Court Opinion

ID: 9535366
Source: CourtListenerOpinion
Date Created: 2023-08-07 04:48:23.108518+00
Date Added: 2024-06-11T13:33:13.569789
License: Public Domain

GEORGE, C. J., Concurring.
I agree with the holding of the plurality that, under Labor Code section 3860, subdivision (e),1 when the employer and the employee are represented by separate attorneys, both of whom actively participate in the proceedings, “the fees awarded to the employer’s attorney and the employer’s pro rata share of other litigation costs are to be deducted from the amount paid to the employer out of the settlement proceeds as reimbursement for its workers’ compensation expenses.” (Plur. opn., ante, at p. 1024.) I write separately because the plurality opinion discusses a further issue not presented by the circumstances of the present case and, in my view, suggests an incorrect resolution of that issue.
As recognized by the plurality, section 3860, subdivision (e), establishes the priority to be followed in allocating the proceeds of a settlement obtained through the efforts of both the employer’s and the employee’s separate counsel. First, the proceeds of the settlement are used to pay the litigation expenses, including the attorney fees of both attorneys. Next, the proceeds of the settlement are used to reimburse the employer for the amount of compensation paid to the employee. Any remaining settlement proceeds go to the employee.2 (See Phelps v. Stostad (1997) 16 Cal.4th 23, 30 [65 Cal.Rptr.2d 360, 939 P.2d 760].)
On several occasions, the Courts of Appeal have addressed (most often in dicta) the question whether the proceeds of a settlement or judgment may be used to pay the employee’s attorney fees if the entire proceeds will be consumed by the payment of costs and attorney fees and reimbursement to the employer, leaving nothing for the employee. In such circumstances, the appellate court decisions consistently have held that the employee’s attorney *1037is not entitled to attorney fees if the employee ultimately does not receive a portion of the proceeds of the settlement or judgment. (Gapusan v. Jay (1998) 66 Cal.App.4th 734, 745-747 [78 Cal.Rptr.2d 250]; Crampton v. Takegoshi (1993) 17 Cal.App.4th 308, 318 [21 Cal.Rptr.2d 284], disapproved on other grounds in Phelps v. Stostad, supra, 16 Cal.4th 23, 34; Walsh v. Woods (1986) 187 Cal.App.3d 1273, 1276-1279 [232 Cal.Rptr. 629]; Eldridge v. Truck Ins. Exchange (1967) 253 Cal.App.2d 365, 367 [61 Cal.Rptr. 347].) This issue is not presented by the circumstances of the present case, because the settlement proceeds here are sufficient to ensure that a portion will be left for the employee. Nonetheless, the plurality cites with approval the foregoing Court of Appeal decisions and endorses their view that “the reasonable value of the employee’s attorney’s services is determined ... by reference to the actual benefit that the settlement confers on the attorney’s own client, the employee.” (Plur. opn., ante, at p. 1028.)
Because the issue regarding the payment of fees to an employee’s attorney when the judgment is insufficient to provide any residual proceeds to the employee is not presented by this case, it is unnecessary to address the issue here and I do not believe we should do so. Furthermore, as I shall explain, I disagree with the substance of the plurality’s dictum on this discrete point. In my view, this reading of the statute is inconsistent with the statutory purpose we recognized in Quinn v. State of California (1975) 15 Cal.3d 162, 170 [124 Cal.Rptr. 1, 539 P.2d 761], of “assuring the worker that he can obtain an attorney by guaranteeing that attorney priority in the event that the judgment recovered should not suffice both to recompense him and to satisfy the employer’s claim.”
