Staley v. Board of Education

COUCH, Judge. We are here concerned with the obligation of an employer and its insurer to pay legal fees to a claimant’s attorney under the Workmen’s Compensation statute. ⁴⁴ I The facts in this case are not in dispute. Joy M. Renehan Staley, the appellant (claimant), was a school teacher employed by the Board of Education of Washington County. During the course of her employment, she fractured her hip.

The Workmen’s Compensation Commission (Commission) concluded that she had suffered a permanent partial disability amounting to fifty percent industrial loss of the use of her body as a result of the injury. Accordingly, the Commission ordered the Board of Education, the employer, and the Twin City Fire Insurance Company, the insurer, 1 to pay her disability benefits of $166.00 per week for 333 weeks, a total of $55,278.00, beginning August 16, 1982. The employer and the insurer appealed the award to the Circuit Court for Washington County. After a de novo bench trial, the court determined that the Commission had erred, and that the claimant actually suffered permanent partial disability amounting to thirty-five percent industrial loss of the use of her body.

The claimant’s award was modified to reflect this new finding. Benefits were reduced to a rate of $83.00 per week for 175 weeks, a total of $14,525.00, beginning August 16, 1982. During the pendency of the circuit court appeal, the appellees continued to pay compensation benefits to the claimant at the original rate of $166.00 per week as obligated by law. By the time the claimant’s award was modified, the appellees had already paid her a total of $23,900.68, which exceeded the amount due her under the Commission’s modified award by $9,375.68. 2 It was also during the pendency of the appeal, February 16, 1984, that the claimant’s attorney, William C. Wantz, ⁴⁵ filed a legal fee petition with the Commission.

The petition was subsequently approved in the amount of $6,100.00. When the claimant’s disability award was subsequently modified, Mr. Wantz filed a revised petition for attorney’s fees, which the Commission approved on February 7, 1985 in the reduced amount of $3,255.00. Both orders specified that the legal fees were to be paid from the final weeks of compensation due the claimant. The appellees did not file an appeal from either of these orders.

When claimant’s attorney did not receive payment from the appellees, he filed issues with the Commission in an attempt to require appellees to pay the fee awarded. In an order dated May 23, 1985, the Commission again found Mr. Wantz to be entitled to counsel fees as set forth in its previous modified fee order of February 7. Appellees appealed this order to the Circuit Court for Washington County. Pursuant to an order granting leave to intervene, claimant’s attorney, pro se, filed a complaint against appellees seeking enforcement of the fee order.

The circuit court entered judgment in favor of claimant’s attorney and ordered the appellees to pay the fee. The appellees then filed an appeal with the Court of Special Appeals, which reversed the judgment of the circuit court. We issued a writ of certiorari to review the decision of the intermediate appellate court. The issue before us is whether the appellees must pay $3,255.00 in legal fees to the claimant’s attorney even though the amount already paid to the claimant exceeded the total sum due her under the modified award.

Reversing the circuit court, the Court of Special Appeals concluded that the appellees were under no such obligation. 66 Md. App. 390 , 504 A.2d 653 (1986). We now reverse the judgment of that court. II Our analysis begins with Maryland Code (1957, 1985 RepLVol.), Art. 101, § 57, which provides in part: ⁴⁶ “No person shall charge or collect any compensation for legal fees in connection with any claims arising under this article, or for services or treatment rendered or supplies furnished pursuant to § 37 of this article, unless the same be approved by the Commission. When so approved, such fee or claims shall become a lien upon the compensation awarded, but shall be paid therefrom only in the manner fixed by the Commission.” Section 57 represents a comprehensive scheme by which an award of attorney’s fees is to be regulated.

As we noted in Chanticleer Skyline Room, Inc. v. Greer, 271 Md. 693, 699-700 , 319 A.2d 802, 805 (1974), this provision safeguards competing interests. By providing the Commission with the power to regulate the amount of remuneration an attorney should receive, the provision “acts to prohibit the dissipation of an employee’s compensation through the payment of excess legal fees out of the award.” Id. at 699 , 319 A.2d at 805 . On the other hand, in light of this legislative intrusion into the attorney-client relationship, this section protects a claimant’s counsel by imposing a charging lien 3 for his benefit on the compensation awarded the employee in the amount of the fee. Id. at 700 , 319 A.2d at 805 .

