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Well, the 800-pound gorilla is now in the spotlight. Last week I published a blog entitled Partisan Politics Invades OJCC in Violation of the Judicial Code of Ethics addressing the illogical interpretation of Miles v. City of Edgewater Police Dept., Case No. 1D15-0165 (Fla. App 1st DCA 2016) by many Judges of Compensation Claims in their approval of attorney’s fees in Florida Workers’ Compensation cases, and, quite frankly, questioning their motives since I do not believe there position follows the law, and therefore must be politically motivated. It was and is my opinion that they are unlawfully invading the right to contract, which will ultimately impact an injured workers’ right to access the courts to petition for redress, and which is patently unconstitutional.

As I pointed out then, Miles states the fee agreement must be approved, not the fee itself. After much discussion with colleagues since that time, I think it worthy of a deep dive into the issue of how workers’ compensation fees and fee agreements should be approved under the law. Giving the OJCC the benefit of the doubt, the confusion lies in the misapplication of Rule 4-1.5(b) of The Rules Regulating the Florida Bar, and the failure to follow the actual holding in Miles by applying Rules 4-1.5(d)&(f). If you are not a lawyer, this may put you to sleep, so please forgive me.

You see, the OJCC are applying Rule 4-1.5(b) – Factors to Be Considered in Determining Reasonable Fees and Costs – to the contingency fee contract between an attorney and the attorney’s client. That is not something that is done by a court of law. In fact, there are no appellate decisions on this issue. Why not? Because the fee is determined by the fee contract in advance, and there is no reason for court intervention to determine the fee. It has been set by the fee contract to which both parties of the contract have previously agreed. If there is no dispute regarding the terms of that contract, there is no reason for court intervention.

In the event there were a dispute regarding the fee or the fee contract, The Florida Bar has a grievance process for clients to use when they think a fee is unreasonable or have other complaints about their attorney’s representation. Rule 4-1.5(b) is to be used by a court when the fee is disputed and is being paid by someone else who is not privy to the contract between the attorney and their client.

I can see several judges I know shaking their heads as they read this (if I am so lucky to think that they might). Disagree? Let’s look at the history of how courts have applied Rule 4-1.5(b).

Rule 4-1.5(b) vs. Rules 4-1.5(d) & Rule 4-1.5(f)

Rule 4-1.5 of The Rules Regulating the Florida Bar regulates Fees and Costs for Legal Services. Rule 4-1.5(b) lists the Factors to Be Considered in Determining Reasonable Fees & Costs. Rule 4-1.5(f) governs Contractual Contingent Fee Agreements, and gives a Florida Bar approved guideline for a contingency percentage. Rule 4-1.5(d) says fee agreements will ordinarily be enforceable. While not directly conflicting, the question is: should every fee agreement between a lawyer and their client that is in compliance with Rule 4-1.5(f) be subject to scrutiny under Rule 4-1.5(b) by a court? To answer that question, a review of the application of Rule 4-1.5(b) by trial and appellate courts is necessary.

Application of Rule 4-1.5(b) by the Courts

The application of Rule 4-1.5(b) by the courts was initiated in Florida Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985) when the Florida Supreme Court stated:

Although the amount of an attorney fee award must be determined on the facts of each case, we believe that it is incumbent upon this Court to articulate specific guidelines to aid trial judges in the setting of attorney fees. We find the federal lodestar approach, explained below, provides a suitable foundation for an objective structure. See Lindy Bros. Builders v. American Radiator & Standard Sanitary Corp., 487 F.2d 161 (3d Cir. 1973) and 540 F.2d 102 (3d Cir. 1976) (Lindy II); City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974) and 560 F.2d 1093 (2d Cir. 1977) (Grinnell II); Copper Liquor, Inc. v. Adolph Coors Co., 624 F.2d 575 (5th Cir. 1980). See also Derfner; Berger, Court Awarded Attorneys’ Fees: What is “Reasonable”, 126 Pa. L. Rev. 281 (1977); Leubsdorf, The Contingency Factor in Attorney Fee Awards, 90 Yale L.J. 473 (1981).

