Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Sinkler v. American Family Mutual Insurance Company

Court of Appeals of Wisconsin, District III

October 22, 2019

Brian L. Sinkler, Plaintiff-Respondent,
v.
American Family Mutual Insurance Company and James R. Thomas, Defendants, Nicole M. Sinkler, Plaintiff, EMCASCO Insurance Company, Defendant-Appellant.

          APPEAL from an order of the circuit court for Brown County Cir. Ct. No. 2017CV108: MARC A. HAMMER, Judge. Affirmed.

          Before Stark, P.J., Hruz and Seidl, JJ.

          STARK, P.J.

         ¶1 EMCASCO Insurance Company ("EMC") appeals an order distributing the settlement proceeds in a third-party liability action filed under Wis.Stat. § 102.29 (2017-18).[1] EMC argues the circuit court erroneously exercised its discretion by failing to distribute any portion of the reasonable cost of collection to EMC's attorneys, the Ron Harmeyer Law Office LLC ("the Harmeyer firm"). In addition, EMC urges this court to adopt a per se rule that the attorney fees awarded as a reasonable cost of collection in a third-party liability action must be divided between the injured employee's attorneys and the worker's compensation carrier's attorneys on a pro rata basis-that is, in proportion to their clients' respective recoveries.

         ¶2 We conclude the circuit court properly applied the three-part framework set forth in Anderson v. MSI Preferred Insurance Co., 2005 WI 62, 281 Wis.2d 66, 697 N.W.2d 73');">697 N.W.2d 73, when determining and apportioning the reasonable cost of collection in this case. Under the circumstances, the court did not erroneously exercise its discretion by refusing to distribute any portion of the reasonable cost of collection to the Harmeyer firm. We decline EMC's invitation to adopt a per se rule requiring the pro rata distribution of the reasonable cost of collection. Accordingly, we affirm the order distributing the settlement proceeds.

         BACKGROUND

         ¶3 Brian Sinkler was injured in a motor vehicle accident during the course of his employment.[2] Brian made a claim to EMC for worker's compensation benefits, and EMC ultimately paid benefits totaling $51, 321.03 on his behalf.

         ¶4 On April 28, 2015, Brian and his wife, Nicole, retained attorney Ralph Tease from the law firm of Habush Habush & Rottier, SC ("the Habush firm") to pursue a third-party liability claim under Wis.Stat. § 102.29 against the driver of the other vehicle involved in the accident, James Thomas, and Thomas's automobile insurer, American Family Mutual Insurance Company. Brian signed a retainer agreement that stated, in relevant part: "I agree to give [the Habush firm] 33 1/3% of the recovery from my case as their fee. … In the event there is no recovery, I will not be required to pay [the Habush firm]."

         ¶5 On January 27, 2017, the Sinklers-represented by the Habush firm-filed the instant third-party liability lawsuit against Thomas and American Family. The Sinklers' complaint asserted a negligence claim on Brian's behalf and a loss of consortium claim on Nicole's behalf. EMC was also named as a defendant in the Sinklers' lawsuit, based on the worker's compensation benefits it had paid on Brian's behalf.[3]

         ¶6 On March 23, 2017-just shy of two years after the Sinklers retained the Habush firm-EMC retained the Harmeyer firm to represent it in the Sinklers' third-party liability lawsuit. The retainer agreement that EMC executed contained the following provisions regarding the Harmeyer firm's fee:

