LexisNexis Workers' Compensation eNewsletter

In Alvarez, applicant's counsel charged defendant a deposition fee rate of $275.00 per hour. Although defendant did not object to the total time charged by applicant's counsel, a certified specialist in workers' compensation, defendant objected to the rate of $275.00 per hour and instead paid at $250.00 per hour, leaving a balance owing of $56.25.[FN2] Applicant's counsel filed a petition seeking an award of the remaining unpaid fee. After a Workers' Compensation Administrative Law Judge (WCALJ) ordered the fee paid at the rate requested by applicant's counsel, defendant filed an objection. At trial on the fee dispute, applicant's counsel submitted contemporaneous documents demonstrating that other insurance carriers had paid and other judges had awarded him deposition fees at a rate of $275 per hour. Defense counsel submitted no evidence but argued at trial that a reasonable fee at the time of Mr. Alvarez's deposition is $250.00 per hour. Relying on the authority to award attorney's fees pursuant to Labor Code � 5813, subdivision (a), the trial judge awarded applicant's counsel $2,250 in hourly fees at $300 per hour pursuant for the time incurred by applicant's counsel in securing his deposition fees. Additionally, the disputed $56.25 was awarded. When awarding attorney's fees pursuant to Labor Code � 5813, the trial judge specifically concluded that because defense counsel did not submit evidence supporting his argument that a reasonable fee is $250.00 per hour, defense counsel had engaged in "bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary delay."[FN3]

The use of Labor Code � 5813 to award attorney fees and sanctions for defendant's failure to pay deposition fees pursuant to Labor Code � 5710 dates back to at least 1999 in EMC Insurance Company v. Workers' Compensation Appeals Board (Writ Denied)(1999) 65 Cal. Comp. Cases 75. In EMC, Defendant refused to pay Labor Code � 5710 fees until a judge signed an uncontested order awarding the fees. An order to pay is not a prerequisite to the expected voluntary payment of those deposition fees that are uncontested. A similar result occurred in Roshandell v. Sear, Roebuck & Co. 2006 Cal. Wrk. Comp. P.D. LEXIS 38. In Roshandell, applicant's counsel was awarded both Labor Code � 5814 increased compensation and attorney fees pursuant to Labor Code � 5813 when defendant failed to pay deposition fees for 64 days and eventually paid the uncontested portion after applicant's counsel sent a follow-up request for payment. Once more, an order is not a condition precedent to the voluntary payment of uncontested deposition fees. Although neither case provides guidance on what evidence would be persuasive in a deposition fee dispute, they do illustrate how the use of fees and sanctions can be imposed should defendant fail to pay the that portion of the fee that is uncontested. In Alvarez defendant timely paid the uncontested fees litigating only the contested difference between $250 and $275 per hour.

What evidence each party must submit to prove their respective positions in a Labor Code � 5710 fee dispute is unclear, and Alvarez does nothing to shed light on what proof is required. The trial judge in Alvarez stated throughout his Report and Recommendation, Labor Code � 5710 fees are discretionary with the Appeals Board and by delegation with each WCALJ who hears fee cases. Apparently applicant's counsel must merely demonstrate that other judges and insurers had been willing to order or pay the requested fee rate contemporaneous in time to the fee dispute. Even so, the trial judge concluded that this evidence was helpful and admissible, "but not necessarily determinative of the issues raised in the instant matter." Another factor that weighed heavily in Alvarez is that applicant's counsel is certified in workers' compensation and thus presumably an accomplished attorney in workers' compensation litigation. Nonetheless, if the evidence submitted by applicant's counsel was not persuasive, it is unclear on what evidence the judge in Alvarez was relying or if deposition fees can be awarded without evidence of reasonableness because they are discretionary.

Although inexcusably defense counsel produced no evidence to demonstrate that a deposition fee of $275 per hour is unreasonable compelling a finding that he must pay his opponent's attorney fees pursuant to Labor Code � 5813, the trial judge was particularly vague when describing what evidence defendant might have produced. Although applicant's counsel's evidence was admissible but not determinative, the Alvarez judge specifically stated that had defendant produced contemporaneous evidence showing that a fee rate of $250 per hour had been awarded or voluntarily paid, "it still would not be persuasive" that a fee of $275 per hour was unreasonable. If the reasoning in Alvarez is to stand, apparently all that determines whether a deposition fee is reasonable is the discretion of the judge, and contesting an awarded fee rate becomes a quest to prove that the trial judge abused that discretion.

What threshold evidence defendant must produce to avoid the risk of a Labor Code � 5813 fee award is ill-defined. Would it have been acceptable to the Alvarez judge for defendant to have produced data demonstrating that defense attorneys who are certified specialists in workers' compensation and who have a similar experience level as Mr. Alvarez's lawyer and who practice in and maintain law offices in the same community are only compensated $175 per hour? The economic variances of an applicant's contingency-fee practice compared to a defense attorney practice might dictate against such evidence being dispositive, but would it be enough to alleviate an award of fees pursuant to Labor Code � 5813? Perhaps a defense lawyer could muster evidence from her insurance client to prove that an applicant's attorney similarly credentialed would only command a fee of $250 for representing injured workers. Would such data need to be refined to the relevant community or could that data include all of California or perhaps include fee awards from many jurisdictions? Might defense counsel have produced expert witnesses to testify about how much deposition lawyers should be compensated? Would it be required that such an expert be an applicant's attorney and, if so, is it realistic for defendant to acquire a member of the applicant's bar to testify against his or her self-interest?

