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Court strikes fees limits in WC cases

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Court strikes fee limits in WC cases

Senior Editor

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Attorneys representing injured workers are entitled to a reasonable fee even when the benefit they procure is modest, according to the Florida Supreme Court.

In a 5-2 decision on April 28, the court invalidated a 2009 amendment to the state’s workers’ compensation law that frequently resulted in miniscule fees for claimants’ attorneys even when a judge found their efforts were reasonable and justified.

It was the second setback for the attorney compensation section of the law in just a few days. On April 20, a panel of the First District Court of Appeal struck down another part of the law’s compensation section that prevented injured workers or third parties from paying fees to claimants’ attorneys. (See story, here.)

“The importance of the [Supreme Court] decision is it has really kicked the courthouse doors open to people who have low value claims,” said Tampa attorney Michael Winer, who was co-counsel on the case and also handled the appeal on the First DCA case. “It levels the playing field because insurance carriers have always been free to hire their lawyers and pay their lawyers whatever they want, and they’re free to adopt this scorched earth policy in defending their claim.”

The 2009 law limited plaintiffs’ lawyers to 20 percent of the first $5,000 in benefits won, 15 percent of the next $5,000, and 10 percent for benefits above that won for 10 years. Any benefits won after 10 years have a limit of 5 percent. The law also makes it a criminal misdemeanor for the attorney to accept any additional fee directly from the client the issue specifically addressed in the First DCA case. (In a footnote, the Supreme Court noted the First DCA decision and added that issue was not before it in this case.)

The Supreme Court decision came in Castellanos v. Next Door Company, et al., case no. SC 13-2082. It involved an injured worker who was initially denied on his claim and his attorney spent 107.2 hours pursuing his case, while the employer/carrier (E/C) raised numerous defenses and paid its attorneys for 122 hours of work. The attorney eventually won around $850 in benefits.

The judge of compensation claims (JCC) found the attorney’s hourly claim justified, noting the E/C raised 12 specific defenses and its attorneys expended even more time defending the claim. Although the judge found the attorney’s claim for time justified and a request for a fee of $350 per hour reasonable, he said the law prohibited him from deviating from the fee schedule or ruling on its constitutionality. Consequently, he awarded 15 percent of the value of the claim, which amounted to about $1.53 an hour for the attorney.

The First DCA upheld that finding, but certified the issue to the Supreme Court on whether the fee schedule constituted a denial of due process under the Florida and U.S. constitutions.

“It is undeniable that without the right to an attorney with a reasonable fee, the workers’ compensation law can no longer ‘assure the quick and efficient delivery of disability and medical benefits to an injured worker,’ as is the stated legislative intent in section 440.015, Florida Statutes (2009), nor can it provide workers with ‘full medical care and wage-loss payments for total or partial disability regardless of fault and without the delay and uncertainty of tort litigation.’ Martinez v. Scanlan, 582 So. 2d 1167, 1172 (Fla. 1991),” Justice Barbara Pariente wrote for the court majority.

“The statute prevents every injured worker from challenging the reasonableness of the fee award in his or her individual case — an issue of serious constitutional concern given the critical importance, as a key feature of the workers’ compensation statutory scheme, of a reasonable attorney’s fee for the successful claimant. Accordingly, we answer the rephrased certified question in the affirmative, quash the First District’s decision upholding the patently unreasonable $1.53 hourly fee award, and direct that this case be remanded to the JCC for entry of a reasonable attorney’s fee.”

Pariente summarized the history of workers’ compensation law in Florida, noting that reasonable compensation for the successful claimant’s attorney had always been part of the system. That included a change in 2003 which deleted references to reasonable fee factors in setting attorneys’ fees and resulted in low fees for claimants’ attorneys. That was challenged, but the Supreme Court then declined to make a constitutional finding and instead held another section of the statute that allowed for a reasonable fee took precedence over the revised section.

The Legislature then amended the law again in 2009 and removed the word “reasonable” in relation to claimants’ attorney fees to specifically address that Supreme Court ruling.

