NO. 91-243
IN THE SUPREME COURT OF THE STATE OF MONTANA
1992
DON EDGAR BURRIS (DOROTHY M.
.
BARNHART, et a1 , Claimants) ,
Claimant and Appellant,
V.
EMPLOYMENT RELATIONS DIVISION/
DEPARTMENT OF LABOR & INDUSTRY,
Defendants and Respondents.
APPEAL FROM: Workers' Compensation Court,
The Honorable Timothy W. Reardon, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Don Edgar Burris, Attorney at Law,
Billings, Montana
For Respondents:
Claren Neal, Department of Labor and
Industry, Helena, Montana
Submitted on Briefs: October 31, 1991
Decided: A p r i l 15, 1992
i
APR B 5 1392
Justice R. C. McDonough delivered the Opinion of the Court
Don Edgar Burris appeals from the judgment of the Workers'
Compensation Court which held that the Department of Labor and
Industry had authority to regulate attorney fees and that Burris
did not show any injury under his constitutional claims. We
affirm.
The issues on appeal are whether the Department of Labor and
Industry has the authority to regulate attorney fees under § 39-71-
613, MCA (1987), and whether 5 39-71-613, MCA (1987), is
unconstitutional.
Attorney Don Edgar Burris entered into attorney retainer
agreements with respect to three separate clients between July 17,
1989 and January 31, 1990. All three agreements provided that
Burris be retained on a contingency fee basis. Burris submitted
the attorney retainer forms provided by the Department of Labor and
Industry to the Employment Relations Division (ERD) as required by
the statute. However, he included an attachment titled,
"Attorney's Fee Contract RE: Workers' Compensation.It The contract
provided fees of $250.00 per hour or a contingency of twenty-five
percent for cases that do not go before the Workers' Compensation
Court, or thirty-three and one-third percent for cases that go
before the Workers' Compensation Court. The fees provided in
Burris' attached contract were higher than those allowed by law.
The ERD subsequently denied the approval of the attorney retainer
forms .
Burris appealed ERD's decision and a hearing followed which
resulted in affirmance of ERD's decision. Burris next appealed to
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the Workers' Compensation court. The Workers' Compensation Court
affirmed the decision of the Hearings Bureau of the Department of
Labor and Industry (the Department). This appeal follows.
Whether attorney fees can be regulated is controlled by
statute and therefore is a question of law. The standard of review
utilized by this Court when reviewing decisions of the Workers'
Compensation Court is:
When an issue raises only questions of law, this court is
free to reach its own conclusions .. .
Doig v. State
Comp. Ins. Fund (1991), 248 Mont. 50. 61, 809 P.2d 12,
13, citing solheim v. Tom Davis Ranch (1984), 208 Mont.
265, 272, 677 P.2d 1034, 1037-1038. In reviewing
conclusions of law we will determine if the lower court's
or agency's interpretation of the law is correct. See
also Steer, Inc. v. Dept. of Revenue, (1990), 245 Mont.
470, 803 P.2d 601, 603.
The Workers' Compensation Court found that 5 39-71-613, MCA,
granted the Department authority to require an attorney to submit
a contract of employment, on a form provided by the Department,
stating the terms of the fee agreement. The court further found
that the Department had authority to regulate attorney fees in any
workers' compensation case.
Section 39-71-613, MCA (1987), provides:
(1) When an attorney represents or acts on behalf of
a claimant or any other varty on any workers'
compensation claim, the attorney shall submit to the
department a contract of employment, on a form provided
by the department, stating specifically the terms of the
fee arrangement between the attorney and the claimant.
(2) The administrator of the division [now the
Department of Labor and Industry] shall regulate the
amount of the attorney's fee in any workers' compensation
case. In regulating the amount of the fee, the
department shall consider:
(a) the benefits the claimant gained due to the
efforts of the attorney:
(b) the time the attorney was required to spend on
the case:
(c) the complexity of the case: and
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(d) any other relevant matter the department may
consider appropriate.
(3) 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. (Emphasis added.)
The Workers' Compensation Judge relied on our decision in
Wight v. Hughes Livestock Company, Inc. (1983), 204 Mont. 98, 664
P.2d 303, in its determination that the Department had the
authority to regulate attorney fees. There we said:
The concern of the legislature, the spirit of the
Workers' Compensation law are one and the same: that the
cost of repairing a worker's injuries or replacing his
lost earning capacity shall be the burden of the
industry, and not that of the injured worker. It is from
that viewpoint that the Workers' Compensation Court or
Division should determine the reasonableness of attorneys
fees and exercise discretion in regulating the same.
wiaht at 108, 109, 664 P.2d at 309.
