Opinion ID: 885205
Heading Depth: 1
Heading Rank: 9

Heading: Does Article II, Section 16, of the Montana Constitution create a fundamental right to recover attorney fees and costs?

Text: ¶ 83 Following trial, Klemens moved the District Court to alter or amend its judgment to reduce it by the amount collected from collateral sources and the amount paid in settlement by M & H Gas Company and Marley Company, previous codefendants. Schuff objected on the basis that if granted, the offsets claimed would reduce her recovery to less than zero in violation of the right to full legal redress found in Article II, Section 16, of the Montana Constitution. [6] ¶ 84 The District Court held that: Therefore, as applied to the case at bar, to the extent that § 27-1-307 and -308 and the offset standard announced in Deere will deny Plaintiffs' full legal redress, including recovery of the costs of being made whole, those statutes are constitutionally invalid. However, this Court makes clear that such invalidity is premised on the specific application of the statutes and offset standard to the facts of this case, that is, as against an injured worker, not on a facial invalidity of the statutes. Therefore, Defendant's claims for collateral source reduction and offset must be reduced by the costs of recovery to the Plaintiffs, including attorney fees. ¶ 85 The District Court based its decision on this Court's decisions in Trankel v. State Department of Military Affairs (1997), 282 Mont. 348, 938 P.2d 614; Francetich v. State Compensation Mut. Ins. Fund (1992), 252 Mont. 215, 827 P.2d 1279; and Skauge v. Mountain States Telephone & Telegraph Co. (1977), 172 Mont. 521, 565 P.2d 628. ¶ 86 On appeal, Klemens contends that based on Meech v. Hillhaven West, Inc. (1989), 238 Mont. 21, 776 P.2d 488, Article II, Section 16, guarantees only those damages recoverable by common law or statutory law and because the law does not provide for recovery of attorney fees in cases of this nature, attorney fees are not part of full legal redress. ¶ 87 Schuff responds that this Court in Trankel held that employees injured during the course of their employment are entitled to full legal redress against third-party tortfeasors and that Meech did not define full legal redress but simply addressed whether pursuant to Article II, Section 16, an employee has a right to a particular cause of action. Schuff contends that the measure of full legal redress is the full amount of the jury's verdict and based on decisions in several workers' compensation cases, contends that the cost of recovery must be added to that amount before they have been fully compensated. ¶ 88 Article II, Section 16, provides as follows: Courts of justice shall be open to every person, and speedy remedy afforded for every injury of person, property, or character. No person shall be deprived of this full legal redress for injury incurred in employment for which another person may be liable except as to fellow employees and his immediate employer who hired him if such immediate employer provides coverage under the Workmen's Compensation Laws of this state. Right and justice shall be administered without sale, denial, or delay. ¶ 89 As is more fully discussed in the following section, the pro tanto offset of amounts received through settlement as provided for in this Court's decision in State ex rel. Deere & Co. v. Fifth Judicial District Court (1986), 224 Mont. 384, 730 P.2d 396, does not deny full compensation for a claimant's losses. It simply assures a single recovery for a single injury. Collateral source offset is based on the same principle. See § 27-1-308, MCA. We have previously held that full legal redress need not be satisfied by a single source. See Brandner v. Travelers Ins. Co. (1978), 179 Mont. 208, 214, 587 P.2d 933, 937, overruled on other grounds, Francetich v. State Compensation Mut. Ins. Fund (1992), 252 Mont. 215, 827 P.2d 1279, 1284. The question here is whether the amount of those offsets can be reduced by the amount of the claimant's attorney fees so that in effect the defendant entitled to those offsets is responsible for claimant's fees based on the constitutional guarantee of full legal redress. ¶ 90 In Skauge the plaintiffs' home was destroyed by fire and an explosion and all of their personal possessions destroyed. Their personal possessions were insured for $4000. Their insurance policy granted the insurer the right to subrogate against any third party responsible for the damage. Skauges' actual damage was in the amount of $11,267.32 and they filed a third-party complaint to recover that amount. However, the district court held that Skauges' insurer was entitled to