JAMES JURGENSEN, Employee/Appellant, v. DAVE PERKINS CONTRACTING, INC., and TGB CLAIMS SERVS., Employer-Insurer/Respondents.

The employee’s attorney appeals from the judge’s determination that the maximum statutory contingency fee of $26,000 was adequate compensation for the work on the case and that fees in excess of the statutory maximum are not appropriate.  We affirm.

The employee sustained an admitted work injury to his left shoulder on July 29, 2021, while working for Dave Perkins Contracting, Inc.  He required a surgical repair of the left rotator cuff and a bicep tenotomy on October 4, 2021.  On September 20, 2021, the employee retained attorney Joshua E. Borken for representation in this workers’ compensation matter.  The retainer agreement^[1] provides:

The employer and insurer voluntarily paid temporary total disability benefits to the employee and also voluntarily paid for the employee’s shoulder surgery and other medical treatment.  Initially there was no litigation or dispute regarding benefits.  Following a functional capacities evaluation, he returned to work on October 13, 2022, at a significant wage loss.

On October 25, 2022, the employer and insurer obtained an independent medical evaluation (IME) of the employee.  The IME report indicated that the employee was at MMI, had no ratable permanency, and would not need additional medical treatment.  Based on the IME report, the employer and insurer filed a notice of intent to discontinue benefits.  The employee made a settlement demand for claimed benefits to resolve the parties’ differences regarding entitlement to further benefits.

At a mediation on February 6, 2023, the parties reached an agreement to settle the employee’s workers’ compensation claims.  A Stipulation for Settlement was submitted to the Office of Administrative Hearings for approval on March 10, 2023.  The stipulation provided that the employer and insurer would pay $150,000 for a full, final, and complete settlement, including a close out of future medical and vocational rehabilitation benefits, although the value of those future benefits was not specified.  Of this lump sum, $26,000 was to be paid to the employee’s attorney as contingent attorney fees pursuant to Minn. Stat. § 176.081.  An additional $4,000 was to be paid to the employee’s attorney as an excess fee, which the parties agreed was fair and reasonable.  The employee thus was to receive a net lump sum payment of $120,000.^[2]  The employee’s attorney filed an Excess Fee Exhibit on March 14, 2023, which showed that he and a member of his office staff spent a total of 24 hours representing the employee.  Based on his hourly rate of $425 and his staff’s hourly rate of $210, the hourly value of time spent was $9,972.50.

On March 16, 2023, the compensation judge issued a Partial Award on Stipulation, approving the Stipulation for Settlement with the exception of that portion of attorney fees which exceeded $26,000.  The compensation judge ordered the employer and insurer to escrow the additional $4,000 in fees provided in the stipulation pending a hearing to determine whether excess fees were appropriate.

An attorney fee hearing was conducted on July 10, 2023, on the issue of whether the employee’s attorney was entitled to an excess contingency attorney fee in the amount of $4,000.  At hearing, the employee testified that he felt that his attorney was entitled to the excess fee of $4,000 and that he understood that the $4,000 was considered an excess fee.  (T. 10.)  The attorney for the employer and insurer testified that the settlement amount included a close out of future medical and vocational rehabilitation and he agreed that, although no amount was ascribed to those future benefits, it was a “significant aspect of the settlement.”  (T. 9.)

The compensation judge, after reviewing the Irwin factors,^[3] found that the maximum statutory contingency fee of $26,000 adequately compensates the employee’s attorney for his time spent on the case and that fees in excess of the statutory maximum are not warranted.  The employee’s attorney 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).

In this case, the compensation judge reviewed the stipulation for settlement as prescribed by Minn. Stat. § 176.521 and issued a Partial Award on Stipulation, reserving the issue of entitlement to excess attorney fees for an attorney fee hearing.  Following the attorney fee hearing, the compensation judge issued her findings and order denying the excess fee.  Appellant argues that the compensation judge did not have jurisdiction to disapprove a stipulation’s provision for excess fees or to then review the claim for those excess fees.  He also argues that even if there was authority for such review, the compensation judge abused her discretion in denying the excess fees.  We disagree.

