Committee on Legal Ethics of the West Virginia State Bar v. Coleman

• Decision Date: 09 December 1988
• Docket Number: No. 18496,18496
• Citation: 180 W.Va. 493,377 S.E.2d 485
• Parties: The COMMITTEE ON LEGAL ETHICS OF THE WEST VIRGINIA STATE BAR v. James H. COLEMAN, a Member of the West Virginia State Bar.
• Court: West Virginia Supreme Court

Page 485

377 S.E.2d 485

180 W.Va. 493

The COMMITTEE ON LEGAL ETHICS OF THE WEST VIRGINIA STATE BAR v. James H. COLEMAN, a Member of the West Virginia State Bar.

No. 18496.

Supreme Court of Appeals of

West Virginia.

Dec. 9, 1988.

Syllabus by the Court

1. Under W.Va.Code, 23-5-5 [1975], an attorney's fee for assisting a workers' compensation claimant in obtaining a permanent total disability award, consisting of accrued and future benefits, is not to exceed twenty percent of the accrued and future benefits as one award subject to the 208-week limitation.

2. Where an attorney bases his or her fee upon a good faith interpretation of an ambiguous fee-limiting statute, the attorney's fee is not "an illegal or clearly excessive fee" under Disciplinary Rule 2-106(A), for the purpose of imposing disciplinary sanctions against the attorney.

Jack H. Marden, Charleston, Cynthia Santoro Gustke, West Virginia State Bar, for appellant.

Victor A. Barone, Charleston, for appellee.

McHUGH, Chief Justice:

This case raises initially the question of whether the workers' compensation statute limiting an attorney's fee is applicable to an award of permanent total disability benefits in such a manner that the accrued benefits are not a separate award from the future benefits. Should we answer that question in the affirmative, the second question raised in this case is whether an attorney is subject to discipline for charging and collecting "an illegal or clearly excessive fee" when the attorney has in good faith interpreted the aforementioned statute as authorizing separate attorney's fees for the accrued benefits and the future benefits involved in a permanent total disability award.

I

Charles Barnhouse sustained an injury in the course of his employment (he fell and injured his feet when a scaffold collapsed). Mr. Barnhouse retained the respondent James H. Coleman, as his attorney to represent him in his workers' compensation claim. Mr. Barnhouse agreed in his contract with the respondent to pay the respondent the maximum attorney's fees authorized by W.Va.Code, 23-5-5 [1975]. That statute provides for a maximum contingent attorney's fee of twenty percent of any award, not to exceed twenty percent of the benefits to be paid during a period of 208 weeks. ¹ Over several years of representation of Mr. Barnhouse, beginning in 1979, the respondent assisted in obtaining four administrative determinations of progressively larger percentages (the last being fifty percent) of permanent partial disability ("PPD"). For each new PPD award the respondent received a fee based upon twenty percent of the new benefits. These fees are not at issue. At least an eighty-five percent disability rating is necessary for an award of permanent total disability benefits.

Ultimately, in December, 1986, Mr. Barnhouse was found to be permanently and totally disabled. Accordingly, he was awarded accrued benefits, from the date of the last PPD award, of $28,968.00, covering a period of 172 3/7 weeks. He simultaneously was determined to be entitled to future benefits of $730.00 per month for life. In January, 1987, the respondent charged and withheld twenty percent of both the accrued benefits (172 3/7 weeks) and of the future benefits (limited to the first 208 weeks of future benefits, in light of W.Va.Code, 23-5-5 [1975] ), for a total attorney's fee of $12,782.40, based upon a total of 380 3/7 weeks of benefits. This attorney's fee was collected from the $28,968.00 check for the accrued benefits. No attorney's fees will therefore be charged or collected from each workers' compensation check in the future in payment of the future benefits, also called a "life award."

Mr. Barnhouse had also applied for federal social security benefits. The Social Security Administration offsets against social security benefits the net workers' compensation benefits, that is, workers' compensation benefits reduced by attorney's fees. A representative of the Social Security Administration noticed that the respondent had charged and collected from Mr. Barnhouse an attorney's fee based upon twenty percent of more than 208 weeks of benefits.

Mr. Barnhouse subsequently filed a complaint against the respondent with the Committee on Legal Ethics of the West Virginia State Bar (the "Committee"), alleging a violation of Disciplinary Rule 2-106(A), that is, charging and collecting "an illegal or clearly excessive fee." ² A formal statement of charges was served upon the respondent in November, 1987.