The earliest case cited by the plurality is Eldridge v. Truck Ins. Exchange, supra, 253 Cal.App.2d 365. In Eldridge, the employer and the employee were represented by separate counsel, and the amount of the employer’s lien ($16,378) exceeded the amount of the stipulated judgment ($10,000). The trial court allowed attorney fees in the amount of $3,000 to be paid from the judgment to the employee’s attorney. The Court of Appeal reversed this payment of the employee’s attorney fees based upon what I believe is a strained reading of section 3856, subdivision (c), which states, in language closely tracking the wording of section 3860, subdivision (e), that if the employee and the employer are represented by separate attorneys, the proceeds of the judgment first shall be used to pay “the reasonable litigation expenses incurred in preparation and prosecution of such action or actions, together with reasonable attorneys’ fees . . . based solely upon the service rendered in each instance by the attorney in effecting recovery for the benefit of the party represented.” Noting that the amount of attorney fees was “based solely upon the service rendered in each instance by the attorney in effecting *1038recovery for the benefit of the party represented,” the Court of Appeal reasoned that the employee’s attorney was not entitled to obtain attorney fees from the judgment, because the employee did not receive a portion of the judgment and, thus, did not “benefit” from the judgment. (Eldridge v. Truck Ins. Exchange, supra, 253 Cal.App.2d at p. 367.) The Court of Appeal concluded that “[t]he sole beneficiary of the judgment was the carrier,” and only the carrier’s attorney was entitled to attorney fees. (Id. at pp. 367-368.)
I disagree with this reading of the statutory language. Sections 3856 and 3860 do not state that attorney fees shall be based upon services rendered in effecting a settlement that actually benefits the employee, or that results in a benefit to the employee. The language states that the amount of attorney fees shall be based upon the services rendered in effecting a settlement for the benefit of the employee. The fees, therefore, are based upon the services rendered. The phrase “rendered in securing and effecting a settlement for the benefit of the party represented” describes the type of services for which attorney fees will be paid from the judgment or settlement. An attorney representing an employee, who settles a lawsuit brought by the employee or obtains a judgment on behalf of the employee, acts “for the benefit” of the employee even if the settlement or judgment ultimately does not result in a net recovery for the employee. In my view, the statutory language does not provide that the employee’s attorney is entitled to fees only if the employee obtains a recovery, but rather that the amount of the attorney fees shall be based upon the services rendered on behalf of the employee only, and not on behalf of any other party.
Following Eldridge, we held in Quinn v. State of California, supra, 15 Cal.3d 162, that an employee who obtains a judgment against a negligent third party, solely through the employee’s own efforts, is entitled to deduct a portion of the employee’s attorney fees from the amount of the judgment used to reimburse the employer. Quinn did not address the issue that is before us in the present case, because Quinn differs from the instant case in two important respects: the judgment in Quinn was obtained solely through the efforts of the employee’s attorney, and the amount of the judgment in Quinn was sufficient to permit the employee to share in the proceeds. There was no question in Quinn that the employee’s attorney fees would be paid from the judgment. The issue in Quinn was whether the amount of reimbursement due the employer would be reduced by an amount equal to a portion of the employee’s attorney fees, resulting in a corresponding increase in the employee’s share of the judgment.'
We held in Quinn that the Legislature incorporated into the statutes the principle of apportionment of attorney fees, requiring an employer who was *1039a passive beneficiary of a judgment obtained through the sole efforts of the employee to contribute a portion of the reimbursement that was due to the employer, to pay an equitable share of the attorney fees expended to obtain that judgment. We noted, however, that this duty of equitable apportionment would not apply if the employer and the employee were represented by separate counsel. (15 Cal.3d 162, 176, fn. 19.)
In Walsh v. Woods (1982) 133 Cal.App.3d 764 [184 Cal.Rptr. 267] (Walsh I), the amount of the judgment was less than the amount of the benefits that had been paid to the employer. The trial court awarded attorney fees to the employee, finding that the judgment had been obtained through the sole efforts of the employee’s attorney. The Court of Appeal reversed, noting that the employer had been represented by separate counsel, and reasoning that the doctrine of equitable apportionment discussed in Quinn would not apply where the employer’s attorney had been an active participant in the litigation. The court remanded the case to the trial court to determine whether the employer’s attorney actively had participated in the suit.
