No.
95-542
IN THE
SUPREME COURT OF THE STATE OF MONTANA
1997
JACK
MURER, JAY HARBRIGE, KEITH MORDJA, SUSAN VERNON, BRUCE NELSON, STEVE PRICKETT,
and JAMES BROWN,
Claimants
& Appellants,
v.
STATE
COMPENSATION MUTUAL INSURANCE FUND,
Defendant,
Respondent & Cross-Appellant,
and
BEVERLY
HARDY, et al.,
Intervenors
& Respondents.
APPEAL
FROM: Workers' Compensation Court, State of Montana,
The Honorable Mike McCarter, Judge presiding.
COUNSEL
OF RECORD:
For
Appellants:
James
H. Goetz (argued); Goetz, Madden & Dunn; Bozeman,
Montana; and Allan M. McGarvey; McGarvey, Heberling,
Sullivan & McGarvey; Kalispell, Montana
For
Respondent:
Bradley
J. Luck (argued) and Lucy T. France; Garlington,
Lohn & Robinson; Missoula, Montana
For
Intervenors:
Ira
D. Eakin (argued); Lynaugh, Fitzgerald, Eiselein & Eakin;
Billings, Montana
Submitted:
February 18, 1997
Decided: June 23, 1997
Filed:
__________________________________________
Clerk
Justice
Terry N. Trieweiler delivered the opinion of the Court.
The claimants,
Jack Murer, Jay Harbrige, Keith Mordja, Susan Vernon, Bruce
Nelson, Steve Prickett, and James Brown, filed a petition for benefits
in the Workers' Compensation Court for the State of Montana. On November
20, 1995, the Workers' Compensation Court entered its final judgment
granting in part and denying in part the benefits and fees which were
sought. Claimants appeal and the respondent, State Compensation Mutual
Insurance Fund, cross-appeals. We affirm in part and reverse in part
the judgment of the Workers' Compensation Court, and remand to that
court for further proceedings consistent with this opinion.
On appeal, claimants
raise the following issues:
1. Did the Workers' Compensation
Court err when it concluded that the
temporary cap on maximum benefits enacted in 1987 did not expire until
June 30, 1991?
2. Did the Workers' Compensation
Court err when it concluded that the
settlement agreements entered into between claimants and the State
Fund foreclose claimants' rights to further benefits?
3. Did the Workers' Compensation
Court err when it denied claimants' motion for attorney fees pursuant
to the common fund doctrine?
On cross-appeal,
the State Fund raises the following issues:
1. Did the Workers' Compensation
Court err when it concluded that an
impairment award, paid in the form of a lump sum before June 30, 1991,
at the request of claimant Keith Mordja, must be increased pursuant
to Murer II ?
2. Did the Workers' Compensation
Court err when it determined that the State Fund's failure to increase
Mordja's impairment award was unreasonable and, on that basis, assessed
a penalty pursuant to 39-71-2907, MCA?
FACTUAL BACKGROUND
In 1987, the
Montana Legislature enacted the following cap on temporary total
disability benefits for injured workers:
[B]eginning
July 1, 1987, through June 30, 1989, weekly compensation
benefits for temporary total disability may not exceed the state's average
weekly wage of $299 established July 1, 1986.
Section 39-71-701(5),
MCA (1987). See also 39-71-702(6), MCA (1987) (permanent
total disability), and 39-71-703(3), MCA (1987) (permanent partial
disability). The 1989 Legislature enacted similar caps for injuries
which occurred between July 17, 1989, and June 30, 1991. Those caps
extended "through June 30, 1991." See 39-71-701(5), -702(6),
and -703(3), MCA (1989). The State Fund deemed the caps ($299 per week
for total benefits; $149.50 per week for partial benefits) to be permanent
and, on that basis, continued to apply them after June 30, 1991.
Claimants are
seven workers who were injured between July 1, 1987, and June 30, 1991,
and who are entitled to disability benefits at the maximum statutory
rate. They filed a petition in the Workers' Compensation Court in which
they contended that the 1987 and 1989 legislative caps were temporary
and, therefore, cannot be applied after 1991. Furthermore, they asserted
that: (1) the temporary cap enacted in 1987 expired June 30, 1989, and
did not apply thereafter to workers injured before that date; and (2)
the temporary cap enacted in 1989 can only be applied to injuries which
occurred between July 17, 1989, and June 30, 1991.
Claimants initiated
this litigation as representatives of a class of injured claimants
similarly situated. However, the Workers' Compensation Court concluded
that
a final judgment will have the same effect as a class action without
the
unnecessary complications. The Court is convinced that the regulatory
agency (D.O.L.I.) and the supervision of the courts sufficiently protects
all
claimants . . . .
