Court Opinion

ID: 6352793
Source: CourtListenerOpinion
Date Created: 2022-06-23 12:26:07.521842+00
Date Added: 2024-06-11T09:13:29.724010
License: Public Domain

TENNESSEE BUREAU OF WORKERS’ COMPENSATION
               WORKERS’ COMPENSATION APPEALS BOARD

Cathy Cravens                                 )   Docket No.      2018-04-0295
                                              )
v.                                            )   State File No. 39315-2018
                                              )
Cummins Filtration, Inc., et al.              )
                                              )
                                              )
Appeal from the Court of Workers’             )
Compensation Claims                           )
Robert V. Durham, Judge                       )

                       Reversed, Modified, and Certified as Final

This appeal concerns a trial court’s decision to exclude a portion of the parties’ global
settlement from the calculation of the employee’s attorney’s fee. The employee has
appealed. Upon careful review of the statutes at issue and relevant precedent, we reverse
the trial court’s order, modify the order and the settlement agreement to reflect the original
terms prior to the trial court’s modification, and certify the modified order approving the
settlement agreement as final.

Presiding Judge Timothy W. Conner delivered the opinion of the Appeals Board in which
Judge Pele I. Godkin joined.

Peter Frech, Nashville, Tennessee, for the employee-appellant, Cathy Cravens

Fredrick R. Baker, Cookeville, Tennessee, for the employer-appellee, Cummins Filtration,
Inc.

Patrick A. Ruth, Nashville, Tennessee, for appellee Abbie Hudgens, Administrator of the
Tennessee Bureau of Workers’ Compensation and the Tennessee Subsequent Injury and
Vocational Recovery Fund

                          Factual and Procedural Background

        On May 24, 2018, Cathy Cravens (“Employee”) was working for Cummins
Filtration, Inc. (“Employer”), when she sustained severe injuries to her right arm and
shoulder as a result of getting her arm caught in a machine. Employer accepted her claim
as compensable and benefits were initiated. Following extensive medical care, Employee

                                              1
was evaluated by a vocational expert, who concluded Employee had “little to no reasonable
job opportunities to her that exist in significant numbers on a full-time basis within the
competitive labor market.” Thereafter, the parties agreed to add the Tennessee Subsequent
Injury and Vocational Recovery Fund as a defendant in the case. On March 22, 2022, the
parties entered into a tentative settlement of all issues in the case. Under the terms of the
proposed settlement, Employer and Employee agreed that Employee was not permanently
and totally disabled. Each defendant agreed to pay a lump sum amount, and a portion of
the lump sum amount paid by Employer was to be used to fully fund a Medicare Set-Aside
Arrangement (“MSA”). 1 As a result, the Settlement Agreement, if approved, would
terminate Employer’s obligation to provide any additional benefits, including future
medical benefits. In addition, Employee’s attorney sought approval of his fee of 20% of
the amount of the global settlement, to be paid by Employee from settlement proceeds.

        When the settlement was presented to the trial court for approval, the court approved
all terms of the settlement except for the amount of Employee’s attorney’s fee. The trial
court concluded that Employee’s attorney was not entitled to a fee from the portion of the
settlement designated to fund the MSA. As a result, the trial court struck through the
amount of Employee’s attorney’s fee, the net amount to be paid to Employee, and the
monthly amortized benefit for Social Security set-off purposes in the Settlement
Agreement, and it wrote different figures in the margin. The Court then issued a separate
order approving the settlement agreement in which it cited a May 2004 Memorandum from
the Centers for Medicare and Medicaid Services (“CMS”) that it concluded supported its
determination that Employee’s attorney was not entitled to a fee from the amount used to
fund the MSA. Employee has appealed.

                                        Standard of Review

       The interpretation and application of statutes and regulations are questions of law
that we review de novo. See Mansell v. Bridgestone Firestone N. Am. Tire, LLC, 417
S.W.3d 393, 399 (Tenn. 2013). We are also mindful of our obligation to construe the
workers’ compensation statutes “fairly, impartially, and in accordance with basic principles
of statutory construction” and in a way that does not favor either the employee or the
employer. Tenn. Code Ann. § 50-6-116 (2021).

                                                Analysis

       The sole issue presented in this appeal is whether Employee’s attorney is entitled to
include the value of the MSA when seeking a fee of 20% of the award to the injured worker.
1
  “A Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) is a financial agreement that
allocates a portion of a workers’ compensation settlement to pay for future medical services related to the
workers’ compensation injury, illness or disease.” Workers’ Compensation Medicare Set Aside
Arrangements,            https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-
Compensation-Medicare-Set-Aside-Arrangements/WCMSA-Overview, last visited June 22, 2022.
                                                    2
As an initial matter, we note that both Employer and the Subsequent Injury and Vocational
Recovery Fund filed briefs stating that, because the resolution of the issue on appeal has
no impact on the liabilities of their respective clients, “they do not take a position on this
appeal.”

