NO. 89-51
IN THE SUPREME COURT OF THE STATE OF MONTANA
1989
LLOYD E. HARTFORD,
Appellant,
-vs-
FLORENCE YOUNG,
Claimant and Respondent,
BILLINGS PUBLIC SCHOOL DISTRICT, #2,
Employer,
EBI/ORION GROUP,
Insurer.
APPEAL FROM: The Workers' Compensation Court, The Honorable
Timothy Reardon, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Vernon E. Woodward argued; Woodward Law Office,
Billings, Montana
For Respondent:
Mike McCarter argued; Hughes, Kellner, ~ullivan&
Alke, Helena, Montana
submitted: September 25, 1989
~ecided
: November 14, 1989
Filed:
Chief Justice J. A. Turnage delivered the Opinion of the Court.
Attorney Lloyd E. Hartford appeals the Workers1 Compensation
Court's affirmation of an order by the Division of Workers1
Compensation directing the appellant to forfeit all attorney fees
related to his representation of claimant Florence Young. We
affirm.
ISSUES
1 Are section 24.29.3801, ARM (1985), and the administrative
.
hearings held thereunder invalid because they are inconsistent with
section 39-3-613, MCA, and the rule of Wight v. Hughes Livestock
Co. (1983), 204 Mont. 98, 664 P.2d 303?
2. Did attorney Hartford's actions violate either section 39-
3-613, MCA, or section 24.29.3801, ARM (1985), and thereby justify
total forfeiture of attorney fees?
FACTS
Florence Young submitted a claim for workers1 compensation
following an injury incurred during her employment as a housekeeper
at Meadowlark Elementary School in Billings, Montana. In November
of 1985, insurer EBI/Orion Group paid the claimant a lump sum
advance of $2,500 and in December of 1985, paid a further advance
of $1,000.
In February of 1986, Mrs. Young retained Lloyd E. Hartford
agreeing to pay the attorney,
(a) For cases that have not gone to a hearing
before the Workers1 Compensation Court,
twenty-five percent (25%) of the amount of
compensation payments the Client received due
to the efforts of the attorney ....
The agreement also stated,
3. That as of the date of this Agreement, the
Client has received benefits as follows: A n .
rt
unknown and that no attorney's fees will be
charged on the aforesaid amount.
The administrator of the Division of Workers1 Compensation approved
the agreement in compliance with section 24.29.3801, ARM (1985).
On April 24, 1986, with Hartford's assistance, Mrs. Young
received an advance of $12,466.65 which included $2,493.33 for
attorney fees. The following April, the insurer notified Mrs.
Young that she had received $4,312.05 in overpayments because she
was receiving Social Security benefits which the insurer was
entitled to offset. Thereafter, Hartford negotiated a full and
final compromise settlement which provided that, 'Ithe Claimant
agrees to accept the sum of $58,275.00 ... plus insurer's waiver
of recovery of $20,278.70 overpayment and advance, for a total
settlement of $78,553.70 .... I'
Hartford calculated his attorney fees at $19,638.43, twenty-
five percent of the final settlement, and submitted his claim to
the Insurance Compliance Bureau. The claims examiner advised
Hartford that it was inappropriate to charge for Mrs. Young's
overpayments and advances, and ordered the insurer to retain the
attorney fees until the matter was settled.
During the subsequent contested case on the attorney fees,
Hartford argued that the overpayment and advances were debts which
the insurer agreed to waive only because of his negotiation
efforts. The hearing examiner rejected this contention and awarded
$14,568.75 in attorney fees, twenty-five percent of the $58,275.00
in "new moneyw obtained in the final settlement.
The hearing examiner deducted $1,000 from the attorney fees
after determining that Hartford violated section 39-71-613, MCA,
and section 24.29.3801, ARM (1985). The hearing examiner found
that Hartford charged the claimant fees based on benefits he had
not obtained--specifically, the $1,000 and $2,500 advances, and
the $4,312.05 overpayment. The examiner also found that Hartford
charged the claimant twice on the $12,466.65 lump sum advance.
Hartford appealed this decision to the administrator of the
Division of Workers1 Compensation. The administrator agreed with
the examinerls findings and conclusions with the exception of the
$1,000 forfeiture. The administrator held that Hartford had
blatantly overcharged his client and made an example of him by
requiring forfeiture of all fees.
