Wight v. Hughes Livestock Co., Inc.

NO. 82-61
IN THE SUPREME COURT OF THE STATE OF MONTANA

1983

GENE WIGHT,
Claimant and Appellant,
VS .
HUGHES LIVESTOCK COMPANY, INC.,
Employer,
and
MOUNTAIN WEST FARM BUREAU MUTUAL
INSURANCE COMPANY,
Defendant and Respondent.

Appeal from: Workers' Compensation Court
Honorable Tim Reardon, Judge presiding.
Counsel of Record:
For Appellant:
R. V. Bottomly argued, Great Falls, Montana
For Respondent:
Robert L. Johnson argued, Lewistown, Montana
For Amicus Curiae:
Milodragovich, Dale and Dye, Missoula, Montana
Harold Dye argued, Missoula, Montana
Robert Kelleher, Billings, Montana
For Guardian Ad Litem:
D. Patrick McKittrick argued, Great Falls, Montana

Submitted: February 24, 1983
Decided: May 16, 1983
Filed:
MAY 1 6 1983

Clerk
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.

This appeal presents the issue of the weight to be given
by the Workers' Compensation iudge to contingent fee
contracts between successful claimants and their attorneys,
where the F70rkers1 Compensation judge fixes attorneys fees
under section 39-71-611, MCA, and related statutes.
The underlying cause was before us on appeal in Wight v.
Hughes Livestock Company, Inc. et al. (1981), - Mont. -I

634 P.2d 1189, 38 St.Rep. 1632. We upheld the right of Wight
to recover compensation benefits, deleted a 20 percent
statutory penalty that the Workers' Compensation Court had
levied, and remanded the cause to the Workers' Compensation
judge for the purpose of fixing attorneys fees to be awarded
to Wight.
In May 1979, Wight had entered into a contingent fee
agreement with his attorney which provided that Wight would
pay 25 percent of all monies obtained on his claim by way of
settlement and/or judgment. After the successful appeal to
this Court, Wight and his attorney entered into a second
contingent fee agreement whereby Wight agreed to pay 40
percent of any compensation received.
On November 11, 1981, the claimant filed an amended
petition before the Workers' Compensation Court to fix
attorneys fees at $35,916.74, that figure representing 40
percent of Wight's readjusted lifetime benefits.
Farm Bureau objected to the petition respecting
attorneys fees, contending that the petition did not contain
information as to the a.mount of time that was spent by
claimant's attorney in prosecuting his client's cause, and
that the attorneys fees in any event should be based on
past-due benefits as opposed to lifetime benefits.
Claimant responded by recomputing his attorneys fees to
claim $33,022.49 and noted that both of his contingent fee
agreements had been filed with the Workers' Compensation
Division pursuant to section 39-71-613 (2), MCA, and that the
agreements which were in accordance with the Division's rules
had been approved by the Division.
On December 14, 1981, the Workers' Compensation judge
issued a.n order directing the claimant to file further
information regarding attorneys fees and costs, specifically
requesting a "detailed statement specifying the number of
hours compiled in pursuing the above entitled matter and the
exact amount of costs incurred. " Claimant ' s attorney
responded stating, "counsel is engaged in 100 percent of
legal work and litigation on a contin.gentfee basis and keeps
no records concerning hours on any case and ha.s no way to
reconstruct on a fair and reasonable basis the hours involved
in this extended litigation." Claimant's attorney further
responded that he was relying on his 40 percent contingency
fee agreement as a fair and reasonable arrangement, and
requested the court to set a hearing if the court felt the
evidence was insufficient to determine the fee.
On December 24, 1981, the Workers' Compensation judge
entered an order awarding attorneys fees, part of which
reads :
"Claimant's counsel is entitled to attorney fees in
the amount of $8,500.00. This amount is based. on
two factors: the amount of effort required in
taking this case to trial and defending it on
appeal; and the fact that claimant's counsel is in
a difficult position to collect from his client
under the contingent fee contract. Claimant's
counsel argues that this court is obligated to
award attorney fees based on his contingent fee
 contract and on conclusion of law no. 4, which
states: 'The court will fix and establish
reasonable attorney fees and costs based in part
upon the contract between the claimant and his
attorney.' This conclusion does not state that
this Court will award the entire contingent fee as
an attorney fee, but that the fee will be based in
part on the contingent fee contract. The $8,500.00
amount is awarded with the contingent fee in mind.

