Hatten v. Little Rock Dodge

• Decision Date: 16 November 1994
• Docket Number: No. CA,CA
• Citation: 886 S.W.2d 891,47 Ark.App. 147
• Parties: Henri HATTEN, Appellant, v. LITTLE ROCK DODGE and Chrysler Insurance Corporation, Appellees. 93-1090.
• Court: Arkansas Court of Appeals

Page 891

886 S.W.2d 891

47 Ark.App. 147

Henri HATTEN, Appellant, v. LITTLE ROCK DODGE and Chrysler Insurance Corporation, Appellees.

No. CA 93-1090.

Court of Appeals of Arkansas,

En Banc.

Nov. 16, 1994.

Robert R. Cortinez, Robert S. Tschiemer, Little Rock, for appellant.

James C. Baker, Jr., J. Michael Pickens, Little Rock, for appellees.

MAYFIELD, Judge.

The issue in this appeal from the Workers' Compensation Commission is the right of appellant's attorney to a fee on the amount of an insurance carrier's subrogation interest in the proceeds of a third-party tort action. The Commission denied the attorney's fee.

On July 8, 1991, the appellant was employed by appellee Little Rock Dodge when he was involved in an automobile accident with Peggy Nichols. Appellee Chrysler Insurance Corporation paid workers' compensation benefits to appellant in the amount of $1,981.17. The appellant filed a third-party action against Ms. Nichols, and the claim was settled for $4,981.17. After deducting Chrysler's subrogation interest, the appellant received $2,000, and his attorney received $1,000. Appellant's counsel then filed a claim with the Workers' Compensation Commission contending that he was entitled to an attorney's fee equal to one-third of Chrysler's subrogation interest or $660.39.

Relying on Orintas v. Meadows, 17 Ark.App. 214, 706 S.W.2d 199 (1986), the law judge held that the "reasonable cost of collection" did not include attorney's fees and because appellant's attorney had no agreement with Chrysler regarding its lien, appellant's attorney was not entitled to a fee from Chrysler. The Commission affirmed.

Ark.Code Ann. § 11-9-410 (1987) provides:

(a) LIABILITY UNAFFECTED.

(1) The making of a claim for compensation against any employer or carrier for the injury or death of an employee shall not affect the right of the employee, or his dependents, to make claim or maintain an action in court against any third party for the injury, but the employer or his carrier shall be entitled to reasonable notice and opportunity to join in the action. If they, or either of them, join in the action, they shall be entitled to a first lien upon two-thirds ( 2/3) of the net proceeds recovered in the action that remain after the payment of the reasonable costs of collection, for the payment to them of the amount paid and to be paid by them as compensation to the injured employee or his dependents.

(2) The commencement of an action by an employee or his dependents against a third party for damages by reason of an injury to which this chapter is applicable, or the adjustment of any claim, shall not affect the rights of the injured employee or his dependents to recover compensation, but any amount recovered by the injured employee or his dependents from a third party shall be applied as follows:

(A) Reasonable costs of collection shall be deducted;

(B) Then, in every case, one-third ( 1/3) of the remainder shall belong to the injured employee or his dependents, as the case may be;

(C) The remainder, or so much as is necessary to discharge the actual amount of the liability of the employer and the carrier; and

(D) Any excess shall belong to the injured employee or his dependents.

In arguing that attorney fees should be included in the "cost of collection," appellant analogizes Ark.Code Ann. § 11-9-410 to Ark.Code Ann. § 23-89-207 (Repl.1992) (applicable to automobile liability insurance) which provides that an insurer has a right of reimbursement out of any recovery in an automobile collision, "less the cost of collection." It has been held that "cost of collection" under this statute includes attorney's fees. See State Farm Mutual Automobile Insurance Company v. Bing, 305 Ark. 280, 808 S.W.2d 304 (1991); Daves v. Hartford Accident & Indemnity, 302 Ark. 242, 788 S.W.2d 733 (1990); Northwestern National Insurance Company v. American States Insurance Company, 266 Ark. 432, 585 S.W.2d 925 (1979); Baker v. State Farm and Casualty Company, 34 Ark.App. 59, 805 S.W.2d 665 (1991); and National Investors Fire & Casualty v. Edwards, 5 Ark.App. 42, 633 S.W.2d 41 (1982).

