Court Opinion

ID: 9513269
Source: CourtListenerOpinion
Date Created: 2023-08-06 22:33:27.385479+00
Date Added: 2024-06-11T09:05:47.978015
License: Public Domain

MESCHKE, Justice,
concurring and dissenting.
[¶ 45] I concur with the majority opinion in part III (affirming the new rule requiring advance approval for reimbursement of a claimant’s costs over $100), and in part IV (affirming attorney fees to Little and Dietz for resisting the Bureau’s spurious motion for discovery). In part II, I concur that the maximum hourly rate is not arbitrary enough to invalidate the rule, but I disagree with much of the analysis in parts IIB and IIC. I dissent from the majority’s conclusion that the “record of this rulemaking proceeding is adequate” for the tiered maximum attorney fees, and I dissent from the majority’s implicit conclusion the tiered caps are reasonable.
I
[¶46] For a long time, North Dakota’s Workers’ Compensation Act has commanded the Bureau to compensate a worker’s attorney for legal services to prove a claim when it is disputed. See 1943 N.D. Laws, ch. 274, § 10: “All fees on claims for legal ... services rendered under this Act to any claimant shall be in accordance with schedules of fees adopted or to be adopted by the Commissioners of the Workmen’s Compensation Bureau and subject to the approval of said Commission.” A like command remains in NDCC 65-02-08 to this day: “All fees on claims for legal ... services rendered under this title to an injured employee must be in accordance with schedules of fees adopted by the bureau.” By 1991, the hourly rate for all legal services was $60.
[¶ 47] In 1989 and 1991, the Legislature began reducing reimbursements to an in*778jured worker for legal services in establishing the claim. 1989 N.D. Laws, ch. 767, §§ 1-3; 1991 N.D. Laws ch. 714, § 30. A new 1991 section, codified at NDCC 65-02-17, continued payment of the worker’s legal expenses where the worker requested binding arbitration but, where the worker requested an administrative hearing, payment of the injured worker’s attorney fees was authorized only if the worker prevailed. The Bureau then adopted a rule effective November 1, 1991, NDAC 92-01-02-11.1 (1992), that set the non-contingent rate for attorney fees at $70 hourly, and the contingent rate at $85 hourly.
[¶ 48] Historically, North Dakota thus has been one of a “substantial majority” of states that shift the legal expenses on a claim from the injured worker to the contesting carrier or employer when the worker prevailed. 8 Arthur & Lex K. Larson, Larson’s Workers’ Compensation Law, § 83.12(b)(1), at 15-1306-1314 (1995). Reimbursing an injured worker for legal expenses is important because the benefits are already so “closely calculated” and minimal that “a serious question arises whether the social objectives of the [workers compensation] legislation may to some extent be thwarted” by associated legal costs for the worker. Id. § 83.11. “The benefit scales are so tailored as to cover only the minimum support of the claimant during disability.” Id.
[¶ 49] Since 1989, the North Dakota Legislature has continued to pare reimbursement of a worker’s legal expenses. See 1989 N.D. Laws, ch. 767, §§ 1-3; 1993 N.D. Laws, ch. 619, §§ 1-2; 1995 N.D. Laws, ch. 612, §§ 1-3, and ch. 614, §§ 1-7. The changes first shackled a worker’s ability to obtain legal services: “This section does not prevent an injured employee or an employer from hiring or paying an attorney; however, the employee’s attorney may not seek or obtain costs or attorney’s fees from both the bureau and the employee relative to the same services.” NDCC 65-02-08 (part). The 1995 changes also set up a bureaucratic hurdle prohibiting payment of “attorney fees to an attorney who represents an injured employee in a disputed claim before the bureau unless the injured employee has first attempted to resolve the dispute through” a new “workers’ adviser program” enacted in NDCC 65-02-27. The changed NDCC 65-02-08 arbitrarily designated a maximum percentage limit: “Except for an initial determination of compensability, an attorney’s fee may not exceed twenty percent of the amount awarded, subject to a maximum fee set by administrative rule.” Adding to the longstanding direction that the Bureau “adopt rules necessary to carry out this title,” the 1993 changes to NDCC 65-02-08 (my emphasis) also directed the Bureau to “establish, by administrative rule, a reasonable maximum hourly rate and a maximum fee to compensate claimants’ attorneys for legal services following ... issuance of an administrative order under chapter 28-32....”
[¶ 50] Parallel 1995 changes to NDCC 65-02-15 on binding-arbitration procedures directed:
The bureau shall pay an injured employee’s attorney’s fee only when the employee prevails. The bureau shall adopt rules to establish a maximum fee for an injured employee’s attorney. An attorney’s fee may not exceed twenty percent of the amount awarded.
