Florida Legislature Restores Caps On Attorney’s Fees In Workers’ Compensation Cases (October Litigation Quarterly 2009)

October 1, 2009

 

On May 29, 2009, Florida Governor Charlie Crist signed into law House Bill 930.  The law was in direct response to the Florida Supreme Court’s ruling in Murray v. Mariner Health, 994 So. 2d 1051 (2008), which held that attorneys were entitled to a “reasonable” attorney’s fee in workers’ compensation cases.1 In Murray, the Supreme Court of Florida determined that the 2003 amendment to Florida Statute Section 440.34, was ambiguous with respect to attorney’s fees paid by the employer/carrier to a claimant’s attorney when prevailing on workers’ compensation claims.2 The 2003 amendment had placed strict caps on attorney’s fees when a claimant’s attorney obtained benefits on behalf of the injured worker.  The ruling in Murray, however, left the opportunity for the legislature to respond to the decision because the Supreme Court of Florida simply reinterpreted the 2003 amendment and did not declare the statute unconstitutional.  The Florida legislature has redressed the ambiguities of section 440.34 and restored fee caps on attorney’s fees in Florida workers’ compensation cases.

The 2003 Amendments to Section 440.34

 

The legislature made the most dramatic and substantive changes to section 440.34 in 2003.  These changes were made to remedy a Florida workers’ compensation system that had become highly fee driven.  Section 440.34(1) states as in relevant part:

Any attorney’s fee approved by a judge of compensation claims for benefits secured on behalf of a claimant must equal to 20 percent of the first $5,000.00 of the amount of the benefits secured, 15 percent of the next $5,000.00 of the amount of benefits secured, 10 percent of the remaining amount of benefits secured to be provided during the first 10 years after the date the claim is filed, and 5 percent of the benefits secured after 10 years.3

While the statute clearly defined the statutory fee in subsection (1), the language in subsection (3) created an ambiguity that allowed for the Supreme Court of Florida to hold that a claimant’s attorney was entitled to a reasonable fee.  Section 440.34(3) states:

If any party should prevail in any proceeding before a judge of compensation claims or court, there shall be taxed against the nonprevailing party the reasonable costs of such proceedings, not to include attorney’s fees.  A claimant shall be responsible for the payment of her or his own attorney’s fees, except that a claimant shall be entitled to recover a reasonable attorney’s fee from a carrier or employer:

a.              Against whom she or he successfully asserts a petition for medical benefits only, if the claimant has not filed or is not entitled to file at such time a claim for disability, permanent impairment, wage loss, or death benefits arising out of the accident;

b.              In any case in which the employer or carrier files a response to a petition denying benefits with the Office of the Judges of Compensation Claims and the injured person has employed an attorney in the successful prosecution of the petition;

c.               In a proceeding in which a carrier or employer denies that an accident occurred for which compensation benefits are payable, and the claimant prevails on the issue of compensability; or In cases where the claimant successfully prevails in proceedings under Sections 440.24 or 440.28.4

 

Murray v. Mariner Health

In Murray, the petitioner, a certified nursing assistant, sustained a work injury when lifting a patient.5 She was diagnosed with a uterine prolapse and underwent a hysterectomy.6 The claimant filed a petition for workers’ compensation benefits requesting temporary total disability, temporary partial disability, medical care, attorney fees and costs.7 The claim was denied by the carrier, asserting as defenses that the accident did not occur within the course and scope of employment and fraud.8 At the Final Hearing, the Judge of Compensations Claims found that the petitioner’s claims were compensable and awarded her $3,244.21 in benefits.9

The parties agreed that the petitioner was entitled attorney’s fee from respondents pursuant to section 440.34, but disputed the method by which the award should be calculated.10 At the hearing to determine the amount of fees to be awarded, the petitioner argued entitlement to a “reasonable” fee even though subsection (1) of section 440.34 no longer set forth factors for determining the reasonableness of attorneys’ fees.11 The respondents, conversely, argued that the fee should be calculated based on the strict formula in subsection (1).

