Summers v. Command Systems, Inc.

• Decision Date: 29 November 1993
• Citation: 867 S.W.2d 312
• Parties: Billy Roger SUMMERS and Thelma L. Summers, Plaintiffs-Appellants, v. COMMAND SYSTEMS, INC., Defendant, and Fireman's Fund Insurance Company, Intervenor-Plaintiff-Appellee.
• Court: Tennessee Supreme Court

Page 312

867 S.W.2d 312

Billy Roger SUMMERS and Thelma L. Summers, Plaintiffs-Appellants, v. COMMAND SYSTEMS, INC., Defendant and Fireman's Fund Insurance Company, Intervenor-Plaintiff-Appellee.

Supreme Court of Tennessee at Jackson.

Nov. 29, 1993.

James R. Omer, Terrance E. McNabb, Nashville, for plaintiffs-appellants.

Lewis L. Cobb, Jackson, for intervenor-plaintiff-appellee.

OPINION

REID, Chief Justice.

This case presents for review the liability of the employer (and its workers' compensation insurer) for attorney's fees and costs incurred in obtaining a recovery against a third party tortfeasor.

Billy Roger Summers was injured in the scope and course of his employment with MTD Products, Inc. by a truck owned by Command Systems, Inc. MTD's workers' compensation insurance carrier, Fireman's Fund Insurance Company, paid $35,814.73 in benefits to Summers.

Summers sued Command Systems for personal injuries sustained in the accident. Summers was represented in the tort action against Command Systems by attorney James R. Omer, pursuant to an employment contract which provided that Omer would receive one-third of any amounts recovered plus litigation expenses paid by Omer. MTD and Fireman's Fund intervened in that suit, asserting a subrogation claim and a lien on any recovery for the amount of workers' compensation benefits paid to Summers. The intervening petition was filed by attorney William L. Guy, who did not actively participate in the preparation and trial of the suit against Command Systems.

Summers obtained a judgment against Command Systems for $175,000, which was paid into court. Summers' counsel asserted a claim for attorney's fees for one-third of the entire recovery. MTD and Fireman's Fund contended that Summers' attorney was not entitled to be paid any fee from the funds recovered in satisfaction of the subrogation claim. The trial court sustained MTD and Fireman's Fund's position, and Summers has appealed.

Resolution of the issue presented in this case depends upon the interpretation of T.C.A. § 50-6-112 (1991). As will be discussed below, the Court has not been altogether consistent in its interpretation of the statute, which provides:

(a) When the injury or death for which compensation is payable under the Workers' Compensation Law was caused under circumstances creating a legal liability against some person other than the employer to pay damages, the injured worker, or such injured worker's dependents, shall have the right to take compensation under such law, and such injured worker, or those to whom such injured worker's right of action survives at law, may pursue such injured worker's or their remedy by proper action in a court of competent jurisdiction against such other person.

(b) In the event of a recovery from such other person by the worker, or those to whom such worker's right of action survives, by judgment, settlement or otherwise, the attorney representing such injured worker, or those to whom such injured worker's right of action survives, and effecting the recovery, shall be entitled to a reasonable fee for the attorney's services, and the attorney shall have a first lien therefor against the recovery; provided, that if the employer has engaged other counsel to represent the employer in effecting recovery against such other person, then a court of competent jurisdiction shall, upon application, apportion the reasonable fee between the attorney for the worker and the attorney for the employer, in proportion to the services rendered.

(c)(1) In the event of such recovery against such third person by the worker, or by those to whom such worker's right of action survives, by judgment, settlement or otherwise, and the employer's maximum liability for workers' compensation under this chapter has been fully or partially paid and discharged, the employer shall have a subrogation lien therefor against such recovery, and the employer may intervene in any action to protect and enforce such lien.

(2) In the event the net recovery by the worker, or by those to whom such worker's right of action survives, exceeds the amount paid by the employer, and the employer has not, at the time, paid and discharged the employer's full maximum liability for workers' compensation under this chapter, the employer shall be entitled to a credit on the employer's future liability, as it accrues, to the extent the net recovery collected exceeds the amount paid by the employer.

(3) In the event the worker, or those to whom such worker's right of action survives, effects a recovery, and collection thereof, from such other person, by judgment, settlement or otherwise, without intervention by the employer, the employer shall nevertheless, be entitled to a credit on the employer's future liability for workers' compensation, as it accrues under this chapter, to the extent of the net recovery.

The meaning of the statute appears to be plain, except for the determination of credit due the employer for benefits paid to or due the employee. The statute provides that any injured worker who receives workers' compensation benefits from the employer may pursue an action for damages against a third party tortfeasor. T.C.A. § 50-6-112(a). Upon the payment of benefits to the employee, the employer has a "subrogation lien" against any recovery from the third party and may intervene in the employee's suit to protect and enforce the lien. T.C.A. § 50-6-112(c)(1).

The statute also provides that the attorney representing the injured worker "shall be entitled to a reasonable fee for the attorney's services" and "shall have a first lien therefor against the recovery," but if the employer has engaged other counsel to represent its interest in the suit against the third party, the court "shall, upon application, apportion the reasonable fee between the attorney for the worker and the attorney for the employer, in proportion to the services rendered." T.C.A. § 50-6-112(b).

The apparent inconsistencies in the Court's prior decisions regarding the division of the balance of the award between the employee and the employer involve the meaning of the terms "net recovery" and "full maximum liability" found in subsections (c)(2) and (3). The trial court based its dismissal of Summers' claim that attorneys' fees and expenses should be charged against the employer's recovery as well as the employee's recovery, on Royal Indem. Co. v. Schmid, 225 Tenn. 610, 474 S.W.2d 647 (1971), and Cross v. Pan Am World Services, Inc., 749 S.W.2d 29 (Tenn.1987). In this Court, Fireman's Fund relies upon those cases and undertakes to distinguish Aetna Casualty & Sur. Co. v. Gilreath, 625 S.W.2d 269 (Tenn.1981), which is relied upon by Summers.

In Royal Indem. Co. v. Schmid, the employer had paid periodic benefits to the deceased employee's widow and dependents prior to their recovery against the third party tortfeasor in an amount which exceeded the sum of past and future workers' compensation benefits. The employer did not participate in the prosecution of the third party suit. Upon receipt of the recovery in the third party action, the employee tendered to the employer's workers' compensation insurance carrier the amount of benefits it had paid, less a pro rata amount of attorney's fees and...