Woodson v. Phillips Petroleum Co.

Decision Date20 February 1985
Docket NumberNo. 15689,15689
Citation1985 NMSC 18,695 P.2d 483,102 N.M. 333
PartiesRosalie WOODSON, Widow of J.O. Woodson, Jr., Deceased, Plaintiff-Appellee, and Andrew Stewart Woodson, Plaintiff-Intervenor-Appellee, v. PHILLIPS PETROLEUM COMPANY and its workmen's compensation carrier, if any, Defendants-Appellants.
CourtNew Mexico Supreme Court
Rodey, Dickason, Sloan, Akin & Robb, Kenneth J. Ferguson, Albuquerque, Kenneth Heady, C.J. Roberts, Bartlesville, Okl., George Terry, Albuquerque, for defendants-appellants
OPINION

FEDERICI, Chief Justice.

The Court of Appeals has certified this workmen's compensation case to this Court pursuant to NMSA 1978, Section 34-5-14(C)(2) (Repl.Pamp.1981), which provides for certification to the Supreme Court of matters that involve issues of "substantial public interest that should be determined by the supreme court." The appeal presents two issues: whether the award by the trial court to one of the two claimants of a lump sum payment, rather than periodic payments, was proper; and whether the attorney fees awarded to the claimants' attorneys are excessive. Certification of this case was prompted because the Court of Appeals felt that there exists some confusion on the status of the law relating to the setting of attorney fees. We discuss (1) the issue of the lump sum payment, and (2) the standards to be applied by the trial courts in fixing the amount of attorney fees to be properly allowed in workmen's compensation cases.

I. LUMP SUM AWARD

The trial court awarded a lump sum payment, rather than periodic payments, to Andrew Woodson, who is the dependent son of the deceased workman and was the plaintiff-intervenor below (plaintiff-intervenor). The defendant-appellant, Phillips Petroleum Company (defendant), challenges the lump sum award, pointing out that lump sum awards in workmen's compensation cases are "the exception rather than the rule." E.g., Boughton v. Western Nuclear, Inc., 99 N.M. 723, 724, 663 P.2d 382, 383 (Ct.App.1983).

The statute which authorizes lump sum awards, NMSA 1978, Section 52-1-30(B), provides that awards may be in the form of a lump sum when it is in "the best interests" of the claimant. The cases make clear, however, that lump sum payments are justified only when "exceptional circumstances" exist. Merrifield v. Auto-Chlor System of Albuquerque, 100 N.M. 263, 264, 669 P.2d 739, 740 (Ct.App.1983). The claimant seeking a lump sum award has the burden of showing that failure to award a lump sum would create a "manifest hardship where relief is essential to (1) protect the claimant ... from want or privation; (2) facilitate the production of income for the claimant; or (3) help the claimant in a rehabilitation program." Id. (Emphasis in original.) See also Padilla v. Frito-Lay, Inc., 97 N.M. 354, 639 P.2d 1208 (Ct.App.1981). Regarding the second of these criteria, defendant correctly points out that it is not enough that a lump sum award will allow a claimant to maximize return on investment. If that were a justification for lump summing it would apply in almost every case, and the exception would swallow the rule. Merrifield.

In the instant case, however, it is clear that the trial court awarded a lump sum payment not only for investment purposes, but also to insure that plaintiff-intervenor could meet exceptional medical expenses. The evidence shows that plaintiff-intervenor suffers from severe mental illness, and will require medication and psychiatric care for the indefinite future. Plaintiff-intervenor has been hospitalized in the past and will probably require hospitalization, and possibly institutionalization, in the future. "[A] precise enumeration of what factual ingredients constitute special circumstances is impossible"; the propriety of a lump sum award in each case "stands or falls on its own merits." Codling v. Aztec Well Servicing Co., 89 N.M. 213, 216, 549 P.2d 628, 631 (Ct.App.1976). In the instant case, by the very nature of plaintiff-intervenor's illness his future expenses defy precise determination, but his medical situation can fairly be termed "extraordinary." Merrifield, 100 N.M. at 264, 669 P.2d at 740. The trial court acted within its discretion in awarding a lump sum to plaintiff-intervenor. The trial court's judgment is affirmed on this issue.

