Meyer v. Michigan Mut. Ins. Co.

Citation609 N.W.2d 167,233 Wis.2d 493,2000 WI App 53
Decision Date02 February 2000
Docket NumberNo. 98-3432.,98-3432.
PartiesScott R.MEYER of Wisconsin, Plaintiff-Respondent, v. MICHIGAN MUTUAL INSURANCE CO., a foreign corporation, Defendant-Appellant, MILLERS CLASSIFIED INSURANCE CO., a foreign corporation, Defendant.
CourtCourt of Appeals of Wisconsin

On behalf of the defendant-appellant, the cause was submitted on the briefs of Christopher D. Walther of Walther Law Offices, S.C. of Milwaukee.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of Joseph G. Doherty of Bunk, Doherty & Griffin, S.C. of West Bend.

Before Brown, P.J., Nettesheim and Snyder, JJ.

¶ 1. SNYDER, J.

This is an appeal from a judgment approving a settlement and distributing insurance proceeds pursuant to WIS. STAT. § 102.29(1) (1995-96).1 Michigan Mutual Insurance Co. (Michigan Mutual) contends that the circuit court improperly exercised its discretion in awarding Scott R. Meyer a one-third contingent attorneys' fee as part of the "reasonable cost of collection" under § 102.29(1).2 Michigan Mutual claims that the circuit court should have considered a list of factors under SCR 20:1.5(a) (1999) in assessing the reasonableness of Meyer's attorneys' fees. Because we conclude that the court appropriately reviewed the SCR 20:1.5(a) factors, Michigan Mutual's argument fails. We therefore affirm on this issue.

¶ 2. Michigan Mutual also contends that the circuit court erred as a matter of law in entering a judgment against it for $1 million, the limits of its policy, when WIS. STAT. § 102.29(1) provides for the allocation of proceeds to Meyer's employer's insurance carrier, Michigan Mutual. We agree; therefore, on this point of error we reverse and remand with directions that the circuit court enter judgment consistent with this opinion.

BACKGROUND

¶ 3. The facts of this case are lengthy but not particularly complicated. On April 6, 1993, Meyer sustained severe physical injuries when he was hit by a truck driven by a fellow employee and owned by his employer, Milliken Millwork, Inc. (Milliken). Meyer subsequently began receiving worker's compensation benefits from Milliken's worker's compensation insurer, Michigan Mutual. ¶ 4. On February 16, 1996, Meyer filed a third-party liability action against Milliken and the employee who drove the truck that hit Meyer. On April 24, 1996, Meyer amended his complaint to include Michigan Mutual.3

¶ 5. In July 1996, Michigan Mutual tendered a settlement to Meyer of its liability policy limits of $1 million subject to its WIS. STAT. § 102.29(1) right of reimbursement. Meyer rejected the tender, and in August 1996, Michigan Mutual filed a motion for declaratory judgment that the liability policy limits applicable in this case were $1 million.

¶ 6. In a nonfinal order entered on March 12, 1997, the circuit court ruled that Michigan Mutual's liability policy limits were $2 million. Michigan Mutual filed a petition for leave to appeal the circuit court's nonfinal order. The court of appeals granted the petition, and on April 10, 1998, it issued a decision holding that Michigan Mutual's policy provided $1 million in coverage. The court of appeals then remanded the case with directions to enter a declaratory judgment determining that the policy provided $1 million of coverage.

¶ 7. On June 29, 1998, Michigan Mutual informed Meyer that the tender of its $1 million policy limits still remained on the table. Meyer responded by submitting to Michigan Mutual a proposed bill of costs and a stipulation and order for approval of a third-party claim pursuant to WIS. STAT. § 102.29(1), and requesting that Michigan Mutual forward a settlement draft in the amount of $1,001,255.87. Michigan Mutual objected to Meyer's proposed $333,333.33 attorneys' fees, as well as the costs of collection. ¶ 8. On August 21, 1998, Meyer accepted Michigan Mutual's offer to settle the case for the $1 million policy limits subject to the WIS. STAT. § 102.29(1) distribution provision. On the same day, Meyer filed a motion for a protective order prohibiting Michigan Mutual's discovery of documents relating to Meyer's attorneys' fees. The motion also sought approval of the settlement and distribution of the third-party proceeds.

¶ 9. On September 11, 1998, the circuit court conducted a hearing to address Meyer's motion. At the hearing, Meyer produced documentation substantiating his itemization of expenses that Michigan Mutual had requested through interrogatories and a request for production of documents. The circuit court granted Meyer's motion for a protective order and his motion to approve the distribution of the third-party settlement proceeds. The court awarded Meyer's counsel a one-third contingency fee of $333,333.33 and costs in the sum of $7209.09. One-third of the balance was ordered paid to Meyer and the remainder was allocated to Michigan Mutual to reimburse it for the worker's compensation benefits paid. An order was entered to this effect on September 28, 1998.

