Case Name: ROBERT OWENS, PETITIONER-RESPONDENT, v. C & R WASTE MATERIAL, RESPONDENT-APPELLANT; RITA MAE LEE, PETITIONER-RESPONDENT, v. SCOZZARI CONSTRUCTION, INC., RESPONDENT-APPELLANT
Court: Supreme Court of New Jersey
Jurisdiction: New Jersey
Decision Date: 1978-06-15
Citations: 76 N.J. 584
Docket Number: 
Parties: ROBERT OWENS, PETITIONER-RESPONDENT, v. C & R WASTE MATERIAL, RESPONDENT-APPELLANT. RITA MAE LEE, PETITIONER-RESPONDENT, v. SCOZZARI CONSTRUCTION, INC., RESPONDENT-APPELLANT.
Judges: 
Reporter: New Jersey Reports
Volume: 76
Pages: 584–594

Head Matter:
ROBERT OWENS, PETITIONER-RESPONDENT, v. C & R WASTE MATERIAL, RESPONDENT-APPELLANT. RITA MAE LEE, PETITIONER-RESPONDENT, v. SCOZZARI CONSTRUCTION, INC., RESPONDENT-APPELLANT.
Argued April 10, 1978
Decided June 15, 1978.
Mr. George J. Kenny argued the cause for appellants (Messrs. McFlroy, Connell, Foley & Geiser, attorneys).
Ms. Ruth Rabstein argued the cause for respondents (Messrs. Pelleltieri and Rabstein, attorneys).

Opinion:
The opinion of the court was delivered by
Sullivan, J.
These worker's compensation cases, consolidated on appeal, involve basically the single issue of how the employer's (or carrier's) obligation under N. J. S. A. 34:15-40, for its pro rata share of the attorney's'fee in a third-party tort recovery is satisfied.
N. J. S. A. 34:15-40, a section of the Worker's Compensation Act, deals with the situation where there is a third-party tort recovery for the same injury or death for which there is compensation liability. Paragraph (b) of Section 40 provides that where the third-party recovery is greater than the employer's liability for compensation, the employer shall be released from such liability and shall be entitled to be reimbursed for the medical expenses incurred and compensation theretofore paid, less the employee's expenses of suit and "attorney's fee" which is defined as
"[Ajttorney's fee" shall mean such fee, but not in excess of 33-1/3% of that part of the sum paid in release or in judgment to the injured employee or his dependents by such third person or his insurance carrier to which the employer or his insurance carrier shall be entitled in reimbursement under the provisions of this section, but on all sums in excess thereof, this percentage shall not be binding.
In the Owens case, petitioner was found to have suffered a work-connected disability total and permanent in nature. The employer's compensation liability for the first 450 weeks, including temporary benefits and medical expenses, was found to be $64,647.23. The third-party recovery was $71,000 with the counsel fee thereon calculated in accordance with the then provisions of R. 1:21-7 (e). The Division Judge, on a motion pursuant to N. J. S. A. 34:15-40 (b) and (e), ordered that the employer be released from such compensation liability upon payment to petitioner of a pro rata share of the counsel fee in the third-party recovery calculated to be $19,596.12, computed on the basis of 33-1/3% of the first $50,000 of released compensation exposure, and 20% of the balance of such released exposure. The employer was also ordered to reimburse the petitioner $200 for expenses.
In the Lee case, a worker's death dependency claim, the employer's compensation liability for the first 450 weeks was found to be $58,843.63. The third-party recovery was $95,000. The Division Judge, in releasing the employer from such compensation liability, ordered that respondent, pursuant to N. J. S. A. 34:15-40(b) and (e), pay petitioner a pro rata share of the counsel fee in the third-party recovery calculated to be $18,435.40, computed on the basis of 33-1/3% of $50,000, and 20% of the remaining $8,843.63 of released compensation exposure. The employer was also ordered to pay a funeral allowance of $750, and $200 in costs.
In each case the employer was ordered to pay the amount so calculated immediately. The employers appealed, claiming, inter alia, that such amount should be paid over the 450-week period, and that if the enstwhile obligation to make compensation payments were to terminate for some statutory reason, its obligation to continue payments of the attorney's fee would cease. The Appellate Division, in an unreported opinion, affirmed the orders of the Division. Certification was granted by this Court in both cases. 75 N. J. 535 (1977). We affirm.
