Barrera v. National Crane Corp. et al
Filing
50
ORDER GRANTING 44 Motion for Summary Judgment; DENYING 48 Motion to Strike. Signed by Judge Nancy Stein Nowak. (kh, )
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
SONNY BARRERA,
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Plaintiff,
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v.
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NATIONAL CRANE CORP. and
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THE MANITOWOC CO., INC., d/b/a
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National Crane,
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Defendants.
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______________________________________ §
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FIRST LIBERTY INSURANCE
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CORPORATION,
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Intervenor Plaintiff,
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v.
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NATIONAL CRANE CORP. and
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THE MANITOWOC CO., INC., d/b/a
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National Crane,
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Intervenor Defendants.
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CIVIL ACTION NO.
SA-10-CV-0196 NN
ORDER ON INTERVENOR’S CLAIM
This order addresses the pending motion for summary judgment. The motion
addresses the remaining issues in this case. After considering the pleadings and
applicable law, I grant the motion.
Nature of the case. This case arose from plaintiff Sonny Barrera’s lawsuit against
defendant National Crane Corporation and defendant The Manitowoc Company, Inc.
(together, the defendants). Barrera sued for damages flowing from an on-the-job
accident. The defendants settled with Barrera for $30,000. First Liberty Insurance
Corporation (Liberty) then sought to intervene to recover its subrogation interest by
virtue of its payment of workers compensation benefits to Barrera.1
After Liberty asked to intervene, the defendants asked to deposit the settlement
money into the court’s registry.2 I conducted a hearing to explore the possibility of
settling Liberty’s claim.3 All agreed to placing the settlement money with Barrera’s
attorneys pending resolution of Liberty’s claim. I granted Liberty’s request to
intervene.
Since then, Liberty and Barrera have been unable to agree about the disposition
of the settlement money. I asked for briefing on the disputed issues. Barrera moved for
summary judgment on the disputed issues. Liberty responded one day late and sought
an extension of time. Barrera objected to the extension of time and asked the court to
strike Liberty’s response. I will overrule Barrera’s objection and consider Liberty’s
response in determining whether summary judgment is appropriate. Summary
1
Docket entry # 34.
2
Docket entry # 35.
3
Docket entry # 37 (referring to status hearing).
2
judgment is appropriate “if [Barrera as] the movant shows that there is no genuine
dispute as to any material fact and [Barrera] is entitled to judgment as a matter of law.”4
Barrera’s motion for summary judgment. In his motion, Barrera argued that
Texas workers compensation law entitles him to one-third of the settlement money to
pay his attorneys. Barrera explained that he agreed to pay his attorneys 40% of any
recovery in this lawsuit, after his expenses. Barrera presented evidence of expenses in
the amount of $27,275.36. Barrera asserted that he is entitled to one-third of the
settlement money as an attorney fee.
Liberty did not dispute that Barrera is entitled to an attorney-fee award, but
argued that summary judgment is inappropriate because Barrera’s contingent-fee
arrangement with his attorneys is irrelevant to Liberty’s claim and because Barrera
failed to show expenses in the amount of $27,275.36 were reasonable to obtain a $30,000
settlement. Barrera maintained that a reasonableness determination is not required.
Texas workers compensation law.
The Texas Workers’ Compensation statute permits an employee to seek
damages from the third-party tortfeasor. In such case, the insurance
carrier is subrogated to the rights of the employee for any benefits paid by
the carrier. This right creates a lien in favor of the insurance carrier in the
amount it has paid to an employee out of the first money recovered from
4
Fed. R. Civ. P. 56(a).
3
the third-party tortfeasor.5
Applied to this case, Liberty, as the insurer carrier, has a subrogation right and a lien in
the amount it has paid to Barrera as workers compensation benefits out of the first
money recovered in this lawsuit. Under Texas workers’ compensation law, “[t]he net
amount recovered by a claimant in a third-party action [like Barrera] shall be used to
reimburse the insurance carrier [like Liberty] for benefits, including medical benefits,
that have been paid for the compensable injury.”6 Because Liberty paid benefits in an
amount greater than $30,000, Liberty has a subrogation right to the entire amount
subject to Texas law for an award of attorney fees.
