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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. State v. Cowgill (06/24/2005) sp-5913

State v. Cowgill (06/24/2005) sp-5913

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STATE OF ALASKA,              		)
DEPARTMENT OF REVENUE,   	)    Supreme Court No. S-11337
          Appellant,               		)    Superior Court No. 3AN-03-4312 CI
     v.                       			)
                              			)    O P I N I O N
WORKERS COMPENSATION,    	)    [No. 5913 - June 24, 2005]
BOARD,                        		)
          Appellees.               		)


          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, Joel H. Bolger, Judge.

          Appearances:    Rebecca   Hiatt,    Assistant
          Attorney  General, Anchorage,  and  Gregg  D.
          Renkes,   Attorney   General,   Juneau,   for
          Appellant.  Joseph A. Kalamarides and Rebecca
          Patterson,  Kalamarides & Lambert, Anchorage,
          for Appellee Pat M. Cowgill.

          Before:   Bryner,  Chief  Justice,  Matthews,
          Eastaugh, Fabe, and Carpeneti, Justices.

          EASTAUGH, Justice.


          The  State  of  Alaska appeals from the Alaska  Workers

Compensation Boards award of attorneys fees to the claimant,  Pat

Cowgill.   The  state argues that the amount  of  the  award  was

unreasonable,  that  the board failed to make adequate  findings,

and  that it abused its discretion.  The state also requests that

we revisit our previous cases dealing with the boards application

of the contingency factor in awarding fees.

          We  conclude  that  the fee award  was  not  manifestly

unreasonable, that the board made adequate findings, and that  it

did not abuse its discretion.  We also see no need to revisit our

prior holdings in this area.


          Pat  Cowgill  worked  for the  State  of  Alaska.   She

applied  for  workers compensation benefits after developing  arm

pain  she  attributed  to  her workstation.   The  state  opposed

awarding her permanent partial impairment (PPI) benefits; Cowgill

hired  attorney  Joseph  Kalamarides  to  represent  her.   After

finding  in  favor  of  Cowgill  on  her  PPI  claim,  the  board

considered Cowgills request for an award of attorneys fees  based

on  a rate of $250 per hour.  It concluded that $240 per hour was

a  reasonable  rate under AS 23.30.145(b).1  The  state  appealed

and,   following  remand  from  the  superior  court,  the  board

concluded that the same rate applied under AS 23.30.145(a).2  The

board  relied on several factors in explaining its reasonableness

determination,  including the contingent nature  of  representing

workers   compensation  claimants.   The  superior  court   again

reviewed  the boards decision and this time held that the  boards

$240-per-hour award was not manifestly unreasonable.   The  state



     A.   Standard of Review

          When  the superior court acts as an intermediate  court

of  appeal  in an administrative matter, we independently  review

and  directly scrutinize the merits of the boards decision.3  And

[u]nless statutory interpretation is required, we review an award

of  attorneys  fees  by the board under the abuse  of  discretion

standard.  The award of attorneys fees should be upheld unless it

is manifestly unreasonable. 4

     B.   The Fee Award Was Not Manifestly Unreasonable.

          The state relies on two contentions in arguing that the

          boards award was unreasonable.  First, according to the state,

the  rates charged by workers compensation defense counsel should

have  served as the starting point for the board when determining

Cowgills fee award because they reflect the market rate or normal

rate.   Second,  the state claims that the boards enhancement  of

this  normal rate is not justifiable in light of the actual  rate

of  non-payment of claimants attorneys coupled with the potential

for overpayment.  We will discuss each contention in turn.

          1.   Defense counsel rates

          Fees payable to an employees lawyer must be approved by

the  board.5  The state therefore argues that [t]he hourly  rates

of the equivalently experienced defense counsel are virtually the

only  normal  or  market rates available in workers  compensation

proceedings.   The  state  presented expert  testimony  that  the

highest  rates  for defense attorneys during the  relevant  times

ranged  from  $165  to $180 per hour. Because the  board  awarded

Cowgills  attorney  $240 per hour, the state  suggests  that  the

board  must have augment[ed] the  normal hourly rate by at  least

thirty-three percent.

