CLAIM NO. E014876
Before the Arkansas Workers’ Compensation Commission
OPINION FILED APRIL 4, 2001
Upon review before the FULL COMMISSION in Little Rock, Pulaski County, Arkansas.
Claimant represented by HONORABLE GUY BRINKLEY, Attorney at Law, Piggott, Arkansas.
Respondent No. 1 represented by HONORABLE BETTY J. DEMORY, Attorney at Law, Little Rock, Arkansas.
Respondent No. 2 represented by HONORABLE DAVID L. PAKE, Attorney at Law, Little Rock, Arkansas.
Decision of Administrative Law Judge: Affirmed as modified.
OPINION AND ORDER
The Death and Permanent Total Disability Trust Fund (hereinafter “the Trust Fund”) appeals an opinion and order filed by the Administrative Law Judge on November 7, 2000. In that opinion and order, the Administrative Law Judge ordered the Trust Fund to withhold and issue by separate check to the claimant’s attorney the claimant’s one-half attorney’s fee from all future indemnity benefits pursuant to Arkansas Workers’ Compensation Commission Rule 10. In addition, the Administrative Law Judge directed the Trust Fund to pay a penalty equivalent to the amount of the claimant’s portion of the one-half attorney’s fee owed by the claimant from October 2, 1998, until the date of the Administrative Law Judge’s November 7, 2000 opinion and order.
The Trust Fund raises a number of issues on appeal. Among those issues, the Trust Fund argues: (1) There is no statutory authority or duly-constituted rule or regulation of the Workers’ Compensation Commission which requires the Trust Fund to withhold the claimant’s portion of his attorney’s fee and pay same by separate check to the claimant’s attorney; and (2) Even if such authority exists, any penalty assessed must be restricted to a type of penalty specifically enumerated by statute, and the assessment of a penalty is not appropriate under the facts of this case.
The relevant history as discussed by the Administrative Law Judge is not in dispute. On August 27, 1990, the claimant was injured in a work-related accident, which resulted in compression fractures at two levels and the amputation of the claimant’s right leg below the knee. The claimant reached the end of his healing period in May, 1992. A controversy arose as to the extent of permanent disability and a hearing was requested. A prehearing conference was held in January, 1996 and following the conference the respondents stipulated that the claimant was permanently and totally disabled. A hearing was held on March 21, 996, and an opinion and order was filed on August 19, 1996, finding that the respondents had controverted claimant’s entitlement to permanent and total disability benefits and owed appropriate attorney’s fees. The order also specifically stated in relevant part:
[T]he claimant’s portion of the controverted attorney’s fee is to be withheld from, and paid out of, indemnity benefits and remitted, by the respondents, directly to the claimant’s attorney.
The employer, Woodruff Electric Cooperative, and insurance carrier, Federated Rural Electric Insurance, paid appropriate indemnity benefits but did not pay the appropriate claimant’s attorney’s fees as ordered. The employer/insurance carrier met its liability for indemnity benefits on October 2, 1998, pursuant to Ark. Code Ann. § 11-9-502(b). The Trust Fund provided a Certificate of Acceptance on September 12, 1997, advising the claimant, the employer, and the insurance carrier that the Trust Fund would assume liability for payment of benefits effective October 2, 1998. The record is unclear if the Trust Fund notified the claimant’s attorney of the Trust Fund’s date of acceptance of the claim.
On April 12, 1999, the claimant’s attorney filed a Petition for Attorney’s Fees, since only the claimant’s attorney’s fee on accrued benefits was paid by the respondent employer/insurance carrier following the August 19, 1996, order and opinion awarding a controverted attorney’s fee. No additional claimant’s attorney’s fees were paid until the September 7, 1999, Administrative Law Judge’s order and opinion was filed awarding attorney’s fees.