On that basis,
the Workers' Compensation Court denied class certification and, on appeal,
we affirmed. Murer v. State Fund (1993), 257 Mont. 434, 849
P.2d 1036 (Murer I). On remand, the Workers' Compensation Court
concluded that the 1987 and 1989 caps were permanent and that, therefore,
the State Fund could continue to apply the caps after June 30, 1991.
On appeal from that decision, we reversed the Workers' Compensation
Court, held that the caps on disability benefits were only temporary,
and remanded the case to the lower court for further proceedings. Murer
v. State Fund (1994), 267 Mont. 516, 885 P.2d 428 (Murer II).
Pursuant to
Murer II, the State Fund was obligated to increase benefit
payments
to a substantial number of claimants who were neither parties to, nor
directly involved in the Murer litigation. For that reason,
claimants again moved for class certification. The State Fund, however,
agreed to contact and pay all absent claimants, without requiring further
action on their behalf. Under supervision of the Workers' Compensation
Court, the State Fund identified and notified absent claimants, and
disbursed to them the required increase in benefits. Claimants and their
attorneys asserted a lien for fees against those increased payments.
In recognition of that lien, the State Fund withheld 20 percent from
the amounts paid to absent claimants. Claimants also moved the Workers'
Compensation Court to award them attorney fees pursuant to the common
fund doctrine.
On February
16, 1995, thirteen absent claimants, Beverly Hardy, et.al., filed a
motion to intervene, which the Workers' Compensation Court granted.
On August 7, 1995, the court denied claimants' motion and refused to
award them attorney fees pursuant to the common fund doctrine.
Claimants continued
to assert that workers' compensation claimants injured
between 1987 and 1989 should be subject only to the 1987 cap, and that
the 1989 cap applies only to claimants injured between 1989 and 1991.
The Workers' Compensation Court, however, refused to differentiate between
the two classes of injured workers and concluded that both the 1987
and the 1989 temporary caps expired June 30, 1991. During the pendency
of this litigation, four of the Claimants--Jay Harbrige, Susan Vernon,
Steve Prickett, and James Brown--made settlement agreements with the
State Fund. Each of the settlement agreements was executed on Form LF820,
a standardized form which is published by the Department of Labor and
Industry for purposes of lump sum conversions pursuant to 39-71-741(2),
MCA. Form LF820 contains the following
caption:
PETITION FOR
COMPROMISE AND RELEASE SETTLEMENT
(Permanent Partial Wage Supplement and/or Rehabilitation Benefits).
Notwithstanding the parenthetical language to the caption, the operative
provisions
of each agreement contain the following language:The parties to this
matter have agreed to fully and finally conclude
all compensation and/or rehabilitation payments due the claimant under
the
Workers' Compensation Act . . . .
. . . .
The claimant hereby petitions the Division of Workers' Compensation
. . . for approval of this petition and that the claim be fully and
finally closed on the basis set forth above.
The Department
of Labor and Industry approved each settlement petition, and its
orders provide that the State Fund is "fully released and discharged
from all further obligations for compensation benefits for this injury
under the Workers' Compensation Act." Those orders also indicate
that any dissatisfied party can appeal the order to the Workers' Compensation
Court; however, no appeals were filed.
Claimants' counsel
selected and prepared these standardized settlement petitions
(Form LF820), and then forwarded them to the State Fund for execution.
Claimants' counsel, however, did not use the additional spaces provided
to insert any special provisions or to indicate the retention of any
specific rights.
Claimants maintained
that there are ambiguities in the settlement petitions, and that the
contemporaneous correspondence between the parties reveal that they
intended to settle only their wage supplement and rehabilitation entitlements.
The Workers' Compensation Court, however, concluded that the settlement
petitions foreclose Claimants' rights to all further workers' compensation
benefits, including their rights to increased temporary total and impairment
rating benefits.
Claimant Keith
Mordja was injured on January 17, 1988. On June 14, 1990, it
was determined that he had reached maximum healing and his physician
evaluated his physical impairment at 30 percent. On June 27, 1990, the
State Fund notified him that his impairment rating entitled him to 150
weeks of benefits, commencing June 14, 1990. Thus, 54.57 weeks of benefits
would accrue before July 1, 1991, and 95.43 weeks would accrue after
July 1, 1991. He elected to receive his impairment award in a lump sum
and received the balance of his award on July 10, 1990. Pursuant to
39-71-703(1)(a)(iii), MCA (1987), his lump sum award was reduced to
present value.
