MCDANOLD v B N TRANSPORT INC

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No. 84-287 IN THE SUPREME COURT OF THE STATE OF MONTANA 1985 E. L. McDANOLD, Claimant and Appellant, -vs- B. N . TRANSPORT, INC. , Employer- Defendant and Respondent. APPEAL FROM: Workers' Compensation Court, The Honorable Timothy Reardon, Judge presiding. COUNSEL OF RECORD: For Appellant: William T. Kelly, P.C.; Halverson, Sheehy Billings, Montana Gene A. Picotte, Clancy, Montana & Prindle, For Respondent : Utick, Grosfield & Uda, Helena, Montana Thomas Spence, Billings, Montana Submitted on Briefs: Decided: Filed: - Feb. 28, 1985 June 27, 1985 J N 2 '. 1985 U ,. Clerk Mr. J u s t i c e Fred J . Weber d e l i v e r e d t h e O p i n i o n o f t h e C o u r t . i s an This appeal from the decision of t h e Workers' Compensation C o u r t l i m i t i n g c l a i m a n t ' s f e e t o t h e c o n t i n g e n t fee agreement without regard to the records of his Compensation proceeding was Compensation Court W e reverse and remand. counsel. The underlying commenced before Workers' the Workersf Inc. (Mont. 1981), 634 in McDanold v. B . N . Two a p p e a l s t o t h i s C o u r t f o l l o w e d . port, time P.2d 175, 1979. Trans- St.Rep. 38 McDanold v . B.N. Transport, Inc. 4 1 St.Rep. 472. Following appeal o f t h e lower c o u r t determi- nation the in second c a s e t h a t b e n e f i t s was $ 1 5 , 4 5 2 . 7 0 , (Mont. 1 9 8 4 ) , 679 P.2d 1466; the total 1188, amount o f weekly t h e m a t t e r was remanded f o r d e t e r m i - n a t i o n o f a t t o r n e y s f e e s and c o s t s . The i s s u e s p r e s e n t e d on a p p e a l a r e : 1. tion Was it r e v e r s i b l e e r r o r f o r t h e Workers' Court to enter Compensa- i t s order determining attorneys fees without allowing claimant a t l e a s t f i v e days t i m e t o respond t o t h e d e f e n d a n t ' s memorandum? Was i t r e v e r s i b l e e r r o r t o f i x t h e a t t o r n e y s f e e s a t 2. t h e amount o f t h e c o n t i n g e n t f e e c o n t r a c t w i t h o u t r e g a r d t o attorneys' affidavits? By o r d e r d a t e d May Court determined disability $15,452.70. and 4, claimant's permanent 1 9 8 4 , t h e Workers' entitlement partial to disability Compensation temporary at a total The o r d e r f u r t h e r s t a t e d : " F u r t h e r , c l a i m a n t ' s c o u n s e l s h a l l , w i t h i n 10 d a y s r e c e i p t o f t h i s Order, provide t h e Court w i t h a R e q u e s t f o r R e a s o n a b l e C o s t s and A t t o r n e y F e e s , and Proposed O r d e r . Said requests s h a l l include a statement o f itemized c o s t s , c a l c u l a t i o n s concerning t h e determination of a reasonable attorney fee, and a copy o f t h e c l a i m a n t f s a t t o r n e y f e e a g r e e ment. Counsel s h a 1 1 s i m u l t a n e o u s l y p r o v i d e d e f e n d a n t ' s c o u n s e l w i t h c o p i e s o f t h e s e documents." of total of P u r s u a n t t o t h e o r d e r , c l a i m a n t ' s a t t o r n e y f i l e d a copy of t h e attorney-client agreement under which c l a i m a n t agreed t o p a y h i s a t t o r n e y a c o n t i n g e n t f e e , b a s e d upon t h e f o l l o w ing provision: "In t h e e v e n t t h e c a s e should be a p p e a l e d by e i t h e r t h e d e f e n d a n t i n s u r a n c e company o f t h e Workmen's C o m p e n s a t i o n D i v i s i o n , o r t h e CLIENT, a s t h e s i t u a t i o n may o c c u r , t o t h e d i s t r i c t c o u r t o r t h e Supreme C o u r t o f t h e S t a t e o f M o n t a n a , t h e n a n d i n s u c h e v e n t , s a i d ATTORNEY s h a l l r e c e i v e a s h i s f e e (1/3) o f all sums a sum e q u a l t o one-third r e c o v e r e d . l1 In addition, which e s t a b l i s h e d sworn a f f i d a v i t s w e r e f i l e d , t h a t one firm o f the f i r s t of a t t o r n e y s worked on the c a s e f o r a t o t a l o f 239.06 h o u r s , r e s u l t i n g i n c l a i m e d a t t o r neys fees of t o t a l of a fee of $18,684.15. The o t h e r a f f i d a v i t e s t a b l i s h e d a 1 1 9 . 