No. 86-049 IN THE SUPREME COURT OF THE STATE OF MONTANA 1986

CLIFFORD GULLETT, Claimant/Respondent,

STANLEY STRUCTURES, Employer, and AETNA COMMERCIAL INSURANCEDIVISION, Defendant/Appellant.

APPEAL FROM: Workers' Compensation Court of the State ofMontana The HonorableTimothy Reardon, Judgepresiding. COUNSEL OF RECORD:

ForAppellant: Poore,Roth and Robinson;C. RichardAnderson, Butte, Montana,

For Respondent: Robert L. Kelleher,Billings,Montana

Submitted on Briefs: March 28, 1986 Decided: July 25, 1986

Filed:

ClerkMr. Justice William E. Hunt, Sr., delivered the Opinion of the Court.

Clifford Gullett's employer, Stanley Structures,and its insurer,Aetna, appeal the Order of theWorkers' Compensation Court awarding attorney's fees to Gullett's counsel in the amount of $17,959.00based upon an hourly fee of $125.00 per hour and a paralegal fee of $35.00 per hour. We affirm the Workers' CompensationCourt's award. The single issuepresented by this appeal iswhether the award of attorney's fees was properly calculated under § 39-71-614,MCA (1985)

# . The award of attorney's fees arose in the context of litigation concerning the amount of permanent partial disability benefits to which Gullettwas entitled. On April 23, 1985 the Workers' Compensation Court filed its Findings of Fact,Conclusionsof Lawand Judgment awarding Gullett 480 weeks ofpermanent partialdisabilitybenefits at the rateof $93.07 per week. The Court also found that Gullett was entitled to an award of reasonable costs and attorney's fees pursuant to § 39-71-612, MCA. Consistent with the Order of the court,Gullett's counsel submitted a record of the costs and of the hours compiled in preparing and trying the case, with supporting affidavits. Counsel also submitted the contingent fee contract between himself and his client, Gullett. Finally, counsel also submitted a Proposed Order specifying the amount of attorney's fees claimed and including his customary and current hourly fee used to determine the amount. The calculation submittedby Gullett's counsel included 150.8 hours of attorneywork at $125.00 perhour ($17,612.50) and 9.90 hours ofparalegal time at $35.00 per hour ($346.50) for a totalof $17,959.00. Aetna filed a motion opposing the proposed calculation of attorney's fees tobe awarded to Gullett's counsel. Aetna argued that 150.8 hours of attorney timewas an unreasonably high calculation for the nature of the case. Aetna further contended that $125.00 per hour was an unreasonably high hourly fee. Aetna urged theWorkers' Compensation Court not to award attorney's fees based on this calculation which Aetna believed to be engineered to garner an award roughly equal to what Gullett's counsel would have received if the court could have awarded fees based on the contingency contractbetween Gullett and his counsel. On April 22, 1985, one day before the Workers' Compensation Court issued its Findings of Facts and Conclusions of Law, a recent amendment to 

### 5 39-71-614,MCA, went into effect. Previous to the amendment, contingency contracts could be considered by the court in awarding attorney's fees. Wight v. Hughes Livestock Company, Inc.

(Mont. 1983), 664 P.2d 303, 40 St.Rep. 696. The statute, as amended, now states: (1) The amount of an attorney's fee assessed against an employer or insurer under 39-71-611 or 39-71-612 must be based exclusively on the time spent by the attorney in representing the claimant on the issues brought before the workers' compensation judge. The attorneymust document the time spent and give the documentationto the judge. The judge shall determine a reasonable attorney fee and assess costs. He is not bound by the documentation submitted tohim. Thehourly fee the judge applies to the time spent must be based on the attorney's customaryand currenthourly fee for legalwork performed in this state.

(2) This section does not restrict a claimant and an attorney from entering into a contingency fee arrangement under which the attorney receives a percentage of the amount of compensation payments received by the claimant because of the efforts ofthe attorney. However, an amount equal to any fee and costs assessed against an employer or insurer under 39-71-611 or 39-71-612 and this sectionmust be deducted from the fee an attorney is entitled to from the claimant under a contingency fee arrangement. The statute clearly provides that award of attorney's feesmust be based on thehourly rateof the attorney and the hours expended. Gullett's counsel submitted records and affidavits supporting the hours claimed and his fee. Aetna contends this fee impermissibly contains a factor to compensate for the risk involved in contingency situations, that is: losing the case and hence not being paid any fee. A more reasonable fee, Aetna argues, would be what it considers tobe the commonrate of $85.00 per hour. We must note that the statutedoes not require that fee awards be based on an average rate ofMontana attorneys,but rather awards must be based on the particular attorney's customary hourly rate. How the individual attorney calculates what would be an adequate hourly rate to cover overhead,expenses and compensation isnot of concern. There is substantial credible evidence in the record to support the lower court's finding that: As to the reasonableness of the fee, all of the time thatwas spent by claimant's counsel has been documented and is on file with this Court. Since the claimant prevailed on every issue except the 20 percent penalty, this Court cannot find that the time spent was unreasonable. Claimant's attorney should be compensated for 150.8 hours of time. He should be paid at the rate he commands in the open market, which he reports to be $125/hour for his services and $35/hour for his paralegal services. Claimant'sattorney fee is $17,959. The order of the Workers' Compensation Court is affirmed.We Concur:

Chief JusticeMr. Justice Fred J. Weber dissents as follows: I dissent from the majority opinion in its conclusion that there is substantial credible evidence to support the lower court's determinationof attorney's fee. Section 39-71-614, MCA, requires that an amount of an attorney's fee must be based exclusively on the time spent. While the record supports the time determination of the Workers' CompensationCourt, Ido notbelieve that the record meets the requirements of the last sentence ofparagraph (1) of § 39-71-614,MCA,which states:

The hourly fee the judge applies to the time spent must be based on the attorney's customary and currenthourly fee for legalwork performed in this state. The affidavit of Robert C. Kelleher, Sr., dated May 2, 1985, established that Robert E. Kelleher, Jr., passed the Montana and California bar exams in 1984,and detailed various experience which he had. In addition it stated the following:



# . .. that because all of the work of said OFFICE is on a contingent feebasis,anhourly rate has to be set on the basis of overhead,attorney's skills, and the fact that occasionally a case is lost, resulting in the OFFICE absorbing not only lost attorney and staff salaries but invariably several thousand dollars in costs formedical exams, medical consultations, medical expert witness fees, vocational rehabilitation expert studiesand attorney consultations, vocational rehabilitation expert witness fees, deposition charges, air plane fares, motel bills, long distance telephone calls, copying, etc.; that the hourly rate of Robert L. Kelleher,Jr., has avalue of $125. The statement that the hourly rate has a value of $125 does not meet the statutory requirement that the hourly feewhich the judge applies must be based upon the attorney's "customary and current hourly fee for legal work performed in this state." Itmay wellbe that this deficiencyresulted inpart from the recent amendment made to $ 39-71-614, MCA, whichtook effect one dayprior to the findingsof fact and conclusionsof the court. Inaddition, Iconclude that the affidavits submittedby the attorneys for the insurance company are not satisfactory because they set forth the customary and current hourly fee for defense legal work which may be significantly different thanplaintiff's work in this type of case. I would therefore reverse the determination by the Workers' Compensation Court and remand the case with instructions for a redeterminationof the fee in accordancewith the provisions of the statute.

Chief Justice J.A. Turnage and Justice L.C. Gulbrandson join in the foregoingdissent of Justice Fred J. Weber.