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IN THE
WORKERS’ COMPENSATION COURT OF THE STATE OF MONTANA
2003
MTWCC 66
WCC
No. 2000-0201
ANN
BUSTELL
Petitioner
vs.
AIG
CLAIMS SERVICE, INCORPORATED and
THE INSURANCE COMPANY OF PENNSYLVANIA
Respondents/Insurers.
DECISION AND
JUDGMENT FOR ATTORNEY FEES
AFFIRMED
12/21/04 in
Bustell v. AIG Claims Service Inc.,
2004 MT 362 (No. 04-124)
Summary: The
Court previously held that claimant’s attorney is entitled to attorney
fees. Claimant’s attorney requested that the fee award be based on his
contingent fee agreement with the claimant or for 477 hours worked at
a rate of $225 an hour.
Held: The
Court is bound by the attorney fee regulations of the Department of Labor
and Industry. § 39-71-714(2), MCA. While those regulations provide
for a standard hourly fee of $75 an hour, they also allow the Court to
deviate from that amount if ten factors set out in the rule favor such
deviation. In this case the factors clearly cut in favor of an increased
award of $140 an hour for the 477 hours claimed by the claimant’s attorney.
Topics:
Attorney Fees: Amount.
Attorney fees which can be awarded by the Court must be based on the
hours worked by the claimant’s attorney at either his usual and customary
hourly rate or the rate established by the Department of Labor and Industry,
whichever is less. § 39-71-614(2), MCA (1999).
Attorney Fees: Amount.
While the attorney fee regulation of the Department of Labor and Industry,
ARM 24.29.3802, was expressly enacted under section 39-71-613, MCA (1999),
subsection (2), of that section generally authorizes it to establish
attorney fees. The provision in section 39-71-614(2), MCA (1999), limiting
the Court to the Department’s schedule when awarding attorney fees,
is mere recognition of the Department’s authority under section 39-71-613,
MCA. The claimant’s attorney therefore had fair notice of the limitation
and was not denied due process of law by application of the fee schedule.
Attorney Fees: Amount.
While the Department of Labor and Industry rule regarding attorney fees
initially fixes a maximum fee of $75 an hour, the rule also allows for
an increase of the hourly fee based upon consideration of ten factors.
Giving consideration to those factors in this case, the Court awards
the claimant’s attorney fees at a $140 hourly rate, which it finds is
a reasonable rate for his services.
Attorney Fees: Amount.
Attorney fees awarded against the insurer must be based on documented
hours of the attorney. No fees can be awarded where an attorney does
not keep track of his or her time.
Constitutional Law:
Due Process. While the attorney fee regulation of the Department
of Labor and Industry, ARM 24.29.3802, was expressly enacted under section
39-71-613, MCA (1999), subsection (2) of that section generally authorizes
it to establish attorney fees. The provision in section 39-71-614(2),
MCA (1999), limiting the Court to the Department’s schedule when awarding
attorney fees is mere recognition of the Department’s authority under
section 39-71-613, MCA. The claimant’s attorney therefore had fair notice
of the limitation and was not denied due process of law by application
of the fee schedule.
Constitutions, Statutes,
Rules, and Regulations: Montana Code Annotated: 39-71-614, MCA (1999).
Attorney fees which can be awarded by the Court must be based on the
hours worked by the claimant’s attorney and either his usual and customary
hourly rate or the rate established by the Department of Labor and Industry,
whichever is less. § 39-71-614(2), MCA (1999).
Constitutions, Statutes,
Rules, and Regulations: Montana Code Annotated: 39-71-614, MCA (1999).
While the attorney fee regulation of the Department of Labor and Industry,
ARM 24.29.3802, was expressly enacted under section 39-71-613, MCA (1999),
subsection (2) of that section generally authorizes it to establish
attorney fees. The provision in section 39-71-614(2), MCA (1999), limiting
the Court to the Department’s schedule when awarding attorney fees is
mere recognition of the Department’s authority under section 39-71-613,
MCA.
Constitutions, Statutes,
Rules, and Regulations: Montana Code Annotated: 39-71-613, MCA (1999).
While the attorney fee regulation of the Department of Labor and Industry,
ARM 24.29.3802, was expressly enacted under section 39-71-613, MCA (1999),
subsection (2) of that section generally authorizes it to establish
attorney fees. The provision in section 39-71-614(2), MCA (1999), limiting
the Court to the Department’s schedule when awarding attorney fees is
mere recognition of the Department’s authority under section 39-71-613,
MCA.
