Wight v. Hughes Livestock Co., Inc.

• Decision Date: 16 May 1983
• Docket Number: No. 82-61,82-61
• Citation: 204 Mont. 98,664 P.2d 303,40 St.Rep. 696
• Parties: Gene WIGHT, Claimant and Appellant, v. HUGHES LIVESTOCK COMPANY, INC., Employer, and Mountain West Farm Bureau Mutual Insurance Company, Defendant and Respondent.
• Court: Montana Supreme Court

Page 303

664 P.2d 303

204 Mont. 98

Gene WIGHT, Claimant and Appellant, v. HUGHES LIVESTOCK COMPANY, INC., Employer, and Mountain West Farm Bureau Mutual Insurance Company,

Defendant and Respondent.

No. 82-61.

Supreme Court of Montana.

Submitted Feb. 24, 1983.

Decided May 16, 1983.

R.V. Bottomly, argued, Great Falls, for claimant and appellant.

Robert L. Johnson, argued, Lewistown, for defendant and respondent.

Milodragovich, Dale & Dye, Harold Dye, argued, Missoula, Robert Kelleher, Billings, for amicus curiae.

D. Patrick McKittrick, argued, Great Falls, for Guardian Ad Litem.

SHEEHY, Justice.

This appeal presents the issue of the weight to be given by the Workers' Compensation judge to contingent fee contracts between successful claimants and their attorneys, where the Workers' Compensation judge fixes attorneys fees under section 39-71-611, MCA, and related statutes.

The underlying cause was before us on appeal in Wight v. Hughes Livestock Company, Inc. et al. (1981), Mont., 634 P.2d 1189, 38 St.Rep. 1632. We upheld the right of Wight to recover compensation benefits, deleted a 20 percent statutory penalty that the Workers' Compensation Court had levied, and remanded the cause to the Workers' Compensation judge for the purpose of fixing attorneys fees to be awarded to Wight.

In May 1979, Wight had entered into a contingent fee agreement with his attorney which provided that Wight would pay 25 percent of all monies obtained on his claim by way of settlement and/or judgment. After the successful appeal to this Court, Wight and his attorney entered into a second contingent fee agreement whereby Wight agreed to pay 40 percent of any compensation received.

On November 11, 1981, the claimant filed an amended petition before the Workers' Compensation Court to fix attorneys fees at $35,916.74, that figure representing 40 percent of Wight's readjusted lifetime benefits.

Farm Bureau objected to the petition respecting attorneys fees, contending that the petition did not contain information as to the amount of time that was spent by claimant's attorney in prosecuting his client's cause, and that the attorneys fees in any event should be based on past-due benefits as opposed to lifetime benefits.

Claimant responded by recomputing his attorneys fees to claim $33,022.49 and noted that both of his contingent fee agreements had been filed with the Workers' Compensation Division pursuant to section 39-71-613(2), MCA, and that the agreements which were in accordance with the Division's rules had been approved by the Division.

On December 14, 1981, the Workers' Compensation judge issued an order directing the claimant to file further information regarding attorneys fees and costs, specifically requesting a "detailed statement specifying the number of hours compiled in pursuing the above entitled matter and the exact amount of costs incurred." Claimant's attorney responded stating, "counsel is engaged in 100 percent of legal work and litigation on a contingent fee basis and keeps no records concerning hours on any case and has no way to reconstruct on a fair and reasonable basis the hours involved in this extended litigation." Claimant's attorney further responded that he was relying on his 40 percent contingency fee agreement as a fair and reasonable arrangement, and requested the court to set a hearing if the court felt the evidence was insufficient to determine the fee.

On December 24, 1981, the Workers' Compensation judge entered an order awarding attorneys fees, part of which reads:

"Claimant's counsel is entitled to attorney fees in the amount of $8,500.00. This amount is based on two factors: the amount of effort required in taking this case to trial and defending it on appeal; and the fact that claimant's counsel is in a difficult position to collect from his client under the contingent fee contract. Claimant's counsel argues that this court is obligated to award attorney fees based on his contingent fee contract and on conclusion of law no. 4, which states: 'The court will fix and establish reasonable attorney fees and costs based in part upon the contract between the claimant and his attorney.' This conclusion does not state that this Court will award the entire contingent fee as an attorney fee, but that the fee will be based in part on the contingent fee contract. The $8,500.00 amount is awarded with the contingent fee in mind.

"...

