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Madill v. State Compensation Insurance Fund

Court of Workers Compensation of Montana

January 11, 1996


          Submitted Date: October 12, 1995


          Mike McCarter JUDGE.

         Summary: Claimant sought attorneys fee award though case settled before reaching WCC.

         Held: Under section 39-71-612, MCA (1979), DOL hearing officer properly denied attorneys fee award where case settled before reaching WCC and no controversy existed under statute based on factual and procedural posture of case. Note: this holding was reversed by the Montana Supreme Court in Madill v. State Compensation Insurance Fund, 280 Mont. 450, 930 P.2d 665 (1996).

         This is an appeal from a determination by the Department of Labor and Industry denying appellant's claim for attorney fees and costs. Appellant, Gerald Madill (claimant), asks the Court to reverse the Department's decision and hold that he is entitled to attorney fees from the respondent, State Compensation Insurance Fund.


         Claimant does not specifically challenge any of the Department's findings of fact. The facts, as found, are therefore adopted for purposes of appeal. They provide the following background.

         On September 28, 1979, the claimant injured his knee in an industrial accident. Since the injury he has undergone repeated surgeries on his knee. He walks with a limp. His limp causes secondary back pain.

         The State Fund insured claimant's employer and commenced temporary total disability benefits effective March 1980. While receiving those benefits, claimant retained the law firm of Graybill, Ostrem, Warner & Crotty to represent him with respect to his workers' compensation claim. Gregory H. Warner, a partner in the firm, was assigned to the case and has represented claimant ever since. While Mr. Warner later left the law firm, he has continued to represent the claimant. No liens have been filed against the claim by his former law firm.

         The fee agreement between claimant and Warner obligates claimant to pay Warner "20% of any settlement recovered without suit, and 33% of whatever may be recovered from said claim after suit or trial." (Ex. 2.) The agreement was approved by the Division of Workers' Compensation on August 29, 1980. (Ex. 4.)

         Based on claimant having reached maximum healing and his graduation from a two-year college course in human services, on May 31, 1988 the State Fund reduced claimant's benefits from temporary total to permanent partial benefits. (Ex. 35.) The State Fund continued paying the benefits at the permanent partial rate until August 1989. During that time Warner provided the State Fund with an evaluation of a certified rehabilitation counselor stating that it would be "very difficult if not impossible" to find claimant a job in the human services field. (Ex. 33 at 4.) The State Fund responded that it would continue the permanent partial benefits until it was supplied with information which took into account claimant's employability at jobs for which he had transferrable skills. (Ex. 44.) On August 16, 1989, Warner provided the State Fund with information indicating that claimant was unemployable even considering his transferrable skills. (Ex. 45.) The State Fund immediately reinstated total disability benefits retroactive to May 31, 1988. It forwarded Warner a check for $3, 560.32, representing the retroactive difference between total and partial disability benefits. (Ex. 47.)

         On January 4, 1991, the State Fund conceded that claimant was permanently totally disabled. Shortly thereafter, on January 29, 1991, Warner wrote a letter to the State Fund representing that claimant was unable to meet monthly financial obligations and urging that it was in his best interest to lump sum his future benefits. (Ex. 58.) The State Fund responded with an offer of $64, 000.00, which it believed was the net amount of claimant's future benefits discounted to present value. Warner disagreed with the State Fund's calculation, tendering his own calculation of $225, 359.68. (Ex. 61.) The State Fund then sweetened its offer to $90, 000.00 plus 20% to account for attorney fees, for a total offer of $108, 940.80.

         Warner, on behalf of claimant, then petitioned the Workers' Compensation Court for a lump-sum conversion of his future benefits. Minutes before the hearing was to commence, the parties reached an agreement calling for a partial lump-sum advance of $69, 038.39 (WCC Tr. at 78-9; DLI Tr. at 17), of which $22, 248.57 was designated for payment of attorney fees and costs over the period of the attorney/client relationship. (Ex. 71.) The balance of the advance was to pay claimant's debts and expenses. The advance was approved by the Department on January 3, 1992, and the petition was dismissed. (Ex. 73.)

         The State Fund continues to pay claimant biweekly permanent total disability benefits.

         Procedural History

         On April 2, 1992, claimant filed a Petition for Attorney Fees and Costs with the Department. He sought an order directing the State Fund to reimburse him for attorney fees and costs he has incurred as a result of Warner's representation. According to the petition filed with the Department, claimant has incurred $17, 381.25 in fees to date and $4, 522.35 in costs, for a total of $21, 903.60. This is somewhat less than the amount mentioned in his 1991 petition for a partial lump-sum advance. Claimant also sought an award of an additional 20% with respect to all biweekly benefits paid following the settlement.

         The matter was assigned to a Department hearing examiner. A telephonic hearing was held on February 18, 1993. Proposed findings of fact and conclusions of law were thereafter submitted by the parties. The final brief was submitted on April 20, 1993. For whatever reason, the hearing examiner's Findings of Fact, Conclusions of Law, and Order were not issued until May 11, 1995. This appeal followed.

         Standard of Review

         The scope of review in this case is limited by section 2-4-704(2), MCA, which provides in relevant part:

(2) The court may not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact. The court may affirm the decision of the agency or remand the case for further proceedings. The court may reverse or modify the decision if ...

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