Court Opinion

ID: 1049942
Source: CourtListenerOpinion
Date Created: 2013-10-08 19:56:39.771385+00
Date Added: 2024-06-11T12:47:52.171366
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                                   May 18, 2010 Session

JAMES ERWIN v. TRAVELERS PROPERTY CASUALTY COMPANY OF
                       AMERICA

                    Appeal from the Law Court for Sullivan County
                   No. C36134     Hon. John S. McLellan, III., Judge

                No. E2009-01288-COA-R3-CV - FILED JUNE 28, 2010

Plaintiff recovered a judgment in this medical malpractice action, and during the pendency
of the case the workers compensation carrier for plaintiff's employer intervened asserting its
subrogation interest in any recovery due to its having paid the medical bills plaintiff incurred
as a result of his injuries. The Trial Court awarded attorney's fees and expenses to plaintiff's
attorney and plaintiff has appealed, arguing that the Trial Court failed to make an adequate
award. On appeal, we affirm the Judgment of the Trial Court.

    Tenn. R. App. P.3 Appeal as of Right; Judgment of the Law Court Affirmed.

H ERSCHEL P ICKENS F RANKS, P.J., delivered the opinion of the Court, in which C HARLES D.
S USANO, J R., J., and J OHN W. M CC LARTY, J., joined.

Larry V. Roberts, Kingsport, Tennessee, for the appellant, James Erwin.

Joseph L. Broy, Germantown, Tennessee, for the appellee, Travelers Property Casualty
Company of America.
                                          OPINION

                                         Background

      Plaintiffs filed their Complaint against John Raff, Galen Smith, Appalachian
Orthopaedic Associates, P.C., and Wellmont Health System d/b/a Wellmont Holston Valley
Medical Center and Wellmont, Inc., alleging that Raff and Smith were orthopedic surgeons
who performed a surgical procedure on plaintiff James Erwin’s spine and that defendants
were negligent and they committed a battery on the plaintiff.

        Travelers Property Casualty of America filed a Motion to Intervene, asserting they had
an interest in the action because it had paid workers compensation benefits on behalf of
plaintiff Erwin. Plaintiffs objected to Travelers’ intervention, and at a hearing, the Trial
Court allowed Travelers to intervene to recover their subrogation.

       A trial by jury was held in this case, and the jury returned a verdict finding defendant
Raff to be negligent, and awarded damages to plaintiff in the amount of $75,000.00, and
awarded damages of $181,859.00 to Travelers for medical expenses that Travelers had paid
for plaintiff.

        Defendants paid the total judgment to the court clerk, and plaintiff’s counsel asked
that plaintiff be allowed to receive his $75,000.00, which the court granted. Plaintiff then
filed a Motion to Release Funds from Registry of Court for Attorney Fee and Pro-Rate Share
of Litigation Expenses. Plaintiff’s attorney sought a 1/3 fee from the judgment awarded to
Travelers, and also sought a percentage of the litigation expenses to be paid from Travelers’
award. Plaintiff’s counsel attached the 1/3 contingency fee agreement that plaintiff signed
with him, as well as copies of his time sheets and litigation expenses. In Travelers' Response
they asserted it should be given the full amount of its medical expenses paid for the
corrective surgery ($141,118.11) and that plaintiff should then receive the remainder of the
$181,859.00 jury award to Travelers ($33,741.00) as a reasonable amount of attorneys fees
and expenses. Travelers also attached a series of letters that its counsel sent to other
attorneys in the litigation concerning a possible settlement of Travelers’ claim for
$150,000.00.

        The Trial Court entered an Order, finding that Travelers had a subrogation interest due
to their payment of expenses for plaintiff, and that plaintiff’s attorney filed this malpractice
action without notice to Travelers. The Court stated that Travelers was thus required to file
a Petition to Intervene through its own counsel to protect its subrogation interest, which was
granted about seven months later. The Court stated that Travelers’ counsel did not actively
participate in discovery or in the trial, but was present at the pre-trial hearing and for most

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of the trial.