Pursuant to
Murer II, the Workers' Compensation Court concluded that, with
regard to those benefits paid for the 95.43 weeks after July 1, 1991,
Mordja was entitled to an increase in his impairment award:
The State
Fund's refusal to pay the additional benefits was
unreasonable. More than 95 weeks of the benefits were attributable to
the
time period after the temporary cap had expired. In paying the benefits
in
a lump sum the State Fund discounted the future benefits to present
value
(See 39-71-703(1)(a)(iii), MCA (1987)), thus acknowledging that the
benefits were attributable to the later time. The matter was not reasonably
debatable.
On that basis,
the court assessed a 20 percent penalty in the amount of $191.32 pursuant
to 39-71-2907, MCA.
STANDARD OF
REVIEWWhen we review
the Workers' Compensation Court's conclusions of law, our standard of
review is plenary and we must determine whether its conclusions are
correct as a matter of law. Lund v. State Fund (1994), 263
Mont. 346, 348, 868 P.2d 611, 612.
ISSUE 1
Did the Workers'
Compensation Court err when it concluded that the temporary
cap on maximum benefits enacted in 1987 did not expire until June 30,
1991?
The Workers' Compensation Court concluded that the 1987 temporary cap
on
maximum benefits did not expire until June 30, 1991. The court based
its conclusion on the following language contained within Murer
II:
We hold that
the "cap" on benefits, of $299.00, set by the 1987 and 1989
legislatures in 39-71-701(5), MCA, was a temporary cap on benefits
which terminated on June 30, 1991, and that on that date the appellants
should have begun receiving benefits under 39-71-701(3), MCA, at the
statutory rate determined as of the date of injury . . . .
Murer II,
267 Mont. at 522, 885 P.2d at 432. While this isolated quote, by itself,
arguably supports the Workers' Compensation Court's conclusion, a more
thorough analysis of the entire Murer II opinion, and its rationale,
reveals that Murer II does not support the Workers' Compensation
Court's conclusion.
In Murer
II, we held that, pursuant to the plain, objective language of
the relevant
statutes, the 1987 and 1989 caps on maximum benefits were only temporary
and,
therefore, that the State Fund could not continue to apply those caps
after the dates on which they expired. We reasoned as follows:
Appellants
argue, and we agree, that subsection (5) of 39-71-701, MCA,
for the years 1987 and 1989, was a temporary, time-specific limitation
and
that when the limitation expired, the claimants should then have been
paid
maximum benefit rates not to exceed the state's average weekly wage
rate
at the time of the injury under 39-71-701(3), MCA.
Murer II,
267 Mont. at 522, 885 P.2d at 432. Accordingly, to the extent that any
language in Murer II supports the Workers' Compensation Court's
conclusion, we clarify that opinion today.
The 1987 law
unequivocally provides that the temporary caps on maximum
benefits expired June 30, 1989. "[B]eginning July 1, 1987, through
June 30, 1989,
weekly compensation benefits for temporary total disability may not
exceed the state's average weekly wage of $299 established July 1, 1986."
Section 39-71-701(5), MCA (1987) (emphasis added). See also 39-71-702(6),
MCA (1987) (permanent total disability), and 39-71-703(3), MCA (1987)
(permanent partial disability). It is well established that the workers'
compensation law in effect at the time of an injury governs the claim.
Chagnon v. Travelers Ins. Co. (1993), 259 Mont. 21, 25, 855
P.2d 1002, 1004; Watson v. Seekins (1988), 234 Mont. 309, 312,
763 P.2d 328, 331. Furthermore, it is undisputed that any attempt by
the Legislature to retroactively change the law in effect at the time
of an injury would be an unconstitutional impairment of contract. Buckman
v. State Comp. Ins. Fund (1986), 224 Mont. 318, 328, 730 P.2d 380,
386.
Based on these
well-established principles of law, we make the following
conclusions: (1) the 1987 temporary cap applies to injuries which occurred
between July 1, 1987, and June 30, 1989; (2) the 1987 temporary cap
expired June 30, 1989; (3) the 1989 temporary cap applies to injuries
which occurred between July 17, 1989, and June 30, 1991; (4) the 1989
temporary cap expired June 30, 1991; and (5) the 1989 temporary cap
cannot be applied retroactively to injuries which occurred prior to
July 17, 1989, the date on which it became effective.
Accordingly,
we hold that the Workers' Compensation Court erred when it
concluded that the temporary cap on maximum benefits enacted in 1987
did not expire until June 30, 1991. That part of the Workers' Compensation
Court's judgment to the contrary is reversed.
ISSUE 2
Did the Workers'
Compensation Court err when it concluded that the settlement agreements
entered into between claimants and the State Fund foreclose claimants'
rights to additional benefits?
During the pendency
of this litigation, four of the claimants--Jay Harbrige, Susan
Vernon, Steve Prickett, and James Brown--reached settlement agreements
with the State Fund. The Workers' Compensation Court concluded that
those agreements foreclose claimants' rights to all further workers'
compensation benefits, including increased temporary total and impairment
rating benefits.