“The Legislature has, thus, eliminated any consideration of reasonableness and removed any discretion from the JCC, or the judiciary on review, to alter the fee award in cases where the sliding scale based on benefits obtained results in either a clearly inadequate or a clearly excessive fee,” Pariente wrote. “Confronted again with a constitutional challenge to the statute, we must now determine whether the complete elimination of any ability of either the JCC or the reviewing court to deviate from the statutory formula, even when the amount of the fee is determined to be unreasonable, is unconstitutional. We hold that it is.”

The law specifically violates a worker’s due process rights because it can result in an inadequate fee and an excessive fee, and it encourages E/Cs to deny claims and raise multiple defenses with the knowledge the worker will have difficulty hiring an attorney to litigate his or her case, Pariente noted. The law also does not limit fees an E/C can pay its attorneys.

“In effect, the elimination of any requirement that the fee be ‘reasonable’ completely eviscerates the purpose of the attorney’s fee provision and fails to provide any penalty to the E/C for wrongfully denying or delaying benefits in contravention to the stated purpose of the statutory scheme,” the opinion said. “.. . . Without the ability of the attorney to present, and the JCC to determine, the reasonableness of the fee award and to deviate where necessary, the risk is too great that the fee award will be entirely arbitrary, unjust, and grossly inadequate. We therefore conclude that the statute violates the state and federal constitutional guarantees of due process.”

As a remedy, the court ordered judges of compensation claims to use the previous statute allowing reasonable attorneys’ fees, and emphasized that attorneys must still demonstrate that the schedule in the statute results in an unreasonable fee before they can seek a higher fee.

Chief Justice Jorge Labarga, and Justices Peggy Quince and James Perry concurred with Pariente.

In a separate concurring opinion, Justice Fred Lewis agreed the strict adherence to the schedule in the law resulted in inherently unfair attorney’s fees and the consequent difficulty in injured workers obtaining counsel.

“Additionally, where workers face the exclusive remedy under Florida’s workers’ compensation statutes, but are then denied the ability to secure competent counsel due to the totally unreasonable attorney fees provision, the legislation operates to unconstitutionally deny Florida workers access to our courts,” Lewis wrote.

Justices Charles Canady and Ricky Polston dissented.

Canady, in an opinion joined by Polston, said the Legislature made a policy decision that the amount of attorneys’ fees should be related to the amount of benefits obtained.

“This policy violates none of the constitutional provisions on which the petitioner relies,” Canady wrote. “In reaching the conclusion that the statute violates due process, the majority fails to directly address the actual policy of the statute. Instead, the majority assumes — without any reasoned explanation — that due process requires a particular definition of ‘reasonableness’ in the award of statutory attorney’s fees. The definition assumed by the majority categorically precludes the legislative policy requiring a reasonable relationship between the amount of a fee award and the amount of the recovery obtained by the efforts of the attorney. Certainly, this legislative policy may be subject to criticism. But there is no basis in our precedents or federal law for declaring it unconstitutional.”

Polston concurred with that dissent, and wrote his own. He argued that the petitioner wrongly raised a facial instead of an as-applied challenge to the law.

“I am not saying that a constitutional challenge to section 440.34, Florida Statutes (2009), could never succeed. In fact, I would not foreclose the possibility of a successful as-applied constitutional challenge to the attorney’s fees provision based upon access to courts, depending upon the particular facts of the case involved. However, as acknowledged during oral argument, the petitioner did not raise any as-applied challenge to the statute in this Court, even given what would certainly seem to be the rather egregious facts of his case. Instead, the petitioner raised a facial challenge that lacks any merit under our precedent,” Polston wrote.

Canady also said he agreed with Polston’s reasoning.

Pariente in her opinion acknowledged the dissents but rejected the arguments in both.

An as-applied challenge would be case by case, she wrote, and “would be both unworkable and without any standards for determining when the fee schedule produces a constitutionally inadequate fee. Simply put, the statute is not susceptible to an as-applied challenge, but instead fits into our precedent governing the constitutionality of irrebuttable presumptions, which is a distinct body of case law that differs from the typical ‘facial’ versus ‘as-applied’ cases cited by Justice Polston’s dissent.”

