Counsel Fees

There are only a few appellate level cases dealing with counsel fees in the New Jersey Division of Workers’ Compensation.   In Garzon v. Morris County Golf Club, A-1100-21 (App. Div. December 23, 2022), the Appellate Division embraced an approach that petitioner’s attorney’s counsel fee should be based on considerations of reasonableness and not automatically set at 20%.

The case dates back six years. Petitioner suffered injuries on December 15, 2016 to her neck, back and left hand tripping over a box in the kitchen where she prepared and served food.  Temporary disability benefits commenced but stopped on December 29, 2016 when petitioner traveled to Colombia for a two-week vacation. 

Petitioner filed a claim petition and a motion to compel payment of temporary disability benefits from December 29, 2016 to January 24, 2017.  Petitioner also opposed respondent’s termination of the care provided by treating physician, Dr. Joseph Fodero.  Petitioner relied on a letter written by the adjuster to Dr. Fodero, asking the doctor why he extended petitioner’s disability when petitioner had left the country on vacation.  The adjuster asked the doctor to reconsider his opinion. 

Dr. Fodero responded that the petitioner already had swelling before she left for vacation and the vacation “had no bearing on her care.”  Dr. Fodero added that the adjuster was “more concerned with the fact that you would need to pay for the lost time than with her treatment and well being.”  On February 15, 2017 the adjuster advised petitioner that Dr. Fodero was no longer authorized to treat, appointing a new treating facility.

During the trial on the first motion, petitioner testified that Dr. Fodero did not recommend physical therapy before she traveled to Colombia.  She said that the doctor approved her travel plans and did not require treatment while she was away.  She further stated that the Golf Club was closed from December 24, 2016 to March 4, 2017, so she could not have worked.

Following petitioner’s testimony, the Judge of Compensation registered his concerns that the adjuster was “playing doctor” and considered her actions “completely inappropriate.”  The parties then resolved the issues surrounding the motion.  The Golf Club agreed to pay temporary disability benefits from December 29, 2016 to January 24, 2017 in the amount of $1,880.84.  Counsel fees on the motion were deferred until the conclusion of the case. An Order was entered confirming these terms on April 17, 2017.

A new issue developed in late August 2018.  The treating physician imposed permanent work restrictions on August 23, 2018.  The Golf Club then stopped temporary disability benefits.  There is no comment in the decision whether the doctor found petitioner to be at maximal medical improvement.  Another conference ensued, and respondent agreed to restore the temporary disability benefits.  However, payments were not immediately restored, leading to a second motion. This motion was filed to enforce the April 17, 2017 Order.  Temporary disability benefits were restored as of March 1, 2019.   A June 3, 2019 Order was entered confirming that the Golf Club was then providing temporary disability benefits and reserving the issue of fees and penalties until the end of the case.

Counsel for petitioner submitted an affidavit in support of his counsel fee application, stating that he had expended 25 hours on this matter and that if the time was converted to an hourly rate, he would be entitled to $500 per hour.  The Appellate Division commented that there was no invoice detailing work performed by counsel.  Respondent’s counsel opposed the fee application.

On October 19, 2021, the Judge of Compensation entered an order approving the settlement for a percentage amounting to $164,577.  Arguments were placed on the record in regard to petitioner’s fee application and the request for penalties. 

The Judge of Compensation approved a counsel fee of $32,915, or 20% of the award and assessed this entirely against respondent.  The Judge explained that “it has been a struggle for petitioner the entire time right up until the commencement of the trial to get the protection that she’s entitled to under the law under the Workers’ Compensation statute.”

With regard to the initial motion which petitioner filed for benefits while she was in Colombia, the Judge disagreed with the decision of the carrier to stop benefits and held that a penalty was warranted equal to 25% of the amount of the withheld benefits under N.J.S.A. 34:15-28.2.  The Judge of Compensation also awarded a counsel fee on the motion for Medical and Temporary Disability Benefits of $78,000 based on $61,008 paid in temporary disability benefits and $329,172 in medical benefits paid in the case (approximately $390,000 paid before permanency benefits).

With regard to the 2019 motion to enforce, the Judge found that the respondent erred in stopping temporary disability benefits unilaterally without the Court’s permission in August 2018.  A penalty was assessed in the amount of 25% of $5,564.17 or $1,391.04. 