On appeal, claimants
contend that the settlement agreements foreclose only their
entitlements to wage supplement and rehabilitation benefits and, therefore,
that the Workers' Compensation Court erred when it concluded that those
agreements foreclose their rights to all further benefits. In support
of this contention, they assert the following two arguments: (1) pursuant
to Ingraham v. Champion International (1990), 243 Mont. 42,
793 P.2d 769, the settlement petitions used by the parties (DOLI Form
LF820) cannot be applied to impairment awards; and (2) because the settlement
petitions are ambiguous, the court can and should analyze extrinsic
evidence in order to determine the parties' intent.
Claimants' first
argument asserts that: (1) pursuant to Ingraham, impairment
awards are not subject to the lump sum conversion requirements of
39-71-741, MCA; (2) the settlement petitions used in this case (DOLI
Form LF820) are specifically designed to implement the provisions of
39-71-741(2), MCA; and (3) therefore, the settlement petitions cannot
be applied to impairment awards.
Although 39-71-741(2),
MCA (1987-89), permits permanent total disability and
permanent partial wage supplement benefits to be converted to a lump
sum, it does not preclude claimants who are entitled to either type
of those benefits from fully and finally settling their potential rights
to other types of benefits. Furthermore, Ingraham merely provides
that lump sum awards of impairment benefits are not subject to the requirements
set forth in 39-71-741(2), MCA (1987-89). Ingraham, 243 Mont.
at 47, 793 P.2d at 772. We therefore conclude that claimants' reliance
upon Ingraham is misplaced.
Second, claimants
contend that the settlement petitions are ambiguous and,
therefore, that the court can and should analyze extrinsic evidence---the
contemporaneous correspondence between the parties--in order to determine
the parties' intent. In their brief, they concede that there is language
in the body of the petitions which "could be construed as closing
all claims for all types of benefits." The exact language of the
settlement petitions to which they refer provides, in part, that the
parties "agreed to fully and finally conclude all compensation
and/or rehabilitation payments due the claimant" and that the claimant
"petitions the Division of Workers' Compensation . . . for approval
of this petition and that the claim be fully and finally closed."
Despite that
operative language in the petitions, claimants allege that, based on
the following factors, the settlement petitions are ambiguous: (1) the
petitions are
standardized forms, produced by the DOLI; (2) the petitions are designed
to implement, and correspond directly to 39-71-741(2), MCA; and (3)
the petition is captioned:
"(Permanent
Partial Wage Supplement and/or Rehabilitation Benefits)."
Although the settlement petitions are, in fact, standardized forms produced
by the DOLI pursuant to 39-71-741(2), MCA, claimants' counsel selected
and prepared the petitions, and then forwarded them to the State Fund
for execution. Claimants' counsel, however, did not attempt to modify
the unambiguous language in the petitions; nor did they use the additional
spaces provided to insert any special provisions or to indicate the
retention of any specific rights. Had they intended to enter into only
a partial settlement, they could easily have inserted an express provision
which retained their rights to further benefits.
Therefore, even
if we assume, without deciding, that the settlement petitions in this
case are, in fact, ambiguous, we conclude that any such ambiguities
must be strictly construed against the party who created them. Mueske
v. Piper, Jaffray & Hopwood, Inc. (1993), 260 Mont. 207, 216,
859 P.2d 444, 449-50; Lauterjung v. Johnson (1977), 175 Mont.
74, 78, 572 P.2d 511, 513. Accordingly, we hold that the Workers' Compensation
Court did not err when it concluded that the settlement agreements entered
into between claimants and the State Fund foreclose claimants' rights
to all further benefits, including increased temporary total and impairment
rating benefits. That part of the judgment of the Workers' Compensation
Court is affirmed.
ISSUE 3
Did the Workers'
Compensation Court err when it denied claimants' motion for
attorney fees pursuant to the common fund doctrine?
As a result
of our decision in Murer II, the State Fund became obligated
to
increase the rate of benefits payments to a substantial number of workers'
compensation claimants who were neither parties to, nor directly involved
in the Murer litigation. Accordingly, the State Fund agreed to contact
and pay those absent claimants. Under supervision of the Workers' Compensation
Court, the State Fund identified and notified the absent claimants,
and disbursed to them the required increase in benefits. Claimants and
their attorneys asserted a lien against those increased payments. In
recognition of that lien, the State Fund withheld 20 percent from the
amounts paid to absent claimants. Claimants also moved the Workers'
Compensation Court to award them attorney fees pursuant to the common
fund doctrine. The Workers' Compensation Court, however, denied that
motion.