See Feissner v. Prince George’s County, 282 Md. 413, 418 , 384 A.2d 742, 746 (1978). We have had occasion to discuss in some detail the nature and operation of this attorney fee system. In Feissner, 282 Md. at 418 , 384 A.2d at 745 , we noted that section 57 does not treat attorney’s fees as an “add on” or “double” benefit, which the injured employee is entitled to receive from his employer in addition to the compensation award itself. The employee receives only one award from which his legal fees are to be paid.

We said: “[T]he payment of legal fees does not become an independent obligation of the employer or his insurer, but instead ⁴⁷ remains at all times the personal responsibility of the claimant. Thus legal fees are not among the enumerated benefits available to the claimant from his employer under the workmen's compensation laws of this state.” Id. In order to ensure payment of such fees, section 57 provides the attorney with a lien upon the compensation award in an amount equal to the fee approved by the Commission. Chanticleer, 271 Md. at 700 , 319 A.2d at 805 .

This charging lien places a charge upon the award as security for the debt owed to the attorney by the claimant. Id. at 701 , 319 A.2d at 806 . In order to effectuate the operation of the attorney’s lien, the Workmen’s Compensation Commission has promulgated Rule 21F: 4 “The filing of a petition for a fee with the Commission and service of a copy on the employer and insurer, self-insurer, or the State Accident Fund, as the case may be, shall be notice to the employer and insurer, self-insurer, or the State Accident Fund, to reserve in escrow the amount of fee requested in the petition until a fee is approved by the Commission.” COMAR 14.09.01.21F. According to this Rule, when a claimant’s attorney files a fee petition with the Commission, the employer and the insurer must reserve in escrow a portion of the disability award in an amount equal to the requested fee. 5 Once the petition is approved, the attorney’s lien comes into play and attaches to the claimant’s award to the extent of the fees approved by the Commis ⁴⁸ sion.

As we recognized in Hoffman v. Liberty Mutual Insurance Company, 232 Md. 51, 55 , 191 A.2d 575, 577 (1962), the lien will attach to the segregated compensation funds held in escrow. As we summarized: “The effect of the above mentioned statute and rule is to impose a lien in the amount of the attorney’s fee upon a part of the award equal to the amount of the fee approved by the Commission, which is to be held in escrow by the insurer. It is this amount in escrow to which the lien attaches. This is an interception of the money in the hands of the insurer.” Id.

This “interception,” in effect, bars direct payment to the claimant of a portion of his compensation. This escrow account and the lien on the funds therein remain in existence until the attorney receives his due compensation. 6 See id. at 55-6 , 191 A.2d at 577-79 . Since the lien and the escrow do not extinguish at any earlier date, the claimant’s attorney is assured that no future contingency will jeopardize the payment of his fees. This is consistent with the often recognized purpose of section 57 and Rule 21F — the protection of attorneys who represent claimants in Workmen’s Compensation cases.

Id. at 55-6 , 191 A.2d at 578 . Ill Our application of the foregoing principles to the present case leads us to conclude that appellees must pay the claimant’s attorney the sum of $3,255.00, as approved by the Commission in its orders of February 7, 1985 and May 23, 1985. The claimant’s attorney filed his initial fee petition for $9,891.70 with the Commission on February 16, 1984. On that date, the appellees were put on notice to segregate that ⁴⁹ amount from the claimant’s compensation award and to place the sum in an escrow account.

Once the attorney’s fee petition was approved in the amount of $6,100.00, his lien materialized and attached to that amount in the escrow. The only effect of the Commission’s subsequent modified fee award was to change the sum held in the escrow account to $3,255.00. See Hoffman, 232 Md. at 55-6 , 191 A.2d at 578 . Since, as we have noted earlier, the escrow account and the lien on the funds therein remain in existence until counsel is paid, claimant’s attorney still has a lien on the $3,255.00.

The escrow account and the lien were not extinguished when the circuit court subsequently reduced the claimant’s compensation award to $14,525.00, a sum below what she had already received. Id. at 55 , 191 A.2d at