7 5 h o u r s worked by a n o t h e r a t t o r n e y and c l a i m e d $10,777.50. The affidavits contained detailed s t a t e m e n t s o f t h e t i m e r e c o r d s c o n v e r t e d t o money b a s e d upon t h e r o u t i n e hourly r a t e of t h e a t t o r n e y involved. The a f f i - d a v i t s c o n t a i n e d no f u r t h e r f a c t u a l e x p l a n a t i o n w i t h r e g a r d t o t h e n a t u r e o f t h e services performed. not a d d r e s s t h e r e a s o n why The a f f i d a v i t s d i d f e e s s h o u l d b e d e t e r m i n e d on an hourly b a s i s i n s t e a d o f under t h e c o n t i n g e n t f e e agreement. The d e f e n d a n t f i l e d i t s o b j e c t i o n t o a n y a w a r d o f a t t o r neys order fees in dated excess o f June 19, the 1984, contingent fee the made court agreement. the following f i n d i n g s and c o n c l u s i o n s : "The c l a i m a n t ' s a t t o r n e y s h a v e s u b m i t t e d a c o p y o f t h e i r c o n t i n g e n t f e e agreement, which p r o v i d e s f o r ( 1 / 3 ) o f a l l sums r e c o v e r e d upon a s u c one-third 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 , p l u s reasonable c o s t s incurred. They h a v e a l s o s u b m i t t e d a s t a t e m e n t o f t h e hours compiled i n p u r s u i n g t h i s m a t t e r and t h e c o s t s i n c u r r e d . "There e x i s t s a r e b u t t a b l e presumption t h a t t h e a t t o r n e y f e e due c l a i m a n t ' s a t t o r n e y under t h e continqent f e e aqreement i s a r e a s o n a b l e f e e . Hughes ~ i v e s t o c k , I n c . , Mont. I Wight 664 p.Td 3 0 3 , ( 1 9 8 3 ) ; . . By " N e i t h e r p a r t y h a s f i l e d a Motion f o r E v i d e n t i a r y Hearing Regarding Reasonableness o f Attorney f e e s b a s e d on t h e c o n t i n g e n t f e e a g r e e m e n t and a n award o f costs based on c l a i m a n t ' s a t t o r n e y ' s s t a t e m e n t of costs. "It a p p e a r s from t h e r e c o r d t h a t t h e d e f e n d a n t p a i d $8,890.00 i n t e m p o r a r y t o t a l d i s a b i l i t y b e n e f i t s and $2,083.68 i n permanent p a r t i a l d i s a b i l i t y benefits before a controversy arose. Following t h e c l a i m a n t ' s a t t o r n e y s ' e f f o r t s , and a 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 , t h a t C o u r t determined that temporary t o t a l and permanent [TI h e p a r t i a l e n t i t l e m e n t t o t a l e d $15,452.70. c l a i m a n t ' s a t t o r n e y s a r e e n t i t l e d t o a n award o f attorney fees based on the $4,479.02 difference. .. .. "The i n s t a n t c a s e i s o n e i n w h i c h t h e a t t o r n e y f e e award a p p e a r s i n a d e q u a t e when compared t o t h e t o t a l number o f h o u r s r e p o r t e d b y c l a i m a n t ' s a t t o r n e y s . However, n o R e q u e s t f o r E v i d e n t i a r y H e a r i n g wa s r e c e i v e d , a n d n o e v i d e n c e was p r e s e n t e d ( b e s i d e s t h e lone statement of hours) suggesting