Opinion
B222327
08-24-2011
SHAWNA ALONZO, Plaintiff and Respondent, v. CASEY BEAR BRENNAN et al., Defendants and Appellants.
Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup; Pollard Mavredakis Cranert Crawford & Stevens, and James E. Siepler for Defendants and Appellants. Bisnar Chase, Brian D. Chase, Scott A. Ritsema, and J. Michael McClure for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. VC051815)
APPEAL from a judgment of the Superior Court of Los Angeles County, William J. Birney, Jr., Judge. Affirmed.
Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup; Pollard Mavredakis Cranert Crawford & Stevens, and James E. Siepler for Defendants and Appellants.
Bisnar Chase, Brian D. Chase, Scott A. Ritsema, and J. Michael McClure for Plaintiff and Respondent.
INTRODUCTION
In this appeal, we consider an award of attorney fees made pursuant to Labor Code section 3856. That statute provides that when an injured employee obtains a judgment from a third party tortfeasor that results in the employer's recovery of its workers' compensation lien, the trial court may equitably apportion from the judgment an award of attorney fees and expenses incurred by the employee in obtaining the judgment from which the employer's lien is to be satisfied. Defendants (the third party tortfeasors) were the lienholders here, by virtue of their settlement with the employer, which included an assignment of the workers' compensation lien. Defendants appeal from the award of attorney fees, contending that equitable apportionment of fees was not permissible because the action was not prosecuted by the plaintiff alone and because her counsel's efforts were not deserving of an award of attorney fees. Because we conclude that plaintiff's counsel's efforts conferred a benefit on the employer, and that defendants failed to present any evidence that the employer had actively participated in prosecuting the lawsuit, we find no merit in defendants' contentions. We further conclude that the trial court's method of calculating the amount of attorney fees, which took into account the contingency fee agreement between plaintiff and her counsel, did not constitute an abuse of discretion. We affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Shawna Alonzo was injured in October 2006 during the course and scope of her employment when an ambulance she was riding in was involved in an accident. At the time of the accident, Alonzo was employed by Children's Hospital of Orange County (CHOC). The ambulance was being operated by defendants Casey Bear Brennan and Filyn Corporation, doing business as Lynch Ambulance. Alonzo filed suit against defendants in September 2008. Tristar Risk Management (TRM), the workers' compensation third party administrator for CHOC, filed a complaint in intervention. TRM alleged that CHOC was self-insured for workers' compensation benefits, and that Alonzo was injured as a result of defendants' negligent operation of the ambulance in which she was riding, requiring CHOC to provide benefits to Alonzo.
In September 2009, before trial, TRM reached a settlement with defendants. TRM filed a settlement agreement that included an assignment of its lien. Specifically, TRM agreed to release defendants from all claims for workers' compensation benefits paid prior to the assignment for Alonzo's injuries arising out of the events set forth in her complaint. TRM assigned "all of its liens or claims of any kind which exist[ed] in favor of Plaintiff-in-Intervention [TRM] and against [Alonzo]" as of the date of the assignment. TRM and defendants agreed that TRM had expended $96,644.27 in workers' compensation benefits, and defendants agreed to pay TRM $40,000 in consideration of the dismissal and assignment of the lien. TRM dismissed its complaint in intervention.
The matter proceeded to a jury trial in October 2009. Alonzo and defendants entered into a stipulation of facts. The parties stipulated to the following facts (among others) that they agreed would be read to the jury: Brennan's negligence was the sole legal cause of the accident; defendant Filyn Corporation was legally responsible for all damages caused by the negligence of its employee Brennan; and the bills for the medical treatment received by Alonzo related to the subject accident totaled $36,511.07. The parties stipulated to additional facts that they agreed would not be read to the jury, including that the reasonable value of the workers' compensation lien was $95,421.34.
The jury returned a verdict in favor of Alonzo totaling $163,891. The trial court entered a judgment on special verdict.