We hold that the Workers' Compensation Court is correct in its
application of the law.
The more difficult issue is whether 5 39-71-613, MCA, denies
due process of law and equal protection of the law. Specifically,
Burris argues that his constitutional rights are being violated
because the Department regulates the fees of only claimants'
attorneys and not defense attorneys, impairing his right to
contract. This, he argues, is in contravention of the statute
which provides, "When an attorney represents or acts on behalf of
a claimant or any other partv . .. I* (Emphasis added.) Burris
argues that the statute is unambiguous. He maintains the statute
needs no interpretation, that !'any other party" means defense
attorneys.
The Workers' Compensation Court found that Burris did not set
4
forth a factual or legal analysis to support his constitutional
claims, nor did he show any injury resulting from the legislation
regulating attorney fees. We agree.
Burris first argues he was denied due process. When a due
process claim is involved, the initial question is whether due
process is required and if so, how much? The Supreme Court has
stated, "When protected interests are implicated, the right to some
kind of prior hearing is paramount." Board of Regents v. Roth
(1971), 408 U.S. 5 6 4 , 569-570. Burris was given a hearing by the
Department, by the Workers' Compensation Court and now by this
Court. Thus, Burris received due process.
Burris also argues that the Department's regulation of
claimant's attorneys and not defense attorneys in workers'
compensation cases violates equal protection. Suffice to say that
there is no suspect class involved, nor is a fundamental right
involved. Thus the strict scrutiny test does not apply.
Nor do these issues fall under the middle tiered analysis.
This Court has employed the middle tiered analysis in cases
involving the constitutionally protected interests of education and
welfare. Meech v. Hillhaven West, Inc. (1989), 238 Mont. 21, 45,
776 P.2d 488, 502.
The question is whether the statute and its application is
rationally related to a legitimate government interest. Meech at
45, 776 P.2d at 502. Section 39- 71- 105, MCA (1987), declares the
public policy behind the workers' compensation law:
(1) It is an objective of the Montana workers'
compensation system to provide, without regard to fault,
wage supplement and medical benefits to a worker
suffering from a work-related injury or disease. Wage-
5
loss benefits are not intended to make an injured worker
whole: they are intended to assist a worker at a
reasonable cost to the employer. Within that limitation,
the wage-loss benefit should bear a reasonable
relationship to actual wages lost as a result of a work-
related injury or disease.
(2) A worker's removal from the work force due to a
work-related injury or disease has a negative impact on
the worker, the worker's family, the employer, and the
general public. Therefore, it is an objective of the
workers' compensation system to return a worker to work
as soon as possible after the worker has suffered work-
related injury or disease.
We hold that 5 39-71-613, MCA, and the Department's application of
the statute to a claimant's attorney's fee is rationally related to
the government's legitimate interest in protecting the claimant's
net benefits in workers' compensation cases. The Act is
essentially for the protection of the injured worker and his
dependants, and protection from impaired fee agreements is
rationally related thereto, regardless of any interpretation or
implementation by the Department of the words "any other party."
For the foregoing reasons, the judgment of the Workers'
Compensation Court is affirmed.
We Concur:
6
Justice Terry N. Trieweiler dissenting.
I dissent from the opinion of the majority.
The Division of Workers' Compensation's efforts to limit the
availability of attorneys who will represent injured workers by
artificially limiting claimants' ability to pay those attorneys
without any comparable limitation on the rights of employers or
insurers, clearly violates the Equal Protection Clause of
Article 11, Section 4, of the Montana Constitution.
I do not agree that when the State arbitrarily and selectively
interferes with the right of a litigant to contract and pay for the
services of an attorney that that interference does not deserve
middle-tiered scrutiny under the Equal Protection Clause. However,
for purposes of this discussion, let's assume that the majority's
favorite level of scrutiny, the rational basis or "almost anything
goes'l test applies. The Department of Labor's blatant
discrimination against claimants and their attorneys does not even
pass that minimal level of scrutiny.
