No. 8 4 - 3 9 3
IN THE SUPREME COURT OF THE STATE OF MONTANA
1985
FREDERICK CONWAY,
Claimant and Respondent,
-vs-
BLACKFEET INDIAN DEVELOPERS, INC.,
Employer,
and
MISSOULA SERVICE COMPANY,
Defendant and Appellant.
APPEAL FROM: The Workers' Compensation Court, the Honorable Timothy
Reardon, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Jardine, Stephenson, Blewett & Weaver; K. Dale
Schwanke argued, Great Falls, Montana
For Respondent :
Donald Marble argued, Chester, Montana
Norman Grosfield, co-counsel, Helena, Montana
Filed:
JUL L i9BS
Clerk
Mr. Justice L. C. Gulbrandson d e l i v e r e d t h e Opinion o f the
Court.
Defendant, Missoula S e r v i c e Company, appeals from two
o r d e r s o f t h e W o r k e r s ' Compensation C o u r t a w a r d i n g a t t o r n e y s '
f e e s and c o s t s . The f i r s t o r d e r , e n t e r e d a f t e r a n e v i d e n t i a r y
h e a r i n g , awarded c l a i m a n t ' s a t t o r n e y s $ 4 4 , 5 3 3 . 7 8 i n f e e s on a
forty percent contingency fee agreement applied to the
discounted value of periodic disability benefits due the
claimant, t o g e t h e r w i t h c o s t s of $1,641. The s e c o n d o r d e r
awarded c l a i m a n t ' s a t t o r n e y s $941 i n c o s t s f o r p u r s u i n g t h e
attorneys' fees issue.
C l a i m a n t was i n j u r e d i n a n i n d u s t r i a l a c c i d e n t on J u l y
30, 1976. H e s u f f e r e d t r a u m a t o h i s r i g h t arm, s h o u l d e r and
neck. By December, 1976, he could no l o n g e r work and in
e a r l y 1977 h e was d i a g n o s e d a s h a v i n g m u l t i p l e s c l e r o s i s . He
f i l e d f o r b e n e f i t s w i t h t h e i n s u r e r and was d e n i e d . H e then
filed a petition with t h e Workers' Compensation C o u r t , and
t h e c o u r t h e l d t h e c l a i m a n t was e n t i t l e d t o p e r m a n e n t t o t a l
disability benefits. The i n s u r e r a p p e a l e d t o t h i s C o u r t , and
i n Conway v. Blackfeet Indian Developers, Inc. (Mont. 1 9 8 3 ) ,
669 P.2d 225, 40 S t . R e p . 1427, w e a f f i r m e d .
After t h i s Court's decision i n t h e previous appeal, t h e
only remaining i s s u e was t h e amount o f attorneys' fees and
c o s t s t o be awarded the claimant, and t h e manner of their
payment. On remand of t h e c a s e t o t h e W o r k e r s ' Compensation
Court, claimant filed a motion for an order determining
attorneys' fees. The insurer responded to the motion by
asking for an evidentiary hearing. Over claimant's
objection, a h e a r i n g was h e l d . At t h e hearing, claimant's
attorneys presented the testimony of two e x p e r t w i t n e s s e s ,
B r u c e F i n n i e , an e c o n o m i s t and Tom Keegan, a n a t t o r n e y . One
of the claimant's attorneys also testified. The insurer's
attorney testified and, subsequent to the hearing, the
insurer submitted the deposition testimony of Bob James, a
Great Falls attorney.
The primary issue before the Workers' Compensation
Court was the method of calculation and payment of attorneys'
fees in Workers' Compensation cases where the claimant has a
contingent fee arrangement with his attorney, and is to
receive benefits in periodic payments. Claimant requested
fees of approximately $45,000. This request, supported by
the experts' testimony, was reached by taking claimant's life
expectancy times his weekly rate, yielding a sum of $195,948,
and discounting this at six percent to reach a present value
of $76,268. Past benefits total $35,066. Claimant's total
entitlement is $111,334. The contingency fee arrangement
provides for fees of forty percent of net recovery if
successfully litigated through the Supreme Court. Forty
percent of $111,334 is $44,533.78. The Workers' Compensation
Court awarded this amount to the claimant, plus $1,641 in
costs. Subsequently, the Workers' Compensation Court awarded
claimant $941 for costs in the attorneys' fees action.
