Larry Pitt & Associates, PC v. Butler

• Decision Date: 30 October 2001
• Citation: 785 A.2d 1092
• Parties: LARRY PITT & ASSOCIATES, P.C. and Larry Pitt, Esquire, Petitioners, v. Johnny BUTLER, individually and in his capacity as Secretary to Department of Labor and Industry of the Commonwealth of Pa. and Richard Thompson, individually and in his capacity as Director of the Pennsylvania Bureau of Workers' Compensation, Respondents.
• Court: Pennsylvania Commonwealth Court

785 A.2d 1092

LARRY PITT & ASSOCIATES, P.C. and Larry Pitt, Esquire, Petitioners, v. Johnny BUTLER, individually and in his capacity as Secretary to Department of Labor and Industry of the Commonwealth of Pa. and Richard Thompson, individually and in his capacity as Director of the Pennsylvania Bureau of Workers' Compensation, Respondents.

Commonwealth Court of Pennsylvania.

Argued March 7, 2001.

Decided October 30, 2001.

Neil Kerzner, Philadelphia, for petitioners.

Linda S. Lloyd, Deputy Atty. Gen., Harrisburg, for respondents.

Before DOYLE, President Judge, COLINS, J., SMITH, J., PELLEGRINI, J., FRIEDMAN, J., KELLEY, J., and LEADBETTER, J.

KELLEY, Judge.

Presently before this Court for disposition are the preliminary objections of Johnny Butler, Secretary of the Pennsylvania Department of Labor and Industry¹, and Richard Thompson, Director of the Pennsylvania Bureau of Workers' Compensation², (Commonwealth Respondents) to a petition for review in the nature of an action for declaratory judgment filed in our original jurisdiction by Larry Pitt & Associates, P.C. and Larry Pitt, Esq. (Petitioners) pursuant to the provisions of the Declaratory Judgments Act (DJA), 42 Pa. C.S. §§ 7531-7541.³

Petitioners provide legal services which include, inter alia, representing clients who are seeking compensation pursuant to the provisions of the Pennsylvania Workers' Compensation Act (Act).⁴ In particular, Petitioners represented Dolfis Gaither, James Gibson, Kevin Cardwell, Julius Curry and Carmen Camacho (collectively, claimants) in proceedings before workers' compensation judges (WCJs) to obtain compensation under the Act pursuant to petitions for compromise and release. Petitioners had entered into contingency fee agreements with the claimants whereby Petitioners were to be paid 33 1/3% of the amounts recovered under the Act as payment for their legal services. Pursuant to Section 442 of the Act⁵, the contingency fee agreements were submitted to the WCJs for approval. However, the WCJs did not approve the contingency fee agreements as submitted. Rather, the WCJs either denied the fee agreements in their entirety and had the claimants amend the fee agreements to only provide for a payment of 20% of the amounts recovered, or approved the payment of 20% of the amounts recovered and directed that the remaining 13 1/3% be placed in escrow.

On November 27, 2000, Petitioners filed the instant petition for review. In the petition, Petitioners allege, inter alia:

14. In the first paragraph of Section 442 of the Act, the legislature delegated to the executive branch the power and authority to regulate contingent fee agreements entered into by injured workers and their legal representatives by restricting legal fees to twenty percent, or less, without regard to the amount agreed upon by the injured workers and their legal representatives. Said delegation of power and authority is in contravention of the language of Article 5, Section 10(c) of the Pennsylvania Constitution⁶ which expressly vests such power and authority solely in the Supreme Court.

15. The aforementioned unconstitutional delegation of power and authority has become so deeply ingrained in the workers' compensation system that it has resulted in an unconstitutional interpretation of the second paragraph of Section 442. In particular, while the second paragraph of Section 442 provides for an award of attorney fees as agreed upon by the claimant and his/her attorney, without regard to any per centum, the Department of Labor and Industry has interpreted the second paragraph as restricting attorney fees to twenty per centum, or less.

Petition for Review, pp. 5-6.

Based on the foregoing, Petitioners assert the following claims for relief:

23. At all relevant times, [Commonwealth Respondents] exercised their authority by and through their agents and officials, all of whom are members of the executive branch of government, including but not limited to the aforementioned [WCJs]....

24. By interfering with [Petitioners'] contract with the aforementioned claimants, and refusing to honor the fee agreements specified above, [Commonwealth Respondents] have unlawfully infringed upon and violated Article 5, Section 10(c) of the Pennsylvania Constitution, which vests in the Supreme Court of Pennsylvania the exclusive power to regulate the practice of law in Pennsylvania.

25. As [officers] of the Court and member[s] of the judicial branch, [Petitioners] ha[ve] been unconstitutionally subjected to the authority of the aforementioned officers of the executive branch, and legislative branch, all acting without proper authority.

