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Gibeau v. Kollsman Inst. Co. (6/9/95), 896 P 2d 822
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Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0607, fax (907) 276-5808.
THE SUPREME COURT OF THE STATE OF ALASKA
HENRY J. GIBEAU, )
) Supreme Court No. S-6248
Appellant, )
) Superior Court No.
v. ) 3AN-93-1512 CI
)
KOLLSMAN INSTRUMENT COMPANY, ) O P I N I O N
SCIBAL INSURANCE and CRAWFORD )
& COMPANY, )
)
Appellees. ) [No. 4217 - June 9, 1995]
______________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage,
Joan M. Woodward,
Judge.
Appearances: Meredith A. Ahearn,
Hagans, Moran, Ahearn & Webb, Anchorage, for
Appellant. Susan M. West, Eric P. Gillett,
Guess & Rudd, Anchorage, for Appellees.
Before: Moore, Chief Justice,
Rabinowitz, Matthews, Compton and Eastaugh,
Justices.
MATTHEWS, Justice.
This appeal requires us to decide whether the Workers'
Compensation Board should be required or permitted to award lump-
sum attorney's fees equal to the present value of expected future
attorney's fees, where the claimant's benefits on which the
attorney's fees are based are paid out periodically for an
indefinite period.
Henry Gibeau became a paraplegic as a result of a work-
related helicopter accident. After Gibeau's claim was
controverted by his employer, Kollsman Instrument Company
("Kollsman"), the Workers' Compensation Board ("Board") awarded
Gibeau permanent total disability ("PTD") benefits under AS
23.30.180(a). Payments of $472.03 per week were to be
distributed in bi-weekly installments pursuant to AS
23.30.155(b).
Gibeau's attorney then filed a motion requesting
statutory minimum attorney's fees (25% of the first $1,000 of
benefits and 10% of all additional sums awarded), and asked that
the fees be paid in a lump sum equal to the present value of
expected future fees. The Board awarded the statutory minimum
fees, but denied the request that they be paid in a lump sum.
Thus, for as long as Gibeau receives benefits his attorney will
receive a check for $94.41 every two weeks.1 Gibeau appealed to
the superior court, and the superior court affirmed.
We review the question presented under the independent
judgment standard, since the issue is one of statutory
interpretation where no agency expertise is required. See
Summerville v. Denali Center, 811 P.2d 1047, 1050 (Alaska 1991).
The relevant statute, AS 23.30.145(a), states:
Fees for legal services rendered in
respect to a claim are not valid unless
approved by the board, and the fees may not
be less than 25 per cent on the first $1,000
of compensation or part of the first $1,000
of compensation, and 10 per cent of all sums
in excess of $1,000 of compensation. When
the board advises that a claim has been
controverted, in whole or in part, the board
may direct that the fees for legal services
be paid by the employer or carrier in
addition to compensation awarded; the fees
may be allowed only on the amount of
compensation controverted and awarded. When
the board advises that a claim has not been
controverted, but further advises that bona
fide legal services have been rendered in
respect to the claim, then the board shall
direct the payment of the fees out of the
compensation awarded. In determining the
amount of fees the board shall take into
consideration the nature, length, and
complexity of the services performed,
transportation charges, and the benefits
resulting from the services to the
compensation beneficiaries.
The statute does not directly state whether attorney's fees
should be paid periodically or in a lump sum. However, fees
based on a percentage of an award cannot be presently calculated
where substantial uncertainties exist as to the value of the
award. That is the case here.