Appellant-defendant raises the following issues on
appea 1:
(1) Whether the Workers' Compensation Court erred in
ruling that attorneys' fees should be payable in a lump sum.
(2) Whether there was substantial evidence to support
the Workers' Compensation Court's determination of fees?
(3) Whether the Workers' Compensation Court erred in
awarding claimant's costs for the attorneys' fees proceeding?
Claimant-respondent, pursuant to Rule 14,
M.R.App.Civ.P., raises the following issues:
(1.) Whether the present value discount of claimant's
n e t award s h o u l d b e i n c l u d e d i n t h e c a l c u l a t i o n o f a t t o r n e y s '
fees.?
( 2 ) Whether t h e C o u r t s h o u l d award c l a i m a n t damages and
impose a penalty on defendant pursuant to Rule 32,
M.R.App.Civ.P.?
This Court in Wight v. Hughes Livestock Co. (Mont.
1 9 8 3 ) , 664 P.2d 303, 40 St.Rep. 696, a p p r o v e d c o n t i n g e n t f e e
agreements i n Workers ' Compensation c a s e s . Wight d i d n o t ,
however, s a y how s u c h a r r a n g e m e n t s w e r e t o b e implemented.
Section 39-71-611, MCA is the statute that provides for
attorneys' f e e s i n Workers' Compensation a c t i o n s . It s t a t e s
in part that, "the insurer s h a l l p a y r e a s o n a b l e c o s t s and
attorneys' f e e s a s e s t a b l i s h e d by t h e w o r k e r s ' compensation
judge."
A p p e l l a n t c o n t e n d s t h a t t h e above s t a t u t e p r o v i d e s no
guidance as to how attorneys' fees are to be awarded in
workers' compensation a c t i o n s and that, in the absence of
express l e g i s l a t i v e i n t e n t , t h e Workers' Compensation C o u r t
d o e s n o t h a v e t h e a u t h o r i t y t o award a t t o r n e y s ' fees in a
lump sum when t h e c l a i m a n t i s r e c e i v i n g p e r i o d i c d i s a b i l i t y
payments.
W e do not f i n d a p p e l l a n t ' s argument t o be p e r s u a s i v ~ .
The Workers' Compensation Court's order simply e f f e c t u a t e d
the parties i n t e n t and m e t the criteria s e t o u t i n Wight,
supra. Secondly, section 39-71-611, MCA gives the lower
court the discretionary authority t o determine "reasonable
fees." Reasonable i s a t e r m t h a t can e a s i l y be i n t e r p r e t e d ,
and w e d o s o h e r e , t o comprehend b o t h t h e amount, and t h e
kind of fee--lump sum o r p e r i o d i c . A c a s e a p p e l l a n t relies
upon p o i n t s o u t t h i s d i s t i n c t i o n . I n U.S.F. & G. v. P o t t e r ,
(Ark. 1978), 567 S.W.2d 104, the Arkansas Supreme Court held
that that state's statute did not contain implied authority
for the workers' compensation division to award attorney's
fees on a lump sum basis. The pertinent statute,
Ark.Stat.Ann. S81-1332, provides that:
"In determining the amount of fees, the
Commission shall take into consideration
the nature, length and complexity of the
services performed, and the benefits
resulting therefrom to the compensation
beneficiaries." (Emphasis added.)
Montana's statutory language is broader. It does not refer
to the "amount" of fees, but rather that the court shall set
a "reasonable" fee. As stated above, this includes the power
to set the kind of fee that shall be paid claimant's
attorneys. On this point we affirm the Workers' Compensation
Court.
Next, appellant contends that the Workers' Compensation
Court did not have substantial credible evidence for its
ruling. It argues that the court relied on evidence
introduced at trial without a proper foundation, and
therefore the order has no evidence to support it.
Specifically, appellant contends that claimant's experts
relied on an inaccurate mortality table in calculating the
present value of the award.