In regard to petitioner’s prior affidavit regarding the second termination of benefits in August 2018, the Judge noted that counsel expended 25 hours and awarded $12,500 in counsel fees.

Lastly, an additional penalty was assessed in the amount of $5,000 to be paid into the Second Injury Fund pursuant to N.J.S.A. 34:15-28.2(b).  The Judge commented that this penalty was appropriate because of the “reckless conduct in the way the Club treated this petitioner and unilaterally worked to deny the petitioner the benefits the petitioner was entitled to under the statute.”

Respondent appealed all of the counsel fee awards and argued that the fee awards were excessive and unfair.   The Appellate Division noted that there was no appeal of the penalties assessed against respondent.

The Appellate Division reversed all the fee awards.  The Court focused on the language in N.J.S.A. 34:15-64 (a) which provides that a Judge of Compensation may “allow to the party in whose favor judgment is entered . . . a reasonable attorney fee, not exceeding 20% of the judgment.”  The Court quoted Quereshi v. Cintas Corp., 413 N.J. Super. 492, 500 (App. Div. 2010) for the proposition that “an attorney for a petitioner can anticipate up to 20%, but may receive less, if the judge of compensation finds an award less than 20% is reasonable.”

The thrust of the Court’s holding is that fee awards must be reasonable. The Court looked to non-workers’ compensation cases for the principle that the Judge of Compensation must consider “the number of hours reasonably expended multiplied by a reasonable hourly rate.”  The Court cited Quereshi: “When a petitioner’s attorney requests a substantial fee, albeit not in excess of the allowed 20%, the fee request must be supported by an affidavit of services that demonstrates the extent of the attorney’s efforts, including the time expended and ‘the extent of his expertise and experience. . . ..’” (citations omitted).  The Court noted that Collas v. Raritan River Garage, Inc., 460 N.J. Super. 279 (App. Div. 2019) “cautioned against a reflexive application of a twenty-percent award without full analysis.”

The Appellate Division found that the Judge of Compensation “did exactly what we have cautioned against: he engaged in a ‘reflexive application’ of the twenty-percent maximum set forth in N.J.S.A. 34:15-64(a) and failed to make a ‘full analysis’ of petitioner’s fee submission.”  The Court vacated the award of $32,915 in counsel fees with respect to the permanency award.  The Court also vacated the award in counsel fees of $78,000 on the Motion.  In regard to fees on a successful motion, the Court said as follow:

In N.J.S.A. 34:15-28.1, which is the applicable statute for an award of fees in connection with a motion regarding a delay or refusal to pay temporary disability benefits, the Legislature said nothing about awarding fees equal to twenty percent of the benefits obtained through the motion.  Instead, the Legislature clearly provided for an award of ‘any reasonable legal fees incurred by the petitioner as a result of an in relation to such delays or refusals.’

The Court stressed that “the Club paid benefits immediately after the accident, agreed to limit what ultimately had to be tried, and interrupted benefits payments based only on petitioner’s trip to Colombia and on information that her treating physician had imposed permanent restrictions.  Those circumstances do not bespeak a maximum award.”  

This case is not a reported decision.  It is therefore not binding on Judges of Compensation or on other appellate panels.  It should not be read as requiring that in every case counsel for petitioner must provide an affidavit or invoices detailing hours expended.  In actual practice, workers’ compensation attorneys who represent injured workers are much like personal injury attorneys in not being permitted to bill by the hour.  Both practice areas are based on contingent fees.  If petitioner obtains no recovery, there is no fee paid to his or her counsel.  Sometimes the awards are very small and the counsel fee, if converted to an hourly rate, could be well under $100 per hour.  It would make no sense in smaller cases to require counsel to submit evidence of hours expended.  

Where this case is on sounder footing concerns substantial fees awarded on successful motions for medical and temporary disability benefits, particularly where motions are resolved by consent order with little or no testimony required.  No one can predict the total amount of benefits that will be incurred after an Order for Medical and Temporary Disability Benefits is entered.  The variables are whether there is surgery, whether the surgery succeeds or fails and requires a second surgery, whether there are pain management issues, hospitalizations, injections, expensive medications, and other such complicating factors. 

