Injured Workers Ass'n of Utah v. State

• Decision Date: 18 May 2016
• Docket Number: No. 20140372.,20140372.
• Citation: 2016 UT 21,374 P.3d 14
• Parties: INJURED WORKERS ASSOCIATION OF UTAH, et al., Appellants, v. STATE of Utah, Appellee.
• Court: Utah Supreme Court

374 P.3d 14

2016 UT 21

INJURED WORKERS ASSOCIATION OF UTAH, et al., Appellants

v.STATE of Utah, Appellee.

No. 20140372.

Supreme Court of Utah.

May 18, 2016.

Virginius Dabney, St. George, for appellant.

Sean D. Reyes, Att'y Gen., Stanford E. Purser, Asst. Att'y Gen., Salt Lake City, for appellee.

Justice DURHAM authored the opinion of the Court in which Chief Justice DURRANT and Justice HIMONAS joined. Associate Chief Justice LEE filed an opinion concurring in part. Justice JOHN A. PEARCE became a member of the Court on December 17, 2015, after oral argument in this matter, and accordingly did not participate.

Justice DURHAM, opinion of the Court:

INTRODUCTION

¶ 1 In Utah, attorneys representing injured workers in workers' compensation claims receive their fees out of the compensation awarded to the worker. By statute, the legislature delegated the authority to regulate these fees to the Utah Labor Commission. Utah Code § 34A–1–309. The Labor Commission created a sliding-scale fee schedule and an overall cap on the maximum amount of attorney fees for attorneys representing injured workers. Utah Admin. Code R602–2–4(C)(3).

¶ 2 The Injured Workers Association of Utah and several of its member attorneys (collectively, IWA) challenge the statute and the Labor Commission's fee schedule as unconstitutional. IWA argues that under the Utah constitution, the Utah Supreme Court is vested with exclusive authority to regulate the practice of law, and that this authority extends to the regulation of attorney fees.

¶ 3 We agree with IWA and hold that the regulation of attorney fees is included within the power to govern the practice of law. Because the Utah Supreme Court is vested with exclusive inherent and constitutional authority to govern the practice of law—and the court cannot under the separation-of-powers doctrine delegate the regulation of attorney fees to the legislature or the Commission—we hold both the Commission's fee schedule and its authorizing statute unconstitutional.

BACKGROUND

¶ 4 The Utah legislature enacted the Workers' Compensation Act in 1917. 1917 Utah Laws 306. The legislature designed this act as a “security system” to compensate workers for their injuries without requiring costly litigation. See Helf v. Chevron U.S.A., Inc., 2015 UT 81, ¶ 84, 361 P.3d 63 (citation omitted). Workers give up common law tort remedies against their employers, and in exchange, employers must compensate workers for workplace injuries regardless of fault. See Utah Code § 34A–2–105(1) ; Shattuck–Owen v. Snowbird Corp., 2000 UT 94, ¶ 19, 16 P.3d 555.

¶ 5 Shortly after promulgating the Workers' Compensation Act, the legislature granted the Industrial Commission “full power to regulate and fix the fee charge” of attorneys involved in workers' compensation cases. 1921 Utah Laws 182. This power now resides with the Labor Commission¹ and is codified in Utah Code section 34A–1–309(1) : “In a case before the commission in which an attorney is employed, the commission has full power to regulate and fix the fees of the attorney.”

¶ 6 Initially, the Commission created a scheme in which attorneys received a minimum fee of ten dollars, plus 5 percent of the injured worker's award. See Ellis v. Indus. Comm'n, 91 Utah 432, 64 P.2d 363, 370 (1937) (noting the Commission's adoption of this policy on July 21, 1921). Under this policy, the Commission retained discretion to adjust the attorney fee upward or downward if the fee would otherwise be considered unjust to the parties. Id. The Commission's scheme affected injured workers' attorney fees only. The Commission has never regulated fees of attorneys representing employers or insurance companies.

¶ 7 The fee schedule has been adjusted several times since its inception, typically for inflation. Today the regulation grants successful² injured workers' attorneys a fee of 25 percent for the first $25,000 of the award, 20 percent for the next $25,000 of the award, and 10 percent of amounts awarded in excess of $50,000. Utah Admin. Code R602–2–4(C)(3)(a). Beginning in 1991, the Commission also added a cap to the overall fees.³ Currently, attorneys may not receive fees in excess of $18,590 for “all legal services rendered through final commission action.” Id. Some additional fees are awarded if the case is appealed. Id. R602–2–4(C)(3)(b)–(c). The regulation no longer allows the Commission discretion in awarding fees; the amount of attorney fees awarded depends solely on the size of the judgment.