At the hearing, claimant's attorneys introduced and
qualified Bruce Finnie as an expert economist. On voir dire
of Finnie, insurer elicited testimony that his calculations
were based on a standard mortality table that did not
specifically account for claimant's American Indian
genealogy, on-reservation status, and multiple sclerosis.
Asked if these circumstances would substantially effect
claimant's life expectancy, Finnie replied "yes. " At that
point defendant objected to the admission of Finnie's
computation because its "underlying basis" was "significantly
off." The court noted insurers' objection, but admitted the
evidence "for what it is worth."
In its order, the Workers' Compensation Court noted:
"The defendant objects to the claimant's
calculated life expectancy, asserting
that the claimant's physical condition
and American Indian genealogy have not
been accounted for. While these
assertions may have merit, there was no
evidence submitted either to support the
contentions or to rebut Mr. Finny's [sic]
ca l culations. Therefore, the life
expectancy, as presented by the
claimant's expert, shall be accepted."
Insurer insists that this evidence was lacking a proper
foundation, and that the court erred in relying thereupon,
citing 32 C.J.S. Evidence S583, and Jones, - - -of
The Law
Evidence, (6th Ed.) S4.59. While we note that strictly as a
matter of evidence 'Law, insurer's argument has merit, it
fails to account for section 39-71-2903, MCA, which
specifically provides that " . . . the workers' compensation
judge is not bound by common law and statutory rules of
evidence." In the past, responding to similar arguments, we
have upheld the admission of hearsay evidence, Stevens v.
Glacier Gen. Assur. Co. (1978), 176 Mont. 61, 65, 575 P.2d
1326, 1329, and "appraiser's conclusions . . . based upon
only a cursory investigation" Krause v. Sears Roebuck & Co.
(1981), 197 Mont. 102, 105, 641 P.2d 458, 460, before the
Workers' Compensation Court. Although we specifically noted
in Krause, supra, that "the court did not place any undue
reliance on the appraiser's testimony." 197 Mont. at 106,
641 P.2d at 460, which is not the case here; we find another
factor that weighs against appellant. As noted by the
Workers' Compensation Court, the insurer "submitted [no
evidence] e i t h e r t o support t h e contentions o r t o r e b u t M r .
Finny's [sic] calculations." Though the claimant has the
b u r d e n o f making a p r i m a f a c i e c a s e , if he does s o , and i f
t h e defendant r a i s e s a n i s s u e , defendant t h e n h a s t h e burden
o f going forward w i t h evidence s u f f i c i e n t t o r e b u t c l a i m a n t .
With t h e r e l a x e d e v i d e n t i a r y r u l e s i n workers' compensation
proceedings, t h e r e i s an i n c r e a s e d e m p h a s i s on t h e r i g h t s t o
cross-examine, Hart v. J. J. Newberry Co. ( 1 9 7 8 ) , 179 Mont.
160, 587 P.2d 11, and to produce evidence. Here, the
d e f e n d a n t d i d l i t t l e more t h a n r a i s e t h e i s s u e on v o i r d i r e ,
o b j e c t , and t h e n d r o p it. D e f e n d a n t d i d n o t a s k F i n n i e how
much the claimant's circumstances would affect his life
expectancy, or introduce any of i t s own e v i d e n c e on t h a t
point. W e d o n o t f i n d e r r o r on t h i s p o i n t .
Defendant also contends that the court erred in
adopting t h e 6% discount figure proposed by the claimant.
Our r e v i e w o f t h e r e c o r d i n d i c a t e s t h a t t h e r e i s s u b s t a n t i a l
credible evidence supporting t h i s figure. Defendant's own
expert, Robert James, testified that the discount process
used i n t h i s c a s e was a c c e p t e d and r e a s o n a b l e . Claimant's
e x p e r t s , Bruce F i n n i e and Thomas Keegan, b o t h t e s t i f i e d t h a t
the fee arrangement and amount requested by claimant's
attorneys w e r e reasonable. The Workers' Compensation C o u r t
d i d n o t e r r on t h i s p o i n t .