        The Court stated that plaintiff’s counsel was seeking to recover 1/3 of Travelers’
award as an attorney fee ($60,619.00), and was also seeking to recover $38,845.00 in
litigation expenses. The Court held that plaintiff’s counsel asserted that the pertinent issue
was what each counsel did to produce the subrogation recovery, and that plaintiff’s attorney
introduced an itemization of his time records, showing a total of 835 hours for plaintiff’s
attorney and 124 hours for his staff. The Court stated that after it asked plaintiff’s counsel
to revise his records to reflect only his effort made to effect the subrogation recovery, he
changed the totals to 829 hours for him and 123 hours for staff, thus apparently contending
that he spent all but 5.5 hours of his time working on the subrogation recovery.

        The Court noted that Travelers’ attorney argued that causation was established by
plaintiff’s expert witness during pre-trial proceedings, such that there was no question of the
medical expenses being necessary, and further that the amount of Travelers’ subrogation
interest was stipulated to and placed on the jury form, such that he did not have to actively
participate in the trial, however, since plaintiff’s attorney opposed the intervention and
clearly did not have Travelers’ interests at heart, Travelers’ attorney had to spend 210 hours,
for a total billing of $27,192.00, to protect Travelers’ subrogation claim. Further, the Court
noted that Travelers had a standing settlement offer on the table for $150,000.00 which
plaintiff never accepted.

        The Court found that plaintiff’s counsel’s theory of allocating basically all of his time
to the subrogation claim was neither rational nor logical, and that the Court, in “presiding
over this matter through its duration, multi-day jury trial and in consideration of the record
in this cause”, found that the bulk of counsel’s time was spent in an effort to collect a
substantial malpractice recovery for plaintiff. The Court said that at times the interests of
plaintiff and Travelers were inconsistent, such that it was proper for Travelers to utilize its
own counsel to protect its interests.

       The Court found that the time and effort of plaintiff’s counsel in providing evidence
as to causation and reasonableness of medical expenses was necessary to both Travelers’
claim and plaintiff’s claim, and that he had taken a “liberal review, line item by line item”
of plaintiff’s counsel’s time records, in an effort to approximate the time spent on efforts
related to the subrogation interest, and the Court calculated that plaintiff’s counsel spent
about 12.8% of his total time on this issue. The Court conceded, however, that this number
was somewhat speculative as some of the descriptions did not permit an exact time
computation, but that this supported the Court’s conclusion that the bulk of counsel’s time
was actually spent to recover a substantial money judgment for plaintiff.

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       The court noted that Travelers had offered to take $148,118.00, leaving 19% of its
award or $33,741.00 to be awarded to plaintiff’s attorney for his fees. The Court found that
this was reasonable for plaintiff’s counsel’s services and a portion of Dr. Kennedy’s expenses
in effecting the subrogation recovery. The Court stated that it had also considered that
Travelers paid its attorney $27,192.00 for his 210 hours of work as reasonable and necessary
fees. The Court found that 12.8% of plaintiff’s counsel’s total time would be about 107
hours of work.

        The Court entered an Amended Order, correcting that the stipulated amount of
Travelers’ subrogation interest which was typed onto the verdict form was $200,172.00.
Plaintiff has appealed the Trial Court's decision and raises these issues on appeal:

       1.     Whether the Trial Court abused its discretion by determining the amount of
              attorney’s fee and litigation expenses for the recovery of Travelers’
              subrogation interest to be the difference between the amount awarded to
              Travelers by the jury and the amount of Travelers’ settlement offer not
              responded to by the defendants?

       2.     Whether the evidence preponderates against the Trial Court’s finding that
              plaintiff’s attorney is entitled to only $33,741.68 for attorney’s fee and
              reimbursement of litigation expenses, for the recovery of Travelers’
              subrogation interest?