In determining reasonable attorney fees, courts of this state should utilize the criteria set forth in Disciplinary Rule 2-106(b) [now Rule 4-1.5(b)] of The Florida Bar Code of Professional Responsibility. Rowe, supra (emphasis added).

Rowe was the beginning of the application of Rule 4-1.5(b) in Florida. It is a crucial point that Rowe dealt with an analysis of how to determine a disputed fee in a fee-shifting case. The primary reason the Rowe Court made this determination was to have a uniform guideline for courts to follow in determine a reasonable fee in a very specific situation: fee-shifting cases where the party paying the fee has not agreed to pay a fee based upon a contract.

Recently, partially because of the substantial increase in the number of matters in which courts have been directed by statute to set attorney fees, great concern has been focused on a perceived lack of objectivity and uniformity in court-determined reasonable attorney fees.

The contingency risk factor is significant in personal injury cases. Plaintiffs benefit from the contingent fee system because it provides them with increased access to the court system and the services of attorneys. Because the attorney working under a contingent fee contract receives no compensation when his client does not prevail, he must charge a client more than the attorney who is guaranteed remuneration for his services. When the prevailing party’s counsel is employed on a contingent fee basis, the trial court must consider a contingency risk factor when awarding a statutorily-directed reasonable attorney fee. However, because the party paying the fee has not participated in the fee arrangement between the prevailing party and that party’s attorney, the arrangement must not control the fee award. Rowe, supra (emphasis added).

This last statement forms the basis of each and every case that follows in which a court applies Rule 4-1.5(b) in determining a reasonable attorney’s fee. It is used only when the payor did not agree to the fee in advance through contract. Rule 4-1.5(b) is invoked only in circumstances with there is no privity of contract between lawyer and payor, and when the fee is in dispute.

There is no appellate decision evaluating the reasonableness of an attorney’s fee using Rule 4-1.5(b) when there is a contingency fee contract that complies with Rule 4-1.5(f). Why not? Proving the absence of something is challenging. Proving the meaning of that absence even more so. Nevertheless, it is clear that the reason there is no court opinion that applies Rule 4-1.5(b) to an attorney’s fee based upon a Contractual Contingent Fee Agreement that is compliant with Rule 4-1.5(f) is that pursuant to Rule 4-1.5(d) such Fee Agreements will ordinarily be enforceable, and Rule 4-1.5(b) is not meant to be used to override the Fee Agreement between an attorney and their client.

Privity of Contract, Common Fund & Fee-Shifting Cases

To illustrate this fact, it is important to understand three different parties who may pay an attorney’s fee:

  1. Contracting Parties: a party (client) who contracts directly with an attorney for representation (Privity of Contract);
  2. Absent Parties: A party (client) who, such as an absent member of a class in class-action or common fund cases, is represented by a lawyer as a part of that class, but did not enter into a retainer agreement with that lawyer (No Privity of Contract).
  3. Adverse Parties: A party, adverse to the party whom the lawyer represents, that is ordered to pay the lawyer’s fees as a result of a fee-shifting provision in a contract or statute (No Privity of Contract).

In workers’ compensation cases, we deal with (a) Contracting Parties & (c) Adverse Parties. While (b) Absent Parties do not exist in workers’ compensation cases, the body of law surrounding attorneys’ fees in Common Fund cases, which are brought as “class actions,” is a clear statement on the importance and weight given to a Contingent Fee Contract between a lawyer and a client.

There is a significant distinction between Contracting Parties on the one side and Absent & Adverse Parties on the other: Absent & Adverse Parties have no privity of contract with the lawyer to whom they must pay a fee, whereas Contracting Parties have specifically agreed to pay a certain fee in advance.

