Supreme Court Decides Irwin Factors Should Not Be Considered to Reduce an Excessive Award of Attorney Fees ($1,000.00 per hour)

In David v. Bartel Enterprises, 856 N.W.2d 271 (Minn. 2014), the Minnesota Supreme Court addressed whether the Irwin factors could be considered to reduce an award of Roraff attorney fees based on the 25/20 statutory formula. In the case, the Employee sustained a back injury and received extensive medical treatment. The parties eventually entered into a settlement wherein the Employer and Insurer agreed to resolve all of the medical intervention claims. The Employer and Insurer resolved these claims for $233,054.50. The Employee’s attorney subsequently sought an award of Roraff attorney fees in the amount of $36,810.90, based upon the statutory formula and disregarding the $13,000.00 cap on fees.

A hearing was held on the attorney fee dispute. At the hearing, the Employer and Insurer argued that the statute limited attorney fees to $13,000.00. In addition, they argued that, per the Irwin factors, the statutory formula over-compensated the Employee’s attorney as a $13,000.00 award would result in an attorney fee of $1,000 per hour. The compensation judge refused to consider whether the statutory fee was reasonable in light of the Irwin factors. Instead, the judge simply applied the statutory formula and awarded the Employee’s attorney $13,000.00.

The Employer and Insurer appealed, asserting a constitutional challenge to the statutory formula. Again relying on Irwin, they argued that the statute was unconstitutional to the extent it precluded judicial review of whether a fee award under the formula was excessive. The Workers’ Compensation Court of Appeals affirmed the decision of the compensation judge, noting that they did not have jurisdiction to address the constitutional challenge. The matter was then appealed to the Minnesota Supreme Court.

The Minnesota Supreme Court elected not to expand its reasoning in Irwin to include cases in which an attorney fee is awarded pursuant to the statutory formula. In doing so, they found that an attorney fee calculated according to the statutory formula was, per se, not excessive, absent “exceptional circumstances.”

In short, Employee’s attorneys can claim fees in excess of the statutory formula when they believe that they have been undercompensated, but Employers and Insures cannot use the Irwin factors when they believe the formula would overcompensate counsel for the Employee. In addition, as of October 1, 2013, Minn. Stat. §176.081 was revised and now permits contingency attorney fees of 20% of the first $130,000 of compensation awarded. In turn, the David decision opens the door to mandatory attorney’s fees of $26,000, regardless of the time and effort spent by counsel for the Employee.