Opinion
W.C. No. 3-968-056
April 30, 1996
FINAL ORDER
The claimant, by and through her attorney, Suzanne Harvey Lynch (Lynch), and Lynch individually, seek review of the Corrected Orders of Administrative Law Judge Friend (ALJ) dated June 20, 1995 and August 15, 1995. We affirm the June 20, 1995 order and set aside the August 15, 1995 order.
The claimant suffered a compensable injury on November 10, 1989. In 1992, while represented by attorney Marshall A. Fogel (Fogel), the claimant entered into a full and final settlement of the injury claim.
The claimant was subsequently represented by Lynch. In 1994, the claimant petitioned to reopen the claim on the grounds of error or fraud. The claimant also sought to recovery the attorney fees she previously paid to Fogel.
On June 12, 1995, the ALJ issued an order which denied the petition to reopen and the claimant's request to recover the attorney fees paid to Fogel. The ALJ issued a Corrected Order on June 20, 1995, which the claimant timely appealed.
In addition, counsel for Albertson's Inc. (Albertson's) filed a motion contending that claimant's petition to reopen lacked substantial justification, and requested an order assessing attorney fees against Lynch under § 8-43-216(1), C.R.S. (1995 Cum. Supp.). In response, Lynch argued, inter alia, that § 8-43-216(1) is not applicable to this claim. However, in an order dated July 25, 1995, the ALJ rejected Lynch's argument and granted Albertson's motion for attorney fees. The order was corrected on August 15, 1995. Lynch timely appealed that order.
I.
On appeal, Lynch reasserts, inter alia, her contention that § 8-43-216(1) does not apply to this claim. We agree, and therefore, set aside the ALJ's August 15 order.
Section 8-43-216(1) authorizes the ALJ to award costs and attorney fees "on and after January 1, 1992, in any claim for compensation" where an attorney pursues a claim that "lacks substantial justification." Section 8-43-216(1) was enacted as part of Senate Bill 91-218 (SB 218). 1991 Colo. Sess. Laws, ch. 219 at 1321. The legislature expressly directed that the provisions of SB 218 "take effect July 1, 1991, and shall apply to injuries occurring on or after said date." 1991 Colo. Sess. Laws, ch. 219, § 61 at 1342.
Section 61 of SB 218 does not contain any exception to the directive that SB 218 applies only to "injuries" occurring on or after July 1, 1991. Thus, the courts have consistently declined to apply the provisions of SB 218, including those governing attorney fees, to claims where the injury occurred prior to July 1, 1991. Golden Animal Hospital v. Horton, 897 P.2d 833 (Colo. 1995); Hrabczuk v. John Lucas Landscaping, 888 P.2d 367 (Colo.App. 1994); Martinez v. Regional Transportation District, 832 P.2d 1060 (Colo.App. 1992). Therefore, the ALJ lacked jurisdiction to assess attorney fees against Lynch under § 8-43-216(1).
Further, we believe that the phrase "on and after January 1, 1992" refers to the date ALJ may begin to award costs and attorney fees in claims arising on or after July 1, 1991. Thus, the statute includes a "grace period" before a SB 218 claim is subject to the assessment of attorney fees. Renz v. Larimer County School District Poudre R-1, W.C. No. 2-986-485, January 5, 1996; Adams v. Neoplan U.S.A. Corporation, W.C. 4-016-717, September 14, 1992, rev'd on other grounds Adams v. Neoplan U.S.A. Corp., 881 P.2d 373 (Colo.App. 1993).
Moreover, we reject Albertson's argument that § 8-43-216(1) is "procedural" and therefore, applicable to the 1995 hearing of the claimant's petition to reopen. Notwithstanding Albertson's arguments, § 8-43-216(1) creates a substantive right to recover costs and attorney fees which did not exist under the Workers' Compensation Act (Act) prior to SB 218. See Rosa v. Industrial Claim Appeals Office, 885 P.2d 331 (Colo.App. 1994); cf. Colorado Compensation Ins. Authority v. Industrial Claim Appeals Office, 907 P.2d 676 (Colo.App. 1995) cert. denied December 4, 1995 (statutory right to penalties is a substantive right). Therefore, we conclude that § 8-43-216(1) is "substantive" and not "procedural."