Why is this distinction important? Because it will determine how and whether a court should intervene and evaluate the reasonableness of a fee. In Kuhnlein v. Dep’t of Revenue, 662 So. 2d 309 (Fla. 1995), the Florida Supreme Court highlighted this difference:

Similarly, in common-fund cases brought pursuant to the classification procedure of Florida Rule of Civil Procedure 1.220, most class members do not enter into written contingency fee agreements with class counsel. As in this case, contingency fee agreements in common-fund cases generally are entered only by the named plaintiffs who are a small portion of the class. Consequently, if the court allowed the written fee agreements to control the fee to be awarded from the common fund, it would be enforcing fee agreements to which the vast majority of class members did not consent. Thus, the fact that class counsel and the named parties agreed that attorney fees would be calculated on a percentage basis cannot control what approach the court should use in exercising its inherent power to determine reasonable attorney fees to be paid from the common fund.

The significance of this distinction is what leads Florida Courts to evaluate the “reasonableness” of a contingent fee via Rule 4-1.5(b) where there no privity of contract between lawyer and payor. The Kuhnlien Court noted the similarity between cases where is no privity of contract:

Furthermore, there is a compelling similarity between common-fund and fee-shifting cases which causes us to disagree with counsel’s contention that the fee agreement between class counsel and the named parties should control the approach used to set a reasonable fee. In both cases the court is setting a fee that binds individuals or entities who have not entered a fee agreement. In fee-shifting cases the party paying the fee has not participated in the fee agreement between the prevailing party and that party’s attorney. Rowe, 472 So. 2d at 1151. Consequently, the fee agreement does not control the amount of the fee. Id. We noted in Rowe that “‘were the rule otherwise, courts would find themselves as instruments of enforcement, as against third parties, of excessive fee contracts.'” 472 So.2d at 1151 (quoting Trustees of Cameron-Brown Inv. Group v. Tavormina, 385 So. 2d 728 (Fla. 3d DCA 1980)).

From the above, it is clear that in the eyes of the Florida Supreme Court, when there is no privity of contract, the fee agreement does not control the amount of the fee; therefore, the court should evaluate the reasonableness of the attorney’s fee by using Rule 4-1.5(b). This makes perfect sense. You should not enforce a contract against someone who is not privy to that contract.

The Fee Agreement between Attorney & Client Controls!

If that is the case, then the inverse must also be true: where there is a written fee contract, the fee agreement does control the amount of the fee. If it does not, then why make the distinction? Why would the Florida Supreme Court make such a distinction between the two if they did not intend to give deference to the fee agreement between a lawyer and their client? In Kuhnlien, the Court’s basis for stating that the Contingent Fee Agreement did not control the fee is that the absent class members were not parties to the original contract between the attorneys and the named plaintiffs.

The Kuhnlein Court noted that this was a question in common-fund, class-action type claims and in statutory fee-shifting cases because they involved parties who had NOT entered into a contract with the lawyer for the given percentage:

In Tenney, this Court recognized those who received the benefit of the creation of a common fund through a class action should share equitably in the burden of paying attorney fees and costs necessary to the creation of the common fund. 11 So. 2d at 190. To insure that each class member paid his or her equitable share of the fees, the Court approved the payment of the amount of the attorney fees based upon a percentage contingency fee contract which the court stated was “agreed to freely and voluntarily by those who benefited.” Id. at 190. In that class action, however, unlike the class action presently before us, there were 232 claimants, of which 170 contracted on a contingent basis for one-third of the amount recovered. The Tenney Court found that there was ample evidence to support the reasonableness of the contract relative to those who executed the contract. Id. at 190. The case was remanded for the chancellor to determine whether that contract was also reasonable for the 62 claimants who had not agreed to it. Id. at 193 (Chapman, J., concurring specially).

Based upon the fact that there was no privity of contract between the attorneys and the absent members, they used Rule 4-1.5(b) to determine a reasonable fee, and used the lodestar method for fee calculation, which is based upon time expended (by the way, this resulted in a lodestar multiplier of 5.0 times the hourly rate in Kuhnlien).

