EMMA MUNOZ, Employee/Respondent, v. JBS USA, LLC, and SEDGWICK CLAIMS, Employer-Insurer/Respondents, and LAW OFFICES OF DONALD F. NOACK, Attorney/Appellant.

This case involves an attorney fee dispute. The employee’s current attorney and her former attorney both claimed 100 percent of attorney fees withheld from a stipulation for settlement. Following a hearing, a compensation judge awarded approximately two-thirds of the fee to the current attorney and approximately one-third of the fee to the former attorney. The former attorney appeals. Because the compensation judge’s findings and order are supported by substantial evidence and the law, we affirm.

The employee, Emma Munoz, suffered injuries while employed by the employer, JBS USA, LLC, on February 4 and November 7, 2016. Although the employer and its insurer admitted the injuries, the nature and extent of the employee’s injuries were subject to dispute.

In August 2017, the employee stopped working due to the effects of her injuries and the employer and insurer began to voluntarily pay temporary total disability (TTD) benefits to the employee. Also in August 2017, the employee hired the Law Offices of Donald F. Noack to represent her in her workers’ compensation claim. She signed a standard workers’ compensation retainer agreement with attorney Noack. Other than her initial meeting with attorney Noack, which the employee described as hurried, lasting 20 minutes, the employee had no further direct contact with him, by phone or in person.

The Noack law firm, through attorney Noack, attorney Vincent Peterson, and paralegal staff, prepared and reviewed various correspondence with the employee, the employee’s qualified rehabilitation consultants, the defense attorney, the Department of Labor and Industry, and the Office of Administrative Hearings (OAH). They reviewed medical records, prepared and filed a claim petition, made discovery demands, and responded to the employer and insurer’s discovery demands. They also engaged in email correspondence and reviewed intervention pleadings.

In December 2017, a mediation took place between defense counsel and attorney Peterson regarding the employee’s claims. Before the date of the mediation, there is no evidence in the record that anyone from the Noack law firm contacted the employee to discuss evaluation of her claim or to advise her that a mediation was to take place. There is no evidence in the record that the Noack law firm made a settlement demand on behalf of their client. At some point during the mediation, attorney Peterson called the employee and presented the defense offer, which he recommended she accept. After attorney Peterson told her to decide as quickly as possible, she asked for 15 minutes to think about the offer and he agreed. Approximately 15 minutes later, she called him back and accepted the offer. The next day, she withdrew her acceptance of the offer. She testified at the hearing that she was uncomfortable accepting the offer, having felt pressured and having no understanding of the settlement agreement.

Shortly after rejecting the settlement proposal, the employee contacted attorney Mark Thalberg. A few weeks later she hired attorney Thalberg and discharged the Noack law firm.

Over the ensuing months, attorney Thalberg reviewed the Noack law firm’s file and had numerous in-person and telephone exchanges with the employee. He also prepared and reviewed correspondence with the employee, the defense attorney, and OAH, prepared the employee for and attended her deposition with her, engaged in email correspondence, provided an intervention notice to a new medical provider, and prepared the employee for the medical examination scheduled by the employer and insurer. He also reviewed medical records, medical bills, and vocational reports. He further prepared a letter to the employee’s medical provider seeking additional medical support for the portion of her claims that were subject to dispute. The report the doctor prepared was not favorable to those claims. Attorney Thalberg then commenced negotiations with defense counsel and agreed to essentially the same settlement which had been reached in December 2017. The only significant change in the agreement was that the new medical provider, which had intervened, had its claims resolved by the employer and insurer.^[1] Otherwise, the agreement called for the same lump sum to the employee, the same close-out of benefits, and the same attorney fees.

The settlement agreement called for a contingent attorney fee of $7,500.00 and an additional Roraff^[2] attorney fee of $2,400.00, which were withheld by the employer and insurer. The employee was paid her portion of the settlement amount after the Award on Stipulation was signed. When the Noack law firm and attorney Thalberg could not come to an agreement on the division of fees, the matter came on for a hearing before a compensation judge.

Both the employee and attorney Thalberg testified at the hearing. Attorney Peterson attended the hearing on behalf of the Noack law firm but did not testify. Both attorneys provided statements of attorney fees with additional documentary evidence. Both attorney Peterson and attorney Thalberg presented arguments.

Attorney Peterson argued entitlement to the entirety of the fee, alleging attorney Thalberg achieved no additional benefit to the employee which had not already been achieved by the tentative settlement agreement of December 2017. Moreover, attorney Peterson alleged that attorney Thalberg’s efforts to obtain a medical report, which proved unsuccessful, put the settlement agreement in jeopardy.^[3] He asserted his firm was entitled to 100 percent of the fees.

Attorney Thalberg, on the other hand, argued the employee had no understanding of how the settlement amount had been reached in December 2017, had been pressured into accepting it, and had almost no communication with her former attorneys except for the brief initial conference and the call pressuring her during the mediation. He argued that the employee ultimately did not agree to any settlement in December 2017. Instead, he asserts it was only after he had many meetings with her, going over the medical evidence, attempting to prove up additional claims through more medical reports, going through a deposition, explaining the entirety of the process to the employee, and evaluating her claim with her, that the employee felt comfortable and accepted the settlement terms.

Attorney Thalberg also argued that, but for his representation of the employee, she would not have received four additional months of TTD benefits or the additional medical benefits. Attorney Thalberg claimed entitlement to 100 percent of the fees.

After hearing the evidence, the compensation judge determined that both attorneys had provided valuable services to the employee, applied the Irwin^[4] factors, and ordered $6,750.00 of the attorney fee to be paid to attorney Thalberg and $3,150.00 of the fee to be paid to the Noack law firm. The Noack law firm appeals.

