Court of Appeals of Texas, Dallas.

LUMBERMENS MUTUAL CASUALTY COMPANY, Appellant,

v.

Peggy Janette PARRENT, Appellee.

No. 05-96-01144-CV.

|

April 20, 1998.

Before: LAGARDE, KINKEADE, and CHAPMAN, Justices.

OPINION

SUE LAGARDE, Justice.

*1 In August 1990, Peggy Janette Parrent, an employee of Xerox Corporation, while in the course and scope of her employment, slipped and fell on the premises of a Kinko’s graphic shop. Lumbermens Mutual Casualty Company, Xerox’s workers compensation insurance carrier, paid Parrent $66,323 in medical and indemnity benefits. Parrent retained attorney Patricia S. Montes to represent her in a third-party liability claim against Kinko’s. Parrent agreed to pay Montes forty percent of her recovery plus expenses. Montes, on behalf of Parrent, filed suit against Kinko’s. Lumbermens retained its own counsel and intervened in Parrent’s suit against Kinko’s to recover the $66,323 it paid Parrent in medical and indemnity benefits. Parrent settled her dispute with Kinko’s for $80,000. Out of the settlement proceeds, Parrent placed $66,323 into the court’s registry and requested the court to determine how that sum should be apportioned. Following a hearing, the trial court found that the settlement was obtained solely through the efforts of Parrent’s counsel without any help or assistance from Lumbermens or its counsel.¹ The trial court awarded Parrent’s counsel, Montes, $50,000 of the $66,323 for attorney’s fees and expenses and the remainder, $16,323, to Lumbermens to partially reimburse it for past workers compensation benefits paid to Parrent.

Lumbermens appeals the trial court’s apportionment of the funds placed into the court’s registry, arguing that the trial court erred in: (1) awarding Montes attorney’s fees in an amount that exceeded the statutory maximum allowed under the workers compensation statute; (2) awarding attorney’s fees before Lumbermens received its full lien recovery; and (3) allowing Montes to recover her expenses out of the subrogation recovery. We disagree with each assertion and affirm the judgment of the trial court.

Applicable Law

This is an “old law” workers compensation case.² The parties agree that the relevant statute in effect at the time Parrent sustained her injury is section 6a(a)(b) and (c) of former article 8307 of the Texas Revised Civil Statutes Annotated entitled “recovery from third person; subrogation; attorneys’ fees.” Tex.Rev.Civ.Stat.Ann. art. 8307 § 6a (Vernon Supp.1986). In article 8307, section 6a, the legislature created two benefits for a workers’ compensation carrier when a claimant receives a settlement or judgment in a third party action. One, the net amount recovered must first be applied to reimburse the carrier for past benefits and medical expenses it has paid. Two, any amount in excess of those benefits shall be treated as an advance against future benefits. Tex.Rev.Civ.Stat.Ann. art. 8307 § 6a(c) (Vernon Supp.1986);³ see also Hartford Accident and Indem. Co. v. Buckland, 882 S.W.2d 440, 445 (Tex.App.-Dallas 1994, writ denied). The net amount of recovery is “obtained after deducting all expenses necessary for achieving the settlement or judgment” including attorney’s fees and court costs incurred by the claimant in obtaining his third-party settlement. See Bridges v. Texas A & M University System, 790 S.W.2d 831, 833 (Tex.App.-Houston [14th Dist.] 1990, no writ); see also Insurance Company of North America v. Wright, 886 S.W.2d 337, 344 (Tex.App.-Houston [1st Dist.] 1994, writ denied); Holley v. Hooper, 205 S.W.2d 120, 122 (Tex.Civ.App.-Austin 1947, writ ref’d n.r.e.).

*2 In this case, Parrent settled her case against Kinko’s for $80,000. She agreed to pay her attorney forty percent of her recovery, or $32,000, as attorney’s fees. Additionally, she agreed to reimburse her attorney $3000 in expenses. Therefore, she owed her attorney $35,000 in attorney’s fees and expenses. Consequently, Parrent’s “net amount recovered” is $80,000 minus the $35,000, or a total of $45,000. Because the $45,000 figure is less than Lumbermens’ lien, Parrent is not deemed to have received an advance and Lumbermens does not receive a credit against future payments. Instead, the $45,000 is available to reimburse Lumbermens for the benefits it has already paid to Parrent.

The trial court must also determine whether Lumbermens should pay a portion of the $45,000 as attorney’s fees and, if so, should it pay its own attorney or the claimant’s attorney. Section 6a(b) of article 8307 provides that if the carrier obtains an attorney and if that attorney actively participates in the recovery, “the court shall award and apportion attorney’s fees allowable out of the … subrogation recovery between such attorneys taking into account the benefit accruing to the [carrier] as a result of each attorney’s service;” however, the aggregate of such fees may not exceed one-third of the subrogated interest. Tex.Rev.Civ.Stat.Ann. art. 8307 § 6a(b) (Vernon Supp.1986); see also Chambers v. TEIA, 693 S.W.2d 648, 649 (Tex.App.-Dallas 1985, writ ref’d n.r.e.). Because the trial court found that the settlement was obtained solely through the efforts of Parrent’s counsel, without any help or assistance from Lumbermens or its counsel, it chose to award Parrent’s counsel one-third of the $45,000 subrogation recovery, or $15,000. Therefore, Parrent’s counsel, Montes, received a total of $50,000 for attorney’s fees and expenses ($35,000 plus $15,000) of the $80,000 settlement, or 62.5% of the settlement.

