Attorney Fees. Prepared by Whitney L. Teel, Esq. The type of fees payable in a workers compensation case depends upon the type of benefit recovered.

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1 Attorney Fees Prepared by Whitney L. Teel, Esq. I. Types of Fees The type of fees payable in a workers compensation case depends upon the type of benefit recovered. A. Recovery of Monetary Compensation: 25/20 Contingent Fees Contingent fees are payable when the employee s attorney recovers genuinely disputed monetary compensation, including: TTD, TPD, PTD, PPD, supplementary benefits (for injury dates on or after July 1, 1981), and death/dependency benefits. Contingent fees are also payable from remodeling compensation, penalty sums awarded to the employee or dependent, and interest on monetary compensation. See Minn. Rule , subp. 5 (10). Minn. Stat , subd. 1(a), currently provides: A fee for legal services of 25 percent of the first $4,000 of compensation awarded to the employee and 20 percent of the next $60, of compensation awarded to the employee is the maximum permissible fee and does not require approval by the commissioner, compensation judge, or any other party. Minn. Stat , subd. 1 (b), provides, All fees for legal services related to the same injury are cumulative and may not exceed $13, Subdivision 2 and subdivision 5 were both repealed as the legislature did not intend for excess fees to ever be available. The $13,000 limit was declared unconstitutional by the WCCA in Clark v. Dick s Sanitation, slip. op. (W.C.C.A. May 16, 2000). The general consensus and practice of the judges and the bar has been to treat the $13,000 limit as a presumptive limit on fees which may be exceeded if a judge determines that an excess fee is warranted after consideration of the Irwin factors. It is unclear whether the presumptive limit of $13,000 applies on a per claim basis or a per injury basis. Otherwise, we have effectively returned to the principles which applied from July 1, 1992, through September 30, 1995.

2 B. Recovery of Medical Expense Benefits: Roraff Fees On January 11, 1980, the Minnesota Supreme Court established in Roraff v. State, Dept. of Transportation, 288 N.W.2d 15 (Minn. 1995), that employers are obligated to pay the employee s attorney reasonable hourly fees for recovery of disputed medical expense benefits. Effective October 1, 1995, Minn. Stat was amended to make radical changes in the way attorney fees, including Roraff fees, were to be calculated and paid. The changes related to Roraff fees included: 1. Roraff fees are to be limited to 25 percent of the first $4,000 of medical benefits awarded and 20 percent of the next $60,000 of medical expense benefits awarded, where the dollar value of the benefits are reasonably ascertainable; 2. Where the dollar value of the benefits are not reasonably ascertainable, or for obtaining a change of doctor, the maximum fee is the amount charged in hourly fees for the representation or $500, whichever is less; 3. All fees for legal services related to the same injury are cumulative and may not exceed $13,000, regardless of the amount recovered or the amount of professional services rendered by the employee s attorney; 4. No Roraff fee may be charged for services performed before the employee has consulted with the Department and the Department certifies that there is a dispute and that it has tried to resolve the dispute; and 5. The provisions discussing how and within what time limits objections to fees may be filed, how objections to fees are to be resolved, and the principles for determining what constitutes a reasonable fee set forth in subdivision 5 were all repealed. In cases where only medical expense benefits are recovered, so that there is no 25/20 contingent fee payable from monetary compensation, Roraff fees are to be determined in a two-step process post-irwin: Step One: The attorney is presumptively entitled to 25/20 percent of the ascertainable dollar value of the medical expense benefits recovered, up to the statutory presumptive limit of $13,000.