¶ 10. On October 2, 1998, Meyer sent Michigan Mutual a proposed order for judgment and judgment awarding Meyer $560,361.61, which was the total of the attorneys' fees, costs and one-third of the balance that the circuit court had awarded him. On October 5, he submitted a revised proposed order for judgment and judgment in the amount of $1 million. Michigan Mutual objected to this revision; however, the court disagreed and entered a $1 million judgment against Michigan Mutual on October 19, 1998. After Michigan Mutual moved to amend the judgment, the court denied its motion. Michigan Mutual now appeals.

DISCUSSION
A. Attorneys' Fees

[1]

¶ 11. Michigan Mutual argues that the circuit court erroneously exercised its discretion by awarding a one-third contingent attorneys' fee to Meyer as part of the reasonable cost of collection in dividing the proceeds of the settlement. In reviewing the circuit court's ruling as to the value of attorney fees, we consider whether the court properly exercised its discretion. See Village of Shorewood v. Steinberg, 174 Wis. 2d 191, 204, 496 N.W.2d 57 (1993)

. A circuit court properly exercises its discretion if it "employs a logical rationale based on the appropriate legal principles and facts of record." Id. (quoting Petros v. City of Watertown, 152 Wis. 2d 692, 696, 449 N.W.2d 72 (Ct. App. 1989)).

¶ 12. The formula for dividing the proceeds of a settlement in a third-party liability action when worker's compensation benefits have been paid is set forth in WIS. STAT. § 102.29(1). That section states:

[T]he proceeds of such claim shall be divided as follows: After deducting the reasonable cost of collection, one-third of the remainder shall in any event be paid to the injured employe . . . . Out of the balance remaining, the employer, insurance carrier or, if applicable, uninsured employers fund shall be reimbursed for all payments made by it . . . . A settlement of any 3rd party claim shall be void unless said settlement and the distribution of the proceeds thereof is approved by the court before whom the action is pending and if no action is pending then by a court of record or by the department. (Emphasis added.)

The statute "requires the court approving the settlement to determine the attorneys' fees to be allowed." Diedrick v. Hartford Accident & Indem. Co., 62 Wis. 2d 759, 763, 216 N.W.2d 193 (1974). While § 102.29(1) refers to the "reasonable cost of collection," it does not mandate what that cost should be.

¶ 13. Michigan Mutual argues that the circuit court erred by only considering the existence of Meyer's contingent fee contract. In support, Michigan Mutual relies on Village of Shorewood. In that case, the supreme court reviewed an award of attorney fees under an eminent domain statute, WIS. STAT. § 32.28, authorizing a court to award "reasonable" and "necessary" attorney fees under certain conditions. The court held that for eminent domain cases, courts should use "a contingency fee agreement as a guide only and must consider all the circumstances of the case to determine whether the contingency fee amount is a just and reasonable figure." Village of Shorewood,174 Wis. 2d at 204. The court then looked to SCR 20:1.5(a) as a guide for assessing the reasonableness of attorney fees.4See Village of Shorewood,174 Wis. 2d at 204; see also Standard Theatres, Inc. v. DOT, 118 Wis. 2d 730, 749 n.9, 349 N.W.2d 661 (1984).

¶ 14. The Village of Shorewood court reviewed six of the SCR 20:1.5(a) factors in concluding that the attorney's fees were reasonable. While the court pointed out that the attorney's contingent fee was significantly higher than the opposing party's attorney's fee — $108,867 compared with $13,757 — it concluded that the circuit court's determination was properly grounded on the SCR 20:1.5(a) factors. The court added that "[i]f we were to review this case de novo, we might make a different determination, but because the circuit court is in `an advantageous position to make a determination as to the reasonableness of a firm's rates,' our review is limited to determining whether the circuit court properly exercised its discretion." Village of Shorewood, 174 Wis. 2d at 206 (quoting Standard Theatres, 118 Wis. 2d at 747).

¶ 15. Although Meyer contends that Village of Shorewood is "not really on point," we find the opinion instructive. WISCONSIN STAT. § 102.29 calls for a "reasonable cost of collection," and WIS. STAT. § 32.28 authorizes "reasonable" and "necessary" attorney fees. In both instances, the SCR 20:1.5(a) factors provide an appropriate assessment of reasonable attorney fees.

¶ 16. Michigan Mutual claims that the court ignored all of the factors except whether the attorneys' fees were fixed or contingent. We disagree. While the court's decision was based in large part on the existence of a contingent fee agreement, we observe that the court also considered the substantial...

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    ...of reasonable attorney fees and costs is limited to whether the circuit court properly exercised its discretion. See Meyer v. Michigan Mut. Ins. Co., 2000 WI App 53, ¶ 11, 233 Wis. 2d 493, 609 N.W.2d 167. A proper exercise of discretion requires the circuit court to employ "a logical ration......
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