"The usual method employed by this court in
determining a reasonable fee is to review the
number of hours spent in a case as submitted by
claimant's counsel.. .. [TIhis court ordered
claimant's counsel to submit a statement specifying
his hours spent on the case and the amount of costs
incurred. Claimant's counsel respectfully declined
to submit hours stating that all of his legal
business is done on a contingent fee basis and that
he does not keep time records. If that is the
case, claimant's counsel must rely on the
discretion of this court to award him a reasonable
fee.''
On January 12, 1982, claimant filed for a rehearing on
attorneys fees which was by the Workers' Compensation Court
denied. Thereafter this appeal was taken on the issue of
attorneys fees.
In spite of the reduced amount of attorneys fees
awarded, the Workers' Compensation Court nevertheless found
the contingent fee agreement to be reasonable, but that the
brunt of the attorneys fees should be borne by the claimant.
The Workers' Compensation Court said:
"The court would like to add that the
reasonableness of the contingent fee agreement is
not disputed. The question before the court was
what is a reasonable fee to be assessed against the
insurer. The insurer is not a party to the
contingent fee agreement and is not bound by its
terms. In addition, when an attorney fee is
awarded by the court, that award is not intended to
render invalid the contingent fee agreement. The
court does expect that an attorney fee award will
be applied to reduce any contingent fee liability
the claimant may have incurred by reason of his
contingent fee agreement. The holding in Holton v.
Stoltze Land and Lumber Company, 38 St.Rep. 1835,
does not require this court to assess against the
insurer the entire contingent fee liability."
 Thus the appeal from the Workers' Compensation order
fixing attorneys fees in this case places before us two
important issues: (1) whether a successful claimant for
Workers' Compensation benefits should be required under the
statutes to pay any part of his incurred attorneys fees, and
(2) how does a claimant's contingent fee contract with his
attorney affect the discretion of the Workers' Compensation
judge in fixing attorneys fees to be awarded to the claimant?
The Net Award Concept
Three statutes bear on the right of a successful
claimant to recover attorneys fees against the insurer or
employer. They are as follows:
Section 39-71-611, MCA:
"In the event an insurer denies liability for a
claim for compensation or terminates compensation
benefits and the claim is later adjudged
compensable by the workers' compensation judge or
on appeal, the insurer shall pay reasonable costs
and attorneys' fees as established by the workers'
compensation judge."
Section 39-71-612, MCA:
"(1) If an employer or insurer pays or tenders
payment of compensation under chapter 71 or 72 of
this title, but controversy relates to the amount
of compensation due and the settlement or award is
greater than the amount paid or tendered by the
employer or insurer, a reasonable attorney's fee as
established by the division or the workers'
compensation judge if the case has gone to a
hearing, based solely upon the difference between
the amount settled for or awarded and the amount
tendered or paid, may be awarded in addition to the
amount of compensation.
" (2) When an attorney's fee is awarded against an
employer or insurer under this section there may be
further assessed against the employer or insurer
reasonable costs, fees, and mileage for necessary
witnesses attending a hearing on the claimant's
behalf. Both the necessity for the witness and the
reasonableness of the fees must be approved by the
division or the workers' compensation judge."
Section 39-71-613, MCA:
 "(1) When an attorney represents or acts on behalf
of a claimant or any other party on any workers'
compensation claim, the attorney shall submit to
the division a contract of employment stating
specifically the terms of the fee arrangement
between the attorney and the claimant.
" (2) The administrator of the division may
regulate the amount of the attorney's fee in any
workers' compensation case. In regulating the
amount of the fee, the administrator shall consider
the time the attorney was required to spend on the
case, the complexity of the case, and any other
relevant matter the administrator may consider
appropriate.
" (3) If an attorney violates a provision of this
section, a rule adopted under this section, or an
order fixing attorney's fee under this section, he
sha.11 forfeit the right to any fee which he may
have collected or been entitled to collect."

It will be seen from the foregoing statutes, that
section 39-71-611, MCA, applies where the insurer denies
completely the Workers' Compensation benefits. Section
39-71-612, MCA, applies where there has been a partial
payment or partial tender of compensation to the claimant.
Section 39-71-613, MCA, gives the Division of Workers'
Compensation the power to require the submission to it of
attorneys' employment contracts; the administrative division
is given the power to regulate the amount of the attorneys
fees "in any Workers1 Compensation case." Section 39-71-611,
MCA, gives the Workers' Compensation judge the exclusive
power to fix attorneys fees; section 39-7,--612,gives the
Division or the Workers' Compensation judge the power to set
fees.
The "net recovery" concept was first discussed by this
Court in Myers v. 4-B's Restaurant, Inc. (1977), 172 Mont.
159, 561 P.2d 1331. At issue in Myers was whether the
insurer was liable for attorneys fees where the insurer had
not denied compensability but claimed that the workers'
disability was permanent partial, rather than permanent
total. This Court stated:
"[Als the purpose of the statute is to grant
claimant a net recovery of compensation benefits
... a partial d-enial of benefits ...
later
adjudged payable is within [the statute.] If the
statute were otherwise construed ...
its purpose
and objective of affording a net recovery would be
defeated." (Emphasis added.) 172 Mont. at 161,
561 P.2d at 1333.
Then came the case of Smith v. Pierce Packing (1978),
177 Mont. 267, 581 P.2d 834, where we quoted at length from,
a-nd approved of the net recovery language in Myers. Last
came Holton v. F. H. Stoltze Land and Lumber Company (1981),

- Mont . -, 637 P.2d 10, 38 St.Rep. 1835. In Hol-ton, the
Workers' Compensation judge awarded a claimant $9,000 and
then directed the claimant to pay $1.,000 of his award to his
attornev. This Court said:
"While the Workers' Compensation judge may
determine which attorney fees are reasonable, the
clear meaning of the statute is to provide attorney
fees above and beyond the compensation awarded to a
successful claimant. Assessing a successful
claimant $1,000 for attorney fees clearly reduces
his net compensation and thus cannot be allowed."
637 P.2d at 14, 38 St.Rep. at 1840.
We are aware that the net award concept is within the
spirit and history of the Workers' Compensation Act. Montana
was in the vanguard of the states to a.dopt acts providing
Workers' Compensation. In Ch. 67, Laws of Montana (1909),
the legislature provided for a state accident insurance and
workman's compensation plan for personal injury sustained by
coal mine employees in the course of their employment. The
act was to be administered by the state auditor. The concept
of coal mine workers' compensation was attacked in Cunningham
v. Northwestern Improvement Company (1911), 44 Mont. 180, 119