At the hearing, the petitioner introduced evidence that the rate of pay for attorneys’ fees in workers’ compensation cases involving similar issues was $200.00 per hour.12 The testimony further indicated that the petitioner’s attorney spent 80 hours working on the case and would only be entitled to a statutory fee of $684.84 in attorneys’ fees.13 This equated to an hourly rate of $8.11 per hour.14 The Judge of Compensation Claims, however, awarded a statutory fee of $684.84 in attorneys’ fees based on the fee schedule allocated in subsection (1).15 On appeal, the First District Court of Appeals affirmed the order awarding the petitioner $684.84 in attorneys’ fees.16

On appeal to the Supreme Court of Florida, the petitioner challenged the 2003 amendment on the basis that the section 440.34 was ambiguous and the statute violated the claimant’s constitutional rights of equal protection, due process, access to courts and separation of powers.17 However, the Supreme Court of Florida was able to avoid the issue of constitutionality, by resolving the issue on the basis of statutory construction and the ambiguity contained in the statute.18 The Supreme Court of Florida held that when reading the statutory formula contained in subsection (1) compared with subsection (3), the result is an “unclear and ambiguous statute.”19 In using the traditional rules of statutory construction, the Supreme Court of Florida determined that subsection (3) was controlling and allowed the claimant to pursue a reasonable fee based on an hourly rate.20

In other words, the Supreme Court Florida held that the specific subsection (3) controls over the general subsection (1), thereby allowing for a reasonable attorney fee.21 The Supreme Court of Florida further held that if subsection (3) was controlled by subsection (1), then the reasonable fee requirement contained in subsection (3) would essentially be rendered meaningless and absurd because the application of statutory fee caps would result in inadequate fees in some cases and excessive fees in other cases.22 The Court noted that inadequate and excessive fees are not reasonable fees as defined in subsection (3).23 Thus, the Murray decision avoided the constitutional challenges and interpreted the law to allow for a “reasonable” attorney based on an hourly rate.   The ruling led to a return to a fee driven workers’ compensation system which had existed prior to 2003 amendments to section 440.34.

The 2009 Amendments to Section 440.34

The Florida Legislature responded to the decision in Murray by amending subsection (3) to essentially remove the ambiguous language.  In relevant part, section 440.34(3) now states:

If any party should prevail in any proceedings before a judge of compensation claims or court, there shall be taxed against the nonprevailing party the reasonable costs of such proceedings, not to include attorney’s fees.  A claimant is responsible for the payment of her or his own attorney’s fees, except that a claimant is entitled to recover an attorney’s fee in an amount equal to the amount provided in subsection (1) or subsection (7) from a carrier or employer.24

Becausethe amended version of section 440.34 (3) deletes the reasonable fee language, there no longer exists an ambiguity in the statute as subsection (1) and subsection (3) can read together in harmony with one another.  As such, a claimant’s attorney will only be entitled to a statutory fee as indicated in subsection (1) or a “medical only” fee in subsection (7).  Subsection (7) states:

If an attorney’s fee is owed under paragraph (3)(a), the judges of compensation claims may approve an alternative to attorney’s fee not to exceed $1,500 only once per accident, based on a maximum hourly rate of $150 per hour, if the judge of compensation claims expressly finds that attorney’s fee amount provided for in subsection (1), based on benefits secured, fails to fairly compensate the attorney for disputed medical-only claims as provided in paragraph (3)(a) and in the circumstances of the particular case warrant  such action.25

Therefore, a claimant will no longer be entitled to a “reasonable fee,” based on an hourly rate, but rather the strict statutory fee caps as outlined in sections (1) and (7).  The law became effective on July 1, 2009 and applies to accident dates on or after July 1, 2009.

