Ruhd v. Liberty Northwest Insurance Corporation

• Decision Date: 31 August 2004
• Docket Number: No. 03-504,03-504
• Citation: 322 Mont. 478,97 P.3d 561,2004 MT 236
• Parties: JEREMY RUHD, Petitioner and Respondent, v. LIBERTY NORTHWEST INSURANCE CORPORATION, and RICHARD BARBER d/b/a BARBER HOMES, Respondents and Respondents, v. FISCH, FROST, RAUSCH, Intervenors and Appellants.
• Court: Montana Supreme Court

2004 MT 236

322 Mont. 478

97 P.3d 561

JEREMY RUHD, Petitioner and Respondent, v. LIBERTY NORTHWEST INSURANCE CORPORATION, and RICHARD BARBER d/b/a BARBER HOMES, Respondents and Respondents, v. FISCH, FROST, RAUSCH, Intervenors and Appellants.

No. 03-504

Supreme Court of Montana.

Argued: March 24, 2004

Submitted: April 27, 2004

Decided: August 31, 2004

For Appellants: Monte D. Beck (argued), Beck, Richardson & Amsden, PLLC, Bozeman, Montana (Fisch).

Stephen D. Roberts, Attorney at Law, Bozeman, Montana (Frost).

Lon J. Dale (argued), Milodragovich, Dale, Steinbrenner & Binney, P.C., Missoula, Montana (Rausch).

For Respondent Ruhd: Geoffrey C. Angel (argued), Angel Law Firm, Bozeman, Montana.

For Amicus Curiae Montana State Fund: Bradley J. Luck, Thomas J. Harrington, Garlington, Lohn & Robinson, PLLP, Missoula, Montana.

Justice John Warner delivered the Opinion of the Court.

¶1 Appellants/Intervenors, Fisch, Frost, and Rausch, and their respective counsel, Mr. Monte Beck, Mr. Stephen Roberts, and Mr. Lon Dale, appeal a decision of the Workers' Compensation Court (WCC) that the attorneys' fees common fund created via the litigation entitled Rausch v. State Compensation Insurance Fund, 2002 MT 203, 311 Mont. 210, 54 P.3d 25, was limited solely to claimants insured by the State Fund. The Workers' Compensation Court bifurcated the issue of common fund attorneys' fees from the other issues in the case and certified it for appeal.

¶2 We state the issues on appeal as follows:

¶3 Did the Workers' Compensation Court err in determining that Intervenors' counsel are not entitled to common fund attorneys' fees with respect to impairment awards payable by insurers other than the State Fund.

¶4 Did the Workers' Compensation Court err in determining that Ruhd's attorney is entitled to common fund attorneys' fees with respect to all relevant impairment awards payable by Liberty Northwest Insurance Corporation.

¶5 Reversed and remanded.

FACTUAL AND PROCEDURAL BACKGROUND

¶6 The history of this case is intertwined with that of Rausch v. State Compensation Insurance Fund, 2002 MT 203, 311 Mont. 210, 54 P.3d 25.¹ In 1999 and 2000, Rausch, Fisch, and Frost filed petitions in the WCC on behalf of themselves and all similarly situated workers, to determine whether permanently totally disabled workers were entitled to impairment awards upon establishment of their impairment ratings or if they had to wait until retirement age. In late 2000 and early 2001, the WCC determined that permanently totally disabled workers' compensation claimants were not entitled to impairment awards at all. The plaintiffs appealed.

¶7 In January 2002, while the Rausch appeal was pending in this Court, Ruhd filed a petition in the WCC seeking essentially the same relief as that sought in Rausch with the exception that Liberty Northwest Insurance Corporation was the defendant insurer. In June 2002, Ruhd amended his petition to join similarly situated claimants and for common fund attorneys' fees. In August 2002, the WCC entered judgment against Ruhd relying on its prior decision in Rausch. Ruhd appealed.

¶8 On September 5, 2002, this Court decided Rausch v. State Compensation Insurance Fund, 2002 MT 203, 311 Mont. 210, 54 P.3d 25. The decision reversed the WCC and held that permanently totally disabled workers are entitled to impairment awards immediately upon receipt of their impairment ratings. The decision also held that the Rausch attorneys were entitled to common fund fees from the State Fund. The decision, however, did not specifically reach the question of whether the common fund included only claimants ensured by the State Fund or whether the common fund included all permanently totally disabled claimants irrespective of their insurer.

¶9 Immediately following the Rausch decision, Liberty acknowledged that the decision was binding upon it and agreed to pay Ruhd an impairment award under the same terms and conditions as set forth in Rausch. On December 10, 2002, this Court decided Ruhd v. Liberty Northwest Insurance Corp., 2002 MT 290N, affirming Liberty's agreement to pay Ruhd pursuant to the holding in Rausch, and remanding the issues of class certification and common fund attorneys' fees to the WCC.