A subcommittee conducted an evidentiary hearing. The evidence adduced discloses that a few attorneys in this State have a practice of calculating their fees for assistance in obtaining a permanent total disability award in the same manner as the respondent, that is, by considering the accrued benefits to be a separate award from the future benefits, specifically, an award subject only to the twenty percent limitation of the first sentence of W.Va.Code 23-5-5 [1975], without the 208-week limitation of the second sentence of that statute. The second sentence of W.Va.Code, 23-5-5 [1975] is applicable to benefits "to be paid," suggesting, according to this view, future benefits only. ³ On the other hand, the evidence shows that most attorneys in this State limit their fees for the accrued and future benefits together as one award subject to the twenty percent and 208-week limitations. The record further indicates that none of the regulations promulgated by the Workers' Compensation Commission address the attorney's fee issue presented here.

The subcommittee concluded that the respondent had violated Disciplinary Rule 2-106(A) by basing his attorney's fee upon more than 208 weeks of workers' compensation benefits, contrary to the subcommittee's interpretation of W.Va.Code, 23-5-5 [1975].

The full Committee agreed with the subcommittee's conclusion and with the subcommittee's recommendations that the respondent's license to practice law be suspended for thirty days and that the respondent is to repay Mr. Barnhouse for the excessive amount of attorney's fees ($5,793.60), plus interest. The Committee urges this Court to impose these sanctions against the respondent.

II

The 208-week limitation for the calculation of attorney's fees in workers' compensation cases was added to W.Va.Code, 23-5-5 in 1971. ⁴ This statute was amended in 1973 ⁵ and 1975. ⁶ Under each of these three versions of the statute an attorney's fee calculation is hinged upon an "award" of benefits being granted. In State ex rel. Magun v. Sharp, 143 W.Va. 594, 598, 103 S.E.2d 792, 795 (1958), the Court, quoting Black's Law Dictionary, defined an "award" as " '[t]he decision or determination rendered by arbitrators or commissioners, or other private or extrajudicial deciders, upon a controversy submitted to them; also the writing or document embodying such decision.' " The Court therefore held that a final order of the State Workers' Compensation Commissioner allowing benefits to a dependent of a fatally injured worker was an "award" within the meaning of the statute of limitations applicable to an action for recovery of money founded upon, inter alia, an award. See syl. pt. 2 of Magun. The significance of Magun for our purposes here is that it focuses attention upon whether the benefits, upon which an attorney's fee is based, were allowed in a final determination "upon a controversy," in which case one "award" is involved and one attorney's fee is authorized.

Our opinion in Hinerman v. Levin, 172 W.Va. 777 , 310 S.E.2d 843 (1983), stresses that the attorney's fee limitation set forth in W.Va.Code, 23-5-5 [1975] is applicable to each final award. In that case the attorney represented the workers' compensation claimant initially as the attorney for the claimant's labor union and subsequently, under a separate attorney-client contract, as the workers' compensation claimant's personal attorney, to pursue an appeal of the disability rating (of a permanent partial disability of twenty percent). As counsel for the claimant's labor union, the attorney received a $600 fee from the union for representing the claimant. Thereafter, the attorney, as the claimant's personal attorney, succeeded in obtaining a permanent total disability award for the claimant, consisting of accrued or retroactive benefits and future or monthly benefits for life.

The workers' compensation claimant argued that the $600 attorney's fee received by the attorney from the claimant's labor union should be deducted from the maximum attorney's fee allowed by W.Va.Code, 23-5-5 [1975], which was incorporated into the attorney-client contract. This Court agreed. We stated: "The statute bars an attorney['s] fee in excess of twenty percent of 'any award granted'.... Despite the fact that appellee [the attorney] represented the appellant [the workers' compensation claimant] pursuant to two separate contracts, all of his actions on the part of appellant were aimed toward the procurement of a single award." Hinerman v. Levin, 172 W.Va. 777, 785, 310 S.E.2d 843, 851 (1983). Syllabus point 6 of that case provides, in pertinent part, that W.Va.Code, 23-5-5 [1975] "requires that an attorney's fee ... shall not exceed twenty percent (20%) of the claimant's recovery during a period of two hundred eight weeks.... This limitation applies to the litigation ... up to the rendition of a final order, but does not apply to ... reopenings, that ... involve the full litigation of a new case." In the latter instance, "[i]f a separate award is given to the claimant, the attorney may receive the agreed additional payment for his [or her] services ... up to the statutory limit." Id.

Hinerman v. Levin did not discuss whether the accrued or retroactive benefits and the future or monthly benefits included in the permanent total disability award were separate "awards." The language and logic of that case, as well as the definition of "award" in State ex rel. Magun v. Sharp,...