a departure f r o m t h e presumed r e a s o n a b l e n e s s o f t h e c o n t i n g e n t f e e agreement. T h e r e f o r e , a n a t t o r n e y f e e award u n d e r t h e c o n t i n g e n t fee c o n t r a c t , and p u r s u a n t t o Wight, s u p r a . , s h a l l govern. "Based s o l e l y o n t h e d i f f e r e n c e b e t w e e n t h e t o t a l amount t h e Supreme C o u r t a w a r d e d and t h e amount t h e defendant previously paid t h e claimant, t h e claimant's a t t o r n e y s a r e e n t i t l e d t o a n award o f $ 1 , 4 9 2 . 0 1 u n d e r t h e terms o f t h e c o n t i n g e n t f e e agreement. (33 1 / 3 p e r c e n t t i m e s $4,479.02, e q u a l l i n g $1,493.01) ." C l a i m a n t ' s a t t o r n e y s a p p e a l from t h e f o r e g o i n g o r d e r . Was it r e v e r s i b l e e r r o r f o r t h e Workers' Compensation Court t o e n t e r i t s o r d e r determining a t t o r n e y s f e e s without allowing claimant a t l e a s t f i v e days t i m e t o respond t o t h e d e f e n d a n t ' s memorandum? Claimant's attorneys point out t h a t the administrative r u l e s o f t h e Workers' post-trial motions, Compensation C o u r t d o n o t p r o v i d e f o r s o t h e r e i s no s p e c i f i c p r o v i s i o n which would h a v e a l l o w e d them t o r e s p o n d t o t h e o b j e c t i o n t o f e e s filed by 2.52.316, the defendant. A.R.M., Claimant argues pertaining to pre-trial that under Rule motions, a f i v e day period should have been allowed comparable t o t h e f i v e d a y s a l l o w e d f o r a r e p l y b r i e f on p r e - t r i a l motions. The d e f e n d a n t r e p l i e s t h a t t h e r e i s n o r e q u i r e m e n t u n d e r t h e o r d e r t o g r a n t any a d d i t i o n a l t i m e f o r s u c h a r e p l y and contends t h a t t h i s is merely a "red herring." points out that, 1 9 8 3 ) , 664 P.2d the order under Sorenson 3 2 0 , 40 S t . R e p . v. The d e f e n d a n t Drilcon, Inc. (Mont . 829, even a f t e r t h e e n t r y o f setting attorneys fees, claimant's f r e e t o request an evidentiary hearing. attorneys were They h a v e f a i l e d t o do s o e v e n up t o t h e p r e s e n t t i m e . I n S o r e n s o n , f o l l o w i n g t h e e n t r y b y t h e W o r k e r s ' Compens a t i o n Court o f an order attorney requested a evidence t o j u s t i f y fixing attorneys fees, claimant's h e a r i n g and a n o p p o r t u n i t y t o p r e s e n t her fee. T h i s Court r e v e r s e d t h e lower c o u r t ' s d e n i a l o f t h e m o t i o n f o r a h e a r i n g and remanded t h e matter to the lower court with evidentiary hearing regarding the instructions attorney's to fee. hold an We held t h a t it was a n a b u s e o f d i s c r e t i o n n o t t o a l l o w t h e h e a r i n g . In t h e i n s t a n t case, evidentiary hearing. we conclude claimant the that t h e c l a i m a n t f a i l e d t o r e q u e s t an In t h e absence o f any r u l e requirement, the lower opportunity to court file a did not response err in denying t o t h e defen- d a n t ' s memorandum. Was it r e v e r s i b l e e r r o r t o f i x t h e a t t o r n e y s f e e s a t t h e amount o f t h e c o n t i n g e n t fee contract without regard t o t h e attorneys' affidavits? B o t h c o u n s e l r e l y on Wight v . Hughes L i v e s t o c k C o . , (Mont. 1 9 8 3 ) , 664 P.2d 303, 40 S t . R e p . bnc. 696, which d i s c u s s e s t h e elements t o be considered i n determining t h e reasonablen e s s of c o n t i n g e n t f e e c o n t r a c t s