The September 7, 1999, Administrative Law Judge’s order and opinion ordered Woodruff Electric Cooperative/Federated Rural Electric Insurance Co. to pay the claimant’s attorney his full fee from the date claimant’s attorney fee payment ceased and continuing until its last compensation check to the claimant. Also, Woodruff Electric Cooperative/Federated Rural Electric Insurance Co. was ordered to pay one-half of the claimant’s attorney fee beginning October 2, 1998, and continuing for all future indemnity benefits to the claimant. Woodruff Electric Cooperative/Federated Rural Electric Insurance Co. complied with the order and made and continues to make appropriate payments to the claimant’s attorney.
The September 7, 1999 Administrative Law Judge’s order and opinion also ordered the Trust Fund to withhold and issue by separate check the claimant’s portion of the attorney’s fee from all future indemnity benefits paid to the claimant. The Trust Fund was further ordered to pay the claimant’s attorney a penalty amounting to one-half attorney’s fee owed by the claimant but not withheld and issued by separate check, as ordered, from October 2, 1998 until the date of the September 7, 1999 opinion. The Trust Fund appealed this order, noting among other issues, that the Trust Fund was never given adequate notice that the Trust Fund was a party to the attorney’s fee issue in the claimant’s April 12, 1999 Petition for Attorney’s Fees. Finding merit in the Trust Fund’s procedural arguments, the Full Commission on two occasions remanded this case to the Administrative Law Judge to permit the parties to develop the record, to develop the issues, and for the Administrative Law Judge to make findings of fact and conclusions of law thereafter. One potentially key factual issue prior to our last remand involved when the Trust Fund first had notice of the Administrative Law Judge’s August, 1996 order directing that the claimant’s portion of the controverted attorney’s fee be withheld from indemnity benefits and remitted by the respondents directly to the claimant’s attorney. The Administrative Law Judge found in her November 7, 2000 opinion and order that the Trust Fund had actual notice of the August 19, 1996 order when the Trust Fund checked out the Commission file on August 27, 1996. The Trust Fund has not addressed this finding in its brief on appeal, and we therefore affirm on this record the Administrative Law Judge’s finding that the Trust Fund had actual knowledge of the contents of the Administrative Law Judge’s August 19, 1996 opinion and order no later than August 27, 1996. Consequently, to the extent that the Trust Fund has suggested at some points in this litigation that the Trust Fund may have initiated payments on October 2, 1998 without actual knowledge of the contents of the August 19, 1996 order, we find that argument contrary to a preponderance of the evidence, and we treat all related procedural arguments as now abandoned by the Trust Fund.
Issue 1: Under what authority, if any, may the Workers’ Compensation Commission require The Trust Fund to withhold the claimant’s portion of his attorney’s fee and pay same by separate check to the claimant’s attorney?
The creation of a statutory attorney’s lien, and the jurisdiction of the Workers’ Compensation Commission to determine and enforce the lien are created in Ark. Code Ann. §16-22-304(Repl. 1999), which states:
(a)(1) From and after service upon the adverse party of a written notice signed by the client and by the attorney at law, solicitor, or counselor representing the client, which notice is to be served by certified mail, a return receipt being required to establish actual delivery of the notice, the attorney at law, solicitor, or counselor serving the notice upon the adversary party shall have a lien upon his client’s cause of action, claim, or counterclaim, which attaches to any settlement, verdict, report, decision, judgment, or final order in his client’s favor, and the proceeds thereof in whosoever’s hands they may come.
(2) The lien cannot be defeated and impaired by any subsequent negotiation or compromise by any parties litigant.
(3) However, the lien shall apply only to the cause or causes of action specifically enumerated in the notice.
(b) In the event that the notice is not served upon the adverse party by an attorney at law, solicitor, or counselor representing his client, the same lien created in this section shall attach in favor of the attorney at law, solicitor, or counselor from and after the commencement of an action or special proceeding or the service upon an answer containing a counterclaim, in favor of the attorney at law, solicitor, or counselor who appears for and signs a pleading for his client in the action, claim, or counterclaim in which the attorney at law, solicitor, or counselor has been employed to represent the client.
