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CHAPTER 4-500 - LEGAL FEES

1. Purpose and Scope. This Chapter provides the procedures for considering applications regarding fees for legal services and determining the amount of and liability for such services.

2. Right to Representation.

a. Claimants in disability or death cases, employers, and insurance carriers may be represented in any informal proceeding by an attorney or other person previously authorized in writing to perform such services. The authorization of a claimant's representative must be submitted to the DO, and the claimant's signature must appear on the authorization.

b. Not withstanding the above, the Longshore Act Amendments of 1984 provided that the Secretary of Labor shall annually publish a list of individuals who are disqualified from representing claimants under the Act (see PM 5-600 for debarment procedures). Such individuals are not authorized to represent claimants and the Act prohibits the DD, administrative law judges, Benefits Review Board or any courts from approving fees for representing Longshore Act claimants (See section 31(b)(1) of the Act, and 20 C.F.R. section 702.131(b).)

3. Liability for the Legal Fee. Generally, if a claimant retains the services of an attorney, the fee for such services is the liability of the claimant (i.e., is a lien on his/her compensation). However, in disputed claims, the attorney fee frequently is assessed against the employer and is paid in addition to compensation. Fees for services by other than attorneys are neither assessed against the EC nor made a lien on the claimant's compensation. Nevertheless, claimants are responsible for the payment of these fees also (see subparagraph 3c, below). The following describes situations when an attorney fee should be assessed.

a. Fee When Carrier Declines to Pay Compensation. Under section 28(a), if an EC does not pay any compensation within thirty days after receiving written notification of a claim being filed, and the case is later settled at the informal level in favor of the claimant, the DD/CE must assess the fee for an attorney against the EC. The DD shall issue a compensation order, as required under this section of the Act, awarding a reasonable attorney's fee, in addition to the award of compensation, against the EC. In such cases, the legal fee shall not be a lien on the compensation due. Upon successful prosecution of a claim, the BRB has held that the employer must pay attorney's fees under § 928(a) of LHWCA for services performed before employer controverted the claim (See Liggett v. Crescent City Marine Ways & Drydock Co. 31 BRBS 135, October 16, 1997).

b. Fee Where Voluntary Payment Made, But Controversy Arises Over Amount of Additional Compensation.

(1) If the EC voluntarily pays compensation without an award and a controversy develops over the amount of additional compensation (if any) to which the claimant may be entitled, the DD/CE shall, within ten days of knowledge of the controversy, set the case for an informal conference. Either at the conference or afterwards, the DD/CE is to recommend in writing the disposition of the matter. If the claimant has utilized the services of an attorney during this period to obtain additional compensation, any additional legal fee (based on efforts to obtain additional compensation) is to be assessed against the EC.

(2) If a recommendation relating to the degree or length of disability is not accepted by either or both parties, and the claimant utilizes the services of any attorney and the EC thereafter agrees to pay additional compensation, an attorney fee shall be based solely on the difference between the amount awarded and the amount tendered or paid. The fee under these circumstances is to be assessed against the EC.

(3) If a controversy develops over the amount of additional compensation to which the claimant may be entitled as described in subparagraph 3b(2) and the claimant has utilized the services of an attorney before an informal conference has been held on the controversy, the DD/CE shall assess the EC only for that portion of the attorney fee which is related to services performed after the initial informal conference. For service performed before the initial conference, the DD/CE shall approve the attorney fee as a lien on the compensation due.

(4) Where the EC voluntarily pays compensation, but a controversy develops over length or degree of disability, section 28(b) of the Act also provides that the attorney fee may be a lien on the compensation due in the following situation. Where the EC agrees to submit the case for impartial medical examination as authorized under section 7(e) of the Act, and accepts the recommendation to pay compensation based upon the degree or length of disability found by the independent medical report, an attorney fee which is approved must be a lien upon the compensation due.