¶1 This Court previously
determined that claimant’s attorney, Mr. Paul E. Toennis (Toennis), is
entitled to attorney fees from the respondent/insurer. The matter now
before the Court is the amount of attorney fees to be awarded. A hearing
regarding attorney fees was held in Billings on May 13, 2003, and the
matter is now ready for decision. Findings of fact as pertain to attorney
fees are contained in the following discussion and are not separately
enumerated.
Decision
¶2 Toennis initially seeks
fees based on his contingent fee agreement with the claimant. If the Court
rejects that as a basis for fees, he then seeks fees on an hourly basis,
$225 an hour for his own time and $135 an hour for the time of his associate,
Ingrid Gustafson (Gustafson). Toennis presented an accounting of his time.
That accounting was kept contemporaneously with his work and shows 477.1
hours of work. Gustafson did not keep her time but Toennis estimates she
spent 50 hours of her time working on the case.
¶3 Respondent urges that
Toennis should be limited to $70 an hour. It does not contest 310.6 of
hours of his time but disputes the remaining 166.5 hours. It also disputes
the fees claimed for Gustafson.
¶4 The fee dispute is
governed by statute. Section 39-71-614, MCA (1999), fixes the amount of
fees that may be awarded against an insurer, providing:
39-71-614. Calculation of
attorney fees -- limitation. (1) The amount of an attorney's fee assessed
against an insurer under 39-71-611 or 39-71-612 must be based exclusively
on the time spent by the attorney in representing the claimant on the
issues brought to hearing. The attorney must document the time spent,
but the judge is not bound by the documentation submitted.
(2) The judge shall determine a reasonable attorney fee and assess costs.
The hourly rate applied to the time spent must be based on the attorney's
customary and current hourly rate for legal work performed in this state,
subject to a maximum established by the department.
(3) This section does not restrict a claimant and an attorney from entering
into a contingency fee arrangement under which the attorney receives
a percentage of the amount of compensation payments received by the
claimant because of the efforts of the attorney. However, an amount
equal to any fee and costs assessed against an insurer under 39-71-611
or 39-71-612 and this section must be deducted from the fee an attorney
is entitled to from the claimant under a contingency fee arrangement.
The statute is plain and clear
on its face. The Court cannot add to it, ignore portions of it, or modify
it. §1-2-101, MCA (“In the construction of a statute, the office
of the judge is simply to ascertain and declare what is in terms or in
substance contained therein, not to insert what has been omitted or to
omit what has been inserted.”).
¶5 Initially, the statute
precludes any award based on Toennis’ contingent fee with the claimant.
While he may enter into a contingency fee contract with the claimant,
the fees which may be awarded against the insurer must be based on an
hourly fee basis. Toennis’ request for a contingency fee award is therefore
denied.
¶6 The statute also requires
the attorney to “document the time spent” on the case. By necessary implication,
fees cannot be awarded with respect to undocumented time. Since Gustafson
did not document her time, the request for fees with respect to her time
must be disallowed.
¶7 Toennis documented
477.1 hours of work. As set forth in section 39-71-614(1), MCA, I am not
bound by that documentation. Although the subsection sets forth no standards
for deviating from the documentation, a reasonableness standard is implied.
Thus, the Court must review the hours to determine if they are reasonably
related to the case and if they are reasonable in relation to the work
performed. Attorney fees must be limited to work reasonably connected
to the case. Having reviewed Toennis’ itemization of hours and his testimony
at the attorney fee hearing, I find that all 477.1 hours were reasonably
connected to the claimant’s case and were reasonable with respect to the
actual work performed. He is therefore entitled to fees for those 477.1
hours of work.
¶8 The final question
is the hourly rate for Toennis’ time. He urges $225 an hour. That figure
is not a rate he charges clients as all his work is on a contingent fee
basis. Rather, it is the amount of his contingency earnings in 2001 divided
by the number of hours he worked that year. That figure does not represent
a “customary and current hourly rate for legal work performed in this
state.” It is also a volatile figure which could dramatically change year-to-year
based on his recoveries for his clients. Most importantly, it exceeds
the maximum amount prescribed by the Department of Labor and Industry
(Department).
¶9 A maximum fee of $75
an hour is prescribed by the Department in Rule 24.29.3802, which provides
in relevant part:
24.29.3802 ATTORNEY
FEE REGULATION (1) This rule is promulgated under the authority
of 39-71-20339-71-203 and 39-71-61339-71-613, MCA, to implement regulation
of the fees charged to claimants by attorneys in workers' compensation
cases as provided in 39-71-61339-71-613, MCA.