(c) This lien shall apply to proceedings before the Workers’ Compensation Commission. The lien shall attach from the date a notice of claim is filed with the commission, if served by certified mail, return receipt requested, or from the date the commission mails notice of the claim to the employer or carrier, regardless of whether this mailing by the commission is by certified mail or regular mail, whichever date occurs first.
(d) The court or commission before which an action was instituted, or in which an action may be pending at the time of settlement, compromise, or verdict, or in any chancery court of proper venue, upon the petition of the client or attorney at law, shall determine and enforce the lien created by this section.
In the present case, there is no dispute regarding whether the claimant’s attorney satisfied the notice requirements prior to entry of the Administrative Law Judge’s August 1996 order. Nor is there any dispute as to the appropriate amount of the fee owed to the claimant’s attorney. The issue in the present case is how, and by whom, are checks to be paid to the claimant’s attorney for the claimant’s one-half of the fee due to his attorney.
Ark. Code Ann. § 11-9-715(a)(2)(A) and (B)(i) state:
(2)(A) Whenever the commission finds that a claim against the Treasurer of State, as custodian of the Second Injury Trust Fund, has been controverted, in whole or in part, the commission shall direct that fees for legal services be paid from the fund, in addition to compensation awarded, and the fees shall be allowed only on the amount of compensation controverted and awarded from the fund.
(B)(i) In all other cases, whenever the commission finds that a claim has been controverted, in whole or in part, the commission shall direct that fees for legal services be paid to the attorney for the claimant as follows: One-half (½) by the employer or carrier in addition to compensation awarded; and one-half (½) by the injured employee or dependents of a deceased employee out of compensation payable to them.
Finally, Ark. Code Ann. § 11-9-205(a)(1) provides that for the purpose of administering the provisions of this chapter, the Arkansas Workers’ Compensation Commission is authorized:
(a) To make such rules and regulations as may be found necessary.
The Arkansas Workers’ Compensation Commission has promulgated Rule 10 in order to assure the claimant’s attorney is fully compensated according to the statutory limitations. Rule 10 states:
In all cases where the petition for a fee is presented by attorneys or representatives of a claimant and a fee is granted, the fee shall be paid by separate check. (Effective March 1, 1982)
By its plain language, Ark. Code Ann. § 16-22-304(d) provides the Commission statutory authority to determine and enforce the lien created in that statute. Therefore, we find that the Commission has the power to direct the manner in which the proceeds of an award are to be distributed in order to protect the ability of the claimant’s attorney to receive his fee based on the lien statute.
Moreover, the Trust Fund has failed to cite us to any authority or persuasive argument indicating why an Administrative Law Judge would not have authority to direct that an attorney’s fee be paid by separate check to the claimant’s attorney, regardless of whether or not the Commission had ever promulgated Rule 10. However, when the authority in Ark. Code Ann. §16-22-304(d) is consistent in light of the mandate of Rule 10, we find that Administrative Law Judges are not only authorized to order such payments, but that respondents are generally required
to pay the claimant’s attorney’s fees by separate check as mandated by Rule 10.
The Trust Fund has also made a number of arguments at various points in this litigation as to why extraordinary circumstances exist whenever the Trust Fund is involved. For example, at various points in this litigation, the Trust Fund has cited the administrative costs in issuing separate checks, and the fact that the Trust Fund has never before been specifically directed to withhold a claimant’s one-half attorney’s fee and remit that fee by separate check to the claimant’s attorney. The Trust Fund also considers significant the fact that the Trust Fund cannot itself
be made to pay an attorney’s fee in controversion under Ark. Code Ann. § 11-9-715(a)(2)(B)(i).