If the basis for doing an evaluation under Rule 4-1.5(b) is that there is no privity of contract, where does that leave us in evaluating a fee where there is privity of contract? Rule 4-1.5(d) says fee agreements will be ordinarily enforceable, so Rule 4-1.5(f) should control. Is Rule 4-1.5(b) irrelevant to contingent fee agreements? No. But, in the absence of a justiciable controversy surrounding the issue of attorneys’ fees, the courts have no business intervening so long as the contingent fee contract complies with Rule 4-1.5(f).

Enforce the Contract!

Rule 4-1.5(d), Enforceability of Fee Contracts, states:

Contracts or agreements for attorney’s fees between attorney and client will ordinarily be enforceable according to the terms of such contracts or agreements, unless found to be illegal, obtained through advertising or solicitation not in compliance with the Rules Regulating The Florida Bar, prohibited by this rule, or clearly excessive as defined by this rule (emphasis added).

This language gives a presumption of reasonableness and correctness in deference to the terms of a properly executed Contingent Fee Contract that is in compliance with Rule 4-1.5(f), as is given to the parties to any contract.

There is no appellate case (yet) where a court has evaluated a fee using Rule 4-1.5(b) of the Rules Regulating The Florida Bar when the parties are privy to a contingency fee contract under Rule 4-1.5(f) and neither party is disputing the fee. Why not? Because no court (except the OJCC) would ever intervene in a case where a client agrees to pay their attorney a fee that is within the guidelines of Rule 4-1.5(f) unless the client objected to payment of the fee. Where the client does not object to payment of the fee, and the Contractual Fee Agreement complies with Rule 4-1.5(f), there is no basis for the OJCC to challenge the fee and they should enforce the contract and approve the fee.

What Miles Really Says:  Approve the Fee Agreement!

Many in the OJCC assert that Miles indicates that the JCC must use Rule 4-1.5(b) in approving the fee. That is NOT what Miles says. In dicta regarding this issue, the court stated:

Additionally, any fee agreement must nonetheless, like all fees for Florida attorneys, comport with the factors set forth in Lee Engineering & Construction Co. v. Fellows, 209 So. 2d 454, 458 (Fla.1968), and codified in the Rules Regulating the Florida Bar at rule 4-1.5(b).” Jacobson, 113 So. 3d at 1052. Miles, supra (emphasis added).

Two very important factors should be noted in this dicta: it is contained in dicta, not in the holding/conclusion, and it states that the fee agreement must comply, not the fee itself. Why is the latter significant? Because in the holding the Court reiterated the proper remedy was approval of the fee agreement by the JCC:

We conclude that the statutory restrictions are unconstitutional, and that the proper remedy is to allow an injured worker and an attorney to enter into a fee agreement approved by the JCC, notwithstanding the statutory restrictions. Miles, supra (emphasis added).

Of course the fee agreement must comply with Rule 4-1.5(b), “like all fees for Florida attorneys,” but when is it the court’s duty to intervene and make a determination under this rule? Kuhnlien would suggest that the court should use Rule 4-1.5(b) only when there is no privity of contract. If that is untrue, then, again, why would they make that distinction? The First DCA is saying that the contingent fee agreement should be approved at the outset as permitted by Rule 4-1.5(f)(4)(B)(i).

Therefore, the only questions for the JCC to answer in approving an attorney’s fee in the Florida Workers’ Compensation system are: did the Claimant knowingly waive F.S. 440.34(1) and does the subsequent contingent fee agreement comply with Rule 4-1.5(f)? If both of these questions can be answered in the affirmative, the fee agreement should be approved at the outset of representation and the fee itself should be approved upon settlement without further analysis under Rule 4-1.5(b).

Stick a Fork in Me. I’m done!

I feel like this should be a fairly simple concept. No? It’s a contract. It falls within the guidelines of Rule 4-1.5(f). Rule 4-1.5(d) says enforce it and approve the fee. I’ve got nothing else….

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