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PA Justices Consider “Loser Pays” for Workers Comp Cases

October 18, 2017 | Posted in : Contingency Fees / POF, Expenses / Costs, Fee Award, Fee Issues on Appeal, Fee Shifting, Prevailing Party Issues

A recent Legal Intelligencer story by Max Mitchell, “Justices Urged to Avoid Chilling Effect of Lower Court ‘Loser-Pays’ Ruling in Comp Case” reports that, if the state Supreme Court upholds a decision that workers’ compensation lawyers can be ordered to pay the employer’s attorney fees for unreasonable contest, if the employer prevails on appeal, there will be a chilling effect on smaller cases, a lawyer representing a claimant told the justices.  Attorney David Landay of Pittsburgh, who is representing the claimant in County of Allegheny v. Workers’ Compensation Appeal Board (Parker), argued that the Commonwealth Court’s decision in his client’s case was against the statutory scheme of the Workers’ Compensation Act.

“Judges will think twice before awarding attorneys fees if they think they may be taken away,” Landay said.  He gave the example of a dispute over $2,500 in medical bills.  Even if it is absolutely clear that the claimant was entitled to benefits, he said he would not be able to take the case, because, if he were unable to recover unreasonable contest fees, he would only be able to recover $5,000.  “I can’t afford to take that case,” Landay said.

The dispute stems from a December decision from the Commonwealth Court, which remanded claimant Harold Parker’s workers’ compensation case with instructions to order Parker’s lawyer to refund $14,750 in unreasonable contest fees to Parker’s employer, Allegheny County.

That decision had been based on the Commonwealth Court case Barrett v. WCAB (Sunoco), which held that “where litigation costs are awarded and are paid by the employer as a result of denial of a stay and the award of costs is later reversed on appeal, the employer is entitled to an order requiring the claimant’s counsel to repay the erroneously awarded costs.”  Although Barrett involved non-attorney fee litigation costs, the majority said the reasoning in Barrett applied to Parker’s case.

Landay, however, told the justices that Barrett was based on a plurality decision in a case that did not involve contingency fees.  “Once you take those out, then the opinion [in Parker] collapses of its own weight,” Landay said.  Landay contended the way unreasonable contest fees are paid is outlined in the Workers’ Compensation Act, and the act does not allow for disgorgement of the fees, but rather the fees should be paid out of the supersedeas fund.

Bradley R. Andreen of O’Brien, Rulis & Bochicchio, who represented Allegheny County, said the Workers’ Compensation Act was not meant to provide a windfall for plaintiffs’ attorneys.  “The claimant didn’t need to get more fees when we ultimately prevailed,” Andreen said.

Parker was receiving total disability benefits for a 1993 work-related injury when the county filed a petition in 2007 seeking to suspend his benefits.  A workers’ compensation judge granted the suspension petition in 2008, given that Parker had failed to follow through in good faith with a job referral that was within his physical limitations.  Parker was 80 years old at the time.

In 2009, however, the WCAB reversed and held that Parker was entitled to unreasonable contest attorney fees.  The employer, Allegheny County, successfully appealed that ruling in the Commonwealth Court, which also held that Parker was not entitled to unreasonable contest fees since he was ultimately not the prevailing party.

In the wake of the 2012 Commonwealth Court ruling, the county sought reimbursement from the supersedeas fund for more than $100,000 in compensation it paid Parker as well as $14,750 in unreasonable contest fees.  The Bureau of Workers’ Compensation approved reimbursement for the compensation paid, but not for the unreasonable contest fees.  So the county filed a petition seeking an order that would require Parker’s lawyer to pay the refund.

Andreen said the process ensures claimants do not have their benefits reduced due to a mistake the employer made, and any decision by the justices in Parker would not affect the claimant’s attorneys’ ability to recover fees.