3 Step Two: If the attorney believes that the 25/20 statutory fee is inadequate to reasonably compensate him or her for the services rendered, he or she may request a larger hourly fee based upon the Irwin factors. C. Heaton Fees On October 31, 1983, the WCCA established in Heaton v. J.E. Fyer & Co., 36 W.C.D. 316 (W.C.C.A. 1983), that employers are obligated to pay a reasonable hourly fee to employee s attorneys for recovery of disputed vocational rehabilitation benefits. 1. Same two-step analysis as in Roraff. D. Minn. Stat Fees Minn. Stat fees are payable where the employee has sustained two or more injuries, everyone agrees that compensation benefits are payable, but a dispute exists between two or more employers, or two or more insurers, or the Special Compensation Fund, as to which is liable and the employee retains an attorney to assist in resolving that dispute or to protect the employee s interests while that dispute is resolved by the employers and insurers. The amount of.191 fees to be awarded is a reasonable amount based upon the services performed by the employee s attorney. The factors set forth at Minn. Stat , subd. 5, were utilized to determine a reasonable fee until their repeal in Since then, the same factors have been utilized pursuant to Irwin. E. Edquist Fees Edquist fees are not really a separate type of fee at all. The term applies to 25/20 contingent fees withheld from that portion of the employee s wage loss benefits reimbursed to a third party which paid some type of indemnity benefits to the employee while the workers compensation claim was being denied. F. Subdivision 7 Fees Subdivision 7 Fees are partial reimbursement of contingent fees to the Employee. They are named such because the of statutory provision subd. 7 sets forth the reimbursement calculation. If a dispute exists, and the Employee s attorney is successful in securing payment, the employer and insurer pay 30% of attorney fee award in excess of $ back to the Employee.

4 Example: pay $4, in attorney fees. Subdivision 7 fees: $4, $ = $4, x 30% =$1, to the Employee for subdivision 7 fees. II. Existence of a Dispute Minn. Stat , subd. 1 (c), provides: In no case shall fees be calculated on the basis of any undisputed portion that is of compensation awards. Allowable fees under this chapter shall be based solely upon genuinely disputed claims or a portion of claims, including disputes related to the payment of rehabilitation benefits or to other aspects of a rehabilitation plan. The existence of a dispute is dependent upon a disagreement after the employer or insurer has had adequate time and information to take a position on liability.... [Fees may not be charged] for services with respect to a medical or rehabilitation issue arising under Sections , or performed before the employee has consulted with the department and the department certifies that there is a dispute and that it has tried to resolve the dispute. Certification of a dispute is not a determination of whether there is a genuine dispute under Minn. Stat ; certification is merely a condition precedent to payment of Roraff/Heaton fees. Shamp v. Daybreak Foods, slip. op. (W.C.C.A. December 12, 2002). Certification does not by itself establish entitlement. The employee s attorney has the burden of proving the existence of a genuine dispute. See, Bye v. Federal Reserve Bank of Minneapolis, slip. op. (W.C.C.A. July 21, 2003). In Freeman v. Tri County Hospital, the court found there was no genuine dispute when employee s attorney filed a medical request and the employer then filed a medical response agreeing to pay for the requested surgery. Slip. op. (W.C.C.A. July 10, 2002). The employee sustained an admitted personal injury to her right shoulder while working at the hospital. Two years after the injury, the employee s orthopedic surgeon recommended additional surgery. The recommendation from the doctor came on January 17, On January 23, 2001, the employee s attorney requested the Department of Labor and Industry certify the existence of a medical dispute regarding the surgery. The Department of Labor and Industry, at that time, declined to certify the dispute, as the report from a January 11, 2001 independent medical evaluation was pending. The independent medical evaluation doctor opined that the surgery might be necessary if x-rays and a clinical examination documents worsening symptoms. On February 15, 2001, after receiving the IME report, the employee s attorney again requested certification. Certification was granted February 27, A medical request was filed on March 9, On April 5, 2001, the employer filed a medical response agreeing to pay for the requested surgery, per an addendum report by the IME doctor opining he agreed with the additional surgery. The court held no genuine dispute