The costs incurred after the entry of an Order for benefits may turn out to be a few thousand dollars or a few hundred thousand dollars, but if the costs are a few hundred thousand dollars, a 20% fee could be higher than the fee on the ultimate permanency award.  That is exactly what happened in the Garzon case.  The counsel fee on the motion was more than twice as high as the counsel fee for the award of permanency at the end of the case.  In such a situation, the Court argued that there needs to be some analysis of the hours expended on the motion and on the whole case before defaulting to the 20% fee.

The post Appellate Division Reverses Award of 20% Counsel Fee on Order for Medical and Temporary Disability Benefits and Permanency Benefits appeared first on NJ Workers' Comp Blog.

One recurring question which adjusters and practitioners are often asked is this:   in computing the workers’ compensation lien, does the employee get to reduce the employer’s lien by the amount the injured worker had to pay for costs and expenses in the third party action? Further, does the employee get to reduce the employer or carrier’s lien by the amount the injured worker paid in counsel fees in the workers’ compensation case?

Let’s deal with costs first.   Many third party law suits are complex and require a substantial outlay of funds for depositions, experts and investigation.  When it comes time to repay the workers’ compensation lien, some plaintiffs’ counsel will send the subrogation adjuster a ledger of all expenses paid in the third party case.  Sometimes those costs can amount to many thousands of dollars.

Nonetheless, N.J.S.A. 34:15-40 only allows a reduction in the employer’s lien for costs up to $750.  If the costs are only $300, then $300 is the reduction. But if the costs are well over $750, then the lien is only reduced by a capped amount of $750.   Before the 2007 amendments to N.J.S.A. 34:15-40, the cost cap was only $250!

What about counsel fees in the workers’ compensation case paid by the employee to his or her own attorney?  Let me provide a scenario to make this situation clearer.  Suppose Employer pays $150,000 in workers’ compensation benefits, consisting of $50,000 in medical and temporary disability benefits and eventually $100,000 in permanent partial disability benefits.  In New Jersey the petitioner’s attorney is entitled to a fee of 20% of the gross workers’ compensation award.  So on a $100,000 workers’ compensation award, the legal fee will be $20,000.  Who pays the $20,000 in petitioner’s counsel fee on a percentage award?  The answer is that the employer pays 60% of the injured worker’s legal fee and the injured worker pays 40% of that fee.  In the above scenario, that means that petitioner is paying her attorney $8,000 from her award and the employer or carrier in the workers’ compensation case is paying $12,000 toward petitioner’s attorney’s fee for a total of $20,000.

The third party case settles for $400,000 before the permanency aspect of the case settles.  The attorney in the third party sends a check to the employer for two thirds of $50,000 minus $750 for costs.  That takes care of the lien on the medical and temporary disability benefits.  The statutory costs have also been resolved. The permanency award settles next for $100,000.  Does the employer have a lien on $100,000 or on $92,000.  (Remember, the employee paid her lawyer $8,000 from the $100,000 compensation ward).  The employee may argue that she did not receive $100,000 in the workers’ compensation award and therefore should not have to pay back two thirds of $100,000.  Suppose the plaintiff’s attorney only offers to pay back two thirds of $92,000. Who is right here?

This issue was decided in 2021 in Panckeri v. Allentown Police Department, A-2015-19 (App. Div. March 2, 2021), reaffirmed, (App. Div. August 19, 2022).  While this is an unreported case, the case is useful because the Appellate Division answered this very question head on.  It affirmed the ruling of the Honorable Christopher B. Leitner, Judge of Compensation, who found that the permanency lien is based on the gross award in the compensation case.  So the employer gets back two thirds of $100,000, not two thirds of $92,000.  The Appellate Division said, “We further agree with the judge that had the Legislature intended to include the petitioner’s fees and costs in Section 40, it could have done so through the 2007 amendment or at any other time in the Act’s one-hundred-and-ten-year history.”

The Appellate Division made one other important point based on a prior case called Kuhnel.  It said the employer cannot lien what it paid toward the workers’ compensation counsel fee of petitioner.  In our example above, even though the employer paid $12,000 toward the injured workers’ counsel fee, the employer cannot add that $12,000 to its lien and seek repayment of $112,000 in our scenario above.  The employer’s lien is based on the gross permanency award, which was $100,000 in our scenario.  It is not reduced by what the injured worker had to pay her attorney nor increased by what the employer had to pay toward the legal fee of petitioner’s attorney.