(5) The EC is to be assessed the attorney fee only in the situations described in subparagraphs 3a, 3b(1), 3b(2), and 3b(3). In all other cases, the attorney fee is to be a lien on the compensation due. The exception to the situations above is provided in paragraph 3b(4).

c. Lay Representatives. Under sections 28(a) through 28(d), fees approved for claimant representatives other than attorneys at law are never to be assessed against an EC, and such fees may not be made liens upon the compensation due under awards. In spite of the fact that a non-attorney representative's fee is not protected by sections 28(a) through 28(d), section 28(e) requires prior approval of fees for all representatives, whether they are attorneys or non-attorneys.

4. Review of DD Fee Awards. In an ordinary case when entitlement to compensation under the Act is in dispute, the controversy is referred from the DD to the OALJ for formal resolution. The Benefits Review Board (BRB) has held, however, that in certain situations, including disputes over attorney fee awards before the DD, the dispute is typically not within the adjudicatory power of the ALJ and therefore should be appealed directly to the BRB. The Board has outlined three basic principles regarding whether an DD's actions should be reviewed by an ALJ or the BRB. Glenn v. Tampa Ship Repair and Dry Dock, 18 BRBS 205 (1986). First, review of discretionary acts of the DD must be undertaken by the Board. Second, the proper route for appeal of the DD's determination of strictly legal issues is directly to the Board. Finally, when a dispute involves questions of fact, the case must be referred to an administrative law judge. (See LHWCA Circular 87-01, November 14, 1986.) These three principles can be applied to DD attorney fee awards in the following manner:

a. Discretionary Issue. The determination of whether an attorney fee is adequate for work performed before the DD is discretionary. The DD evaluates the itemized hours and hourly rate contained in the fee application and issues a compensation order. An appeal of this award would be heard by the Board.

b. Strictly Legal Issue. The DD may also determine the liability for the fee, i.e., whether the claimant or employer is liable (see paragraphs 3 and 4, above). This is not a discretionary issue in that it depends on a legal interpretation of section 28. If no disputed questions of fact are involved in the fee award, an DD determination of fee liability should be appealed directly to the Board because it is a strictly legal issue.

c. Question of Fact. The only time an attorney fee dispute before the DD should be referred to an ALJ is when a non-discretionary finding of fact must be made, e.g., the date of employer's controversion, whether the employer refused the written recommendation of the DD regarding additional compensation, whether the claim was controverted, etc.

5. Penalties/Sanctions. In all cases where the claimant is successful in the prosecution of a claim, the amount of legal fees payable either by the claimant or the EC is subject to the approval of the person before whom the services were performed. A contract for a stipulated fee may not be recognized. No fee may be approved if the claimant is not successful in prosecuting the claim (see Brattoli v. International Terminal Operating Co., 2 BRBS 57 (1975), and Timmons v. Jacksonville Shipyards, Inc., 2 BRBS 125 (1975) for explanation of successful prosecution of claim).

a. Under section 28(e), a person who receives a fee, other consideration, or any gratuity on account of services rendered as a representative of a claimant (unless the consideration or gratuity is approved by the person before whom the services were performed), or who makes it a business to solicit business for an attorney or for himself in respect of any claim under the Act, is upon conviction thereof, subject for each offense to a fine of not more than $1,000, or by imprisonment for not more than one year, or by both fine and imprisonment. 20 C.F.R. section 702.133.

b. If a DD receives information suggesting or alleging that a person violated the provisions of section 28(e) in a case, the DD shall collect whatever additional information can be obtained relating to the alleged violation, and forward the information with an explanatory memorandum to the Director, DLHWC. The Director will in turn notify the office of the Associate Solicitor and request appropriate legal advice and/or action against the person(s).

6. Application for Legal Fees. An attorney or other representative seeking a fee for services performed on behalf of a claimant with respect to a claim filed under the Act must make application for approval of the fee to the person before whom the services were performed. The application must be supported by an itemization, in duplicate, showing the date(s) on which such services were performed, a brief description of the services, the time spent on each, and the amount of fee requested. Where questions arise as to the propriety of the amount of fee requested, the representative may be asked to also include a description of the professional status (attorney, paralegal, law clerk, secretary) of each person performing such work and the normal billing rate and hours expended for and by each such person. If the itemization is not self-explanatory, the person approving the fee shall require the applicant to submit a supplemental statement explaining the basis for the charges. When the fee is to be assessed against the EC, a copy of the application for the attorney fee and the fee recommended shall be sent to the EC for comments/objections prior to the issuance of an order by the DD.

