Appellate Court Overturns Award of Excessive Counsel Fees by WC Judge

01.09.23

In an interesting decision, the Appellate Court (Garzon v Morris County Golf Club,  App Div. decided December 23, 2022) overturned the awarding of counsel fees for permanency and fees on a Motion for Medical Temporary Total Disability Benefits and Motions to Compel and Enforce on December 23, 2022.

The underlying claim was an accepted injury in 2016. Immediately after the injury and during the initial treatment, the petitioner was out of work and left the country for a vacation. The employer ceased temporary disability benefits (TTD) over the objection of petitioner. Once she returned and continued treatment, TTD benefits were reinstated. Counsel for the petitioner filed a Motion seeking payment of the withheld TTD. The parties resolved the Motion issues and agreed to resolve any fee issue at the conclusion of  the claim. Subsequently, the TTD benefits were again terminated when the treating physician imposed “permanent” work restrictions on the petitioner. The adjuster correlated “permanent” restrictions with maximum medical  improvement. The termination of TTD was challenged again with a Motion along with a Motion to Enforce the prior court order  Past TTD benefits were paid with another reservation that “the issue of fees and penalties on the motion would be determined at the conclusion of the claim.”  

The trial started in 2021, and after the petitioner testified the parties settled. The only issue remaining was counsel fees. The court granted the petitioner’s counsel a 20% counsel fee on the permanency award, apportioning it all to the respondent. The court opined that it had been a struggle for the petitioner to get the protection she was entitled to under the law. After hearing oral arguments on the issue of counsel fees and reviewing an affidavit and supplemental affidavit submitted by counsel, the court imposed a penalty for withholding temp equal to 25% of the amount “withheld” with a separate 20% counsel fee for this additional benefit. As to a fee on the Medical Temporary Disability Motion, the court estimated the total amount of benefits provided according to the motion to be approximately $390,000 and therefore awarded counsel a 20% fee on the same of $78,000.00.  

The respondent appealed and argued that all of the counsel fees assessed were excessive, arbitrary, and an abuse of discretion. The Appellate Court agreed, and the decision was reversed and remanded.

The Appellate Court specifically referenced the Workers' Compensation Statute, 34:15-64(a) as it applies to counsel fees on a judgment “not to exceed” 20% of the judgment but noted counsel can anticipate a fee of 20%. The fee can be less if the court finds it reasonable. The court also referred to the Workers' Compensation Statute and noted that if a party “negligently or unreasonably” delays or refuses to pay temporary benefits, a judge may award “any reasonable legal fees incurred by the petitioner…due to the delay.” Reasonable fees can be awarded for a party’s failure to comply with an order of the court.  

The court focused mainly on what should be or could be considered “reasonable” based on the evidence presented during all of the various proceedings and hearings. The court determined the prior award of 20% counsel fee on the permanency award was a “reflexive application” of the statute, was done without a full analysis, and that the Workers' Compensation Judge thereby abused his discretion.  

For the fees on the motion for Medical Temporary Disability and Motion to Compel, the court found the Workers' Compensation Judge again abused his discretion by accepting the petitioner’s counsel’s representation of the $390,000 for benefits and awarding a 20% fee. It was held that the statute does not require a 20% fee, and the legislature provided for an award of “any reasonable legal fee.” The court found the basis for the fee is not the benefits provided but the “reasonable legal fees incurred” in bringing the motion.  

Lastly, on the Motion to Enforce, the counsel submitted documents in support of the services provided with an “estimated” rate for his fee calculation. He provided an estimated time expanded of 25 hours over 3 years. The Court reviewed the Judge’s determination of a fee on this motion and determined that the Judge did not award a reasonable counsel fee incurred to enforce the motion. The Court analyzed the information provided in the “unsworn” documentation finding the same to be “critical” to its decision. The information provided was noted to have some ambiguous information and therefore could not reasonably be counted on to support the award. The Court found that the actions of the respondent and carrier did not warrant maximum fee awards.  

All of the counsel’s fees awarded were reversed and remanded for review by another Judge, requesting that the newly assigned Judge issue an award of counsel fees for the permanency portion based on the “lodestar” (the number of hours reasonably expended multiplied by a reasonable hourly rate). For the Motions, the court suggested the new Judge “must” determine the reasonable fees incurred in bringing the motions.  

The Appellate Court believed the Workers' Compensation Judge’s 20% counsel fee award covering all motions and the permanency award was a clear abuse of discretion. While is it common practice that the court will award fees up to 20% and will rarely give a petitioner’s attorney less than a 20% fee, it is also clear that when the court attempts to use counsel fees as a punishment against a carrier for actions in defending a claim, same will not be upheld unless the decision for the fee is based on the reasonableness of fees incurred.

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