          In  Wise  Mechanical Contractors v. Bignell we observed

that  the  objective in workers compensation  cases  is  to  make

attorney  fee  awards both fully compensatory and  reasonable  so

that  competent  counsel  will  be  available  to  furnish  legal

services  to  injured  workers.6   The  state  misreads  Wise  by

reasoning  that fully compensatory and reasonable  fees  must  be

equated with placing employees attorneys on an even footing  with

the employers attorneys defending the claims.  Wise discussed the

difference  between contingency fee arrangements and various  law

practice areas where a steady hourly fee is available and how the

contingency  factor can reduce the disincentive for attorneys  to

represent   claimants.7   It  referred  to  workers  compensation

defense  as an example of an hourly fee practice, not as  a  yard

stick  for  measuring claimants attorneys fees.8  Therefore,  the

states premise that awards of attorneys fees to employees lawyers

          must be comparable to the fees charged by lawyers for employers

rests on a flawed interpretation of Wise.

          We  have  previously  observed an important  difference

between  employees  lawyers  and  employers  lawyers  in  workers

compensation practice; namely, that employers attorneys are  paid

whether they win or lose, while employees attorneys fees are,  by

statute, contingent upon success.9  Two of the states own  expert

witnesses  reiterated this distinction.  In addition, one  expert

agreed  that  employers negotiate contracts with  defense  firms,

whose  lawyers know in advance how much they will be paid whether

their  clients  win  or lose.10  There is also competition  among

potential suppliers of legal services to employers,11 a situation

that  has  no clear analogy with respect to employees  attorneys.

These  differences work to drive defense counsel  rates  downward

and  militate  against  using defense rates  as  a  benchmark  in

awarding fees to employees attorneys.

          2.   Negative contingency evidence

          The  state  argues that the actual negative contingency

how  often  claimants lawyers receive no compensation  is  small.

The states expert witnesses testified that the actual rate of non-

payment for claimants attorneys is six percent or less. The state

posits  that this testimony indicates that the contingency factor

is  unnecessary because the small actual negative contingency  is

offset  by positive contingenc[ies] (the possibility that counsel

is overcompensated in some cases).

          But  we  agree  with  the boards observation  that  the

states   negative   contingency  evidence   is   incomplete   and

unpersuasive.    Most  notably,  the  testimony  only   concerned

instances  in which claimants attorneys receive no fee at  all.12

The  testimony  failed to take into account situations  in  which

claimants   attorneys  receive  partial  awards   that   may   be

dramatically lower than if the attorneys were compensated  on  an

hourly basis.  The negative contingency evidence proffered by the

state  does  not provide an adequate picture of claimant  counsel

          compensation and the board did not err in disregarding it.13

          3.   Positive contingency evidence

          The  state  also  argues  that  the  mandatory  minimum

attorneys  fee  provision  contained  in  AS  23.30.145(a)14  can

overshadow  the  risks  of underpayment presented  by  contingent

representation  of  workers  compensation  claimants.   Attorneys

could  in theory be overcompensated if the time and effort  spent

do  not  justify the minimum fee, a possible phenomenon  that  we

have noted in the past.15  The state argues that the board failed

to   adequately   consider   the   impact   of   these   positive

contingenc[ies] potentially arising from the minimum fee statute.

          Wise  held that the contingency factor was a legitimate

consideration  for the board, and noted that employees  attorneys

need  to  earn more than a normal hourly fee on successful  cases

because  they  receive  nothing on  unsuccessful  cases.16   This

recognizes the general nature of a contingency fee practice; that

is,   fees  from  successful  cases  ideally  serve  as  a  rough

counterbalance to unpaid time spent on unsuccessful  cases.   But

Wise  did  not suggest that the board should compare an attorneys

income from workers compensation cases with the hours expended to

determine  whether  there  is  a net  loss  before  applying  the

contingency  factor.   The  states argument  lacks  statutory  or

precedential support and appears unworkable on a practical level.

Under  the  states  proposed framework, every  time  an  attorney

requested  fees,  the board would have to hold an  individualized

hearing in an attempt to determine whether that attorney had been

overcompensated  in some cases and whether that surplus  eclipsed

the  efforts  that had gone uncompensated.  We see  no  statutory

basis for requiring the board to undertake this inquiry.