Alonzo then filed a motion for attorney fees and costs based on Labor Code section 3856, subdivision (b), which provides that when an employee alone prosecutes an action against a third party tortfeasor that results in a judgment benefitting the employer, the employee's attorney fees and litigation expenses must be paid out of any judgment before any workers' compensation lien held by the employer is satisfied. Alonzo's attorney submitted a declaration in support of the motion, indicating that his firm had a 40 percent contingency fee agreement with Alonzo. He declared he had spent 200 to 300 hours on the case on discovery matters, mediation, attendance at a case management conference and a final status conference, and preparation for and attendance at trial. His normal billing rate was $300 per hour.
All further undesignated statutory references are to the Labor Code.
Defendants opposed the motion for attorney fees, arguing there should be no award because defendants had admitted liability. They also argued the amount of fees and costs requested was excessive, and that the court was required to adopt a lodestar approach in calculating any award.
Alonzo filed a reply to the opposition, arguing defendants' admission of liability was irrelevant and the amount of fees requested, based on her contingency fee agreement with counsel, was reasonable.
The trial court awarded Alonzo and her attorney $38,168.54 in attorney fees (i.e., 40 percent of the stipulated lien amount of the workers' compensation lien) and $5,717.32 in nonstatutory costs pursuant to section 3856, subdivision (b), for a total award of $43,885.86. It is this award that is at issue in the present appeal.
This timely appeal followed.
DISCUSSION
I. Equitable Apportionment and Section 3856
Pursuant to section 3852, "[t]he claim of an employee . . . for compensation does not affect his or her claim or right of action for all damages proximately resulting from the injury or death against any person other than the employer." Thus, an employee who sustains an injury in the course of his or her employment, which is caused by the negligence of a third party, may bring a civil action for damages against the third party. The employer may also seek to recover from the third party the compensation and damages the employer is obligated to pay to the employee, either by bringing a separate action, joining as a party plaintiff or intervening in an action filed by the employee, or applying for a lien against the amount of any judgment obtained by the employee. (§§ 3852, 3853, 3856; see Eskenazi et al., 2 Cal. Civ. Practice: Workers' Compensation, Tort Actions Against Third Parties (Thomson West 2007) § 16:5, p. 16-10.)
As relevant here, section 3856 provides for reimbursement to the employer of the workers' compensation benefits paid to injured employees in such suits against third parties, and also provides for an award of attorney fees to the employee and/or the employer. It states in relevant part: "In the event of suit against such third party: [¶] . . . [¶] (b) If the action is prosecuted by the employee alone, the court shall first order paid from any judgment for damages recovered the reasonable litigation expenses incurred in preparation and prosecution of such action, together with a reasonable attorney's fee which shall be based solely upon the services rendered by the employee's attorney in effecting recovery both for the benefit of the employee and the employer. After the payment of such expenses and attorney's fee the court shall, on application of the employer, allow as a first lien against the amount of such judgment for damages, the amount of the employer's expenditure for compensation together with any amounts to which he may be entitled as special damages under Section 3852.
Section 3856, subdivision (a) addresses the situation in which an action against a third party is prosecuted by the employer alone.
"(c) If the action is prosecuted both by the employee and the employer, in a single action or in consolidated actions, and they are represented by the same agreed attorney or by separate attorneys, the court shall first order paid from any judgment for damages recovered, the reasonable litigation expenses incurred in preparation and prosecution of such action or actions, together with reasonable attorneys' fees based solely on the services rendered for the benefit of both parties where they are represented by the same attorney, and where they are represented by separate attorneys, based solely upon the service rendered in each instance by the attorney in effecting recovery for the benefit of the party represented. After the payment of such expenses and attorneys' fees the court shall apply out of the amount of such judgment for damages an amount sufficient to reimburse the employer for the amount of his expenditures for compensation together with any other amounts to which he may be entitled as special damages under Section 3852."
The question presented in this case is whether subdivision (b) (action prosecuted by the employee alone) or subdivision (c) (action prosecuted both by the employee and the employer) applies here, where the employer intervened (through its workers' compensation administrator) in the plaintiff's suit but settled with the defendants and assigned its lien and dismissed its complaint in intervention before trial. The trial court proceeded under subdivision (b), and awarded attorney fees and litigation expenses to Alonzo's counsel.
