Unresolved attorney’s fee liens can derail a settlement of future benefits in Florida workers’ compensation cases, and even expose an employer/carrier to civil liability. This article discusses the various manifestations of these liens, how lienholders perfect their liens, how employer/carriers can proactively identify and resolve any fee/cost liens, so as to close the file and protect it against future claims.
We start with the maxim that “the best file is a closed file.” A file cannot truly be closed until all aspects of Fla. Stat. §440 are resolved. Most cases typically involve “one claimant, one attorney”. But what are the consequences if the claimant discharges one or more attorneys prior to the conclusion of the case? Plenty… if the prior attorney(s) files a lien alleging he/she is entitled to fees or costs (or both) for work done on the file prior to resolution of issues or the entire case.
Are You Seeing More Lien Litigation?
Claimants’ attorney fees and costs are codified in Fla. Stat. §440.34; various amendments over the years have led to the present controversy between the claimant’s bar and employer/carriers. Presently, anticipation (and anxiety) is unprecedented pending the Florida Supreme Court’s decision on the constitutionality of the 2009 amendment to §440.34 limiting fees to a statutory percentage of benefits obtained as opposed to an hourly rate as argued in Castellanos v. Next Door, Inc. The 2009 statutory fees reduced the cost of claims; and we have seen, perhaps not coincidentally, an increase in the number of contentious lien battles. Litigation arises most often when a case is settled without resolving a prior attorney’s lien.
In most situations, the claims professional administering a file will know a lien is pending. Typically, when there is a change in counsel, the new attorney will notify the employer/carrier or if the matter is pending before the Judge of Compensation Claims, a formal stipulation for substitution of counsel reserving on attorney’s fees and costs and establishing a lien is included in the Order approving the substitution. (Rule 60Q-6.104, F.A.C.) Care should be taken by the claims professional and defense counsel, if any, to note the identity of the discharged attorney and to inquire of that individual as to what type of lien is asserted. The lien could be for an employer/carrier-paid fee based upon benefits secured as a result of filing a Petition, a quantum meruit lien (or “charging lien”) or a fee based upon all benefits paid after overcoming a denial of compensability. Understanding the different types of liens will enable the claims professional to identify liens which is the first step at resolving them.
1. Liens for employer/carrier-paid fees/costs
Generally, the claimant is responsible for his/her attorney’s fees and costs unless certain exceptions as enumerated in Fla. Stat. §440.34(3) are met. But what happens if an attorney is discharged prior to resolution of past or pending issues or in the event of a Fla. Stat. §440.20(11)(c) settlement of future benefits? The discharged attorney may file a lien for any employer/carrier-paid fee that would have been due during his/her representation of the claimant. Recently, Florida’s First District Court of Appeals held that these fees associated with prevailing on claims raised via a Petition for Benefits are subject to dismissal for lack of prosecution pursuant to Fla. Stat. §440.25(4)(i). Limith v. Lenox on the Lake, 163 So. 3d 616 (Fla. 1st DCA 2015).
2. Quantum Meruit Liens (Charging liens)
If the claimant discharges an attorney without cause, and no benefits were secured, the attorney would be entitled to a “charging” lien for an attorney fee under the equitable theory of quantum meruit (“what one has earned”). Quantum meruit fees have been long recognized in Florida and were generally paid by the claimant.
Most often, lien problems arise when a subsequent attorney settles the entire case and fees are paid; if known liens are not protected, the employer/carrier could be “on the hook” to the former attorney or attorneys. Perfection of a quantum meruit lien requires only timely notice to the affected parties. Zaldivar v. Okeelanta Corp., 877 So. 2d 927 (Fla. 1st DCA 2004) The lien “ripens” when there are settlement proceeds to which the lien can attach.
If the attorney’s lien has ripened, and he was provided notice of the settlement, then failure to resolve or prosecute the lien can result in dismissal of the lien through the application of the equitable doctrine of laches (but not a motion for lack of prosecution, as the quantum meruit lien is not a “claim” for attorney’s fees raised by petition). Limith v. Lenox on the Lake, 163 So. 3d 616 (Fla. 1st DCA 2015).