Discussion

In Lumbermens’ second point of error, it asserts that the trial court erred in awarding Montes attorney’s fees before Lumbermens received its full lien recovery. In other words, Lumbermens argues, the trial court should have deducted Lumbermens’ $66,323 lien from the $80,000 settlement before awarding any attorney’s fees.⁴ We disagree. As explained above, the portion of the third-party settlement that may be allocated to reimburse the insurance carrier is the “net amount” recovered, meaning the amount recovered by the injured party after payment of all attorney’s fees and expenses incurred by the injured party in obtaining the settlement. See Bridges, 790 S.W.2d at 833.

In Lumbermens’ first point of error, it asserts that the trial court erred in awarding Montes $50,000 because that amount exceeds the one-third maximum allowed under article 8307. Again, we disagree. Section 6a(b) of article 8307 provides that the trial court cannot award more than one-third of the subrogated recovery as attorney’s fees. In this case, the subrogated recovery was $45,000, and the trial court awarded one-third of that amount, the statutory maximum, to Montes.

*3 In Lumbermens’ last point of error, it asserts that the trial court erred in allowing Montes to recover her expenses out of its lien. We agree that article 8307 does not make any provision for recovery of litigation expenses. However, in this case, the trial court did not award Montes any litigation expenses against Lumbermens, but instead awarded Montes the expenses that Parrent contractually owed her. Accordingly, we overrule all of Lumbermens’ points of error.

Although we find no merit in any of Lumbermens’ points of error, we write further to address an argument inherent in all of Lumbermens’ points of error that is, any interpretation of article 8307 that allows a claimant’s attorney to receive 62.5% of settlement proceeds must be wrong. First, we note that this is an unusual case in that the claimant’s attorney had a high contingency fee and the trial court awarded her the statutory maximum of the subrogated recovery. Although other courts have interpreted article 8307 in the same way the trial court did in this case, we have not found any other case where a claimant’s attorney received 62.5% of the third-party settlement proceeds.

Second, the trial court acted within its discretion in awarding Montes one-third of the subrogated recovery. Had the trial court awarded the attorney’s fees to Lumbermens’ counsel, Montes’s recovery would have been limited to her contract with Parrent. Alternatively, article 8307 provides that the maximum in attorney’s fees that the trial court can award from the subrogated recovery is one-third. The trial court could have awarded one dollar from the subrogated recovery in attorney’s fees. Had it done so, Montes would have received the attorney’s fees set forth in her contract with Parrent and most of the subrogation recovery would have gone to Lumbermens to reimburse it for benefits paid.

Thus, article 8307 does not mandate an inequitable attorney’s fee award. Assuming arguendo that awarding Montes 62.5% of the total settlement funds was inequitable, the inequity did not result from the trial court’s interpretation of article 8307, but instead resulted from the trial court’s discretionary award to Montes of one-third of the subrogated recovery.⁵ Lumbermens does not assert that the trial court abused its discretion in awarding Montes one-third of the subrogated recovery; accordingly, we express no opinion on that issue.

For all the reasons stated above, we affirm the judgment of the trial court.

	Footnotes
1		Because Lumbermens has not asserted a point of error challenging that finding, it is binding on this Court. See Hotel Partners v. KPMG Peat Marwick, 847 S.W.2d 630, 632 (Tex.App.-Dallas 1993, writ denied).
2		In December 1989, the Texas Legislature repealed the existing workers compensation act and enacted a new workers compensation act effective January 1991. See Act of May 15, 1973, 63d Leg., R.S., Ch. 88, 1973 Tex.Gen.Laws 187, amended by Act of June 8, 1985, 69th Leg., R.S. Ch. 326, 1985 Tex.Gen.Laws 1387, repealed by Act of December 13, 1989, 71st Leg., 2d C.S., Ch. 1, 1989 Tex.Gen.Laws 1, 122 (current version at Tex. Labor Code Ann. § 401.001 (Vernon 1996)).
3		Article 8307 § 6a(c) provides in relevant part: (c) If at the conclusion of a third-party action a workers compensation beneficiary is entitled to compensation, the net amount recovered by such beneficiary from the third-party action shall be applied to reimburse the association for past benefits and medical expenses paid and any amount in excess of past benefits and medical expenses shall be treated as an advance against future payments of compensation to which the beneficiary is entitled to receive under the Act.
4		Lumbermens’ proposed apportionment is as follows: First, subtract the $66,323 lien from the $80,000 settlement, leaving a balance for Parrent of $13,677. Parrent contractually owes her attorney forty percent of the $13,677, or $5471, leaving Parrent a net recovery of $8206 (i.e., $13,677 minus $5471). The net recovery is referred to as “future benefit” and is added to the past amount recovered on behalf of the carrier to determine the amount of subrogation recovery. Therefore, in this case, the $8206 future benefit is added to the $66,323 recovered on behalf of the carrier for a total subrogation recovery of $74,529. The trial court then has discretion to award up to one-third of the $74,529 figure, or $24,843, in attorney’s fees to either the claimant’s or carrier’s counsel. If the trial court had awarded the full one-third to Montes, she would have received a total of $30,314 ($5471 plus $24,843), or 37.8% of the total settlement in attorney’s fees. On the other hand, had the trial court chosen not to award Montes any of the subrogated recovery, she would have received only $5471, or 6.8% of the settlement in attorney’s fees.
5		We also note that Lumbermens’ interpretation of article 8307 does not preclude an inequitable result. As discussed in footnote four, under Lumbermens’ formulae, had the trial court chosen not to award Montes any portion of the subrogation recovery, she would have only received 6.8% of the settlement proceeds in attorney’s fees despite her having a forty percent contingency fee contract. In other cases, where the workers compensation lien is greater than the settlement proceeds, and the trial court chooses not to award the claimant’s attorney any portion of the subrogation recovery, the claimant’s attorney will not receive any attorney’s fees.