      Tennessee Code Annotated section 50-6-226(a)(1) governs attorneys’ fees in
workers’ compensation cases. It provides:

       The fees of attorneys for services to employees under this chapter[] shall be
       subject to the approval of the workers’ compensation judge before which the
       matter is pending, as appropriate; provided, that no attorney’s fees to be
       charged employees shall be in excess of twenty percent (20%) of the amount
       of the recovery or award to be paid by the party employing that attorney.
       The department shall deem the attorney’s fee to be reasonable if the fee does
       not exceed twenty percent (20%) of the award to the injured worker . . . .

Tenn. Code Ann. § 50-6-226(a)(1) (2018) (emphasis added). In Henderson v. Pee Dee
Country Enters., No. 2020-06-1013, 2021 TN Wrk. Comp. App. Bd. LEXIS 8 (Tenn.
Workers’ Comp. App. Bd. Mar. 8, 2021), we addressed the meaning of the phrase “award
to the injured worker” in the context of a claim for death benefits, and we concluded the
phrase encompasses an award of death benefits even if the scope and duration of such
benefits are contingent on future events. Id. at *8-9. 2 Here, the amount of the settlement
designated to fund the MSA is not contingent on any future event. Thus, we must now
determine whether the phrase “award to the injured worker” includes amounts attributable
to future medical benefits and, specifically, the amount used to fund an MSA.

       In Langford v. Liberty Mutual Ins. Co., 854 S.W.2d 100 (Tenn. 1993), the Tennessee
Supreme Court addressed, as a question of first impression, whether contested medical
expenses are “part of the ‘recovery or award’ under Tenn. Code Ann. § 50-6-226(a) (1991)
and, therefore, subject to attorneys’ fees.” The court answered that question in the
affirmative:

       We conclude that our workers’ compensation laws should be construed so as
       to encourage adequate representation by counsel in contested claims. We
       think that representation would be less likely if medical expenses were not
       subject to attorneys’ fees in a contested case, particularly where the medical
       expenses constitute all, or a significant part, of the recovery. As the trial
       court observed in this case:

2
  The Tennessee Supreme Court’s Special Workers’ Compensation Appeals Panel recently affirmed the
two opinions we issued in Henderson. See Henderson v. Pee Dee Country Enters., No. M2021-00970-SC-
R3-WC, 2022 Tenn. LEXIS 215 (Tenn. Workers’ Comp. Panel June 20, 2022).
                                                3
              There are cases where the employee could not recover anything
              without the lawyer. There are cases where medical expenses
              may be up in the tens of thousands of dollars, yet the employee
              compensation may amount to only a few weeks. The
              possibility of a lawyer taking those cases would be rather
              small.

       We, therefore, conclude that contested medical expenses are a part of the
       “recovery or award” specified in Tenn. Code Ann. § 50-6-226(a) on which
       attorneys’ fees may be assessed.

Id. at 102. As a result of this conclusion, the Court ordered that an amount equal to twenty
percent (20%) of the contested medical expenses, which the trial court had already
determined was reasonable, would be awarded as part of the attorney’s fee. Id.

        In Harris v. Nashville Center for Rehabilitation and Healing, No. 2019-06-1008,
2021 TN Wrk. Comp. App. Bd. LEXIS 9 (Tenn. Workers’ Comp. App. Bd. Jan. 28, 2021),
the employee’s attorney sought to include contested medical expenses in the calculation of
the attorney’s fee, and we explained:

       The Tennessee Supreme Court has held that contested medical expenses are
       considered part of the “recovery or award” upon which attorney’s fees may
       be based. We have previously noted that the 2013 Workers’ Compensation
       Reform Act modified section 50-6-226(a), which governs awards of
       attorney’s fees, but the changes did not vitiate or impair the precedent
       established in Langford. Thus, while the trial court is given discretion as to
       the award of attorney’s fees, Employee’s contested medical expenses are to
       be considered part of Employee’s award for purposes of attorney’s
       fees. . . . [A]n award of attorney’s fees based on a percentage of unpaid
       medical expenses would be deducted from Employee’s award.

Id. at *17 (internal citations omitted).

       Here, the parties negotiated a global settlement of the claim, including the closure
of future medical benefits and the funding of an MSA. It is unrefuted that Employee’s
counsel spent significant time and used his expertise in representing Employee and
negotiating a settlement on her behalf, including the MSA. It is further unrefuted that
Employee entered into a contract with her attorney in which she agreed to pay twenty
percent of the total recovery, whether said recovery was obtained by settlement or trial, to
her attorney as his fee, subject to the court’s approval. No other party contested the
reasonableness of the fee, and the trial court did not conclude that the fee was unreasonable.