Amendments to NDCC 65-10-03 in 1989 had required rulemaking to limit attorney fees for obtaining judicial review:
The bureau shall, pursuant to section 65-02-08, establish a maximum fee to be paid in an appeal, provided that the maximum fee may be exceeded upon application of the claimant and approval of the court, upon a finding that the claim had clear and substantial merit, and that the legal or factual issues involved in the appeal were unusually complex.
[¶ 51] Following the comprehensive directions in NDCC 65-02-08, 65-02-15, and 65-10-03, the Bureau revised NDAC 92-01-02-11.1, effective January 1, 1996, to limit reasonable costs, designate a reasonable maximum hourly rate, and set maximum fee caps in reimbursing the attorney fees for a worker who prevails on a disputed claim. That rulemaking resulted in this appeal.
*779II
[¶ 52] An agency’s rulemaking must be judicially reviewed “based only on the record filed with the court.” NDCC 28-32-19.1 and 28-32-21. Our Administrative Agencies Practice Act shares a common derivation with the 1981 Model State Administrative Procedure Act. Shark v. U.S. West Communications, Inc., 545 N.W.2d 194, 197 n. 1 (N.D.1996). The Comments to the Model Act help explain the importance of the record:
In requiring an official agency rule-making record, [the statute] should facilitate a more structured and rational agency and public consideration of proposed rules, and the process of judicial review of the validity of rules.
Model State Administrative Procedure Act (1981) § 3-112, 15 U.L.A. 49, 50 (1990). Another Comment to the parallel Model Act section requiring a rulemaking record emphasizes, “to the extent another provision of law expressly requires a particular class of rulés to be made by the agency and, therefore, judicially reviewed, wholly on the basis of the official agency rule-making record, that other provision of law will control.” Id. at 51. Yet the majority opinion views the North Dakota directive for judicial review of a new rule “only on the record” as “vague,” assumes that “no provisions incorporating adjudicatory agency functions into agency rulemaking actions” exist, and declares “we will not apply concepts of evidentiary proof suitable in an adjudicatory setting to an agency’s rulemaking action.”
[¶ 53] In my opinion, the majority’s declaration is wrong. The majority shut their eyes to “only” in the directive for judicial review “on the record” in NDCC 28-32-19.1. The majority thus makes the clear directive that judicial review be “based only on the record filed with the court” meaningless.
[¶ 54] “Giving the word ‘only’ its ordinary meaning, and applying it in its restrictive sense, as qualifying the word[s] to which it naturally belongs, the conclusion cannot be escaped that it restricts the meaning to be given to [those words].” Dowagiac Mfg. Co. v. Mahon, 13 N.D. 516, 101 N.W. 903, 903 (1904). “[T]he Legislature must be presumed to have approved and passed the bill with the intention that the word ‘only’ should be given its usual ordinary meaning. According to Webster ‘only’ means exclusively, solely, merely, for no other purpose, at no other time, in no other wise.” Ex parte Salhus, 63 N.D. 238, 247 N.W. 401, 402 (1933). Although the majority assigns it no meaning, “only” means exclusively.
[¶ 55] The majority opinion declares “[i]t is not the function of this Court to decide whether the ... hourly rate and the fee caps are reasonable.” But the authorizing section, NDCC 65-02-08, gave the Bureau power to set only “a reasonable maximum hourly rate and a maximum fee.” Our standards of review in NDCC 28-32-19.1 allows judicial approval of a new rule only when the agency has complied with the rulemaking procedures, when the new rule is constitutional, when the new rule is not an arbitrary or capricious application of the agency’s authority, and when the rule is within the agency’s authority. If the rate and fee caps are not demonstrably reasonable, as the authorizing legislation requires, I do not comprehend how they can be approved under our standards of review.
[¶ 56] The amount of attorney fees to be reimbursed for an individual worker’s claim is directly affected by the maximum fees set by these rules. The United States Supreme Court has commented on the nature of judicial review in this kind of rate-making context:
In prior opinions we have intimated that even in a rulemaking proceeding when an agency is making a “ ‘quasijudicial’ ” determination by which a very small number of persons are “ ‘exceptionally affected, in each case upon individual grounds,’ ” in some circumstances additional procedures may be required in order to afford the aggrieved individuals due process.
Vermont Yankee Nuclear Power Corp. v. N.R.D.C., 435 U.S. 519, 542, 98 S.Ct. 1197, 1211, 55 L.Ed.2d 460 (1978). As Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 419, 91 S.Ct. 814, 825, 28 L.Ed.2d 136 (1971), explained, “ ‘post hoc ’ rationalizations ... have traditionally been found to be an inadequate basis for review.” When a *780specific statute authorizes a successful party to recover reasonable'attorney fees, setting the amount is an adjudicative act. See Duchscherer v. W.W. Wallwork, Inc., 534 N.W.2d 13, 16 (N.D.1995). The amount of attorney services for an individual .worker’s claim will vary considerably, depending on the complexity of the factual and legal issues, as well as the quality and quantity of the professional and legal efforts contesting the claim. Id. at 17. Setting reasonable attorney fees is not a quasi-legislative function, but is essentially an adjudicative or quasi-adjudicative function. While some rulemak-ing can be undoubtedly policy-making and quasi-legislative, setting reasonable attorney fees is surely more adjudicative and should •be reviewed accordingly.