The case returned to the Court of Appeal following remand. (Walsh v. Woods, supra, 187 Cal.App.3d 1273 (Walsh II).) The Court of Appeal reiterated its earlier holding and added: “Each party’s attorney fees must come out of the party’s respective share of the ultimate judgment.” (Id. at p. 1278, fn. omitted.) The decision in Walsh II was followed in Crampton v. Takegoshi, supra, 17 Cal.App.4th 308, 318 (overruled on other grounds in Phelps v. Stostad, supra, 16 Cal.4th 23), which stated, in dictum, that the attorney fees for the employer and the employee should be “paid for out of each party’s own share of the recovery.” The decision in Walsh II also was followed in Gapusan v. Jay, supra, 66 Cal.App.4th 734, 745.3
*1040In my view, the Court of Appeal in Walsh I & II focussed on an issue not appropriately before the court. The doctrine of equitable apportionment of attorney fees arises only in a case, such as Quinn, in which the amount of the judgment or settlement is sufficient for some of the proceeds to be left for the employee after the attorney fees and costs are paid and the employer is reimbursed. We held in Quinn that, in such circumstances, the amount of the employer’s reimbursement must be reduced so that the employer shares in the payment of the attorney fees 'that produced the judgment or settlement. When the amount of the judgment or settlement is insufficient to permit the employee to receive a portion of the proceeds, the doctrine of equitable apportionment of attorney fees does not apply and a different principle controls—the principle, made explicit in the statutes, that the attorney fees of both the .employer and the employee shall be paid from the judgment or settlement before the employer is reimbursed.
Section 3860, subdivision (e), provides that if the employer and the employee are represented by separate attorneys, “prior to reimbursement of the employer . . . , there shall be deducted from the amount of the settlement the reasonable expenses incurred by both the employer and the employee or on behalf of either, including costs of suit, if any, together with reasonable attorneys’ fees to be paid to the respective attorneys for the employer and the employee, based upon the respective services rendered in securing and effecting settlement for the benefit of the party represented.” This language could not be clearer in requiring that the settlement first be used to pay the attorney fees for both parties before the employer is reimbursed.
We recognized in Quinn that the priority given to the payment of attorney fees is separate from the doctrine of equitable apportionment of attorney fees. Noting that an earlier version of the statute had provided for apportionment of attorney fees, we observed: “The statute left unclear, however, the priority rights as between the worker’s attorney and the employer in case the recovery should not suffice both to compensate the attorney and to recompense the employer for his workers’ compensation outlay. To remedy this obscurity the Legislature enacted the current statute, which, with an evident eye to the problem of conflicting priorities, specifies that ‘the court shall first order paid from any judgment’ the attorney’s fee.” (Quinn v. State of California, supra, 15 Cal.3d 162, 169, original italics.) We explained that the reason for this priority was to “assur[e] the worker that he can obtain an attorney by guaranteeing that attorney priority in the event that the judgment *1041recovered should not suffice both to recompense him and to satisfy the employer’s claim.” (Id. at p. 170.)
The rule announced in Eldridge and Walsh I & II and endorsed in dictum by the plurality would render meaningless this priority for the payment of the employee’s attorney fees if the employer retains separate counsel who actively participates in the proceedings. If the employer’s separate counsel actively so participates, the employee’s attorney would receive attorney fees only if the judgment is sufficiently large that a portion will be left for the employee after the employer’s attorney is paid and the employer is reimbursed. But if the judgment is that large, the priority for the payment of attorney fees will be of no consequence. If the judgment or settlement is large enough to pay both the employer and the employee and their attorneys, it hardly matters who is paid “first.” As we recognized in Quinn, the priority for the payment of attorney fees is intended to ensure that the employee’s attorney is paid “in the event that the judgment recovered should not suffice both to recompense him and to satisfy the employer’s claim.” (Quinn v. State of California, supra, 15 Cal.3d 162, 170.) The rule announced in Eldridge and Walsh I & II is inconsistent with the statutory language and our holding in Quinn, because it denies the employee’s attorney priority if the amount of the judgment or settlement is insufficient to provide a recovery for the employee and the employer has retained separate counsel who actively participates in the proceedings. Under such a rule, some workers will have difficulty obtaining attorneys, because those attorneys will not be guaranteed priority. If the employer retains separate counsel who actively participates in the proceedings (and few employers will fail to do so), the proceeds of any judgment or settlement first will be used to pay the employer’s attorney fees, then will be used to reimburse the employer, and only then will be used to pay the employee’s attorney fees, if any proceeds remain. This is contrary to the plain language of section 3860, subdivision (e), which states that the fees of both attorneys shall be paid “prior to reimbursement of the employer.”
