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Langham: Fee Cap in West Virginia

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A recent decision of the West Virginia Supreme Court is an interesting contrast to Florida precedent. In April 2016, the Florida Supreme Court concluded in Castellanos v. Next Door Co. that the statutory constraints on Florida attorney fees in Section 440.34, Fla. Stat. are unconstitutional.

Judge David Langham

Judge David Langham

On Oct. 10, 2017, the West Virginia Court decided Bandy v. Murray American Energy Inc., Case No. 16-1165, and rejected constitutional challenges of similar fee constraints.

Bandy involved litigation of some psychotherapy care in 2016. The benefits were denied by the employer/carrier, but the Office of Judges ordered the benefits provided. An administrative appellate process, the Board of Review, affirmed that decision.

The claimant sought $500 in attorney's fees regarding the Board of Review litigation, to which the employer objected. The employer argued that the claimant’s attorney had already received an aggregate equal to the $2,500 maximum allowed attorney fees for obtaining medical treatment, following earlier litigation. The Board of Review denied the $500 fee request.

The claimant sought Supreme Court review, contending that the $2,500 statutory limitation of attorney fees "during the life of a claim is unconstitutional." The claimant contended that this limitation arbitrarily "interferes with the ability of claimants to access the judicial system," and denies "due process of law."

The limitation allegedly restricts "financial incentive on the part of attorneys" and makes it difficult for injured workers to find counsel to represent them. 

West Virginia Code §23-5-16(c) provides several limitations on attorney fees. In (a) it limits contingency fees to "20% of any award granted." This contingency is also limited in calculation to the value of "benefits to be paid during a period of 208 weeks."

In West Virginia, fees exceeding the limits are "unlawful and unenforceable as contrary to the public policy." The same 20% limitation applies to any "final settlement, pursuant to paragraph (b)," subject again to the overall limitation of regarding 208 weeks of benefits. 

Florida Statute Section 440.34 similarly applied a formula and limited fees to: 

20% of the first $5,000 of the amount of the benefits secured, 15% of the next $5,000 of the amount of the benefits secured, 10% of the remaining amount of the benefits secured to be provided during the first 10 years after the date the claim is filed, and 5% of the benefits secured after 10 years. 

Thus, the percentages in the Florida statute are more limiting than the West Virginia 20%. However, the Florida statute allowed that percentage fee on any benefits obtained, not subject to a chronology of benefit entitlement (208 weeks) as in West Virginia. Thus, depending on the facts of a particular situation, either formula fee might produce a greater attorney fee.

But the provision at issue in Bandy is the fee provision regarding the "successful recovery of denied medical benefits" under paragraph (c). That provision provides "additional" fees payable by "the private carriers or self-insured employers," "following the successful resolution of the denial in favor of the claimant."

An attorney seeking such a fee must "submit a claim for attorney fees and costs within 30 days following" the order awarding the medical benefits. 

The "additional" fee may not "exceed $125 per hour and reasonable costs." Furthermore, the fees "in no event may" exceed $500 per litigated medical issue and in the course of the "claim" may not exceed the total of $2,500.

In "determining the reasonableness" of fees, four factors are consider: the "experience of the attorney, the complexity of the issue, the hours expended and the contingent nature of the fee."

Thus, the West Virginia fee limitation interpreted in Bandy is perhaps more akin to the "medical only" fee limitation in Section 440.34(7) Fla. Stat.: 

... the judge of compensation claims may approve an alternative attorney’s fee not to exceed $1,500 only once per accident, based on a maximum hourly rate of $150 per hour, if the judge of compensation claims expressly finds that the attorney’s fee amount provided for in subsection (1), based on benefits secured, fails to fairly compensate the attorney for disputed medical-only claims. 

The West Virginia statute afforded a slightly more modest hourly rate ($125 vs. $150) and a more constrained "per issue" limitation of $500 (Florida not limited by issue). However, West Virginia allows an aggregate of $2,500 for all medical issues in the course of a claim, compared to Florida's limitation of $1,500 for any "accident."

In short, the two fee statutes have similarities, but notable differences. Comparing them effectively would likely require applying them to various factual scenarios.

The court was persuaded in Bandy, however, that the claimant's ability to hire an attorney had not been prejudiced by the limitation. The court detailed when counsel was hired and various benefits that the claimant received thereafter. This appears from context to illustrate the court considering the attorney fee issue in a broad, holistic manner. The court's discussion of fees other than those under the "additional" paragraph (c) fees seems logical only in that holistic context.

The court rejected the claimant's characterization of this challenge as a "constitutional issue," concluding instead that it was "in fact a policy argument." The court held that such policy arguments “are more appropriately directed to the Legislature.”

The court affirmed the "Board of Review’s denial of attorney fees," concluding that the "statutory maximum for payment of attorney fees in relation to" denial of medical benefits had been paid.

A major point that is illustrated by comparison of Bandy and Castellanos is that various courts may reach differing conclusions. They are called upon to consider specific facts and to apply particular state statutes. While all courts would consider constraints of the U.S. Constitution, various statutes and facts might also be subject to constraints of state constitutions, with courts considering different constraints.

But, the very nature of our federalist system has so far facilitated the development and evolution of more than 56 workers' compensation systems in America (50 states, District of Columbia, Puerto Rico, Guam, Virgin Islands, Federal workers' compensation, Federal Employee Liability Act, and more). In this federalist system, there will be different outcomes in different states as state law is interpreted and applied. 

Though that makes workers' compensation fascinating for those who study it, it likewise makes it frustrating and confusing for many who benefit from workers' compensation. People who travel in their employment, and employers doing business in various states, are among those who may find distinct experiences depending upon various state laws.

David Langham is deputy chief judge of the Florida Office of Judges of Compensation Claims. This column is reprinted, with his permission, from his Florida Workers' Comp Adjudication blog.

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