The post What Costs and Legal Fees Are Deducted From the Lien of the Employer or Carrier? appeared first on NJ Workers' Comp Blog.

We all know certain events are going to happen every year:  Alabama is going to play for the national football championship, your property taxes will certainly rise, Tom Brady will be in the Super Bowl, and most likely of all – someone is going to challenge the way Section 40 liens are calculated in New Jersey.  This year the lien challenge has already occurred in Panckeri v. Allentown Police Department, No. A-2015-19 (App. Div. March 2, 2021).

Police Officer Daniel Panckeri was injured on April 15, 2012 rendering assistance at the scene of a motor vehicle accident. While attempting to stop one of the cars that was rolling into oncoming traffic, Panckeri suffered injuries to his left foot that resulted in an award of thirty three and one third percent permanent disability.  He reopened the case two years later and received an increase to forty percent of the foot.

Panckeri also settled a third party suit for $99,000 and respondent asserted its full lien for the gross amount of its workers’ compensation payments: $16,547.13 for temporary disability benefits, $16,287.05 in medical benefits, $16,560.01 in permanency benefits for the first settlement, and $4,323.09 for the reopener settlement.  That meant that the Township was entitled to be reimbursed two thirds of all these payments minus $750 in costs because the third party settlement amount was higher than the total amount of workers’ compensation payments.

The issue in this case centered on the fees petitioner paid his attorney and whether they should be included in the lien.  In the original workers’ compensation case the Judge of Compensation assessed against petitioner $1,524 for Panckeri’s share of counsel fees and costs and another $844 for Panckeri’s share of counsel fees and costs on the reopener claim.  Panckeri argued that the workers’ compensation lien should not apply to his payments of counsel fees and costs on the two cases because he never received those funds.  He argued they should be deducted before respondent calculates its lien.

The Judge of Compensation, Christopher B. Leitner, ruled in favor of the Allentown Police Department and held that there should be no reduction of $2,368 for the two combined awards of counsel fees and costs assessed against petitioner because the New Jersey statute does not sanction any such exception.  The judge ruled that the statute is designed to avoid double recoveries, and the only cost allowance allowed by the statute is $750.  Judge Leitner further observed that the Act is “silent’ with regard to costs incurred in the workers’ compensation matter by the petitioner.  Finally, Judge Leitner observed that the Legislature amended N.J.S.A. 34:15-40 in 2007 to raise the cost allowance from $250 to $750 and specifically “examined exemptible fees and costs,” choosing “only to increase the deductible amount,” and “not to include any new interpretation.”

On appeal Panckeri argued that the attorneys’ fees and costs he paid in the workers’ compensation case were not made for his “benefit or enjoyment” and therefore were not “compensation payments.”   The Appellate Division did not agree. “We affirm substantially for the reasons articulated by Judge of Compensation Christopher B. Leitner, in his thoughtful and thorough written decision.”

The Appellate Division observed that the case relied on by Panckeri, namely Kuhnel v. CNA Insurance Cos., 322 N.J. Super. 568 (App. Div. 1999) is not really on point.  That case held that a Section 40 lien does not include rehabilitation nursing services in most cases and does not include the respondent’s portion of petitioner’s attorney’ fees nor expert fees for defense IMEs.  The Court concluded that Kuhnel did not address at all whether petitioner can deduct his portion of fees and costs paid in the workers’ compensation case.  Lastly, the Court said that the Legislature could have amended Section 40 in 2007 to make such an adjustment, but it chose not to do so.

After a year in 2011 in which workers’ compensation rates actually declined for the first time in decades, the new rates in 2012 have renewed the steady ascent which commenced in 1980.

The Workers’ Compensation rates effective January 1, 2012 are:

Maximum for temporary disability and permanent total  — $810.00 per week up from $792.00

Minimum for temporary disability — $216.00 per week up from $211.00

These rates are based on the State Average Weekly Wage.  For 2012 that average is $1,079.91.  The State Average Weekly Wage in 2011 is $1,056.54.

At this time Capehart does not have the new rate charts put out by New Jersey Manufacturers.  These rate changes will affect all awards.  The rate of increase over 2011 appears to be approximately 2%.