Brinkley v. Department of Army/Naf

• Decision Date: 14 May 2001
• Docket Number: BRB 00-0866
• Parties: BERTHA S. BRINKLEY, Claimant-Respondent v. DEPARTMENT OF THE ARMY/NAF, Self-Insured Employer-Petitioner
• Court: Longshore Complaints Court of Appeals

BERTHA S. BRINKLEY, Claimant-Respondent v. DEPARTMENT OF THE ARMY/NAF, Self-Insured Employer-Petitioner

BRB No. 00-0866

May 14, 2001

Appeal of the Supplemental Decision and Order - Awarding Attorney's Fees of James W. Kerr, Jr., Administrative Law Judge, United States Department of Labor.

Anthony Lawrence Romo (Romo & Associates, P.C.) Albuquerque, New Mexico, for claimant.

Andrew Z. Schreck (Galloway, Johnson, Tompkins, Burr & Smith) Houston, Texas, for self-insured employer.

Before: HALL, Chief Administrative Appeals Judge, SMITH and McGRANERY, Administrative Appeals Judges, SMITH, Administrative Appeals Judge

DECISION and ORDER

ROY P. SMITH Administrative Appeals Judge

Employer appeals the Supplemental Decision and Order - Awarding Attorney's Fees (96-LHC-2262) of Administrative Law Judge James W. Kerr, Jr., rendered on a claim filed pursuant to the provisions of the Longshore and Harbor Workers' Compensation Act, as amended, 33 U.S.C. §901 et seq., as extended by the Nonappropriated Fund Instrumentalities Act, 5 U.S.C. §8171 et seq. (the Act). The amount of an attorney's fee award is discretionary and may be set aside only if the challenging party shows it to be arbitrary, capricious, an abuse of discretion, or not in accordance with law. See, e.g., Muscella v. Sun Shipbuilding & Dry Dock Co., 12 BRBS 272 (1980).

Claimant, a secretary with the Department of the Army in Fort Hood, Texas, suffered a work-related psychological injury. In August 1999, the administrative law judge awarded claimant various periods of temporary total disability benefits and a period of temporary partial disability benefits, as well as medical benefits pursuant to Section 7 of the Act, 33 U.S.C. §907. Neither claimant nor employer appealed this award.

Subsequent to the administrative law judge's award of benefits, claimant's counsel submitted a fee petition to the administrative law judge requesting an attorney's fee of $28, 601, representing 216.43 hours of attorney services at $125 per hour, 20.63 hours of paralegal services at $75 per hour, plus the New Mexico gross receipt tax of $1, 568.75, and $2, 141.19 in expenses, plus a gross receipt tax of $117.62. Employer filed numerous objections to claimant's counsel's fee request. Employer objected to its liability for the gross receipts tax, asserting it was in the nature of interest and therefore not allowable, citing Boland Marine & Mfg. Co. v. Rihner, 41 F.3d 997, 29 BRBS 43(CRT) (5^th Cir. 1995) (interest is not available on attorney's fee awards). Employer also objected to certain services as unnecessary, excessive, clerical, or insufficiently detailed. Employer further objected to time spent on a status conference and an unsuccessful motion for sanctions. Employer lastly objected to all costs except the deposition transcription fee of $312.46 and the witness fee for Dr. Neland of $500.

Subsequent to employer's filing of its objections but prior to the issuance of his fee award, the administrative law judge ordered claimant's counsel to clarify his request for reimbursement of the New Mexico gross receipts tax and requested that a copy of the relevant statute be included in the response. The administrative law judge also ordered claimant's counsel to show cause as to why the gross receipts tax should not be considered a requirement of doing business and why the tax should be considered in furtherance of claimant's case. Claimant's counsel responded, enclosing a copy of the relevant statute and conceding that neither the Act nor case law under the Act has addressed the issue of whether an administrative law judge can award a separate amount for the gross receipts tax paid on an attorney's fee and costs awarded under the Act. Claimant's counsel attempted to distinguish the holding in Rihner, 41 F.3d 997, 29 BRBS 43(CRT), asserting that the New Mexico gross receipts tax is mandatory and accrues to the benefit of the state of New Mexico, unlike interest on a fee which would accrue to claimant's counsel. Claimant's counsel asserted that an award of this tax would not be inconsistent with the Act's policy of ensuring that competent counsel is available to represent claimants under the Act. Claimant's counsel further stated that:

The tax at issue should not be considered a requirement of doing business because it is not in the nature of overhead. Further in no way does the amount at issue advance the infrastructure of Applicant's professional practice. Rather, it is an assessment that by law must be remitted to the New Mexico Taxation and Revenue Department by the 25^th day of the month following receipt by the Applicant.

Response to Order Seeking Clarification and Order to Show Cause at 2.