The problem with the majority's conclusion is that it is based
upon blind acceptance of the Department of Labor's bald assertion
that these limitations on fee agreements between claimants and
their attorneys are for the benefit of injured workers. A brief
review of recent history in the area of attorney fee regulation
discloses that nothing could be further from the truth.
The Division of Workers' Compensation was given the statutory
authority to regulate claimant's attorney fees in 1975. Section
7
39-71-613, MCA (1975). Pursuant to that authority, the Division of
Workers' Compensation enacted 24.29.3801, ARM, which until 1987
allowed attorneys to enter into fee agreements with injured workers
for contingent fees ranging from 25 to 40 percent, depending on
whether the case was resolved prior to trial, following trial, or
on appeal. Attorneys were only allowed to recover fees when
benefits were recovered due to the efforts of the attorney.
Attorneys were not permitted to recover a fee for benefits that had
never been disputed.
Furthermore, where benefits were denied or the amount was
disputed, and the claimant later prevailed, the insurer who denied
his benefits was responsible for payment of his fees. (Sections
39-71-611, MCA (1973), and 39-71-612, MCA (1975) ) . In wight v. Hughes
Livestock, Inc. (1983), 204 Mont. 98, 664 P.2d 303, we held that the
purpose of these statutes was to assure that claimants whose
benefits had been wrongfully denied would eventually receive the
net amount of benefits they had been entitled to under the law
without having to deduct costs and attorney fees incurred to
collect those benefits. We held that in order to further that
purpose, claimants could recover the full amount of their
contingent fee under § 39-71-611, MCA, so long as that fee had been
approved by the Division of Workers' Compensation.
Had the Department of Labor or its Division of Workers'
Compensation been truly concerned about protecting injured workers
8
from paying excessive attorney fees or protecting the best
interests of the worker, as it righteously claims in this case,
that would still be the law. Attorneys would be precluded from
recovering a fee unless the benefits had been recovered due to the
attorney's effort. However, when the attorney's efforts were
necessary to recover benefits to which the claimant had been
entitled in the first place, the insurer who wrongfully denied them
would be responsible for the full amount of attorney fees and costs
incurred so that the claimant's net recovery would equal the
benefits to which he was lawfully entitled.
Instead, the Division of Workers' Compensation requested an
amendment to the Workers' Compensation Act in the very next
legislative session following the Wight decision. That amendment
became 5 39-71-614, MCA (1985), and limited the amount of attorney
fees that a claimant could recover from an insurer to an amount
based upon an hourly rate. The effect was that even though the
claimant's contract with his attorney may call for a contingent
fee, he would, in most cases, be precluded from recovering the full
amount of that fee, even when the fee had been necessitated by the
wrongful denial of his claim. So much for the Division of Workers'
Compensation's concern for the workers' best interests. However,
the Department of Labor's and the Division of Workers'
Compensation's concern for the best interests of workers did not
end in 1985. In 1987, it advocated massive amendments to the
9
Workers' Compensation Act which were ultimately passed, based upon
its lobbying efforts. Those amendment drastically reduced benefits
that could be recovered by injured workers. See §§ 39-71-701, -702,
-703, and -741, MCA (1987). In addition, those same Division-
sponsored amendments made it much more difficult for claimants to
recover attorney fees and costs, even when it was necessary to
retain an attorney because their benefits were wrongfully denied,
Both 5 39-71-611 and -612, MCA, were amended to require that before
attorney fees could be recovered, claimant must prove that the
denial of his benefits was unreasonable.
At the same time, the Division of Workers' Compensation was
lobbying through substantial cuts in workers' benefits and severe
restrictions on the ability of workers to recover attorney fees
from insurers, it proposed amending 24.29.3801, ARM, to further
restrict the fees that claimants could pay attorneys. The modified
rule provided as follows:
(3) Except as provided in subsection (7), an
attorney representing a claimant on a workers'
compensation claim who plans to utilize a contingent
percentage fee arrangement to establish the fee with the
claimant, may not charge a fee above the following
amounts:
(a) For cases that have been settled without
an order of the Workers' Compensation Judge or the
Supreme Court, twenty percent (20%) of the amount
of compensation payments the claimant receives due
to the efforts of the attorney.
( b ) For cases that go to a hearing before the
Workers' Compensation Judge or the Supreme Court,
twenty-five percent (25%) of the amount of
10
additional compensation payments the claimant
receives from an order of the Workers' Compensation
Judge due to the efforts of the attorney.