We find the Trust Fund’s arguments to be misdirected for a number of reasons. First, we point out that the threshold issue in this case does not involve the issue as to who owes an attorney’s fee or by what formula a fee is calculated (questions answered by Ark. Code Ann. § 11-9-715). This case instead involves the issue as to administrative means as to how checks are exchanged (who writes a check to whom). As discussed above, we believe that the attorney’s lien statute and Rule 10, not the attorney’s fees statute, provides the authority and the mandate to direct separate checks to be remitted directly to a claimant’s attorney, and we point out that, if the Trust Fund complies with a directive to remit separate checks, complying with that directive will not cost the Trust Fund anything in addition to the administrative costs involved. To the extent that the Trust Fund has suggested at some points in this litigation that the administrative costs of issuing separate checks to the claimant and to the claimant’s attorney are cost prohibitive, we note that the administrative costs associated with issuing separate checks for an attorney’s fee/lien would appear to be no different from issuing separate checks for a child support enforcement lien.See, Ark. Code Ann. § 11-9-110(a) (Repl. 1996). Again, we are not persuaded by the Trust Fund’s argument that it should not be made to bear the administrative costs at issue. We find that the Trust Fund is required by Rule 10 to withhold and remit by separate check the claimant’s portion of his attorney’s fee. We also find that the Commission has the authority to direct this withholding if the Trust Fund fails to do so.
Issue 2: Is the assessment of a penalty appropriate in this case?
In her November 7, 2000 order, the Administrative Law Judge assessed a “penalty” against the Trust Fund , purportedly pursuant to Ark. Code Ann. § 11-9-207(a)(8), in an amount equal to the claimant’s portion of the claimant’s attorney’s fee from October 2, 1998 (when the Trust Fund took over payments) until the date of the November 7, 2000 opinion. The “penalty” directive contained in the Administrative Law Judge’s November 7, 2000 opinion and order does not indicate to whom the purported penalty should be paid. The issue of a “penalty” was apparently raised by the Administrative Law Judge on her own initiative. We also note that the Administrative Law Judge appears to have assessed a “penalty” for a period of nonpayment from October 2, 1998 until the date of the November 7, 2000 opinion, even though the Trust Fund only became advised of it’s obligation to the claimant’s attorney on September 7, 1999, and this issue has been in ongoing litigation since September 7, 1999. We do not reach the issue as to whether an Administrative Law Judge has the discretion under Ark. Code Ann. § 11-9-208(a)(8) to fashion the penalty imposed in this case. We find that the Administrative Law Judge abused her discretion in assigning any type of penalty where, as here, no party even sought a penalty, and it has not yet been shown that the Trust Fund engaged in any conduct indicative of a penalty.
Finally, with respect to attorney’s fees at issue which accrued, but which were never withheld and remitted prior to September 7, 1999, we note that the claimant has not been represented by separate counsel in the present matter. We also note that neither the claimant or the Trust Fund have raised affirmative defenses of waiver, estoppel, any statute of limitations, or other affirmative defenses to the attempt by the claimant’s attorney to obtain a fee on benefits paid by the Trust Fund to the claimant between October 2, 1998 and September 7, 1999. Consequently, we find that the claimant’s attorney has established by a preponderance of the evidence in the record that he is entitled to payment of the claimant’s one-half attorney fee, which accrued but were not withheld and remitted by separate check on those weeks of benefits paid between October 2, 1998, and September 7, 1999. However, whereas the claimant’s attorney asserts that the Trust Fund should now be responsible for those fees, we note that the claimant has received the benefit of those overpayments, and we note that the Trust Fund continues to pay weekly benefits to the claimant for permanent and total disability.
In this case of first impression on the specific issues involved, where neither the claimant nor his attorney ever sought to notify the Trust Fund of the claimant’s attorney’s interest in enforcing his lien against the claimant’s benefits from the Trust Fund prior to September 7, 1999, and where the Trust Fund continues to pay the claimant weekly benefits, at the present time and into the foreseeable future, we direct the Trust Fund to withhold from the claimant’s future benefits and remit to the claimant’s attorney, at a rate to be jointly determined by the claimant and his attorney, amounts sufficient to satisfy the unpaid attorney’s fee owed by the claimant for the period from October 2, 1998 through September 7, 1999.