Award of attorney fees. “[A]s compensation for pursuing the third-party action,
the employee’s attorney may recover fees for services rendered.”7 “Such fees are
payable out of the carrier’s subrogation recovery in an amount not to exceed one-third
of the insurance carrier’s recovery. Thus, the ‘net amount recovered’ by the employee is
the third-party recovery less the employee's attorney’s fees.”8
Under these legal principles, Barrera’s attorneys are entitled to an attorney fee of
5
Texas Workers’ Compensation Ins. Fund v. Alcorta, 989 S.W.2d 849, 851 (Tex. App.—San
Antonio 1999, no pet.).
6
Tex. Labor Code § 417.002(a).
7
Alcorta, 989 S.W.2d at 851.
8
Alcorta 989 S.W.2d at 852 (citations omitted).
4
one-third of the $30,000 settlement allocated to Liberty. The only question before the
court is whether Barrera must demonstrate an award of $10,000 for attorney fees and
expenses is reasonable and necessary. Barrera maintained “there is no requirement that
[his] expenses be shown to be reasonable because the failure to pay for the previously
incurred costs will give the carrier a windfall at the expense of the injured Plaintiff.”9
Statutory provisions for an attorney-fee award. Texas law “provides three ways
by which an attorney may recover fees based upon a subrogation recovery: (1) where
the insurer has an attorney but he does not actively represent [the insurer]; (2) where
the worker’s attorney represents both the worker and the insurer; and (3) where the
insurer has an attorney who actively represents it and participates in obtaining a
recovery.”10 “An attorney ‘actively represents’ a carrier when he or she ‘takes steps,
adequate when measured by the difficulty of the case, toward prosecuting the claim.’”11
“In determining whether an attorney actively represented the carrier’s interest, the
controlling factor is not who aided in the claimant’s recovery but, rather, who aided in
9
Docket entry # 48, p. 3.
10
Erivas v. State Farm Mut. Auto. Ins. Co., 141 S.W.3d 671, 677 (Tex. App.—El Paso 2004,
no pet.).
11
Erivas, 141 S.W.3d at 678.
5
the carrier’s recovery.”12
Here, the evidence indicates that Liberty has an attorney, but Liberty’s attorney
did not actively represent Liberty’s interest in obtaining a recovery from the defendants.
Although Liberty’s attorney asked to intervene, Texas courts require more for active
representation of the carrier’s interest.13 In the absence of active representation, the
12
See Morales v. Michelin N. Am., 351 S.W.3d 120, 123 (Tex. App.—San Antonio 2011, no
pet.) (internal citation omitted) (writing in a workers compensation dispute, “‘Active
representation requires more than filing pleadings asserting the carrier's subrogation
interest,’” and explaining that active participation includes “serving discovery requests,
preparing and delivering discovery products, deposing witnesses, hiring experts,
participating in hearings, preparing the charge, negotiating a settlement, and the like);
Elliott v. Hollingshead, 327 S.W.3d 824, 836 (Tex. App.—Eastland 2010, no pet.).
13
See Elliott, 327 S.W.3d at 836 (determining that carrier’s attorney actively represented
his client’s interest by filing a plea in intervention, twice amending the plea in intervention,
attending depositions and mediation, entering into stipulations as to the amount of benefits
defendant-employer paid to deceased employee’s minor children and employer
subrogation rights, moving for order nunc pro tunc seeking clarification of the trial court’s
rulings on motion for summary judgment, and participating in a hearing on the motion;
the court found the carrier’s attorney clearly took steps to protect employer’s subrogation
rights and aided in its recovery); Caesar v. Bohacek, 176 S.W.3d 282, 285 (Tex.