Effect on Insurance Rates

Section 440.34 and the Murray decision have had a dramatic effect on workers’ compensation insurance rates.  Section 440.34 was originally enacted in 2003 to curb Florida’s workers’ compensation rates, which were consistently ranked the first or second highest in the country prior to the 2003 amendment.26 The reform in attorney’s fees in 2003 certainly achieved its goal as Florida dropped out of the top 10 for highest rates in the country.27 After the 2003 amendments, there were 6 consecutive drops in insurance rates resulting in a statewide average of more than a 60% decrease in rates.28 This had the potential to save Florida employers more than $610 million.29 These 6 consecutive filings were the largest consecutive cumulative decreases on record for Florida’s workers’ compensation rates, dating back to 1965.30

However, following the Murray decision on October 23, 2008, the workers’ compensation rates began to increase, prompting lobbying efforts for the Murraydecision to be addressed by the Florida legislature.  Effective April 1, 2009, Florida Insurance Commissioner Kevin McCarty approved a 6.4% increase in Workers’ Compensation premium costs.31 The increase reflected the anticipated cost of legal fees due to the claimant’s ability to collect increased fees for their services as a result of the Murray decision.32 While the increase was significant, it was not as dramatic as the increase proposed by the National Council on Compensation Insurance (NCCI).  On November 14, 2008, the NCCI proposed an 18.6% increase over the next two years.33 Though the Florida Office of Insurance Regulation did not increase the rates as dramatically as proposed, a gradual increase appeared imminent as a response to the Murray decision.  However, with the recent legislative changes to section 440.34, we can expect that trend to be discontinued.  In fact, as of June 3, 2009, the 6.4% increase in insurance rates was repealed by Kevin McCarty, effective immediately, upon Governor Christ approving House Bill 930.34 Employers can expect that workers’ compensation rates will remain reasonable as long as section 440.34 remains in effect

 

Constitutional Challenges

Undoubtedly, we can expect that there will be constitutional challenges to section 440.34, as amended in 2009.  However, overturning a statute on constitutional grounds can be a daunting challenge due to the fact that “every presumption is to be indulged in favor of the validity of that statute.”35 To date, all constitutional challenges to Section 440.34 have been denied by Florida courts.

Opponents of this statute have argued that the legislature has impermissibly encroached on the powers of the judiciary by placing strict caps on attorney’s fees.  However, in Lundy,the court ruled that the legislature may limit the amount of fees that a claimant’s attorney may charge as the state legislature has a legitimate interest in regulating attorney’s fees in workers’ compensation cases.36 Additionally, opponents have argued that the law violates the injured workers’ right to due process and equal protection.  However, a challenge based on equal protection will be unlikely successful because an injured worker is not a “suspect class” and thus, the review will be pursuant to a quite deferential rational basis standard.  The statute will need only bear a reasonable relationship to a legitimate state interest.37 The burden is on the party challenging the statute to show that there is no conceivable factual predicate which would rationally support the classification under attack.38 A statute subject to the rational basis standard is seldom overturned as having no reasonable relationship to a legitimate state interest.

Opponents of section 440.34 have also argued that the law impermissibly restricts the right to freely contract.  A statute restricting the right to contract will not be invalidated if the restriction was enacted to protect the public’s health, safety or welfare.39 In Lundy, the Court addressed this issue indicating that Section 440.34(1) was enacted to protect the public’s welfare, as it ensured that the placement of caps on attorney’s fees would allow an injured worker to retain a substantial portion of the benefits awarded.  In turn, this would prevent the burden of providing medical treatment from being placed upon society, because the injured worker would have the means to pay for medical treatment.40