On appeal, claimants
contend that the Workers' Compensation Court erred when
it denied their motion. Claimants concede that they do not have attorney
fee agreements with the absent claimants and that they are not statutorily
entitled to the requested fees. However, they maintain that, as a result
of their attorneys' efforts throughout the Murer litigation,
they have created a common fund which has directly benefitted a substantial
number of the absent claimants and, therefore, that those absent claimants
should be required to share in the costs, including reasonable attorney
fees, of this unique litigation.
On that basis,
claimants assert that they are entitled, pursuant to the equitable common
fund doctrine, to reimbursement of their reasonable attorney fees.
The common fund doctrine is deeply rooted in American jurisprudence
and
provides a well-recognized exception to the traditional American rule
regarding attorney fees. The United States Supreme Court created the
common fund doctrine in Trustees v. Greenough (1881), 105 U.S.
527, 15 Otto 527, 26 L. Ed. 1157, and has subsequently applied that
doctrine in numerous other cases. See e.g. Boeing Co. v. VanGemert
(1980), 444 U.S. 472, 100 S. Ct. 745, 62 L. Ed. 2d 676; Alyeska
Pipeline Serv. Co. v. Wilderness Society (1975), 421 U.S. 240,
95 S. Ct. 1612, 44 L. Ed. 2d 141; Fleischmann Co. (1967), 386
U.S. 714, 87 S. Ct. 1404, 18 L. Ed. 2d 475; Hobbs v. McLean
(1886), 117 U.S. 567, 6 S. Ct. 870, 29 L. Ed. 940; Central Railroad
& Banking Co. v. Pettus (1885), 113 U.S. 116, 5 S. Ct. 387,
28 L. Ed. 915. These common fund doctrine cases provide that when a
party has an interest in a fund in common with others and incurs legal
fees in order to establish, preserve, increase, or collect that fund,
then that party is entitled to reimbursement of his or her reasonable
attorney fees from the proceeds of the fund itself.
In Means
v. Montana Power Co. (1981), 191 Mont. 395, 625 P.2d 32, we
recognized that the common fund doctrine is "rooted in the equitable
concepts of quasi-contract, restitution and recapture of unjust enrichment.
" Means, 191 Mont. at 403, 625 P.2d at 37. Furthermore,
we expressly adopted the common fund doctrine and concluded that:
The "common
fund" concept provides that when a party through
active litigation creates, reserves or increases a fund, others sharing
in the
fund must bear a portion of the litigation costs including reasonable
attorney
fees. The doctrine is employed to spread the cost of litigation among
all
beneficiaries so that the active beneficiary is not forced to bear the
burden
alone and the "stranger" (i.e., passive) beneficiaries do
not receive their
benefits at no cost to themselves.
Means,
191 Mont. at 403, 625 P.2d at 37.
Application
of the common fund doctrine is especially appropriate in a case like
this where the individual damage from an institutional wrong may not
be sufficient from an economic viewpoint to justify the legal expense
necessary to challenge that wrong. The alternative to the doctrine's
application is simply for the wrong to go uncorrected. Based on these
legal principles and authorities, we conclude that when a party, through
active litigation, creates a common fund which directly benefits an
ascertainable class of non-participating beneficiaries, those non-participating
beneficiaries can be required to bear a portion of the litigation costs,
including reasonable attorney fees. Accordingly, the party who creates
the common fund is entitled, pursuant to the common fund doctrine, to
reimbursement of his or her reasonable attorney fees from that fund.
Claimants have
engaged in complex, lengthy, and expensive litigation. As a
result, they were able to establish, in Murer II, a legal precedent
which directly benefits a substantial number of workers' compensation
claimants who were neither parties to, nor directly involved in the
Murer litigation. However, claimants have also accomplished
significantly more than just the establishment of a favorable legal
precedent. Additionally, claimants established a vested right on behalf
of the absent claimants to directly receive immediate monetary payments
of past due benefits underpayments; and based on the establishment of
those vested rights, the State Fund became legally obligated to make
the increased benefits payments.
In order to
implement the mandate of Murer II, the State Fund, under supervision
of the Workers' Compensation Court: (1) identified a substantial number
of absent
claimants; (2) notified those claimants of their rights pursuant to
Murer II; (3) calculated, with mathematical certainty, the
increases to which each individual absent claimant is entitled; and
(4) made actual payments to those claimants. The State Fund, therefore,
has been able to determine, with certainty, the number of absent claimants
involved and the amount of money to which each individual claimant is
entitled. Accordingly, as a direct result of claimants' litigation efforts,
a substantial number of absent claimants have received direct monetary
benefits payments, even though they were not required to intervene,
file suit, risk expense, or hire an attorney. Moreover, claimants filed
a lien on the increased benefits payments made by the State Fund to
absent claimants. In recognition of that lien, the State Fund withheld
20 percent from the payments which have actually been disbursed to the
individual absent claimants. In essence, therefore, claimants request
that they be awarded a reasonable percentage of the amounts which have
actually been paid to an identifiable class of absent claimants.
