Opinion ID: 1899160
Heading Depth: 1
Heading Rank: 1

Heading: Right to Contract

Text: Relators argue that the provisions of Minn.Stat. § 176.081 (1982) limiting the right of employees to contract with attorneys as to the costs of representation render the statute unconstitutional under the state and federal due process clauses. U.S. Const. amend. V, XIV; Minn. Const. art. 1, § 7. They cite Federal Distillers, Inc. v. State, 304 Minn. 28, 229 N.W.2d 144 (1975), in which the court said that it is well established that the freedom to contract with respect to one's property and in the conduct of a lawful business to select the party with whom one chooses to do so is a part of the liberty protected by the due process clause of the State and Federal Constitutions. 304 Minn. at 45, 299 N.W.2d at 157. Relators acknowledge that the court in 1923 upheld the constitutionality of the predecessor statute to Minn.Stat. § 176.081, in Sarja v. Pittsburg Steel Ore Co., 154 Minn. 217, 191 N.W. 742 (1923), cert. denied sub nom., Swanson v. Sarja, 262 U.S. 754, 43 S.Ct. 702, 67 L.Ed. 1216, writ of error dismissed, 263 U.S. 685, 44 S.Ct. 180, 68 L.Ed. 505 (1925). The statute construed there contained almost identical language to what is now the first sentence of Minn.Stat. § 176.081, subd. 1 (1980). The appellant there had argued that the limitation on attorney fees would result in less competent counsel for employees. We rejected the argument, noting there was no necessary connection between attorney competence and compensation, and stressed that the legislature could rationally differentiate between employers and employees because the latter were often in precarious financial situations, and the bulk of the compensation benefits were intended to aid employees, not their attorneys. Relators argue that Sarja is not controlling, because of extensive amendments in 1975. Specifically, relators challenge (1) the $5,000 limit on the authority of the compensation judge to award attorney fees; (2) the two-tier system for setting attorney fees; and (3) the failure of the statute to include existence of a contingent fee arrangement as a factor to be considered in determining the reasonableness of a fee. These objections must be analyzed under three tests. As Federal Distillers stated: Where an economic regulation is enacted, the guarantee of due process demands only (1) that the act serve to promote a public purpose; (2) that it not be an unreasonable, arbitrary or capricious interference; and (3) that the means chosen bear rational relation to the public purpose sought to be served. 304 Minn. at 46, 229 N.W.2d at 158. Relators concede that the first requirement is met. Relators argue that the limitations on attorney fees are unreasonable and arbitrary because there is no basis for the dollar limits and percentages in section 176.081, subd. 1. Relators claim these figures do not represent an average or median amount of fees awarded. They argue that the two-tier system is unreasonable because although the statute states that the determination of attorney fees must be done with the same care as any other fact question in the matter, [6] the trial judge who knows most about the conduct of the case is not allowed to decide excess fees; instead, an appellate court without firsthand knowledge must determine reasonable fees. Finally, they argue that the parties' expectations and evaluation of a reasonable fee are expressed in the retainer agreement, which should therefore be a factor considered in determining reasonableness. Relators also argue that no rational relation exists between the statute's ends and its means, since (1) there is no absolute limit on attorney fees which a client might be charged, and, (2) on the other hand, attorneys may not be adequately compensated, so that clients ultimately will receive less competent counsel. Every legislative enactment comes to the court with a presumption in favor of its constitutionality   . The burden of proof is on the challenging parties to show beyond a reasonable doubt that the act violates some particular constitutional provision. Federal Distillers, 304 Minn. at 39, 229 N.W.2d at 154 (citations omitted). In our view, relators have failed to meet this high standard. We turn now to a brief discussion of relator's specific arguments. First, as to the reasonableness of the percentage and dollar limitations, the legislature could reasonably believe that 20-25% is a fair contingent fee for handling compensation matters of moderate size. The legislature could reasonably conclude that in the usual case a $5,000 attorney fee would serve the dual purpose of maximizing the employees' net benefit and minimizing the employer's costs, while at the same time providing attorneys with sufficient incentive to undertake workers' compensation cases. In cases where a large fee is warranted, it is not foreclosed; the court of appeals may grant a larger fee. Second, as to the reasonableness of the two-tier level of review, the requirement that excess fees be determined by the court of appeals may have stemmed from a desire of the legislature to insure uniformity in the setting of such fees. Furthermore, if such fees are considered to be exceptional, then the legislature may have desired a stronger showing of eligibility to be made, by requiring them to be justified before an independent tribunal. Third, as to whether existence of a contingent fee arrangement is a factor that should be considered, we believe the 1975 amendments were not responsible for exclusion of that factor from consideration. In Blair v. Village of Coleraine, 180 Minn. 388, 231 N.W. 193 (1930), an attorney appealed an award of attorney fees he considered inadequate. We construed the workers' compensation statute and stated, These provisions of the compensation law render the contract between Blair and his attorney of no force and effect. 180 Minn. at 389, 231 N.W. at 193. Sarja, supra, was cited in support of this proposition. Chief Justice Wilson dissented, believing as relators do, that the fact [Blair's attorney] was working on a contingent fee was not duly appreciated. 180 Minn. at 390, 231 N.W. 193. The other members of the court by implication found that this factor was not relevant. Thus, contrary to relator's argument, failure to consider the terms of a contingent fee arrangement does not stem from the 1975 amendments; rather, it can be traced to longstanding decisions of this court. The ends-means rational relation attacks also fail. A statute is not unconstitutional merely because it does not assure complete amelioration of the evil it addresses; it is sufficient if the statute bears a reasonable relationship to a legitimate public purpose. See Williamson v. Lee Optical of Oklahoma, Inc., 348 U.S. 483, 487, 75 S.Ct. 461, 464, 99 L.Ed. 563 (1955); Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 466, 101 S.Ct. 715, 725, 66 L.Ed.2d 659 (1981). The legislature is not compelled to prohibit all evils or none; it may hit at an abuse which it has found even though it fails to strike at another. Federal Distillers, 304 Minn. at 43, 229 N.W.2d at 156. Thus, the protections afforded injured employees by Minn.Stat. § 176.081 are not invalid merely because an additional protection  an absolute ceiling on fees  was not included. [7] To the argument that the statute fails to meet its goal of insuring that employees have competent counsel, two responses are appropriate. First, the statute had several goals, one of which was to protect employees from excessive fees. The limitations in Minn.Stat. § 176.081 certainly are closely related to that goal. Second, if the fees set are in fact unreasonably low, the statute itself has been violated, since it requires that reasonable fees be set.