Claimants' Attorney Fees Nearly Tripled in Year After Castellanos

By J. Todd Foster

The amount of hourly fees awarded to claimants' attorneys nearly tripled in fiscal year 2017 over the prior year, but stakeholders warned Monday that the increase most likely is related to the hoarding of fee petitions until after the Florida Supreme Court released its decision in the Castellanos case.

According to unreleased data that will be published later this year in the annual report by the Office of Judges of Compensation Claims (OJCC), claimants' attorneys' hourly fees went from a statewide total of $25.9 million in fiscal 2016 to $75.4 million last year - a 191% increase.

Scales With Money

David Langham, the OJCC's deputy chief judge, cautioned that the 2017 numbers could be artificially high and the 2016 data artificially low because attorneys were anticipating the high court's April 2016 decision in Marvin Castellanos v. Next Door Co.

The high court ruled that Florida's statutory attorney fee schedule was unconstitutional because it did not allow for reasonable fees in some cases. The decision opened the door for attorneys to submit fee petitions going back to cases filed on and after July 1, 2009.

Langham said it is not yet possible to determine whether or by how much hourly fees were driven by pent-upcases with lawyers awaiting the Supreme Court's decision, or if Castellanos represents a significant trend.

But he suspects the former.

"Some attorneys have told me they decided to park the fee issue on the side of the road and say, 'I'm going to wait to see what the Supreme Court does,"' Langham said. "After Castellanos, a lot of those (fee issues) were jump-started."

Since 1979, claimants' attorneys have had a statutory fee formula: 20% of the first $5,000 secured for workers, 15% of the next $5,000, 10% of the remainder secured during the first 10 years after the claim was filed, and 5% of the benefits secured after 10 years.

Before 2003 reforms, the formula was the starting point; hourly fees were still allowed depending on case complexity, hours worked and other factors.

After 2003, however, the formula became absolute. So in 2008, the state Supreme Court ruled in Emma Murray v. Mariner Health and Ace USA that claimants' attorneys were entitled to reasonable hourly fees outside the formula when employers/carriers wrongfully denied benefits.

The Legislature quickly responded by deleting the word "reasonable" from the fee statute, 440.34, and capping claimants' attorney fees at the formula. (Defense fees are not capped.)

That 2009 legislative action is what the Florida Supreme overturned in Castellanos. Ever since, the business and insurance communities have pushed lawmakers to enact a new fee system that would pass constitutional muster. Several competing bills aimed toward that end failed to pass earlier this year.

Stakeholders agree that it will be difficult to gain legislative reforms in 2018 because of the recent proposal by the National Council on Compensation Insurance to reduce rates by 9.3%.

"I would be surprised if someone would be able to get traction on the attorney fee issue in the Legislature with a proposed 9.3% decrease," said Orlando defense attorney Rogers Turner.

He said it was "pretty good bet" that the fiscal 2017 numbers corning out of OJCC on attorney fees are due to delays in fee petitions.

Carolyn Johnson, director of business, economic development and innovation policy at the Florida Chamber of Commerce, said the OJCC numbers appear to confirm a $1 billion unfunded liability projected by NCCI over the retrospective consequences of Castellanos.

She noted that the unfunded liabilities were not even considered in an earlier 14.5% rate increase, only the return to hourly attorney fees.

"I could envision that the fee backlog will be reduced or eliminated, but I think attorney fees will still be higher than they were pre-Castellanos," Johnson said. "I have this vision in my head of trial lawyers feeding at an open trough, a buffet of increased attorney fees."

Bill Herrle, executive director of the National Federation of Independent Business Florida, said it's much too early to say that delayed fee petitions are to blame for increased hourly fees.

"Should Castellanos stand, we believe that it will drive litigation, particularly with smaller cases, which would be the most profitable type of cases for plaintiff attorneys," Herrle said. "Workers' compensation has a long tail, so we'll be waiting a while for any 'I-told-you-so's.' "

To demonstrate the long-tailed nature of comp claims, take the case of David Fickey v. Montgomery Wards, which currently is before the OJCC even though it has an accident date of Feb. 8, 1943.

Seventy-four years ago, Fickey was an automobile sales specialist for Montgomery Wards in Tampa and hurt his back while carrying a battery and then got hit in the head with a jack.

To view his claim, click here, then click on case search at the upper left and key in Case Number 16-021217.

On Aug. 31, 2016, Fickey filed a petition for benefits seeking a walk-in tub, a raised toilet seat, bathroom safety bars and an adjustable bed.

Adjuster Saundra Woodley with Travelers said in a response to Fickey's petition that she has requested additional information from the worker's treating physician but heard nothing back. Now the case is being litigated before the OJCC with a final hearing set for Dec. 18.

William W. Large, president of the Florida Justice Reform Institute, an anti-tort group, said Castellanos will permanently increase litigation behavior patterns.

"The 191% increase has to do with behavioral economics. The Castellanos decision removes the cost-containment measures passed during the 2003 session and essentially revives the concept of fee for service," Large emailed.

"This will alter the behavior of claimants' attorneys and lead to more claims being filed. The 'parked' fee petition phenomena is an example of the Castellanos decision altering claimants' attorneys' behavior," he said.

Tampa claimants' attorney Mike Winer agreed that many of his peers held back fee claims for years, "hoping that a reasonable fee might be the standard."

But Winer said any increases in claimants' attorney fees are the fault of insurers and that such fees are awarded only when benefits are wrongfully denied to injured workers.

Carriers fought many cases for years in the belief they would face only a 10% penalty if they lost, he said.

"Many carriers took very dubious defenses to trial and didn't pay benefits when they should have, and now they are having to pay for those ill-advised claims decisions," Winer said.

"I maintain that 2017 marks an artificially high year for fees because of these factors. Carriers are now in a more timely fashion and are not indiscriminately denying benefits that are obviously due with the same frequency as in the past. These factors and the passage of lime will cause the numbers to even out to a more predictable and reasonable level," he said.

The OJCC data show that the average attorney fee by the hour in fiscal 2016 was $176.48, compared to $247.95 in 2017, a 40.5% increase.

Litigation volumes are measured in Florida with two metrics: "petition for benefits" and "new case."

The OJCC's Oct. 5 blog explains the metrics here.

OJCC statistics show that:

• New cases filed increased only 0.54% in fiscal 2017 over the prior year, from 31,165 to 31,334. Since fiscal 2003, the number of new cases filed has dropped 45%.

• Petitions for benefits increased 4.61% in fiscal 2017 over the prior year, from 67,265 to 70,365.

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Reprinted courtesy of WorkCompCentral.