9-26-2016; Supreme Court Orders Millions in "Legal Fees" Due As Part of Subro Recovery; Law Limiting Civil Juries to Six Vacated; Ten Simple WC Questions to Ask Your Current Defense Lawyer
/Synopsis: IL Supreme Court Holds an Employer Has to Pay Statutory 25% Legal Fee on Unpaid TTD/PPD and Medical Benefits Even When Injured Worker Recovers Millions in Third-Party Claim.
Editor’s comment: In Bayer v. Panduit, the Illinois Supreme Court considered a claim where the worker was severely injured. In his third-party action against the construction companies who caused the accident, he recovered an IL record $64M verdict for such injuries. At the time of the jury verdict, the gross work comp lien was about $5.2M. When/if that verdict would have been paid by Defendants, the employer would receive the $5.2M lien less a 25% statutory attorney fee owed to Claimant’s attorneys along with deduction of a pro rata share of court costs.
Moving forward, the employer wouldn’t owe any work comp benefits until the remaining “credit” or setoff of about $59M would be used up by Plaintiff. At that point, work comp benefits might have to be restarted.
In this ruling, the IL Supreme Court held an employer was relieved of their obligation to pay its employee’s future medical care as a result of the jury verdict in the lawsuit against third parties must include that reduction in calculating how much the employer owes in statutory attorney fees for the legal work of the employee’s attorneys. In this instance, the employer Area Erectors, Inc. began paying TTD and later total and permanent disability benefits to Plaintiff Bayer after he was rendered a quadriplegic in a workplace accident. Bayer also sought recovery from Panduit Corporation, for whom Area Erectors was building warehouse facilities at the time of the accident. Ultimately Plaintiff Bayer and his attorneys, one of the top Plaintiff firms in the U.S. obtained a judgment via an all-time IL record jury verdict of $64 million.
Section 5(b) of the Workers’ Compensation Act, 820 ILCS 305/5(b) (West 2006), protects an employer’s right to receive reimbursement for all compensation paid under the IL WC Act if the employee recovers from a third party legally responsible for the employee’s injuries. The employer’s obligation to make future payments is suspended until the employee’s recovery from the third party has been used up or “exhausted.” Section 5(b) also requires the employer to pay for the Plaintiff attorney’s legal work resulting in the recovery from which the employer is reimbursed. In the absence of an agreement stating otherwise, Bayer’s lawyers were entitled to 25% of the amount of TTD, then T&P benefits along with all medical bills Area Erectors would have had to pay. The plain language of Section 5(b) provides the employer’s reimbursement includes “amounts paid or to be paid pursuant to paragraph (a) of Section 8.” In other words, the IL WC Act expressly contemplates that future medical payments are to be included in the amount to be reimbursed to the employer. The 25% collection fee to be paid to Plaintiff’s attorney is to be taken from the “gross amount of such reimbursement,” which is to include both past and future payments.
The Policy Underlying This Section of the IL WC Act is
· The employer receives a benefit from the third-party judgment, in that the employer may no longer be required to pay future indemnity and medical benefits;
· The employer has received this benefit as a result of the efforts of the plaintiff’s attorney;
· Therefore, the employer should share in the obligation to pay the plaintiff’s attorney fees. To that point, it should be emphasized the attorney does not reap a double recovery. Rather, the fee paid by the employer operates as a credit towards the fee owed by plaintiff to his attorneys.
Our sources indicate the employer Area Erectors agreed to pay and was regularly paying 25% of what they would have owed for weekly TTD and then T&P benefits but for whatever reason, disputed the 25% owed on the medical bills. We consider that legal position to be arguably contradictory and it was even odder to see the position appealed at significant defense cost all the way to our highest court.
The dispute was whether Area Erectors had to include the reduction in future medical expense payments in the ongoing attorney fee calculation. Based on a plain language interpretation of Section 5(b), our highest Court concluded the employer would have to pay the statutory attorney fee on the value of medical expenses the employer was relieved from paying in the future by virtue of the recovery in the lawsuit. Citing decisions in Zuber and In re Estate of Dierkes, the unanimous Court explained Section 5(b) of the IL WC Act equitably permits the employer to come out even, places the ultimate loss on the wrongdoer, and allows the employee to recover more fully for actual damages than is possible under the IL WC Act alone.
We are also advised by sources these various third party claims are being settled and paid and there is a confidentiality agreement as part of the settlement so no further details can or will be forthcoming.
From our view, this outcome is an accurate statement of the law but also incongruous and unusual—in a situation where an injured worker is to receive an 8-figure jury award--$64,000,000 and basically be set for life with that much tax-free money, it is odd to imagine this IL employer has to keep paying possibly millions more in substantial “legal fees” calculated on both total and permanent disability and medical benefits that aren’t being paid. We caution our readers in the claims, broker and risk industry—if you don’t truly understand this outcome, don’t feel too bad. It is a very narrow set of facts that might lead to this outcome. Send a reply if you want more information or background on it.
So Every Time Claimant Bayer Gets Some Aspirin, Does His Former Employer Have to Give This Non-Lawyer 25% Of The Cost As “Legal Fees?”
There is a practical problem of calculating the amount owed on future medical bills. The practical difficulty of computing future bills, standing alone, does not form a basis for relieving the employer of its obligation to pay a portion of the fee to the attorneys whose efforts directly benefited the employer.
In this case, Claimant’s counsel now need to compile and present the medical expenses incurred by Claimant since 2013, when the employer ceased paying attorney’s fees on the medical bills. Claimant Bayer may be entitled to receive “attorney’s fees” in the amount of 25% of those bills. We assume the WC carrier may contend its liability would be limited to 25% of its negotiated rate with the providers, or in the absence of a negotiated rate, then the lesser of the actual charges or the IL WC Medical Fee Schedule amount. We do see the potential for Section 8A Petitions to be filed to battle over such costs.