     C.   The Boards Findings Were Legally Sufficient.

          The  state  argues that the board failed to  adequately

describe  the  factors that it did, and did  not,  rely  upon  in

fashioning its enhanced hourly rate, and urges us to remand.  The

state  contends  that the board failed to consider  and  document

          material issues, including the yearly normal rates as well as the

impact  of  minimum percentage fees exceeding  those  based  upon

hourly rates.

          We have stated that [t]he Board need only make findings

with  respect  to  issues that are both material  and  contested.

When  the Board fails to make a necessary finding, we cannot fill

the  gap by making our own determination from the record; we must

remand to the Board.17  In Pioneer Construction v. Conlon, relied

upon by the state, we vacated an attorneys fee award because  the

lower court failed to explain its reasons for making the award.18

The  lower court had merely stated that [the employer] was to pay

[the claimant] $2,917.50 in attorney fees . . . .19  We noted that

[a]ppellate  review is facilitated by demonstrating what  factors

were  considered,  careful decision making is promoted,  and  the

parties are aided in their determination as to whether to appeal.20

          Unlike the situation in Pioneer, the board in this case

explained  its  reasons for the attorneys fee award.   The  board

explained that the

          claim   was  vigorously  litigated  by   very
          competent  counsel.  The range  of  litigated
          benefits  to  the  employees was  significant
          (between   $0.00   and  $24,300.00   in   PPI
          benefits)  .  .  . .  [W]e find  the  medical
          evidence was fairly complex.  Last,  we  find
          the    employer   raised   unique   arguments
          regarding   attorneys  fees,  not  previously
The  board  also pointed to the contingent nature of representing

claimants in workers compensation cases and to the experience and

expertise of Cowgills lawyer.  That the board declined to address

explicitly   the  states  normal  fee  and  positive  contingency

theories  does  not render the findings inadequate.   The  boards

implicit  rejection  of these theories is acceptable  because  it

adequately  articulated its justifications  for  the  fee  award.

And,  in  any case, our ruling today makes immaterial the  states

normal fee and positive contingency arguments.  We conclude  that

the boards findings were legally sufficient.

     D.    The Board Did Not Abuse Its Discretion by Applying the
Contingency         Factor.

          The  state  argues that the board abused its discretion

by  relying on contingency as a factor in its attorneys fee award

because  it  made  no  attempt  to  explain  the  scope  of   the

contingencies  [it]  found,  made no  references  to  any  record

evidence supporting such findings, and extended no opportunity to

address  them.   Moreover,  the  state  contends  that  [i]t   is

manifestly unreasonable to require the State to pay enhanced fees

based  on  no more than a presumption.  But there is no  evidence

that  the  fee was enhanced as the state contends.   Rather,  the

contingent nature of representing workers compensation  claimants

was  one  factor among many relied upon by the board. We conclude

that  the board permissibly exercised its expertise and therefore

did not abuse its discretion.

     E.   We See No Reason To Revisit Wise.

          The  state asks us to revisit [our] decisions  in  Wise

forward  and  [to]  clarify  the scope  and  application  of  the

contingency  factor, [including] whether the  contingency  factor

may  be  offset  by overcompensation elsewhere, or  whether  that

factor should be eliminated from consideration under AS 23.30.145

fee  awards.   Alternatively, the state essentially advocates  an

individualized   inquiry   into  the   need   for   []   enhanced

compensation.   We  see  no  reason  or  need  to   clarify   the

permissible use of the contingency factor, aside from reiterating

that it is an appropriate factor on which the board may rely.  We

also  conclude that an individualized inquiry is neither required

by law nor desirable in practice.


          Because   the  boards  attorneys  fee  award  was   not

manifestly  unreasonable  and because the  boards  findings  were

sufficient, we AFFIRM the superior courts judgment affirming  the

boards award.

     1    AS 23.30.145(b) provides that a reasonable attorney fee
may  be  awarded [i]f an employer fails to file timely notice  of
controversy  or fails to pay compensation or medical and  related
benefits within 15 days after it becomes due or otherwise resists
the payment of compensation or medical and related benefits.

