Anderson v. MSI Preferred Ins. Co., 2003AP1880.

• Decision Date: 02 June 2005
• Docket Number: No. 2003AP1880.,2003AP1880.
• Citation: 2005 WI 62,281 Wis.2d 66,697 N.W.2d 73
• Parties: Anthony R. ANDERSON and Naomi Anderson, Plaintiffs-Appellants-Petitioners, v. MSI PREFERRED INSURANCE COMPANY, Defendant, ACCIDENT FUND COMPANY, Defendant-Respondent.
• Court: Wisconsin Supreme Court

281 Wis.2d 66

2005 WI 62

697 N.W.2d 73

Anthony R. ANDERSON and Naomi Anderson, Plaintiffs-Appellants-Petitioners, v. MSI PREFERRED INSURANCE COMPANY, Defendant, ACCIDENT FUND COMPANY, Defendant-Respondent.

No. 2003AP1880.

Supreme Court of Wisconsin.

Oral argument December 13, 2004.

Decided June 2, 2005.

For the plaintiffs-appellants-petitioners there were briefs by C.M. Bye, Tracy N. Tool, and Bye, Goff & Rohde, Ltd., River Falls, and oral argument by Tracy N. Tool.

For the defendant-respondent there was a brief by Christopher D. Walther and Walther Law Offices, S.C., Milwaukee, and oral argument by Christopher D. Walther.

¶ 1. LOUIS B. BUTLER, JR., J.

Anthony and Naomi Anderson ("Anderson") seek review of an unpublished court of appeals decision that concluded the circuit court properly exercised its discretion by awarding Accident Fund Insurance Company nearly $7,500 in attorney fees and costs as part of the reasonable costs of collection in a third-party settlement distribution under Wis. Stat. § 102.29(1) (2001-02).¹ Anderson v. MSI Preferred Ins. Co., No. 2003AP1880, unpublished slip op. (Wis. Ct. App. Feb. 10, 2004).² Anderson argues this court should reverse the court of appeals' decision on either of two grounds: (1) conclude that for a worker's compensation carrier's attorney to join in the pressing of the claim against the third-party tortfeasor requires the attorney to demonstrate that his or her activities substantially contributed to obtaining recovery from the third party; or (2) agree that Accident Fund's failure to produce any evidence of hours worked and rate charged requires overturning the circuit court's exercise of discretion.³

¶ 2. We decline Anderson's invitation to alter the existing law for what is required to join in the pressing of a claim against a third party. In short, because the worker's compensation carrier has the same right to bring, and an equal voice in prosecuting, a third-party claim, and because the worker's compensation carrier's attorney does not represent the employee, the attorney is entitled to recover reasonable attorney fees and costs associated with representing the worker's compensation carrier as part of the reasonable costs of collection under Wis. Stat. § 102.29(1).

¶ 3. However, we conclude that the circuit court erroneously exercised its discretion by failing to determine whether $17,700 in total fees and costs on a $25,000 settlement constitutes the reasonable costs of collection in this case. Therefore, we reverse the court of appeals' decision and remand this matter to the circuit court for a hearing to determine what the reasonable costs of collection are and how those costs are to be apportioned between the attorneys.

I

¶ 4. On October 15, 2001, Anderson was injured in a motor vehicle accident caused by Shawn Jones. It is undisputed that Anderson was in the course of his employment at the time of the accident and that his injuries arose out of his employment. Jones was insured by Acceptance Insurance Co. and had a policy limit of $25,000. Accident Fund paid worker's compensation benefits and medical expenses totaling $8,711.98.

¶ 5. In March 2002, Accident Fund referred the case to Walther Law Offices, SC, to seek reimbursement for the payments it made to Anderson.⁴See Wis. Stat. § 102.29(1).⁵ On July 11, 2002, Accident Fund directed Walther to take an active role in managing the claim to protect its reimbursement interest.

¶ 6. On July 23, 2002, Anderson commenced a third-party tort action against Jones, Acceptance Insurance Co., and MSI Preferred Insurance Co. (Jones' underinsured motorist carrier), pursuant to Wis. Stat. § 102.29(1). However, Anderson did not name Accident Fund as a party, even though § 102.29(1) gives both the employee and the worker's compensation carrier the same right to make the third-party claim and requires each to "give to the other reasonable notice and opportunity to join in the making of such claim ...."

¶ 7. In August 2002, Accident Fund began searching for Jones' insurer. After learning Jones' insurer was Acceptance Insurance, Accident Fund also learned that Anderson commenced a Wis. Stat. § 102.29(1) claim. Concerned with whether Anderson would protect its interests, Accident Fund prepared a motion to intervene, but Anderson voluntarily joined Accident Fund as a party on October 9, 2002.