"The aim of statutory construction is to discern and give effect to the legislative intent. [Citation.] The first step is to examine the statute's words because they are generally the most reliable indicator of legislative intent. [Citations.] To resolve ambiguities, courts may employ a variety of extrinsic construction aids, including legislative history, and will adopt the construction that best harmonizes the statute both internally and with related statutes. [Citations.]" (Summers v. Newman (1999) 20 Cal.4th 1021, 1026.) In interpreting section 3856, we bear in mind the general proviso of section 3202 that the Workers' Compensation Act "'shall be liberally construed by the courts with the purpose of extending their benefits for the protection of persons injured in the course of their employment.'" In other words, we liberally construe workers' compensation statutes to the worker's benefit. (Id. at p. 1032; Quinn v. State of California (1975) 15 Cal.3d 162, 170 (Quinn).)
Defendants contend on appeal that subdivision (c) applies here because the employer's representative, in whose shoes defendants now stand by virtue of the assignment to defendants of the workers' compensation lien rights, was separately represented during most of the pendency of the case and therefore under the plain meaning of the statute, "the action [was] prosecuted both by the employee and the employer." (§ 3856, subd. (c).) They assert that "[a] personal injury case is not 'prosecuted by the employee alone,' unless the employee is, at all times, the sole claimant in the litigation." They further contend that Alonzo is not entitled to compensation under section 3856, subdivision (c), because the defendants admitted liability and because there was no evidence presented that the work of Alonzo's attorney benefitted her employer. As we shall explain, we disagree.
"An employer entitled to reimbursement for payment of workers' compensation benefits may assign its lien rights, even to the tortfeasor, who then steps into the shoes of the employer/intervener. [Citations.]" (Crampton v. Takegoshi (1993) 17 Cal.App.4th 308, 314, fn. 3 (Crampton), disapproved on other grounds in Phelps v. Stostad (1997) 16 Cal.4th 23, 34 (Phelps).)
We find the language of section 3856 to be ambiguous on the issue we are asked to determine here regarding when an action is "prosecuted by the employee alone" as opposed to "prosecuted both by the employee and the employer." While the interpretation defendants suggest is reasonable on its face, it is also reasonable to interpret the statute as requiring more than nominal pretrial participation by an intervener. We turn for guidance to the case law that has interpreted section 3856.
Section 3856 was interpreted by the California Supreme Court in Quinn, supra, 15 Cal.3d 162. In that case, an injured employee filed suit against a third party tortfeasor. After paying workers' compensation benefits, the employer's insurance carrier filed a lien against any judgment the employee might recover, but did not participate further in the litigation. The employee proceeded to trial and was awarded damages, then moved for an order apportioning his attorney fees between himself and his employer. (Id. at p. 166.) The trial court denied the motion. The Supreme Court reversed and remanded the case to the trial court with directions to calculate a reasonable attorney fee and then make a reasonable apportionment of the fee award between the parties benefitted by the recovery. (Id. at p. 175.) In so doing, Quinn held that both the language of section 3856, as well as its legislative history, indicated that the statute "incorporate[d] the principle that an active litigant (here the worker) may require the passive beneficiary of his efforts (here the employer) to contribute toward the payment for the services of [the] litigant's attorney which produced the recovery." (Id. at p. 165.) In other words, the Legislature had incorporated into section 3856 the doctrine of equitable apportionment, which requires the passive beneficiaries of a judgment to bear their fair share of the costs of procuring it. (Id. at p. 166.) Since Quinn was decided, the Legislature has never amended section 3856, and it can safely be said that it has acquiesced in the Supreme Court's observation that the statute incorporates the doctrine of equitable apportionment.
