Case # 00134750
Matter of William & Michael Keenan t/a Keenan's Bar
2018 NY Wrk. Comp. 00134750
By: Chair Rodriguez
The Full Board, at its meeting on March 20, 2018, considered the above captioned case for Mandatory Full Board Review of the Board Panel Memorandum of Decision filed July 17, 2017.
The issues presented for Mandatory Full Board Review are:
- whether a late payment penalty should be assessed against the Uninsured Employer's Fund (UEF) pursuant to Workers' Compensation Law (WCL) § 25(3)(f); and
- whether the attorney's fee awarded to the claimant's counsel was properly reduced to $450.00 based a defective attorney's fee application.
The Workers' Compensation Law Judge (WCLJ) awarded the claimant's attorney a fee in the amount of $4,875.00 out of the proceeds of a Section 32 waiver agreement. In a subsequent decision, the WCLJ assessed a late payment penalty against UEF pursuant to WCL § 25(3)(f).
The Board Panel majority modified the WCLJ decision to find that the claimant's attorney was entitled to a fee in the amount of $450.00 due to a defective fee application, and rescinded the late payment penalty and continued the case for further development of the record on whether a penalty is warranted.
The dissenting Board Panel member would affirm the attorney's fee of $4,875.00.
The claimant filed an application for Mandatory Full Board Review on August 17, 2017, arguing that the late payment penalty should be affirmed as the UEF conceded that the payment to the claimant was made on or after February 1, 2017, and is therefore untimely under WCL § 25(3)(f). With respect to the award of attorney's fees, the claimant's attorney contends that its entries on the relevant fee applications were not defective. The claimant's attorney states that he cannot provide additional details in the fee request application as doing so would run afoul of the attorney client privilege. The claimant's attorney states that the fee requested ($10,000.00) in this case is appropriate.
A rebuttal was not filed.
Upon review, the Full Board votes to adopt the following findings and conclusions.
This claim is established for injuries to the abdomen that occurred when the claimant was shot on December 12, 2000, while working as a bartender. This claim is the responsibility of the UEF. The case was subsequently amended to include post-traumatic stress disorder. The claimant was classified to be permanently partially disabled in a decision filed on August 19, 2008.
Claimant's attorney filed a notice of retainer (OC-400) with the Board on January 14, 2003.
The claimant's attorney filed an OC-400.1 with the Board on April 14, 2004, requesting a fee in the amount of $1,200.00.
In a decision filed on December 8, 2004, the claimant's attorney was awarded a fee in the amount of $7,000.00.
In a decision filed on October 3, 2006, the claimant's attorney was awarded a fee in the amount of $50.00.
In a decision filed on August 19, 2008, the claimant's attorney was awarded a fee in the amount of $1,250.00.
The claimant's attorney filed an OC-400.1 with the Board on June 10, 2016, requesting a fee in the amount of $10,000.00.
The claimant's attorney filed an OC-400.1 with the Board on July 25, 2016, requesting a fee in the amount of $10,000.00.
In a C-32 (Waiver Agreement - Section 32 WCL) filed on December 9, 2016, the parties agreed to a gross settlement to the claimant in the amount of $107,718.29, of which $75,218.29 was deemed to reasonably compensate the claimant for all future medical expenses related to the work injury that would otherwise be payable to Medicare. The agreement also provided for a $10,000.00 fee to the claimant's attorney.
At a hearing held on December 9, 2016, the claimant was authenticated based on his appearance by telephone from Ireland and sworn in to testify. The claimant testified that he understood that from the gross settlement, an attorney's fee would be deducted and that he was to put aside in a separate account $75,218.29 to pay for future medical care, that he was aware that he did not have to settle the case, and that he did not currently receive Medicare benefits. The WCL § 32 agreement was approved by the WCLJ following the claimant's testimony. The claimant's attorney then made an application for a $10,000.00 attorney's fee, which is supported by an OC-400.1 detailing 66.58 hours of work on the claimant's behalf. The WCLJ concluded that the "part set aside for the medical" should not be taken into account when awarding the attorney's fee and approved a $4,875.00 attorney's fee. The claimant's attorney noted an exception to this particular finding on the record, arguing that there is no support for such a conclusion in the Workers' Compensation Law and noting that the claimant is not a Medicare recipient.