¶ 8. The claim against Jones was mediated on March 3, 2003, and Acceptance Insurance Co. offered its policy limits of $25,000. The parties did not resolve the distribution of the proceeds under Wis. Stat. § 102.29(1).

¶ 9. Just over one month later, on April 17, Anderson filed a motion to approve the settlement and distribution of the proceeds. The motion listed Accident Funds' costs of collection as $3,547.13, a figure Anderson received from Accident Fund a month earlier during the mediation. Accident Fund opposed the distribution, asking that the court award it $7,472.97 in costs of collection. The parties filed briefs in support of their positions. On May 20, the Barron County Circuit Court, Honorable James C. Babler, approved the $25,000 settlement but set a hearing for a determination on the distribution of the proceeds. The court required the parties to submit affidavits and any other necessary documents to support their fees and costs.

¶ 10. Anderson submitted an affidavit that stated Accident Fund indicated its costs of collection were only $3,547.13 at the mediation. Anderson also attached a copy of the attorney's contingency fee agreement, which provided for a one-third recovery plus out-of-pocket expenses.⁶ The affidavit expressed Anderson's belief that its contingency fee was reasonable and then generally listed the activities taken in pursuing this claim.⁷

¶ 11. Accident Fund also submitted an affidavit. It contested Anderson's assertion regarding its costs of collection, claiming that it never suggested its costs were actually $3,547.13. Accident Fund stated that that amount was a settlement offer to resolve its costs of collection, an offer Anderson rejected. Accident Fund further stated that the mediation and settlement occurred as a result of its persistence on having, and its argument during, mediation. As was the case with Anderson's affidavit, Accident Fund's submissions cursorily describe the legal work done and did not contain the numbers of hours worked or the fee charged. Accident Fund did not include an itemized billing of costs.

¶ 12. At the hearing on June 26, Anderson claimed it was unreasonable for Accident Fund to claim an additional $3,000 in fees that were apparently incurred from the mediation to the filing of the affidavits. Anderson took issue with Accident Funds' failure to supply the court with any proof regarding the number of hours billed, an itemization of what work was done, when it was done, and the hourly rate at which it was done. Finally, Anderson argued that it was unreasonable for Accident Fund to claim over $7,000 as costs of collection to secure an $8,711.98 reimbursement interest.

¶ 13. Accident Fund reiterated that it simply offered to settle the fees and costs at the mediation for $3,547.13, a figure that represented the fees and costs incurred prior to attending the mediation session. Although Accident Fund knew that there could be additional costs associated with attending the mediation, it stated it was willing to compromise and not claim those additional amounts. From the close of the mediation to the date of the hearing, Accident Fund averred it now had incurred $7,472.97 in total fees and costs.

¶ 14. Accident Fund further explained that some of its fees were incurred because Anderson did not provide it with notice of the suit as required by Wis. Stat. § 102.29(1). Accident Fund indicated it was suspicious of Anderson following this failure and did not trust him to protect its interest. What those fees and costs were, however, was not developed.

¶ 15. The circuit court found that Anderson's failure to join Accident Fund from the beginning was not intentional or based on bad faith, but did result in Accident Fund becoming distrustful of Anderson and how the case was to be handled. The court then concluded it was required to approve Accident Fund's fees of $7,472.97. The court expressed regret at having to do so, but stated the high costs were associated with Anderson's handling of the case from the beginning.

¶ 16. Anderson appealed, arguing that the court erred by concluding it was required to award Accident Fund's fees and costs, as opposed to awarding the reasonable costs of collection, and that there was an insufficient factual basis to sustain that award. The court of appeals affirmed. The court noted that the circuit court requested affidavits detailing the basis for each party's costs and read the affidavits at least three times. Anderson, No. 2003AP1880, unpublished slip op., ¶ 12.

¶ 17. Because the circuit court indicated it read the affidavits multiple times, the court of appeals concluded that the circuit court implicitly based its decision on them. Id., ¶ 18. The court of appeals then turned to the relevant factors in SCR 20:1.5(a) and evaluated them in light of the record. Id., ¶¶ 19-24. The court concluded the record revealed a rational basis for the circuit court's conclusion that Accident Fund's fees were reasonable. Id., ¶ 24. Therefore, the court concluded the award was not the product of an erroneous exercise of discretion. Id. We accepted Anderson's petition for review, and we reverse.

II

¶ 18. This case requires us to interpret Wis. Stat. § 102.29(1). Statutory interpretation presents a question of law we review de novo. German v. DOT, 2000 WI 62, ¶ 7, 235 Wis. 2d 576, 612 N.W.2d 50. Our goal is to discern the intent of the legislature. Id. The purpose of statutory interpretation is to determine what a statute means so that it may be given its full, proper, and intended effect. State ex rel. Kalal v. Circuit Court for Dane...