If the EC agrees, the DD shall review the fee application and issue a compensation order awarding a reasonable attorney fee. If the EC disagrees, the DD shall evaluate the evidence provided by the EC in conjunction with the fee application and issue a compensation order awarding a reasonable attorney fee (see paragraph 7, below for factors to be considered in determining a reasonable fee).

7. Determination of Reasonable Legal Fee.

a. In determining whether a fee is reasonable, a number of factors must be considered. A partial list of factors is provided in subparagraph 7b, below, but it is not all-inclusive. Although there may be a broad agreement on the factors to be considered in setting fees, in practice the standards of what is appropriate compensation for claimant's counsel vary markedly from one State to another (The Law of Workmen's Compensation, Arthur Larson). The variation is reflected not only in statutory limits but also in administrative and judicial decisions.

b. The following factors should be considered in determining a reasonable legal fee (20 C.F.R. section 702.132):

(1) Usefulness and necessity of the representative's services to the claimant.

(2) Nature and complexity of the claim.

(3) Actual necessary work performed (the itemization showing the dates on which services were performed, brief descriptions of services, time spent on each, and the amount of fees requested. Time spent in preparation of a fee application is a appropriate factor to be considered in the determination of a reasonable attorney fee). See LHWCA Circular No 97-01.

(4) Amount of benefits involved.

(5) Customary local charges for similar services.

(6) Professional qualifications of the representative.

(7) When the fee is to be assessed against the claimant, the financial circumstances of the claimant are also to be taken into account.

(8) Enhancement for extraordinary delay in receiving payment. (See Anderson vs. Director 30 BRBS 67 (CRT) and LHWCA Circular No 97-01).

(9) Whether the fee is reasonable in relation to the results obtained. [(See Bullock v. Ingalls Shipbuilding 27 BRBS 90, July 16, 1993, for a decision of the two-prong test under Hensley vs. Eckerhart 461 U.S. 424 1983).]

c. In considering the factors above, emphasis is given to the factor in subparagraph 7b(1), above. Before considering the other factors, the necessity or usefulness of the representative's services should be considered. If the necessity for the service is questionable, the fee should be kept to a minimum. Many States prescribe, by statute or administrative regulation, the maximum dollar or percentage amount which can be charged. Others permit a sliding scale which allows certain percentages on various portions of the award.

Since almost all States in one way or another regulate the amount of legal fees for claimants' representatives, any person approving a legal fee under this act should be aware of the various States' workers' compensation laws governing attorney's fees in that DO's jurisdiction.

d. If the requested fee is reduced, the DD must advise the attorney or representative in writing of the reduction, and state the reason(s) for the reduction. This may be stated in the compensation order approving the fee or in a letter accompanying the compensation order; however, any change must be justified. The recipient of a fee for representation of a claimant, if dissatisfied with the amount awarded, may appeal to the Benefits Review Board (BRB) for a review of the award.

e. In the absence of collusion, when the parties in arm's length settlement negotiation have reached an agreement on the amount of the fee which is the responsibility of the employer/carrier, the DD should approve the fee unless it is clearly excessive (Ballard v General Dynamics, 12 BRBS 966 (1980) and Watkins v Ingalls, 26 BRBS 179 (1993)).

8. Compensation Orders. All attorney and representative fees are to be approved by compensation order. The only exception to this rule is in those instances where there is a settlement which is deemed approved when not specifically disapproved within thirty days after submission, as provided under section 8(i) of the Act. The regulations, at section 702.241(e), provide that an attorney fee which is included in a settlement agreement approved in this manner, shall also be considered approved by the DD, administrative law judge, Board or court.

9. Special Fund Liability. Based upon U.S. Court of Appeals decisions on this issue it is now generally well settled that the Special Fund cannot be held liable for attorney fees (see also PM 6-203.6).