ATTORNEY FEES – EDQUIST FEES. An intervenor who is awarded reimbursement as a result of its own efforts and risk to establish primary liability at a Parker/Lindberg hearing need not pay an Edquist fee to the employee’s attorney.
Compensation Judge: William J. Marshall
Attorneys: Joshua E. Borken, Law Office of Joshua Borken, St. Paul, Minnesota, for the Respondent Employee. David J. Klaiman, Aafedt, Forde, Gray, Monson & Hager, P.A., Minneapolis, Minnesota, for the Respondents Employer-Insurer. Kelly Sofio, Oskie & Sofio, P.L.L.C., St. Paul, Minnesota for the Appellant Intervenor.
DAVID A. STOFFERAHN, Judge
The compensation judge ordered that the intervenor, State Farm Insurance Company, be reimbursed for no-fault benefits it paid to the employee following injuries sustained as a result of a work-related motor vehicle accident. Upon petition by the employee’s attorney, the compensation judge awarded an Edquist fee payable from the intervenor’s reimbursement. The intervenor appeals and we reverse.
The employee, Lisa Borucki Vukelich, was seriously injured in a motor vehicle accident on July 20, 2017, while traveling to a work meeting. The employer, Rise, Inc., and its insurer, Sentry Insurance Group, denied liability for her injuries. The employee retained an attorney and filed a claim petition seeking workers’ compensation benefits. During the pendency of her workers’ compensation claim, the employee also filed a claim for no-fault benefits with her personal auto insurer, State Farm Insurance Company. State Farm eventually paid the policy limits of $20,000.00 for wage loss benefits and $20,000.00 for medical expenses. State Farm intervened in the employee’s pending workers’ compensation matter.
Rather than proceed to hearing on her claim petition, the employee entered into a stipulation for settlement with her employer, resolving all claims arising out of the claimed work injury on a full, final, and complete basis, including a close-out of future medical benefits. The employee was paid $64,900.00, from which $12,900.00 was withheld and paid as attorney fees to the employee’s attorney. Claims of intervenors were settled as well, with the exception of State Farm. State Farm contended the settlement offer was inadequate and it chose to proceed to a Parker/Lindberg hearing.
At the Parker/Lindberg hearing, State Farm’s claims were asserted and argued by its own attorney. The employee was subpoenaed by State Farm. She appeared as a witness and was examined by State Farm’s attorney to establish that the employee’s injuries were work related. The employee’s attorney was present but asked no questions and did not otherwise participate in the hearing. The compensation judge issued his Findings and Order on April 5, 2019, determining that although State Farm had not been excluded from the settlement, the employee’s injury was work related, and State Farm was entitled to full reimbursement of the no-fault benefits it had paid to the employee. The employer and insurer appealed to this court but settled with State Farm to resolve its intervention claim while the appeal was pending. The employee and her attorney did not participate in negotiations and were not parties to the agreement between the employer and insurer and State Farm.
On June 24, 2019, the employee’s attorney filed a statement of attorney fees seeking a $7,000.00 Edquist fee, that being 20 percent of the reimbursement awarded to State Farm. State Farm objected to the fee claim and a hearing was held on July 8, 2019. By Findings and Order issued August 28, 2019, the compensation judge awarded the claimed Edquist fee, concluding that the employee had a right to be represented at the Parker/Lindberg hearing, and that Edquist fees are based upon recovery rather than effort. State Farm 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 intervenor, State Farm, appeals from the compensation judge’s award of an Edquist fee to the employee’s attorney, thereby reducing State Farm’s reimbursement. We reverse.
Reimbursement awarded to an intervenor may be reduced by a 20 percent fee payable to the employee’s attorney. Minn. Stat. § 176.081, subd. 1(a); Edquist v. Browning-Ferris, 380 N.W.2d 787, 38 W.C.D. 411 (Minn. 1986). In awarding a fee, the supreme court in Edquist reasoned that “the fund from which reimbursement is made – the compensation awarded to the employee – comes into existence because of the attorney’s efforts.” Edquist, 380 N.W.2d at 790, 38 W.C.D. at 414. The court stated that an award of an attorney fee furthered two purposes of the statute, those being to ensure that employees are protected against excessive fees while employee attorneys are reasonably compensated, and to ensure that employees have access to representation by competent counsel. Edquist, 380 N.W.2d at 789, 38 W.C.D. at 413-14.