App.—Houston [1 Dist.] 2004, no pet.) (explaining why the carrier’s attorney actively
represented the carrier; the attorney filed a petition in intervention, designated the carrier’s
expert witnesses, produced documents establishing the amount of workers’ compensation
benefits paid to the injured employee, negotiated a settlement with the defendant and his
insurer, and filed a copy of the settlement agreement with the trial court); New York
Underwriters Ins. Co. v. State Farm Mut. Auto. Ins. Co., 856 S.W.2d 194, 203 (Tex.
App.—Dallas 1993, no pet.) (determining that “an attorney did not actively represent the
carrier’s interest” where the injured employee’s attorney was solely responsible for
negotiating the settlement with the defendant, and the carrier’s attorney took no part in
settlement negotiations, the carrier’s attorney refused the defendant’s offer to settle for
more than the benefits paid, the carrier’s attorney refused the defendant’s offer to settle for
the amount of the benefits paid and filed suit).
6
following statutory provision applies:14
An insurance carrier whose interest is not actively represented by an
attorney in a third-party action shall pay a fee to an attorney representing
the claimant in the amount agreed on between the attorney and the
insurance carrier. In the absence of an agreement [between the claimant’s
attorney and the insurance carrier, the court shall award to the attorney
payable out of the insurance carrier's recovery:
(1) a reasonable fee for recovery of the insurance carrier’s interest that may
not exceed one-third of the insurance carrier’s recovery; and
(2) a proportionate share of expenses.15
In this case, there was no agreement, so Barrera is entitled to “a reasonable fee for
recovery of the insurance carrier’s interest that may not exceed one-third of the
insurance carrier’s recovery” and “a proportionate share of expenses.”
Barrera argued that Texas law does not require a finding of reasonableness for an
award of attorney fees, but the use of the language “reasonable fee” in statutory
provision quoted above implicitly requires a reasonableness finding. Liberty
complained that Barrera provided insufficient documentation to support an award of
one-third of the settlement money, but Texas courts do not require the claimant’s
attorney to submit a detailed account of specific hours expended and an hourly rate to
14
See Morales v. Michelin N. Am., 351 S.W.3d 120, 124 (Tex. App.—San Antonio 2011, no
pet.) (“Subsection (c) does not apply to a contest between the claimant and the carrier. If
a claimant improperly resists paying the carrier its subrogation interest, the carrier may
seek to recover its attorney’s fees in a declaratory judgment action.”).
15
Tex. Labor Code § 417.003(a).
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justify an award of attorney’s fees under Texas workers compensation law.16
In the Fifth Circuit, courts use the “lodestar” method and the factors set forth in
Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974) to determine
statutorily authorized attorney fees.17 Although I found no opinion in which the
Supreme Court of Texas explicitly adopted this method,18 Texas courts have often used
the lodestar method and the Johnson factors to determine a reasonable attorney fee.19
Although the lodestar method does not quite fit a contingent-fee recovery, the Johnson
factors are helpful in determining the reasonableness of a $10,000 award.
Application of the Johnson factors. The twelve Johnson factors are: (1) the time
16
See Twin City Fire Ins. Co. v. Meave, 743 S.W.2d 765, 766 (Tex. App.—Hous. [1st Dist.]
1988, no writ); Univ. of Tex. Sys. v. Melchor, 696 S.W.2d 406, 408 (Tex. App.—Hous. [14th
Dist. 1985, no writ).
17
McClain v. Lufkin Indus., 519 F.3d 264, 284 (5th Cir. 2008) (internal citations omitted).
18
See Mid-Continent Cas. Co. v. Chevron Pipe Line Co., 205 F.3d 222, 232 (5th Cir. 2000)
(“Because Texas courts engage in a similar analysis, it has not been necessary for our court
to decide whether the Johnson factors control in Texas diversity cases.”).