Based on the
facts in this case, we conclude that claimants, through active
litigation, created a common fund which has directly benefitted an ascertainable
class of absent workers' compensation claimants and, therefore, that
those absent claimants should be required to contribute, in proportion
to the benefits they actually received, to the costs of the litigation,
including reasonable attorney fees. Accordingly, we hold that the Workers'
Compensation Court erred when it denied claimants' motion and refused
to award them reasonable attorney fees pursuant to the common fund doctrine.
The judgment of the Workers' Compensation Court to the contrary is reversed.
CROSS-APPEAL ISSUE 1
Did the Workers'
Compensation Court err when it concluded that an impairment
award, paid in the form of a lump sum before June 30, 1991, at the request
of Claimant Keith Mordja, must be increased pursuant to Murer II
?
Claimant Keith
Mordja was injured on January 17, 1988. On June 14, 1990, he
was found to have achieved maximum healing and his physician evaluated
his physical impairment at 30 percent. That rating entitled him, pursuant
to 39-71-703, MCA (1987), to an impairment award of 150 weeks at the
maximum statutory rate. He elected to receive his impairment award in
a lump sum and received the balance on July 10, 1990. Pursuant to
39-71-703(1)(a)(iii), MCA (1987), his lump sum award was reduced to
present value. The calculation by which the State Fund reduced his award
to present value utilized a period of 150 weeks, commencing June 14,
1990. Thus, 54.57 of the weeks occurred before July 1, 1991, and 95.43
of the weeks occurred after July 1, 1991.
Pursuant to
our holding in Murer II that the 1987 and 1989 caps on maximum
disability benefits were only temporary, Mordja sought an adjustment
of his lump sum impairment award to reflect the increased rate. The
State Fund, however, determined that the 1987 temporary cap did not
expire until 1991 and, on that basis, refused to pay the increase for
those weeks prior to July 1, 1991. The State Fund also refused to pay
the increase for those weeks after July 1, 1991, based on the fact that
Mordja received his lump sum award on July 10, 1990, which was prior
to the 1991 expiration of the temporary caps.
Based on its
determination that the 1987 temporary cap on benefits did not expire
until 1991, the Workers' Compensation Court concluded that Mordja is
not entitled to an increased impairment award for the 54.57 weeks prior
to July 1, 1991. The court, however, found that "[e]ven though
all benefits were paid in a lump sum, 95.43 weeks of those benefits
were attributable to July 1, 1991 and thereafter." On that basis,
the court concluded that Mordja is entitled to an increased impairment
award for the 95.43 weeks after July 1, 1991.
On appeal, the
State Fund contends that the Workers' Compensation Court erred
when it determined that Mordja is entitled to an increased award for
the 95.43 weeks after July 1, 1991. However, we conclude that the State
Fund's contention is now moot. In Issue 1 of this opinion, we concluded
that the 1987 temporary cap on benefits expired, by its express terms,
on June 30, 1989, and that the 1989 temporary cap applies only to injuries
which occurred between July 17, 1989, and June 30, 1991. Mordja's injury
occurred on January 17, 1988, and therefore, the 1987 temporary cap
governs his claim. See Chagnon, 259 Mont. at 25, 855 P.2d at
1004. The actual payment of his lump sum award, however, did not occur
until July 10, 1990, more than one year after the 1987 cap expired.
Moreover, the 1989 cap cannot be applied retroactively to an injury
which occurred before July 17, 1989, the date on which it became effective.
See Buckman, 224 Mont. at 328, 730 P.2d at 386.
Therefore, we
conclude that the temporary cap on Mordja's disability benefits
expired June 30, 1989, and that, concomitantly, his entire 150-week
benefit package, which was paid after the applicable 1987 temporary
cap expired, must be calculated at the maximum statutory rate and is
not subject to the temporary cap on benefits. On that basis, we hold
that the Workers' Compensation Court: (1) did not err when it concluded
that Mordja is entitled to an increase in his impairment award for the
95.43 weeks after July 1, 1991; and (2) erred when it concluded that
Mordja is not entitled to an increase for the 54.57 weeks prior to July
1, 1991. Accordingly, that part of the judgment of the Workers' Compensation
Court is affirmed in part and reversed in part.
CROSS-APPEAL
ISSUE 2
Did the Workers'
Compensation Court err when it determined that the State Fund's refusal
to increase Mordja's impairment award was unreasonable and, on that
basis, assessed a penalty pursuant to 39-71-2907, MCA?