a n d t h e amount o f a t t o r n e y s f e e s t o b e awarded. C i t i n g a n I d a h o Supreme C o u r t d e c i s i o n , t h i s Court adopted s e v e r a l f a c t o r s t o be c o n s i d e r e d by t h e judge o r t h e D i v i s i o n : " [I]n determining a reasonable attorneys fee [ t h e judge o r t h e D i v i s i o n ] must e n g a g e i n a b a l a n c i n g p r o c e s s and c o n s i d e r on c o n t i n g e n t b a s i s t h e following f a c t o r s : ' ( 1 ) The a n t i c i p a t e d t i m e and l a b o r r e q u i r e d t o perform t h e l e g a l s e r v i c e p r o p e r l y . ' ( 2 ) The n o v e l t y and d i f f i c u l t y o f l e g a l i s s u e s involved i n t h e matter. ' ( 3 ) The f e e s c u s t o m a r i l y c h a r g e d f o r s i m i l a r l e g a l services. ' ( 4 ) The p o s s i b l e t o t a l r e c o v e r y i f s u c c e s s f u 1 . ' ( 5 ) The t i m e l i m i t a t i o n s imposed by t h e c l i e n t o r circumstances of t h e case. ' ( 6 ) The n a t u r e and l e n g t h o f t h e a t t o r n e y - c l i e n t relationship. ( 7 ) The e x p e r i e n c e , s k i l l and r e p u t a t i o n o f t h e attorney. ' ( 8 ) The a b i l i t y o f t h e c l i e n t t o p a y f o r t h e l e g a l services r e n d e r e d . ' ( 9 ) The r i s k o f no r e c o v e r y . ' 629 P.2d a t 661. ... "Not mentioned by t h e I d a h o c o u r t i n C l a r k v . S a g e , s u p r a , b u t s u r e l y a f a c t o r t o b e considered: is the market v a l u e o f t h e I awyerl s s e r v i c e s a t t h e t i m e and p l a c e i n v o l v e d . Indeed it may b e s a i d t h a t i n e v e r y r e t a i n e r c o n t r a c t , b e it p e r s o n a l o r p u b l i c , h o u r l y , f i x e d f e e o r c o n t i n g e n t f e e , each such c o n t r a c t i s i n r e a l i t y b a s e d on t h e m a r k e t v a l u e o f With t h e added f a c t o r o f t h e lawyer's services. t h e market v a l u e o f t h e l a w y e r ' s s e r v i c e s a t t h e t i m e and p l a c e i n v o l v e d , we a d o p t t h e f a c t o r s s e t o u t by t h e I d a h o Supreme C o u r t t o b e c o n s i d e r e d by Montana ' s Workers ' Compensation j u d g e o r t h e D i v i sion i n determining t h e reasonabl eness of conting e n t f e e c o n t r a c t s and t h e amount o f a t t o r n e y s f e e s t o b e awarded t o s u c c e s s f u l c l a i m a n t s . " Wight, 664 P.2d a t 311-12, 40 St.Rep. a t 706. Under Wight, the l o w e r c o u r t was r e q u i r e d t o consider the foregoing i n i t s determination of t h e reasonableness of t h e c o n t i n g e n t f e e c o n t r a c t and t h e amount o f a t t o r n e y s f e e s t o b e awarded. I n d i s c u s s i n g Wight, d e f e n d a n t e m p h a s i z e s t h e h o l d i n g by t h e c o u r t w i t h regard t o t h e s t r o n g presumption i n f a v o r o f the contingent fee contract: " I n considering Wight's contingent f e e c o n t r a c t w i t h h i s a t t o r n e y , t h e Workers' Compensation j u d g e 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 h a v i n g a I f t h e judge does s t r o n g presumption i n i t s favor. n o t s e t a f e e i.n a c c o r d a n c e w i t h t h e c o n t i n g e n t f e e c o n t r a c t , he s h a l l s t a t e w i t h p a r t i c u 3 a r i t y h i s reasons in writing, based upon strong 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 what w ~ i g h th e a c c o r d e d t o t h e c o n t i n g e n t f e e c o n t r a c t . " W i g h t , 664 P.2d a t 3 1 2 , 40 S t . R e p . a t 707 ( e m p h a s i s