How does an insurer know when to challenge an award of attorney fees in a Minnesota workers’ compensation action? The answer would usually involve looking to the appropriate statute, as workers’ compensation is a creature of the legislature. In the case of fees, however, it is often court interpretation of the statute that provides guidance. As most who are familiar with our system know, $26,000 (as of August 1, 2014) is the cap on statutory attorney fees – with the possibility of excess. What happens when the fee is $26,000 or less? Can a defendant successfully challenge the award based on the same factors the court would use to determine if we should break through the cap? The Minnesota Supreme Court recently decided that matter in the negative in David v. Bartel Enterprises (Nitro Green), No. A13-2141 (Minn. Nov. 26, 2014).
I will give a little background before diving into the Court’s opinion. In 1999, the Minnesota Supreme Court decided a case called Irwin v. Surdyk’s Liquor, 599 N.W.2d 132 (Minn. 1999). In the Irwin decision, the Court held portions of Minnesota Statute § 176.081, specifically with regard to the maximum attorney fees awardable, unconstitutional because it did not allow a court the power to review an award. Irwin gave us a series of factors that would allow an award to push past the maximum. These factors include: “the statutory guidelines,…the amount involved, the time and expense necessary to prepare for trial, the responsibility assumed by counsel, the experience of counsel, the difficulties of the issues, the nature of the proof involved, and the results obtained.” Until recently, these factors could arguably have applied to an award fallingbelow the maximum fee as well as those in excess.
In David, the plaintiff injured his back in a work-related incident and incurred medical expenses. Bartel Enterprises and its insurer, SFM Mutual Insurance Company, agreed to pay $233,054.50 to settle all of David’s medical bills. David’s attorney sought an award of contingent attorney fees in the amount of $46,810.90, thereby disregarding the upper limit set by the statutory formula. The compensation judge set the award at the then statutory maximum of $13,000. Nevertheless the employer and insurer demanded that all fees be evaluated by the Irwin factors even though the total awarded was within the maximum set by statute.
The Minnesota Supreme Court opined that a fee could be challenged using the Iriwin factors, but only if it was above the statutory maximum. The primary issue before the court in David was whether a fee, which followed the statutory guidelines only, was challengeable based on the other factors listed above. The Court held that only a fee that was determined to bebeyond the statutory maximum could be challenged. It based this decision upon the principle of “comity,” a term denoting respect and deference, in this case as regards the power of the legislature. As a result, the Court declared that so long as the fee was calculated by the statutory guidelines, it was “presumptively reasonable.” Today, after August 1, 2014, the increased statutory maximum of 20 percent of the first $130,000 of compensation awarded to the employee is presumed reasonable.
Is there any recourse to challenge a fee that seems un-reasonable and yet falls inside the statutory maximum? The answer is a moderately firm “rarely.” According to the Court in David, the other Irwin factors can come into play under “exceptional circumstances.” What does this mean? The Court gives us some guidance in a footnote in the opinion, wherein they suggest that such circumstances are when an award is “arbitrary and unwarranted by the evidence.” As the Court’s opinion otherwise leads us to believe, however, so long as the award is consistent with the statute, it is safe.
Will it ever change? The only alternative to the Court’s decision is to change the framework by statute or challenge the meaning of “exceptional circumstances” by litigating the issue. The citations provided by the Court refer to cases outside of the workers’ compensation statutory constellation and thus arguments can be made, but only time will tell.
If you have any questions about attorney fees, awards, or any other workers’ compensation matter, please feel free to call or e-mail any one of our many experienced attorneys – www.hansendordell.com / 651-482-8900.