     2     AS  23.30.145(a) addresses [f]ees for  legal  services
rendered in respect to a claim and directs that such fees are not
valid  unless approved by the board.  It also provides that  [i]n
determining  the  amount  of  fees  the  board  shall  take  into
consideration the nature, length, and complexity of the  services
performed,  transportation charges, and  the  benefits  resulting
from the services to the compensation beneficiaries.

     3    Williams v. Abood, 53 P.3d 134, 139 (Alaska 2002).

     4     Id. (quoting Bouse v. Firemans Fund Ins. Co., 932 P.2d
222, 241 (Alaska 1997)).

     5    AS 23.30.145(a).

     6     Wise  Mech. Contractors v. Bignell, 718 P.2d 971,  973
(Alaska  1986) (emphasis added).  See also Cortay v.  Silver  Bay
Logging, 787 P.2d 103, 108-09 (Alaska 1990).

     7    We reasoned in Wise that

          [i]f  an  attorney  who represents  claimants
          makes  nothing on his unsuccessful cases  and
          no  more  than  a normal hourly  fee  in  his
          successful  cases, he is in a poor  business.
          He  would be better off moving to the defense
          side  of the compensation hearing room  where
          attorneys receive an hourly fee, win or lose,
          or  pursuing  any  of the other  various  law
          practice areas where a steady hourly  fee  is
          available.   As we have noted, the  objective
          of  awarding  attorneys fees in  compensation
          cases is to ensure that competent counsel are
          available to represent injured workers.  This
          objective would not be furthered by a  system
          in  which  claimants  counsel  could  receive
          nothing more than an hourly fee when they win
          while  receiving  nothing at  all  when  they
Wise, 718 P.2d at 975 (citation omitted).

     8    Id.

     9    Id. (citing AS 23.30.145(a)).

     10    The employer in this case, the state, uses salaried in-
house lawyers rather than contracting with private firms.

     11     See  Arthur  Larson  &  Lex Larson,  Larsons  Workers
Compensation   Law   133.09,  at  133-41  (2004)  (referring   to
employers  attorneys ever-present concern that,  if  his  or  her
charges get out of line, the [client] will take away its business

     12     One  witness was asked to estimate the percentage  of
resolved cases that [do] not involve the payment of fees  by  the
employer,  another  testified about the percentage  of  claimants
attorneys who never receive anything, and the third expressed  an
opinion  that ninety-five percent of the time claimants attorneys
are paid some fee.

     13      The   board   concluded:  Regarding  the   employers
contingency argument, we find that the statistics relied on  d[o]
not  include  cases  where  a claimants  counsel  withdraws  from
claims.   Furthermore, the statistics and evidence do not reflect
how  much  of an attorneys fee may be compromised in a settlement

     14      AS  23.30.145(a)  provides  in  relevant  part  that
attorneys  fees  may  not be less than 25 percent  on  the  first
$1,000   of   compensation  or  part  of  the  first  $1,000   of
compensation, and 10 percent of all sums in excess of  $1,000  of

     15     Wien  Air Alaska v. Arant, 592 P.2d 352, 366  (Alaska
1979)  (suggesting  that [t]he legislature may  wish  to  examine
whether  the  formula  in AS 23.30.145(a)  sometimes  results  in
excessive fee awards, awards higher than are necessary to attract
counsel into the compensation area).

     16     Wise Mech. Contractors v. Bignell, 718 P.2d 971,  975
(Alaska 1986).

     17     Bolieu v. Our Lady of Compassion Care Ctr., 983  P.2d
1270, 1275 (Alaska 1999).

     18     Pioneer Constr. v. Conlon, 780 P.2d 995, 1001 (Alaska

     19    Id. at 1000.

     20     Id.  at 1001.  See also Stephens v. ITT/Felec Servs.,
915  P.2d  620,  629 (Alaska 1996) (Matthews, J.,  dissenting  in
part)  (Findings are adequate when, at a minimum, they show  that
the  Board considered each issue of significance, demonstrate the
basis  for the Boards decision, and are sufficiently detailed  so
that they afford an opportunity for meaningful judicial review.).