II. A
Next, we address the ALJ's June 20 order which, in part, denied the claimant's petition to reopen. The claimant does not contest the ALJ's failure to reopen the claim on the grounds of "error" or "mistake." Rather, the claimant argues that the ALJ should have reopened the claim on the ground of "fraud."
The claimant's argument is based upon the evidence that Fogel did not "personally" review the terms of the settlement with the claimant as indicated and certified in the "Full and Final Settlement Agreement." The claimant argues that in so doing, Fogel "perpetrated a fraud on the Division" and violated § 8-43-204 C.R.S. (1995 Cum. Supp.), which requires that the settlement be "reviewed in person with the injured employee." We reject the claimant's arguments.
"Fraud" exists when there has been a false representation of a material fact, or the representation of a material existing fact with reckless disregard of its falsity, or the concealment of a material fact which in equity and good conscience should have been disclosed. Morrison v. Goodspeed, 100 Colo. 470, 68 P.2d 458 (1937). Because the existence of fraud is factual in nature, we must uphold the ALJ's determination if supported by substantial evidence in the record. Section 8-43-301(8), C.R.S. (1995 Cum. Supp.).
The ALJ found that the written settlement agreement was read to the claimant by Fogel's paralegal and that even though the claimant did not meet with Fogel on the day she signed the settlement, Fogel was available to answer questions the claimant may have had concerning the written agreement. The ALJ further found that on several occasions Fogel personally reviewed with the claimant what the terms of the settlement would be. Consequently, the ALJ determined that Fogel's signed certification on the Full and Final Settlement Agreement was substantially correct.
The ALJ's findings are supported by substantial evidence in the record. Therefore, we must uphold the ALJ's determination that Fogel did not perpetrate a fraud.
Furthermore, where the claimant seeks to reopen the claim based upon "fraud," the pertinent issue is whether the claimant relied upon false representations by the respondents to settle the claim. See 3 A. Larson, Workmens Compensation Law, § 81.51(b), pp. 15-1132, 1133 (1995); see also American Fence Co. v. Industrial Commission, 123 Ariz. 45, 597 P.2d 198 (Ct.App. 1979) (claimant's misunderstanding of effect of waiver signed on advice of counsel was a matter between the claimant and counsel, and was not due to any fraud by the insurance carrier). At the hearing the claimant conceded that she was not alleging any fraud by Albertson's. Consequently, the ALJ did not err in failing to reopen the claim on the ground of "fraud."
B
In denying the claimant's request to recover attorney fees from Fogel, the ALJ made the following factual determinations. There was no written contingent fee agreement between Fogel and the claimant. However, there was a "meeting of the minds" for an oral contract which provided that Fogel would receive a contingent fee equal to twenty percent of the benefits recovered. Furthermore, Fogel represented the claimant for two years, and negotiated the settlement which the claimant accepted.
Based upon these findings, the ALJ determined that Fogel is entitled to a contingent fee. The ALJ also determined that the twenty percent fee was reasonable.
On appeal the claimant contends that oral contingent fee agreements are unenforceable, and therefore argues that the ALJ erred insofar as he concluded that Fogel is entitled to attorney fees based upon a contingent fee agreement. We agree.
Initially, we note that § 8-43-403, C.R.S. (1995 Cum. Supp.), which addresses contingent fee agreements in workers' compensation cases, was enacted as part of SB 218. Therefore, the statute does not govern this claim.
Rather, as argued by the claimant, the law which existed prior to the enactment of SB 218 requires that all contingent fee agreements be in writing, and signed by the client and the attorney. C.R.C.P. Rules Governing Contingent Fee Agreements, ch. 23.3, Rules 1 and 2. Further, Rule 6 of the Rules Governing Contingent Fee Agreements provides that "no contingent fee agreement shall be enforceable" unless there has been "substantial compliance" with Rules 1 and 2. Elliott v. Joyce, 889 P.2d 43 (Colo. 1994).
