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State v. Cowgill (06/24/2005) sp-5913
State v. Cowgill (06/24/2005) sp-5913
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) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
STATE OF ALASKA, )
DEPARTMENT OF REVENUE, ) Supreme Court No. S-11337
)
Appellant, ) Superior Court No. 3AN-03-4312 CI
v. )
) O P I N I O N
PAT M. COWGILL, and ALASKA )
WORKERS COMPENSATION, ) [No. 5913 - June 24, 2005]
BOARD, )
)
Appellees. )
)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Joel H. Bolger, Judge.
Appearances: Rebecca Hiatt, Assistant
Attorney General, Anchorage, and Gregg D.
Renkes, Attorney General, Juneau, for
Appellant. Joseph A. Kalamarides and Rebecca
Patterson, Kalamarides & Lambert, Anchorage,
for Appellee Pat M. Cowgill.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, Fabe, and Carpeneti, Justices.
EASTAUGH, Justice.
I. INTRODUCTION
The State of Alaska appeals from the Alaska Workers
Compensation Boards award of attorneys fees to the claimant, Pat
Cowgill. The state argues that the amount of the award was
unreasonable, that the board failed to make adequate findings,
and that it abused its discretion. The state also requests that
we revisit our previous cases dealing with the boards application
of the contingency factor in awarding fees.
We conclude that the fee award was not manifestly
unreasonable, that the board made adequate findings, and that it
did not abuse its discretion. We also see no need to revisit our
prior holdings in this area.
II. FACTS AND PROCEEDINGS
Pat Cowgill worked for the State of Alaska. She
applied for workers compensation benefits after developing arm
pain she attributed to her workstation. The state opposed
awarding her permanent partial impairment (PPI) benefits; Cowgill
hired attorney Joseph Kalamarides to represent her. After
finding in favor of Cowgill on her PPI claim, the board
considered Cowgills request for an award of attorneys fees based
on a rate of $250 per hour. It concluded that $240 per hour was
a reasonable rate under AS 23.30.145(b).1 The state appealed
and, following remand from the superior court, the board
concluded that the same rate applied under AS 23.30.145(a).2 The
board relied on several factors in explaining its reasonableness
determination, including the contingent nature of representing
workers compensation claimants. The superior court again
reviewed the boards decision and this time held that the boards
$240-per-hour award was not manifestly unreasonable. The state
appeals.
III. DISCUSSION
A. Standard of Review
When the superior court acts as an intermediate court
of appeal in an administrative matter, we independently review
and directly scrutinize the merits of the boards decision.3 And
[u]nless statutory interpretation is required, we review an award
of attorneys fees by the board under the abuse of discretion
standard. The award of attorneys fees should be upheld unless it
is manifestly unreasonable. 4
B. The Fee Award Was Not Manifestly Unreasonable.
The state relies on two contentions in arguing that the
boards award was unreasonable. First, according to the state,
the rates charged by workers compensation defense counsel should
have served as the starting point for the board when determining
Cowgills fee award because they reflect the market rate or normal
rate. Second, the state claims that the boards enhancement of
this normal rate is not justifiable in light of the actual rate
of non-payment of claimants attorneys coupled with the potential
for overpayment. We will discuss each contention in turn.
1. Defense counsel rates
Fees payable to an employees lawyer must be approved by
the board.5 The state therefore argues that [t]he hourly rates
of the equivalently experienced defense counsel are virtually the
only normal or market rates available in workers compensation
proceedings. The state presented expert testimony that the
highest rates for defense attorneys during the relevant times
ranged from $165 to $180 per hour. Because the board awarded
Cowgills attorney $240 per hour, the state suggests that the
board must have augment[ed] the normal hourly rate by at least
thirty-three percent.
In Wise Mechanical Contractors v. Bignell we observed
that the objective in workers compensation cases is to make
attorney fee awards both fully compensatory and reasonable so
that competent counsel will be available to furnish legal
services to injured workers.6 The state misreads Wise by
reasoning that fully compensatory and reasonable fees must be
equated with placing employees attorneys on an even footing with
the employers attorneys defending the claims. Wise discussed the
difference between contingency fee arrangements and various law
practice areas where a steady hourly fee is available and how the
contingency factor can reduce the disincentive for attorneys to
represent claimants.7 It referred to workers compensation
defense as an example of an hourly fee practice, not as a yard
stick for measuring claimants attorneys fees.8 Therefore, the
states premise that awards of attorneys fees to employees lawyers
must be comparable to the fees charged by lawyers for employers
rests on a flawed interpretation of Wise.
We have previously observed an important difference
between employees lawyers and employers lawyers in workers
compensation practice; namely, that employers attorneys are paid
whether they win or lose, while employees attorneys fees are, by
statute, contingent upon success.9 Two of the states own expert
witnesses reiterated this distinction. In addition, one expert
agreed that employers negotiate contracts with defense firms,
whose lawyers know in advance how much they will be paid whether
their clients win or lose.10 There is also competition among
potential suppliers of legal services to employers,11 a situation
that has no clear analogy with respect to employees attorneys.
