Clark v. Sage

• Decision Date: 29 April 1981
• Docket Number: No. 13464,13464
• Citation: 629 P.2d 657,102 Idaho 261
• Court: Idaho Supreme Court
• Parties: Wade S. CLARK, Claimant-Appellant, v. Jack SAGE and Vern McCalmont, dba Sage & McCalmont Logging Co., Employer, and State Insurance Fund, Surety, Defendants-Respondents.

Page 657

629 P.2d 657

102 Idaho 261

Wade S. CLARK, Claimant-Appellant, v. Jack SAGE and Vern McCalmont, dba Sage & McCalmont Logging Co., Employer, and State Insurance Fund, Surety, Defendants-Respondents.

No. 13464.

Supreme Court of Idaho.

April 29, 1981.

Rehearing Denied June 15, 1981.

Nicholas M. Lamanna, Priest River, Thomas A. Mitchell, Coeur d'Alene, for claimant-appellant.

Glenn A. Coughlan, Boise, for defendants-respondents.

McFADDEN, Justice.

This appeal is the sequel to the case of Clark v. Sage, 95 Idaho 79, 502 P.2d 323 (1972). The facts initially giving rise to this appeal are set out and discussed with considerable particularity therein. The primary issue before the court in this appeal is whether the Industrial Commission erred in departing from its prior approval of a contingent fee agreement entered into between claimant-appellant Wade S. Clark and his former attorney in awarding Clark reasonable attorney fees payable from defendant-respondents Sage and McCalmont Logging Company and State Insurance Fund.

The relevant facts to this appeal are not in dispute.

On April 27, 1977, Mr. Nick Lamanna, claimant's new attorney of record as of May 28, 1976, filed an application for a hearing before the Industrial Commission concerning the question of the liability of claimant's employer and its surety for attorney fees incurred by the claimant in prosecuting his workmen's compensation claim. On May 11, 1977, a stipulation was entered into between the attorney for the claimant's former counsel and the claimant's present counsel, and was subsequently filed with the Industrial Commission on May 31, 1977. The stipulation was to the effect that a contingent fee agreement entered into between the claimant and his former counsel remains the contingent fee agreement between the two parties and also requested the Commission to approve the agreement and employ it in determining a reasonable attorney fee to be charged against the claimant's employer and its surety.

The contingent fee agreement, which has been of record with the Industrial Commission since September 8, 1970, called for compensation in a sum equal to 35% of the award received and receivable by the claimant. The pertinent language of the agreement is as follows:

"(T)he attorney accepted the representation, and on discussion with the claimant, agreed to the minimum fee by the Idaho Bar Association which is 35 per cent to 40 per cent, and claimant, on a copy of the Advisory Fee Schedule stated his agreement to such arrangement, subject to approval of the Industrial Accident Board, the same being dated April 9, 1970. A copy was sent to the Industrial Accident Board at the time the Board was first notified of attorney's representation for the claimant.

It becomes necessary to determine whether the fee arrangement will be 35 or 40 per cent, and the parties are agreed to 35 per cent."

On March 14, 1978, counsel for the claimant's former attorney by letter presented to the Industrial Commission a proposed order approving the contingent fee agreement entered into between the claimant and his former attorney. Without notice to the employer or its surety, on March 17, 1978, the Industrial Commission by way of ex parte order approved the contingent fee agreement:

"WADE S. CLARK, claimant, and ..., his attorney, having on April 9, 1970, entered into a fee agreement subject to approval of the Industrial Accident Board, which said fee agreement was later ratified by both said parties, by 'AGREEMENT AS TO COMPENSATION AND REQUEST FOR APPROVAL' dated July 15, 1970, and the Industrial Commission having not, to date, acted upon that request for approval, and said request for approval appearing to be in order, now, therefore,

IT IS HEREBY ORDERED that the agreement as to compensation between WADE S. CLARK, claimant, and ..., his attorney, in a sum equal to 35% of the total award received and receivable by claimant, be and the same is hereby approved as being a reasonable fee for services rendered by said attorney on behalf of said client." The claimant's application for a hearing regarding an award of attorney fees was granted, and the matter was heard before the Industrial Commission on June 6, 1979. The attorneys for the claimant and his former counsel declined to introduce any evidence, apparently choosing to rely on the Commission's March 17, 1978 approval of the contingent fee agreement as a reasonable attorney fee. Counsel for the surety called only one witness, the claims examiner for the State Insurance Fund, who reviewed the sequence of events in the matter. At the conclusion of this testimony, the Commission requested that briefs be filed by the respective parties.

