### No. 84-393 

### IN THE SUPREME COURTOF THE STATEOF MONTANA 1985



### FREDERICK CONWAY, Claimant and Respondent,

-vsBLACKFEET INDIANDEVELOPERS,INC., Employer, and MISSOULA SERVICE COMPANY, DefendantandAppellant.

APPEAL FROM: TheWorkers' CompensationCourt, the Honorable Timothy Reardon, Judgepresiding.

COUNSEL OF RECORD:

ForAppellant: Jardine,Stephenson,Blewett & 

### Weaver; K. 

### Dale Schwanke argued,Great Falls,Montana For Respondent: 

### Donald Marble argued, Chester,Montana Norman Grosfield, co-counsel, Helena,Montana

Filed: 

## JULL 

## i9BS

ClerkMr. Justice L. C. Gulbrandson delivered the Opinion of the Court.Defendant, Missoula Service Company, appeals from two orders of theWorkers' Compensation Court awarding attorneys' feesand costs. The firstorder, entered afteran evidentiary hearing, awarded claimant's attorneys $44,533.78 infeeson a forty percent contingency fee agreement applied to the discounted value of periodic disability benefits due the claimant, together with costs of $1,641. The second order awarded claimant's attorneys $941 in costs for pursuing the attorneys' feesissue. Claimant was injured in an industrial accident on July 30, 1976. He suffered trauma tohisright arm, shoulder and neck. By December, 1976, he could no longer work and in early 1977 he was diagnosed ashavingmultiple sclerosis. He filed forbenefits with the insurer and was denied. Hethen filed a petition with the Workers' Compensation Court, and the court held the claimant was entitled topermanent total disabilitybenefits. The insurerappealed tothisCourt, and inConway 

### v. Blackfeet Indian Developers, Inc. (Mont. 1983), 669 P.2d 225, 40 St.Rep. 1427, 

### we affirmed. After thisCourt's decision in theprevious appeal, the only remaining issue was the amount of attorneys' 

### fees and costs to be awarded the claimant, and the manner of their payment. On remand 

### of the case totheWorkers' Compensation Court, claimant filed a motion for an order determining attorneys' fees. The insurer responded to the motion by asking for an evidentiary hearing. Over claimant's objection, a hearing was held. At the hearing, claimant's attorneys presented the testimony of two expert witnesses, Bruce Finnie, an economist and Tom Keegan, an attorney. One

### of the claimant's attorneys also testified. The insurer's attorney testified and, subsequent to the hearing, the insurer submitted the deposition testimony of Bob James, a Great Falls attorney. The primary issue before the Workers' Compensation Courtwas themethod of calculationand payment of attorneys' fees in Workers' Compensation cases where the claimanthas a contingent fee arrangement with his attorney, and is to receive benefits in periodic payments. Claimant requested fees of approximately $45,000. This request, supported by the experts' testimony,was reached by taking claimant's life expectancy times hisweekly rate,yielding a sum of $195,948, and discounting this at six percent to reach a present value of $76,268. Past benefits total $35,066. Claimant's total entitlement is $111,334. The contingency fee arrangement provides for fees of forty percent of net recovery if successfully litigated through the Supreme Court. Forty percent of $111,334 is $44,533.78. TheWorkers' Compensation Court awarded this amount to the claimant, plus $1,641 in costs. Subsequently,theWorkers' Compensation Court awarded claimant $941 for costs in the attorneys' fees action. Appellant-defendant raises the following issues on appea1: 

### (1) Whether the Workers' Compensation Court erred in ruling that attorneys' fees should be payable in a lump sum. (2) 

### Whether there was substantial evidence to support the Workers' Compensation Court's determination of fees? (3) Whether the Workers' Compensation Court erred in awarding claimant's costs for the attorneys' feesproceeding? Claimant-respondent, pursuant to Rule 14, M.R.App.Civ.P., raises the following issues:(1.) Whether the present value discount of claimant's netaward shouldbe included inthecalculation of attorneys' fees.?(2) Whether theCourt should award claimant damages and impose a penalty on defendant pursuant to Rule 32, M.R.App.Civ.P.? This Court in Wight 