P. 554. There this Court held that a Workers' Compensa.tion
law was within the police power of the state, was not cla.ss
legislation because it extended only to coal miners, was
within the taxing power of the state, was properly adopted
for a public purpose, did not abuse the trial by jury right
of the Seventh Amendment of the United States Constitution,
provided due process of law, - was repugnant to the equal
but
protection clause of the United States Constitution because
the act did not prevent separate suits by employees against
their coal mine employers.
The essential framework for the present Workers'
Compensation Act was adopted by the legislature in Ch. 96,
Laws of Montana (1915). This act was attacked on behalf of
Lewis and Clark County, upon the ground that the act should
not apply to it since the county's premiums would ha.ve to be
raised by taxes which the county contended was not a public
purpose (Lewis and Clark County v. Industrial Accident Board
(1916), 52 Mont. 6, 155 P. 268). What this Court said in
1916 about the development of Workers' Compensation Acts is
worth remembering:
"Workingmen's Insurance and Compensation Laws are
the products of the development of the social and
economic idea that the industry which has always
borne the burden of depreciation and destruction of
the necessary machinery, shall also bear the burden
of repairing the efficiency of the human machines
without which the industry itself could not exist.
The economic loss from vocational disease,
industrial accident, invalidity, old age and
unemployment was a subject of serious inquiry among
the constituent German states before the days of
the empire, but the credit for crystallizing the
sentiment into workable laws will always remain
with Bismarck. From the enactment of the sick
insurance statute in Germany in 1883, and the
fundamental law in 1884, the idea of compensation
based only upon the risks of the business and the
impairment of earning efficiency spread to other
European states, and finally penetrated to this
country. The federal government, thirty-one
states, Alaska, Ha.waii and the canal zone now have
measures for the relief of injured workmen
patterned after the Germa.n insurance or English
compensation plan.. .. Compensation laws proceed
upon the theory tha.t the injured workingman is
 entitled to pecuniary relief from the distress
caused by his injury, as a matter of right, unless
his own willful act is the proximate cause, and
that it is wholly immaterial whether the injury can
be traced to the negligence of the ma.ster, the
neqligence of the injured employee or a
fellow-servant, or whether it results from an act
of God, the public enemy, an unavoidable accident,
or a mere hazard of the business which may or may
not be subject to more exact classification; that
his compensation shall be certain, limited by the
impairment - - e a r n i n ~ a p a c i t ~ ,
of his proportioned-
his wages, - - dependent upon the skill
and not or
eloquence of counsel - - - - or caprice - -
or the whim of a
jury; thatas between workmen of the same class who
suffer like injuries, each shall receive the sa.me
compensation, and - - without the economic
that, too,
waste incident to protracted litigation and without
reference to t h e fact that the injury to the one
may have been occa.sioned by the negligence of the
master, and to the other hy reason of his own
fault." (Emphasis added.)
In later cases, this Court piously intoned (while
turning down the claimants) that the theory of workman's
compensation law is to lift the burden of industrial
accidents from the injured workman and their dependents and
place it on industry. Betor v. National Biscuit Company
(1929), 85 Mont. 481., 280 P. 641; Kerns v. ~nacondaCopper
Mining Compa-ny (1930), 87 Mont. 546, 289 P. 563.
It should be beyond cavil therefore that the fundamental
basis of worker's compensation laws is to accommodate the
public interest in placing economic 1-oss caused by employment
accidents not upon the public, but upon the industry in which
the accident occurred, Williams v. Industrial Accident Board
(1939), 109 Mont. 235, 97 P.2d 1115; and that the principal
aim of workers' compensation coverage is to provide social
insurance which protects the injured workman against
disability from a work-connected injury, again placing the
cost of the injury on the industry employing him. Mahlum v.
Broeder (1966), 1-47Mont. 386, 412 P.2d 572.
 If therefore, the social purpose of Workers'
Compensation Acts is to provide for the injured worker a fund
which replaces his lost earnings or his lost earning
capacity, the reasonable cost of effectuating such social
purpose where litigation is necessary ought also be the
burden of the industry. Any erosion of the workers1 right of
recovery by imposing upon the worker the cost of procuring
his rights erodes to that extent the social purpose.
It is clear to us that it is the objective of the
statutes allowing attorneys fees in compensation cases to
preserve intact the eventual award recovered by the claimant
for his impairment, by assessing in addition his attorneys
fees and costs against the insurer or employer. It is a
further purpose of the statutes to allow the Workers'
Compensation Court or Division to regulate attorneys fees for
successful claimants. Section 39-71-613, MCA, supra. The
statutory requirement that Workers1 Compensation laws be
liberally construed exists for the protection of the worker.
Section 39-71-104, MCA. 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 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.
Effect of Approved Contingent Fee Contracts
We turn now to the more difficult issue, the weight that
should be accorded by the Division or the Workers'
Compensation judge to a contingent fee contract which has
been entered into between the successful claimant and his
attorney.
Where the subject of a contingent fee contract offends
public policy, Montana will not enforce the contract. Keller
v. Turner (1969), 153 Mont. 59, 453 P.2d 781. Otherwise, as
between attorney and client, Montana will enforce a
contingent fee contract according to its written terms.
Gross v. Holzworth (1968), 151 Mont. 179, 440 P.2d 765.
