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Texas Workers' Compensation Insurance Fund v. Alcorta3/17/1999
REVERSED AND REMANDED
The instant dispute concerns the propriety of an order apportioning attorney's fees out of a workers' compensation subrogation recovery. For the following reasons, we reverse the trial court's order and remand the cause to the trial court.
Factual and Procedural History
The parties stipulated to the underlying facts. On January 6, 1995, during the course and scope of his employment, Abel Alcorta was injured in an automobile accident due to the negligence of Amber Starr. At the time of the accident, Alcorta's employer was covered by a workers' compensation policy issued by Texas Workers' Compensation Insurance Fund (hereinafter "the Fund"). The Fund paid out $28,031.11 in medical and indemnity benefits to Alcorta. Thereafter, Alcorta sued Starr for recovery of his damages. The Fund intervened in the suit, asserting its statutory right of subrogation and seeking repayment of the benefits it paid on Alcorta's behalf. Prior to trial, the parties settled the dispute, with Starr's policy limits of $20,035.00 tendered and deposited into the court registry of the court in release of all claims asserted against Starr. Thereafter, the Fund filed a motion for apportionment, asserting entitlement to all of the settlement monies, and disputing Alcorta's entitlement to attorney's fees.
At the hearing, counsel for Alcorta argued that pursuant to section 417.002(a) of the Texas Labor Code, the Fund is entitled to the recovered settlement amount less all the attorney's fees owed and taxable costs of court. Alcorta had entered into a contract for representation under which the attorney's fees amounted to $8,014.00. In response, the Fund opposed Alcorta's reliance upon section 417.002(a), arguing that an award of attorney's fees, if appropriate, is governed by section 417.003(c), which limits such fees to no greater than one-third of the insurance carrier's recovery. The trial court agreed with Alcorta's position. The trial court expressly rejected section 417.003's application to the instant dispute, and awarded to Alcorta's attorney the amount of fees for which she had contracted, $8,014.00, or approximately 40% of the recovery. Costs of court in the amount of $813.50 were also awarded to Alcorta, with the remaining balance of $11,207.50 awarded to the Fund.
On appeal, the Fund challenges the trial court's order on two levels. It first maintains that it is entitled to the total settlement recovery, as a matter of law, because it is less than the amount of its statutory lien. The Fund argues that an award of attorney's fees to Alcorta's counsel defeats its well-established right to the "first money" paid by the third-party tortfeasor. Alternatively, the Fund contends the trial court's order impermissibly circumvents the statutory limit of fees allowed under section 417.003(c). We agree with the Fund's second-stated argument, but not the first.
Third Party Liability Claims
We review the trial court's award of attorney's fees under an abuse of discretion standard. Bocquet v. Herring, 972 S.W.2d 19, 20 (Tex. 1998); Twin City Fire Ins. Co. v. Jones, 834 S.W.2d 114, 116-17 (Tex. App.-Houston [1st Dist.] 1992, writ denied). An abuse of discretion lies when the trial court misapplies the law. See Landon v. Jean-Paul Budinger, Inc., 724 S.W.2d 931, 935 (Tex. App.-Austin 1987, no writ). The dictates of section 417.003(c) that the trial court "shall award and apportion" attorney's fees "out of the insurance carrier's subrogation recovery" are not discretionary. Bocquet, 972 S.W.2d at 20. Likewise, the court "shall consider the benefit accruing to the insurance carrier as a result of each attorney's service." Tex. Lab. Code Ann. ยง
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