After conducting a de novo review of the entire record, we find that authority exists to direct the Trust Fund to withhold the claimant’s portion of his attorney’s fee and pay same by separate check to the claimant’s attorney. We affirm the Administrative Law Judge’s directive that the Trust Fund take that action with respect to all future indemnity compensation payable to the claimant. Consequently, we also direct the Trust Fund to release to the claimant’s attorney those monies which the Administrative Law Judge ordered the Trust Fund to begin withholding prospectively for the benefit of the claimant’s attorney beginning on September 7, 1999. With regard to the attorney’s fees at issue which accrued between October 2, 1998, when the Trust Fund took over payment, and September 7, 1999, when the Administrative Law Judge first directed the Trust Fund to withhold attorney’s fees prospectively, we direct the Trust Fund to also withhold from the claimant’s future indemnity payments and pay by separate check to the claimant’s attorney, at a weekly rate of withholding mutually agreeable between the claimant and his attorney, an amount equal to the attorney’s fee which the claimant’s attorney should have received out of benefits paid by the Trust Fund to the claimant between October 2, 1998 and September 7, 1999. In light of these findings, the Trust Fund’s argument that the Administrative Law Judge’s “penalty” was inappropriate is moot.
IT IS SO ORDERED.
________________________________ ELDON F. COFFMAN, Chairman
________________________________ MIKE WILSON, Commissioner
Commissioner Turner concurs in part and dissents in part.
SHELBY W. TURNER, Commissioner
I concur with the opinion of the majority finding that the Commission has the authority to require respondents in general, and the Trust Fund specifically, to withhold claimant’s portion of his attorney’s fees from his indemnity benefits and pay same by separate check to claimant’s attorney. I likewise concur with the finding that the Trust Fund had actual notice of the Administrative Law Judge’s August 19, 1996 Opinion at least by August 27, 1996. I also concur with the finding that claimant’s attorney is entitled to payment of claimant’s one-half attorney’s fee which accrued between October 2, 1998 and September 7, 1999. However, I must respectfully dissent from the finding that the Trust Fund is to withhold from claimant’s future indemnity benefits and remit to claimant’s attorney, at a rate to be jointly determined by claimant and his attorney, an amount sufficient to satisfy the unpaid attorney’s fee owed by claimant for the period of time from October 2, 1998 through September 7, 1999.
At the time the Trust Fund assumed liability for the payment of indemnity benefits on October 2, 1998, the Trust Fund had actual notice of the attorney’s lien and the Administrative Law Judge’s August 19, 1996 Opinion ordering that claimant’s portion of his attorney’s fee was to be withheld from his indemnity benefits by respondent, who has possession of this money, and paid directly to claimant’s attorney by separate check. Thus, the Trust Fund was aware of the attorney’s lien and the method of satisfying the lien during the period between October 2, 1998 and September 7, 1999.
Claimant’s attorney has specifically sought payment of this disputed fee from the Trust Fund. The Administrative Law Judge placed liability, in the nature of a “penalty,” for the disputed attorney’s fee on the Trust Fund. In my opinion, the majority has erroneously placed liability for the disputed fee solely on claimant. As I interpret the Attorney Lien Law, claimant’s attorney had the discretion to proceed against claimant or the Trust Fund to collect the unpaid fees, and the Full Commission lacks authority to order claimant, the attorney’s client, to pay the fee under circumstances where the attorney sought to recover the fee from the opposing party. Ark. Code Ann. § 16-22-303(b)(1) (Repl. 1999). Henry, Waldon, Davis v. Goodman, 294 Ark. 25, 741 S.W.2d 233 (1987); Lockley v. Easley, 302 Ark. 13, 786 S.W.2d 573 (1990). Accordingly, although I do not characterize this as a penalty, I agree with the Administrative Law Judge that the Trust Fund should have liability for claimant’s portion of the accrued but unpaid attorney’s fee between October 2, 1998 and September 7, 1999.
_____________________________ SHELBY W. TURNER, Commissioner