Here, Fogel admitted, and the ALJ found, that there was no written fee agreement with the claimant. (Tr. April 3, 1995, pp. 37, 58). Consequently, insofar as the ALJ's order was based upon the enforcement of an "oral" contract for the payment of a contingent fee, he erred.
However, in the absence an express fee agreement, an attorney may recover attorney fees on a theory of quantum meruit. Elliott v. Joyce, 889 P.2d at 45; Murdock v. Cohen, 762 P.2d 691 (Colo.App. 1988). Contrary to the claimant's argument, Elliott v. Joyce, supra, does not stand for the proposition that there must be a written fee agreement to recover on the theory of quantum meruit. Rather, Joyce held that attorney fees cannot be recovered on the theory of quantum meruit if there is a written contingent fee agreement which does not contain specific language obligating the client to pay attorney fees upon contingencies other than those expressed listed in the agreement.
To recover attorney fees under a theory of quantum meruit, the attorney must establish a benefit conferred on the client, and that the benefit was appreciated by the client. Losavio v. McDivitt, 865 P.2d 934 (Colo.App. 1993); Murdock v. Cohen, supra. Once the attorney sustains his burden to prove the elements of a claim under the theory of quantum meruit, the ALJ may award fees based upon the "reasonable value of an attorney's services." Losavio v. McDivitt, 865 P.2d at 936. Several factors are pertinent in this determination, including but not limited to the time and labor involved, the results obtained, the nature and the length of the professional relationship with the client. Losavio v. McDivitt, 865 P.2d at 937.
Notwithstanding the claimant's argument to the contrary, the record indicates that the attorney fee issue was litigated on a theory of quantum meruit. (Tr. April 3, 1995, pp. 81, 86). Consequently, we reject the claimant's contention that the ALJ was precluded from applying a quantum meruit analysis to the attorney fee dispute.
Here, Fogel testified that he spent over 45 hours on the claimant's case and his hourly rate is $175. (Tr. April 3, 1995, pp. 79, 81). Further, there is substantial evidence to support the ALJ's finding that Fogel represented the claimant for over two years and negotiated the settlement that the claimant ultimately accepted.
Under these circumstances, we are bound by the ALJ's factual determination that a fee equal to twenty percent of the aggregate permanent disability benefits paid to the claimant reflects the reasonable value of Fogel's services to the claimant. Consequently, we have no basis to interfere with the ALJ's order denying the claimant's request to recover the previously paid fees.
The claimant's remaining arguments to the contrary have been considered and are unpersuasive.
IT IS THEREFORE ORDERED that the ALJ's order dated June 20, 1995 is affirmed.
IT IS FURTHER ORDERED that the ALJ's order dated July 25, 1995, and corrected order dated August 15, 1995, are set aside.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ Kathy E. Dean
____________________________________ Bill WhitacreNOTICE
This Order is final unless an action to modify or vacate this Order is commenced in the Colorado Court of Appeals, 2 East 14th Avenue, Denver, CO 80203, by filing a petition for review with the court, with service of a copy of the petition upon the Industrial Claim Appeals Office and all other parties, within twenty (20) days after the date this Order is mailed, pursuant to section 8-43-301(10) and 307, C.R.S. (1995 Cum. Supp.).
Copies of this decision were mailed April 30, 1996 to the following parties:
Alev Beeson, 6760 S. Downing Cir. W., Littleton, CO 80122-1341
Albertson's, Inc., Scott Wetzel Services, P.O. Box 6578, Englewood, CO 80111
Suzanne Harvey Lynch, Esq., 3515 S. Tamarac Drive, Ste. 200, Denver, CO 80237
(For the Claimant and pro se)
Mark H. Dumm, Esq., 3900 E. Mexico Ave., Ste. 1000, Denver, CO 80210 (For Albertson's)
Marshall Fogel, Esq., 1199 Bannock St., Denver, CO 80204
By: _______________________