### v. Hughes Livestock Co. (Mont. 1983), 664 P.2d 303, 40 St.Rep. 696, approved contingent fee agreements in Workers

## ' Compensation cases. Wight did not, however, say how such arrangements were tobe implemented. Section 39-71-611, MCA 

### is the statute that provides for attorneys' fees inWorkers' Compensation actions. It states in part that, "the insurer shall pay reasonable costs and attorneys' fees as established by the workers' compensation judge." Appellant contends that the above statute provides no guidance as to how attorneys' fees are to be awarded in workers' compensation actions and that, in the absence of express legislative intent, the Workers' Compensation Court does not have the authority to award attorneys' fees in a lump sum when the claimant 

### is receiving periodic disability payments. We do not find appellant's argument tobe persuasiv~. The Workers' Compensation Court's order simply effectuated the parties intent and 

### met the criteria 

### set out in Wight, supra. Secondly, section 39-71-611, MCA gives the lower court the discretionary authority to determine "reasonable fees." Reasonable 

### is a 

### termthat can easilybe interpreted, and 

### we do so here, to comprehend both the amount, and the kind of fee--lump sum orperiodic. A case appellant 

### relies upon points out thisdistinction. InU.S.F. & G. 

### v. Potter,

### (Ark. 1978), 567 

### S.W.2d 104, 

### the Arkansas Supreme Court held that that state's statute did not contain implied authority for the workers' compensation division to award attorney's fees on a 

### lump sum basis. The pertinent statute, Ark.Stat.Ann. S81-1332,provides that: "In determining the amount of fees, the Commission shall take into consideration the nature, length and complexity of the services performed, and the benefits resulting therefrom to the compensation beneficiaries." (Emphasisadded.) Montana's statutory language is broader. It does not refer to the "amount" of fees,but rather that the court shall set

a 

### "reasonable"fee. As stated above, this includes thepower to set the kind of fee that shall be paid claimant's attorneys. On thispointwe affirm the Workers' Compensation Court. Next, appellant contends that theWorkers' Compensation Court did not have substantial credible evidence for its ruling. It argues that the court relied on evidence introduced at trial without a proper foundation, and therefore the order has no evidence to support it. Specifically, appellant contends that claimant's experts relied on an inaccurate mortality table in calculating the present value of the award. At the hearing, claimant's attorneys introduced and qualified Bruce Finnie as an expert economist. On voir dire of Finnie, insurer elicited testimony that his calculations

were 

### based on a standard mortality table that did 

### not specifically account for claimant's American Indian genealogy, on-reservation status, and multiple sclerosis. Asked if these circumstances would substantially effect claimant's life expectancy, Finnie replied "yes.

### " At that

### point defendant objected to the admission of Finnie's computationbecause its "underlying basis"was "significantly off." The court noted insurers'objection,but admitted the evidence "forwhat it isworth." In its order, the Workers' Compensation Court noted: "The defendant objects to the claimant's calculated life expectancy, asserting that the claimant's physical condition and American Indian genealogy have not been accounted for. While these assertions may have merit, there was no evidence submitted either to support the contentionsor to rebutMr. Finny's [sic] cal

### culations. Therefore, the life expectancy, as presented by the claimant's expert, shall be accepted." Insurer insists that thisevidencewas lacking a proper foundation, and that the court erred in relying thereupon, citing 32 C.J.S. Evidence S583, and Jones, 

## --- The Law of Evidence, (6thEd.) S4.59. While we note that strictly as a matter of evidence 'Law, insurer's argument has merit, it fails to account for section 39-71-2903, MCA, which specifically provides that 

### " 

# .. . the workers' compensation judge is not bound by common law and statutory rules of evidence." In the past, responding to similar arguments,we have upheld the admission of hearsay evidence, Stevens v. Glacier Gen. Assur. Co. (1978), 176 Mont. 61, 65, 575 P.2d 1326, 1329, and "appraiser's conclusions

# . . .based upon only a cursory investigation" Krause v. Sears Roebuck & 

### Co.

(1981), 197 Mont. 102, 105, 641 P.2d 458, 460, before the Workers' Compensation Court. Although we specifically noted in 