This Court is quite aware that a small segment of the
Bar is available to a worker seeking an attorney to prosecute
a Workers' Compensation claim. Most of the members of the
bar do not engage in Workers' Compensation practice, not
because those claims are undesirable, but in the sense of
being outside their expertise. Workers' Compensation claims
are a specialized practice, requiring training and experience
if the claims are to be successfully negotiated. Rare is the
worker who can afford an attorney on the basis of an hourly
fee, pay as you go. More important, a claims attorney will
often find it necessary to advance on behalf of the client
the costs incident to prosecuting the claim, the fees for
consultations with doctors, the costs of depositions, the
preparation of exhibits, and the necessity of travel. The
"risk factor" that an attorney faces in entering into a
contingent fee contract with a Workers' Compensation claimant
includes not only the loss of the value of his services, but
of the costs which he may have advanced. For that reason, it
has been observed:
"The experience of the marketpla-ce indicates that
lawyers generally will not provide legal
representation on a contingent basis unless they
receive a premium for taking that risk.
Ordinarily, when lawyers undertake a representation
on a contingency basis, they bargain for a
percentage of the recovery. That percentage is
 sufficiently high to compensate the lawyer not only
for the reasonable value of the time he or she
anticipates devoting to the particular lawsuit, but
also for the time devoted to other lawsuits
undertaken on the same basis but unsuccessful in
result. Thus, in a rough and arbitrary way, the
contingent percentage fee accounts for the risk of
nonrecovery." Berger, Court Awarded Attorneys'
Fees : What is Reasonable? 126 Univ. Pa. Law
Review 281, 324-325 (1977); Clark v. Sage (1981),
102 Idaho 261, 629 P.2d 656, 661.
In ~cKittrickv. Gardner (4th Cir. 1967), 378 ~ . 2 d872,
875, the Court said in a case involving a contingent fee in a
social security benefits claim:
"While the judge must approve the reasonableness of
the fee in every case and may not unquestioningly
endorse contingent fee contracts providing for a
fee of not more than 25 percent of the accrued
benefits, there is no prohibition against his
consideration of the contingency of compensation.
Availability of lawyers to such claimants is of the
highest importance, and if a lawyer is to receive
no compensation unless there is an award, his
compensation is contingent on whether or not he has
a contract that says so. Most of the disability
claimants have no other resources for the payment
of fees. The contingency of compensation, whether
it stems from an employment contract or results
from the claimants indigency, is highly relevant in
the appraisal of the reasonableness of any claim.
The effective lawyer will not win all of his cases,
and any determina-tion of the reasonableness of his
fees in those cases in which his client prevails
must take account of the lawyer's risk of receiving
nothing for his services. Charges on the basis of
a minimal hourly rate are surely inappropriate for
a lawyer who has performed creditably when payment
of any fee is so uncertain."
We have previously noted that section 39-71-613, MCA,
granted power to the administrator of the Division of
Workers' Compensation to regulate attorneys fees "in any
Workers' Compensation case." Since the statute does not
speak directly of contingent fees, the administrator of the
Division after hearings adopted an administrative rule,
section 24.29.3801, A.R.M., which provides as follows:
"24.29.3801. Attorney Fee Regulation. (1) An
attorney representing a claimant on a worker's
compensation claim shall submit to the division, in
accordance with Section 39-71-613, MCA, a contract
or a copy of a contract of employment stating
specifically the terms of the fee arrangement. The
contract of employment shall be signed by the
claimant and the attorney.
"(2) An attorney representing a claimant on a
workers1 compensation claim, and who plans to
utilize a contingent fee system to establish the
fee arrangement with the claimant may not charge a
fee above the following amounts:
" (a) For cases that have not gone to a hearing
before the Workers' Compensation judge, twenty-five
percent (25%) 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, thirty-three percent
(33%) of the amount of compensation payments the
claimant receives from an Order of the Workers'
Compensation judge;
" (c) For cases that are appealed to the Montana
Supreme Court, forty percent (40%) of the amount of
compensation payments the claimant receives based
on the order of the Supreme Court.
" ( 3 ) The amount of medical and hospital benefits
received by the claimant shall not be considered in
calculating the fee, unless the workers'
compensation insurer has denied all liability,
including medical and hospital benefits, in the
claimant's case, or unless the insurer has denied
the payment of certain medical and hospital costs
a.nd the attorney has been successful in obtaining
such benefits for the claimant.
" (4) For good cause shown, the division may allow
contingent fees in excess of the maximum fees as
set forth in the above schedule. Such a variation
from the maximum contingent fee schedule must be
approved by the division before a final fee
contract is entered into between the attorney and
the claimant.
"(5) The fee schedule set forth above does not
preclude the use of other attorney fee
arrangements, such as the use of a fee system based
on time. When such a fee arrangement is utilized,
the contract of employment shall specifically set
forth the fee arrangement, such as the amount
charged per hour.
" (6) The contingent fee schedule set forth above
is a maximum schedule, and nothing prevents an
attorney from charging a contingent fee below the
maximum contingent fee schedule. The division
encourages attorneys to review each workers'
compensation claim on a case by case basis in order
to determine an appropriate fee. An attorney may
 also reduce the attorney's fee from what was
originally established in the fee contract, without
the approval of the division.