Although the plurality opinion recognizes the statutory requirement that payment of the employee’s attorney fees be given priority, it effectively denies such priority by suggesting that if the employee does not receive a portion of the settlement or judgment, the amount of the fee the employee’s attorney may recover from the settlement or judgment will be nothing. The plurality states that the amount of the employee’s attorney fees is determined “by reference to the actual benefit that the settlement confers on the attorney’s own client, the employee. [Citations.]” (Plur. opn., ante, at p. 1028.) But this is not what the statute says. Section 3860, subdivision (e), states that the attorneys for both the employer and the employee are entitled to “reasonable attorneys’ fees . . . based upon the respective services rendered in *1042securing and effecting settlement for the benefit of the party represented.” The employee’s attorney, therefore, is entitled to a reasonable fee based upon the services rendered on behalf of his or her client. As noted above, the statute does not provide that the employee’s attorney is entitled to a fee only if the employee receives an actual benefit from the settlement; it simply states that the amount of the fee shall be based on the services rendered in effecting settlement for the benefit of the employee. Certainly it cannot be said that a reasonable fee under such circumstances necessarily would be nothing, simply because the amount of the judgment or settlement is insufficient to permit the employee to share in the proceeds of the judgment.
I believe that the language of section 3860, subdivision (e), is plain in this regard. When a settlement is secured through the efforts of separate attorneys representing the employer and the employee, the proceeds of the settlement first must to used to pay the reasonable fees of both attorneys. Next, the proceeds of the settlement are used to reimburse the employer for compensation benefits paid to the employee. The amount of this reimbursement is reduced by the amount of the attorney fees paid to the employer’s attorney. The doctrine of equitable apportionment discussed in Quinn does not apply when the employer and the employee are separately represented. Any remaining proceeds are disbursed to the employee.
Werdegar, J., concurred.

Further undesignated statutory references are to the Labor Code.

Section 3860, subdivision (e), states: “Where both the employer and the employee are represented by the same agreed attorney or by separate attorneys in effecting a settlement, with or without suit, prior to reimbursement of the employer, as provided in subdivision (b) hereof, there shall be deducted from the amount of the settlement the reasonable expenses incurred by both the employer and the employee or on behalf of either, including costs of suit, if any, together with reasonable attorneys’ fees to be paid to the respective attorneys for the employer and the employee, based upon the respective services rendered in securing and effecting settlement for the benefit of the party represented. In the event both parties are represented by the same attorney, by agreement, the attorney’s fee shall be based on the services rendered for the benefit of both.”

In addition to establishing priority for the payment of attorney fees, sections 3856, subdivision (c), and 3860, subdivision (e), also grant priority for the payment of the employee’s “reasonable litigation expenses.” Unlike attorney fees, the amount of such litigation expenses is not based upon the services rendered by the attorney for the benefit of the party represented. It would appear, therefore, that the employee would be entitled to reimbursement for reasonable litigation expenses regardless of the size of the judgment or settlement. This appears to be the result reached in Walsh II, in which the trial court awarded the employee litigation costs and, on remand, denied the employee attorney fees, and the Court of Appeal affirmed the judgment in its entirety. (Walsh II, supra, 187 Cal.App.3d 1273, 1275-1276, 1280.) In Gapusan, however, the Court of Appeal, without analyzing the award of litigation expenses, held that if the employer’s attorney actively participated in the proceedings, “the parties must shoulder their own attorney fees and costs from their respective shares of the recovery, if any.” (Gapusan v. Jay, supra, 66 Cal.App.4th 734, 747, italics added, fn. omitted.)
Assuming, as appears clear from the statutory language, that an employee is entitled to priority for the payment (from a judgment or settlement) of reasonable litigation expenses, regardless of the amount of the judgment or settlement, it is difficult to understand why the *1040employee would not similarly be entitled to priority for the payment of reasonable attorney fees, particularly where the employee has incurred such fees as an out-of-pocket expense in the same manner as litigation expenses.