We are finally advised the IL WC case technically remains open. The prior Section 5(b) lien has been paid, subject to the 25% collection fee and the employer’s pro rata share of litigation costs. Benefits have been suspended due to the third-party recovery, but the WC carrier continues to pay 25% of the amount owed for PTD each week. We are told that money is being remitted directly to Claimant Bayer. We will let the accountants among our readers decide whether such payments of what are supposed to be “attorney’s fees” comprise a gift from his law firm to Plaintiff who isn’t an attorney.
We appreciate your thoughts and comments. Please post them on our award-winning blog.
-------------------------------------------------
Synopsis: IL Supreme Court Knocks Out IL Law Allowing for Six-Person Juries.
Editor’s comment: Starting on June 1, 2015, all civil cases in Illinois were to be tried by a jury of six, halving the longstanding tradition of deciding civil lawsuits with a twelve-person jury. Criminal trials were still to be decided by a jury of twelve.
Senate Bill 307 (SB 307), later Public Act 98-1132 cut the number of jurors in all civil cases from twelve to six and increased the minimum payment for jury service to $25 for the first day and $50 for each subsequent day. Reaction to the new law was mixed, with approval split along party lines–and between the plaintiff and defense bar. The new law was widely supported by the Illinois Association of Trial Lawyers who claim the change will result in reduced costs and time savings to litigants and increased courtroom efficiency, all while encouraging jury service by increasing jury pay. Critics argued the perceived benefits were minimal – particularly in light of the trade off in halving the numbers in a civil defendant’s “jury of their peers.” However, the six-person rule was not unprecedented, with federal courts and many states employing six-person juries in civil matters.
As a populist measure, most agree the $17.20 paycheck Cook County jurors (jurors in other counties receive even less) receive for each day of service does little to offset the lost time and inconvenience of appearing for jury duty. But the question remains was the new provision of $25 per day for the first day and $50 per day if selected to sit on the jury really a fair measure of jurors’ time and service? Probably not. The pay raise was definitely an improvement, but the people who complain that they cannot afford the lost time of jury service were not likely to be swayed by the small increase.
Critics of the change also questioned whether the new law saved court time and costs. Criminal trials are still tried by a jury of twelve. By the time a significant civil case reached trial, the court time saved in selecting six jurors instead of twelve is unlikely to be significant to most litigants, particularly defendants who are losing the opportunity to present their case to an additional six people. Others claim the new law resulted in a lack of diversity of backgrounds and viewpoints on the jury. Conventional wisdom suggests larger juries tend to moderate the size of jury awards. A smaller jury is more likely to be dominated by a strong personality, whereas there is more room for debate in a larger group where it is less likely that a single juror or small faction will control the discussion. Across the board, it is easier for a plaintiff to convince a jury of six than a jury of twelve.
Now, in Kakos v. Butler, our highest court unanimously affirmed Judge Gomolinski’s judgment in the Circuit Court confirming the 6-person jury limit established by Public Act 98-1132 is facially unconstitutional. Supreme Court Chief Justice Rita Garman wrote for the Supreme Court.
The law eliminated the right of either litigant to request a jury of 12 members and provided instead “all jury cases shall be tried by a jury of 6.” The Act also established a uniform rate of pay for jury service at $25 for the first day and $50 per day thereafter. Because the Circuit Court judge found the Act to be unconstitutional, Plaintiffs were able to avoid the Appellate Court level and took a direct appeal to the Supreme Court as a matter of right pursuant to Supreme Court Rule 302(a).
The Supreme Court first explained it applied a limited lockstep approach when interpreting cognate provisions of the state and federal constitutions. Caution was appropriately taken because the Supreme Court of the United States held the amendments contained in the Bill of Rights do not require 12-person juries. The IL Supreme Court found the distinction the Illinois Constitution revealed an intent on the part of the drafters to maintain common-law characteristics of jury trials. Accordingly, a different construction of the Illinois Constitution, as opposed to the rights protected by the U.S. Constitution, is appropriate.
The Court then noted a long history in Illinois describing juries of consisting of 12 men. The Court ruling took note of the respective arguments of both Plaintiffs and Defendants as to whether the size of a jury affects the performance of juries, commenting both positions have some merit. However, “our task is limited to determining whether the challenged legislation is constitutional, and not whether it is wise.” The Court found ample evidence the drafters of the 1970 Constitutional Convention believed they were specifically preserving the right to a 12-person jury. A proposal to the contrary was not adopted by the Convention.
The Court distinguished its opinion in 1939 which held women, as opposed to just men, could serve on juries. Among other distinctions, the Court stated the sex of a juror is a matter of juror qualification, and not an essential element of the right of trial by jury. The court concluded the 12-person size of a jury was an essential element of the right of trial by jury enjoyed at the time the 1970 IL Constitution was drafted, the right was protected in the Constitution, and therefore the Act was unconstitutional.
The Court further ruled the companion provision for increasing the pay of jurors was not severable from the unconstitutional portion of the Act, and therefore it was found to be invalid as well. It was clear to the Court the legislation was intended to make jury trials more efficient and to encourage citizens to participate in jury duty. If the increased pay scale alone survived, the cost of jury trials throughout the state would dramatically increase.
Like the issue of fake government pensions that our state can’t afford, a concept like this has to be brought up in a “Con-Con” or constitutional convention. Our problem with suggesting such a convention be conducted in this state is IL House Speaker Michael Madigan and Chicago Finance Chairman Ed Burke are still in dominant power so any actions to make significant and cost-saving reforms might be impossible.
We appreciate your thoughts and comments. Please post them on our award-winning blog.