The claimant will receive PTD benefits only as long as
he lives and continues to be unable to work because of his
disability. The claimant's future benefits may also be reduced
or eliminated if the claimant recovers damages or a settlement
from a third-party tortfeasor. See AS 23.30.015. The statutory
language that "fees may be allowed only on the amount of
compensation . . . awarded,"means, in our view, that percentage
fees based on an award payable for an indefinite number of
installments cannot be reduced to a lump sum. The "amount of
compensation . . . awarded"is unknown at the time of the award.2
Gibeau's policy argument in favor of awarding lump-sum
attorney's fees is that paying attorney's fees in installments
may give workers' compensation attorneys insufficient
compensation and may consequently make it difficult for workers
to find lawyers willing to argue their claims. Gibeau relies on
this court's stated recognition that the purpose of our workers'
compensation attorney's fees statute is "to ensure that injured
workers have competent counsel." Cortay v. Silver Bay Lodging,
787 P.2d 103, 108 (Alaska 1990); see also Wise Mechanical
Contractors v. Bignell, 718 P.2d 971, 973 (Alaska 1986). While
Gibeau describes the purpose of the attorney's fees statute
correctly, his argument is not economically sound. In present
value terms, the value of expected attorney's fees paid out in
the future is equivalent to the value of expected attorney's fees
reduced to present value and paid out in a lump sum. Therefore,
reducing expected attorney's fees to present value and paying
them out in a lump sum will generally not make any difference to
an attorney's economic situation and will not increase the
incentive that attorneys have to represent injured workers.
While paying lump-sum attorney's fees will not make it
significantly easier for injured workers to find lawyers, it
would entail certain added costs. Correctly calculating the
present value of expected attorney's fees will often be
difficult, as illustrated by the facts of this case. Gibeau's
attorney proposed that expected attorney's fees be calculated
based on the assumption that Gibeau will continue to receive PTD
benefits until his death. Gibeau's attorney hired an expert who
used a life-expectancy table broken down only by sex and race as
the basis for his calculations.
In the general PTD case, the method Gibeau's attorney
proposed for calculating present value would probably lead to a
calculation of expected attorney's fees higher than the actual
attorney's fees which a PTD claimant's attorney would receive,
for three reasons.3 First, some PTD claimants obtain employment
after receiving an award. This results in a reduction or
termination of compensation benefits.4 See AS 23.30.180.5
Second, some PTD claimants have valuable claims against third
parties who have caused their disability. Success on such claims
will reduce or eliminate their entitlement to compensation
benefits.6 See AS 23.30.015. Third, the method proposed for
calculating present value assumed that PTD claimants as a group
do not have a life expectancy lower than the life expectancy of
the average American in a particular claimant's demographic
group. No evidence was submitted in support of this assumption.
The uncertainty surrounding when an injured worker may
die, whether the worker may reenter the labor force, and whether
the worker may receive damages or a settlement from a third party
may lead to expensive and time-consuming debate before the Board,
as illustrated by the debates in this case.7 Properly
calculating the present value of expected attorney's fees would
consume administrative and judicial resources without
significantly increasing the incentives that attorneys have to
represent workers' compensation claimants and without producing
any other social benefit.
Both parties rely on cases from other states dealing
with the issue of whether attorney's fees should be paid in a
lump sum in workers' compensation cases. However, Alaska's
workers' compensation attorney's fees statute is unique among the
fifty states in that it sets a minimum fee but no maximum fee. 3
Arthur Larson, Workmen's Compensation Law 83.14, at 15-1339 to
15-1340 (1992). As a result, cases from other jurisdictions are
often not useful to the interpretation of our attorney's fees
statute. See Haile v. Pan American World Airways, Inc., 505 P.2d
838, 841 n.4 (Alaska 1973). Foreign cases are not helpful here,
as the decisions relied on by both parties are distinguishable
due to differences in the attorney's fees statutes being
interpreted.8
For the foregoing reasons the decision of the superior
court affirming the Board's decision is AFFIRMED.
_______________________________
1 The fees are in addition to the benefits award to
Gibeau.
2 Professor Arthur Larson states that a compensation
award may only be converted to a lump sum by agreement or where
there is "an award fixing a definite period of disability on
which the [conversion] is to be based." 3 Arthur Larson,
Workmen's Compensation Law 82.71, at 15-1240 to 15-1241 (1992).
3 If the Board were directed to calculate lump-sum
attorney's fees in the manner suggested by Gibeau's attorney,
this would increase the incentive workers' compensation attorneys
have to represent injured workers, since attorney's fees awarded
would be higher than the true present value of expected
attorney's fees. However, such a result is not justified by the
statute.