Canady “fails to acknowledge that a reasonable attorney’s fee has always been the linchpin to the constitutionality of the workers’ compensation law,” Pariente wrote, adding without an attorney, the claimant has no guarantee to a “quick and efficient” delivery of services legally required by the workers’ comp system.

Winer called the decision “hugely important.”

“I have had the difficult decision with a large number of clients that if I have to spend 75 hours on your case and the fee is going to be less than $20 an hour,. . . I have a financial conflict with my client from the beginning to the point where it’s a disincentive to work on that case,” he said.

Winer said while the decision may be beneficial to lawyers, it is more notable because it helps workers.

“Industry will want to spin this case and make it about lawyers and fees, but at the end of the day, that’s not what it’s about. It’s about the ability of injured workers to get benefits,” he said, adding it will reduce the difficulty workers with minor injuries had in getting attorneys.

“You certainly saw it [the problem of finding an attorney] with a high degree of frequency. You saw it especially with some of the more difficult claims, the exposure claims. They [attorneys] know that benefits may not be that much,” Winer continued. “Five thousand or 10,000 dollars in the grand scheme of things may not seem like a lot, but to the insured working for $10 an hour, that’s a lot. It keeps him in his apartment; it keeps food on the table. It means the world to him.”

The ruling drew instant criticism from business and industry-related groups, which predicted it could lead to a rise in workers’ compensation insurance rates. The Florida Chamber of Commerce, in a news release, said it has already formed a task force to advise on a legislative remedy to the decision.

“As Florida’s leading advocate fighting to keep workers’ comp working, the potential impact of the high court’s ruling could threaten Florida’s improving business climate. The Florida Chamber remains laser focused on ensuring workers’ comp rates are fair, and we will lead the effort before lawmakers and in the halls of justice to ensure the voices of job creators are heard,” said Mark Wilson, the chamber’s CEO and president.

Associated Industries of Florida, another business group, released a statement that said, “Today’s ruling on the Castellanos v. Next Door Company case by the Florida Supreme Court declaring the mandatory fee schedule under the workers’ compensation law unconstitutional is a significant blow to Florida employers. It will certainly trigger a substantial and hefty rate increase for which employers have not prepared or budgeted. We also know from history that this will spark an avalanche of increased and unbridled litigation that will continue to be a leading cost driver to the system in the future and a major disruption to the economic success we have worked so many years to achieve.. . . We call on our elected leaders to immediately act and respond to this ruling in a way that protects our economy and continues to ensure Florida businesses, as well as their employees, have a workers’ compensation system they can rely on to provide expedient care and adequate resources.”

Winer, though, said circumventing the ruling may be difficult.

“The language by the court is that reasonable fees are necessary as part of the tradeoff that allows the workers’ compensation system to exist,. . . the Legislature can’t come back and try to fix this problem by trying to remove carrier-paid fees because they’re going to come back with the same problem as before,” he said.

The Castellanos case was one of three major challenges to the workers’ compensation law pending at the court. One of those cases, Daniel Stahl v. Hialeah Hospital, et al., case no. SC15-725, sought to have the court declare in a facial challenge the entire workers’ compensation law as unconstitutional on the grounds that benefits had been reduced or eliminated to such an extent that injured workers were no longer adequately compensated. The court heard oral arguments on that case April 6, but the same day the justices issued Castellanos, they decided to “exercise our discretion and discharge jurisdiction. Accordingly, we dismiss review.”

That leaves pending the third case, Wesphal v. City of St. Petersburg, case no. SC13-1930, which like Castellanos was argued before the court in late 2014. In that case attorneys for an injured firefighter argued that the law unfairly cuts off benefits for injured workers who are getting better but take longer than two years to reach maximum medical improvement, when they then can be compensated for permanent disabilities. The attorneys also asked that the court, similar to Castellanos and Stahl, consider the broader law unconstitutional.

Winer noted that the court did not use Castellanos to declare the entire worker’s comp law unconstitutional. “The court fixed the problem with a scalpel instead of a shovel,” he said. “The decision is extraordinarily well written and well-reasoned.”

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