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In a Blow to Business, Supreme Court Bans Workers Comp Limits on Attorney’s Fees

| April 28, 2016

workers comp florida

The lawyers are smiling. (Daniel Oines)

In a major ruling, the Florida Supreme Court on Thursday said that a state law limiting attorney’s fees in workers-compensation insurance cases is unconstitutional.


The 5-2 ruling in the closely watched case was a victory for attorneys who represent injured workers — and a blow to business groups that have long argued legal fees drive up the costs of workers-compensation insurance. The fee issue will bounce back to the Legislature, where it could spark a fierce debate.

Justice Barbara Pariente, writing for the court’s majority, said the 2009 law is a violation of due-process rights under the Florida Constitution and the U.S. Constitution because it prevents challenges to the “reasonableness” of attorney’s fees awarded in workers-compensation cases. The ruling stemmed from a case in which an attorney was awarded the equivalent of $1.53 an hour in successfully pursuing a claim for benefits for a worker injured in Miami.

Pariente wrote that the goal of the workers-compensation system is to quickly provide benefits to get injured people back on the job at a reasonable cost to employers.

“This case, and many others like it, demonstrate that despite the stated goal, oftentimes the worker experiences delay and resistance either by the employer or the (insurance) carrier,” wrote Pariente, who was joined in the majority by Chief Justice Jorge Labarga and justices R. Fred Lewis, Peggy Quince and James E.C. Perry. “Without the likelihood of an adequate attorney’s fee award, there is little disincentive for a carrier to deny benefits or to raise multiple defenses, as was done here.”

But Justice Charles Canady wrote a dissent that said the law involves a “policy determination” by the Legislature that there should be a relationship between the amount of benefits obtained in workers-compensation cases and the amount of attorney’s fees awarded. The law includes a formula that links benefits and attorney’s fees.

“In reaching the conclusion that the statute violates due process, the majority fails to directly address the actual policy of the statute,” wrote Canady, who was joined in dissent by Justice Ricky Polston. “Instead, the majority assumes — without any reasoned explanation — that due process requires a particular definition of ‘reasonableness’ in the award of statutory attorney’s fees. The definition assumed by the majority categorically precludes the legislative policy requiring a reasonable relationship between the amount of a fee award and the amount of the recovery obtained by the efforts of the attorney. Certainly, this legislative policy may be subject to criticism. But there is no basis in our precedents or federal law for declaring it unconstitutional.”

The case, known as Marvin Castellanos v. Next Door Company, was one of three major challenges to the workers-compensation system that have been pending at the Supreme Court. The other cases have focused on a workers-compensation overhaul that lawmakers and then-Gov. Jeb Bush approved in 2003 to reduce insurance rates for employers.

Business groups received a partial victory Thursday when the Supreme Court said it will not rule in one of the other cases, brought on behalf of former Hialeah Hospital nurse Daniel Stahl who was injured on the job. Justices heard arguments in that case April 6, but it was clear they had questions about the procedural history of the case and a lack of a factual record.

Attorney’s fees have long been one of the most-contentious issues in the workers-compensation system, which handles disputes through a legal process outside of more-typical civil courts. Under the formula included in the 2009 law, for example, attorneys who successfully represent workers can receive fees equal to 20 percent of the first $5,000 in benefits obtained and 15 percent of the next $5,000 in benefits.

The attorney’s fee ruling Thursday stemmed from a case that started in 2009 when Marvin Castellanos was injured while at work at Next Door Company, a manufacturer of metal doors and door frames, Pariente wrote in the majority opinion. But a dispute about the injuries ultimately led to a case going before a judge of compensation claims.

Pariente wrote that the dispute resulted in Castellanos securing benefits with a value of $822.70. His attorney spent 107.2 hours on the case and was entitled to fees of $164.54 — or $1.53 an hour — under the formula. In the dissent, Canady wrote that the amount of attorney’s fees sought in the case were $36,817.50.

In a concurring opinion, Lewis described the attorney’s fees part of the workers-compensation system as “emasculated” and pointed to the example of the $1.53 an hour in fees in the Castellanos case, which he wrote is “clearly unreasonable and insufficient to afford workers the ability to secure competent counsel.”

In striking down the fee law, the majority directed the state to return to a previous law “until the Legislature acts to cure the constitutional infirmity.” Under that previous law, workers will be able to present evidence about how using the fee schedule would lead to “unreasonable” attorney’s fees.

“We emphasize, however, that the fee schedule remains the starting point, and that the revival of the predecessor statute does not mean that claimants’ attorneys will receive a windfall,” Pariente wrote. “Only where the claimant can demonstrate … that the fee schedule results in an unreasonable fee — such as in a case like this — will the claimant’s attorney be entitled to a fee that deviates from the fee schedule.”

The ruling drew quick rebukes from the Florida Chamber of Commerce, Associated Industries of Florida and the business-backed Florida Justice Reform Institute, all of which raised the specter of increased insurance rates. The Florida Chamber, anticipating the possibility of the ruling, had earlier formed a task force to make recommendations to the Legislature about how to respond.

Chamber President and CEO Mark Wilson said in a prepared statement the “potential impact of the high court’s ruling could threaten Florida’s improving business climate. The Florida Chamber remains laser focused on ensuring workers’ comp rates are fair, and we will lead the effort before lawmakers and in the halls of justice to ensure the voices of job creators are heard.”

–Jim Saunders, News Service of Florida

Castellanos v. Next Door Company (2016)

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