LARRY HORTON, Employee/Appellant, v. ASPEN WASTE SYS., INC., and EMC INS. CO., Employer-Insurer/Cross-Appellants, and C. JEREMY LAGASSE, Respondent.

The employee and the employer and insurer appeal from an award of attorney fees to the employee’s former attorney.  We reverse.

Larry Horton, the employee, was injured on June 22, 2017, while training as a driver and waste handler for Aspen Waste Management, the employer.  A fully loaded garbage truck ran over him when the driver backed the truck up and stopped the truck on top of him. The employee was taken to Regions Hospital for treatment, where he was diagnosed with fractures of the cervical spine, thoracic spine, right scapula, ribs, right elbow, and right forearm.  He also sustained a nerve injury to his brachial plexus, resulting in almost total loss of use of his right, dominant arm.  The employer and its insurer admitted responsibility for the work injury, paid medical expenses, and commenced payment of temporary total disability (TTD).

Medical care for the employee’s work injury was provided by Dr. Daniel Sipple.  The insurer wrote to Dr. Sipple on June 22, 2018, sending him a blank Health Care Provider Report form (HCPR) and asking him to rate the employee’s permanent partial disability (PPD) and address whether the employee had reached maximum medical improvement (MMI).  Dr. Sipple responded on July 12, 2018.  He rated disability for the brachial plexus injury at 60 percent under Minn. R. 5223.0400 and for the cervical fracture at 10.5 percent under Minn. R. 5223.0370.  Dr. Sipple also stated the employee was not yet at MMI.  The insurer followed with a letter dated August 8, 2018, requesting clarification on the rating for the employee’s arm.  The employee and the Department of Labor and Industry were copied on the correspondence.

In August 2018, the employee retained Attorney C. Jeremy Lagasse to represent him in connection with his work injury.  According to information in the file, Mr. Lagasse was apparently the fifth lawyer to represent the employee for his work injury. Mr. Lagasse participated in mediation to possibly settle the employee’s claims.  The mediation was not successful, and Mr. Lagasse filed a claim petition on November 12, 2018, alleging the employee’s entitlement for PPD based on the ratings provided by Dr. Sipple in the HCPR previously requested by the insurer.  The employee was still receiving TTD at that time and was accordingly not yet eligible to receive payment of PPD benefits.  The insurer filed an answer which included a general denial but affirmatively alleged that a clarification on the PPD ratings provided by Dr. Sipple had been requested but had not yet been received.

The employee was seen by Dr. Michael Smith at the request of the insurer on January 11, 2019.  In his report following that evaluation, Dr. Smith agreed with the ratings provided by Dr. Sipple for the brachial plexus injury and cervical fracture and added an additional seven percent rating for the thoracic spine fracture.

The insurer wrote to Dr. Sipple again in January 2019, noting that this was a second request for a clarification of the employee’s PPD ratings.  Dr. Sipple reexamined the employee on January 8, 2019, and reaffirmed his previous ratings.  The insurer wrote to the employee on March 1, 2019, copying Mr. Lagasse.  The insurer advised the employee that it had accepted Dr. Smith’s combined PPD rating of 66.66 percent but also advised that PPD was not yet payable because the employee was still receiving TTD benefits.

The employee terminated Mr. Lagasse’s services on April 22, 2019.  On April 25, 2019, Mr. Lagasse filed a Statement of Attorney Fees and Costs claiming $26,000 in contingent fees from the PPD benefits to be paid to the employee, as well as excess fees of $6,020.  The employer and insurer objected to the fee statement and a hearing on the issue of attorney fees was held on October 21, 2019.  The compensation judge found the claim for fees to be premature and dismissed the claim.  There was no appeal to this court.

The employee continued to receive TTD benefits until December 19, 2019, at which time he had received 130 weeks of that benefit.  The insurer then began payment of PPD benefits on a weekly basis pursuant to statute.  At the request of the employee, the balance of his PPD was paid in a lump sum pursuant to Minn. Stat. § 176.101, subd. 2a(b), at which time the insurer withheld $26,000 pending determination of contingent fees.  Mr. Lagasse filed another Statement of Attorney Fees and Costs, claiming $26,000 in contingent fees, $20,000 in excess fees, and costs of approximately $1,870.

The employee, now represented by a new lawyer, objected to the fee statement and a hearing was held on April 1, 2020.  In a decision filed on May 15, 2020, the compensation judge awarded Mr. Lagasse the requested contingent fee and allowed some of the costs, but denied the claim for excess fees. The employee appealed to this court. In our decision of December 24, 2020, we noted that Mr. Lagasse based his claim for fees on the claim petition he had filed in November 2018.  Since PPD was not payable at that time, it was not possible to ascertain whether there was a dispute over benefits payable to the employee which might result in an award of contingent fees, and we vacated the compensation judge’s decision.