Hartford then requested judicial review by the Workers'
Compensation Court. The court agreed with the administrator's
decision noting that forfeiture of fees is mandatory under section
39-71-613, MCA. Hartford now appeals the Workers1 Compensation
Court's decision.
VALIDITY OF THE REGULATION AND HEARINGS
The appellant argues that the workers1 compensation regulation
governing attorney fees is invalid because it is inconsistent with
the statute under which it was promulgated and the factors set out
by this Court in Wight v. Hughes Livestock Co. (1983), 204 Mont.
98, 114, 664 P.2d 303, 312.
Consideration of this issue is precluded by the appellant's
failure to raise it at the trial court level. Both parties fully
briefed and argued this case before the lower court, but the record
shows no indication that the appellant attacked the validity of the
regulation. As a general rule, this Court will not review issues
not raised before the Workers' Compensation Court. Martinez v.
Montana Power Co. (Mont. 1989) , - P.2d , , 46 St.Rep.
1684, 1687.
FORFEITURE OF FEES
We note at the outset that this Court is guided by the purpose
of the workers' compensation statutes. That purpose is protection
of the interests of the injured worker. North American Van Lines
v. Evans Transfer and Storage (Mont. 1988), 766 P.2d 220, 223, 45
St.Rep. 1848, 1852.
The Montana workers' compensation statute on attorney fees
provides :
If an attorney violates a provision of this
section, a rule adopted under this section, or
an order fixing an attorney's fee under this
section, he shall forfeit the right to any fee
which he may have collected or been entitled
to collect.
5 39-71-613 (3), MCA.
The workers1 compensation regulation in effect when this case
arose provided that an attorney may not charge:
(a) for cases that have not gone to a hearing
before the workers1 compensation judge, a fee
above twenty-five percent (25%) of the amount
of compensation payments the claimant receives
due to the efforts of the attorney.
5 24.29.3801, ARM (1985).
Appellant Hartford argues that the Workers1 Compensation Court
erred in relying on the current version of the regulation, section
24.29.3802, ARM (1987), instead of the version which controlled at
the time the dispute arose, section 24.29.3801, ARM (1985). The
appellant is correct, but the error is harmless. For the purposes
of this case, the regulations are essentially identical in wording
and meaning.
Prior to reaching the Supreme Court, appellant Hartford argued
that he did not violate the attorney fees regulation by charging
Mrs. Young for the advances and overpayment. He asserted that they
were debts which the insurer waived due to his negotiating efforts.
We agree that in workers1 compensation cases, an attorney may
bill for debts waived through the attorney's efforts. A waiver of
debt is a benefit to the claimant obtained by the attorney and is
fully compensable within the limitations of the attorney fees
regulation.
The regulation limits compensation in at least two aspects.
First, an attorney may not charge more than twenty-five percent of
the compensation "the claimant receives. 5 24.29.3801, ARM
(1985). The regulation looks first to the claimant's recovery in
capping attorney fees. Undoubtedly, an attorney may become
involved in several distinguishable efforts in securing a single
recovery for the client. In such cases, agency approval of
increased fees may be appropriate. See 5 24.29.3801(4), ARM
(1985). However, absent such approval, the attorney may not bill
more than twenty-five percent on each amount received by the
client.
Second, the recovery must be "due to the efforts of the
attorney." 5 24.29.3801, ARM (1985). Whether the attorney's
efforts brought about the waiver, as opposed to a voluntary waiver
by the insurer, is a question of fact to be determined by the
hearing examiner. See 5 5 2-4-621(2), 2-4-623, MCA.
Appellant Hartford also argues that he made a mistake in
calculating his fees and is being excessively punished for pursuing
a good faith claim. We agree that a simple mistake in calculation
should not result in total forfeiture of attorney fees. However,
we do not agree that his is a good faith claim.
Hartford consistently and vehemently argued that he was
entitled to additional attorney fees for Mrs. Young's advances and
overpayments because they were debts the insurer waived through
Hartford's negotiating efforts. He made this argument in a series
of letters to Judge Reardon of the Workers' Compensation Court
after Mrs. Young complained to the judge about Hartford's excessive
fees. He maintained the same inflexible position before the
hearing examiner, the administrator, and the Workers' compensation
Court.