                                              4
       In declining to approve the attorney’s fee, the trial court reasoned that the amount
of the settlement designated to fund the MSA was not “available” to Employee and,
therefore, is not properly includable in the fee calculation. We respectfully disagree. The
amount of the settlement used to fund the MSA does, in fact, inure to Employee’s benefit
because it relieves Employee of direct financial obligations attributable to certain future
medical expenses. Moreover, Tennessee precedent does not distinguish between portions
of a settlement “available” to the plaintiff versus portions that are “unavailable” in
considering the amount of an attorney’s fee. For example, the Supreme Court in Langford
did not conclude that the amount of the award attributable to the payment of contested
medical bills was “unavailable” to the employee and excludable from the attorney’s fee
calculation; in fact, it reached the opposite conclusion. The same rationale applies here.

        Moreover, in our opinion in the second appeal in Henderson, we concluded that the
second sentence of Tennessee Code Annotated section 50-6-226(a)(1) limits the discretion
of the trial court to refuse to approve attorney’s fees “in circumstances where the fee does
not exceed 20% of the award to the injured worker.” Henderson v. Pee Dee Country
Enters., No. 2020-06-1013, 2021 TN Wrk. Comp. App. Bd. LEXIS 26, at *13 (Tenn.
Workers’ Comp. App. Bd. July 23, 2021). Here, we conclude that the total amount of the
settlement, including the amount designated to fund the MSA, is includable in the term
“award to the injured worker” as used in section 226(a)(1). Thus, it was error for the trial
court to exclude that amount in calculating and approving the attorney’s fee.

       Finally, we agree with Employee that the May 2004 Memorandum issued by CMS
does not dictate the result reached by the trial court. The CMS Memorandum, even if
instructive or persuasive authority in this case, merely states that funds used to pay
administrative fees or expenses associated with the MSA, including attorney’s fees, cannot
come from the corpus of the monies used to fund the MSA. 3

                                             Conclusion

       For the foregoing reasons, we reverse the trial court’s order with respect to                  the
amount of the approved attorney’s fee; modify the settlement agreement to reinstate                   the
original amounts of the attorney’s fee, the net recovery to the injured worker, and                   the
amortized monthly benefit for Social Security set-off purposes; and certify as final                  the
order and agreement as modified. Costs on appeal are taxed to Employee.

3
 Parenthetically, we note that Employee’s attorney acknowledged that monies used to satisfy the attorney’s
fee “would not infringe upon the corpus of the MSA as approved by CMS.” We recognize that there may
be factual circumstances where an award of attorney’s fees on the amount designated for an MSA may
significantly lessen or even deplete the net recovery of the injured worker. However, as we noted in
Henderson II, “wholly separate and apart from the provisions of Tennessee’s Workers’ Compensation Law
governing attorney’s fees, attorneys representing injured workers or their dependents must abide by Rule 8
of the Rules of the Tennessee Supreme Court, RPC 1.5, and any other rules, statutes, or regulations that
govern fees in contingency fee cases.” Henderson, 2021 TN Wrk. Comp. App. Bd. LEXIS 26, at *13 n.5.
                                                    5
                 TENNESSEE BUREAU OF WORKERS’ COMPENSATION
                   WORKERS’ COMPENSATION APPEALS BOARD

Cathy Cravens                                         )      Docket No. 2018-04-0295
                                                      )
v.                                                    )      State File No. 39315-2018
                                                      )
Cummins Filtration, Inc., et al.                      )
                                                      )
                                                      )
Appeal from the Court of Workers’                     )
Compensation Claims                                   )
Robert V. Durham, Judge                               )

                                   CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the Appeals Board’s decision in the referenced
case was sent to the following recipients by the following methods of service on this the 23rd
day of June, 2022.

 Name                              Certified   First Class   Via   Via     Sent to:
                                   Mail        Mail          Fax   Email
 Peter Frech                                                         X     pfrech@forthepeople.com
 Fred Baker                                                          X     fbaker@wimberlylawson.com
 Patrick Ruth                                                        X     patrick.ruth@tn.gov
 Robert V. Durham, Judge                                             X     Via Electronic Mail
 Kenneth M. Switzer, Chief Judge                                     X     Via Electronic Mail
 Penny Shrum, Clerk, Court of                                        X     penny.patterson-shrum@tn.gov
 Workers’ Compensation Claims

Olivia Yearwood
Clerk, Workers’ Compensation Appeals Board
220 French Landing Dr., Ste. 1-B
Nashville, TN 37243
Telephone: 615-253-1606
Electronic Mail: WCAppeals.Clerk@tn.gov