Cases decided since Quinn have endeavored to determine the circumstances under which equitable apportionment should occur in cases governed by section 3856, applying familiar concepts long applicable in situations in which a common fund has been created. For example, the court in Crampton described the statutory scheme as follows: "[T]he equitable apportionment and the common fund doctrines codified in Labor Code section 3856 permit the active litigant who benefits a passive beneficiary to recover a portion of his attorney fees and costs. 'When the employee sues alone, the statute provides that the award of attorney fees is to be "based solely upon the services rendered by the employee's attorney in effecting recovery both for the benefit of the employee and the employer." (§ 3856, subd. (b)[.]) The same standard is used when the employer sues alone (§ 3856, subd. (a)) and when both parties are represented by a single attorney (§ 3856, subd. (c)). Stated differently, the trial court fixes the attorney fees based on the efforts of counsel which created the common fund. After fixing the amount of the attorney fee award, the trial court must apportion the fee award between the parties benefitted by the recovery; in doing so, the trial court must decide to what extent the passive beneficiary should contribute to the litigation expenses and fees which created the recovery fund.' (Walsh v. Woods [(1986)] 187 Cal.App.3d [1273,] 1277 [(Walsh)], italics in original.)" (Crampton, supra, 17 Cal.App.4th at pp. 317-318.) However, when the respective attorneys of the employee and the employer are both active in producing the recovery, there are no passive beneficiaries, and equitable apportionment does not apply; in that case, each attorney's fee comes out of his or her client's share of the recovery. (Crampton, supra, 17 Cal.App.4th at p. 318; see also Hartwig v. Zacky Farms (1992) 2 Cal.App.4th 1550, 1556 (Hartwig); Kaplan v. Industrial Indem. Co. (1978) 79 Cal.App.3d 700, 708-709 (Kaplan); § 3856, subd. (c).)
Alonzo contends that case law supports the existence of a bright line rule that whenever the employer or its representative intervenes but settles with the third party tortfeasor before trial, the employer is not considered an active participant in obtaining the recovery, and therefore section 3856, subdivision (b) applies. However, none of the cases cited by Alonzo specifically considered whether subdivision (b) versus subdivision (c) of section 3856 applies under these circumstances. (See Hone v. Climatrol Industries, Inc. (1976) 59 Cal.App.3d 513; Manthey v. San Luis Rey Downs Enterprises, Inc. (1993) 16 Cal.App.4th 782 (Manthey); Crampton, supra, 17 Cal.App.4th 308; Raisola v. Flower Street Ltd. (1988) 205 Cal.App.3d 1004 (Raisola).) Indeed, in Phelps, supra, 15 Cal.4th 23, in which the employer/intervener settled the matter with the third party tortfeasor prior to trial, the Supreme Court pointedly noted that the parties, the trial court, and the Court of Appeal had proceeded on the assumption that the matter fell within subdivision (b) of section 3856, and that neither party was contending that the matter was governed by subdivision (c). The Supreme Court therefore "express[ed] no view" on that question. (Phelps, supra, 16 Cal.4th at p. 31, fn. 4.) In Crampton, supra, 17 Cal.App.4th 308, where the employer participated in the matter through judicial arbitration but then sold the lien to the defendant, and the employee proceeded to trial, the court determined without discussion that the plaintiff/employee was entitled to an award of attorney fees and expenses pursuant to section 3856, subdivision (b). (Id. at p. 316.) In Manthey, supra, 16 Cal.App.4th 782, the court stated that it did not matter to the outcome of the case before it whether subdivision (b) or (c) applied, although it went on to state in dicta that subdivision (c) did not apply because the dismissal of the complaint in intervention meant the entire posture of the case reverted to what it was prior to the filing of the complaint in intervention. (Id. at p. 788 & fn. 6.) In Raisola, supra, 205 Cal.App.3d 1004, the appellate court remanded the matter to the trial court for it to determine whether there was active participation by the employer's representative. In short, the cited cases did not consider the precise issue involved here. They either focused on different issues or accepted, without meaningful discussion, that subdivision (b) applied where the employer or its representative settled with the third party tortfeasor before trial. (Id. at p. 1009 [construing § 3860].) Cases are not authority for propositions not considered. (Leaming v. Municipal Court (1974) 12 Cal.3d 813, 816, citing In re Tartar (1959) 52 Cal.2d 250, 258.) Thus, prior case law has not established a bright line rule as suggested by Alonzo.
