High Court: No Reimbursement to Employers for Overturned Attorney Fee Awards
BY Morgan, Akins & Jackson
| January 22, 2018
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High Court: No Reimbursement to Employers for Overturned Attorney Fee Awards

By Emily Brill

Three years after Howard Parker’s death at the age of 88, the Pennsylvania Supreme Court has settled a nine-year dispute between his attorney and employer over a $14,750 fee.

The ruling handed down Thursday overturned the Commonwealth Court and settles once and for all that claimants’ attorneys don’t have to repay employers for unreasonable contest attorney fees that are later overturned.

The decision in County of Allegheny v. WCAB (Parker) also hinted that the Supreme Court may be inclined to second-guess another Commonwealth Court opinion related to the Supersedeas Fund, which reimburses employers for benefit overpayments, if a proper challenge comes before it.

Parker’s attorney, David Landay, was awarded the fee in 2009 in his client’s case against Allegheny County. Landay persuaded the Workers’ Compensation Appeal Board that the county made the same argument twice in an attempt to cut off Parker’s benefits, a move that violated the legal doctrine of collateral estoppel.

WCAB deemed the county’s second appeal unreasonable and ordered it to pay Landay $14,750 in unreasonable-contest fees. The county attempted to stay the order by filing an application for a writ of supersedeas, a request to suspend benefits, penalties and fees until the case’s end.

But WCAB denied it, so Allegheny County paid Landay the $14,750 in 2012.

Six months later, the Commonwealth Court issued a decision reversing the WCAB’s decision in Parker’s case. The court also overturned the attorney fee award.

When an employer prevails in a case in which its writ of supersedeas was denied, it can ask for a reimbursement of benefits from the state’s Supersedeas Fund, a fund maintained through assessments on self-insured employers and workers’ compensation carriers.

But under Section 443(a) of Pennsylvania’s Workers’ Compensation Act, which governs the Supersedeas Fund, they are not allowed to petition for a reimbursement of fees.

So Allegheny County asked Landay for the money back. Landay said he would not return it, because there was no mechanism in the workers’ compensation law that allowed for employers to take already-paid fees back from an attorney.

By the time the case made it up to the Supreme Court, all but two judges who had looked at it sided with Landay. The two judges who disagreed, however, comprised the majority on the three-member Commonwealth Court panel that decided the case in Allegheny County’s favor in 2016.

The Supreme Court’s seven justices reversed the Commonwealth Court in a unanimous opinion, siding with Landay, and validating the opinions of the WCAB and Workers’ Compensation Judge David Torrey.

“Here’s the money quote in the opinion: ‘For the reasons that follow, we hold that the General Assembly, in enacting the Workers’ Compensation Act, did not provide any mechanism by which employers can recoup erroneously awarded counsel fees, once paid,’” Pittsburgh claimants’ attorney Thomas Baumann said, reading from Thursday’s decision.

“Realistically, that’s what it came down to. You look at the structure of the act; it’s not provided for in the act,” Baumann continued. “One could argue that the Commonwealth Court took an intellectual leap to reach the decision that it did, and the Supreme Court is not willing to make that intellectual leap.”

Landay said he was happy with, but not surprised by, the Supreme Court’s opinion.

He said it was clear to him that the Workers’ Compensation Act did not require attorneys to reimburse employers’ fees they had already been paid. The biggest surprise came when the Commonwealth Court reversed the WCAB, he said. He said that if the ruling had stood, it would produce a chilling effect on claimants’ attorneys willingness to take an unreasonable contest case.

“I’m a solo practitioner, and if the Supreme Court had not reversed, this really would have had an effect on my evaluation of smaller cases — I’d have to think twice about taking a case, knowing that if they gave me unreasonable contest fees, they could be taken away from me two, three years down the road,” Landay said.

Landay said he thinks self-insured Allegheny County pushed the case as hard as it did in an attempt to set case law that would discourage attorneys from taking unreasonable contest cases.

“The county, who was the employer, tried to frame it in terms of equity, but it really wasn’t equity. They spent more money paying their defense lawyer than they ever would have gotten back in this case,” Landay said. “They’re trying to keep attorneys from taking small claims.”

Landay had represented Parker since the 1990s in a workers’ compensation claim springing from an injury sustained in his 60s while breaking up a fight at a juvenile detention facility.

Now that the case has finally ended and Landay knows he can keep the $14,750, he said he plans to give a portion of it to Parker’s widow, Joyce. Parker died in 2015 of causes unrelated to his work injury.

Other claimants’ attorneys in Pennsylvania were cheered by the outcome of the Parker case.

“I think that justice was done,” Philadelphia claimants’ attorney Glenn Neiman said. “It’s important that there not be a chilling effect on workers obtaining representation. I think when you’re asking for money back, you’re getting into dangerous territory with making sure injured workers have proper representation.”

Philadelphia claimants’ attorney George E. Martin III authored an amicus brief in support of Parker on behalf of the Pennsylvania Association for Justice. He said he was “heartened by the opinion, and especially the fact it was unanimous.”

Martin said that the opinion lays the groundwork for a challenge to the case law set in Barrett v. WCAB (Sunoco), a 2010 Commonwealth Court decision that gave employers the right to reimbursement of litigation costs by claimants if the employer ultimately prevails in a case.

“The reasoning in Parker would suggest that that was wrongly decided,” Martin said.

Ardmore defense attorney David Kunz said that thought had occurred to him as well.

“The court clearly implied that they might not agree with the Barrett case, because they explicitly said that the decision in Barrett is not before the court at this time, so we’re not going to make a comment on it,” Kunz said. “I suspect that they’re implying they would not approve of that.”

Kunz and Philadelphia defense attorney Wendy Smith said defense attorneys should cite this case in the future when asking courts to approve — or approve in part — their applications for writ of supersedeas. Under 034 Pa. Code § 111.24(a), courts can require the employer to continue paying benefits but grant the writ of supersedeas as it applies to fees and penalties.

“What the appeal board could have done is they could have denied supersedeas in part — I have to keep paying the benefits, but I don’t have to pay the unreasonable contest fees,” Smith said. “(Because) if supersedeas is denied on appeal, how are you supposed to get (the fees) back? You’re not talking about $100. You’re talking about close to $15,000.”

Kunz and Baumann said it’s likely that courts will start granting writs of supersedeas in part on the issue, because defense attorneys will probably start citing the case in their applications.

“There’ll be even more reason to grant the request for supersedeas so the unreasonable contest fees are not paid in this situation pending appeal,” Baumann said. “Doesn’t take a rocket scientist to figure that out.”

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