Court Opinion

ID: 9760163
Source: CourtListenerOpinion
Date Created: 2023-08-29 00:41:32.589379+00
Date Added: 2024-06-11T07:29:08.585325
License: Public Domain

DISSENTING OPINION BY
Judge SMITH-RIBNER.
I respectfully disagree with the majority’s decision to reverse the order of the Workers’ Compensation Appeal Board *1049(Boai'd) and reinstate the order issued by the Workers’ Compensation Judge (WCJ) to grant Employer’s petition to review benefit offset against the proceeds of a settlement in the third-party lawsuit filed by Timothy Wolfe (Claimant). Employer argues that the Board erred by including in the calculation of the value of Employer’s lien the portion of the counsel fee that was refunded to Claimant by his attorney upon distribution of the proceeds.
It is undisputed that Claimant sustained a broken right leg on April 16, 2004 when he was involved in an automobile accident, which occurred during the course of his employment. He received medical and wage loss benefits totaling $48,259.32, and he returned to work on October 4, 2004 with no further injury-related losses. Claimant filed a third-party lawsuit arising out of the automobile accident and eventually settled the suit for $75,000. His counsel paid Employer’s insurer $28,478.67 in full satisfaction of its subrogation lien, representing the sum of $47,464.44 (what Claimant then believed to be the total lien) less Employer’s share of the 40 percent counsel.fee. Employer disagreed with the sum tendered; it noted that although Claimant’s counsel had a 40 percent contingent fee agreement the fee was reduced at the time of distribution of settlement proceeds by $9205.92, resulting in a total counsel fee of only $20,794.08.
The Settlement Distribution Statement states that money was refunded to Claimant “to avoid [Claimant] receiving less monies than attorneys in a settlement involving serious and permanent injury to Plaintiff Timothy Wolfe.” Reproduced Record at 10a. Without counsel’s refund, Claimant would have received $15,794.08 of the $75,000 settlement. With the refund, Claimant received $25,000. As to the disputed issue, the WCJ found as follows:
8. The issue in this matter relates to the contingent fee agreement between the Employee and his counsel. His counsel accepted its 40 percent fee, then refunded $9,205.92 of its fee to the Employee. The Employee’s counsel maintained that its 40 percent fee amount applies to the calculation of Employer’s pro-rata recovery of its compensation hen, regardless of his counsel’s voluntary decision to refund a waived portion of its fee to Employee.
The Employer’s position was that that [sic.] the fee amount which applies to the pro-rata recovery calculation is $20,794.08. This is the fee remaining after deduction of the waived and refunded amount.
The WCJ found that Claimant and his counsel had a valid 40 percent contingent fee agreement and that counsel accepted a 40 percent fee from proceeds of the settlement and then refunded a portion of the fee to Claimant. See (Finding of Facts Nos. 7-8). The WCJ however directed Claimant to reimburse Employer’s insurer a net hen amount calculated by using the lower counsel fee amount, and he ordered a total reimbursement of $34,485.67 based on a $48,259.32 accrued hen, with credit for $28,478.67 already paid. The WCJ’s findings were not disturbed by the Board, but it overturned the WCJ’s conclusion that the waived and refunded counsel fee was not a reasonable fee “incurred in obtaining the recovery from a third party, within the meaning of Section 319 of the [Act].” Conclusions of Law No. 1. The Board reversed the WCJ’s order, and it cited A.C. and S. v. Workman’s Compensation Appeal Board (Dubil), 151 Pa.Cmwlth. 314, 616 A.2d 1085 (1992), where the Court held that a 40 percent contingent fee in third-party litigation is not unusual and that a subrogation hen is to be reduced to reflect that amount. The *1050Board stated that Claimant’s counsel had a valid claim on a 40 percent counsel fee and that under Pennsylvania Manufacturers’ Ass’n v. Wolfe, 534 Pa. 68, 74, 626 A.2d 522, 525 (1993), an attorney who creates a settlement fund is entitled to be paid first even before the insurer or employee, regardless of how the counsel fee is prorated.
In support of its decision to reverse the Board, the majority writes that the statutory right to subrogation in Section 319 of the Workers’ Compensation Act (Act), Act of June 2, 1915, P.L. 736, as amended, 77 P.S. § 671, is mandatory and that it allows for no exceptions or adjustments on equity grounds. Thompson v. Workers’ Compensation Appeal Board (USF&G Co.), 566 Pa. 420, 781 A.2d 1146 (2001). Section 319 expressly provides: “Where the compensa-ble injury is caused in whole or in part by the act or omission of a third party, the employer shall be subrogated to the right of the employe ... against such third party to the extent of the compensation payable under this article by the employer....” 77 P.S. § 671 (emphasis supplied). The Supreme Court explained in Wolfe that “[t]he rights to which the subrogee succeeds are the same as, but no greater than, those of the person for whom he is substituted.” 534 Pa. at 74, 626 A.2d at 525.
The Board’s decision to reverse the WCJ’s order is reinforced by the Supreme Court’s decision in Gillette v. Wurst, 594 Pa. 544, 937 A.2d 430 (2007).' The court ruled there that an insurer was entitled to subrogation against a wrongful death settlement even though the decedent’s wife disclaimed a right to her spousal share, thereby allowing the funds to go to her children. The Court recognized that the plain language of Section 319 allows for the employer to be subrogated to the right of the employee or his representative. The employer’s insurer therefore was sub-rogated to the amount the wife had a right to receive as opposed to what she actually received, ie., she had a right to receive an award apportioned under the intestate schedule, which right passed to the insurer. The court reiterated settled principles that a right to subrogation is absolute and that the purpose of subrogation is to prevent double recovery by a claimant for the same injury, to ensure that an employer does not pay for a third party’s negligence and to prevent a third party from escaping liability for wrongful conduct. Specifically, the Act is designed to benefit injured workers; it is to be liberally construed to effectuate its humanitarian objectives, and any borderline interpretations are construed in favor of the worker.
Applying the reasoning articulated in Gillette to the present matter, it becomes readily apparent that if Claimant signed a valid 40 percent contingent fee agreement he had a “right” to receive $75,000 less the counsel fee and expenses of $30,727.25. Although Claimant actually received more from settlement proceeds due to his counsel’s refund, Claimant could not have en-' forced any “right” to that refund. On that same basis, Employer had no right to enforce its subrogation lien against the refund from counsel. The moneys belonged to counsel at the time of distribution of the proceeds, and as the Board stated counsel had a right to dispose of his counsel fee as he wished. The Board rightly concluded that Employer has received payment of its lien, and I concur with the holding that “to recalculate the subrogation amount to reduce the third party recovery to the Claimant under these facts would be contrary to the humanitarian purposes of the [Act] in addition to the contractual rights of the parties.” Board’s Opinion at 6.
By granting Employer subrogation rights against the $9205.92 refund, the ma*1051jority has conferred greater rights in Employer than those held by Claimant and did so in direct contravention of Section 319 of the Act. Wolfe. The Board correctly analyzed the issue and properly denied subrogation rights against the sum refunded to Claimant by counsel who accepted a 40 percent fee from the settlement proceeds and voluntarily decided thereafter to waive a portion of that fee. Nothing in the Act precludes counsel’s voluntary waiver of his counsel fee, and nothing in the Act conferred greater subrogation rights in Employer when counsel did so, particularly when there is absolutely no evidence in the record to demonstrate that counsel’s waiver was to avoid Employer’s subrogation lien.