Kelleher Law Office v. State Compensation Insurance Fund

NO. 84-202

IN THE SUPREME COURT OF THE STATE OF MONTANA

1984

KELLEHER LAW OFFICE,
Claimant and Appellant,
-vs-
STATE COMPENSATION INSURANCE FUND,
Defendant and Respondent.

APPEAL FROM: Workers' Compensation Court, The Honorable Timothy
Reardon, Judge presiding.

COUNSEL OF RECORD:

For Appellant:
Kelleher Law Office, Billings, Montana

For Respondent:
Thomas E. Martello, Helena, Montana

Submitted on Briefs: August 2, 1984
Decided: November 28, 1984

Filed: r\i 0 V 2 d 1984

Clerk
Mr. Justice Frank B. Morrison delivered the Opinion of the
Court.

Kelleher filed an action in the Workers' Compensation
Court for an order directing the Fund to pay attorney fees
and costs. The Workers' Compensation Judge denied petition-
er's claim on the grounds that it lacked jurisdiction.
Kelleher appeals.
Timothy Richards was injured on September 10, 1 3 8 2 . Big
Horn Calcium, Richards' employer, was insured by State Com-
pensation Insurance Fund (Fund), which d-enied Richards'
claim. Richards retained the Kelleher Law Office to repre-
sent him.
Kelleher's retainer agreement with Richards was drafted
pursuant to requirements of the Administrator of the Division
of Workers' Compensation and was filed with the Division.
The contingency agreement entitled attorney to 25 percent of
the amount recovered.
An attorney in the Kelleher Law Office negotiated a
settlement with Fund. In addition to claimant's hospital and
medical bills, Fund agreed to compensate Richards $1,162.46,
representing 4 3/7 weeks of temporary tota-l benefits. Attor-
ney was entitled to $290.62 in attorney fees and $32.70 in
costs. Fund sent the state warrant directly to the claimant.
Kelleher's name was not listed as payee on the warrant.
Richards left the state without paying Kelleher Law Office
for attorney's fees or reimbursing it for costs as provided
for in the retainer agreement on file with the Division.
In response to a demand made to the Administrator that
the Fund be directed to pay the 25 percent attorney fee and
related costs, the Administrator sent an opinion dated 24
March 1983, to Kelleher denying that the Fund was liable.
 Kelleher then filed an action against the Fund in the
Workers' Compensation Court for an order directing Fund to
pay attorneys fees and costs. Petitioner also requested a
declaratory ruling that Fund must list the attorney's name as
payee on all compensation drafts. Workers ' Compensation
judge denied the claim based on lack of jurisdiction.
On appeal these issues are presented:
1. Does a claimant's attorney have a lien on the pro-
ceeds of his client's workers' compensation award?
2. Is the lien created at the moment an agreement is
reached between the attorney and the insurer?
3. Does the Workers ' Compensation Court have jurisdic-
tion to enforce a lien arising out of a workers' compensation
claim?
4. Must the insurer list the attorney's name as a payee
on the draft representing the proceeds of the workers compen-
sation award or settlement?
5. Is the petitioner entitled to en award of reasonable
attorney fees and costs for prosecuting this action?
6. Is the Respondent liable for interest on the attor-
ney fees?
In State ex rel. Uninsured Fund v. Hunt (Mont. 1981),
625 P.2d 539, 38 St.Rep. 421, interpreting 39-71-2905, MCA,
this Court recognized that whenever the dispute is related to
workers' compensation benefits payable to a claimant, the
jurisdiction of the Workers' Compensa.tion Court goes beyond
merely providing a forum for adjudicating workers' claims.
The Workers Compensation Court was granted broad jurisdic-
tional powers by the unequivocal language of this Court:
"Although the Workers' Compensation Court is not
vested with the full powers of a District Court, it
nevertheless has been given broad powers concerning
benefits due and payable to claimants under the
Act. It has the power to determine which of
 several parties is liable to pay the Workers'
Compensation benefits, or if subrogation is allow-
able, what apportionment of liability ma.y be made
between insurers, and other matters that go beyond
the minimum determination of the benefits payable
to an employee." Hunt, supra, 625 P.2d at 539, 38
St.Rep. at 425.
We find that this extended jurisdictional authority of
the Workers' Compensation Court includes payment of attor-
ney's fees and related costs. We reverse the Workers' Com-
pensation Court's judgment denying jurisdiction and remand
for determination of attorney's fees. The following guide-
lines are pertinent to such determination.
The legislature enacted the attorney's statutory right
to a judgment lien for compensation against proceeds of a
client's award in 37-61-420, MCA:
"37-61-420. Judgment lien for compensation. (1)
The compensation of an attorney and counselor for
his services is governed by agreement, express or
implied, which is not restrained by law.
(2) From the commencement of an action or the
service of an answer containing a counterclaim, the
attorney who appears for a party has a lien upon
his client's cause of action or counterclaim which
attaches to a verdict, report, decision, or judg-
ment in his client's favor and the proceeds thereof
in whose hands they may come. Such lien cannot be
affected by any settlement between the parties
before or after judgment."
Applying this statutory scheme to the case at bar a
judgment lien would not attach against the claimant's compen-
sation award, because the attorney negotiated a settlement
with the State Compensation Insurance Fund prior to the
"commencement of an action" or "service of an answer contain-
ing a counterclaim."
We agree with the policy of the legislature that an
attorney should be able to obtain his fee in case of an
award. However, the present statutory entitlement to a lien
encourages litigation. By judicial fiat we extend the same
protection to those attorneys who have filed their retainer
agreement with the Division of Workers' Compensation. The
lien for compensation attaches upon filing of the contingency
fee agreement with the Workers' Compensation Division.
We do not find our holding in conflict with our ruling
in State ex rel. Harry v. District Court (Mont. 1981) 628
P.2d 657, 659, 38 St.Rep. 818, 820 strictly construing
39-71-743, MCA. In Harry this Court stated, " . . . the
Montana legislature has specifical1.y provided that payment of
a workers' compensation award shall be exempt from all forms