" (7) The division retains its authority to
regulate the attorney fee amount in any workers1
compensation case even though the contract of
employment fully complies with the rules set forth
above. "
As a matter of legislative history, section 39-71-611,
MCA, supra, originally provided that "the insurer shall pay
reasonable costs and attorneys fees as established & the
division." By an amendment Ch. 63, § 2, Laws of 1979, the
word "divisj-on" was struck from the statute and the term
"Workers' Compensation judge" inserted. Thus the
a.dministrative rule above cited was adopted by the Division
when it had the power to regulate not only fees on cases
which had not gone to adjudication, but also fees on those
cases which were adjudicated by the Workers' Compensation
Court.
When we turn our attention to the administrative rule
promulgated by the Division, it becomes self-evident that the
contingent fees included therein by the Division were
considered by it to be reasonable. No other weight can be
attached to the adoption of the administrative rule but that
the Division had determined that the amount of such
contingent fees fully protected the claimant, were consonant
with the practice of attorneys in the Workers1 Compensation
field, and fulfilled the Division's legislative obligation to
provide for reasonable attorneys fees to successful
claimants.
Our sister state, Idaho, subscribes to the "net award"
theory in fixing attorneys fees. Clark v. Sage (1981), 102
Idaho 261, 629 P.2d 657, 659. Idaho had earlier held that
when its industrial accident board had approved a contingent
fee agreement, the successful claimant was entitled to an
award of: attorneys fees against the insurer or employer in
accordance with the contingent fee agreement. Mayo v.
Safeway Stores, Inc. (1969), 93 Idaho 161, 457 ~ . 2 d400.
In Clark v. Sage, supra, the case came before the Idaho
Supreme Court because the industrial accident commission had
withdrawn its approval of a contingent fee contract. The
question before the Idaho court was what effect should be
given to the contingent fee contract. The Idaho Court
stated:
"Nevertheless, the proposition still remains that
where an employer and its surety have unreasonably
refused to pay an otherwise compensable claim, an
award of attorney fees from them 'should not be
less than the amount that would be found reasonable
if agreed upon between the claimant and his
attorney as a fee to be paid by claimant.' 3
Larson on Workers' Compensation Laws, S 83.40 at
15-649 (1976) (relying on Mayo v. Safeway Stores,
Inc. , supra) .Given that the claimant and his
former attorney entered into a contingent fee
agreement, the commission is under a duty to
determine what would - - reasonable attorney fee
be a
on
- a contingenc basis. This obligation
neces~arilyarises Yfrom the fact that the intent of
the claimint and his former attorney was for the
attorney to be paid on a contingent fee basis.
(Emphasis added.)" 629 P.2d at 660.
The 1da.ho court further held that in determining a reasonable
attorneys fee its commission must engage in a balancing
process and consider on contingent basis the following
factors:
" (1) The anticipated time and labor required to
perform the legal service properly.
"(2) The novelty and difficulty of legal issues
involved in the matter.
" (3) The fees customarily charged for similar
legal services.
"(4) The possible total recovery if successful.
"(5) The time limitations imposed by the client or
circumstances of the case.
 " (6) The nature and length of the attorney-client
relationship.
" (7) The experience, skill and reputation of the
attorney.
"(8) The ability of the client to pay for the
legal services rendered.
" (9) The risk of no recovery." 629 P.2d at 661.
Not mentioned by the Idaho court in Clark v. Sage,
supra, but surely a factor to he considered, is the market
value of the lawyer's services at the time and place
involved. Indeed it may be said that in every retainer
contract, be it persona1 or public, hourly, fixed fee or
contingent fee, each such contract is in reality based on the
market value of the lawyer's services. With the added factor
of the market value of the lawyer's services at the time and
place involved, we adopt the factors set out by the Idaho
Supreme Court to be considered by Montana's Workers'
Compensation judge or the Division in determining the
reasonableness of contingent fee contracts and the amount of
attorneys fees to be awarded to successful claimants.
It is clear to us in the instant case that the Workers'
Compensation judge, in fixing a fee of $8,500 for Wight's
attorney did not consider the proper factors in determining
the reasonableness of the fee to be awarded.
We therefore, remand this case for a hearing based on
the factors which we have here approved to determine the
reasonable attorneys fees that Wight is entitled to recover.
In considering Wight's contingent fee contract with his
attorney, the Workers' Compensation judge should accept the
approved contract as having a strong presumption in its
favor. If the judge does not set a fee in accordance with
the contingent fee contract, he shall state with
particularity his reasons in writing, based upon strong
countervailing evidence, why the contingent fee contract is
not followed by him, and precisely what weight he accorded to
the contingent fee contract.
We would direct, however, that the Workers' Compensation
Court give no effect to the 40 percent contingent fee
contract adopted between the claimant and his attorney after
the successful appeal had taken place in this case. When the
attorney entered into the first contract with his prospective
client for a 25 percent contingent fee contract, no
confidential relationship existed between the attorney and
the worker at tha.t time, and a 25 percent contingent fee
contract stands on the sa.me footing as any other contract
between persons competent to contract. Renegar v. Staples
(Okla. 1963), 388 P.2d 867. After the confidential
relationship was established by the execution of the 25
percent contingent fee contract the attorney was bound not to
use the influence which his position gave him to obtain an
advantage over his client. See section 72-20-202, MCA. We
do, however, accept the attorney's explanation that the
second contract came about when he realized that he was
charging less than other attorneys for the same kind of
services, and therefore requested of his client a new
contract in line with the rules promulgated by the Division.
The attorney at oral argument felt that the second contract
clouded the real issues in this ca.se and indeed it has so
operated.
We are troubled that one effect of this decision is that
it may require the Workers' Compensation judge to hold
evidentiary hearings on all contested attorneys fees. Since
the court's time now is so severely limited and its workload
so great, this additional burden would undoubtedly adversely
affect the rights of other claimants to a speedy
determination of their claims. To a.void such an effect, we
suggest that the Workers1 Compensation Division promulgate an
addition to section 24.29.3801, A.R.M., providing a system
whereby an attorneys fee contract submitted to the Division
for approval under section 39-71-613, MCA, shall at the same
time be served by copy upon the employer or insurer, and a
procedure be set out for the insurer or employer to contest
before the Division the reasonableness of the provisions in
the contract for an attorneys fee. The Division, in
approving or disapproving such contract should be guided by
the same factors herein set forth in determining a reasonable
attorneys fee. When the Worker's Compensation Judge is
required to fix attorneys fees under our statutes, a fee
contract approved by the Division should have the same
presumption in its favor and the Judge should apply the same
factors and procedure for contested fee cases before him as
here set out.
In the rare case where an evidentiary hea.ring is
necessary, the Worker's Compensation judge shall extend
opportunity for hearing, and to that extent we overrule the
holding in Continental Insurance Co. & Raymond Corcoran
Trucking v. Horton (1980), Mont . -, 613 P.2d 1011, 37
St.Rep. 1244. Needless, frivolous or picayunish requests for
evidentiary hearings before the Workers Compensation judge
shall be regarded by this court as an abuse of procedure
warranting penalty or discipline.
Reversed and remanded to the Workers1 Compensation Court
pursuant to the instructions herein. Costs to claimant.
 Justice