As to issue number three, the Workers' Compensation
Court, i n i t s o r d e r awarding f e e s , reasoned:
"The c o n t i n g e n t fee contract i n the
p r e s e n t case provided a t t o r n e y f e e s of 40
p e r c e n t o f t h e c l a i m a n t ' s r e c o v e r y upon
s u c c e s s f u l a p p e a l t o t h e Montana Supreme
C o u r t , which was awarded by t h i s C o u r t ' s
June 1, 1984 O r d e r . Thp contract
a d d i t i o n a l l y provided t h a t :
" ' T h e Law O f f i c e s h a l l b e r e i m b u r s e d by
c l i e n t f o r a l l c o s t s and d i s b u r s e m e n t s
incurred a n r expended on behalf of
client. (Emphasis added. ) '
"The c l a i m a n t ' s a t t o r n e y was f o r c e d t o
a d v a n c e monies t o r e c o v e r a t t o r n e y f e e s
t h a t t h e c l a i m a n t was r e q u i r e d t o pay
under t h e f e e c o n t r a c t . In o r d e r t o
e f f e c t u a t e t h e ' n e t award' concept set
f o r t h i n Wight, s u p r a . , t h e s e a d d i t i o n a l
costs must be assessed against the
insurer. Additional attorney fees f o r
pursuing t h e underlying attorney fee
award c o u l d n o t b e a s s e s s e d s i n c e t h e f e e
c o n t r a c t l i m i t s s u c h f e e s t o 40 p e r c e n t . "
We find that the Workers' Compensation Court's
reasoning, and o r d e r , i s c o r r e c t , and a f f i r m o n t h i s p o i n t .
We w i l l not address claimant's i s s u e s on c r o s s - a p p e a l
because t h e y were not properly raised pursuant t o Rule 1.4
M.R.App.Civ.P. T h a t Rule s t a t e s i n p a r t :
"Rule 1 4 . R u l i n g a g a i n s t r e s p o n d e n t may
be reviewed. Whenever t h e r e c o r d on
a p p e a l s h a l l c o n t a i n any o r d e r , r u l i n g o r
proceeding of t h e t r i a l c o u r t a g a i n s t t h e
respondent, affecting his substantial
r i g h t s on t h e a p p e a l o f s a i d c a u s e ,
t o g e t h e r w i t h any r e q u i r e d o b j e c t i o n o r
e x c e p t i o n o f s u c h r e s p o n d e n t , t h e supreme
c o u r t on s u c h a p p e a l s h a l l c o n s i d e r s u c h
o r d e r s , r u l i n g s , o r p r o c e e d i n g s , and t h e
o b j e c t i o n s and e x c e p t i o n s t h e r e t o ... "
Rule 1 4 M.R..App.Civ.P. provides a s p e c i f i c procedure
for the claimant to raise certain issues without the
necessity of cross-appealing. Claimant n e i t h e r o b j e c t e d nor
was t h e r e a n y r u l i n g a g a i n s t him on t h i s p o i n t . Further, the
t y p e o f i s s u e c l a i m a n t r a i s e s i s n o t c o n t e m p l a t e d by R u l e 1 4 .
The f a c t t h a t t h e r e l i e f r e q u e s t e d u n d e r t h i s R u l e 1 4 r e q u e s t
would nearly double the insurer's exposure points to the
c o n c l u s i o n t h a t t h i s i s s u e i s one t h a t s h o u l d b e f u l l y r a i s e d
t h r o u g h normal p r o c e d u r e . Converse v. Converse (1982) , 198
Mont. 227, 232, 645 P.2d 413, 416; J o h n s o n v . T i n d a l l (1981),
1 9 5 Mont. 1 6 5 , 1 6 9 , 635 P.2d 266, 268.
Finally, claimant argues that this Court should grant
him damages and a penalty pursuant to Rule 32 M.R.App.Civ.P.
We decline to do so. Insurer has been pursuing substantial
and reasonable legal grounds throughout this protracted
litigation. It did not intend to delay, but rather has
diligently pursued the case at all times. A penalty pursuant
to Rule 32 M.R.App.Civ.P is inappropriate.
The order of the Workers' Compensation Court is
affirmed.
We concur: /
Honorable Gordon R. Bennett,
Judge of the District Court,
sitting for Mr. Justice
William E. Hunt, Sr.