Opinion ID: 2131797
Heading Depth: 1
Heading Rank: 3

Heading: method of division of attorney fees

Text: Given that the employee's and the insurer's attorney are entitled to be compensated for services rendered in the preparation and trial of this case, the question becomes how much each attorney is to receive from the employee's recovery. Under MCLA 418.827; MSA 17.237(827), attorney fees are an expense of recovery. The trial court is charged by subsection (6) of this statute to determine what the reasonable expenses of recovery, including attorney fees, are in a third-party action. Thus, the first step in calculating the division of the attorney fees is the determination of the reasonable total fees for all the attorneys concerned. In making this determination, the trial court shall look to GCR 1963, 928, which establishes reasonable limits of the contingency fees that may be charged in a suit for personal injury or wrongful death and be guided thereby. The trial court should also review the reasonableness of the fee agreement between the insurer and its attorney. As shown below, the proportion of the total fees which goes to the insurer's attorney will often be affected by this fee agreement. Second, under subsection (6), if the attorneys have agreed upon the division of the reasonable total fees, the trial court should abide by this agreement. Third, subsection (6) directs that if there is no such agreement, the attorney fees shall be divided among the attorneys for the plaintiff as directed by the court. The court in making the division should consider the value of the services performed by attorneys, the agreement each attorney had with his client, and the necessity of ensuring that attorneys working on a contingent fee basis are compensated sufficiently to ensure that the incentive to take third-party actions on such a fee basis is protected. If the total reasonable attorneys' fees determined by the court are less than the sum of the amounts originally agreed to by the attorneys and their clients, the fees of both attorneys should be appropriately reduced, assuming the insurer's attorney contributed in the preparation and trying of the suit. Where the employee's attorney and the insurer's attorney have both rendered substantial service in the preparation and trial of the suit, the following sample calculation might be appropriate. The precise method of calculation used here is not intended to be mandatory, but is illustrative of an acceptable apportionment. In other situations, modifications may have to be made to take into account the factors listed above as they appear in a specific case. Calculation of Total Unadjusted Attorneys' Fees Insurer's Attorney's Salary Per Year $52,000 Number of Working Days Per Year 260 Salary Per Day $ 200 ($52,000/260) Insurer's Unadjusted Attorney's Fees $ 4,000 (Assume 20 days work on suit) Employee's Attorney's Unadjusted Fee $40,000 _______ (One-third contingency fee for major part of work) Total Unadjusted Attorneys' Fee $44,000 Calculation of Division of Court-Adjusted Attorneys' Fees Total Adjusted Attorneys' Fees $40,000 (Contingency fee agreement if within limits of GCR 1963, 928) Insurer's Attorney's Percentage of Total Unadjusted Fees ($4,000/$44,000) 9% Employee's Attorney's Percentage of Total Unadjusted Fees ($40,000/$44,000) 91% Insurer's Adjusted Attorney's Fees $ 3,600 (9% of $40,000) Employee's Adjusted Attorney's Fees $36,400 (91% of $40,000) In the instant case, there has been no agreement as to how the reasonable attorneys' fees are to be divided. Thus, the trial court on remand must divide the attorneys' fees and should take into account the factors summarized here.