We Concur:

Chief Justice
/----,

Justices
Mr. Justice Frank B. Morrison, Jr. dissenting:
I dissent in part.

In my opinion the result reached by the majority is
correct except for rejection of the 40 percent contingent fee
contract adopted between claimant and his attorney. This
contract was approved by the Division and under the rationale
of the opinion should be transferred to the insurance company
unless there is strong evidence rejecting that contract as
being unreasonable. There was a confidential relationship
existing between attorney and client but there is no
indica.tion that the attorney abused tha.t relationship. In
fact the majority opinion recognizes that the contingent fee
contract was adjusted because it was lower than the contracts
normally approved for the same or similar representation.
Under the rationale that we adopt in this case, the 40
percent contingent fee contract, once approved by the
Division, should be accepted by the Worker's Compensation
Court as reasonable absent the requisite countervailing
evidence. Here there is none. Therefore, the 40 percent
contingent fee should be paid by the insurance carrier.
n
Mr. J u s t i c e J o h n Conway Harrison concurring in part and
dissenting in part.

I concur i n t h e m a j o r i t y ' s d e c i s i o n t o remand t h i s case to

t h e Workers' Compensation Court. However, my v i e w s a r e n o t in

complete accordance with the majority.
For t h e most p a r t , I agree with t h e m a j o r i t y ' s v i e w of the
net recovery concept, however, I would h a v e expanded somewhat.

The majority frames the question of net recovery as follows:
"whether a s u c c e s s f u l c l a i m a n t f o r Workers' Compensation b e n e f i t s

should be required under the s t a t u t e s t o pay any p a r t of his
incurred attorneys fees." The m a j o r i t y t h o r o u g h l y d i s c u s s e d t h e
n e t r e c o v e r y c o n c e p t a s w e l l a s t h e u l t i m a t e p u r p o s e of W o r k e r s '
Compensation l e g i s l a t i o n t o reach t h e c o n c l u s i o n t h a t : " [ i ] t is
clear to us that i t i s t h e o b j e c t i v e of the s t a t u t e s allowing

a t t o r n e y s f e e s i n c o m p e n s a t i o n c a s e s t o p r e s e r v e i n t a c t t h e even-

tual award recovered by the claimant for his impairment, by
a s s e s s i n g i n a d d i t i o n h i s a t t o r n e y s f e e s and c o s t s a g a i n s t t h e
insurer and employer ." I completely agree, however, I would

r e s p e c t f u l l y add t h e f o l l o w i n g comments.
Any award of a t t o r n e y s f e e s u n d e r s e c t i o n 39-71-611, MCA, is
a c o m p l e t e award. The c l a i m a n t ' s a t t o r n e y cannot seek further
c o m p e n s a t i o n from h i s c l i e n t b a s e d on any c o n t r a c t u a l a r r a n g e -

ment. The s t a t u t e empowers t h e W o r k e r s ' Compensation judge to

award "reasonable costs and attorneys' fees; " thus anything
claimed beyond the amount set by the court must be deemed
unreasonable; e v e n t h o u g h ( a s i n t h i s c a s e ) any e x c e s s had p r e -
viously been approved by the Workers' Compensation Division.
T h e r e c a n n o t e x i s t two s t a n d a r d s of reasonableness; one a r i s i n g
o u t of an a t t o r n e y / c l i e n t c o n t r a c t a p p r o v e d by t h e D i v i s i o n , and
o n e a p p l i e d by t h e C o m p e n s a t i o n C o u r t .
M v i e w of t h e n e t r e c o v e r y c o n c e p t is a s h a d e d i f f e r e n t from
y

the majority's view. In theory, we f u l l y agree; n e t recovery

means t h a t a c l a i m a n t ' s b e n e f i t s s h o u l d n o t be r e d u c e d by a t t o r -

n e y s f e e s and c o s t s . Our d i f f e r e n c e m u s t be i n how a n e t r e c o -
very comes about. and this involves the discretion of the

