February 22, 2013; withdrawn and opinion filed April 12, 2013
Appeal from the Industrial Commission of the State of Idaho.
The opinion of the court was delivered by: Eismann, Justice.
The orders of the Industrial Commission are affirmed.
This is an appeal out of Ada County challenging the administrative rule adopted by the Industrial Commission in 1994 that regulates the amount of attorney fees allowable for attorneys representing claimants in worker's compensation proceedings. We uphold the validity of the rule.
The Idaho Industrial Commission (Commission) adopted an administrative rule that took effect on July 1, 1994, and that regulated the amount of fees that an attorney could recover from a claimant in a worker's compensation proceeding. IDAPA 17.02.08.033 (1994). Seiniger Law Offices, P.A., (Seiniger) challenges the part of the rule stating that to recover a contingent fee
from a particular sum of money paid to the claimant, the attorney must prove that "[t]he services of the attorney operated primarily or substantially to secure the fund out of which the attorney seeks to be paid." IDAPA 17.02.08.033.01.c.ii & 03.d (1994).
The rule, which was in effect from July 1, 1994, through April 6, 2011, provided that in worker's compensation cases in which no hearing on the merits was held, a reasonable attorney fee is presumed to be "twenty-five percent (25%) of available funds." IDAPA 17.02.08.033.01.e.i (1994). For money received by the client to be considered available funds, the attorney was required to demonstrate, among other things, that "[t]he services of the attorney operated primarily or substantially to secure the fund out of which the attorney seeks to be paid." IDAPA 17.02.08.033.01.c.ii (1994).*fn1
To obtain approval of a fee, an attorney was required to submit specified information to the Commission for review by its staff. 17.02.08.033.02 (1994). The staff would then issue an informal determination as to the reasonableness of the claimed fee, and it was required to state the reasons for a determination that the fee was not reasonable, which could be lack of required information. 17.02.08.033.03.a (1994). An attorney who disagreed with the staff's informal determination could request a hearing before the Commission for the purpose of presenting evidence and argument. 17.02.08.033.03.b (1994). At the hearing, the attorney had the burden of proving by a preponderance of the evidence that the claimed fee was reasonable.
17.02.08.033.03.d (1994). If the attorney claimed a contingent fee greater than the percentage presumed reasonable in the rule, then the attorney had the burden of proving by clear and convincing evidence entitlement to such greater percentage. Id.
In 2005, 2007, and 2008 respectively, three claimants retained counsel in the Seiniger law firm to represent them in worker's compensation proceedings. In each case, the claimant signed a fee agreement agreeing to pay Seiniger "[t]wenty-five percent (25%) of all amounts obtained for Client after execution of this agreement if the case is settled before a hearing." The fee agreement provided that the 25% contingent fee applied to "all amounts obtained for Client after execution" of the fee agreement rather than 25% of "available funds" as defined by the administrative rule.
Each of the three cases was settled without a hearing. In the first case to be settled, Seiniger requested that the Commission approve the lump sum settlement agreement and Seiniger's requested contingent attorney fee. That fee included money already received by Seiniger amounting to 25% of the funds that the surety had paid prior to the settlement for the claimant's permanent partial impairment (PPI) benefit. The attorney fee agreement signed by the client included the statement, "Attorney will take a percentage of any benefits obtained by Client with respect to permanent partial impairment if a rating is given after the parties execute this agreement." In support of the requested award of attorney fees, Seiniger stated:
Before Counsel was retained, Defendants denied, discontinued, or disputed Claimant's right to additional medical benefits and treatment, time loss benefits, and impairment compensation, and disability beyond impairment, and retraining, and attorney fees. Subsequent to retaining Counsel, Claimant received additional medical treatment and time loss benefits and impairment compensation and disability beyond impairment compensation.
The Commission staff made an informal determination that the claimed attorney fees did not comply with the Commission's rule because Seiniger did not provide facts showing that Seiniger's services primarily or substantially secured the funds out of which it sought to be paid. Seiniger requested a hearing pursuant to the rule.*fn2 The Commission scheduled a hearing to determine whether Seiniger's efforts were primarily or substantially responsible for securing the PPI award and the permanent partial disability (PPD) award.
After the hearing, the Commission found that the PPD award was secured both primarily and substantially as a result of Seiniger's efforts. It therefore affirmed payment of 25% of that award to Seiniger as a contingent fee.
With respect to the PPI award, Seiniger primarily challenged the validity of the rule requiring that its services primarily or substantially operated to secure that fund. In post-hearing briefing, Seiniger stipulated "that its attorneys were not 'primarily or substantially' responsible for securing the PPI benefit involved - whatever 'primarily or substantially' may mean in the context of defining 'available funds' as those terms are used in the relevant IDAPA rules."
Nevertheless, in its decision the Commission also examined the record to determine if the evidence showed that Seiniger's efforts were primarily or substantially responsible for securing the PPI award. In doing so, the Commission construed this requirement as follows:
In summary, in order to meet his burden of proving that his efforts were "primarily or substantially" responsible for securing the fund from which he hopes to be paid, Counsel bears the burden of proving, by a preponderance of the evidence, that he originally, or initially, took action that secured the fund, or that his efforts essentially, or in the main were responsible for securing the fund, i.e. that his efforts were such that a ...