be subrogated to the extent of its payment. ¶ 91 On appeal we noted that [s]ubrogation is a device of equity which is designed to compel the ultimate payment of a debt by the one who in justice, equity, and good conscience should pay it. Skauge, 172 Mont. at 524, 565 P.2d at 630 (citation omitted). We cited with approval the following language from 16 Couch on Insurance 2d, Subrogation § 61.92: Subrogation is the substitution of another person in the place of the creditor, so that the person substituted will succeed to the rights of the creditor in relation to the debt or claim, and is an act of the law growing out of the relation of the parties to the original contract of insurance, and the natural justice or equities arising from the fact that the insurer has paid the insured, rather than a right depending upon the contract.... Skauge, 172 Mont. at 526, 565 P.2d at 630-31. ¶ 92 We held that the doctrine of legal subrogation is equitable in nature and exists for the purpose of serving the ends of justice: [W]hen the insured has sustained a loss in excess of the reimbursement by the insurer, the insured is entitled to be made whole for his entire loss and any costs of recovery, including attorney's fees, before the insurer can assert its right of legal subrogation against the insured or the tortfeasor. Skauge, 172 Mont. at 528, 565 P.2d at 632. ¶ 93 In Francetich, the claimant was injured during the course of his employment and received disability benefits from the State Compensation Mutual Insurance Fund. When he settled a third-party claim arising from the same incident for policy limits, the state fund sought to exercise its subrogation rights pursuant to § 39-71-414(6)(a), MCA. That statute gave the insurer full subrogation rights even though a claimant was able to demonstrate damages in excess of his workers' compensation benefits and third-party recovery combined. Francetich contended that the subrogation statute violated his right to full legal redress guaranteed by Article II, Section 16. This Court agreed. We pointed out that the earlier decision in Skauge was based on equitable principles and on the nature of legal subrogation. Francetich, 252 Mont. at 221, 827 P.2d at 1283-84. We cited this Court's discussion of equitable limitations on legal subrogation from Zacher v. American Ins. Co. (1990), 243 Mont. 226, 794 P.2d 335, where we observed that the doctrine is based: [U]pon an equitable balancing of the rights of the insurer as compared to the claimant. As previously quoted, the basic conclusion is that when the amount recovered by the claimant is less than the claimant's total loss, with the result that either the claimant or the insurer must to some extent go unpaid, then it is equitable that the loss be born by the insurer which had been paid an insurance premium for the assumption of its liability. Zacher, 243 Mont. at 230, 794 P.2d at 338. ¶ 94 In Francetich, the equitable limitation on legal subrogation was no longer available because it had been written out of the law by the terms of § 39-71-414(6)(a), MCA (1987). Therefore, in Francetich we held as follows: We hold that § 39-71-414(6)(a), MCA is unconstitutional in light of the clear and direct language of Article II, Section 16 of the Montana Constitution. We hold that in a case of reasonably clear liability where a claimant is forced to settle for the limits of an insurance policy which, together with claimant's workers' compensation award, do not grant full legal redress under general tort law to the claimant, under workers' compensation laws the insurer is not entitled to subrogation rights under § 39-71-414, MCA. Francetich, 252 Mont. at 224, 827 P.2d at 1285 (emphasis added). ¶ 95 In Trankel, the plaintiff claimed to have been injured due to the negligence of the State of Montana, acting through its Department of Military Affairs while in the course of his employment with the United States Army. However, the District Court held that because Trankel's injuries were incident to his service in the national guard, his claim was barred pursuant to the United State Supreme Court's decision in Feres v. United States (1950), 340 U.S. 135, 71 S.Ct. 153, 95 L.Ed. 152, and our prior decision in Evans v. Montana National Guard (1986), 223 Mont. 482, 726 P.2d 1160. We reversed the District Court and held that Article II, Section 16, of the Montana Constitution protects an employee's right to recovery of compensation for injuries caused during the course of his or her employment by someone other than the employer or a fellow employee. Referring to our prior decision in Francetich, we held that: We reaffirm that pursuant to the second sentence in Article