Court Opinion

ID: 9514302
Source: CourtListenerOpinion
Date Created: 2023-08-06 22:48:33.07171+00
Date Added: 2024-06-11T09:06:15.956029
License: Public Domain

GILBERTSON, Justice
(concurring).
 I fully concur with the majority’s determination of the employer’s right to notice and the corresponding right to be heard before the Department establishes an appropriate attorney’s fee. I write separately only to provide guidance as to how, on remand, an appropriate fee is to be determined.
 In this case the Department approved an attorney’s fee of $51,642.40, that sum being twenty-five per cent of the present value calculation of the award. SDCL 62-7-8, which was in effect on the date of Stanton’s injury, June 18, 1991, provided: “[e]xcept as otherwise provided, fees of attorneys and physicians for services under this title shall be subject to approval of the department.” In 1992 the Legislature removed the “attorney’s fees” provision from SDCL 62-7-8 and enacted SDCL 62-7-36 to address this subject. SDCL 62-7-36 provides as follows:
Except as otherwise provided, fees for legal services under this Title shall be subject to approval of the department. Attorneys’ fees may not exceed the percentage of the amount of compensation benefits secured as a result of the attorney’s involvement as follows:
(1) Twenty-five percent of the disputed amount arrived at by settlement of the parties;
(2) Thirty percent of the disputed amount awarded by the department of labor after hearing or through appeal to the circuit court;
(3) Thirty-five percent of the disputed amount awarded if an appeal is successful to the Supreme Court.
Attorneys’ fees and costs may be paid in a lump sum on the present value of the settlement or adjudicated amount.
This statute does not mandate contingent fees over any other type of fee arrangement in workers’ compensation cases, nor does it set forth the amount an attorney will charge; it merely sets the maximum limits in relation to the amount of compensation awarded, at various levels of the proceedings. Placing statutory limits on attorney fees does not constitute automatic approval of every contingent fee agreement within the maximum. As noted under either statute, these fees “shall be subject to the approval of the department.”
 Nevertheless, without a hearing, the Department awarded the maximum amount allowable under this statute for this type of ease disposition. It apparently did so solely based on a contingent fee agreement between Stanton and his attorney, Leach. This is a private agreement which is not binding on the Department under either the former SDCL 62-7-8 or the current version of *797SDCL 62-7-36. Under settled law in South Dakota, an attorney has the burden of establishing that the charged fee is justified and reasonable, In re Estate of Lingscheit, 387 N.W.2d 738, 741-2 (S.D.1986), and a contingent fee does not, per se, equate with a reasonable attorney fee. “ ‘It is the duty of the court ... to determine the reasonableness of payments of services of an attorney....’” In re Estate of Hansen, 366 N.W.2d 852, 855 (S.D.1985) (quoting In re Johnson’s Estate, 68 S.D. 598, 5 N.W.2d 38, 41 (1942)). See Hogaboom v. Economy Mattress, 107 Idaho 13, 684 P.2d 990, 992-93 (1984) (contingency fees are subject to the same standards of reasonableness as other types of fees; agreement between claimant and attorney, while persuasive evidence, is not dispositive as to the reasonableness of the fee). See also Eugenie v. Workmen’s Compensation Appeal Bd., 140 Pa.Cmwlth. 51, 592 A.2d 358, 362 (1991) (worker’s compensation statute permitting attorney’s fees up to twenty per cent of amount awarded may require less than that amount where the record shows twenty per cent would be unreasonable).
When examining the appropriateness of a contingent fee agreement or any request for attorney’s fees in a workers’ compensation setting, two important and competing public policies must be kept in mind.
If attorneys are denied fees for work prosecuted on behalf of an injured work[er], there would be a chilling effect upon the ability of an injured party to obtain adequate representation. Through their insurance companies, employers regularly obtain exceptional and well-qualified counsel to defend them in such cases. It is imperative that courts foster and protect the ability of an injured work[er] to obtain counsel of his choice. We must avoid a policy or a practice which would discourage representation or the taking of appeals where counsel feels that an injured work[er] has been aggrieved at the trial court level. We must also preserve the right of an injured work[er] to have representation where the employer has appealed. When a successful claimant is not awarded attorney fees or when the fees awarded are too low, the above policy tends to be frustrated.
On the other hand, it is obvious that the total of all attorney fees paid in work[er]s’ compensation cases are ultimately reflected in higher insurance premiums and later in the cost of goods and services to the general public. Excessive fees that are not justified by reference to services rendered the work[er] constitute a burden on the system, on other citizens and are against public policy. We must juxtapose the policy demanding preservation of the work[er]’s right to adequate representation with the rights of other citizens to avoid unreasonable increases in the prices they pay for goods and services because of excessive fees paid to lawyers.
