Meyer v. Michigan Mut. Ins. Co., No. 98-3432.

• Court: Court of Appeals of Wisconsin
• Writing for the Court: Before Brown, P.J., Nettesheim and Snyder, JJ.
• Citation: 609 N.W.2d 167,233 Wis.2d 493,2000 WI App 53
• Parties: Scott R.MEYER of Wisconsin, Plaintiff-Respondent, v. MICHIGAN MUTUAL INSURANCE CO., a foreign corporation, Defendant-Appellant, MILLERS CLASSIFIED INSURANCE CO., a foreign corporation, Defendant.
• Docket Number: No. 98-3432.
• Decision Date: 02 February 2000

233 Wis.2d 493
2000 WI App 53
609 N.W.2d 167

Scott R.MEYER of Wisconsin, Plaintiff-Respondent,
v.
MICHIGAN MUTUAL INSURANCE CO., a foreign corporation, Defendant-Appellant,
MILLERS CLASSIFIED INSURANCE CO., a foreign corporation, Defendant

No. 98-3432.

Court of Appeals of Wisconsin.

Submitted on briefs October 22, 1999.

Decided February 2, 2000.

233 Wis.2d 494

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

233 Wis.2d 495

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.

233 Wis.2d 496

¶ 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.

233 Wis.2d 497

¶ 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

233 Wis.2d 498

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

233 Wis.2d 499

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...