Abraham Lincoln said that a lawyer's time and advice are his stock and trade. Abraham Lincoln was not wrong. Time is an important factor.” So said workers' compensation claimant attorney Richard Sicking standing before the Florida Supreme Court in what may be a seminal moment for the future of the workers' compensation system.

Since the passage of the 2003 reforms, employers' rates have been cut by more than half, including a statewide average 18.4 percent decrease that took effect in January. But even as employers savored the largest rate decrease in the state's history, which translates into a collective savings of $700 million, employers/carriers have been awaiting the most serious challenge posed to the reforms. Such is the case as the $4 billion industry faces a potentially dynamic change that could turn upside down the entire scope of its business practices after the Florida Supreme Court showed strong signs that it might declare all or part of the statutory attorneys' fees provision unconstitutional.

No issue addressed in 2003 received more attention than the payment of claimant attorneys' fees, which had been calculated on a hourly basis after a 1990 court ruling that found that the state's statutory reimbursement schedule did not adequately compensate attorneys. Critics had long argued that the court's decision represented a case of judicial activism. They accused the court of ignoring the statutory intent of the law, which contained no reference to hourly fees. As a result of the hourly fees, critics said claimant attorneys had a strong incentive to prolong cases, even to the detriment of injured workers who needed benefits.

The legislature agreed with the employers/carriers by eliminating all hourly fees with one exception: a $150 hourly fee up to a maximum of $1,500 for one medical claim per accident. Lawmakers also said the legislative intent of the fee provision was to follow the current statutory fee schedule, which calls for claimant attorneys to receive 20 percent of the first $5,000 in benefits, 15 percent of the following $5,000, and 10 percent of the remaining benefits awarded in the 10-year period following the date of the accident. As a means to further ensure that the fee provisions were followed, lawmakers specifically stated that judges of compensation claims (JCCs) could not approve fees higher than what was spelled out in the law.

Emma Murray v. Mariner Health/ACE USA

When the Florida Supreme Court donned their robes to hear oral arguments in Emma Murray v. Mariner Health/ACE USA (SC07-244), all of those law changes were up for review. The case in question is relatively straightforward. The JCC found that an on-the-job accident resulted in Murray needing surgery to repair her collapsed uterus. In addition, they determined that she qualified for wage loss benefits. Those medical and indemnity benefits were determined to be in the amount of $3,224.21. Brian O. Sutter, who represented Murray, indicated that he spent 84.4 hours on the case, which under the current fee schedule equals a total fee of $648.84 — or $8.11 per hour. By comparison, Cora Malloy, who represented the employer/carrier, acknowledged that she spent 135 hours on the case and was paid $16,050, which equals $125 per hour.

From the beginning, some justices made clear their attitudes toward the case and the workers' compensation system in general. Justice Barbara Pariente set the tone for much of the hearing. “Everyone here would agree that the facts look crazy,” she said. “You have an employer who is paying its attorney $16,000, but an experienced workers' compensation attorney who has done 80 hours of work gets $600.”

When Is Reasonable, Reasonable?

Sicking's case rested on several constitutional arguments that claimant attorneys have been making ever since the fee language was first circulated through the workgroups and legislative committees that led up to the 2003 reforms. Simply stated, he maintained that the legislature unconstitutionally interfered with the rights of injured workers to due process in the legal system because it unfairly restricted claimant attorneys' fees to the point where they might not take certain small benefit cases. This is because the fees would not reflect the time and effort spent on the case.

As a starting point, Sicking pointed to Chapter 440.34(1), Florida Statutes, which governs attorneys' fees. The statute reads, “A fee, gratuity, or other consideration may not be paid for a claimant in connection with any proceedings arising under this chapter, unless approved as reasonable by the JCC or the court having jurisdiction over such proceedings.” The same language is somewhat echoed in Chapter 440.34(3), which states that “if any party should prevail in any proceedings before a JCC or court, there shall be taxed against the non-prevailing party the reasonable costs of such proceedings, not to include attorneys' fees.”

As constructed, the two provisions were designed to eliminate hourly fees by specifically limiting the ability of JCCs to award contingency fees without consideration of the time and expenses associated with an attorney pursuing benefits on behalf of an injured worker. Secondly, it eliminated employer/carrier fees paid to claimant attorneys even if they prevailed in a case, which claimant attorneys say further restricts the abilities of claimant attorneys to be adequately compensated.