On August 13, 1979, the Industrial Commission filed its findings of fact, conclusions of law and award. The Commission concluded that an award of attorney fees would be proper in this case because the claim was contested by the employer's surety without reasonable grounds. The Commission found that the award should not be based on the fee agreement entered into between the claimant and his former counsel, even though they had previously approved the agreement. The rationale for this action is contained in finding of fact no. 4, which reads:

"The Advisory Fee Schedule of the Idaho State Bar was cancelled and withdrawn by the Board of Commissioners of the Bar in April, 1973. The Commission concludes that its approval of the fee agreement which was based upon the Advisory Fee Schedule was improper. The Commission concludes that it should not have used such a schedule upon which to base an award of attorney fees."

The Commission then found in its finding of fact no. 5, in pertinent part, that:

"... those methods customarily used to determine the amount of the fees should be used in this case, primarily considering the time and effort involved. The Commission finds and concludes that the reasonable value of the services of the Claimant's attorney is $2,500.00 to be awarded in addition to attorney fees previously awarded on appeal."

On appeal, claimant's central contention is that the Industrial Commission erred in awarding him only $2,500.00 attorney fees payable from the employer and its surety, when the Commission had previously approved the fee agreement he had entered into with his former attorney as a reasonable attorney fee. Under the agreement, an award in conformity to its provisions would have been about $11,000.00. In the alternative, claimant asserts that the Commission's award of $2,500.00 as a reasonable attorney fee is not based on substantial, competent evidence, and must therefore be set aside and the matter remanded for further proceedings.

The employer and its surety do not dispute the Commission's finding that the surety acted unreasonably in denying the claim. Nor do they dispute the Commission's finding of an award of $2,500.00 as being a reasonable attorney fee in the matter. The employer and its surety, however, do disagree with the claimant's characterization of the effect to be given the Commission's prior approval of the fee agreement entered into between the claimant and his attorney.

The Idaho Workmen's Compensation Laws provide for the assessment of a claimant's attorney fees against the employer and his surety where they contest a claim without reasonable ground, or neglect or refuse to pay a compensable claim within a reasonable time. I.C. § 72-804 (formerly embodied in I.C. § 72-611). Where the Industrial Commission or a court so finds, an award of a fee becomes mandatory, the only restriction being that the amount awarded be a reasonable attorney fee. Id. The award is said to be compensatory, the underlying rationale being that the claimant should not have his benefits lessened by legal expenses incurred as a result of the employer's and his surety's unwarranted conduct in refusing or delaying compensation of an otherwise compensable claim. Mayo v. Safeway Stores, Inc., 93 Idaho 161, 457 P.2d 400 (1969).

In Mayo v. Safeway Stores, supra, the court implicitly recognized the validity of contingent fee agreements entered into between a claimant and his attorney, and held that where the then Industrial Accident Board had approved a contingent fee agreement whereby the claimant's attorney would receive 20% of the principal award and the employer and its surety had unreasonably refused to pay the claim, an award of attorney fees less than the amount due under the agreement constituted an abuse of discretion. 93 Idaho at 166, 457 P.2d at 405. In so holding, the court observed:

"The whole philosophy of the Workmen's Compensation Law is one aimed to secure a 'sure and certain relief for injured workmen and their families and dependents ....' I.C. § 62-102. This court has repeatedly stated that this law is to be liberally construed with a view to effect its objects and promote justice. McNeil v. Panhandle Lbr. Co., 34 Idaho 773, 203 P. 1068 (1921); McCall v. Potlatch Forests, Inc., 67 Idaho 415, 182 P.2d 156 (1947); Rivera v. Johnston, 71 Idaho 70, 225 P.2d 858 (1950); Burch v. Potlatch Forests, Inc., 82 Idaho 323, 353 P.2d 1076 (1960). It is inconsistent for the board, finding that the surety was unreasonable in its denial of the claim, to approve as reasonable the agreement between claimant and her counsel regarding attorney's fees (I.C. § 62-702), and yet award a lesser amount as attorney's fees under I.C. § 72-611. In the situation in which an insurance company has unreasonably refused to recognize a claim, this court has authorized a reasonable attorney's fee and concluded that the attorney's fee was compensatory in nature. Halliday v. Farmers Insurance Exchange, 89 Idaho 293, 404 P.2d 634 (1965); see also Rungee v. Allied...