4 For example, Gibeau was only 39 at the time of the
hearing before the Board. While the Board found that Gibeau is a
paraplegic, it also found that he has "exceptional" mental
capacities. The Board found that psychological problems which
Gibeau developed as a result of his injuries, including
difficulty concentrating, contributed significantly to his
inability to work. Since Gibeau's psychological condition may
improve, he may be able to take a job in the future which does
not require the use of his legs.
5 AS 23.30.180 states that PTD benefits "shall be paid to
the employee during the continuance of the total disability"
(emphasis added).
6 In this case, Gibeau reached a settlement with the
third party after his hearing before the Board.
7 There was also controversy over what discount rate
should be used to calculate present value, since Gibeau's expert
proposed using an interest rate of 1.01%.
8 Gibeau relies on cases from Alabama upholding lump-sum
awards. See Genpak Corp. v. Gibson, 534 So. 2d 312, 313 (Ala.
Civ. App. 1988); Hardin's Bakery v. Higgins, 480 So. 2d 1252,
1253 (Ala. Civ. App. 1985), overruled in part on other grounds by
Ex parte St. Regis Corp., 535 So. 2d 160 (Ala. 1988); Ashland
Chemical Co. v. Watkins, 435 So. 2d 1301, 1302 (Ala. Civ. App.
1983), overruled in part on other grounds by St. Regis, 535 So.
2d 160. However, the Alabama statute specifically gives judges
discretion in setting "the manner"of the payment of attorney's
fees. Ashland, 435 So. 2d at 1302.
Gibeau also cites Quam v. State, 391 N.W.2d 803 (Minn.
1986). The court in Quam held that attorney's fees should not be
delayed until the receipt of compensation benefits. Id. at 807-
08. The statute at issue based attorney's fees on the amount of
work performed and set a maximum cap. Id. at 805. As there is
no justification for delaying fees where fees are not tied to the
amount of benefits received but are based on work performed, Quam
is inapposite.
Kollsman relies on Strong v. Sysco Corp./Nobel Sysco,
776 P.2d 1258 (N.M. App. 1980), and Lindsey v. Strohs Companies,
Inc., 830 S.W.2d 899 (Tenn. 1992), cert. denied, 113 S. Ct. 163
(1992). Strong is inapplicable because the statute in Strong
deducted attorney's fees from the worker's benefits, the attorney
asked for a lump-sum award without reduction to present value,
and the legislature had repealed a statute providing for lump-sum
payment. See 776 P.2d at 1259. In Lindsey, the court simply
stated, without giving any details, that the state's statute did
not authorize lump-sum awards. See 830 S.W.2d at 904.
Both parties cite cases from Texas and Montana. In
Texas, when worker's compensation benefits are awarded by a jury,
the total amount of the award is fixed, so the Texas Supreme
Court has held that there is no reason to pay attorney's fees
derived from such awards in installments. See Texas Employers'
Ins. Ass'n v. Motley, 491 S.W.2d 395, 396 (Tex. 1973). However,
the Texas Supreme Court has also ruled that lump-sum attorney's
fees may not be paid when benefits are granted by the workers'
compensation board, since such benefits are paid in installments,
the total amount of benefits is not fixed, and the Texas statute
directs the board to "fix . . . the proportion of each
installment to be paid [to the attorney],"strongly suggesting
that fees should be paid in installments. Id. (omissions in
original); see also Texas Employers' Ins. Ass'n v. Parra, 806
S.W.2d 294 (Tex. App. 1991); Texas Employers' Ins. Ass'n v.
Smith, 700 S.W.2d 746 (Tex. App. 1985). The Montana Supreme
Court has held that Montana's Workers' Compensation Court has the
discretion to deny lump-sum fees, relying partly on the
possibility that a lump-sum award may exceed Montana's maximum
cap. See Wood v. Ulmer's Car and Truck, 769 P.2d 1264, 1268
(Mont. 1989); Swan v. Sletten Const. Co., 726 P.2d 1170, 1172-73
(Mont. 1986). Gibeau relies only on the dissent in Wood. See
Wood, 769 P.2d at 1268-70 (Sheehy, J., dissenting).
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