Enter Abraham Lincoln.

“Abraham Lincoln was not wrong,” said Sicking. “Time is an important factor, and what the legislature has said is that you can have a hearing, but you can't tell the judge how much time was spent on the case because that now is legally irrelevant.”

In one of those black-letter law disputes, the argument turns on the definition of the word “reasonable.” From Sicking's point of view, reasonable should be the jumping-off point to decide fees, as was generally the case prior to the 2003 reforms. Before the reforms, even though the statutory fee schedule was in place, judges were free to award fees based upon their own determinations of what was reasonable. That led to wide-ranging attorneys' fees that were based on the views of judges and the related differences in cost as determined by geographic area. As Sicking said, the percentages were a starting point for calculating fees, as opposed to being the end point set by the 2003 reforms.

As a means to end the practice of having a legal system predicated on claimant attorneys' hourly fees, employers/carriers convinced lawmakers to shift the underlying premise for awarding benefits so that they were paid on “benefits secured,” as opposed to “services rendered.” The employers/carriers stated that this would ensure that injured workers received more benefits instead of the money flowing into claimant attorneys' pockets. In response, Sicking maintained that this exacerbated an already unfair playing field since the resources of an employer/carrier substantially outweighed any that could be marshaled by injured workers or their attorneys.

“It is an unequal contest because the employer has a sword for which an employee has no shield,” he said. “They can spend whatever they want in defense of the case, but the worker is faced with being able to pay an unlimited amount to his attorney to represent him.”

It was an argument that resonated with many justices. “If the purpose of this is to maximize the award for the claimant, how could arbitrarily limiting the fees paid by the employer/carrier, who has wrongly denied benefits, [accomplish that]? It affects not the claimant with the big claim, but the poor woman or man who has the small claim,” said Pariente. “They haven't leveled the playing field; they have eviscerated the playing field by creating a situation that allows a carrier to spend unlimited amounts of money.”

Speaking on behalf of Mariner Health/ACE USA, John Darin noted that since defense attorneys were defending clients as opposed to injured workers seeking benefits, defense firms were necessarily compensated based on the time and expense associated with defending a claim. He also pointed out that while due process in regards to an injured worker's ability to gain access to the courts is a constitutional issue, there is ample evidence to suggest that they are being represented appropriately.

“There are lots of workers' compensation claimants who get excellent representation from their attorneys,” he said. “You notice that there is a gallery of people here interested because they want to take these cases.”

Attorneys' Fees

In an amicus brief, the Associated Industries of Florida and Florida Insurance Council argued that the 2003 changes had not radically altered the dynamics of the litigation system. The Office of Judges of Compensation Claims (OJCC) earlier this year published an annual report detailing the legal activity throughout the system.

In fiscal year 2006-2007, some $478.5 million was spent on claimant attorney and defense attorney expenses. Of that money, $191 million was reimbursed to claimant attorneys and $287 million to defense lawyers. Those figures, however, reflect fees from cases in different years and multiple petitions for benefits. For example, $500 in claimant attorneys' fees are applicable to a case that was opened in 1957. According to the report, claimant attorneys were paid just over $7 million in cases dating from 1987 to 1954, which represents four percent of the total amount paid. The majority of the claimant attorneys' monies — some 77.14 percent — reflected payments on cases in which a worker suffered an injury between January 1, 2000 and December 31, 2006.

It wasn't until 2002 that the OJCC started tracking the amount of money paid to defense attorneys. One of the arguments used by claimant attorneys in any field of insurance is that there is always an unfair playing field where litigation is concerned. Whereas claimants typically have limited resources and must depend on attorneys to take their cases on a contingency-fee basis, insurers have seemingly unlimited resources to dispute claims. Since there is no credible data on defense attorneys' fees dating back before the reforms, it is impossible to measure the legal spending habits of insurers as compared to claimant attorneys' reimbursements.

One thing is clear, however: Defense attorneys' fees have risen significantly in the post-reform era. In fiscal year 2002-2003, defense firms earned a total of $220 million, a number that increased to $300 million by fiscal year 2005-2006.

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