26 By reason of [Commonwealth Respondents'] unconstitutional actions stated above, [Petitioners] have suffered and continue to suffer substantial and irreparable harm, including but not limited to:

(a) [Petitioners'] loss of their right to the benefit of the contractual fee agreements with the claimants noted above;

(b) [Petitioners'] loss of all or part of their attorney fees pursuant to the actions and decisions of [the WCJs];

(c) [Petitioners'] unrecoverable loss of interest accruing on the portion of [Petitioners'] attorney fees pursuant to the actions and decisions of [the WCJs];

(d) [Petitioners'] loss of their right to enter into and enforce their contractual rights with the above noted claimants;

(e) [Petitioners'] continuing loss of the use of the fees to which they have contracted and to which they are entitled pending the outcome of the disputed compromise and release agreements;

(f) [Petitioners'] loss of reputation and goodwill among the above claimants;

(g) [Petitioners'] deprivation of their legal rights guaranteed by the Pennsylvania Constitution.

27. [Petitioners'] administrative remedies are inadequate at law, and requiring [Petitioners] to pursue them would cause [Petitioners] further and substantial irreparable harm.

Id. at pp. 7-8.

As a result, Petitioners ask this Court to: (1) declare that Section 442 of the Act is unconstitutional as violative of Article 5, Section 10(c) of the Pennsylvania Constitution; (2) enjoin Commonwealth Respondents, their successors in office or interest, and their agents, employees and all other persons acting concert with them, from interfering with, regulating or restricting attorney fees in workers' compensation matters; and (3) direct Commonwealth Respondents, their successors in office or interest, and their agents, employees and all other persons acting in concert with them to immediately release and pay to Petitioners the full amount of the monies held in escrow as a result of the orders issued by the WCJs. Id. at pp. 8-9.

In response to the petition for review, Commonwealth Respondents filed preliminary objections with this Court on December 18, 2000. In the first preliminary objection, Commonwealth Respondents allege that the petition for review should be dismissed because Petitioners have failed to exhaust all administrative remedies. In the second preliminary objection, Commonwealth Respondents allege that the petition for review should be dismissed because Petitioners have failed to state a claim for which relief may be granted.

Initially, we note that in ruling on preliminary objections, we must accept as true all well pleaded material allegations in the petition for review, as well as all inferences reasonably deduced therefrom. Envirotest Partners v. Department of Transportation, 664 A.2d 208 (Pa. Cmwlth.1995). This Court need not accept as true conclusions of law, unwarranted inferences from facts, argumentative allegations, or expressions of opinion. Id. In order to sustain preliminary objections, it must appear with certainty that the law will not permit recovery, and any doubt should be resolved by a refusal to sustain them. Id.

The provisions of the DJA, 42 Pa.C.S. §§ 7531-7541, govern petitions for declaratory judgments. Ronald H. Clark, Inc. v. Township of Hamilton, 128 Pa. Cmwlth. 31, 562 A.2d 965 (1989). Declaratory judgments are not obtainable as a matter of right. Id. Rather, whether a court should exercise jurisdiction over a declaratory judgment proceeding is a matter of sound judicial discretion. Id. Thus, the granting of a petition for a declaratory judgment is a matter lying within the sound discretion of a court of original jurisdiction. Gulnac v. South Butler School District, 526 Pa. 483, 587 A.2d 699 (1991); Ruszin v. Department of Labor and Industry, 675 A.2d 366 (Pa.Cmwlth.1996).⁷

As stated above, Section 7533 of the DJA provides, in pertinent part, that "[a]ny person interested under a ... written contract, or other writings constituting a contract ... whose rights, status, or other legal relations are affected by a statute... [or] contract ... may have determined any question of construction or validity arising under the instrument, statute... [or] contract ... and obtain a declaration of rights, status, or other legal relations thereunder." 42 Pa.C.S. § 7533. Under Section 7533, constitutional challenges to a statute's validity, such as those raised in the instant matter, may be decided by declaratory judgment. See, e.g., Ruszin; Parker v. Department of Labor and Industry, 115 Pa.Cmwlth. 93, 540 A.2d 313 (1988), aff'd, 521 Pa. 531, 557 A.2d 1061 (1989).

However, Section 7541(c) of the DJA provides, in pertinent part, that "[r]elief shall not be available under this subchapter with respect to any ... [p]roceeding within the exclusive jurisdiction of a tribunal other than a court ..." 42 Pa.C.S. § 7541(c)(2). With respect to Section 7541(c)(2), this Court has stated:

The exhaustion of administrative remedies requirement is a judge-made rule intended to prevent premature judicial intervention into the administrative process. National Solid Wastes Management Association v. Casey, [135 Pa. Cmwlth. 134, 580 A.2d 893 (Pa.Cmwlth. 1990) ]. The exhaustion of remedies requirement is also found in Section 7541(c)(2) of [DJA], 42 Pa.C.S. § 7541(c)(2), which

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