3. “Total Benefits Secured” liens
This type of lien is based upon the concept that “benefits secured” can be calculated on the basis of the total benefits secured as a result of a denial of compensability. §440.34(3)(c), Fla. Stat. (2009)
In these situations, because the full amount of the benefits to be paid in the future may be unknown, the court has held that the claimant’s attorney must be allowed to decide when he or she will have the quantum of the fee determined. Zaldivar v. Fla. Transp. 1982, Inc., 19 So. 3d 1093 (Fla. 1st DCA 2009).
Best Practices for Resolution
Typically, Florida workers’ compensation cases settle at mediation. The claims professional or defense counsel should provide notice to any prior attorneys of the mediation conference and invite them to participate; in that fashion, the attorney’s claim will be made known and can be dealt with and resolved in writing in the mediation agreement. In reality, some attorneys will not participate and will not provide lien information to the parties or the mediator. In those cases, provisions should be made in a mediation agreement as to which party (claimant or employer/carrier) will be responsible for any known asserted liens. Once a settlement is reached, any liens have ripened as the Florida appellate court pointed out in Zaldivar v. Okeelanta Corp. At this point, the employer/carrier can compel the lienholder to file a Verified Motion for Attorney’s Fees pursuant to Fla. Admin. C. Rule, 60Q-6.124(4). Thus, prior to disbursement of settlement proceeds, any unresolved lien/attorney fee issues should be brought before the JCC and resolved through an appropriate Final Order.
Recent Administrative Rule Changes
Prior to amendments to the Florida Administrative Code which took effect November 1, 2006 and strengthened effective November 10, 2014, there was no statutory or procedural requirement that a lien be adjudicated. This left open issues which could not be forced to be heard by the Judge of Compensation Claims unless the attorney brought the claim before the JCC… with the result being employer/carrier claim files were left open. The Florida procedural rules (Rule 60Q-6.124(4) and as of November 10, 2014 subsection (5), F.A.C.) require the filing of a verified fee petition upon appropriate motion, (generally by employer/carrier) to adjudicate the lien. An appropriate motion filed with the JCC and served upon all parties and attorneys, including those attorneys asserting liens which have not been resolved, is the preferred vehicle to “force close” the pending lien.
Prior to Rule 60Q-6.124(4) becoming effective on November 1, 2006, there was no mechanism to require that an attorney asserting a lien file a Verified Petition to adjudicate the lien. Thus, liens could remain indefinitely “in limbo”. These new procedural amendments, especially the 2014’s amendment, give strong ammunition to the employer/carrier to require the filing of a verified motion for attorney fees and costs even if entitlement is disputed, upon presentation of appropriate facts. Additionally as the Limith court indicated, if the fee is petition-based, a motion to dismiss for lack of prosecution can be filed so that attorney’s fees do not keep the file open indefinitely, tolling the statute of limitations.
If, as part of the negotiation of the settlement, the employer/carrier agrees to be responsible for liens of prior attorneys, prompt resolution of the lien should be made before the Judge of Compensation Claims. The attorney claiming the lien has the burden of proof that he/she was either discharged without cause (which gives rise to the basis for the “charging”/quantum meruit liens noted above), or proving up that an employer/carrier-paid fee is due for securing benefits on behalf of the claimant.
Furthermore, the best protection against future civil lawsuits for tortious interference with a business relationship is to require the lienholder to resolve his lien prior to the JCC approving the current attorney’s fees and costs for underlying settlement. Because the lien is now ripe, and attached to the settlement proceeds, all the parties to the settlement (claimant, claimant’s current attorney, and the employer/carrier) have an obligation to the prior attorney(s) to protect their lien.
Robert J. Strunin, senior partner, Walton, Lantaff, Schroeder & Carson LLP. Strunin’s primary areas of practice include analysis, discovery, strategy and trial involving the defense of workers’ compensation claims as well as premises liability and automobile negligence in the tort arena.
Michele E. Ready, partner, Walton, Lantaff, Schroeder & Carson LLP. Ready’s primary area of practice is insurance defense, workers’ compensation litigation, including an emphasis on Medicare Secondary Payer compliance. Ready also specializes in workers’ compensation appellate matters.
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