of seizures. " The Harry decision is distinguishable in that
it did not involve a statutory right to invade proceeds of a
workers' compensation award. In the appeal before us, the
legislature exempted attorneys by granting a specific statu-
tory right to attach a lien upon the client's compensation
award. For this reason, Harry is not controlling.
Whether attorney's name is listed a.s a payee on the
state warrant is an administrative detail better left to
determination by the Division of Workers' Compensation.
We reverse the Workers' Compensation Court's judgment
denying jurisdiction in this matter, and issue a declaratory
judgment that a lien for attorney's fees and costs attaches
at the time the retainer agreement is approved by the Divi-
sion of Workers' Compensation.
Appellant presents the issue whether attorney's fees
should be awarded for prosecuting this action.
"It has long been the rule in Montana that in the
absence of agreement between the parties or statu-
tory authorization, a successful party is not
-
entitled to an award of attorney's fees. - ~ i k l e s
v.
Barnes (1969), 153 Mont. 113, 454 P.2d 608. ...
We recognize a very narrow exception to the above
rule. A District Court does have equitable power
to award attorney's fees where the prevailing party
has been forced into an action that is frivolous
and utterly without merit. Wilson v. Department - of
Natural Resources and ~onservation (1982), . .
Mont. , 648 n d 766, 39 st.kep. 13.
Thompkins v. Fuller (Mont. 19831, 667 P.2d 944,
2"
4
 An award of attorney's fees is not appropriate in this
case. There is no requisite statutory authority as basis for
such an award. No contract or agreement between the parties
justifies awarding attorney's fees. Application of the
narrow exception to the general rule permitting award by the
District Court's equitable discretion is also not appropri-
ate. The trial court ruled that it lacked jurisdiction in
the action. There is a justiciable controversy involvj-ng
that question. Therefore, no basis exists for an award of
fees.
Appellant claims interest should accrue on the attorney
fees wrongfully withheld by trial court's denial of jurisdic-
tion. A claim becomes liquidated, for the purpose of allow-
ing prejudgment interest, when both the amoupt due and the
date on which it becomes due are fixed and certain. First
Nat. Bank of Girard v. Bankers Dispatch (1977), 221 Kan. 528,
562 P.2d 3 2 . Liquidated claims include an indebtedness which
is capable of ascertainment by reference to an agreement or
simple mathematical computation. L. M. White Contracting Co.
v. St. Joseph Structural Steel Co. (1971), 15 Ariz.App. 260,
488 P.2d 196, 2 0 0 .
Commensurate with the fee agreement timely filed with
the Division of Workers' Compensation, appellant's legal fees
could be computed to a sum certain upon issuance of the state
warrant establishing the specific amount of appellant's
client's compensation benefits. Prejudgment interest on
appellant's attorney's fees is permitted to run as of the
date the state warrant was issued.
We reverse and remand for a determination of appellant's
fee and interest due thereon.
We c o n c u r :

'A &
?&
Chief Justice
GJiLd4

/

Justices
 Mr. Justice Fred J. Weber dissents as follows.
1 respectfully dissent from the holding of the majority

which "by judicial fiat" extends lien protection to attorneys
who have filed their retainer agreements with the Division of
Workers Compensation.
As set forth in the majority opinion, section 37-61-420,
MCA, provides that a lien attaches from the commencement of
an action or the service of an answer. The legislature has
determined that a lien is appropriate for an attorney where
he has commenced an action for a plaintiff or filed an answer
for a defendant in pending litigation. The legislature has
not provided for such a lien on the part of an attorney for
services prior to the commencement of an action.
Here the majority has concluded that it will extend lien
protection to those attorneys who ha-ve filed a retainer
agreement without the commencement of an action. While there
may be a valid argument that such protection is appropriate
for attorneys representing workers' compensation claimants,
it seems to me that such argument should be made to the
legislature, the appropriate body for this type of legisla-
tion, rather than this Court.
As with other liens, I would defer to the provisions
adopted by the legislature.

[
Justice