### Krause, supra, that "the court did not place any undue reliance on the appraiser's testimony." 197 Mont. at 106, 641 

### P.2d at 460,which is not the case here; we find another factor that weighs against appellant. 

### As noted by the Workers' Compensation Court, the insurer "submitted [noevidence] either to support the contentions ortorebut Mr. Finny's [sic] calculations." Though the claimant has the burden of making a prima facie case, 

### if he does so, and if the defendant raises an issue, defendant then has theburden of going forward with evidence sufficient torebut claimant. With the relaxed evidentiary rules inworkers' compensation proceedings, there 

### is an increased emphasis on the rights to cross-examine, Hart v. J. J. Newberry Co. (1978), 179 Mont. 

### 160, 587 P.2d 11, and to produce evidence. Here, the defendant did 

### littlemore than raise the issue on voir dire, object, and then drop 

### it. Defendant did not ask Finnie how much the claimant's circumstances would affect his life expectancy, or introduce any of 

### its own evidence on that point. We do not finderroron thispoint. Defendant also contends that the court erred in adopting the 

### 6%discount figure proposed by the claimant. Our review of the record indicates that there 

### is substantial credible evidence supporting this figure. Defendant's own expert, Robert James, testified that the discount process used in this case was accepted and reasonable. Claimant's experts, Bruce Finnie and Thomas Keegan, both testified that the fee arrangement and amount requested by claimant's attorneys 

### were reasonable. The Workers' Compensation Court did not 

### err on thispoint. As to issue number three, the Workers' Compensation Court, in

### itsorder awarding fees, reasoned:

"The contingent fee contract in the present caseprovided attorney feesof 40 percent of the claimant'

### s recovery upon successful appeal tothe Montana Supreme Court, which was awarded by thisCourt's June 1, 1984 Order. Thp contract additionallyprovided that:"'The Law Office shall be reimbursed by client for all costs and disbursements incurred anr expended on behalf of 

### client. (Emphasis added.)

## ' "The claimant's attorney was forced to advance monies to recover attorney fees that the claimant was required to pay under the fee contract. In order to effectuate the 'net award' concept set forth in Wight, supra., these additional costs must be assessed against the insurer. Additional attorney fees for pursuing the underlying attorney fee award could not be assessed 

### sincethe fee contract 

### limitssuch feesto40 percent." We find that the Workers' Compensation Court's reasoning, and order, 

### is correct, and affirm on thispoint. We 

### will not address claimant's issues on cross-appeal because they were not properly raised pursuant to Rule 1.4 M.R.App.Civ.P. That Rule statesinpart: "Rule 

### 14. Ruling against respondent may be reviewed. Whenever the record on appeal shall contain any order, rulingor proceeding of thetrial court against the respondent, affecting his substantial rights on the appeal of said cause, together with any required objection or exception of suchrespondent, the supreme court on such appeal shall consider such orders, rulings, orproceedings, and the objections and exceptions thereto

# .

# .. " Rule 14 M.R..App.Civ.P. provides a specific procedure for the claimant to raise certain issues without the necessity of cross-appealing. Claimant neither objected nor

was there any ruling againsthim on thispoint. Further, the type of issue claimant raises 

### isnot contemplatedby Rule 14. The factthattherelief requested under thisRule 14request would nearly double the insurer's exposure points to the conclusion thatthisissue

### isone that should be fullyraised through normal procedure. Converse v. Converse (1982)

## , 198 Mont. 227, 232, 645 P.2d 413, 416; Johnson v. Tindall (1981), 195Mont. 165, 169, 635 P.2d 266, 268.

### Finally, claimant argues that this Court should grant him damages and a penalty pursuant to Rule 32

### M.R.App.Civ.P. We decline to do so. Insurer has been pursuing substantial and reasonable legal grounds throughout this protracted litigation. It did not intend to delay, but rather has diligentlypursued the case at all times. A 

### penalty pursuant to Rule 32

### M.R.App.Civ.P is inappropriate. The order of the Workers' Compensation Court is affirmed.

We 

### concur: /



### Honorable GordonR. Bennett, Judge of theDistrictCourt, sitting forMr. Justice William 

### E. Hunt,Sr.