"The usual method employed by this court in determining a reasonable fee is to review the number of hours spent in a case as submitted by claimant's counsel.... [T]his court ordered claimant's counsel to submit a statement specifying his hours spent on the case and the amount of costs incurred. Claimant's counsel respectfully declined to submit hours stating that all of his legal business is done on a contingent fee basis and that he does not keep time records. If that is the case, claimant's counsel must rely on the discretion of this court to award him a reasonable fee."

On January 12, 1982, claimant filed for a rehearing on attorneys fees which was by the Workers' Compensation Court denied. Thereafter this appeal was taken on the issue of attorneys fees.

In spite of the reduced amount of attorneys fees awarded, the Workers' Compensation Court nevertheless found the contingent fee agreement to be reasonable, but that the brunt of the attorneys fees should be borne by the claimant. The Workers' Compensation Court said:

"The court would like to add that the reasonableness of the contingent fee agreement is not disputed. The question before the court was what is a reasonable fee to be assessed against the insurer. The insurer is not a party to the contingent fee agreement and is not bound by its terms. In addition, when an attorney fee is awarded by the court, that award is not intended to render invalid the contingent fee agreement. The court does expect that an attorney fee award will be applied to reduce any contingent fee liability the claimant may have incurred by reason of his contingent fee agreement. The holding in Holton v. Stoltze Land and Lumber Company, 38 St.Rep. 1835, does not require this court to assess against the insurer the entire contingent fee liability."

Thus the appeal from the Workers' Compensation order fixing attorneys fees in this case places before us two important issues: (1) whether a successful claimant for Workers' Compensation benefits should be required under the statutes to pay any part of his incurred attorneys fees, and (2) how does a claimant's contingent fee contract with his attorney affect the discretion of the Workers' Compensation judge in fixing attorneys fees to be awarded to the claimant?

The Net Award Concept

Three statutes bear on the right of a successful claimant to recover attorneys fees against the insurer or employer. They are as follows:

Section 39-71-611, MCA:

"In the event an insurer denies liability for a claim for compensation or terminates compensation benefits and the claim is later adjudged compensable by the workers' compensation judge or on appeal, the insurer shall pay reasonable costs and attorneys' fees as established by the workers' compensation judge."

Section 39-71-612, MCA:

"(1) If an employer or insurer pays or tenders payment of compensation under chapter 71 or 72 of this title, but controversy relates to the amount of compensation due and the settlement or award is greater than the amount paid or tendered by the employer or insurer, a reasonable attorney's fee as established by the division or the workers' compensation judge if the case has gone to a hearing, based solely upon the difference between the amount settled for or awarded and the amount tendered or paid, may be awarded in addition to the amount of compensation.

"(2) When an attorney's fee is awarded against an employer or insurer under this section there may be further assessed against the employer or insurer reasonable costs, fees, and mileage for necessary witnesses attending a hearing on the claimant's behalf. Both the necessity for the witness and the reasonableness of the fees must be approved by the division or the workers' compensation judge."

Section 39-71-613, MCA:

"(1) When an attorney represents or acts on behalf of a claimant or any other party on any workers' compensation claim, the attorney shall submit to the division a contract of employment stating specifically the terms of the fee arrangement between the attorney and the claimant.

"(2) The administrator of the division may regulate the amount of the attorney's fee in any workers' compensation case. In regulating the amount of the fee, the administrator shall consider the time the attorney was required to spend on the case, the complexity of the case, and any other relevant matter the administrator may consider appropriate.

"(3) If an attorney violates a provision of this section, a rule adopted under this section, or an order fixing attorney's fee under this section, he shall forfeit the right to any fee which he may have collected or been entitled to collect."

It will be seen from the foregoing statutes, that section 39-71-611, MCA, applies where the insurer denies completely the Workers' Compensation benefits. Section 39-71-612, MCA, applies where there has been a partial payment or partial tender of compensation to the claimant. Section 39-71-613, MCA, gives the Division of Workers' Compensation the power to require the submission to it of attorneys' employment contracts; the administrative division is given the power to regulate the amount of the attorneys fees "in any Workers' Compensation case." Section 39-71-611, MCA, gives the Workers' Compensation judge the exclusive power to fix attorneys fees; section 39-71-612, gives the Division or the Workers' Compensation judge the power to set fees.

The "net recovery" concept was first discussed by this Court in Myers v. 4-B's Restaurant, Inc. (1977), 172 Mont. 159, 561 P.2d 1331. At issue in Myers was...