(4) The fee schedule set forth in subsection ( 3 )
does not preclude the use of other attorney fee
arrangements, such as the use of a fee system based on
time at a reasonable hourly rate not exceeding $75 per
hour, but the total fee charged may not exceed the
schedule set forth in subsection ( 3 ) except as provided
in subsection (7). When such fee arrangement is
utilized, the contract of employment shall specifically
set forth the fee arrangement, such as the amount charged
per hour.
Hearings were held on the proposed amendment to the Division's
administrative rule regarding attorney fees and opposition was
virtually unanimous. However, in spite of that response to the
proposal, it was adopted by the Division of Workers' Compensation.
Although the Department of Labor's self-serving representation
in this case is that the further restriction of claimants' attorney
fees was for the benefit of injured workers, the real purpose is
more evident from the declaration of public policy that accompanied
the Division's 1987 amendments to the Workers' Compensation Act.
That declaration is found, in part, in 5 39-71-105(3), MCA (1987),
which states:
(3) Montana's workers ' compensation and
occupational disease insurance systems are intended to be
primarily self-administering. Claimants should be able
to speedily obtain benefits, and employers should be able
to provide coverage at reasonably constant rates. To
meet these objectives, the svstem must be desiqned to
minimize reliance upon lawvers and the courts to obtain
benefits and interpret liabilities. [Emphasis added.]
In other words, the purpose for the limitations on attorney
fees that have been challenged by the claimant's attorney in this
11
case was simply to eliminate attorneys from the process of
resolving workers' compensation disputes. The problem from a
constitutional perspective is that the only class of attorneys so
effected were those attorneys who represent claimants. There were
no similar restrictions on the rights of employers or insurers to
pay their attorneys any amount the market would bear.
The brief point is this: If the Department of Labor or its
Division of Workers' Compensation was honestly concerned about
injured workers having to take money from their already inadequate
disability benefits to pay for attorney fees, they would not have
gone to the great lengths they have to erode the opportunity for
claimants to recover fees from insurers who have wrongfully denied
their benefits. Therefore, history demonstrates that there is no
basis in fact for that concern and it cannot serve as the rational
basis for discriminating against claimants as opposed to employers
or insurers.
If, on the other hand, the real purpose for the Department of
Labor's and its Division of Workers' Compensation's efforts to
restrict attorney fees is to eliminate attorneys from the workers'
compensation system, then it has done so selectively and unfairly.
It has eliminated only those attorneys who represent claimants.
Claimants are the parties to a workers' compensation dispute who
are in the most need of representation. Therefore, eliminating the
claimant's attorney, while leaving sophisticated insurance
companies, and sometimes large corporate employers, free to hire
12
the best attorney they can find, has no rational basis as this
Court has previously defined that concept.
In Meech v Hillhaven West, Iiic. (1989), 2 3 8 Mont. 21, 776 P.2d 488,
.
we cited with approval the following standard for judging whether
class legislation passes the rational basis or "almost anything
goes" test:
"The test of the constitutionality of class
legislation is whether the classification has some
reasonable, just and practical basis and whether the law
operates equally upon every person within the class.
... ,I
Meeclt, 776 P.2d at 502, (quoting Reeves v. Ille Electric Co. (1976), 170
Mont. 104, 551 P.2d 647).
Who can question that the calibre of services available from
the legal profession are, as in every other profession, related to
the amount that can be paid for those services? How can it be
argued that it is "reasonable or just" to arbitrarily limit the
quality of services available to those in most need of legal
services when no similar limitation is placed on those parties who
are already most sophisticated in the workers' compensation laws.
There is no rational basis for the Department of Labor's
concerted efforts to leave injured workers without representation,
other than the unjust and unreasonable purpose of being able to
dictate who does and does not receive disability benefits. The
regulations which are challenged in this case are part of a
concerted effort by the Department of Labor and the Division of
.-
I>
Workers' Compensation to place the burden of that Division's
mismanagement on injured workers--those members of society who are
least able to bear that burden.
For these reasons, I conclude that the Division of Workers'
Compensation's discriminatory regulation of attorney fees found in
24.29.3802, ARM, has no rational basis, and therefore, violates the
Equal Protection Clause of Article 11, Section 4, of the Montana
Constitution. I would reverse the judgment of the Workers'
Compensation Court.
I concur in the foregoing dissent of Justice Trieweiler.
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