Appellant contends that because an excess fee was included in and agreed to by the parties as part of their stipulation for settlement, the compensation judge was required to automatically approve the excess fee as set forth in the stipulation.  We conclude that this approach is inconsistent with the standards set out in Minn. Stat. §§ 176.521 and 176.081.  Regardless of whether all parties agree to the terms of a stipulation for settlement, Minn. Stat. § 176.521, subd. 2,  requires that where a settlement purports to close out the employee’s right to medical compensation or rehabilitation, it must be reviewed by the commissioner or a compensation judge, and is to be approved only if its provisions are in conformity with the Workers’ Compensation Act.^[4]  In this case, because the Stipulation for Settlement closed out future medical and rehabilitation benefits, the compensation judge had the authority and the obligation to review the stipulation to determine if it was in conformity with the Workers’ Compensation Act.

We further conclude that jurisdiction to review and approve such a stipulation includes the authority to determine whether an attorney fee provision in the stipulation comports with the provisions of the Act.  Minn. Stat. § 176.081, subd. 1 provides that an attorney fee “. . . of 20 percent of the first $130,000 of compensation awarded to the employee is the maximum permissible fee and does not require approval by the commissioner, compensation judge, or any other party.”  Thus, the compensation judge was required to approve that portion of the stipulation that provided for the payment of that amount, in this case $26,000, to the employee’s attorney, as a fee in that amount was clearly in conformity with the statute.  The compensation judge acted accordingly and approved that portion of the stipulation for settlement.

The settlement, however, provided for an additional $4,000 in fees to the employee’s attorney.  The award of an excess fee, under statute and case law, is permitted only when approved as reasonable after the commissioner, a compensation judge, or this court’s review of various factors, regardless of whether any party, including the employee objects.  In Irwin, the Minnesota Supreme Court ruled that a statutorily imposed limitation on attorney fees violates the doctrine of separation of powers to the extent that the adequacy of the fee is not subject to review by a duly established court.  Following Irwin, if an employee’s attorney seeks fees above the statutory limit of $26,000 per injury, a petition for excess fees must be filed as set forth in Minn. R. 1415.3200, subp. 3(B).  For fees to be awarded in excess of the statutory cap, a compensation judge must review that claim and determine that those excess fees are warranted in light of the factors set forth in Irwin.  Clark v. Dick’s Sanitation, slip op. (W.C.C.A. May 16, 2000); Beam v. Bemidji Mgmt., Inc., 61 W.C.D. 386 (W.C.C.A. 2001).  We conclude that a stipulation subject to review under Minn. Stat. § 176.521 does not conform to the Workers’ Compensation Act to the extent that its terms provide for an attorney fee beyond the statutory limit without the requisite review.

The Minnesota Supreme Court has explained on numerous occasions that the policies behind Minn. Stat. § 176.081 are: 1) protecting compensation claimants from excessive legal charges which might otherwise severely deplete funds badly needed by the employee and his or her dependents, and 2) ensuring that attorneys who represent claimants will receive adequate compensation, so that competent counsel will be available to injured employees.  Kahn v. State of Minn., 327 N.W.2d 21, 35 W.C.D. 425 (Minn. 1982); Mack v. City of Minneapolis, 333 N.W.2d 744, 35 W.C.D. 875 (Minn. 1983).  In a similar case under a prior statute, the Minnesota Supreme Court articulated and applied this rationale to the review of attorney fees set out in a stipulation for settlement, stating:

The same policy concerns apply in the case before us.  Thus, we conclude that a subsequent separate review of the claim for excess fees in this case was required, and that the compensation judge properly denied the portion of the stipulation that provided for excess fees.^[5]

Finally, in reviewing a judge’s determination to approve or disapprove a settlement agreement, this court will not reverse absent an abuse of discretion.  Braatz v. Parsons Elec. Co., 850 N.W.2d 707, 711, 74 W.C.D. 399, 408 (Minn. 2014) (citing Smith v. City of Sauk Centre, 578 N.W.2d 755, 757, 58 W.C.D. 209, 211 (Minn. 1998).  A judge abuses his or her discretion when the determination to approve or disapprove a settlement agreement is based upon a clearly erroneous conclusion given the record.  Perez-Rivera v. MPLSP Hotel Corp., 76 W.C.D. 627 (W.C.C.A. 2016).  Here, there was no abuse of discretion, and we affirm the disapproval of that part of the stipulation providing for excess fees.