added). Defendant's counsel contends t h a t i n f a i l i n g t o request a hearing and evidence, failing claimant's set to forth strong countervailing a t t o r n e y s have f a i l e d t o d i s c h a r g e t h e b u r d e n w h i c h i s p l a c e d upon t h e m . As a result, they argue t h a t t h e lower c o u r t o r d e r must b e a f f i r m e d . Claimant's attorney argues that under Wight, claimant was n o t r e q u i r e d t o r e q u e s t a n e v i d e n t i a r y h e a r i n g . to attempts place the duty upon the to court Claimant extend o p p o r t u n i t y f o r h e a r i n g once t h e controversy a r i s e s . ant further claimant a argues that under Sorenson, which r i g h t t o an evidentiary hearing, the Claim- granted a such a h e a r i n g must b e h e l d . Respondent present has attached administrative Compensation Court. rules These its to in brief effect rules provide a for copy the the of the Workers' basis for a h e a r i n g upon t h e r e q u e s t o f a p a r t y t o d e t e r m i n e t h e r e a s o n ableness of attorneys Those r u l e s o f c o u r s p a r e n o t fees. applicable i n t h e present case. However, t h e y d o i n d i c a t e a reasonable procedure f o r t h e determination of attorneys fees. Based quested a order of upon Sorenson, hearinq June 19, claimant properly before the court 1984. The r e c o r d could have its following re- adverse does not d i s c l o s e t h e r e a s o n f o r c l a i m a n t ' s f a i l u r e t o make t h a t t y p e o f a m o t i o n . Claimant's tions. evidence significant contradic- On t h e o n e h a n d , t h e c o n t i n g e n t f e e a g r e e m e n t j u s t i - f i e d a n award of $ 1 , 4 9 3 . 0 1 hand, contained the time records, in attorneys fees. i f accepted j u s t i f y a n award i n e x c e s s o f $ 2 8 , 0 0 0 . demonstrates t h a t on their On t h e o t h e r face, would The e v i d e n c e f u r t h e r the attorneys were successful i n securing approximately adequately $5,000 for compare the the evidence Compensation C o u r t r e q u i r e d on t h e v a r i o u s Wight and l a b o r r e q u i r e d , issues, es. In claimant. it Before submitted, the could Workers1 s u b s t a n t i a l additional evidence such a s t h e a n t i c i p a t e d t i m e factors, t h e n o v e l t y and d i f f i c u l t y o f t h e l e g a l and t h e f e e s c u s t o m a r i l y c h a r g e d f o r s i m i l a r servicaddition, it would h a v e b e e n a p p r o p r i a t e f o r b o t h s i d e s t o h a v e s u b m i t t e d e v i d e n c e o f t h e m a r k e t v a l u e of t h e lawyers1 s e r v i c e s under t h e s e unusual circumstances. W h i l e it m i g h t h a v e b e e n a p p r o p r i a t e t o a f f i r m t h e l o w e r c o u r t i n t h e a b s e n c e o f more a d e q u a t e e v i d e n c e , u n d e k a l l t h e c i r c u m s t a n c e s w e h a v e c o n c l u d e d it i s j u s t t o a l l o w a h e a r i n g b e f o r e t h e Workers' Compensation C o u r t . W h i l e b o t h s i d e s may present additional evidence a t t h a t hearing, counsel have t h e primary o b l i g a t i o n evidence from which the court may t h e c l a i m a n t 1s to present determine appropriate a reasonable attorneys fee. We Court. reverse the decision of the Workers1 Compensation T h i s c a u s e i s remanded f o r s u c h f u r t h e r h e a r i n g a n d c o n s i d e r a t i o n a s t h e c o u r t may deem a d v i s a b l e i n a c c o r d a n c e with t h i s opinion. W e concur:

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