorney fee.