Texas Employers Ins. Corp. v. Keenom, 01-85-0468-CV

• Decision Date: 13 February 1986
• Docket Number: No. 01-85-0468-CV,01-85-0468-CV
• Citation: 716 S.W.2d 59
• Parties: TEXAS EMPLOYERS INSURANCE CORPORATION, Appellant, v. Joann KEENOM, et al., Appellees. (1st Dist.)
• Court: Texas Court of Appeals

Page 59

716 S.W.2d 59

TEXAS EMPLOYERS INSURANCE CORPORATION, Appellant, v. Joann KEENOM, et al., Appellees.

No. 01-85-0468-CV.

Court of Appeals of Texas Houston (1st Dist.)

Feb. 13, 1986.

Rehearing Denied Aug. 14, 1986.

Otway B. Denny, Jr., Roger Townsend, Scott D. Lassetter, W. Mark Lanier, Fulbright & Jaworski, Houston, for appellant.

David D. Williams, Mark W. Long, Riddle & Williams, Houston, for appellees.

Before EVANS, C.J., and WARREN and JACK SMITH, JJ.

OPINION

WARREN, Justice.

This is an appeal from the award of attorneys' fees in a workers' compensation case. The trial court entered judgment for appellees in accordance with the jury's verdict, which found that Daniel Keenom died in the course and scope of his employment. The appellant does not challenge the jury verdict, but challenges the amount of attorneys' fees awarded in the trial court's final judgment and the court's appointment of an attorney ad litem.

Daniel Keenom died of a heart/lung attack while working for Hydro-Services. Prior to the time the workers' compensation death case was tried, the beneficiaries of Daniel Keenom settled a third-party action against Dow Chemical Company, which arose out of his compensable death, for $45,000. Subsequent to the settlement, this compensation suit was tried before a jury, which rendered a verdict in favor of the appellees. The trial court's judgment awarded the appellees the following:

$30,942.29--which represents the unpaid accrued compensation benefits from the date of death to the date of Judgment at 4% interest compounded annually; and

$1,250.00--for the statutory funeral and burial expense of Daniel Keenom; and

$99.75--due and payable weekly beginning June 24, 1985. (This sum represents the stipulated compensation rate of $133.00 minus 25% attorney's fees).

The trial court awarded Riddle & Williams, P.C., attorneys' fees as follows:

$83,799.57--such sum representing 25% of $335,198.28, which represents the total amount of undiscounted compensation benefits owed to the Plaintiffs after T.E.I.A.'s third party credit has been fully recouped.

Further, the trial court allowed appellant a "credit" against sums otherwise recovered by the appellees in the following amount:

$33,750.00--sum representing the Keenoms' $45,000.00 third party recovery, less a deduction of 25% in recognition of a reasonable attorney's fee to the Keenoms' counsel for obtaining and recouping such credit for T.E.I.A.

Finally, the trial court's judgment awarded an ad litem fee of $5,000 to attorney Vaughn Stewart.

In six points of error, appellant maintains that the trial court erred: (1) in awarding Riddle & Williams, attorneys at law, fees from the credit T.E.I.A. received for the Keenoms' third-party settlement recovery; (2) in awarding four percent interest compounded annually on unpaid accrued benefits, which appellant asserts will never be owed; (3) in awarding attorneys' fees in a lump sum based on the total amount of undiscounted compensation benefits; (4) in awarding attorneys' fees greater than 25% of the claimants' recovery; and, (5) in appointing an unnecessary attorney ad litem, and awarding excessive ad litem fees.

The appellant's first point of error argues that Riddle & Williams, attorneys at law, should not have been awarded attorneys' fees from the credit that appellant received for the appellees' third-party recovery. Appellant relies on Simpson v. Texas Employers Insurance Association, 519 S.W.2d 209, 213 (Tex.Civ.App.--Fort Worth 1975, writ ref'd n.r.e.), which states that article 8307, sec. 6a provides that a carrier seeking subrogation from a subsequent third-party claim has three choices for attorneys: (1) The carrier may agree with the claimant's attorney upon a fee; (2) the carrier may obtain an attorney to actively represent its interests; or (3) the carrier may be ordered to pay a fee to the claimant's attorney. Id. at 213; Tex.Rev.Civ.Stat.Ann. art. 8307, sec. 6a (Vernon Supp.1986). However, appellant argues, without a previously adjudicated workers' compensation claim, the choices enumerated in Simpson, where the third-party action occurred after a settlement with T.E.I.A., and granted in article 8307, sec. 6a, are inapplicable. Simpson, 519 S.W.2d at 213. The appellant further maintains that in a subrogation case, it is not enough to show the attorneys' efforts benefitted another; rather, the attorneys' "efforts must have been undertaken for the person sought to be charged," citing Bashara v. Baptist Memorial Hospital System, 685 S.W.2d 307, 310 (Tex.1985). Under that test, appellant claims the appellees could not claim in the case at bar that the third-party action against Dow Chemical was undertaken for the benefit of appellant.