These differences work to drive defense counsel rates downward
and militate against using defense rates as a benchmark in
awarding fees to employees attorneys.
2. Negative contingency evidence
The state argues that the actual negative contingency
how often claimants lawyers receive no compensation is small.
The states expert witnesses testified that the actual rate of non-
payment for claimants attorneys is six percent or less. The state
posits that this testimony indicates that the contingency factor
is unnecessary because the small actual negative contingency is
offset by positive contingenc[ies] (the possibility that counsel
is overcompensated in some cases).
But we agree with the boards observation that the
states negative contingency evidence is incomplete and
unpersuasive. Most notably, the testimony only concerned
instances in which claimants attorneys receive no fee at all.12
The testimony failed to take into account situations in which
claimants attorneys receive partial awards that may be
dramatically lower than if the attorneys were compensated on an
hourly basis. The negative contingency evidence proffered by the
state does not provide an adequate picture of claimant counsel
compensation and the board did not err in disregarding it.13
3. Positive contingency evidence
The state also argues that the mandatory minimum
attorneys fee provision contained in AS 23.30.145(a)14 can
overshadow the risks of underpayment presented by contingent
representation of workers compensation claimants. Attorneys
could in theory be overcompensated if the time and effort spent
do not justify the minimum fee, a possible phenomenon that we
have noted in the past.15 The state argues that the board failed
to adequately consider the impact of these positive
contingenc[ies] potentially arising from the minimum fee statute.
Wise held that the contingency factor was a legitimate
consideration for the board, and noted that employees attorneys
need to earn more than a normal hourly fee on successful cases
because they receive nothing on unsuccessful cases.16 This
recognizes the general nature of a contingency fee practice; that
is, fees from successful cases ideally serve as a rough
counterbalance to unpaid time spent on unsuccessful cases. But
Wise did not suggest that the board should compare an attorneys
income from workers compensation cases with the hours expended to
determine whether there is a net loss before applying the
contingency factor. The states argument lacks statutory or
precedential support and appears unworkable on a practical level.
Under the states proposed framework, every time an attorney
requested fees, the board would have to hold an individualized
hearing in an attempt to determine whether that attorney had been
overcompensated in some cases and whether that surplus eclipsed
the efforts that had gone uncompensated. We see no statutory
basis for requiring the board to undertake this inquiry.
C. The Boards Findings Were Legally Sufficient.
The state argues that the board failed to adequately
describe the factors that it did, and did not, rely upon in
fashioning its enhanced hourly rate, and urges us to remand. The
state contends that the board failed to consider and document
material issues, including the yearly normal rates as well as the
impact of minimum percentage fees exceeding those based upon
hourly rates.
We have stated that [t]he Board need only make findings
with respect to issues that are both material and contested.
When the Board fails to make a necessary finding, we cannot fill
the gap by making our own determination from the record; we must
remand to the Board.17 In Pioneer Construction v. Conlon, relied
upon by the state, we vacated an attorneys fee award because the
lower court failed to explain its reasons for making the award.18
The lower court had merely stated that [the employer] was to pay
[the claimant] $2,917.50 in attorney fees . . . .19 We noted that
[a]ppellate review is facilitated by demonstrating what factors
were considered, careful decision making is promoted, and the
parties are aided in their determination as to whether to appeal.20
Unlike the situation in Pioneer, the board in this case
explained its reasons for the attorneys fee award. The board
explained that the
claim was vigorously litigated by very
competent counsel. The range of litigated
benefits to the employees was significant
(between $0.00 and $24,300.00 in PPI
benefits) . . . . [W]e find the medical
evidence was fairly complex. Last, we find
the employer raised unique arguments
regarding attorneys fees, not previously
decided.
The board also pointed to the contingent nature of representing
claimants in workers compensation cases and to the experience and
expertise of Cowgills lawyer. That the board declined to address
explicitly the states normal fee and positive contingency
theories does not render the findings inadequate. The boards
implicit rejection of these theories is acceptable because it
adequately articulated its justifications for the fee award.
And, in any case, our ruling today makes immaterial the states
normal fee and positive contingency arguments. We conclude that
the boards findings were legally sufficient.
D. The Board Did Not Abuse Its Discretion by Applying the
Contingency Factor.
The state argues that the board abused its discretion
by relying on contingency as a factor in its attorneys fee award
because it made no attempt to explain the scope of the
contingencies [it] found, made no references to any record
evidence supporting such findings, and extended no opportunity to
address them. Moreover, the state contends that [i]t is
manifestly unreasonable to require the State to pay enhanced fees
based on no more than a presumption. But there is no evidence
that the fee was enhanced as the state contends. Rather, the
contingent nature of representing workers compensation claimants
was one factor among many relied upon by the board. We conclude
that the board permissibly exercised its expertise and therefore
did not abuse its discretion.