Whether an action
is "unreasonable" pursuant to 39-71-2907, MCA, is a
"question of fact which is subject on appeal to the limited review
of the substantial
evidence test. If there is substantial evidence to support a finding
of 'unreasonableness', this Court cannot overturn the finding."
Wight v. Hughes Livestock Co., Inc. (1981), 194 Mont. 109,
115, 634 P.2d 1189, 1192; see also Marcott v. Louisiana Pacific
Corp. (1996), 275 Mont. 197, 203, 911 P.2d 1129, 1133 ("reasonableness").
The Workers' Compensation Court determined that:
The State
Fund's refusal to pay the additional benefits was
unreasonable. More than 95 weeks of the benefits were attributable to
the
time period after the temporary cap had expired. In paying the benefits
in
a lump sum the State Fund discounted the future benefits to present
value
(See 39-71-703(1)(a)(iii), MCA (1987)), thus acknowledging that the
benefits were attributable to the later time. The matter was not reasonably
debatable.
On that basis,
the court assessed a 20 percent penalty in the amount of $191.32 pursuant
to 39-71-2907, MCA.
We conclude
that the Workers' Compensation Court's findings are supported by
substantial evidence. Accordingly, we hold that the court did not err
when it concluded that the State Fund's failure to increase Mordja's
impairment award was unreasonable and, on that basis, assessed a 20
percent penalty pursuant to 39-71-2907, MCA.
That part of
the judgment of the Workers' Compensation Court is affirmed.
For these reasons, and based on these conclusions, this case is remanded
to the
Workers' Compensation Court for further proceedings consistent with
this opinion.
/S/ TERRY N. TRIEWEILER
We Concur:
/S/ WILLIAM E. HUNT, SR.
/S/ JIM REGNIER
/S/ W. WILLIAM LEAPHART
/S/ JAMES C. NELSON
Justice Karla M. Gray, concurring
in part and dissenting in part.
I concur in
the Court's opinion on all issues except that involving the award of
attorney fees pursuant to the common fund doctrine. I respectfully dissent
from the opinion on that issue.
There is no
question but that we have recognized and applied the common fund
doctrine, which is based on equitable concepts. Means, 625
P.2d at 37. I agree with the doctrine and support its application under
appropriate circumstances. I cannot agree with its application in this
case for two reasons: first, it is my view that neither the Workers'
Compensation Court or this Court is authorized to award such fees in
the context of the purely statutory workers' compensation system which
exists in Montana; and, second, the common fund doctrine is not applicable
here in any event.
The Workers'
Compensation Act (Act) is a purely statutory scheme, duly enacted
by the Legislature, which governs all aspects of workers' compensation
claims and awards. The extent of compensation which may be awarded for
various types of disabilities is controlled by statute. See,
e.g., 39-71-701 through 39-71-703, MCA.
In a similar
fashion, the Act expressly regulates attorney fees and goes so far as
to
require an attorney representing a workers' compensation claimant to
submit his or her employment contract, setting forth the terms of the
fee arrangement, to the Department of Labor and Industry (Department).
See, e.g., 39-71-611 through 39-71-614, MCA. In light of
these circumstances, the Workers' Compensation Court correctly concluded
that it was without authority to create a separate equitable remedy
under the Act regarding attorney fees.
Indeed, one
of the United States Supreme Court's decisions on which this Court
relies in concluding that the common fund doctrine is applicable here
reaches a contrary result under circumstances much like those presently
before us. Fleischmann involved a claim for trademark violation under
the federal Lanham Act and the Supreme Court considered the issue of
whether federal courts could award attorney fees as a separate element
of recovery in light of the Act's enumeration of available remedies.
The Supreme Court discussed the common fund doctrine as an exception
to the "American rule" which allows an award of attorney fees
only where expressly permitted by statute or contract, but observed
that the doctrine had not been developed in the context of statutory
causes of action which prescribe statutory remedies. The Supreme Court
stated that, "[w]hen a cause of action has been created by a statute
which expressly provides the remedies for vindication of the cause,
other remedies should not readily be implied." Fleischmann, 386
U.S. at 720 (citations omitted). Consequently, the Supreme Court was
compelled to conclude "that Congress intended 35 of the Lanham
Act to mark the boundaries of the power to award monetary relief in
cases arising under the Act. A judicially created compensatory remedy
in addition to the express statutory remedies is inappropriate in this
context." Fleischmann, 386 U.S. at 721.
In my opinion,
we must reach the same result here. The Workers' Compensation
Act is a statutory system providing for a statutory cause of action
and statutorily-
prescribed remedies, including attorney fees. No portion of the Act
authorizes the
attorney fees sought here pursuant to the common fund doctrine and we
are not free to judicially engraft equitable remedies such as this onto
the Act. We have stated on prior occasions, in rejecting "equity
and fairness" arguments by both claimants and insurers in the context
of the Act, that it is the province of the courts to construe and apply
the law as we find it and to maintain its integrity as it was written
by a coordinate branch of state government. See Wildin v. CNA Ins.