On appeal, State Farm argues that it should not be required to pay an Edquist fee because it was represented by its own attorney rather than by the employee’s attorney, and because the awarded reimbursement was a result of its own efforts and not the efforts of the employee’s attorney. Primary liability was established by State Farm and its attorney and not by the employee’s attorney. The employee’s attorney settled his client’s claims, did not try the liability case, and with respect to the Parker/Lindberg hearing, did nothing other than appear with his client and only after his client was subpoenaed by State Farm. State Farm contends that the appearance of the employee’s attorney at the hearing with no participation does not warrant a fee.
The compensation judge awarded an Edquist fee to the employee’s attorney, stating that such a fee is based upon recovery and not an attorney’s effort. However, this court has considered effort to be a relevant factor in cases involving separate representation. Heise v. Marathon Grp., slip op. (W.C.C.A. Apr. 28, 1998); see also Peterson v. C.G. Studios/Div. of Olan Mills, slip op. (W.C.C.A. July 24, 1991) (employee’s attorney not entitled to Edquist fee out of settlement recovery to intervenor no-fault carrier where the recovery was obtained through negotiations and effort of the intervenor’s attorney).
In Heise, this court rejected the intervenor’s argument that it should not be required to pay an Edquist fee to the employee’s attorney because the intervenor was separately represented. This court noted that the issue of primary liability was established through the efforts of the employee’s attorney and not by the intervenor’s attorney, and that it was the employee’s attorney who took financial risk to obtain testimony and present evidence at hearing to establish primary liability. In Heise, the intervenor’s attorney “did not actively participate in the contested primary liability issue.” Heise, slip op. at 8. Here, in a reversal of roles from those in Heise, it was State Farm’s attorney who put forth the effort and took the financial risk to establish primary liability, not the employee’s attorney.
Before the compensation judge, State Farm argued that this court’s holding in Heitman v. Red Wing Shoe Co., 41 W.C.D. 392 (W.C.C.A. 1988), summarily aff’d (Minn. Oct. 3, 1988), is controlling. In Heitman, this court affirmed a denial of an Edquist fee where the employee objected to the intervenor’s right to assert its claim and the intervenor was separately represented to protect its own interests. The compensation judge, in his memorandum, distinguished Heitman on the basis that the employee did not contest State Farm’s entitlement to reimbursement for paid no-fault benefits. That factor, however, was not determinative in Heitman, nor should it be in the present case.
The key factor in Heitman was not just that the intervention claim was contested by the employee, but that as a result of the employee’s objection, “it was necessary for the intervenor to appear and defend on this issue.” Id. at 396. In the present case, the employee may not have disputed State Farm’s intervention claim, but the employee’s attorney did not make any effort to assert that claim. It was necessary for State Farm to have its own attorney to protect its interests, assert its rights, and pursue its claim for reimbursement. The intervenor’s attorney was solely responsible for the favorable result at the Parker/Lindberg hearing and the settlement between State Farm and the employer and insurer was negotiated by State Farm’s attorney without any input or other participation by the employee’s attorney.
This case does not present a typical Edquist fee scenario. We acknowledge that without the filing of a claim petition by the employee’s attorney, there would have been no action in which State Farm could have intervened. See Tatro v. Hartmann’s Store, 295 Minn. 282, 204 N.W.2d 125, 26 W.C.D. 576 (1973); see also Mann v. Unity Med. Ctr./Health Cent., 442 N.W.2d 291, 293 n.3, 41 W.C.D. 1171, 1174-75 n.3 (Minn. 1989). From that point on, however, it was State Farm’s attorney who put forth the effort and took the financial risk to establish primary liability and assert its right for reimbursement. “We believe it is incongruous to place upon the intervenor … the burden of proving that the injury was work related before it can recover reimbursement.” Johnson v. Blue Cross Blue Shield, 329 N.W.2d 49, 52 (Minn. 1983) (quoting Brooks v. A.M.F., Inc., 278 N.W.2d 310, 315, 31 W.C.D. 521, 531 (Minn. 1979)). The Minnesota Supreme Court in Edquist awarded attorney fees when the efforts at trial by the employee’s attorney, not the intervenor’s attorney, resulted in recovered benefits for the employee and the intervenor. Edquist, 380 N.W.2d at 790, 38 W.C.D. at 414. Such are not the circumstances in this case. Under the unique circumstances presented in this case, no Edquist fee is payable and we reverse the compensation judge’s award.