19
See Gen. Motors Corp. v. Bloyed, 916 S.W.2d 949, 960 (Tex. 1996) (explaining in a class
action case about defective truck gas tanks that one of two methods for calculating attorney
fees is the lodestar method and citing Johnson); City of Houston v. Levingston, 221 S.W.3d 204,
237 (Tex. App.—Houston [1st Dist.] 2006, no pet.) (stating in a Texas whistleblower statute
case, “[a]fter calculating the lodestar amount, a trial court can adjust the lodestar amount
upward to account for the well-established Johnson factors”); County of Dallas v. Wiland, 124
S.W.3d 390, 403 (Tex. App.—Dallas 2003, pet. granted), rev. on grounds other than attorney
fees, 216 S.W.3d 344 (Tex. 2007) (discussing, in a civil rights case tried in state court, the
lodestar method of calculating attorney fees using the Johnson factors).
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and labor required; (2) the novelty and difficulty of the issues; (3) the skill required to
perform the legal service adequately; (4) the preclusion of other employment by the
attorney because he or she accepted the case; (5) the customary fee for similar work in
the community; (6) whether the fee is fixed or contingent; (7) time limitations imposed
by the client or the circumstances; (8) the amount involved and the results obtained; (9)
the experience, reputation, and ability of the attorneys; (10) the undesirability of the
case; (11) the nature and length of the professional relationship with the client; and (12)
awards in similar cases.20
Time and labor required. Barrera’s attorneys asserted that they actively pursued
this case for 18 months. During that time, the attorneys participated in written
discovery, conducted depositions, inspected the accident site, attended mediation,
appeared for a hearing, and briefed the disputed issues. Barrera’s lawyers practice in
Houston and Lubbock. Personal injury lawyers practicing in Houston typically receive
a median hourly rate of $228; and in Lubbock, a median hourly rate of $190.21
Considering the time and labor required, and the median hourly rates, this factor
weighs in favor of reasonableness for a $10,000 award.
Novelty and difficulty of the issues. Barrera’s attorney approached this case with
20
Johnson, 488 F. 2d at 717-19.
21
St. Bar of Tex., Dep’t of Research & Analysis, 2009 Hourly Fact Sheet.
9
the theory that Barrera’s injury resulted from a defective crane. Cases involving
defective products require specialized knowledge of products liability law, and in this
case, an understanding of safety and manufacturing standards for cranes. During the
deposition of a defendant employee, the attorneys discovered evidence implicating
Barrera’s employer rather than the defendants who manufactured the crane. Because
Texas workers compensation laws prevented Barrera from suing his employer, the
attorneys were forced to change their litigation strategy to obtain any recovery at all.
Considering that Barrera could not have discovered either evidence of defectiveness or
employer liability without the benefit of a significant number of attorney hours, this
factor weighs in favor of reasonableness.
Skill required to perform the legal service adequately; experience, reputation,
and ability of the attorneys. These considerations are evidenced where “counsel
performed diligently and skillfully, achieving a speedy and fair settlement,
distinguished by the use of informal discovery and cooperative investigation to provide
the information necessary to analyze the case and reach a resolution.”22 I do not
question the legal skill, ability, experience, and resources of Barrera’s attorneys. The
attorneys appear to have substantial litigation experience and were required to prepare
for the depositions. The defendants were represented by experienced counsel from
22
Di Giacomo v. Plains All Am. Pipeline, No. H-99-422001, 2001 U.S. Dist. LEXIS 25532, at
*36 (S.D. Tex. Dec. 18, 2001).
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reputable law firms who challenged and defended Barrera’s claims. Despite an
unexpected turn in the litigation, Barrera’s attorneys recognized the improbability of a
greater recovery and settled with the defendants. Barrera’s attorneys also sought to
settle Liberty’s claim. Considering the circumstances, a $10,000 award more likely
represents less than the degree of experience, competence and effort necessary to
achieve the settlement. This factor weighs in favor of reasonableness.
Preclusion of other employment by the attorneys. There is no indication that this
case prevented Barrera’s attorneys from representing other clients. This factor weighs
neither in favor or against reasonableness.
