Rock and a Hard Place - Labor Code § 5814.5

by Sean W. Morrisroe (December 6, 2018)

It’s a bad place to be - between a rock and a hard place. Mick Jagger has sung about it.

You’ve seen defense counsel stuck there at the Board. At a hearing, an aggressive applicant’s attorney demanding a penalty for delayed or refused payment of some benefit post award, and at the same time, demanding reasonable attorneys’ fees for enforcement efforts. Labor Code § 5814.5 creates this proverbial precarious geological hazard. If the defendant doesn’t pay the penalty demanded by the applicant’s attorney, the resulting threat is ongoing litigation with growing, mounting, painful hourly attorney fees.

A simple example, a $50,000 C&R is paid a few days late. Applicant’s counsel files a penalty and attorney fee petition per Sections 5814 and 5814.5, demanding a 25% penalty of $12,500 and attorney fees of $1,500 to date to rectify the matter. The defense unsuccessfully attempts to settle for less than the full $12,500 during the half day MSC, with the penalty issue and attorney fees left unresolved and set for trial. While leaving this courtroom, date in hand, applicant’s counsel forecasts ongoing mounting attorney fees to file exhibits, prepare for, and appear at, trial. Given an hourly rate in the neighborhood of $400, the threat is disconcerting.

It’s a situation which doesn’t get better with time. By the trial date, applicant’s counsel claims fifteen hours have now been spent at $400 per hour, amounting to $6000 in reasonable attorney fees. Before long, the tail is wagging the dog. It becomes more about the power play for attorney fees rather than the underlying penalty issue. Mr. Toad is at the wheel of your $400 a mile cab ride “merrily” on the “way to nowhere in particular…..where the roads are perpendicular”.

Attorneys’ fees can add up. An admittedly extreme example can be found in Charles Abernathy v. Whitwood Baptist Church, Framers Westlake Village 2012 Cal. Work. Comp. P.D. LEXIS 5. Long story short, defendants discontinued ongoing (14 years of) quarterly lump sum payments ($6,250) for medical expenses to an out-of-state applicant who was awarded 100% total permanent disability years earlier. The vent-dependent quadriplegic took issue with the carrier’s unilateral cessation of the payments, leading to a trial near his home in Oregon. (The California WCJ and counsel spent a litigious week up in The Beaver State). Applicant prevailed on the merits of the medical treatment issue, and his attorney was awarded $112,948 in attorney fees for 282.37 hours at $400 per hour.

Most applicants’ attorneys do not proceed with such aggressiveness. Most do try to resolve such issues more quickly and reasonably. Most applicants’ attorneys desire to maintain a reasonable long-term working relationship with the defense attorneys, with whom they will have cases for years to come.

Happily, many applicant attorneys avoid significant battles given their experience that Judges at trial ultimately twist arms to resolve that matter with a much reduced fee. This will often make the venture less monetarily worthwhile. That would seem to be another factor in why these penalty-attorney sieges are more the exception than the rule.

But what is the answer when applicant’s counsel commences the penalty-attorney fees scorched earth March to the Sea? What does one do when faced with the rabid applicant’s counsel who seemingly enjoys stringing the litigation out to maximize fees for enforcement of an award? No easy answer.

The junior partner of one such mad dog applicant’s attorney suggested that the best thing to do is simply pay the demand early quickly. But, one cannot simply roll over when that dog barks. Rather, a logical unemotional evaluation needs to be made at the onset of such a dispute as to actual exposure on the alleged penalty. The facts surrounding the alleged penalty, and the applicable law, need to be clearly understood. Emotions and bravado need to be put to the side. If there is, or probably is, a valid penalty, be reasonable and flexible and quickly make the best deal.

On this issue, some WCJs wisely recommend that the best course of action is to put your best offer in writing to the applicant’s counsel. These same Judges indicate that consideration will be given to the reasonableness of such an offer in deciding the remaining issues. Some Judges view such a written offer as admissible at trial on the penalty and attorney fees issues, for the purpose of determining which side was acting most reasonably.

If possible, at the first and subsequent hearings, involve the Judge in tempering the applicant’s attorney and their demands.

But, if after a thorough exposure evaluation, there is clearly no penalty, fight on!

Sean W. Morrisroe is a Partner in Bradford & Barthel’s Oakland office. Mr. Morrisroe was a civil litigator, who specialized in defending personal injury cases, including trying numerous cases through to jury verdict. Since 1997, he has specialized in workers’ compensation law, but he still occasionally litigates in civil courts in workers’ compensation-related subrogation matters. He can be reached at (510) 268-0061 or via email at smorrisroe@bradfordbarthel.com.

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