In the Orintas case, Mr. and Mrs. Meadows were employees of the Bendix Corporation of Indiana. They had both been injured in a compensable automobile accident in Arkansas and had both collected workers' compensation benefits from the Bendix Corporation. They hired an attorney, Richard Orintas, who agreed to accept a 35 percent contingency fee, and a third-party claim was filed against the estate of the Arkansas driver. The claim was settled for the policy limit of $50,000. A dispute then arose as to how to the proceeds of the settlement should be distributed. The Bendix Corporation contended it was entitled to two-thirds of the $50,000 settlement ($33,334), that the Meadows were entitled to one-third ($16,666), and that the appellants' attorney, Mr. Orintas, should receive only 35 percent of the Meadows' $16,666. Mr. Orintas contended he was entitled to 35 percent of the entire $50,000 settlement. The circuit court agreed with the Bendix Corporation.

On appeal, Orintas argued that attorneys' fees are included in the "reasonable costs of collection" and that he, therefore, was entitled to 35 percent of the $50,000 settlement before the proceeds were divided. This court stated:

Next, the appellant argues that, although Indiana law should be applied to the division of the settlement proceeds, under Ark.Stat. Ann. Section 81-1340 (Repl.1976) [now codified as Ark.Code Ann. § 11-9-410], attorneys fees are included under reasonable costs of collection. Therefore, his 35% attorney fee should be deducted from the entire $50,000 settlement before the proceeds are divided between the parties. In Burt v. Hartford Accident & Indemnity Co., 252 Ark. 1236, 483 S.W.2d 218 (1972), the court refused to allow the employee's attorney fee to be considered costs of collection under Ark.Stat. Ann. Section 81-1340. Citing Winfrey & Carlile v. Nickles, 223 Ark. 894, 270 S.W.2d 923 (1954), the court in Burt stated that, in the usual situation, the question of an allowance of fees to the employee's attorney as part of the costs of collection would not likely arise, because the intervening carrier would either retain the employee's counsel for a fee mutually agreed upon or the employer would employ another attorney of his own choice. Under these circumstances, the court would simply apportion the recovery, leaving each to pay his own attorney. 252 Ark. at 1240-1, 483 S.W.2d 218; Nickles, 223 Ark. at 900, 270 S.W.2d 923. Accord, St Paul-Mercury Indemnity Co. v. Lanza, 131 F.Supp. 684 (W.D.Ark.1955); Phillips v. Morton Frozen Foods, 313 F.Supp. 228 (E.D.Ark.1970). In the case at bar, Bendix Corporation employed its own attorney to pursue the estate of the third-party tortfeasor, and in view of the circuit judge's superior ability to evaluate the situation, we cannot say the trial court committed error in refusing to allow the appellant his attorney fees as costs of collection under Section 81-1340.

17 Ark.App. at 217-18, 706 S.W.2d at 202.

In Burt v. Hartford Accident & Indemnity Co. (cited in Orintas, supra ) appellant Opal Burt was injured during the course of her employment with Wal-Mart and was paid workers' compensation benefits by its insurance carrier, Hartford Accident & Indemnity Company. She then brought an action against D.T. Allen Construction Company, as a third-party tortfeasor, whose liability insurance coverage was also furnished by Hartford. Hartford employed attorneys to seek an intervention to protect its subrogation lien and another firm of attorneys to defend the construction company. In those peculiar circumstances our supreme court held that Burt's attorney was not entitled to a fee out of Hartford's subrogation interest.

In the case of Winfrey & Carlile v. Nickles (cited in the Orintas case), Nickles had been killed in an automobile accident within the scope of his employment. The employer's insurance carrier, St. Paul-Mercury Indemnity Company, paid workers' compensation benefits to Mr. Nickles' dependent parents. The Steins (occupants of the car which collided with the Nickles' truck) brought suit for damages against Nickles' estate and the estate hired the Hardin law firm to defend and file a cross-complaint for the wrongful death of Nickles. The Hardin firm was to receive 50 percent of any recovery. St. Paul hired attorney G. Byron Dobbs to file an intervention to protect its subrogation lien. It just so happened that St. Paul had also issued an automobile liability policy to the Steins and was required to defend them against the cross-complaint of the Nickles' estate. Therefore, St. Paul hired another law firm, Shaw, Jones & Shaw, to defend the Steins.

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