5 existed where the employer and insurer admitted liability for a proposed surgery in its medical response and agreed to pay for the surgery. The court did recognize the employer s ultimate admission of liability is not always determinative on the issue of whether there existed a genuinely disputed claim. Specifically, the court noted an award of attorney fees may be appropriate where the insurer failed to timely pay benefits. The Workers Compensation Court of Appeals in Freeman noted whether a dispute exists is a question of fact and if the judge s factual decision is supported by substantial evidence, the appellate court will affirm. In Cole v. Kruger Construction, the Special Compensation Fund was liable for Roraff fees on medical expenses paid 42 days after the bills were received by the Fund, attached to the employee s claim petition. The employee s claim petition was filed October 13, Medical records and bills were attached thereto. The Fund s answer was filed on December 3, On December 7, 1998, the Fund paid the medical expenses in the amount of $5, The compensation judge held that because the benefits were not timely paid, those benefits can be used to compute a Roraff fee. The Workers Compensation Court of Appeals agreed, citing Minn. Rule , subp. 5, which set forth principles applicable to determine whether a benefit was genuinely disputed. Within that Rule, it states Benefits allegedly admitted but not timely paid may be used to compute the fee. This Rule has since been repealed. In Shamp v. Daybreak Foods, the court found there was a genuine dispute when rehabilitation records noted the insurance claim representative left a message for the QRC saying a surgery was not authorized. Slip. op. (W.C.C.A. June 25, 2004). A dispute was certified over the proposed surgery on February 22, A medical request seeking approval of this surgery was served March 6, By letter dated March 19, 2001, the employer and insurer informed the Department that they agreed to pay for the procedure. The employee s attorney then filed a statement of attorney fees seeking fees for work performed in connection with the medical request. The employer and insurer objected, contending there was no dispute over the right to the surgery and they paid voluntarily. The treating physician recommended surgery January 30, 2001, and it was not until March 19, 2001, that the employer and insurer agreed to pay for the procedure. While the employer and insurer contended there was no dispute, only a short delay prior to their voluntary agreement to pay, occasioned by their exercise of their right to secure a second opinion, the compensation judge determined there was indeed a dispute. The appellate court mentioned a compensation judge under these facts could have concluded there was no real dispute over the surgery, but on a factual review, substantial evidence did support the compensation judge s finding of a dispute. The insurance claim representative leaving a message to the QRC stating that surgery was not authorized did seem to be a determinative fact in this matter.

6 In Bergeleen v. HCMC, the court found when the issue of computer training had been raised in early 2003 and was not finally resolved to the employee s satisfaction until employee s attorney requested and received certification of dispute in July of 2003, despite that no administrative conference was actually ever held, the record was minimally adequate to support a conclusion the dispute existed for purposes of a Heaton fee. Slip. op. (W.C.C.A. May 17, 2004). The court, however, did not base the Heaton fee on the 25/20 amount of the computer class value. Instead, the court noted Heaton fee claims are subject to analysis under the factors set forth in Irwin v. Surdyk s Liquor. Under the Irwin factors, the court found a $2,000 fee more than adequate to compensate the attorney for his work (attorney was claiming $7, in Heaton fees based on hours spent and hourly rate). On appeal, the employer argued that there was not an existence of actual dispute. The court noted that the employer s argument was not entirely without merit, however, the record was minimally adequate to support a dispute existed. Notably, the court looked at the delay of computer training. The QRC had raised the issue in February 2003 and it was not resolved until July 2003, after a dispute had been certified. III. Scope of Dispute Roraff/Heaton fees are only awardable on the claim that is actually in genuine dispute. If one part of the employee s medical treatment is in dispute, such as a surgery, future medical benefits are uncertain and speculative and an award of attorney fees based on a value of future medical benefits is inappropriate. Irwin v. Surdyk s Liquor. If and when future medical benefits are actually disputed, then a Roraff fee would be addressed. Undisputed rehabilitation benefits being received by the employee are not subject to attorney s fees or Heaton fees under Minn. Stat (1) (a). See, Kaisler v. Michigan Pete, slip. op. (W.C.C.A. April 9, 1992). In Bergeleen, the employee s attorney was entitled to Heaton fees on the basis the attorney secured computer training courses. Instead of the 25/20 Heaton fee based on the computer courses, the court calculated Heaton fees per Irwin factors. Specifically, the court, Heaton fee claims are subject to an analysis under the factors set forth in Irwin v. Surdyk s Liquor. Because the scope of the rehabilitation dispute should be limited to employee consult, and there is no monetary amount that can be placed on that consult, Heaton fees should be calculated pursuant to Irwin factors, which include the time spent on the specific rehabilitation issue itself. Roraff fees should be limited to the cost of the surgery, pursuant to fee schedule. IV. Can we Use Irwin to Decrease 25/20 Fees? According to the Workers Compensation Court of Appeals in Cahow v. Brookdale Motors, Irwin factors are only to be applied in situations where the issue was whether or not the contingent fee was inadequate to reasonably compensate the employee s attorney. Cahow dealt with Roraff fees only. The decision in Cahow reflects a belief that the legislative provisions that mandate the payment of attorney fees without regard to the determination of reasonableness are acceptable and must be applied so long as the application does not result in a fee considered to be inadequate to compensate the