III
[¶ 57] I join with the majority in concluding that NDCC 65-02-08 authorized the Bureau to make rules for reimbursement of reasonable costs, and that the rule requiring advance approval for reimbursement of a claimant’s' costs over $100 is reasonable. I agree this regulation merely governs the procedure for collecting costs and makes no substantive change in the statutory direction to reimburse a claimant’s reasonable costs. If the Bureau should unreasonably deny approval of a worker’s advance request to authorize certain costs, that denial is subject to correction by judicial review and to action under NDCC 65-10-03 to compel the Bureau to reimburse the unnecessary attorney fees expended for the correction.
IV
[¶ 58] I concur that the $85 hourly rate is minimally supported by this record as a reasonable amount. “The rate and hours expended by opposing counsel are often probative of the reasonableness of attorney fees for prevailing counsel.” Duchscherer, 534 N.W.2d at 19. Determining attorney fees reasonably depends, however, on more than just the hourly rate.
[¶ 59] Thus, there is some force in the appellants’ argument that the $85 hourly contingent rate to a prevailing worker’s attorney “cannot be considered reasonable compensation” when the Bureau pays that same non-contingent rate to the contesting attorney, win or lose. Obviously, the total effect is to discourage claims.
[¶ 60] A worker has the greater legal burden to prove the claim, but must do so without equivalent financial resources. This kind of increasingly unbalanced bureaucratic administration will, I fear, eventually lead to destruction of the social and legal foundations of the workers compensation compact. If so, I would anticipate policy and politics will then combine to bring about a return to the courts of enforcement of injured workers’ claims through tort law. But that potential is well-beyond the range of judicial review for this case.
[¶ 61] In this record, there is some evidence that $85 hourly is a reasonable rate. Therefore, I concur that the hourly rate in the rule is within the agency’s authority.
V
[¶ 62] I agree with the district court that there is no evidence in this record to justify or support the reasonableness of the tiers of maximum fees set by this rule. Setting maximum fees in tiers commensurate with the expected amount of work necessary through each stage of a claim is, of course, reasonable. But this record has no facts, figures, or other information about the amount or range of legal work needed for each stage that might support the tiers set in the rule. I therefore dissent.
[¶ 63] The majority excuses the lack of record information to gauge the reasonableness of the “fee cap” amounts by assuming the Bureau “arrived” at the tiers “by estimating, through its experience and expertise, the amount of work involved at the various levels of the proceedings.” If the Bureau did that, we. do not know how they did it because there is no information about it in this record. Instead, the Bureau seems to be saying, “trust us, we know what is best,” without tendering a single clue about “the amount of work involved at the various levels of the proceedings” on claims ordinarily.
[¶ 64] The majority reasons “[i]t is not the function of this Court to decide whether ... *781the fee caps are reasonable_” But neither an agency nor a court can fix reasonable attorney fees without evidence about the work performed. See City of Bismarck v. Thom, 261 N.W.2d 640, 646 (N.D.1977)(the number of hours expended is an essential and relevant factor in setting attorney fees). The Legislature made the policy direction for reasonable attorney fees; the Bureau is charged with factually implementing that policy, not making a new policy, as the majority seems to assume.
[¶ 65] Since setting attorney fees is essentially an adjudicative function, fees cannot be set for a case without evidence of the hours worked. Id. Likewise, tiered caps on attorney fees cannot be fore-ordained without evidence about the usual amount of work for each stage. Undoubtedly, having paid reasonable fees in past cases based on the amount of work in each one, the Bureau has relevant information available to it. How it used that information for this rulemaking was not disclosed in this record. In my opinion, without that information, there is no way to judicially review the tiered fee caps “based only on the record.”
[¶ 66] Of course, from its available information, the Bureau is competent to do fact-finding about the range of legal services needed to prove a worker’s claim for each stage. The Bureau offered us no explanation why it failed to make a record of that information in making this rule. Within the range of its information, if it was part of the record, I would agree the Bureau would have the considerable discretion the majority posits. But the Bureau should not be permitted to exercise its discretion secretly, without a record, and expect judicial review blindly to rubber-stamp its actions.
VI
[¶ 67] I would affirm the district court’s holding that the portions of the rule on the maximum fee caps is invalid. Therefore, to that extent, I dissent. I would remand for the Bureau to develop an adequate record to show those tiered classifications reasonably correspond to the “expected amount of work that should be necessary.”
[¶ 68] Herbert L. Meschke.