II. ATTORNEY FEES

The trial court awarded $8,500 in attorney fees to plaintiff-intervenor and $9,500 in attorney fees to the plaintiff, Rosalie Woodson (plaintiff), who is the widow of the deceased workman. Plaintiff and plaintiff-intervenor were represented by separate counsel. Defendant argues that these attorney fees are excessive, especially since defendant, prior to trial, admitted liability for the maximum amount of compensation benefits, so that the only issues contested at trial were the propriety of a lump sum payment to plaintiff-intervenor and the attorney fees themselves. Defendant also argues that some of the trial court's findings lack evidentiary support, and that the trial court failed to make any findings at all on other issues which the trial court must consider in setting attorney fees. See Fryar v. Johnsen, 93 N.M. 485, 601 P.2d 718 (1979) (hereinafter referred to as Fryar I ); Jennings v. Gabaldon, 97 N.M. 416, 640 P.2d 522 (Ct.App.1982).

The statute which authorizes the practice of awarding attorney fees to workmen's compensation claimants, NMSA 1978, Section 52-1-54, provides that the court shall fix the amount of the fee, and in determining a reasonable fee the court must consider certain factors. The portions of Section 52-1-54 which are applicable to the case before us provide as follows:

C. in all cases where the jurisdiction of the court is invoked to approve a settlement of a compensation claim under the Workmen's Compensation Act and the claimant is represented by an attorney, the total amount paid or to be paid by the employer in settlement of the claim shall be stated in the settlement papers and the court shall determine and fix a reasonable fee for claimant's attorney, taking into account any sum or sums previously paid and the fee so fixed by the court shall be taxed as a part of the costs of such proceeding against the employer and shall be the limit of the fee received or to be received by said attorney in connection with the claim;

D. in all cases where compensation to which any person shall be entitled under the provisions of the Workmen's Compensation Act shall be refused and the claimant shall thereafter collect compensation through court proceedings in an amount in excess of the amount offered in writing by an employer thirty days or more prior to the trial by the court of the cause, then the compensation to be paid the attorney for the claimant shall be fixed by the court trying the same or the supreme court upon appeal in such amount as the court may deem reasonable and proper and when so fixed and allowed by the court shall be paid by the employer in addition to the compensation allowed the claimant under the provisions of the Workmen's Compensation Act; provided, however, that the trial court in determining and fixing a reasonable fee must take into consideration:

(1) the sum, if any, offered by the employer:

(a) before the workman's attorney was employed; and

(b) after the attorney's employment but before court proceedings were commenced; and

(c) in writing thirty days or more prior to the trial by the court of the cause; and

(2) the present value of the award made in the workman's favor; * * *

In an effort to provide trial courts with "more definitive guidelines" to determine reasonable attorney fees, this Court in Fryar I supplemented these statutorily imposed considerations with several additional considerations, which have become known as the "Fryar factors":

[I]n addition to the statutory requirements, the following factors are subject to consideration: the chilling effect of miserly fees upon the ability of an injured workman to obtain adequate representation; the time and effort expended by the attorney; the extent to which the issues were contested; the novelty and complexity of the issues involved; the fees normally charged in the locality for similar legal services; the ability, experience, skill and reputation of the attorney; the relative success of the workman in the court proceeding; the amount involved; and the rate of inflation.

93 N.M. at 488, 601 P.2d at 721.

It is now clear, however, that notwithstanding any additional guidance provided in Fryar I, that case also caused some confusion about the standards to be applied, and this has encouraged additional litigation over attorney fees in workmen's compensation cases. This has contributed to the present situation in which hearings on attorney fees sometimes last longer than hearings on the workmen's benefits, and a substantial number of appeals are being heard which deal solely with the issue of attorney fees. This increased litigation also is defeating one of our main purposes in attempting to fix attorney fees at a reasonable level, which is to avoid excessive legal costs and thereby avoid unduly burdening employers and their insurers. See Fryar I, 93 N.M. at 486, 601 P.2d at 719.

In retrospect, it appears that one problem originated not in Fryar I itself as much as in the interpretation placed upon Fryar I in Johnsen v. Fryar, 96 N.M. 323, 630 P.2d 275 (Ct.App.1980), cert. quashed, 96 N.M. 543, 632 P.2d 1181 (1981) (Fryar II ). In Fryar II, the Court of Appeals expressly prohibited trial courts from basing their award of attorney fees on a percentage of the workman's recovery. 96 N.M. at 328, 630 P.2d at 280. The trial court in Fryar II had taken judicial notice of a custom of awarding an attorney fee of 20% of the workman's recovery, in cases which were tried. The Court of Appeals stated that such a custom is "contrary to law. ...

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