Moody v. Arabie

• Decision Date: 24 November 1986
• Docket Number: No. 86-C-0703,86-C-0703
• Parties: Samuel Lee MOODY v. Edward L. ARABIE, NTC Chemical Co., Aetna Casualty & Surety Co., & Francis Camel Construction, Inc. & Commercial Union Assurance Co. (Intervenor).
• Court: Louisiana Supreme Court

Page 1081

498 So.2d 1081

Samuel Lee MOODY v. Edward L. ARABIE, NTC Chemical Co., Aetna Casualty & Surety

Co., & Francis Camel Construction, Inc. &

Commercial Union Assurance Co. (Intervenor).

No. 86-C-0703.

Supreme Court of Louisiana.

Nov. 24, 1986.

Rehearing Denied Jan. 8, 1987.

Lawrence Curtis, J. Minos Simon, Ltd., Lafayette, for applicant.

James Pate, Onebane, Donohoe, Bernard, Torian, Diaz, McNamara & Abell, Lafayette, for respondent.

DENNIS, Justice.

When a third party suit is brought or recovery effected by an injured worker, and his employer or its carrier intervenes for recoupment of workers' compensation paid to the worker, is the employer or carrier obliged to pay a portion of the attorneys' fees out of its share? This is the ultimate question presented in this case. The trial court held that the worker's attorney was entitled under his contingency fee contract with the worker to collect one third of the gross recovery because La.R.S. 9:5001 grants an attorney a first privilege on a judgment obtained by him and on property recovered thereby. The court of appeal reversed, holding that because the employer was not a party or a debtor under the contingent fee contract the accessory right of privilege established by La.R.S. 9:5001 could not affect proceeds due to the employer under the judgment. 485 So.2d 660. We agree with and affirm that part of the court of appeal judgment. However, we amend the remainder of its decree and remand the case to the trial court for further proceedings consistent with our opinion. The employer or carrier may be charged with a proportionate share of the reasonable and necessary costs of recovery, including attorneys' fees, incurred by the injured worker in the suit against the third person. In determining and fixing necessary and reasonable attorneys' fees, the court must adhere to the Code of Professional Responsibility which prohibits a fee in excess of a reasonable fee, and requires the court to disregard any provisions of an attorney-client contract that would produce an excessive, unearned or incommensurate fee.

While operating his employer's pickup truck, Samuel Lee Moody suffered a work related accident for which he received workers' compensation. Moody sued various third persons for damages because of his injuries. The employer's workers' compensation carrier intervened to recover workers' compensation benefits paid to Moody. A jury found for Moody against Francis Camel Construction, Inc., one of the defendants, and a judgment for $60,000 was entered. The judgment recognized the compensation carrier's claim in the amount of $35,401.22 and ordered that sum to be paid, in preference, out of Moody's judgment. The liability insurer of Francis Camel Construction, Inc. paid the judgment, including interest and costs, with a check for $82,303.72 made payable to the worker, his attorney, and the employer's carrier. A dispute arose over the apportionment of the proceeds of the judgment. The employer's insurer filed a motion to enforce the judgment. The worker's attorney filed an opposition to that motion.

After hearings, the trial court ruled that, based on the total recovery, which including interest and costs amounted to $82,303.72, the worker's attorney under the contingency fee contract and La.R.S. 9:5001 was entitled to one third of the recovery or $27,434.57 and reimbursement for out-of-pocket expenses of $5,898.49, and the employer's compensation carrier was entitled to recoup $48,970.66 for compensation paid. The carrier had actually paid $49,286.23 in compensation but because the judgment was not sufficient the carrier was not fully reimbursed and the worker received nothing.

The court of appeal reversed this decision and held that the privilege and first rank granted to a worker's attorney is effective only against the portion of the recovery which falls to the injured worker after the employer or carrier has been first reimbursed in full for everything which has been paid in compensation benefits down to the moment of reimbursement. Because of an inadequate record the court of appeal remanded the case for further proceedings consistent with its opinion.

Throughout this litigation, the worker's attorney has taken the position that by virtue of La.R.S. 9:5001, his one third contingent fee under his contract with the worker ranks as a first privilege on all of the proceeds of the judgment he obtained. As the court of appeal recognized, however, this rationale is incorrect. A privilege is an accessory right, an incident to a debt or obligation for which it is security and a remedy. As Civil Code article 3186 provides, "Privilege is a right, which the nature of a debt gives to a creditor, and which entitles him to be preferred before other creditors, even those who have mortgages." The contract between the attorney and his client the worker created no debt or obligation on the part of the employer or carrier because they were not parties to that agreement. Therefore, this being the only ground urged, the attorney has failed to show that there is any debtor-creditor relationship between him and the employer or carrier which would permit him to superinduce a privilege upon their property or proceeds resulting from the judgment.

We conclude, therefore, that the court of appeal correctly reversed the trial court's judgment awarding plaintiff's counsel one third of the total verdict rendered herein. Nor do we find any fault with the appellate court's decision to remand the case to the trial court for further proceedings rather than to render a judgment upon an inadequate record. When the case is remanded to the trial court, however, that court should be given instructions as to the correct legal basis for the allocation of the costs of recovery between the worker and the employer; and as to the principles of law for determining and fixing the reasonable attorneys' fees.

When a worker is injured during the course and scope of his employment by the offense or quasi offense of a third person, the worker's right to recover damages from the third person is a property right and the employer's payment of workers' compensation does not deprive the injured worker of his action against the third person. La.C.C. art. 2315; La.R.S. 23:1101. However, an employer who is obliged to pay compensation to the worker in such a case may sue the third person for reimbursement of the compensation obligation. La.R.S. 23:1102(B). When either the worker or the employer sues the third person he must notify the other of the pending suit, and the other may intervene as party plaintiff. La.R.S. 23:1102(A). In the event a suit is filed by either the worker or the employer, and damages are recovered, damages shall be apportioned so that the employer's claim for compensation paid shall take precedence over that of the worker, but if the damages are more than sufficient to reimburse the employer, the excess shall be assessed in favor of the worker. La.R.S. 23:1103. When an excess in damages is paid to the worker the employer is entitled to a credit of such amount against compensation it will become obligated to pay in the future. La.R.S. 23:1103.

The workers' compensation law is silent on the subject of who is obliged to pay the costs of litigation or recovery against the third person. Formerly, the statute expressly provided for the employer to be reimbursed his costs and a reasonable attorneys' fees, thereby, in effect, imposing the total burden of recovery costs upon the worker. Act 247 of 1920. In 1958, however, the statute was amended to eliminate this provision and to leave the statute devoid of any statement on the subject. Act 109 of 1958. Because the workers' compensation statute does not expressly provide for the allocation of litigation costs, or costs of recovery, the statute must be construed with reference to other laws on the same subject matter. La.C.C. art. 17.

When an employer pays compensation to a worker who has been injured by the wrongful act of a third person, the employer and the worker become co-owners of a property right consisting of a right to recover damages from the third person. Since the Civil Code has not dealt in detail with co-ownership of single things, the task to construct a doctrine has fallen to the writers, using as help the statutory principles furnished by the titles on ownership, successions, and partnership contract. La.C.C. art. 480; Aubry & Rau, Property § 221, 329.

The...