When the Appeals Board panel adopted the Alvarez judge's reasoning in denying defense counsel's Petition for Reconsideration, they offered no guidance to members of the workers' compensation community on what is sufficient evidence to contest fee rates or how to prove entitlement to fee rates beyond those rates commonly awarded. When fees are determined solely by discretion and not an evidentiary standard, it is difficult to imagine what evidence a defendant might safely produce to contest a fee and remain free from the consequences of an additional fee award pursuant to Labor Code � 5813 should the trial judge disagree. Certainly a more precise definition of discretion is needed so that proof of its abuse can be more readily identified and proven.

Assessing the value of attorney services in workers' compensation cases is a recurring issue WCALJ's frequently encounter. Aside from deposition fees, there are contingency fees that must be approved and awarded. Unlike deposition fees however, there is a great deal more guidance afforded to adjudicators, because an injured worker's recovery is reduced by the amount of contingency attorney's fees awarded, thus requiring enhanced vigilance. California Code of Regulations, Title 8, section (Regulation) 10775, and WCAB Policy and Procedural Manual section 1.140 offer guidelines for ascertaining an appropriate attorney fee. Although not strictly applicable to contingency fees, they are rarely if ever referenced in deposition fee disputes. Regulation 10775 requires an analysis of several factors before setting an attorney's compensation to include the responsibility assumed by the attorney and the care exercised in representing the applicant. Hourly fees are specifically addressed in the WCAB Policy and Procedural Manual, section 1.140, subdivision 4, where it is stated that a recognized specialist with demonstrated skill in the field of workers' compensation "is to be valued much more highly on an hourly basis" than less experienced counsel. Section 1.140, subdivision 4, additionally cites two cases that establish legal standards for assessing the value of attorney services. In Rose, Klein & Marias v. Workers' Comp. Appeals Bd. (1974) 39 Cal. Comp. Cases 771; 1974 Cal. Wrk. Comp. LEXIS 2365, and Bentley v. Industrial Accident Commission, (1975) 75 Cal. App. 2d 547; 171 P.2d 532; 1946 Cal. App. LEXIS 1276, the court considered the responsibility assumed by the attorney, the care employed by the attorney, the time devoted to the case and the results obtained when determining a fee. Perhaps there is guidance in these citations for assessing the value of deposition fees, at least in part by analogy.

Some workers' compensation communities throughout the state have orchestrated novel methods to assist adjudicators in setting deposition fees at levels acceptable to the community as a whole. Bench and Bar committees have been utilized for the purpose of agreeing on recommended fee schedules that formulate various fees depending on a practitioner's level of experience. Although advisory, they have helped reduce the frequency of deposition fee disputes, which is increasingly important. Each deposition fee dispute, whether for $50.00 or $750.00, incur costs way beyond those envisioned by embroiled litigants. Each fee trial requires the services of a court reporter, court time, and judicial resources, not to mention involving the expense of lawyers from both sides of the bench. In an era where hiring freezes restrict the Division of Workers' Compensation from filling open positions, judicial resources are better spent performing core services like adjudicating whether a severely disabled injured worker is entitled to home health care when recovering from a work related surgery or the timely dispensation of a defendant's request for an order terminating temporary disability payments. Extrapolating the number of deposition fee petitions and fee adjudication matters that require judicial resources throughout the more than 20 district offices and over 150 judges statewide, the fiscal impact of fee disputes should not be underestimated.

In an era where government efficiency is a predominant feature of daily news reports, and fewer resources are available to administer government programs, a legislative or regulatory revisit to the issue of deposition fees is evidently needed. A large factor in a functioning workers' compensation system is the regulation of costs. Regulators determine the compensation doctors and pharmacies receive. Permanent disability, a core component to any workers' compensation system, is scheduled by rules drawn by legislatures and regulators. Workers' compensation insurance rate increases are approved by a governmental body. Contingency fee awards are regulated. Perhaps the adoption of a statewide deposition fee schedule, although politically unpopular, is needed so that precious judicial resources can be reserved for the resolution of those disputes that are the core of workers' compensation litigation.

Note: At the time this article was written, it was unknown whether defense counsel had filed a petition for writ of review in this case. Practitioners should check the subsequent history of this case before citing to it.

Footnotes:

1. Although Labor Code � 5710 was enacted in 1937, the attorney fee provision in subdivision (b)(4) was not included until a 1972 amendment.

2. Apparently, Mr. Alvarez's lawyer filed a petition for the payment of $56.25. Another judge ordered it paid but counsel for defendant timely objected, resulting in the matter being set for trial.

3. See Labor Code � 5813, subdivision (a), and California Code of Regulations, Title 8, section 10561, subdivision (6)(A).

Neil R. Robinson, Esq., a former Workers' Compensation Administration Law Judge, is currently Tax Counsel III (Specialist) for the California State Board of Equalization.