A recent Legal Intelligencer story by Zack Needles, “Court: WCJ Has No Authority to Assess Reasonableness of 20% Counsel Fee” reports that a divided Commonwealth Court en banc has ruled that a workers’ compensation judge had no authority under the Workers’ Compensation Act to evaluate whether a 20% counsel fee for a claimant’s medical compensation award was reasonable.
In Neves v. Workers’ Compensation Appeal Board (American Airlines), according to the Commonwealth Court’s May 14 opinion, claimant Robert Neves filed a claim petition alleging that on Jan. 5, 2015, he suffered a work-related heart attack that damaged his heart muscle while he was employed by American Airlines. On May 3, 2016, Workers’ Compensation Judge Joseph Stokes granted the claim petition and specifically found in his decision that Neves’ attorney was entitled to “20% of any benefits awarded to be paid as counsel fees” under the fee agreement claimant signed.
American Airlines appealed to the Workers’ Compensation Appeal Board and Neves cross-appealed, arguing that Stokes had miscalculated Neves’ average weekly wage. On Aug. 18, 2016, Neves filed a review petition and a penalty petition, alleging that his employer had refused to pay for medical treatment and withheld counsel fees. The case was assigned to WCJ Geoffrey Lawrence.
In support of his claim for attorney fees, Neves’ counsel pointed to the fee agreement Neves signed, which stated that he agreed “to pay my attorney a sum equal to 20% of whatever may be recovered from said claim either by suit, settlement, or in any other manner or of whatever may be recovered if a second trial or appeal is taken.”
Lawrence denied Neves’ review petition, holding that his attorney was not entitled to a 20% attorney fee on Neves’ medical compensation. Lawrence held that Neves’ review petition was barred by the doctrine of res judicata because Neves did not appeal Stokes’ order that his counsel was “entitled to 20% of the compensation benefits awarded as counsel fees payable from claimant’s share of the award.”
Lawrence held that Neves failed to establish that his counsel’s fee was reasonable, relying on the Commonwealth Court’s 1993 ruling in Piergalski v. Workmen’s Compensation Appeal Board (Viviano Macaroni), which held that a contingent fee based upon an award of medical compensation will not be approved unless the fee is shown to be reasonable based on the amount and complexity of legal work involved. Lawrence also ruled that, under 1993 amendments to the WCA, known as “Act 44,” any fee award would only apply to the indemnity award and not the medical award.
The board affirmed Lawrence’s ruling, agreeing that Neves needed to show that the fee was reasonable. The board based its decision on the Commonwealth Court’s 2016 ruling in Righter v. Workers’ Compensation Appeal Board (Righter Parking). On appeal to the Commonwealth Court, Neves argued that a 20% counsel fee is per se reasonable under Section 442 of the WCA, regardless of whether the award is for disability or medical compensation. Neves also argued that Act 44 had no bearing on the matter.
Commonwealth Court President Judge Mary Hannah Leavitt, writing for the majority, agreed. “We hold that Section 442 does not distinguish between the type of compensation awarded; does not require an inquiry into the reasonableness of a 20% fee agreement; and does not make the amount and degree of difficulty of the work performed by the attorney relevant,” Leavitt said. “A 20% counsel fee is per se reasonable.”
Leavitt added that, “since its enactment, Section 442 has required the fact finder, now the WCJ, to approve a negotiated 20% counsel fee without regard to whether it applied to indemnity or medical compensation.” Leavitt was joined by Judges P. Kevin Brobson, Patricia McCullough, Anne Covey and Christine Fizzano Cannon.
Judge Michael Wojcik, joined by Judge Renee Cohn Jubelirer, penned a dissenting opinion. “In accord with the humanitarian purpose of the act, we have consistently interpreted Section 442 as requiring a WCJ’s approval of every agreement for attorney’s fees, based on a determination of reasonableness,” Wojcik wrote. “Always, we have been mindful that ‘Section 442 evidences a legislative intent to protect claimants against unreasonable fees imposed upon them by their attorneys pursuant to improvident fee agreements.’”