7 employee s attorney. This is not the holding of Irwin. The decision from the Workers Compensation Court of Appeals in Cahow was not appealed to the Minnesota Supreme Court. The holding in Cahow was limited in Brown v. Omni Remanufacturing. Mr. Brown s attorney had previously received $13,000 in 25/20 fees; therefore, anything in excess of a $13,000 fee is subject to the Irwin factors. The Workers Compensation Court of Appeals reaffirmed the rule established in Cahow in Shamp v. Daybreak Foods. In Shamp, the court held pursuant to Cahow and the statute, the employee s attorney is entitled to Roraff fees, calculated using the 25/20 formula applied to the value of the disputed surgery without regard to Irwin analysis. No case has yet been decided addressing the issue of what happens if the 25/20 formula applied to the dollar value of vocational rehabilitation benefits recovered results in an abnormally high hourly fee. There is little doubt that the plaintiff s bar will argue the same reasoning applied in Cahow should apply. However, the court in Bergeleen used the Irwin factors even though there was an ascertainable dollar value to the retraining courses. The Bergeleen court also clearly stated that Heaton fees are subject to Irwin analysis. V. Stream of Benefits If there is a stream of benefits from which contingent attorney fees could be withheld, then the compensation judge has to determine whether the fees generated by the wage loss benefit award are adequate to compensate the employee s attorney. Kelley v. Inter Faith Care Center, slip. op. (W.C.C.A. December 16, 2003). The stream of benefits must be simultaneous. Potential future stream of benefits is not enough. Id. A contingent attorney fee for the recovery of monetary benefits is presumed adequate to cover recovery of medical and rehabilitation benefits or services concurrently in dispute. See, Moran v. United Parcel Service, 63 W.C.D. 430 (W.C.C.A. 2003). The employer and insurer are liable for additional fees only if the contingent fee is inadequate to reasonably compensate the attorney for representing the employee in the medical or rehabilitation dispute. Id. (citing Minn. Stat , subd. 1 (a) (1)). Where wage loss benefits are being paid which are producing contingency fees, the determination of whether contingency fees are adequate to compensate the employee s attorney is premature. Id. VI. Do Employers and Insurers Have to Pay Subdivision 7 Fees out of a Roraff/Heaton Award? Yes. While subdivision 7 fees are not payable based on Roraff fees for any date of injury prior to October 1, 1995, after the 1995 amendments, the workers compensation courts have held that subdivision 7 provides for an award from Roraff fees. See, Rodriguez v. ConAgra Peavey, slip. op. (W.C.C.A. July 13, 2000); Hanson v. Johnson Brothers Corp., slip. op. (W.C.C.A. June 24, 2002). In Irwin v. Surdyk s Liquor, the Minnesota Supreme Court held thus under the plain language of the statute, a subdivision 7 award should be based on all attorney fees paid

8 pursuant to Minn. Stat , including attorney fees based on medical expenses pursuant to Minn. Stat , subd. 1 (a). Subdivision 7 fees are also available on Heaton fees. See, Schleicher v. Duluth Ready Mix Concrete Co., slip. op. (W.C.C.A. May 9, 2001)

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