II, Section 16, of the Montana Constitution, any statute or court decision which deprives an employee of his right to full legal redress, as defined by the general tort law of this state against third parties, is absolutely prohibited. That sentence is mandatory and self-executing, and leaves no room for erosion based on what federal courts or the courts of other states would do pursuant to federal laws or the laws of other states. Trankel, 282 Mont. at 362, 938 P.2d at 623. ¶ 96 We conclude that the right to full legal redress guaranteed by our decision in Trankel is limited to the recovery of those damages provided by the general tort law and that pursuant to the American Rule, attorney fees are not damages recoverable pursuant to the general tort law as it pertains to survival and wrongful death actions. We furthermore conclude that Skauge and its progeny which include the costs of recovery in the concept of full compensation relate to equitable principles unique to the law of legal subrogation and are inapplicable to the constitutional issue of whether full legal redress as guaranteed by Article II, Section 16, of the Montana Constitution requires payment of attorney fees. In fact, we have previously distinguished Skauge where the party claiming a right to offset is not an insurer which had been paid premiums to assume the risk of loss. See Thayer v. Uninsured Employers' Fund, 1999 MT 304, ¶ 21, 297 Mont. 179, ¶ 21, 991 P.2d 447, ¶ 21. ¶ 97 Montana's common law has followed the American Rule that attorney fees are not an element of damages unless expressly provided for by statute or contract. See Hickingbotham v. Duncan (1995), 271 Mont. 525, 531, 898 P.2d 1215, 1219; Ehly v. Cady (1984), 212 Mont. 82, 687 P.2d 687. The United Supreme Court has held that: [T]he argument that attorneys' fees must be added to a plaintiff's recovery if the award is truly to make him whole is contrary to the generally applicable American Rule. Norfolk & Western Ry. Co. v. Liepelt (1980), 444 U.S. 490, 495, 100 S.Ct. 755, 758, 62 L.Ed.2d 689. ¶ 98 On the other hand, those damages recoverable in a survival or wrongful death action based on the general tort law of Montana were summarized in Swanson v. Champion Int'l Corp. (1982), 197 Mont. 509, 646 P.2d 1166. There we held that: The damages that may be recovered in the survival cause of action for the death of the decedent through tort include his lost earnings from the time of his injury to his death; the present value of his reasonable earnings during his life expectancy; the medical and funeral expenses incurred by him as a result of the tort; reasonable compensation for his pain and suffering, and other special damages. Swanson, 197 Mont. at 515, 646 P.2d at 1169 (citations omitted). ¶ 99 We held that in wrongful death actions: Generally the proof of damages under this cause of action will include loss of consortium by a spouse ... the loss of comfort and society of the decedent suffered by the surviving heirs; and the reasonable value of the contributions in money that the decedent would reasonably have made for the support, education, training, and care of the heirs during the respective life expectancies of the decedent and the survivors. Swanson, 197 Mont. at 517, 646 P.2d at 1170 (citation omitted). ¶ 100 Schuff contends that because the jury awarded damages in the amount of $1,303,000 that is the measure of full legal redress and if she is required to deduct attorney fees from that amount, she will be denied full legal redress. While it is true that following proper instructions regarding the damages recoverable at law a jury's verdict is the measure of full legal redress, it does not follow that a party required to pay attorney fees from that amount is denied full legal redress. As pointed out, attorney fees are not an element of damage. They are the subject of contract between a party and his or her attorney. Brytus v. Spang & Co. (3d Cir.2000), 203 F.3d 238, 241. They are what a party chooses to do with his or her recovery after it is received based upon a prior arrangement. While the practical effect may be that Schuff recovers less than the full amount of her actual damages, she has not been denied something she is entitled to recover against third parties based on the general tort law of this state. ¶ 101 For these reasons, we conclude that Article II, Section 16, of the Montana Constitution does not create a fundamental right to recover attorney fees. Therefore, we conclude that the District Court erred when it held that Klemens' right to offset for collateral source payments and contributions from joint tortfeasors is reduced by the amount of fees incurred by Schuff.