Workers' Compensation judge.
The m a j o r i t y addresses this issue by a s k i n g : "how d o e s a

claimant's contingent fee contract with h i s attorney a f f e c t the
d i s c r e t i o n of t h e Workers ' Compensation judge i n f i x i n g a t t o r n e y s

f e e s t o be awarded t o t h e c l a i m a n t ? " I n answering t h i s q u e s t i o n ,

the majority states:
"[iln considering Wight's contingent fee
contract with h i s attorney, t h e Workers'
Compensation judge s h o u l d a c c e p t t h e approved
c o n t r a c t a s having a s t r o n g presumption i n i t s
favor. I f t h e judge d o e s n o t s e t a f e e i n
accordance with the contingent f e e contract,
he s h a l l s t a t e with p a r t i c u l a r i t y h i s reasons
i n w r i t i n g , b a s e d upon s t r o n g c o u n t e r v a i l i n g
e v i d e n c e , why t h e c o n t i n g e n t f e e c o n t r a c t i s
n o t f o l l o w e d by him, and p r e c i s e l y t h a t w e i g h t
he accorded t o t h e contingent f e e c o n t r a c t . "
The majority very narrowly defines the discretion of the
Workers' Compensation judge. I b e l i e v e a broader interpretation

is correct. T h e r e e x i s t s a n i m p o r t a n t r e a s o n f o r a l l o w i n g broad
discretion. In these situations, before negotiation of an
attorney/client fee contract, the attorney and claimant may

realize that if they a r e successful, t h e i n s u r e r w i l l be l i a b l e
f o r payment o f t h e f e e . T h u s , t h e r e is an i n c e n t i v e t o s e t t h e
f e e a s high a s possible. A similar s i t u a t i o n has occurred in

eminent domain cases. In one such case this Court stated:
" H e r e , s i n c e t h e s t a t e o r p o l i t i c a l sub-
d i v i s i o n must pay t h e a t t o r n e y f e e s , t h e r e is
e v e n a s t r o n g e r r e a s o n t o remand t h e i n s t a n t
c a s e f o r c o n s i d e r a t i o n of t h e f a c t o r s s e t o u t
i n -c e y i c h and T h o l k e s .
Crn Under t h e 1 8 8 9
C o n s t i t u t i o n f e e s i n c o n d e m n a t i o n c a s e s were
percentage contingency fees. In the private
a g r e e m e n t s t h e p a r t i e s p r o t e c t e d t h e i r own
i n t e r e s t s b u t where t h e f e e is t o be p a i d by
t h e s t a t e t h e r e is no i n c e n t i v e f o r t h e l a n d -
owner t o b a r g a i n t o k e e p t h e p e r c e n t a g e
reasonable. " Rauser v. T o s t o n I r r . D i s t .
( 1 9 7 7 ) , 1 7 2 Mont. 5 3 0 , 5 4 6 , 5 6 5 P.2d 6 3 2 , 6 4 1 .
In workers' compensation cases, fee a g r e e m e n t s must first be

approved by the Division; thus, one could argue that the
i d e a e x p r e s s e d i n - a u s- is n o t a p p l i c a b l e .
R er However, i n my v i e w ,
t h e D i v i s i o n ' s r u l e i s n o t c o m p r e h e n s i v e enough t o i n s u r e t h a t i n

particular cases the fee approved will be reasonable. An
e x c e l l e n t example is t h e c a s e b e f o r e u s . The second c o n t r a c t was

approved, it s h o u l d n o t have b e e n . I n o t h e r words, a p a r t i c u l a r
a g r e e m e n t may c o n f o r m t o t h e d i v i s i o n ' s r u l e , y e t i n some c i r -
c u m s t a n c e s , may be u n r e a s o n a b l e . C o n s e q u e n t l y , t h e W o r k e r s ' Com-

pensation judge m u s t h a v e b r o a d d i s c r e t i o n i n making a n award.
Furthermore, I do not believe it is c o r r e c t t o r e q u i r e t h e
j u d g e t o b a s e h i s award on a p a r t i c u l a r method. However, if a

claimant and his attorney have entered into a contingent fee
a g r e e m e n t , I c l e a r l y r e c o g n i z e s u c h a f a c t d e s e r v e s s p e c i a l con-

sideration. Not i n a p p r o p r i a t e a t t h i s j u n c t u r e a r e t h e r e m a r k s

o f Clement F. H a y n s w o r t h , J r . , C h i e f J u d g e of t h e F o u r t h C i r c u i t ,
i n M c K i t t r i c k v. Gardner ( 1 9 6 7 ) , 3 7 8 F.2d 872, 875, i n a case
involving a contingent f e e i n a s o c i a l s e c u r i t y b e n e f i t s claim:

