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Hobson v. Mid-Century Insurance Co.2/27/2001
AFFIRMED
In these two cases, consolidated for appeal, the tr ial courts ruled as a matter of law that A.R. S. § 23-1023(C) does not permit an order compelling a workers' compensation lienholder to pay, fr om the amount it is paid on account of its statutorily prescribed lien, an equitable share of the attorney's fees and costs incurred by the claimant in a third-party tort action. The trial courts also ruled that, so construed, § 23-1023 does not unconstitutionally violate the separation of powers doctrine by infringing on the superior courts' equitable power. Because we agree with those rulings, we affirm.
BACKGROUND
These cases have similar, undisputed facts. After plaintiff/appellant Roger Hobson sustained an industrial injury, his employer's workers' compensation carrier, defendant/ appellee Mid-Century, accepted his claim and paid him benefits in excess of $36,000. Hobson, through his attorney Robert Q. Hoyt, then pursued a third-party action which eventually settled for $33,000, with Mid-Century's approval. After deduction of Hoyt's attorney's fee and costs, Mid-Century ultimately received $20,698.13 in payment of its workers' compensation lien pursuant to § 23-1023.
Hoyt then requested Mid-Century to pay a portion ($6,899.38) of his one-third contingency fee from its lien proceeds. When Mid-Century refused to do so, Hobson and Hoyt (collectively Hobson) filed a declaratory relief action against Mid-Century. Relying on the equitable "common fund" doctrine, Hobson requested the trial court to order Mid-Century to pay a proportionate shar e of the attorney's fees incurred in the third-party action. Mid-Century moved to dismiss the complaint. In granting that motion, the trial court noted that Mid-Century's refusal to pay a proportionate share of Hobson's attorney's fees was "unfair and works an apparent injustice" but that Hobson's "common fund" theory was "inconsistent with the clear language of A. R. S. § -1023(C) and existing case law." Hobson's appeal followed the trial court's entry of judgment in favor of Mid-Century.
Plaintiff/appellant Juano Morales also sustained an industrial injury and received workers' compensation benefits totaling $45,193. 71 from his employer's workers' compensation carrier, the State Compensation Fund (SCF). Morales, through Hoyt, brought a third-par ty action which ultimately settled for $250, 000, with SCF's consent. F rom that amount, Hoyt received $100,000, representing his forty percent contingency fee, plus $10,000 in costs; SCF r eceived payment in full on its lien of $45,193.71; and Morales received the balance of $94,806. 29, on which SCF asserted a "credit lien" against any incurred but unpaid workers' compensation benefits or benefits to be paid in the future and related to the same injury.
Hoyt and Morales (collectively Morales) then made a claim against SCF pursuant to A.R. S. § 12-821. 01, seeking for ty percent (or $18, 077.48) of the money paid to SCF on its lien, plus forty percent (or $4,000) of the costs Hoyt had expended in prosecuting the third-party action. The claim also sought a forty percent (or $37,922. 52) reduction from SCF's asserted "credit lien" on the settlement proceeds that Morales had received. After SCF failed to respond to the claim, Morales filed a declaratory r elief action against SCF alleging the aforementioned claims and essentially seeking the same type of equitable relief that Hobson had sought: an order, pursuant to the common fund doctrine, requiring SCF to pay a proportionate share of attorney's fees and costs incurred in the third-party action. The trial court granted SCF's motion for summary judgment, and Morales's appeal followed.
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