In a Notice of Approval - Section 32 Agreement filed on December 28, 2016, the WCLJ approved the WCL § 32 agreement, which provided for a gross settlement in the amount of $107,718.29, a fee to the claimant's attorney in the amount of $4,875.00, and a resulting net settlement amount of $102,843.29. The decision also provides "[s]ee the Section 32 Agreement for full details of the agreement."
By an application for administrative review filed January 25, 2017, claimant's attorney requested that they be awarded a fee of $10,000.00. The claimant's attorney also filed an OC-400.1 with the Board on January 25, 2017, in support of their request for a fee in the amount of $10,000.00.
In an RFA-1LC (Request for Further Action by Legal Counsel) filed on February 3, 2017, the claimant's attorney indicated that payments have not been made to the claimant as directed in the December 28, 2016, decision, and requested a hearing.
In correspondence filed with the Board on February 9, 2017, the claimant informed the Board that he did not receive payment of the final settlement from the UEF, and that he should have received it on February 3, 2017.
At a hearing held on March 13, 2017, following an off-the-record discussion, the WCLJ assessed a WCL § 25(3)(f) penalty in the amount of $19,543.66 against the UEF, payable to the claimant, based on the claimant's presentation of an envelope that purported to indicate that payment was not mailed to the claimant by the UEF until February 1, 2017. The WCLJ also made a $50.00 assessment against the UEF to be paid to the Chair. The WCLJ granted the claimant's attorney fee request of $1,900.00.
The findings made by the WCLJ at the March 13, 2017, hearing, were memorialized in a decision filed on March 17, 2017.
The claimant's attorney filed an OC-400.1 with the Board on March 15, 2017, in support of its request for a fee in the amount of $1,900.00.
In an application for administrative review filed March 27, 2017, the UEF requested that the late payment penalty be rescinded.
Correspondence filed with the Board on March 30, 2017, contains a copy of a January 3, 2017, check issued by Triad Group to the claimant in the amount of $97,718.29, and an envelope from Triad Group without an addressee and with an illegible post-mark date.
12 NYCRR 300.17(d) requires a written application (form OC-400.1) for an attorney's fee that is requested for an amount greater than $450.00 and states that "[a]ny form OC-400.1 filed shall be accurately completed." The Board may find a form OC-400.1 deficient if the attorney requesting a fee fails to indicate the "date, description, and amount of time spent on each service" (Matter of Fernandez v Royal Coach Lines, Inc., 146 AD3d 1220 , quoting Board Subject Number 046-548, dated May 28, 2013). The Board may also find a fee application deficient if the information that is required to be provided on the form is not legible (Matter of Tenecela v Vrapo Constr., 146 AD3d 1217 ). Upon finding the attorney's fee application to be deficient, it is not an abuse of discretion for the Board to reduce "the award to $450.00, the maximum allowed absent the required form (see 12 NYCRR 300.17[d]; Matter of Kennedy v New York City Dept. of Corr., 140 AD3d 1572 )" (Fernandez, 146 AD3d 1220 ; see also Tenecela, 146 AD3d 1217 ).
While legal services may be needed to negotiate workers' compensation settlements containing MSA provisions, the Center for Medicare & Medicaid Services has made it clear that an attorney's fee associated with establishing the MSA arrangement cannot be charged against the MSA amount. Rather, "the payment of these costs must come from some other payment source that is completely separate from the Medicare set-aside arrangement funds" (see May 7, 2004, Memorandum: Director - Center for Medicare Management; http://www.cms.gov/Medicare/ Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/WCMSA-Memorandums/Memorandums.html).