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).

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).

The Noack law firm makes two basic arguments. First, that there is not substantial evidence to support the compensation judge’s findings. Second, as a matter of law, because the settlement agreement was essentially unchanged, attorney Thalberg provided no valuable services to the employee and should receive no fee.

As noted, this court defers to the compensation judge’s findings of fact if they are supported by substantial evidence. The Noack law firm asserts there is not substantial evidence to support the compensation judge’s findings that the employee spoke with attorney Noack at the initial appointment and attorney Peterson on the day of the mediation (and the day after, when she withdrew her consent to the agreement), but otherwise had no direct communication with an attorney from that firm. The Noack law firm also asserts there is not substantial evidence to support the finding that the employee spoke with attorney Thalberg on approximately one dozen occasions. We are not persuaded by the argument. The billing statements of both law firms, as well as the testimony, support those findings. We see no evidence to support contrary findings.

The Noack law firm also asserts there is no evidence to support that the employee received any additional benefits due to attorney Thalberg’s representation. In particular, the Noack law firm argues the evidence does not support a finding that the employee received ongoing TTD benefits after rejecting the settlement proposal in December 2017. The substantial evidence in the record supports this finding.^[5] More, the evidence is clear that after attorney Thalberg took over, the employee commenced medical care at a new facility, and this medical care was paid for by the employer and insurer as part of the settlement.

Substantial evidence supports all of the compensation judge’s findings.

The crux of the Noack law firm’s appeal is that the settlement offer presented in December 2017, while it was representing the employee and to which the employee initially agreed, was ultimately the same settlement accepted by the employee six months later. The Noack law firm asserts that it was the work of the Noack law firm, not attorney Thalberg, which resulted in the lump sum paid to the employee, the basis of the contingent fee, and in the Roraff fee. They argue that because the terms of the settlement remain mostly unchanged, and the lump sum paid to the employee and the amount of the fees remain completely unchanged, from the initial agreement to the ultimate agreement, attorney Thalberg’s legal services did not provide any value to the employee. Moreover, the Noack law firm argues the work done by attorney Thalberg put the settlement in jeopardy because attorney Thalberg sought a report which was not favorable to the employee and made her claims less likely to be successful.

In Irwin, the Minnesota Supreme Court listed factors to be considered when determining a reasonable attorney fee, including (1) the amount recovered, (2) the time and expense necessary to prepare for trial, (3) the responsibility assumed by counsel, (4) the difficulties of the issues, (5) the nature of the proof involved, and (6) the results obtained. The Irwin factors have been applied when reviewing whether a compensation judge erred in determining how to divide fees between an employee’s former attorney and current attorney. Schmidt v. Nortel Networks, Inc., slip op. (W.C.C.A. July 11, 2003).

The compensation judge in this case appropriately applied the Irwin factors in order to divide the attorney fee between the Noack law firm and attorney Thalberg. Based on those factors, the compensation judge determined attorney Thalberg was entitled to approximately two-thirds of the fee and the Noack law firm was entitled to approximately one-third of the fee. The Noack law firm argues the compensation judged erred in her determination, because attorney Thalberg obtained no additional benefit to the employee which had not already been obtained in the tentative agreement of December 2017. We disagree.

As noted above, under Irwin, attorney fees are not based solely on the amount of a recovery, but on many other factors. Although there was a tentative agreement in December 2017, no stipulation for settlement was signed while the Noack law firm represented the employee. The compensation judge specifically found the employee’s reluctance to settle at that time was due in part to the manner in which the Noack law firm communicated with the employee. Substantial evidence supports this finding. Attorney Noack spoke with the employee on only one occasion for 20 minutes. Attorney Peterson spoke with the employee on the date of the mediation to inform her of his judgment that she ought to accept an offer. Otherwise, there is no evidence in the record of her communication with the Noack law firm other than letters received from the firm or telephone calls with paralegals. The evidence shows the law firm did not prepare her for the mediation or review its evaluation of the claim with her, and did not make her aware of the mediation until an offer was made. The employee testified she had no understanding of the terms of the settlement offer in December 2017, and felt pressured to accept the offer.

While neither law firm played any role in the employee’s receipt of TTD benefits, she continued to receive those benefits for four more months after terminating the Noack law firm. She also sought additional medical care from a different medical provider, and this provider intervened and had its bill resolved in the ultimate settlement. Attorney Thalberg assisted the employee in obtaining the additional medical benefit. Further, attorney Thalberg represented the employee during her deposition, counseled her about her medical examination with the employer and insurer’s expert, and explained the evaluation of her claims, how terms of a settlement agreement would work, and her options regarding trial. These services made the employee comfortable with settling her claims.^[6]

The Noack law firm also argues that attorney Thalberg made the employee’s claims less valuable by seeking a medical report which proved to be unhelpful, even harmful, to her claims. While it is true that attorney Thalberg asked for a medical report from a treating doctor which was not helpful to the case, there is no evidence the employee’s recovery was adversely affected due to the report. In addition, because of this medical opinion, the employee was more comfortable knowing her claims had been thoroughly considered, and that some of her claims were not likely to be successful. There is no evidence the Noack law firm communicated to the employee that some of her claims lacked merit.

The compensation judge compared and contrasted the value of the services provided by both law firms, applied the Irwin factors, and concluded the services provided by attorney Thalberg justified an award of approximately two-thirds of the fee. Substantial evidence supports this finding and the award of attorney fees by the compensation judge, and therefore we affirm.