       In this case, the Trial Court awarded a fee plus litigation expenses to plaintiff’s
attorney for his work in recovering an award for Travelers’ subrogation interest, in
accordance with Tenn. Code Ann. §50-6-112(b), which states:

       In the event of a recovery from the other person by the worker, or those to whom the
       worker’s right of action survives, by judgment, settlement, or otherwise, the attorney
       representing the injured worker, or those to whom the injured worker’s right of action
       survives, and effecting the recovery, shall be entitled to a reasonable fee for the
       attorney’s services, and the attorney shall have a first lien for the fees against the
       recovery; provided, that if the employer has engaged other counsel to represent the
       employer in effecting recovery against the other person, then a court of competent
       jurisdiction shall, upon application, apportion the reasonable fee between the attorney
       for the worker and the attorney for the employer.

In a case interpreting this statutory provision, the Supreme Court has stated:

       Since both the employer and the employee have the right to recover against a third

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      party tort-feasor, each has the right to be represented by its own counsel on such terms
      as the party and its lawyer shall agree. The employer may engage the employee’s
      lawyer to represent its interest also, on such terms as they, with the consent of the
      employee, shall agree. Even if the employer is not represented by separate counsel,
      the employee’s lawyer is obligated to protect the employer’s interest. In that event,
      the employee’s lawyer shall be entitled to reasonable compensation for services
      rendered to the employee and the employer. The lawyer shall be compensated
      according to the terms of the employment contract between the lawyer and the
      employee, provided the trial court shall find that fee agreement to be reasonable. A
      contingent fee agreement between the employee and his lawyer shall apply to the
      entire recovery, and the attorney’s fee will reduce the employer’s portion of the
      recovery by a pro rata amount. The lawyers who prosecute the tort action are entitled
      to receive a reasonable fee based on services rendered. Any dispute regarding the
      amount and apportionment of attorney fees shall be resolved by the trial court.

Summers v. Command Systems, Inc., 867 S.W.2d 312 (Tenn. 1993).

      This Court has further analyzed this issue in the case of Fuller v. Rhoten, 1995 WL
214292 (Tenn. Ct. App. Apr. 12, 1995), wherein it stated:

      Attorneys have the right to contract with their clients for a reasonable fee. . . . The
      Code of Professional Responsibility specifically permits attorneys to enter into
      reasonable contingent fee agreements with their clients.

      An attorney’s right to contract for a fee is not totally unconstrained. Attorneys are
      officers of the court, and thus the courts may review their fees to determine whether
      they are reasonable. Reasonableness depends on the facts of each case, not merely
      on the custom in a particular area.

      Determining whether a fee is reasonable requires consideration of the interests of both
      the client and the attorney, and all of the relevant circumstances, including those
      stated in the disciplinary rules. . . . A trial court’s decision concerning the
      reasonableness of a fee depends upon the court’s knowledge of the real value of the
      services performed. . . . Similarly, the appellate courts are not bound by the
      determinations of the trial courts, but they will customarily decline to second-guess
      a trial court’s decision unless the decision has caused some injustice.

      Attorneys are ordinarily not entitled to collect a fee from someone who has not
      employed them. They may, however, be entitled to a fee for handling a subrogation
      claim if the insurer would be unjustly enriched by accepting the benefit of the

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       attorney’s work without paying for it.

       The amount of the fee for handling a subrogation claim must be reasonable and is not
       necessarily controlled by the attorney’s agreement with his or her client. . . . If the
       employer or its workers’ compensation carrier does not take issue with the fee
       arrangement between the employee and his or her attorney, the trial court may, upon
       deciding that the fee is reasonable, deduct a prorated portion of the attorney’s fee
       from the employer’s share of the employee’s recovery. If the employer or its workers’
       compensation carrier disagrees with the fee, they should request a hearing on the
       reasonableness of the fee.

Fuller, at 292-3 (citations omitted).

       In these cases, the trial court’s findings are reviewed de novo on the record,
accompanied by a presumption of correctness, and we must honor those findings unless the
evidence preponderates to the contrary. Sircy v. Wilson, 2008 WL 4830806 (Tenn. Ct. App.
Nov. 5, 2008). In Sircy, this Court made clear that “the role of the Court is to apportion the
fee produced in accordance with the efforts expended by counsel in producing the fee - not
in pursuing every aspect of the case. The Court’s inquiry is essentially limited to determining
who did what to produce the fee.” Id.