The appellee argues that had the claimants first settled their workers' compensation case and then made a recovery in the third-party action, which is the typical sequence of events, the claimant's counsel would be entitled to a fee for recouping the carrier's "subrogation interest" out of the third-party recovery, pursuant to art. 8307, sec. 6a. Tex.Rev.Civ.Stat.Ann. art. 8307, sec. 6a (Vernon Supp.1986). Appellee urges that the same result should be reached when, though the sequence of events differ from the typical case, the same efforts by the claimant's counsel generated an economic gain to appellant T.E.I.A. in the form of a "credit" rather than a "subrogation interest."

The appellee distinguishes the facts in the instant case from those in Bashara. That case involved a quantum meruit claim for attorney's fees from sums recovered in payment of a hospital lien. Bashara, 685 S.W.2d at 308. The Texas Supreme Court held that the theory of quantum meruit does not apply where efforts were not undertaken "for the person sought to be charged." Id. at 310. Without proof of the quantum meruit elements, recovery was denied. Id. at 310.

Appellee relies upon McCollum v. Baylor University Medical Center, 697 S.W.2d 22 (Tex.App.--Dallas 1985, no writ). In McCollum, a consolidated appeal was taken from a workers' compensation case and a declaratory judgment. An employee was shot while allegedly in the course and scope of his employment, and treated at Baylor Hospital. The injured employee sued his insurer for workers' compensation benefits, and Baylor intervened for its hospital bill. A judgment for McCollum and Baylor was reversed by the appellate court because McCollum failed to prove his average weekly wage rate. While the compensation case was pending, McCollum sued the third-party tortfeasor, which suit was subsequently settled, and filed a declaratory judgment action against Baylor, alleging he was not liable to the hospital for treatment. Baylor counterclaimed, alleging that both McCollum and a third-party tortfeasor were liable under the Hospital Lien Act. A judgment for McCollum and Baylor on the workers' compensation case was reversed and remanded. On remand, the trial court granted a summary judgment for the insurer in the workers' compensation case and rendered a declaratory judgment holding McCollum and tortfeasor jointly and severally liable for the hospital bill. Id. at 23. The appellate court noted that in the usual course of events, an injured worker tries his compensation suit before he proceeds against any third-party for common law damages. In such a case, the compensation carrier then intervenes in the third-party action, and from the carrier's subrogation recovery, the attorneys for the worker and the carrier are awarded fees based on the benefit accruing to the association as a result of each attorney's services. Id. at 24. The court went on to hold that "even though this case did not follow the usual course, Fidelity [insurer] is still liable under the Act [art. 8307, sec. 6a] for the benefit conferred upon it by McCollum's attorney." Id. at 25. The court restates the rule found in Texas Employers' Insurance Association v. Holmes, 145 Tex. 158, 196 S.W.2d 390, 394 (1946), that the Workers' Compensation Act must be liberally construed. The purpose of the Act is the protection of the employee. McCollum, 697 S.W.2d at 25. The court concluded by saying that the issue of the insurer's liability under the Act must be tried in order to determine if the insurer was benefitted by the settlement and if so, the insurer owed attorney's fees for the services of McCollum's attorney in obtaining a third-party settlement. Id. at 25.

Appellant asserts that the holding in McCollum was erroneous and that the Texas Supreme Court, in Johnson v. Second Injury Fund, 688 S.W.2d 107, 109 (Tex.1985), has held that a right to subrogation may not be implied. The facts in Johnson are distinguishable from the instant case. In Johnson, the issue was whether the Second Injury Fund was subrogated to the rights of the injured plaintiff Johnson in his personal injury suit against a third party. Id. at 107-08. While in the course of his employment, Mr. Johnson suffered an injury that resulted in the loss of vision of his left eye. Because he had previously lost the vision in his right eye, the cumulative effect of the two injuries was total and permanent disablement. Mr. Johnson received benefits from T.E.I.A. and the Second Injury Fund, then sued Texas Industries, Inc. for negligence. T.E.I.A. and the Second Injury Fund intervened, alleging subrogation rights to Johnson's third-party suit. Texas Industries agreed to a settlement with Johnson, which also included an agreement to reimburse T.E.I.A. for benefits already paid out to Johnson, but there was no agreement to settle the Second Injury Fund's claim for subrogation. Id. at 108.

The Johnson case, unlike the instant case, dealt with sources of funding for the Second Injury Fund. In reversing the lower court, the Texas Supreme Court noted that the Second Injury Fund sought to establish a right of subrogation in order to increase the amount of money flowing into the fund. Id. at 108. Contrary to what the court of...