¶10 On remand the WCC joined the Rausch attorneys as Intervenors on the issue of whether they were entitled to common fund attorneys' fees from all permanently totally disabled impairment claimants regardless of insurer. The court concluded that the Rausch attorneys were not entitled to common fund fees from any claimants other than State Fund claimants. The WCC ordered that Ruhd's attorney, Geoffrey Angel, was entitled to common fund attorneys' fees from all Liberty claimants. The court denied class certification but retained jurisdiction to oversee payment of impairment awards by Liberty, and to determine the appropriate common fund fee awards.

STANDARD OF REVIEW

¶11 The parties dispute the appropriate standard of review to be applied to this case. Ruhd asserts that the WCC made a discretionary ruling that Ruhd's counsel was entitled to common fund attorneys' fees from the Liberty claimants. Further, Ruhd contends that while the WCC could have extended the common fund doctrine to all workers' compensation insurers in Montana, it exercised its discretion in only extending the doctrine to the State Fund in Rausch and Liberty in Ruhd.

¶12 The Intervenors assert that the WCC decision constitutes an incorrect conclusion of law in determining that the Rausch common fund did not include claimants covered by insurers other than the State Fund.

¶13 We hold the decision by the WCC was a conclusion of law. The issue is not whether the WCC abused its discretion in awarding fees, but rather what would be the source of the fees once awarded. This Court undertakes plenary review of the WCC's conclusions of law to determine whether the WCC was correct. Murer v. State Compensation Mutual Insurance Fund (1997), 283 Mont. 210, 217, 942 P.2d 69, 73.

DISCUSSION

Issue One

¶14 Did the Workers' Compensation Court err in determining that Intervenors' counsel are not entitled to common fund attorneys' fees with respect to impairment awards payable by insurers other than the State Fund.

¶15 When a party, through active litigation, creates, reserves, preserves, or increases a fund which directly benefits an ascertainable class of non-participating beneficiaries, the common fund doctrine provides that non-participating beneficiaries sharing in the proceeds of the fund must bear a portion of the litigation costs including reasonable attorneys' fees. Rausch, ¶ 46-47.

¶16 There are three elements necessary to establish a common fund. First, a party, styled the active beneficiary, must create, reserve, preserve, or increase an identifiable monetary fund or benefit in which all active and non-participating beneficiaries have an interest. Second, the active beneficiary must incur legal fees in establishing the common fund. Third, the common fund must benefit ascertainable, non-participating beneficiaries. Mountain West Farm Bureau Mutual Ins. Co. v. Hall, 2001 MT 314, ¶¶ 15-18, 308 Mont. 29, ¶¶ 15-18, 38 P.3d 825, ¶¶ 15-18.

¶17 The parties to this appeal seize on specific phraseology utilized in our decision in Rausch to make their arguments. Ruhd and the WCC focused on the following language:

The attorneys incurred legal costs and fees in the preservation of that right, and the common fund will benefit an ascertainable class of workers who were denied immediate payment of an impairment award by the State Fund . . . .

Rausch, ¶ 48, (emphasis added).

Ruhd and the WCC argue that this Court utilized the emphasized language in order to limit the common fund created in Rausch solely to claimants insured by the State Fund.

¶18 On the contrary, Intervenors argue that this Court's statement that "[t]he attorneys representing Rausch, Fisch, and Frost all engaged in active litigation which preserved the benefit of immediate impairment awards to permanently totally disabled claimants" is more telling. Rausch, ¶ 48, (emphasis added). Intervenors contend that this language, coupled with the broadly inclusive tenor of Rausch when read in its entirety, constitutes a conclusion that Intervenors recover common fund fees from all permanently totally disabled claimants irrespective of insurer.

¶19 In Rausch, we had before us only claimants insured by the State Fund. However, there is no question that the Intervenors, via active litigation, are directly responsible for securing the right of all permanently totally disabled claimants to receive an impairment award, regardless of their insurer. While it is true that in Rausch the State Fund was the named defendant, and therefore our focus, this was because the issue, whether carriers other than the State Fund should be included in the common fund application, was not specifically raised.

¶20 The three elements necessary for establishment of a common fund have been met by the Intervenors. There is no question that elements two and three are satisfied. Intervenors have incurred fees pursuing litigation, and all permanently totally disabled claimants constitute an ascertainable class.

¶21 Primarily disputed is element one; whether Intervenors created a benefit for all beneficiaries or merely State Fund beneficiaries. Prior to our decision in Rausch, the State Fund, Liberty, and perhaps other workers' compensation insurers, contested either the availability of impairment awards to permanently totally disabled claimants, or contested the timing of those payments. Intervenors efforts in the Rausch litigation resolved both questions in favor of claimants.

¶22 In spite of this, Ruhd argues that the WCC correctly awarded Mr. Angel common fund fees with respect to Liberty claimants because Mr. Angel pressed forward with the claim against Liberty and established Liberty's liability in spite of his awareness of an adverse holding in...