Co. (1993), 256 Mont. 354, 358, 846 P.2d 1022, 1025; Raffety
v. Kanta Products, Inc. (1991), 250 Mont. 268, 272, 819 P.2d 1272,
1275. Doing so here requires us to affirm the Workers' Compensation
Court's conclusion that the common fund doctrine for awarding attorney
fees is not available in the context of the Act.
It is also my
view that, even if the equitable remedy were not precluded by the
Act, it is unavailable here. As set forth by the Court, the common fund
doctrine
recognized by the United States Supreme Court provides that "when
a party has an interest in a fund in common with others and incurs legal
fees in order to establish . . . that fund, then that party is entitled
to reimbursement of his or her reasonable attorney fees from the proceeds
of the fund itself." Similarly, as recognized by this Court in
Means, the doctrine is employed to spread the cost of litigation
among all beneficiaries so that "the active beneficiary is not
forced the bear the burden alone. . . ." Means, 625 P.2d
at 37. I submit that these requirements are not met in this case.
In the first
place, it is my view that there is no common fund here. While Murer
II undoubtedly created an entitlement in numerous individual nonparty
claimants to
additional benefits, no "fund" was set aside for the payment
of such benefits, either in the course of this litigation or otherwise.
The common fund cases, while not defining precisely what is required
to constitute a "common fund," each involve a settlement fund,
a judgment fund, or a trust fund of some sort. This case does not.
Moreover, the
common fund cases commonly involve other beneficiaries who also
are parties in the litigation at issue or, at the least, in related
litigation. Here, efforts to certify this litigation as a class action
were unsuccessful and the individuals who are receiving additional benefits
as a result of Murer II have never been parties to this case.
Yet the Court cites
to no case under which nonparty beneficiaries have been required to
pay a portion of attorney fees under the common fund doctrine.
Finally, while
the common fund doctrine is properly applied in certain
circumstances to avoid forcing the active party to bear the burden of
the attorney fees incurred, those circumstances are not present in this
case. The party claimants here are not required by their fee arrangements
with counsel to bear the burden of fees in excess of those relating
to their own claims; the fee contracts generally provide that the client
claimants are responsible only for the standard 20%/25%. Thus, the fees
for which "reimbursement" is being sought here are not fees
incurred by these claimants such as would support application of the
common fund doctrine under the federal cases cited by the Court. They
are additional and extraordinary fees sought by the attorneys who represented
the named claimants in this case. Similarly, the party claimants are
not being forced to bear the burden of attorney fees for the nonparty
beneficiaries. That burden ultimately will fall on counsel and, in my
view, that is as it should be.
Counsel here
submitted their fee agreements with the party claimants to the
Department as required by 39-71-613, MCA. These are the fees they
sought in their pleadings, pursuant to applicable statutes, through
the first two appeals to this Court in this litigation. In the framework
of the Act, those are the only fees to which counsel are entitled. Subsequent
to Murer II, and on remand to the Workers' Compensation Court,
counsel first asserted a claim to fees under the common fund doctrine.
At that point, it became clear that counsel had had an early understanding
with their claimant clients to seek fees in addition to those obtainable
pursuant to the submitted fee agreements. They had planned to be able
to do so through the class action mechanism; as noted above, however,
efforts to obtain class certification were not successful.
An affidavit
of record from one counsel repeatedly states that "but for"
the "expectation" that the fees would be compensated under
the common fund doctrine, counsel would not have been able to afford
to pursue the litigation to its successful conclusion, since the amounts
to which the party claimants ultimately would be entitled would be small.
While I sympathize
with counsel's substantial investment of time in this litigation,
and applaud their success on behalf of their clients and the benefits
their work is
providing to numerous nonparties, I am unpersuaded that we should "bend"
the common fund doctrine to award them fees under a doctrine intended
to protect the parties to a suit where, as here, the parties require
no protection. Many legal actions involve risk to counsel of fee awards
which are not commensurate with the amount of work performed. Indeed,
it is fair to say that many counsel "give it their all" to
the same extent these counsel have done and are altogether unsuccessful,
both as to their clients' recovery and their own. We do not have a system,
however, under which counsel are then remunerated based on their "expectations."
We should not create one here.
I would affirm
the Workers' Compensation Court's denial of attorney fees under
the common fund doctrine.
/S/ KARLA M. GRAY
Chief Justice J. A. Turnage:
I concur in the dissent of Justice Gray.
/S/ J. A. TURNAGE
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