Now before this Court, Hartford admits for the first time that
he was not entitled to those fees, and asserts that he was merely
mistaken in his calculations. If Hartford's former argument is
incorrect at this appellate level, he should have known that it was
incorrect at the agency level. We cannot credit Hartford with good
faith in pursuing attorney fees under a theory which even he admits
is without legal merit.
We agree with the Workers1 Compensation Court that Hartford
violated the regulation in at least two instances. First, Mrs.
Young received the two advances totaling $3,500 prior to retaining
Hartford. Those advances were settlements of future benefits owing
to Mrs. Young and not debts she was required to repay. Charging
for those benefits violates the regulation because, as appellant
now admits, the claimant received those advances due to her own
efforts and not Hartford's. Furthermore, the parties1 agreement
stated that the attorney would not charge for amounts previously
received. To now label these advances debts waived through the
attorney's efforts is at least a violation of their agreement.
Second, Mrs. Young received a $12,466.65 advance through
Hartford's efforts, but he was paid $2,493.33 for those efforts.
To now call this advance a waived debt would allow the attorney to
charge a twenty-five percent fee in addition to the twenty percent
fee already received.
We hold that attorney Hartford's attempts to overcharge the
claimant are in violation of the attorney fees regulation and the
purposes of the workers1 compensation statutes. Total forfeiture
of fees is required by section 39-71-613(3), MCA. As the Workers'
Compensation Court noted, this is a harsh result considering that
Mrs. Young received more than $58,000 through Hartford's efforts.
However, the statute is clear and it is mandatory. Affirmed.
'Chief 'Justice
We concur:
Justices
Hon. Frank I .I
'asw well , Retired
Chief Justice, sitting in place
of Justice R. C. McDonough
Justice John C. Sheehy, dissenting:
This is indeed a harsh result. The biblical avouchment
that the laborer is worthy of his hire applies even to
lawyers.
I don't understand the majority opinion. It affirms
that waiver of a debt owed by the worker to another, where
the waiver is gained through the attorney's effort, is a
benefit to the claimant for which the attorney should receive
compensation. Then the majority assert that his compensation
is limited to moneys "the claimant receives." The majority
derive that clause from a regulation adopted by the
Department. However the regulation itself is a departure
from the language of the statute on which the regulation must
depend. Section 39-71-613(2) provides the Department may
regulate attorneys fees, but in so regulating, says the
statute, the Department shall consider: "(a) the benefits
the claimant gained due to the efforts of the attorney."
According to my dictionary (Webster's New Collegiate
Dictionary (1981)) "receive" means "to come into possession
of"; on the other hand, "gain" refers to "resources or
advantage acquired or increased"; or again, "to cause to be
obtained or given." Here, Mrs. Young did not receive money
when the debts were forgiven; she gained an advantage in not
having to pay the debts.
In Board of Barbers v. ~ i g Sky College , Etc. (1981),
.
- Mont -, 626 P.2d 1269, 1271, an administrative rule
that required a year's apprenticeship in "a commercial
babershop" prior to examination, when the statute required a
year's apprenticeship served "under the immediate personal
supervision of a licensed barber" was held invalid. In State
ex rel. Swart v. Casne (1977), 172 Mont. 302, 308-309, 564
P.2d 983, 986, this Court struck down a rule of the
Department of Health that defined "Occasional sale" in
conflict with the statute on the same subject. Those cases
should lead us here to say that the regulation, B 24.29.3801
(ARM (1985)) is an invalid restriction on the right of an
attorney to be paid for his work under B 39-71-613(2), MCA.
Hartford, of course, is not entitled to attorney fees
for the two advances totaling $3,000.00, nor for the advance
of $12,466.65 for which he was paid. He was mistaken as to
those items, but against those items must be weighed the
threat, now actuality, that he should get - fees for his
no
successful representation of his client. The positions of
the Department and Hartford hardened, and vengeance set in.
He gained for his client, according to my calculations,
$63,087.05, for which he was entitled to $15,771.76 in
attorney fees. A loss of that amount is a very severe jolt
to an attorney whose livelihood depends on success, and
losers are loss items. Hartford is being punished for daring
to stand up to the Department and to insist on his rights.
I can't think of a criminal case in our state where a
fine exceeding $15,000.00 was ever assessed. Hartford is
being treated worse than a criminal.
I would order payment to Hartford of his rightfully
earned attorney fees.