What is clear from the case law, however, is that the question whether a party has been an active participant in prosecuting an action or a mere passive beneficiary is an issue of fact to be determined by the trial court. (Walsh, supra, 187 Cal.App.3d at p. 1278; Raisola, supra, 205 Cal.App.3d at p. 1009; Steinberg v. Allstate Ins. Co. (1990) 226 Cal.App.3d 216, 221; Kavanaugh v. City of Sunnyvale (1991) 233 Cal.App.3d 903, 915 (Kavanaugh); Hartwig, supra, 2 Cal.App.4th at p. 1557; Gapusan v. Jay (1998) 66 Cal.App.4th 734, 745-746 (Gapusan).) That alone proves to be determinative in this case because in opposing the motion for attorney fees in the trial court below, defendants failed to present any evidence regarding TRM's activity prior to settling the matter with defendants and dismissing its complaint in intervention. Determining whether the employer's representative was an active participant should have involved a factual inquiry of the specific circumstances involved, with the burden of producing such evidence resting with defendants as TRM's assignees. (See Kindt v. Otis Elevator Co. (1995) 32 Cal.App.4th 452, 460.)
If the employer or its assignee "desires to avoid apportionment, it must provide the trial court with sufficient factual detail to establish that its activities constituted a conscientious effort in the circumstances to address the substantive issues encompassed by the lienholder's case. [Citation.] Whether the showing . . . in any one instance constitutes substantial evidence of active participation will necessarily turn upon the particular facts and events involved in the action." (Hartwig, supra, 2 Cal.App.4th at p. 1557; see also Gapusan, supra, 66 Cal.App.4th at pp. 745-746.) Here, rather than presenting any facts in opposition to the motion for attorney fees regarding TRM's counsel's efforts in obtaining the recovery, defendants merely argued that because they had stipulated to liability and the amount of Alonzo's medical bills, Alonzo's counsel was undeserving of attorney fees. As a result, defendants were left to rely only on the bare fact that TRM had a separate attorney who filed a complaint in intervention on its behalf. Mere filing of a motion to intervene is insufficient to remove passive beneficiary status from a party for purposes of awarding attorney fees under the common fund doctrine. (Kavanaugh, supra, 233 Cal.App.3d at p. 915.) Similarly, mere retention of separate counsel is not enough to defeat application of the common fund doctrine. (Walsh, supra, 187 Cal.App.3d at p. 1278.) Under these circumstances, the trial court did not err in concluding that Alonzo alone prosecuted the action and was therefore entitled to recover attorney fees and expenses pursuant to section 3856, subdivision (b). When an employer's workers' compensation insurer files a complaint in intervention in the employee's action against a third party tortfeasor and does no more, and the employee's attorney is solely responsible for effecting a settlement of the action or obtaining the judgment out of which the insurer is reimbursed for benefits paid, the employee's attorney is entitled to fees against the insurer for the benefit conferred by his labors. (See Kaplan, supra, 79 Cal.App.3d at p. 709.)
Defendants argued at trial and assert again on appeal that Alonzo's attorney was not entitled to a fee award because the personal injury judgment cannot be deemed to be solely the result of the efforts of Alonzo's attorney, especially where defendants stipulated to liability and the amount of Alonzo's medical bills. They argue that in moving for attorney fees and costs, "[Alonzo] did not offer any evidence to show that her attorney's efforts were the sole cause of the judgment in her favor from which the Workers' Compensation lien could be satisfied. In fact, she offered no evidence at all of how her attorney's efforts, after the dismissal of the complaint in intervention, even contributed to the jury's verdict." Defendants' argument misstates the proper test to be used when evaluating equitable apportionment in this context. Alonzo did not have to show her attorney's efforts were the sole cause of the judgment; defendants had to show that TRM was an active participant rather than a passive beneficiary. Alonzo, having asserted in her motion for attorney fees that her attorney obtained the recovery by performing stated tasks (including trying the case to judgment), did all she was required to do. Furthermore, it is evident that it was through the efforts of Alonzo's counsel that the jury verdict was obtained. Although liability for the accident was admitted, Alonzo's attorney had to demonstrate at trial the nature and extent of her injuries, and convince the jury she was entitled to an award (out of which the workers' compensation lien would be credited back to defendants as TRM's assignees). In the absence of plaintiff's attorney's efforts in prosecuting the trial, there would have been no award, so the argument that the attorney's efforts were not responsible for obtaining the recovery is unavailing.
