Donald D. David v. Bartel Enterprises (Nitro Green) and SFM Mut. Ins. Co., No. WC13-5567 (W.C.C.A. Oct. 23, 2013)
The employer and insurer unsuccessfully appealed a $13,000 attorney fee award under Roraff and Irwin.
If an attorney obtains medical benefits for a claimant, he is entitled to statutory fees. An attorney can claim 25 percent of the first $4,000 and 20 percent of the next $60,000. Minn. Stat. § 176.081, subd. 1(a)(1). This is known as the “25/20 fees.”
In this case, the employee’s attorney submitted his statement of attorney fees and costs at the end of September 2012, claiming a $36,810.90 contingent Roraff fee based on recovery of $233,054.50 in medical expenses. But his statement of attorney fees did not include an itemization of hours and legal services provided.
The employer and insurer claimed the fees exceeded the maximum allowed under Minn. Stat. § 176.081 and pointed out there may be a potential claim for other indemnity benefits, meaning additional fees could be assessed, and the employee’s attorney had no documents to support a claim for excess fees.
The compensation judge found the employee’s attorney had substantial legal experience in workers’ compensation matters, had provided 13.1 hours of legal service, and the litigation involved no narrative reports, depositions, or independent medical examinations. The judge noted “the proof that was adduced by [the employee’s attorney] was extremely minimal” and that his assumption of responsibility on the case was minor since the health care providers and insurer settled the medical treatment expenses and the employee’s attorney was not involved in negotiation.
But, the compensation judge also found the employee’s attorney had obtained a favorable result for the employee and awarded a contingency fee of $13,000 under Section 176.081, without analyzing the reasonableness of the fee and finding such amount adequately compensated the employee’s attorney for legal services related to the medical dispute. The judge also found an award greater than $13,000 was not warranted under Irwin.
In Irwin v. Surdyk’s Liquor, the Minnesota Supreme Court determined it was unconstitutional to prohibit deviation from the statutory maximum fee of $13,000 in cases where the resulting attorney fees would be inadequate to reasonably compensation the employee’s attorney. 599 N.W.2d 132, 141-42 (Minn. 1999). Courts were instructed to consider the reasonableness of the fee involved based on a number of factors, including “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.” Id.
In Cahow v. Brookdale Motors, the WCCA determined the Irwin factors may not be applied to reduce otherwise available statutory attorney fees. 61 W.C.D. 427 (W.C.C.H. 201). The employer and insurer constitutionally challenged Section 176.081, subd. 1 under Cahow claiming the statute violates the separation of powers clause of the Minnesota Constitution because Irwin’s mechanical application of 25/20 fees violates the judiciary’s exclusive power to regulate and make findings as to the reasonableness of attorney fees. The employer and insurer distinguished the Irwin case arguing its holding was narrow: it was only unconstitutional to prohibit deviation from a statutory maximum fee in cases where the resulting attorney fee award would be inadequate to reasonably compensation the employee’s attorney and that Irwin did not invalidate application of the 25/20 formula to attorney fees amounting to the statutory maximum or less.
Lastly, the employer and insurer alleged attorney fees under Section 176.081 are awarded statutorily and not contractually. Even though the employee and her attorney entered into a standard retainer agreement (contract), which provides for a contingent fee based on the 25/20 formula, there is no contract between the employee’s attorney and the employer and its insurer.
The W.C.C.A. stated it was beyond their jurisdiction to interpret the statute and that analyzing the Irwin factors in every case involving the disputed medical benefits could potentially create “a significant burden” on the Office of Administrative Hearings and affirmed the compensation judge’s decision to award $13,000 in attorney fees under Minn. Stat. § 176.081.