Attorney Fees Fixed in NC Workers’ Compensation Claim

It is little wonder that most defendants are unfamiliar with N.C. Gen. Stat. § 97-90.  But, based upon a recent ruling from the North Carolina Supreme Court (Court), Saunders v. ADP TotalSource Fi Xi, Inc., __ N.C. __ (01 February 2019), defendants may want to acquaint themselves with it.     

N.C. Gen. Stat. § 97-90 says that plaintiff attorneys must submit fee agreements to the Industrial Commission (Commission); their fees are subject to the approval of the Commission; and taking an attorney fee without Commission approval is a crime.  Subsection (c) outlines an unusual option for plaintiff attorneys who disagree with the fee awarded by the Commission.  Plaintiff attorneys may appeal to a superior court, and a superior court judge (judge) may “fix” the fee.  

N.C. Gen. Stat. § 97-90(c) has been around for many years, but it is rarely used, and there are very few cases that interpret it.   Why should defendants be interested in this new case about a plaintiff attorney’s fee?   

The practical effect of Saunders may not be known for years, and that effect may be narrowly limited to a specific fact-pattern.  However, if you handle cases that have significant value, from either an indemnity and/or a medical standpoint, then you may want to monitor Saunders.   Defendants should be alert to the possibility that plaintiff attorneys may argue that the Court’s interpretation of N.C. Gen. Stat. § 97-90(c) is about more than plaintiff attorneys taking a fee from their own client’s award. 

How Saunders Came To Be

The general fact pattern in Saunders is not unfamiliar to experienced workers’ compensation attorneys, and it is not entirely unfamiliar to workers’ compensation adjusters who handle major/catastrophic claims.  Saunders involved a claimant who had sustained compensable back injuries.  Employee’s underlying claims were not disputed, and defendants had accepted them on a Form 60. 

The claimant and his attorney had entered into a standard attorney fee agreement that provided for a 25% fee from “any recovery as ordered by the North Carolina Industrial Commission.”  The Commission awarded the plaintiff’s attorney a 25% attorney fee, from the claimant’s indemnity compensation only.  This is a typical award of attorney fees.  The Saunders Court does not suggest that this fee award was ever challenged. 

Over time, the claimant’s condition deteriorated significantly. He developed CPRS, and eventually, his doctors recommended attendant care services. When disputes arose in connection with the attendant care issues, the claimant’s attorney associated another law firm to assist in the litigation.  Eventually, the Commission awarded the claimant’s partner, who had been providing attendant care services, medical compensation for “retroactive” attendant care services.   However, the Commission did not order an attorney fee out of the retroactive attendant care award, because the associated attorneys did not offer evidence of a fee agreement with the claimant’s partner, and because the Commission determined that the 25% fee from the claimant’s past and ongoing indemnity compensation was a reasonable and sufficient fee. 

The associated attorneys did not immediately appeal to the Court of Appeals, but instead, appealed to the superior court, asking for more fees.  In a typical appeal, an appellate judge does not give the appealing party a second bite at the proverbial apple.  Meaning, the appealing party does not get a new trial, and the appellate judge does not substitute his judgement for that of the trial court.  The appellate judge’s job is only to make sure that the trial court treated the appealing party fairly.  To do this, the judge focuses first upon whether the trial court’s fact finding was properly supported by the evidence, and thereafter, upon whether the trial court properly applied the law to those facts. 

However in Saunders, the judge took new evidence, heard new arguments, reversed the Commission, and in his discretion, awarded additional attorney’s fee to the associated attorneys.  The judge concluded that 25% of any recovery ordered by the Commission was reasonable.  And, he went on to specifically award an additional attorney fee to the associated attorneys, with that fee coming from someone other than the claimant (i.e., the claimant’s partner).   

Old Statute/New Case Law 

In Saunders, the North Carolina Supreme Court ultimately concluded “that the superior court below acted exactly within the authority and discretion provided to it by the plain language of N.C.G.S. 97-90(c).”  The Court explained that, in appealing to the superior court, the judge does not sit as a typical appellate judge does, and that the judge is not obligated to respect the record created at the Commission, or to give any deference to the Commission’s findings and conclusions.  Instead, N.C. Gen. Stat. § 97-90(c) allows the judge to perform a unique, fact-based review; gives the judge unfettered authority to take evidence and to consider arguments not previously tendered to the Commission; and authorizes the judge to award attorney’s fees as he deems appropriate, in his discretion.

Why Should Defendants Care About Saunders?

The Saunders Court expressly sanctions a form of appellate review that is not like the kind of appeal that workers’ compensation defendants are used to seeing.  This appeal does not:

• come with the kind of notice that defendants are accustomed to receiving. 
• take place in a traditional workers’ compensation setting, or on traditional workers’ compensation timelines.
• involve a decision-maker whose caseload would typically include any worker’s compensation claims.
• seem to require the application of specific rules and/or legal standards upon which defendants can rely.  

The facts before the Saunders Court were not routine ones that exist in most workers’ compensation claims.  And, there are compelling reasons to argue that there are substantive and procedural reasons why Saunders is a narrow ruling.  But, the Saunders Court permitted a judge to award an attorney fee that was based upon a workers’ compensation benefit that defendants owed to someone other than the claimant himself.   Those circumstances are unusual.      

Considering the inescapable fact that fees must come from somewhere, those unusual circumstances may represent a new risk for defendants.  It is reasonable for defendants to be concerned that aggressive plaintiff attorneys may argue that the Court has weaponized N.C. Gen. Stat. §97-90, giving them a basis for asking superior court judges to award additional fees to them, and to craft those awards of attorney fees in such a way that defendants are the ones who are ultimately responsible for funding them. 

N.C. Gen. Stat. § 97-90 does not include traditional markers that warn of trouble ahead.  In fact, the statute does not sound like it applies to defendants at all.  But, plaintiff attorneys may argue that Saunders ratifies a new process, and a new target.  While a klaxon call is not warranted just yet, consider the possibility that in routine cases involving a legitimate denial, or even in a case like Saunders where most of the claim is actually accepted, an unsuspecting defendant could find itself dealing with a significant problem, and without much warning.