Stanton v. Hills Materials Co.

• Decision Date: 25 September 1996
• Docket Number: Nos. 19228,19229,s. 19228
• Citation: 553 N.W.2d 793,1996 SD 109
• Parties: Emlon L. STANTON, Claimant and Appellee, v. HILLS MATERIALS COMPANY, Employer and Appellant, and Maryland Casualty Company, Insurer and Appellant.
• Court: South Dakota Supreme Court

Page 793

553 N.W.2d 793

1996 SD 109

Emlon L. STANTON, Claimant and Appellee, v. HILLS MATERIALS COMPANY, Employer and Appellant and Maryland Casualty Company, Insurer and Appellant.

Nos. 19228, 19229.

Supreme Court of South Dakota.

Argued Jan. 9, 1996.

Decided Aug. 28, 1996.

Rehearing Denied Sept. 25, 1996.

James D. Leach, Viken, Viken, Pechota, Leach & Dewell, Rapid City, for claimant and appellee.

Benjamin J. Eicher, Wallahan, Banks & Eicher, Rapid City, for appellants.

AMUNDSON, Justice.

¶1 Hills Materials Company and Maryland Casualty Company (Employer) appeal a lump-sum award of attorney fees to Emlon L. Stanton (Employee), which was granted without notice to them. Employee filed a notice of review as to the denial of prejudgment interest. We reverse the award of lump-sum attorney fees and remand for rehearing on this issue.

FACTS

¶2 Employee was a seasonal construction worker for Employer. On or about June 18, 1991, Employee sustained a back injury while operating a bulldozer for Employer. This injury did not prevent Employee from continuing his work. Around November 25, 1991, Employee felt pain while trying to push a heavy roll of material. After both the June 18 and November 25, 1991, accidents, Employee notified his foreman as to his injury. Employee kept working until December 13, 1991.

¶3 Due to his back injury, Employee began treatment with several physicians, including Dr. Steven Goff (Doctor). Employee did not seek medical help until after he ended work on December 13, 1991. On July 13, 1992, Employer requested an opinion from Doctor regarding Employee's ability to return to work. Doctor's report dated August 11 stated that he did not believe Employee could return to heavy equipment work. However, Doctor opined that Employee could work at a "light level of activity that did not involve jarring, pushing, pulling, heavy lifting, and overhead work." After receiving this report, Employer inquired on August 28 if Employee could do flagging work. Doctor replied on September 25, stating Employee had reached maximum medical improvement and that Employee could return to a light level of activity, "[p]ossibly flagging ... trial of this would not be unreasonable." Employer did not immediately try to reemploy Employee because Employer believed that Employee wanted a determination of permanent partial impairment so that benefits would be paid allowing Employee to retire.

¶4 On December 29, 1992, Doctor issued a report giving Employee a six-percent whole person impairment and opining that Employee was functional at a light level of activity. Employer offered Employee a lump-sum payment for the six-percent partial permanent disability rating. Employee, who was represented by counsel, refused this offer and sought designation of "odd-lot" permanent total disability benefits. Employer denied odd-lot liability, asserting that Employee was capable of doing flagging work and that he had not yet attempted to perform this job. Originally, Employee refused this flagging position until August 1993, but then began employment as a flagger and continued until September 13, 1993, when he complained he was experiencing great back pain. Employee and Employer sought clarification from Doctor as to Employee's impairment designation. Doctor replied, stating Employee was "not capable of handling the sustained standing activity required by [the flagging] job." Because of his incapability, Doctor questioned Employee's "ability to be employable on a day-to-day basis...."

¶5 Due to this report, Employer agreed that Employee was entitled to "odd-lot" benefits. A stipulation was entered into regarding the odd-lot entitlement, which did not contain any provision for a lump-sum payment of attorney fees. This stipulation was approved by the Department of Labor (Department). Originally Employee's attorney (Attorney) approached Employer with an attorney fee demand of $41,313.92, which was twenty percent of the present value of Employee's permanent total disability benefits. Employer rejected this request, based on its belief that this was a nondisputed case. Therefore, Attorney was only entitled to an hourly rate for service rendered. Employer alleged that this raised a conflict of interest between Employee and Attorney. In addition, Employer argued that since Employee's total recovery is not certain (only expected because Employee is receiving monthly payments that cease upon his death), attorney fees cannot be calculated and distributed in a lump sum.