"While t h e judge must approve t h e r e a s o n a b l e -
n e s s of t h e f e e i n e v e r y c a s e and may n o t
unquestioningly endorse contingent fee
c o n t r a c t s p r o v i d i n g f o r a f e e of n o t more t h a n
t w e n t y - f i v e p e r c e n t of t h e a c c r u e d b e n e f i t s ,
t h e r e is no p r o h i b i t i o n a g a i n s t h i s con-
s i d e r a t i o n of t h e c o n t i n g e n c y of c o m p e n s a t i o n .
A v a i l a b i l i t y of l a w y e r s t o s u c h c l a i m a n t s is
o f t h e h i g h e s t i m p o r t a n c e , and i f a l a w y e r i s
t o r e c e i v e no c o m p e n s a t i o n u n l e s s t h e r e i s a n
a w a r d , h i s c o m p e n s a t i o n is c o n t i n g e n t w h e t h e r
o r n o t he h a s a c o n t r a c t t h a t s a y s s o . Most
o f t h e d i s a b i l i t y c l a i m a n t s h a v e no o t h e r
r e s o u r c e s f o r t h e payment of f e e s . The con-
t i n g e n c y o f c o m p e n s a t i o n , w h e t h e r i t stems
f r o m an employment c o n t r a c t o r r e s u l t s from
t h e c l a i m a n t ' s i n d i g e n c y , is h i g h l y r e l e v a n t
i n t h e a p p r a i s a l of t h e r e a s o n a b l e n e s s of a n y
f e e claim. The e f f e c t i v e l a w y e r w i l l n o t win
a l l of h i s c a s e s , and any d e t e r m i n a t i o n of t h e
r e a s o n a b l e n e s s of h i s f e e s i n t h o s e c a s e s i n
w h i c h h i s c l i e n t p r e v a i l s m u s t t a k e a c c o u n t of
t h e l a w y e r ' s r i s k of r e c e i v i n g n o t h i n g f o r h i s
services. C h a r g e s on t h e b a s i s of a minimal
hourly rate are surely inappropriate for a
l a w y e r who h a s p e r f o r m e d c r e d i t a b l y when
payment of any f e e is s o u n c e r t a i n . "
Finally, I d i s a g r e e on t h e i s s u e of whether or n o t a hearing
is r e q u i r e d . The m a j o r i t y s u g g e s t s t h a t e v i d e n t i a r y h e a r i n g s on
a t t o r n e y f e e s w i l l be r a r e . T h i s means t h e y a r e n o t r e q u i r e d . I

realize that we recently stated: "the matter of allowing a
hearing concerning attorney fees is . . . discretionary."

C o n t i n e n t a l I n s . Co. v . H o r t o n ( 1 9 8 0 ) , Mont. , , 613
P.2d 1011, 1013, 37 St.Rep. 1244, 1246. However, I would
overrule - o r t-
H -o n and hold that an evidentiary hearing on
a t t o r n e y s f e e s is r e q u i r e d i n t h e s e s i t u a t i o n s . I would apply

the general rule; " [ a l n award of attorney fees, l i k e any o t h e r
award must be based on competent evidence." Crncevich v.
G e o r g e t o w n Rec. Corp. ( 1 9 7 5 ) , 1 6 8 Mont. 1 1 3 , 1 2 0 , 5 4 1 P.2d 56,

59.
I am fully aware of the heavy workload with which the
Workers' C o m p e n s a t i o n C o u r t is f a c e d . However, I feel t h a t due

process requires an evidentiary hearing on attorney's fees in

section 611 situations. The insurer should have notice and
o p p o r t u n i t y t o be h e a r d t o c o n t e s t r e q u e s t s f o r awards. Also,

t h e c l a i m a n t s h o u l d be a b l e t o j u s t i f y l a r g e r a w a r d s b e c a u s e of
extraordinary circumstances.
Mr. C h i e f J u s t i c e F r a n k I . H a s w e l l , c o n c u r r i n g i n p a r t and
dissenting in part:
I c o n c u r i n t h e r e s u l t r e a c h e d by t h e m a j o r i t y i n t h i s

case. I l i k e w i s e a g r e e t h a t t h e award t o c l a i m a n t s h o u l d b e

a n e t recovery with a l l a t t o r n e y f e e s t o be p a i d by the

i n s u r e r and t h a t t h e f a c t o r s t o be c o n s i d e r e d i n a w a r d i n g
a t t o r n e y f e e s a r e t h o s e s e t f o r t h i n C l a r k v. Sage e t a l .

( 1 9 8 1 ) , 1 0 2 I d a h o 2 6 1 , 629 P.2d 657.
M q u a r r e l is w i t h t h e h o l d i n g of
y the majority t h a t

the a d o p t i o n of a maximum c o n t i n g e n t f e e s c h e d u l e by the
Workers1 Compensation D i v i s i o n c o n s t i t u t e s a d e t e r m i n a t i o n

by t h e D i v i s i o n t h a t f e e s w i t h i n t h e maximum a r e r e a s o n a b l e .
I would h o l d t h a t s u c h maximum f e e s c h e d u l e c o n s t i t u t e s a

d e t e r m i n a t i o n t h a t a n y c o n t i n g e n t f e e e x c e e d i n g t h e maximum
i n t h e s c h e d u l e is u n r e a s o n a b l e . P l a c i n g a l i d on a t t o r n e y

f e e s does n o t c o n s t i t u t e a u t o m a t i c a p p r o v a l of e v e r y c o n t i n -
gent fee contract within t h e maximum. The D i v i s i o n rule
i t s e l f makes t h i s c l e a r :

"The D i v i s i o n r e t a i n s i t s a u t h o r i t y t o
r e g u l a t e t h e a t t o r n e y f e e amount i n a n y
w o r k e r s ' c o m p e n s a t i o n case e v e n t h o u g h
t h e c o n t r a c t o f employment f u l l y c o m p l i e s
w i t h t h e r u l e s set f o r t h above." 24-
3 . 1 8 ( 4 2 ) - 5 - 1 8 2 2 0 ( 7 ) , A.R.M.
T h i s l e a v e s t h e Workers1 Compensation Judge free to

d e t e r m i n e a r e a s o n a b l e a t t o r n e y f e e i n a n i n d i v i d u a l case by
balancing the f a c t o r s set f o r t h i n C l a r k v. Sage e t a l . ,
supra.

%w&J! .%&
Chief J u s t i c e