E. We See No Reason To Revisit Wise.
The state asks us to revisit [our] decisions in Wise
forward and [to] clarify the scope and application of the
contingency factor, [including] whether the contingency factor
may be offset by overcompensation elsewhere, or whether that
factor should be eliminated from consideration under AS 23.30.145
fee awards. Alternatively, the state essentially advocates an
individualized inquiry into the need for [] enhanced
compensation. We see no reason or need to clarify the
permissible use of the contingency factor, aside from reiterating
that it is an appropriate factor on which the board may rely. We
also conclude that an individualized inquiry is neither required
by law nor desirable in practice.
IV. CONCLUSION
Because the boards attorneys fee award was not
manifestly unreasonable and because the boards findings were
sufficient, we AFFIRM the superior courts judgment affirming the
boards award.
_______________________________
1 AS 23.30.145(b) provides that a reasonable attorney fee
may be awarded [i]f an employer fails to file timely notice of
controversy or fails to pay compensation or medical and related
benefits within 15 days after it becomes due or otherwise resists
the payment of compensation or medical and related benefits.
2 AS 23.30.145(a) addresses [f]ees for legal services
rendered in respect to a claim and directs that such fees are not
valid unless approved by the board. It also provides that [i]n
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.
3 Williams v. Abood, 53 P.3d 134, 139 (Alaska 2002).
4 Id. (quoting Bouse v. Firemans Fund Ins. Co., 932 P.2d
222, 241 (Alaska 1997)).
5 AS 23.30.145(a).
6 Wise Mech. Contractors v. Bignell, 718 P.2d 971, 973
(Alaska 1986) (emphasis added). See also Cortay v. Silver Bay
Logging, 787 P.2d 103, 108-09 (Alaska 1990).
7 We reasoned in Wise that
[i]f an attorney who represents claimants
makes nothing on his unsuccessful cases and
no more than a normal hourly fee in his
successful cases, he is in a poor business.
He would be better off moving to the defense
side of the compensation hearing room where
attorneys receive an hourly fee, win or lose,
or pursuing any of the other various law
practice areas where a steady hourly fee is
available. As we have noted, the objective
of awarding attorneys fees in compensation
cases is to ensure that competent counsel are
available to represent injured workers. This
objective would not be furthered by a system
in which claimants counsel could receive
nothing more than an hourly fee when they win
while receiving nothing at all when they
lose.
Wise, 718 P.2d at 975 (citation omitted).
8 Id.
9 Id. (citing AS 23.30.145(a)).
10 The employer in this case, the state, uses salaried in-
house lawyers rather than contracting with private firms.
11 See Arthur Larson & Lex Larson, Larsons Workers
Compensation Law 133.09, at 133-41 (2004) (referring to
employers attorneys ever-present concern that, if his or her
charges get out of line, the [client] will take away its business
altogether).
12 One witness was asked to estimate the percentage of
resolved cases that [do] not involve the payment of fees by the
employer, another testified about the percentage of claimants
attorneys who never receive anything, and the third expressed an
opinion that ninety-five percent of the time claimants attorneys
are paid some fee.
13 The board concluded: Regarding the employers
contingency argument, we find that the statistics relied on d[o]
not include cases where a claimants counsel withdraws from
claims. Furthermore, the statistics and evidence do not reflect
how much of an attorneys fee may be compromised in a settlement
agreement.
14 AS 23.30.145(a) provides in relevant part that
attorneys fees may not be less than 25 percent on the first
$1,000 of compensation or part of the first $1,000 of
compensation, and 10 percent of all sums in excess of $1,000 of
compensation.
15 Wien Air Alaska v. Arant, 592 P.2d 352, 366 (Alaska
1979) (suggesting that [t]he legislature may wish to examine
whether the formula in AS 23.30.145(a) sometimes results in
excessive fee awards, awards higher than are necessary to attract
counsel into the compensation area).
16 Wise Mech. Contractors v. Bignell, 718 P.2d 971, 975
(Alaska 1986).
17 Bolieu v. Our Lady of Compassion Care Ctr., 983 P.2d
1270, 1275 (Alaska 1999).
18 Pioneer Constr. v. Conlon, 780 P.2d 995, 1001 (Alaska
1989).
19 Id. at 1000.
20 Id. at 1001. See also Stephens v. ITT/Felec Servs.,
915 P.2d 620, 629 (Alaska 1996) (Matthews, J., dissenting in
part) (Findings are adequate when, at a minimum, they show that
the Board considered each issue of significance, demonstrate the
basis for the Boards decision, and are sufficiently detailed so
that they afford an opportunity for meaningful judicial review.).