The Board has held that attorney's fees may not be deducted from the portion of the settlement used to fund a Medicare set-aside (see Matter of Home Depot USA, Inc., 2014 NY Wrk Comp 00834535; Matter of Restor Technologies, Inc., 2015 NY Wrk Comp 00749531; Matter of Walmart, 2016 NY Wrk Comp G0171670; and Matter of ITH, 2016 NY Wrk Comp 00632922).
Although not specifically raised by the claimant's attorney in the Mandatory Full Board Review application, the exclusion of the MSA amount from the gross settlement prior to determining the attorney's fee was appropriate based on the Board Panel precedent cited above. This is true even if the claimant resides outside of the country, and is not presently receiving Medicare.
The July 25, 2016, OC-400.1 contains several entries prior to the date that the claimant signed the OC-400 retaining his current attorney. The fee application also contains numerous entries predating the award of fees of $7,000.00 in the WCLJ's December 8, 2004, decision and $1,250.00 in the WCLJ's August 19, 2008, decision. The application also includes numerous entries listed as "bookkeeping note," without adequate descriptions to ascertain the nature of the services performed.
The OC-400.1's filed on June 10, 2016, and January 25, 2017, are likewise defective, containing entries that predate the firm's retainer and the award of fees in the WCLJ's December 8, 2004, and August 19, 2008, decisions, and numerous entries that do not contain adequate descriptions to ascertain the nature of the services. In addition, the entries are not listed in a chronological fashion.
Therefore, the Full Board finds that the fee applications submitted by claimant's attorney were defective and therefore a fee of $450.00 is warranted.
Late Payment Penalty
WCL § 25(3)(f) provides in pertinent part that
[i]f . . . the uninsured employers' fund shall fail to make payments of compensation according to the terms of the award within [40 days after the filing date of the decision making the award] except in case of an application to the board for a modification, rescission or review of such award, there shall be imposed a penalty equal to twenty percent of the unpaid compensation which shall be paid to the injured worker or his or her dependents, and there shall also be imposed an assessment of fifty dollars, which shall be paid into the state treasury.
There is ample support in the record for the conclusion of the Board Panel majority that further development of the record is required in order to determine if the UEF's payment to the claimant was untimely pursuant to WCL § 25(3)(f). While the envelope and copy of the UEF check in the amount of $97,718.29 were not filed with the Board at the close of the record, it was presented to and reviewed by the WCLJ at the March 13, 2017, hearing, and was subsequently filed with the Board on March 30, 2017. As such, further development of the record with the testimony of the claimant and a representative of the UEF is warranted.
It is noted that the clear language of WCL § 25(3)(f) requires the UEF to make payment of compensation according to the terms of the award within forty days. It is also noted that WCL § 25(3)(f) provides for a stay of the assessment of a late payment penalty in the event that an application for administrative review of the underlying award is filed. In this case, an appeal was filed from the December 28, 2016, decision by the claimant's attorney on January 25, 2017, specifically seeking review of the award. Therefore, only the amount in controversy ($5,125.00) can be withheld from payment pending the outcome of the appeal. Therefore, $97,718.29 would still potentially be subject to the assessment of a WCL § 25(3)(f) penalty if a finding is ultimately made that the UEF untimely paid the claimant, and not $102,843.29. Based on the foregoing, the March 15, 2017, OC-400.1 requesting $1,900.00 was properly rescinded by the Board Panel majority.
Therefore, the Full Board finds that further development of the record is required with respect to the issue of the assessment of a late payment penalty under WCL § 25(3)(f).
ACCORDINGLY, the Notice of Approval - Section 32 Agreement filed on December 28, 2016, is MODIIFED to reduce the award of attorneys' fees to $450.00; the net amount payable to claimant is $107,268.29. The WCLJ decision filed March 17, 2017, is RESCINDED. The case is continued for further development of the record on the issue of whether a late payment penalty against UEF is warranted, with the testimony of the claimant and a witness from the third-party administrator for UEF with knowledge of the facts and circumstances of the payment(s) made to the claimant.