Fryar v. Johnsen, 93 N.M. 485, 601 P.2d 718, 719 (1979) (citations omitted). See Kahn v. State of Minnesota, University of Minnesota, 327 N.W.2d 21, 24 (Minn 1982) (setting forth similar policies underlying Minnesota’s worker’s compensation laws).
Except in cases where all parties agree as to the amount of the fee, the Administrative Law Judge should conduct a hearing, take evidence and enter findings of fact as to what constitutes an appropriate fee. City of Aberdeen v. Lutgen, 303 N.W.2d 372, 374-75 (S.D.1981); 3 Larson’s Workmen’s Compensation Law § 83.13(b) (1996). While the contingent fee agreement certainly is entitled to consideration, it does not bind the AL J from making an independent determination as to the appropriateness of the fee. “It is the reasonableness of the fee, and not the arrangements the attorney and his client may have agreed upon, which is controlling.” City of Sioux Falls v. Kelley, 513 N.W.2d 97, 112 (S.D.1994) (quoting City of Bismarck v. Thom, 261 N.W.2d 640, 645-46 (N.D.1977)). The Department’s decision must supported by substantial evidence in light of the whole record. Helms v. Lynn’s, Inc., 1996 SD 8, ¶ 10, 542 N.W.2d 764, 766.
Other courts have addressed this question in workers’ compensation cases and *798found the following factors relevant for consideration in determining a reasonable fee on a contingency basis:
(1) the anticipated time and labor required to perform the legal services properly; (2) the novelty and difficulty of the legal issues involved in the matter; (3) the fees customarily charged for similar legal services; (4) the possible total recovery if successful; (5) the time limitations imposed by the client or circumstances of the case; (6) the nature and length of the attorney-client relationship; (7) the experience, skill and reputation of the attorney; (8) the ability of the client to pay for the legal services to be rendered; and (9) the risk of no recovery.
Hogaboom, 684 P.2d at 992; Kahn, 327 N.W.2d at 24, n. 2 (factors provided by statute); East Coast Tire Co. v. Denmark, 381 So.2d 336, 338 (Fla.App.1980) (factors provided by statute); 3 Larson’s Workmen’s Compensation Law § 83.13(e) (1996).1
 The above factors are nearly identical to those set forth in Rule 1.5 of the Model Rules of Professional Conduct, which we cited with approval in Kelley, 513 N.W.2d at 111. In that case, we stated “it is virtually impossible to set out every conceivable item that should be considered. If the trial judge finds justification or reason to include something else of significance, he should state those reasons and justifications for inclusion in his ultimate determination.” Id. at 112.2 In Kelley, we held the contingency fee agreement at issue did not establish a reasonable fee for the case since it constituted only one of the factors to be considered in determining what is a reasonable fee. Id.
 Given the factors that must be considered in making a determination of reasonableness as to attorney’s fees in workers’ compensation eases, I would view this issue to be a mixed question of fact and law. As such, it is reviewed de novo. In re Hendrickson’s Health Care Serv., 462 N.W.2d 655, 656 (S.D.1990); Permann v. Dep’t of Labor, 411 N.W.2d 113, 119 (S.D.1987). While a fee of $51,642.40 for this type of minimal proceedings is generous at best, further proceedings are necessary to determine if it can be justified at all. As the Florida Supreme Court stated in an early workers’ compensation case, “[b]enefits are measured on the basis of compensation. Attorney’s fees are incident to benefits and if not measured by the factors pointed out herein, they are liable to grow and grow until they kill the goose that laid the golden eggs.” Tampa Aluminum, 132 So.2d at 419.
 MILLER, C.J., joins this special writing.

. In Wight v. Hughes Livestock Co., Inc., 204 Mont. 98, 664 P.2d 303, 312 (1983), the Montana Supreme Court set out the factors as above for determinmg reasonableness of attorney’s fees in a workers' compensation case. Responding to the court’s holding in Wight, the Montana Legislature enacted a statute which now requires the fee be based exclusively on time spent by the attorney. Baeta v. Don Tripp Trucking, 254 Mont. 487, 839 P.2d 566, 569 (1992) overruled on other grounds by Kloepfer v. Lumbermens Mut. Cas. Co., 272 Mont. 78, 899 P.2d 1081, 1084 (1995). The Baeta court noted the key wording of the new statute grants judicial discretion in determinmg the reasonableness of the fee in that the statute provides “the attorney must document the time spent and give the documentation to the judge. The judge shall determine a reasonable attorney fee and assess costs. He is not bound by the documentation submitted to him." (emphasis original) Id. (quoting Montana Code Ann. § 39-71-614 (1985)).

. For example, the Florida Supreme Court held the small size of the employer's business to be a relevant factor in a worker's compensation case wherein the payor was the employer. Tampa Aluminum Prod. Co. v. Watts, 132 So.2d 414, 418 (Fla.1961).