Customary fee. Typically, attorneys pursue personal injury and products
liability cases a contingency-fee basis. Plaintiffs typically contract to pay their attorneys
40% of any recovery after costs. Barrera’s attorneys prosecuted this case on a
contingency-fee basis and advanced all costs and expenses incurred in connection with
the case. A risk of no recovery and significant uncertainty existed. These risks are
properly considered in awarding attorneys’ fees. The legal profession accepts
contingent fees that exceed the market value of the services if rendered on a noncontingent basis as a legitimate way of assuring competent representation for plaintiffs
who cannot afford to pay on an hourly basis regardless of whether they win or lose.23
23
See In re Wash. Pub. Power Supply Sys. Secs. Litig., 19 F.3d 1291, 1299 (9th Cir. 1994).
11
Community standards for this type of case weigh in favor of reasonableness.
Time limitations imposed by the client or the circumstances. The parties in this
case operated under a reasonable time-frame and complied with the scheduling order.
Barrera’s attorneys were required to travel from Texas to South Dakota to inspect the
accident site, to travel to depose the defendants, and to travel from Houston and
Lubbock to San Antonio to attend a hearing. I do not question whether Barrera’s
attorneys devoted significant time to ensure the case was properly handled. This factor
weighs in favor of reasonableness.
The amount involved and the results obtained. “‘[T]he most critical factor in
determining the reasonableness of a fee award ‘is the degree of success obtained.’”24
Courts have consistently recognized that the result achieved is a major factor to be
considered in making a fee award.25 Although on its surface a $30,000 recovery may
appear unreasonable considering the expenditure of attorney hours and expenses in this
case, the unexpected turn in the litigation implicating Barrera’s employer explains the
proportionality. Had Barrera’s attorneys not pursued this case, Liberty would recover
nothing. Given the nature of the litigation, the issues involved, the risks faced, the
quality of the work performed, and the defenses confronted, a $10,000 award is
24
Farrar v. Hobby, 506 U.S. 103, 114 (1992) (citation omitted).
25
Hensley, 461 U.S. at 436.
12
reasonable in relation to the benefit achieved.
The undesirability of the case. From the outset, this case was undesirable
because Barrera lacked the financial resources to hire an attorney. Attorneys who
represent clients who cannot afford to pay them must accept the risks involved with
contingency-fee representation. The risk that investigating the client’s claim and
conducting discovery will reveal significant weaknesses in a client’s claim is an inherent
risk. An injured Texas worker has no likelihood of a recovery in this type of case unless
an attorney is willing to accept that risk. Taking the risk weighs in favor of
reasonableness in this case.
Nature and length of the professional relationship with the client. Barrera’s
attorneys did not address the nature and length of their professional relationship with
Barrera. As such, this factor weighs neither in for nor against reasonableness.
Awards in similar cases. Although Barrera’s attorneys did not address awards in
similar cases, the $30,000 settlement does not appear unreasonable considering the turn
in the litigation. An award of $10,000 as one-third of the recovery is not unreasonable.
Expenses. Although Liberty questioned the reasonableness of Barrera’s
expenses, I do not find the expenses unreasonable considering the unexpected turn in
the litigation implicating Barrera’s employer. Under the circumstances of this litigation,
Barrera’s expenses are reasonable and contributed to the ultimate recovery obtained
13
through the settlement.
Conclusion. The Johnson factors weigh in favor of the reasonableness of a
$10,000 attorney-fee award. After deducting that amount from the settlement money,
$20,000 is available for Barrera’s expenses. Because Barrera’s expenses are greater than
$20,000, he is entitled to the balance of the settlement money. Based on the foregoing, I
deny Barrera’s motion to strike Liberty’s response (docket entry # 48), grant Barrera’s
motion for summary judgment (docket entry # 44) and award Barrera’s attorneys the
full amount of the settlement money, or $30,000.
SIGNED on January 25, 2012.
_____________________________________
NANCY STEIN NOWAK
UNITED STATES MAGISTRATE JUDGE
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