Opinion ID: 1143264
Heading Depth: 1
Heading Rank: 2

Heading: The relevant statutes are based upon principles of apportionment long applied by our courts.

Text: A brief sketch of the policy of employers' subrogation to workers' recoveries in third party negligence actions and of the legislation implementing that policy will illuminate the problem in the instant case and the Legislature's resolution of it. From the earliest workers' compensation statutes, the Legislature has afforded employers an opportunity to shift the financial burdens which they incur under those statutes to third parties whose negligence has caused the injuries in question. To this end the Legislature has enacted a series of subrogation statutes which give the employer the right to recover damages (measured by his outlay of workers' compensation benefits) against third parties who are strangers to the employment relation. [6] Thus an employer whose worker has been injured in the course of his employment by the negligence of a third party may recover from that party the amount paid to the worker in workers' compensation benefits. (§§ 3852; 3854.) Moreover, if the worker exercises his own right to sue the negligent third party, an employer stands entitled to claim from any actual recovery the repayment of the amount of the workers' compensation benefits already paid. (§ 3856.) The question we must decide is whether this statute as now framed affects the courts' historical equity practice of apportioning attorneys' fees among those who are the beneficiaries of funds created by the activities of similarly situated litigants. (Dawson, Lawyers and Involuntary Clients: Attorney Fees from Funds (1974) 87 Harv.L.Rev. 1597.) (1) Although American courts, in contrast to those of England, have never awarded counsels' fees as a routine component of costs, [7] at least one exception to this rule has become as well established as the rule itself: that one who expends attorneys' fees in winning a suit which creates a fund from which others derive benefits, may require those passive beneficiaries to bear a fair share of the litigation costs. [8] Articulating the policies underlying this rule and its exception, a prominent scholar of the problems of unjust enrichment has noted that the denial of an attorney's fee to a prevailing litigant is a partial denial of justice. (Dawson, Lawyers and Involuntary Clients: Attorney Fees from Funds (1974) 87 Harv.L.Rev. 1597.) While American courts have entertained serious doubts as to the wisdom of adopting the English rule in its entirety, it seems clear that no policy is undermined by allowing recovery [of attorneys' fees] where the claim for reimbursement can be deflected toward a stranger  where a litigant, suing on a cause of action of his own, has succeeded and it then appears that his success has ensured gains of nonparty strangers. He will be denied recovery from his opponent of his out-of-pocket loss in counsel fees, even though it was his opponent's resistance that caused this loss, mainly because of the deterrent effect on litigation generally if all of its real costs were regularly shifted to losers. But such reasoning is entirely irrelevant to a claim against a complete outsider, to recapture some part of the windfall to him. (Dawson, supra, pp. 1600-1601.) California courts have long applied this principle of apportionment. [9] In Estate of Stauffer (1959) 53 Cal.2d 124 [346 P.2d 748], one of the many cases exemplifying its use, we summarized some of the considerations behind the principle: The bases of the equitable rule which permits surcharging a common fund with the expenses of its protection or recovery, including counsel fees, appear to be these: fairness to the successful litigant, who might otherwise receive no benefits because his recovery might be consumed by the expenses; correlative prevention of an unfair advantage to the others who are entitled to share in the fund and who should bear their share of the burden of its recovery; encouragement of the attorney for the successful litigant, who will be more willing to undertake and diligently prosecute proper litigation for the protection or recovery of the fund if he is assured that he will be promptly and directly compensated should his efforts be successful. (53 Cal.2d at p. 132.) The instant case therefore might well constitute an appropriate situation for the application of the rule of apportionment, even without reference to the statute. An active litigant has, by bringing and winning this lawsuit, created a fund upon which a nonparticipant in the litigation can draw in order to relieve himself of a legal obligation he would otherwise bear; [10] the passive beneficiary thus necessarily benefits from plaintiff's efforts in bringing suit. The employer has contributed neither time, effort, nor money to the now-successful action; he thus seeks to enjoy the benefits of the suit without contributing to its costs. Furthermore, we point out below that the Legislature has clearly referred to this general equitable precept in the statute before us.