Because defendants failed to establish that TRM was an active participant in the litigation, the trial court properly awarded Alonzo her attorney fees and costs.
II. Formulaic Use of the Lodestar Method in Determining the Amount of the Attorney Fee Award Is Not Required
The trial court awarded Alonzo and her attorney $38,168.54 in attorney fees, which represented 40 percent of the stipulated amount of the workers' compensation lien. This was the amount requested by Alonzo's counsel, based on the 40 percent contingency fee agreement that Alonzo had with counsel. Defendants contend on appeal that (1) "[a] plaintiff's attorney's contingency agreement cannot represent the measure of the benefit to an intervenor or lien holder, which has never agreed to pay any contingent amount[] [Kaplan, supra,]79 Cal.App.3d at [p.] 713"; and (2) "[t]he proper measure of an award of attorney's fees in California is the 'lodestar' principle, representing 'the number of hours reasonably expended multiplied by the reasonable hourly rate.' PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095 [(PLCM)]." We find no error in the amount of the award of attorney fees.
Pursuant to section 3856, subdivision (b), the court was required to order paid from the judgment "a reasonable attorney's fee which shall be based solely upon the services rendered by the employee's attorney in effecting recovery both for the benefit of the employee and the employer." Subdivision (d) of that section states that the amount of attorney fees awarded "shall be fixed by the court." We review the trial court's calculation of the attorney fee award for an abuse of discretion. (Serrano v. Priest (1977) 20 Cal.3d 25, 49 (Serrano); Lealao v. Beneficial California, Inc. (2000) 82 Cal.App.4th 19, 40-41 (Lealao).)
Regarding defendants' first argument, that a plaintiff's contingency agreement cannot represent the measure of the benefit to a lienholder, we disagree. Indeed, the case cited by defendants states that while a contingency agreement is not determinative of the amount of an award of reasonable fees, it is concededly relevant. (Kaplan, supra, 79 Cal.App.3d at p. 713.) A "percentage of the benefit" method of calculating attorney fees has long been used in common fund cases where the amount of the fund is a certain or easily calculable sum of money. (Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1809, citing Serrano, supra, 20 Cal.3d at p. 35; but see Lealao, supra, 82 Cal.App.4th at p. 39 ["questionable" whether a pure percentage fee can be awarded in a common fund case in light of statement made in Serrano, supra, 20 Cal.3d at p. 48, fn. 23].) The case cited by defendants, PLCM, supra, 22 Cal.4th 1084, did not involve a common fund, and therefore it does not govern the outcome in the present case.
There is no mechanical formula that dictates how the trial court must evaluate the factors relevant to an attorney fee award. Instead, trial courts have wide latitude in assessing the value of an attorney's services. (Lealao, supra, 82 Cal.App.4th at p. 41.) Here, the trial court had before it evidence applicable to the lodestar method of calculating fees: the hours expended by Alonzo's counsel in prosecuting the matter (approximately 250), and counsel's noncontingency billing rate ($300 per hour). Defendants have failed to demonstrate that the amount of attorney fees awarded, approximately $40,000, was unreasonable in light of the fact that there was evidence before the court that counsel's services would have commanded $75,000 or more if billed at counsel's hourly rate. Reduction of that amount to $40,000 constitutes reasonable compensation for the attorney's services in conferring the benefit of recovery of the workers' compensation lien on Alonzo's employer (or in this case, defendants as assignee of her employer). The superior court was familiar with the quality of the services performed and the amount of time devoted to the case. The award was within the realm of reason, and we thus conclude that the trial court did not abuse its discretion.
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to Alonzo. NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
SUZUKAWA, J.
We concur:
WILLHITE, Acting P. J.
MANELLA, J.