In Teller v. Major Sales, Inc., 64 N. J. 143 (1974), in interpreting N. J. S. A. 34:15-40, we held that employer should pay a pro rata share of the attorney's fee in the third-party tort recovery, measured by the amount of its compensation liability from which it has been released. In so holding, we cited Justice Heher's opinion in Dante v. Gotelli, 17 N. J. 254, 255 (1955) which states:
Where a third-party tort recovery is had by an injured workman entitled to compensation for the ensuing disability under Workmen's Compensation Act. R. 8. 34:15-7 et seq., the employer is assessable in virtue of R. 8. 34:15-40, as amended by L. 1951, c. 169, for his proportionate share of the attorney's fee, but not in excess of 33-1/3% of the portion of the recovery which inured to him, i. e., his total compensation liability under the act, however much the obligation may remain unfulfilled at the time of the third-party recovery, rather than the compensation payments then actually made to the workman.
Neither Teller nor Dante dealt precisely with the question of manner of payment. However, each decision stands squarely for the proposition that computation of the employer's pro rata share of the attorney's fee in the third-party recovery is to be measured by the amount of compensation liability from which the employer has been released, whether actually paid or not.
It is the employer's contention that its obligation to pay a pro rata share of the attorney's fee in the third-party recovery exists only to the extent that it is released from liability for each weekly compensation payment otherwise due but not payable because of the third-party recovery. In both cases it would pay its pro rata share of the attorney's fee over the 450 week period and limit its obligation to weekly payments. If the erstwhile obligation to make compensation payments were to terminate for some statutory reason, the employer contends that its obligation to continue such payments would terminate.
There are two Appellate Division decisions which support the employers' position. In Pagan v. Hillside Metal Products, Inc., 140 N. J. Super. 154 (1976) and Burpee v. Princeton Mun. Imp. Co., 88 N. J. Super. 552 (1965), it was held that the employer of an injured worker benefits from a third-party tort recovery only to the extent that it is released from liability to make compensation payments as they come due and that it is obliged to pay its proportionate share of the attorney's fee only on the benefit it receives, and as it receives it. Burpee, supra, 88 N. J. Super. at 559.
We disagree and conclude that the legislative intent as expressed in N. J. S. A. 34:15-40 is that the computation of the employer's pro rata share of the attorney's fee in the third-party recovery should be based on the potential compensation liability from which it has been released and does not depend on the happenstance of whether such liability were to terminate prematurely.
The third-party recovery results in a contemporaneous ex-tinguishment of a liability of the employer. That constitutes a present benefit redounding to the employer, in no way rendered less immediate or tangible because the extent of the eliminated liability was contingent in some respects. Since the obtaining by the employer of this tangible benefit coincidas with the third-party recovery, it follows that the obligation to share legal expenses .attributable to that recovery should be satisfied at the same time those expenses are borne by the employee.
Moreover, the attorney's fee in the third-party recovery ordinarily having been paid by or charged to the worker or dependents in a lump sum, we cannot conceive that the Legislature, in requiring the employer to pay its pro rata share of such fee in exchange for its release from compensation liability, intended, as the employer here contends, that the payment of such share be made in small amounts over a period of 450 weeks. It follows that the employer's obligation to pay its pro rata share should be fulfilled immediately.
The employer's payment of its share of the attorney's fee is not compensation. See McDermott v. Standard Accident Ins. Co., 40 N. J. Super. 119, 129 (App. Div. 1956). Rather, as noted by the Appellate Division herein, "it is the employer's (or carrier's) contribution toward the legal expenses incurred in the third-party action from which it benefited."
The employer also argues that if its pro rata share of the attorney's fee is to be paid immediately, its erstwhile compensation liability for the first 450 weeks, payment of which would be spread out over the period, should be discounted to reflect present value, and its pro rata share of attorney's fee computed on the discounted value. It refers to N. J. S. A. 34:15-25 which provides for commutation of the compensation award with the approval of the Division, and payment thereof in a lump sum by discounting the award at 5% simple interest.
We also find this contention to lack merit. N. J. S. A. 34:15-40 requires the employer to pay its proportionate share of the attorney's fee in the third-party recovery measured by the "total compensation liability under the act" from which it has been released, "however much the obligation may remain unfulfilled." Dante, supra, 17 N. J. at 255. The statute makes no provision for the commutation or discounting of such compensation liability in determining the employer's pro rata share of attorney's fee.
The judgment of the Appellate Division in each case is affirmed.
In neither of the appeals has the employer challenged the Division Judge's method of computation of the employer's pro rata share of attorney's fee including the amount so computed.
An example would be the death of the worker, without leaving dependents, before the compensation award, otherwise payable, would have been fully satisfied. N. J. S. A. 34:15-12(e).