Critics of the statute have also indicated that the law may violate the claimant’s right to due process by denying access to courts.  In order to prevail on a due process challenge, Florida courts have held that an injured worker must be denied the opportunity to be heard in a meaningful, full and fair, and not merely colorable or illusive way.41 To prove this, the claimant will need to demonstrate that the statute has unduly burdened the claimant’s ability to retain counsel in order to secure benefits, or that the statute limits the types of benefits a claimant is authorized to pursue under Section 440.42 The claimant would need to present evidence that, since the time the law was enacted, there has been a substantial increase in pro se injured workers or a substantial decrease in litigated cases.  In Lundy, the Court noted that the claimant’s challenge on this theory was unpersuasive as it lacked evidentiary support.43 Therefore, it appears unlikely that a claimant would be successful on this type of constitutional argument unless there was clear evidence that the Section 440.34 somehow impairs a claimant’s opportunity to be heard.

Conclusion

 

The Florida legislature has responded to the Murraydecision, effectively restoring strict caps on attorney’s fees.  Employers can expect that workers’ compensation rates will continue to decrease, which will favor business owners and may, as many argue, disfavor the injured worker. However, future constitutional challenges to Florida Statute section 440.34 remain a near certainty.  While all constitutional challenges to the law, to this point, have been turned aside by Florida Courts, many critics of section 440.34 believe that the Supreme Court of Florida will once again be charged with the task of deciding whether the statute is constitutional.  Since the Florida legislature has removed the ambiguity in section 440.34, opponents will have no choice but to challenge the statute strictly on constitutional grounds.  Thus, the Florida Supreme Court may ultimately be required to make a ruling as to the constitutionality of section 440.34 once and for all.

(Endnotes)

1          Murray v. Mariner Health, 994 So. 2d 1051 (Fla. 2008).

2          Id.

3          Fla. Stat. § 440.34(1) (2008) (emphasis added).

4          Fla. Stat. § 440.34(3) (2008) (emphasis added).

5          Murray, 994 at 1053.

6          Id.

7          Id.

8          Id.

9          Id. at 1054.

10       Id. at 1055.

11       Id.

12       Id.

13       Id.

14       Id.

15       Id.

16       Id.

17       Id. at 1056.

18       Id. at 1062.

19       Id. at 1061.

20       Id.

21       Id.

22       Id.

23       Id.

24       Fla. Stat. § 440.34(3) (2009)(emphasis added)

25       Fla. Stat. § 440.34(7) (2009)(emphasis added)

26       FLOIR Media Release, Florida Insurance Commissioner Recommends Workers’ Compensation Insurance Rate Increase Due to Court Ruling. http://floir.com/pressreleases/viewmediarelease.aspx?id=3088 (last visited July 31, 2009).

27       Id.

28       Id.

29       Id.

30       Id.

31       Insurance Journal, Florida Approves 6.4% Workers’ Compensation Insurance Rate Hike, http://www.insurancejournal.com/news/southeast/2009/02/11/97813.htm (last visited July 31, 2009).

32       Id.

33       Id.

34       National Underwriter Property & Casualty, Fla. Drops Comp Rates After Attorney Fee Cap Restoration, http://www.property-casualty.com/News/2009/6/Pages/Fla-Drops-Comp-Rates-After-Attorney-Fee-Cap- Restoration-.aspx (last visited July 31, 2009).

35       Golden v. McCarty, 337 So. 2d 388, 389 (Fla. 1976).

36       Lundy v. Four Seasons Ocean Grand Palm Beach, 932 So. 2d 506,509(Fla. 1st DCA 2006)(citing Samaha v. State, 389 So. 2d 639, 640 (Fla. 1980)).

37       Id.

38       Florida High School Activities Association, Inc. v. Thomas, 434 So. 2d 306, 308 (Fla. 1983).

39       Khoury v. Carvel Homes S., Inc., 403 So. 2d, 1043, 1046 (Fla. 1st DCA 1981).

40       Lundy, 932 So. 2d at 510.

41       Rucker v. City of Ocala, 684 So. 2d 836, 841 (Fla. 1st DCA).

42       Lundy, 932 So. 2d at 510.

43       Id.


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