In his supplemental decision, the administrative law judge awarded a fee of $28, 601, representing all time requested by counsel, plus the New Mexico gross receipts tax of $1, 505.68, and costs in the amount of $1, 807.11, plus the New Mexico gross receipts tax of $95.22, disallowing costs for facsimiles of $264 and postage of $70.08. On appeal, employer challenges the administrative law judge's fee award. Claimant's counsel responds in support of the administrative law judge's fee award, and requests that employer be sanctioned for appealing the fee award.

Employer first contends that the administrative law judge erred in awarding claimant's counsel a separate amount for the New Mexico gross receipts tax and asserts that the tax should be disallowed, as is interest on a fee award, citing Rihner, 41 F.3d 997, 29 BRBS 43(CRT), and as it is a part of counsel's overhead and cost of doing business. The state of New Mexico imposes "an excise tax equal to five percent of gross receipts . . . on any person engaging in business in New Mexico." See N.M. STAT. ANN. §§7-9-3, 7-9-4 (Supp. 2000). Amounts received as an attorney s fee are subject to the gross receipts tax. Mears v. Bureau of Revenue, 531 P.2d 1213 (N.M. Ct. App. 1975). This tax may be passed on to the attorneys' clients. See Herrera v. First N. Sav. & Loan Ass'n, 805 F.2d 896 (10^th Cir. 1986).

Section 28 of the Act, 33 U.S.C. §928, and its implementing regulation, 20 C.F.R. §702.132, do not state whether a tax required by state law may be assessed against employer or claimant. Section 28 provides merely for a reasonable attorney's fee to be awarded to claimant's counsel by employer or claimant, see 33 U.S.C. §928(a), (b), (c), and the implementing regulation provides for a fee award reasonably commensurate with the necessary work done. See 20 C.F.R. §702.132(a). Because Section 28 is a fee-shifting statute, and the United States Supreme Court has held that case law construing what is a "reasonable fee" applies uniformly to all federal fee-shifting statutes, cases in which federal fee-shifting statutes address the losing party's liability for a gross receipts tax on the fee award are dispositive on this issue. See City of Burlington v. Dague, 505 U.S. 557, 562 (1992). The federal cases involving federal fee-shifting statutes, including the Federal Coal Mine Health and Safety Act, the Truth-in-Lending Act, and the Internal Revenue Code, however, are not uniform in their treatment of this issue.^[1] See Velasquez v. Director, OWCP, 844 F.2d 738, 11 BLR 2-134 (10^th Cir. 1988) (tax not awarded under Section 28 of the Longshore Act, as applicable to the Federal Coal Mine Health and Safety Act); Herrera, 805 F.2d 896 (tax not awarded under the Truth-in-Lending Act); McWilliams v. Commrr of Internal Revenue, No. 4651-92, 1995 WL 116295 (T.C. 1995)(tax not awarded in a federal tax case); but see Mares v. Credit Bureau of Raton, 801 F.2d 1197 (10^th Cir. 1986)(gross receipts tax awarded in case arising under the Truth-in-Lending Act, Fair Credit Reporting Act and the Fair Debt Collection Practices Act).

In Velasquez, 844 F.2d 738, 11 BLR 2-134, the United States Court of Appeals for the Tenth Circuit awarded a reasonable attorneys fee pursuant to Section 28 of the Act, but summarily declined to award an additional amount for the gross receipts tax, to counsel who successfully represented a black lung claimant on appeal. The United States Tax Court in McWilliams, No. 4651-92, 1995 WL 116295, summarily held that the gross receipts tax should be included in overhead and as part of the attorneys hourly rate, and thus it is not recoverable separately. In Herrera, 805 F.2d 896, the Tenth Circuit provided the most extensive explanation in affirming the district court's disallowance of the gross receipts tax. The plaintiffs in this Truth-in-Lending Act (TILA) violations case had agreed to reimburse their attorney for the amount of the gross receipts tax. Their attorney, in turn, included this tax in the amount of his fee request, to be paid by the defendants under the fee-shifting scheme. The district court awarded an attorney s fee, but not the gross receipts tax. On appeal, the Tenth Circuit acknowledged cases wherein the tax had been awarded without discussion, but found no abuse of discretion by the district court in declining to award the tax. Id., 805 F.2d at 902. The court noted that the plaintiffs were not required by law to pay this tax and that a fee award to a successful plaintiff is not governed by a party's fee agreement with his attorney. Finally, the court stated that disallowance of the tax did not defeat the underlying purposes of TILA to make the plaintiff whole and "to create a system of private attorneys general to aid the effective enforcement of the [TILA]." Id. In Mares, 801 F.2d 1197, the Tenth Circuit allowed, without explanation, the gross receipts tax, as had the lower court, in an appeal of an attorney's fee award involving a TILA case.

In the instant case, the administrative law judge summarily awarded the gross receipts tax on the...