(2) An attorney representing
a claimant on a workers' compensation claim shall submit to the division
within thirty days of undertaking representation of the claimant, in
accordance with 39-71-61339-71-613, MCA, on forms supplied by the division,
a contract of employment stating specifically the terms of the fee arrangement.
An attorney substituting for another attorney previously representing
a claimant must submit a new contract conforming with this rule within
thirty days of undertaking representation of the claimant. The contract
of employment shall be signed by the claimant and the attorney, and
must be approved by the administrator of the division of workers' compensation
or his designee. The administrator or his designee shall return the
contract to the attorney along with a notification that the contract
ham been approved or disapproved.
(3) Except as provided in
subsection (7), an attorney representing a claimant on a workers' compensation
claim who plans to utilize a contingent percentage fee arrangement to
establish the fee with the claimant, may not charge a fee above the
following amounts:
(a) For cases that have
been settled without an order of the workers' compensation judge or
the supreme court, twenty percent (20%) of the amount of compensation
payments claimant receives due to the efforts of the attorney.
(b) For cases that go to
a hearing before the workers' compensation judge or the supreme court,
twenty-five percent (25%) of the amount of additional compensation payments
the claimant receives from an order of the workers' compensation judge
or the supreme court due to the efforts of the attorney.
(4) The fee schedule set
forth in subsection (3) does not preclude the use of other attorney
fee arrangements, such as the use of a fee system based on time at a
reasonable hourly rate not exceeding $75.00 per hour, but the total
fee charged may not exceed the schedule set forth in subsection (3)
except as provided in subsection (7). When such fee arrangement is utilized,
the contract of employment shall specifically set forth the fee arrangement,
such as the amount charged per hour.
. . . .
(7) For good cause shown, the division may approve a variance providing
for fees in excess of the guidelines of fees as set forth in subsections
(3) and (4).
(a) To obtain approval of
a variance, an attorney has the burden of providing clear and convincing
evidence of entitlement to a greater fee by documenting the following
factors in regard to the specific claimant and the specific case:
(i) The anticipated time
and labor required to perform the legal service properly.
(ii) The novelty and difficulty of legal issues involved in the matter.
(iii) The fees customarily charged for similar legal services.
(iv) The possible total recovery if successful.
(v) The time limitations imposed by the client or circumstances of the
case.
(vi) The nature and length of the attorney-client relationship.
(vii) The experience, skill and reputation of the attorney.
(viii) The ability of the client to pay for the legal services rendered.
(ix) The risk of no recovery.
(x) The market value of the lawyer's services at the time and place
involved.
(b) If a variance requested
under (7) (a) is not approved, an attorney may request that the administrator
or his designee review the matter and issue his order of determination
pursuant to procedures set forth in ARM. [Emphasis added.]
¶10 Toennis argues that
the $75 an hour limitation does not apply because the rule was expressly
promulgated under section 39-71-613, MCA, not section 39-71-614, MCA.
He further argues that if the $75 limit applies he is deprived of due
process because the rule does not provide him notice of the limitation.
That argument is in turn based on the fact that the rule was expressly
promulgated under section 39-71-613, MCA, and Toennis’ claim that he lacked
notice of the applicability of the limit under section 39-71-614, MCA.
I am unpersuaded by the arguments.
¶11 Section 39-71-614(2),
MCA, expressly provides that the attorney fees awarded by the Court are
subject to an hourly “maximum established by the department.” While the
authority cited by the Department as authorizing it to establish such
maximum was section 39-71-613, MCA, its authority under that section is
broad. Section 39-71-613(2), MCA, provides in relevant part, “(2) The
department may regulate the amount of the attorney fees in any workers'
compensation case.” Thus, section 39-71-614(2), MCA, merely confirms what
is already provided in section 39-71-613(2), MCA, to wit: the Department,
not the Court, has the authority to regulate attorney fees in workers’
compensation cases. Thus, the Department’s exercise of its authority under
section 39-71-613, MCA, was sufficient for purposes of section 39-71-614(2),
MCA, and provided Toennis with adequate notice under the latter section.
Since there was adequate notice, Toennis’ due process argument fails for
lack of a predicate, the predicate being a lack of notice.
¶12 As set forth in subsection
(4), the maximum allowable hourly fee under the rule is $75 an hour, however,
ARM 24.29.3802(7) expressly allows the Department to deviate from that
amount under unusual circumstances. Since the Court, rather than the Department,
must, subject to the rule, fix the fee in a litigated case, § 39-71-614(2),
by implication the Court must have the same authority to apply the exception.
