In re Odle

Decision Date05 February 1997
Docket NumberAdversary No. 96-7070.,Bankruptcy No. 96-70415
Citation204 BR 714
PartiesIn re David M. ODLE, Debtor. John L. SWARTZ, Trustee, Plaintiff, v. David M. ODLE, Carol C. Odle, IL Department of Public Aid, Steven W. Berg, Philip Pennington, Clerk of the Circuit Court of Montgomery County, Defendants.
CourtU.S. Bankruptcy Court — Central District of Illinois

Arthur B. Cornell, Springfield, IL, for Trustee.

Patricia Tinch, Asst. Attorney General, Springfield, IL, for IL Dept. of Public Aid.

William A. Krajec, Springfield, IL, for Debtor.


LARRY L. LESSEN, Bankruptcy Judge.

The issue before the Court is whether an attorney has a valid claim for 20% of the proceeds of a worker's compensation settlement.

The Debtor, David M. Odle, filed a petition pursuant to Chapter 7 of the Bankruptcy Code on February 23, 1996. One of the assets of the bankruptcy estate is a worker's compensation settlement.

The Debtor retained Attorney Stephen Cullison on September 6, 1994, to handle a worker's compensation claim against Philip Pennington, d/b/a Portable Sanitation Systems. The basis for the claim was a slip and fall accident which occurred on July 29, 1994, during the course of the Debtor's employment with Mr. Pennington. The Debtor pinched a tendon in his left shoulder and was on temporary total disability from July 30, 1994, to January 24, 1995.

The Debtor's representation agreement with Mr. Cullison provided for a contingent fee of 20% of the amount recovered. (Mr. Cullison later associated with Attorney Steven Berg for purposes of this case, with the agreement that any fees would be shared equally.)

A settlement in the amount of $12,000 was agreed to by the parties, and the settlement was approved by the State of Illinois Industrial Commission on January 16, 1996. The settlement provided for a payment of $3,000 upon approval of the settlement agreement by the Industrial Commission, and the balance to be paid in installments. Pursuant to an Order of this Court dated July 29, 1996, Mr. Pennington was directed to make all payments under his worker's compensation settlement to the Trustee until further order of the Court.

Mr. Cullison filed a secured claim in the amount of $1,800 on August 29, 1996. (Pursuant to an Order dated May 8, 1996, the last date to file claims was August 6, 1996. Mr. Cullison, however, was not on the mailing matrix for this Order because the Debtor had failed to schedule the worker's compensation claim as an asset of the estate or Mr. Cullison as a creditor. It appears that Mr. Cullison's first notice of the bankruptcy was in May 1996, when Mr. Berg was named as a defendant in an adversary proceeding initiated by the Trustee to deny the Debtor's discharge and to recover a preference.) Mr. Cullison's claim is based on 20% of the $9,000 which he believed was still owed by Mr. Pennington or was held in escrow by a third party. Mr. Cullison claims an attorney's lien upon any proceeds of the settlement with Mr. Pennington.

The Trustee filed an objection to Mr. Cullison's claim on three grounds. First, the claim was filed as secured and only unsecured claims are entitled to share in dividends. Second, the claim does not show proof of perfection as a secured claim. Third, the claim was filed late, and, if allowed, would be subject to 11 U.S.C. § 726(a)(2) regarding the distribution to late filed claims.

820 ILCS 305/16a covers attorney's fees in worker compensation cases. The statute indicates a legislative intent "to encourage settlement and prompt administrative handling of such claims". § 16a(A). The statute caps attorney's fees at 20% of the amount of compensation recovered and paid. § 16a(B). Attorney's fees must be fixed pursuant to a form prescribed by the Commission, and it must be filed with the Commission. § 16a(C). No attorney's fees may be awarded for undisputed medical expenses, or for temporary total disability compensation unless the payment of such compensation is refused or terminated. §§ 16a(D) and (E). Attorney's fees are limited to $100 in certain instances when there is no dispute as to liability or the results of the accident. §§ 16a(F) and (G). No attorney's fees are allowed where the amount recovered does not exceed written offers made prior to representation. § 16a(H). Attorney's fees are "only recoverable from compensation actually paid to" the employee or his dependents. § 16a(I). Disputes regarding attorney's fees are heard and determined by the Commission. § 16a(J). Attorneys who violate the provisions of the statute are...

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