In Irwin the Minnesota Supreme Court held the determination as to whether a fee beyond the statutory contingency fee is reasonable is to be based upon the statutory guidelines together with seven factors, which include the amount at issue, time and expense necessary to prepare for trial, responsibility assumed by counsel, experience of counsel, difficulty of the issues, proof involved, and results obtained.  None of the Irwin factors alone are determinative.  Ansello v. Wis. Cent., Ltd., No. WC20-6333 (W.C.C.A. June 19, 2020).  The compensation judge discussed each of the Irwin factors in arriving at her decision.

Regarding the amount involved, the compensation judge found that the issues involved entitlement to ongoing wage loss benefits, potential permanent partial disability, and vocational rehabilitation benefits.^[6]  As for time and expense necessary for preparing for trial, she found that the only pleading filed by the employee’s attorney was a Notice of Appearance.  She discussed items noted in his Excess Fee Exhibit and found that this matter involved less than a typical amount of discovery, no depositions, and no competing medical expert reports or medical depositions.  She acknowledged that the employee’s counsel took responsibility for the case and that he had 13 years of experience.  As to the difficulty of issues and nature of proof, she found the matter to be of average complexity and limited proof, noting that the matter settled at a mediation, without need of an evidentiary hearing.  As for the result, she found that counsel’s efforts secured a large settlement for the employee.  Substantial evidence of record supports the compensation judge’s findings on the Irwin factors.  The compensation judge did not abuse her discretion in finding that the maximum statutory fee provided adequate compensation in this matter and denying the excess fee claim.

Appellant argues that the Irwin factors should be applied only to the $4,000 excess fee, since the first $26,000 is presumptively reasonable.  In short, he claims that his time and expertise and the other Irwin factors justify a fee of at least $4,000, and the fact that he already secured a fee of $26,000 is irrelevant to the analysis.  There is no statutory or precedential basis for that argument.  We agree that the first $26,000 is presumed to be reasonable per Minn. Stat. § 176.081 and David v. Bartel Enters. (Nitro Green), 856 N.W.2d 271, 74 W.C.D. 651 (Minn. 2014), but this does not limit application of the Irwin factors to only the claimed excess fee.

Minn. Stat. § 176.081 subd. 1 (1) provides:

The statute provides that an attorney can only seek an excess fee by showing that the contingent fee is inadequate compensation.  Evaluating that claim necessarily requires consideration of the amount of the contingent fee in relation to the time expended by the attorney, not just the amount of the excess fee.  The compensation judge correctly considered the statutory maximum fee in her analysis of whether the excess fee was warranted.  For these reasons, we affirm the compensation judge.

Appellant raises the issue of whether the statutes underlying the compensation judge’s denial of the stipulated excess attorney fee violates Article I, section 11 of the Minnesota Constitution, which prohibits any law impairing the obligation of contracts.  Constitutional issues are outside of the jurisdiction of the Workers’ Compensation Court of Appeals and, as such, we do not address that issue, which is preserved for consideration in the appropriate tribunal.  Minn. Stat. § 175A.01, subd. 5 (1998); Hagen v. Venem, 366 N.W.2d 280, 283-84, 37 W.C.D. 674, 678-79 (Minn. 1985).

I concur in the majority decision. I write this concurrence to recommend that all workers’ compensation practitioners review Minn. Stat. § 176.081 governing attorney fees, including subdivision 10.