I must therefore determine whether the criteria established by ARM 24.29.3802(7)
justifies deviation from the $75 rate in this case.
¶13 Toennis must prove
by “clear and convincing evidence” that he is entitled to a fee higher
than $75 an hour. He has carried his burden. Applying the factors set
forth in ARM 24.29.3802(7), he has shown:
(i) The anticipated time
and labor required to perform the legal service properly.
This case involved an accident
occurring in Indiana, a jurisdictional dispute, and a significant dispute
over employment status. Out-of-state depositions were required. As shown
by the actual hours Toennis worked, the case required more time and
effort than many other workers’ compensation cases. Assuming Toennis
had six billable hours a day and worked 2080 hours a year, the time
spent on this case amounted to nearly one-third of a billable year.
That in turn amounts to a significant part of his practice which is
even more significant given the risk of no recovery. This factor favors
Toennis’ request for an increase in the hourly rate.
(ii) The novelty and difficulty
of legal issues involved in the matter.
The issues were both novel
and difficult. Initially, there was a jurisdictional dispute, a dispute
which was complicated by the insurer’s initial indication that Montana
was the proper jurisdiction for the claim and its later repudiation
of that indication and its insistence that Indiana had jurisdiction.
There was also a significant dispute over employment status, a dispute
complicated by the particular facts and circumstances of this case and
the nature of the interstate trucking industry. This factor favors Toennis’
request for an increase in the hourly rate.
(iii) The fees customarily
charged for similar legal services.
Testimony by the insurers’
expert attorney witness established that the usual and customary fee
in Billings for workers’ compensation litigation is between $125 and
$150 an hour. The testifying attorney (Geoffrey R. Keller), like Toennis,
has extensive experience and expertise in workers’ compensation matters
and typically charges $140 an hour. I find that $140 an hour is a reasonable
fee for the work Toennis performed. This factor therefore favors Toennis’
request for an increase in the hourly rate.
(iv) The possible total
recovery if successful.
This case involves a relatively
young quadripelegic. The potential total recovery over her lifetime
is in the millions of dollars, encompassing not only compensation benefits
but significant medical expenses and domiciliary care. Toennis estimates
that benefits will be in the range of $6 million over the claimant’s
life. This factor favors Toennis’ request for an increase in the hourly
rate.
(v) The time limitations
imposed by the client or circumstances of the case.
There were no unusual time
limitations imposed in this case.
(vi) The nature and length
of the attorney-client relationship.
The facts do not establish
a long-term attorney-client relationship or a relationship that is unusual
for a workers’ compensation case.
(vii) The experience, skill
and reputation of the attorney.
The facts, as well as my
own experience with Toennis in litigated matters, establish that Toennis
is highly skilled in workers’ compensation matters. Indeed, his practice
is almost exclusively devoted to workers’ compensation. This factor
therefore favors Toennis’ request for an increase in the hourly rate.
(viii) The ability of the
client to pay for the legal services rendered.
Toennis’ testimony established
that claimant was financially unable to pay for his services on an hourly
rate and that a contingent fee contract was necessary. Indeed, claimant
was confronted not only with the necessity of securing and paying for
counsel but with a total loss of income and catastrophic expenses for
medical and domiciliary care. This factor favors Toennis’ request for
an increase in the hourly rate.
(ix) The risk of no recovery.
There was a significant
risk of no recovery based on the jurisdictional and employment issues.
Indeed, this case was vigorously defended by able counsel for the insurer.
This factor favors Toennis’ request for an increase in the hourly rate.
(x) The market value of
the lawyer's services at the time and place involved.
Again, based on the testimony
of Geoffrey R. Keller, I find that the market value of Toennis’ services
was $140 an hour. (See factor (iii).) This factor favors Toennis’ request
for an increase in the hourly rate.
Cumulatively, the ten factors
clearly and convincingly support a higher rate than $75 an hour. I find
that they support a $140 an hour rate. I therefore find that Toennis is
entitled to attorney fees in the amount of $66,794.
JUDGMENT
FOR ATTORNEY FEES
¶14 For the reasons set
forth above, judgment is entered finding Mr. Paul E. Toennis is entitled
to attorney fees in the sum of $66,794, which shall be paid by respondent,
The Insurance Company of Pennsylvania.
¶15 This Judgment is certified
as final for all purposes.
DATED in Helena, Montana,
this 14th day of November, 2003.
(SEAL)
\s\ Mike McCarter
JUDGE
c: Mr. Paul E. Toennis
Ms. Melanie S. Pfeifer
Submitted: May 13, 2003 |