       In this case, Roberts had a 1/3 contingency fee agreement with his client, and he thus
sought to recover 1/3 of the award given to Travelers for its subrogation interest, claiming
that almost all of his time was spent in pursuing the subrogation recovery. The Trial Court
found, however, that contrary to his claims, most of Roberts’ time was spent in pursuing a
malpractice award for his client, and that the interests of plaintiff and Travelers were, at
times, inconsistent, thereby necessitating that Travelers hire its own counsel to protect its
subrogation interest.

        The Court also found that plaintiff's counsel's theory of allocating basically all of his
time to the subrogation claim was neither rational nor logical, and that the Court, in
“presiding over this matter through its duration, multi-day jury trial and in consideration of
the record in this cause”, found that the bulk of counsel’s time was spent in an effort to
collect a substantial malpractice recovery for plaintiff. The Court found that the time and
effort of plaintiff’s counsel in providing evidence as to causation and reasonableness of
medical expenses was necessary to both Travelers’ claim and plaintiff’s claim, and stated that
it had taken a “liberal review, line item by line item” of plaintiff’s counsel’s time records, in
an effort to approximate the time spent on efforts related to the subrogation interest, and then
allocated the percentage of time spent on the issues.

                                               -6-
        The Court applied the proper legal standard in determining Roberts’ fee, and noted
that the legal authorities stated that the Court was to apportion the attorney’s fee between the
attorneys in proportion to the services rendered. The Court clearly found that while Roberts
had spent a small percentage of his time in effecting a subrogation recovery for Travelers,
his unwillingness at times to protect and promote that interest meant that Travelers had to
incur substantial fees in employing its own counsel throughout the trial, and further Roberts’
efforts did not ultimately seem to affect the amount of Travelers’ recovery, as the amount of
their medical expenses paid for plaintiff was stipulated to on the jury form, and the jury
apparently made its award to Travelers largely in accordance with the stipulation.

        We hold that the evidence does not preponderate against the Trial Court's ruling that
a 1/3 contingency fee to Roberts in this case from Travelers’ subrogation recovery would be
unreasonable.
        The Court noted that Travelers had offered to take $148,118.00, leaving 19% of its
award or $33,741 to be awarded to plaintiff’s attorney for his fees. The Court found that this
was reasonable for plaintiff’s counsel’s services and a portion of Dr. Kennedy’s expenses in
effecting the subrogation recovery. The Court stated that it had considered that Travelers
paid its attorney $27,192.00 for his 210 hours of work as reasonable and necessary fees.

       We conclude that the fee and expense award in total is reasonable, based on the
evidence, and the evidence does not preponderate against the award. This is especially true
under the familiar rule that the Trial Judge presiding over the trial is in a unique position to
evaluate the attorneys' services during the trial of the case.

       Plaintiff argues that the award was insufficient, stating that this Court’s decision in
Fuller, requires that expenses be allocated in a mathematical percentage based on each
party’s recovery. While this approach was taken in Fuller, based upon its facts, what the
Fuller opinion actually stated is that fees and expenses should be assessed pro rata, and the
employer’s assessment of costs was actually limited in that case to no more than its total
percentage of recovery, i.e. the assessment of costs to the employer was decreased based on
the mathematical percentage. Id.

        In this case, the Trial Court considered all of the relevant facts and was in the best
position to determine the efforts of the parties and their attorneys in effecting a recovery, as
well as whether the expenses were reasonable and inured to the benefit of both. The Court
considered each individual item of time and expenses and then made its reasonable award
for both based on its knowledge of the complexity of the case, the issues involved, the time
spent, and the necessity of the expenses. Thus, the trial court’s decision was supported by the
evidence, although it was not stated as a mathematically precise percentage. The Trial
Court’s opinion was thorough and well-reasoned, and the evidence does not preponderate

                                              -7-
against the Trial Court's findings.

       We affirm the Judgment of the Trial Court and remand, with the cost of the appeal
assessed to the appellant, James Erwin.

                                                _________________________________
                                                HERSCHEL PICKENS FRANKS, P.J.

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