¶6 Next Employee's attorney filed with Department a request for approval of attorney fees with supporting documents including the order deeming Employee permanently and totally disabled, the present value calculation of the award, and the amount equalling twenty-five percent of attorney fees, plus six percent sales tax. Department approved payment of $51,642.40 to Attorney. Employer argues that this approval was in error, because it did not have notice or an opportunity to participate in the determination.

¶7 Employer requested Department to vacate its order approving attorney fees. Department denied this motion, stating that Employer did not have standing. Employer denied payment of the lump-sum attorney fees, so Employee moved for summary judgment and also requested prejudgment interest. Department granted summary judgment to Employee, but denied prejudgment interest. Employer appealed to the circuit court, which affirmed Department's decision. From these determinations, Employer appeals based on the following issues.

I. Whether the circuit court applied the proper law for granting summary judgment?

II. Whether the circuit court correctly awarded payment of lump-sum attorney fees?

III. Whether the attorney fee award violated due process and equal protection since notice was not provided to Employer?

IV. Whether Attorney and Employee have a conflict of interest?

¶8 Because the issue of notice is dispositive to all of Employer's issues, we will address that issue only.

DECISION

¶9 Our statutes lay out the procedure for the awarding of lump-sum attorney fees in worker's compensation cases. SDCL 62-7-6 states:

An employer or employee who desires to have any unpaid compensation paid in a lump sum may petition the department of labor asking that the compensation be paid in that manner. If, upon proper notice to interested parties and proper showing before the department, it appears in the best interests of the employee that the compensation be paid in lump sum, the secretary of labor may order the commutation of the compensation to an equivalent lump-sum amount.... If there is an admission or adjudication of permanent total disability, the secretary may order payment of all or part of the unpaid compensation in a lump sum under the following circumstances:

(1) If the employee has exceptional financial need that arose as a result of reduced income due to the injury; or

(2) If necessary to pay the attorney's fees, costs and expenses approved by the department under § 62-7-36.... (Emphasis added.)

Under SDCL 62-7-36, Department must approve fees for legal services. In addition, SDCL 62-7-36 sets the statutory maximums allowed:

. . . . .

(1) Twenty-five percent of the disputed amount arrived at by settlement of the parties;

(2) Thirty percent of the disputed amount awarded by the department of labor after hearing or through appeal to circuit court;

(3) Thirty-five percent of the disputed amount awarded if an appeal is successful to the Supreme Court.

Attorneys' fees and costs may be paid in a lump sum on the present value of the settlement or adjudicated amount.

¶10 We must determine if Employer is an "interested party." An interested party is one that has standing. A party has standing by establishing it is a real party in interest. In order to be a real party in interest, the persons aggrieved must show that they have suffered "the denial of some claim or right of either person or property...." Barnum v. Ewing, 53 S.D. 47, 53, 220 N.W. 135, 138 (1928); see also Tri County Landfill v. Brule County, 535 N.W.2d 760, 763 (S.D.1995); State ex rel. Johnson v. Public Util. Comm'n, 381 N.W.2d 226, 231 (S.D.1986); Keogan v. Bergh, 348 N.W.2d 462, 463 (S.D.1984); In re Application of Northern States Power Co., 328 N.W.2d 852, 855 (S.D.1983).

¶11 SDCL 62-7-6 states that an employer or an employee may file for a lump-sum distribution. It is obvious that the legislature felt that both of these parties were "interested parties." The statute does not limit the application for lump-sum attorney fees to only the employee. It is also important to note that subsection (1) deals with the lump-sum distribution of claimant's award. For the statute to provide notice to Employer under this subsection and not under subsection (2), dealing with attorney fees, is illogical. Had the legislature intended a different result, it could have said so. Statutes are interpreted according to the manifest intent as determined from the statute as a whole, as well as other related enactments. In re Estate of Nelson, 1996 SD 27, p 7, 544 N.W.2d 882, 884.

¶12 Furthermore, there are at least two policy reasons for requiring notice to an Employer. First, as is the scenario in this case, an employee's attorney could "back door" his lump-sum fee by pursuing a settlement that did not include the attorney fee award and then, once the settlement was entered into by the interested parties, the attorney would seek lump-sum distribution of its fee without giving notice to the employer. Here, had Employer known that Attorney was going to seek lump-sum distribution, the settlement might not have been entered. Second, although the fee does come out of the employee's award, it is the employer who is paying the sum to the attorney. We recognize that other jurisdictions have held that notice to an employer is not required for lump-sum distribution of attorney fees. See Goodyear Tire & Rubber Co. v. Foreman, 551...