¶ 8 IWA petitioned the district court for declaratory judgment, challenging the constitutionality of the Commission's fee schedule and the statute authorizing the Commission to regulate attorney fees. IWA attacked the fee schedule on four grounds, but only the separation of powers argument is at issue on this appeal.⁴ IWA argues that under our state's constitution, the Utah Supreme Court has the exclusive power to govern the practice of law; the regulation of attorney fees falls within this power; and therefore, any attempt by the legislature to circumvent this power violates the separation of powers doctrine.

¶ 9 In response, the State cited Thatcher v. Industrial Commission, in which this court rejected the notion “that the regulation and fixing of fees of attorneys is essentially and solely the power of the judiciary.” 115 Utah 568, 207 P.2d 178, 181 (1949). The Thatcher court recognized this court's inherent power to govern the practice of law, but nonetheless stated it was unaware of any power belonging to this court to regulate attorney fees, ultimately finding it unnecessary “to determine whether the judiciary has the power to regulate or fix fees” because it found that at the very least the legislature had the right to do so. Id. at 181–82.

¶ 10 IWA acknowledged Thatcher but argued that the law changed after the 1985 revision of article VIII of the constitution, when the supreme court's power to govern the practice of law became explicit and exclusive. The district court was not persuaded by IWA's argument, determining that

insofar as the power to regulate the practice of law is concerned, the 1985 amendment did not alter the previous allocation of such power in Utah, but merely “ratified” and stated “expressly” what was previously understood to be inherent. That being the case, there is no basis for concluding that the amendment somehow superseded Thatcher 's holding that the Legislature may “giv[e] to the Industrial Commission full power to regulate and fix reasonable fees of attorneys in cases before the commission in which attorneys have been employed.”

(citation omitted).

¶ 11 The district court additionally relied on a comment to rule 1.5 of the Utah Rules of Professional Conduct, which states that “[a]pplicable law may impose limitations on contingent fees, such as a ceiling on the percentage allowable,” and may apply in other fee agreements beyond contingency fees. Utah R. Prof. Conduct 1.5 cmt. 3. The court found this comment consistent with the Thatcher opinion and its determination that the 1985 amendment did not alter the scope of this court's inherent power to govern the practice of law; accordingly, the court denied IWA's petition at the summary judgment stage.

¶ 12 On appeal, IWA asks us to strike down the Labor Commission's fee schedule and its enabling statute as a “direct, unconstitutional, circumvention of the Utah Supreme Court's exclusive authority to regulate the practice of law.”⁵ The constitutionality of a statute presents a question of law. State v. Candedo, 2010 UT 32, ¶ 7, 232 P.3d 1008. We review this question for correctness, granting no deference to the lower court's decision. Id. We have jurisdiction to decide this appeal pursuant to Utah Code section 78A–3–102(3)(j).

ANALYSIS

¶ 13 The separation-of-powers clause in our state constitution describes the three branches of government and specifies that “no person charged with the exercise of powers properly belonging to one of these departments, shall exercise any functions appertaining to either of the others, except in the cases herein expressly directed or permitted.” Utah Const. art. V, § 1. “The latter phrase of this clause establishes that there may be exceptions to the separation-of-powers doctrine, but any exception must be found within the Utah Constitution.” State v. Drej, 2010 UT 35, ¶ 25, 233 P.3d 476.

¶ 14 First, we reiterate that under our state constitution, the Utah Supreme Court has plenary authority to govern the practice of law. This authority is derived both from our inherent power and—since 1985—explicit and exclusive constitutional power.

¶ 15 Second, we determine that the regulation of attorney fees falls squarely within the practice of law, thus invalidating Thatcher v. Industrial Commission, 115 Utah 568, 207 P.2d 178 (1949). Because we cannot delegate the authority to regulate attorney fees in workers' compensation cases to the legislature, both the statute and the Labor Commission's fee schedule are unconstitutional encroachments upon the power of the judiciary to govern the practice of law.

¶ 16 Third, we set forth the reasons why we decline at this time to adopt our own fee schedule for regulating the fees of injured workers' attorneys.

I. THE UTAH SUPREME COURT HAS INHERENT AND CONSTITUTIONAL AUTHORITY TO EXCLUSIVELY GOVERN THE PRACTICE OF LAW

A. Inherent Authority to Govern the Practice of Law

¶ 17 Our origin story begins with the inherent power to govern the practice of law. See Bailey v. Utah State Bar, 846 P.2d 1278, 1280–81 (Utah 1993) (“From its beginning, this Court has had the inherent power to regulate the practice of law....”). The source of this power flowed from article VIII, section 1 of our state constitution, which vests the “judicial power of the state ... in a Supreme Court.” Utah Const. art. VIII, § 1 ; accord Gilbert v. Utah Down Syndrome Found., Inc. (In re Discipline of Gilbert ), 2012 UT 81, ¶¶ 19–20, 301 P.3d 979 (articulating that “the power to regulate the practice of law was...