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Workers’ comp standard of review weighed by high court

Attorney fees may be awarded in a workers’ compensation case when there is an authentic controversy between parties and the employer/insurer had sufficient time and information to take a position on liability, the Minnesota Supreme Court ruled on Nov. 30. 2022.

The opinion also is significant for its determination of the appropriate standards of review in workers’ compensation cases.

The compensation judge’s findings that contingent attorney fees were due under Minn. Stat. 176.081, subd. 1 (c) should not have been reversed because they were supported by substantial evidence, the Supreme Court said.

It also said that the Workers’ Compensation Court of Appeals (WCCA) erred in substituting its findings for those of the compensation judge who determined that fees should be awarded.

Additionally, attorney fees may be awarded under Minn. Stat. 176.081, subd. 7, distinct from subdivision 1 fees, and must be analyzed separately.

In Lagasse v. Horton, et al., the unanimous high court ruled for the relator seeking his attorney fees, reversing the WCCA and remanding to the compensation judge. Justice Anne McKeig wrote the opinion, and Justice G. Barry Anderson concurred in the result.

‘Genuine dispute’

Respondent Larry Horton was injured during his employment when he was run over by a garbage truck. C. Jeremy Lagasse represented him. Lagasse was awarded fees by the compensation judge, but the WCCA reversed, finding that “no genuine dispute” existed between the parties and therefore no fees should be awarded. Horton retained Lagasse on a 20 percent contingent fee basis. A claim petition and an answer ensued. The answer denied that the respondent was entitled to permanent partial disability benefits reflecting a rating of 64.2 percent to the body as a whole.

The insurer also claimed a preexisting condition and that it had not received information from Horton’s doctor.

Holton had an independent medical examination on Jan. 11, 2019, and received a higher permanent partial disability (PPD) rating, after which the insurer offered to pay the PPD sought and more, and asked Lagasse to dismiss the claim petition.

Horton then terminated Lagasse’s representation.

Lagasse filed statements of attorney fees, which were denied because Horton was receiving temporary partial benefits and the PPD payments were not due. During this time, Horton requested his PPD benefits in a lump sum and asked the insurer not to withhold fees. But the court ordered that the fees be withheld.

The compensation judge held that Horton’s PPD benefits were genuinely disputed; that Lagasse was entitled to a contingent fee under Minn. Stat. § 176.081, subd. 1(c) and to reimbursement of costs and disbursements; and that Horton was entitled to partial reimbursement of attorney fees under Minn. Stat. § 176.081, subd. 7.

(See sidebar for text of statutes.)

The WCCA found that no genuine dispute existed over the payment of PPD benefits and that Lagasse took no actions that resulted in Horton being paid PPD benefits. The WCCA therefore concluded that “[t]here is no basis for an award of fees to Mr. Lagasse” and held that the compensation judge erred in awarding fees under both subdivisions.

Answer expresses an actual conflict

The court analyzed the statutory meaning of “genuine dispute” and determined that it means an authentic conflict or controversy.

A claim petition commences an action regarding a dispute, followed by an answer from the other party, which is required by statute to admit, deny or affirmatively defend against the claim. “Thus, the statutory language in Minn. Stat. § 176.081, subd. 1(c) supports an answer being sufficient to give rise to a genuinely disputed claim; it certainly does not preclude it as a matter of law,” wrote McKeig.

An answer will not always give rise to a “genuinely disputed claim, the court continued. The dispute must exist after an employer or insurer has had adequate time and information to take a position on liability, it said.

The Minnesota Administrative Rules, Rule 1415.3200 subp. 7(B) provide that a genuine dispute exists where a party admits liability but disagrees to the precise rate of the benefit, the court continued.

It then rejected the WCCA’s and respondent’s alternative rule. The WCCA claimed that, in addition to the existence of a genuine dispute, an attorney must procure a benefit on behalf of the employee to be entitled to a contingency fee. “But this requirement is completely absent from Minn. Stat. § 176.081, subd. 1(c) 2 .The WCCA cites no statutory support for this proposition,” said the court.

“There may be policy arguments in favor of requiring a workers’ compensation attorney to procure a benefit for their client to receive a contingent fee, but chapter 176 does not currently contain such a requirement; it is not this court’s responsibility to fill holes created intentionally or inadvertently by the Legislature,” McKeig wrote.

Standard of review

The court then noted that Minn. Stat. § 176.421 expressly gives a party the right to appeal a compensation judge on the grounds that the decision was unsupported by the evidence. It also gives the WCCA the power to substitute its own findings grounded in the total evidence. It concluded that the WCCA’s standard of review of compensation judges’ decisions shapes the Supreme Court’s review of WCCA.

The court said that the WCCA cannot substitute its views of the evidence for those of the compensation judge, unless the latter’s findings are not supported by evidence that

a reasonable mind might accept as evidence. Substitution by the WCCA otherwise is inappropriate and must be reversed, the court said. “The WCCA must instead defer to the compensation judge in such circumstances.”

If there is no conflict the Supreme Court will uphold the WCCA unless its finding is manifestly contrary to the evidence. The WCCA may make additional findings that do not conflict with the compensation judge, so long as those are also supported by the record.

The standard of review in substitution cases is more complex, the court continued. The question is first whether there was no evidence in the record to support the compensation judge and next whether the WCCA-substituted findings should be affirmed under the manifestly contrary to the evidence standard. The rule applies to express or implicit findings of the compensation judge who has considered the issue and findings on ultimate questions of fact.

“Any previous language in our cases that suggested that we view the facts in the light most favorable to the findings of the WCCA when determining whether the WCCA applied the correct standard of review in substituting its fact findings for those of the compensation judge is not the law,” the court said.

Remand under subdivision 7

The court went on to find that the dispute as articulated in the answer was genuine. “Because a reasonable mind might accept the evidence in the record as adequate to support the compensation judge’s finding, the WCCA was required to uphold the compensation judge’s findings,” the court said. “The WCCA’s denial of Lagasse’s contingent fees based on its substituted finding that no genuine dispute existed was therefore error.”

The court then turned to the issue of the employee’s entitlement to reimbursement of some portion of the fees under Minn. Stat. § 176.081, subd. 7.

That statute does require the attorney to procure a benefit, which is not required for a contingent fee under subd. 1(c). The WCCA did not analyze subd. 7 fees but summarily reversed the entire fee award. The Supreme Court remanded the fee issue to the compensation court.

Minn. Stat. § 176.081, subd.1(c)

In no case shall fees be calculated on the basis of any undisputed portion of compensation awards. Allowable fees under this chapter shall be based solely upon genuinely disputed claims or portions of claims, including disputes related to the payment of rehabilitation benefits or to other aspects of a rehabilitation plan. The existence of a dispute is dependent upon a disagreement after the employer or insurer has had adequate time and information to take a position on liability. Neither the holding of a hearing nor the filing of an application of a hearing alone may determine the existence of a dispute.

Minn. Stat. § 176.081, subd. 7 (in part)

“[If an attorney] successfully procures payment on behalf of the employee, [the court] shall award to the employee against the insurer or self-insured employer or uninsured employer, in addition to the compensation benefits paid or awarded to the employee, an amount equal to 30 percent of that portion of the attorney’s fee which has been awarded pursuant to this section that is in excess of $250. This subdivision shall apply only to contingent fees payable from the employee’s compensation benefits…”

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