Mr. Lagasse filed another Statement of Fees on or about January 14, 2021, again requesting $26,000 in contingent fees from the employee’s benefits as well as partial reimbursement of fees under Minn. Stat. § 176.081, subd. 7.  The employee and insurer objected to the fee request.  A hearing was held on April 1, 2021, before Compensation Judge Grant Hartman, who awarded Mr. Lagasse his requested contingent fee and the partial reimbursement of fees under subdivision 7. The employee appeals and the employer and insurer cross-appeal from the fee award.

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 statute allows for the payment of a contingent attorney fee from an employee’s benefits “for recovery of monetary benefits.”  Minn. Stat. § 176.081, subd 1.  However, the right to a contingent fee is limited in that such a fee may not be awarded based on benefits that were not genuinely in dispute.  Minn. Stat. § 176.081, subd. 1(c), provides, in pertinent part:

In his decision, the compensation judge noted the filing of a claim petition by Mr. Lagasse in November 2018 and relied on the insurer’s answer to the claim petition as creating a dispute.  However, Minn. Stat. § 176.081, subd. 1(c), clearly provides that the filing of a claim does not in and of itself determine the existence of a dispute.  While the answer filed by the insurer contained a general denial, it specifically noted that the insurer’s failure to admit the PPD claim was based on Dr. Sipple not having responded to a request for clarification of his ratings.  Minn. Stat. § 176.081, subd. 1(c), limits fees to situations where there is disagreement only “after the employer or insurer has had adequate time and information to take a position on liability.”  The insurer, when it was required to file its answer, was still waiting for specific information it needed to determine whether to admit or deny some portion of the claimed PTD ratings.  In addition, we note that the failure of an employer and insurer to file an answer to a claim petition results in a referral to a compensation judge for an immediate hearing and prompt award or other order.  Minn. Stat. § 176.331.  Given the facts of this case, and particularly where the claim asserted by the employee was not yet capable of being awarded, neither the claim petition filed by Mr. Lagasse nor the answer filed by the insurer established a genuine dispute over PPD that would support the claimed contingent attorney fee.

The question then arises whether there is other evidence in the case that provides substantial support for the compensation judge’s decision awarding fees.  There are essentially two elements which are necessary for this statute to apply.  First, there must be a refusal or failure to pay benefits which are owed and payable to the employee.  Second, the lawyer retained by the employee must have taken some action which resulted in the benefits being paid to the employee. Neither of those elements is present in this case.  The monetary benefit underlying Mr. Lagasse’s fee request in this case consists only of the PPD compensation paid to the employee as the result of his horrific work injury.  The employer and insurer argue that the undisputed facts of this matter demonstrate that there was no genuine dispute over the payment of PPD in this case.  We agree.

First, there is no evidence that the insurer refused or failed to pay PPD benefits to the employee when those benefits were payable.  PPD is not payable while TTD benefits are being paid under Minn. Stat. § 176.101, subd. 2a(b).   The employee’s TTD benefits ended on December 19, 2019, when he had received 130 weeks of that benefit.  At that time, the insurer began payment of PPD on a weekly basis as required by that statute.  At the request of the employee, and as also provided by the statute, the insurer then paid the remaining PPD in a lump sum.  That payment was made without objection and within 30 days, as the statute required.  None of these facts are disputed.

Second, we consider what action, if any, Mr. Lagasse took that would justify an award of a contingent fee from the payment of the employee’s PPD benefits.  Mr. Lagasse did not obtain any PPD ratings from either Dr. Sipple or Dr. Smith. Dr. Sipple’s opinion on PPD had already been provided in the HCPR sent to him by the insurer.  After the insurer requested a clarification of the rating, Dr. Sipple sent another report.  Mr. Lagasse was copied on this correspondence but did not obtain or acquire any medical information independently.  Dr. Smith’s rating of 66.66 percent PPD, which the insurer paid, was the result of his evaluation of the employee made at the request of the insurer.  There were no actions by Mr. Lagasse which resulted in the employee being paid PPD benefits.

Finally, we note that the decision of the compensation judge ignores the plain language of Minn. R. 1415.3200, subp. 7, which sets out criteria for determining whether a genuine dispute exists for an award of attorney fees.  Subparagraph B of that rule states: “If there was no dispute concerning the rate, amount, duration, or eligibility for a benefit and the benefit was timely paid, the benefit may not be used to compute the fee.”

There is no basis for an award of fees to Mr. Lagasse on the undisputed facts of this case.  The compensation judge erred in awarding Mr. Lagasse attorney fees from the employee’s benefits.  The award of contingent fees and the award of partial fees under Minn. Stat. § 176.081, subd. 7, are therefore reversed.