Subject to Wis.Stat. §102.29, client and [the Harmeyer firm] agree that, with regard to recoveries in tort:
(a) [The Harmeyer firm's] attorney fee shall be contingent upon client's recovery. [The Harmeyer firm] will not charge client an hourly fee under any circumstances.
(b) [The Harmeyer firm's] attorney fee shall be 25% of the gross recovery if the claim is settled before a lawsuit is filed, and one-third of the gross recovery if the claim is settled after a lawsuit is filed. [The Harmeyer firm] and client agree that this is a "reasonable cost of collection," as that terms [sic] is used in Wis.Stat. §102.29.
(c) If [Brian] retains his … own attorney, that attorney shall have no right to recover any fee based, or otherwise contingent, on client's recovery. Client expressly rejects any attempt by any attorney other than [the Harmeyer firm] to charge a fee for any recovery realized by client.
(d) In the event a court … orders the Wis.Stat. § 102.29 reasonable cost of collection attorney fee to be divided between [the Harmeyer firm] and [Brian's] attorney, [the Harmeyer firm] and client agree that no more than one-third of the gross recovery subject to the Wis.Stat. § 102.29 distribution formula shall be considered a "reasonable cost of collection." No more than one-third of the gross recovery subject to the Wis.Stat. § 102.29 distribution formula shall be divided between the attorneys. Client rejects any attempt to "stack" attorney fees in a manner which would result in more than one-third of the gross recovery being paid for attorney fees.
(e) In the event a court orders the Wis.Stat. §102.29 reasonable cost of collection attorney fee to be divided between [the Harmeyer firm] and [Brian's] attorney, [the Harmeyer firm] and client agree that the appropriate division between [the Harmeyer firm] and … [Brian's] attorney shall be a pro rata division of the attorney fee in the same proportion as client's net recovery to the employee's net recovery.

         ¶7 Following a mediation on December 4, 2018, American Family agreed to pay $175, 000 to settle the Sinklers' claims. The parties further agreed that thirty percent of that amount-or $52, 500-would be allocated to Nicole for her loss of consortium claim. However, EMC and the Sinklers disputed how the remaining $122, 500 in settlement proceeds should be distributed.

         ¶8 The formula for dividing the proceeds of a third-party liability claim is set forth in Wis.Stat. § 102.29(1)(b). After deducting the amount attributable to any loss of consortium claim, [4] the first step of the distribution formula is to subtract the "reasonable cost of collection" from the settlement amount. Sec. 102.29(1)(b)1. Under § 102.29(1)(c), if both the employee and the worker's compensation insurer were represented by counsel and "join[ed] in the pressing" of the claim, then "the attorney fees allowed as a part of the costs of collection shall be, unless otherwise agreed upon, divided between the attorneys for those parties as directed by the court."

         ¶9 After the reasonable cost of collection is deducted from the proceeds of a third-party liability claim, one-third of the remaining amount is paid to the injured employee. Wis.Stat. § 102.29(1)(b)1. After that deduction is made, the worker's compensation insurer is reimbursed for any benefits that it either paid on the employee's behalf or may later be obligated to pay. Sec. 102.29(1)(b)2. The employee is then entitled to any remaining proceeds of the claim. Sec. 102.29(1)(b)3.

         ¶10 The dispute between EMC and the Sinklers pertained to the first step of the statutory distribution formula-namely, the deduction of the "reasonable cost of collection." See Wis. Stat. § 102.29(1)(b)1. The Sinklers asserted that after deducting Nicole's award for loss of consortium, $43, 132.22 should be paid to the Habush firm as "costs of collection." That amount included the Habush firm's one-third contingency fee of $40, 833.33, [5] plus $2298.89 in costs. The Sinklers' calculations did not provide for the distribution of any portion of the reasonable cost of collection to the Harmeyer firm.[6]

         ¶11 EMC, in turn, argued that the reasonable cost of collection was $40, 833.33-one-third of $122, 500. EMC contended that amount should be distributed between the Habush firm and the Harmeyer firm "on a pro rata basis, based on their respective clients' recoveries." According to EMC's calculations, this approach would result in the Habush firm receiving $14, 087.50 (34.5% of the reasonable cost of collection) and the Harmeyer firm receiving $26, 745.83 (65.5% of the reasonable cost of collection).[7] EMC further asserted that each firm should receive its respective litigation costs-i.e., $2298.89 for the Habush firm and $977.71 for the Harmeyer firm.

         ¶12 Following briefing by the parties and a nonevidentiary hearing, the circuit court concluded that the Habush firm was entitled to recover $43, 132.22 as the reasonable cost of collection. It awarded no portion of the reasonable cost of collection to the Harmeyer firm. EMC now appeals, arguing that the court erroneously exercised its discretion by failing to award any portion of the reasonable cost of collection to its counsel. EMC further contends that this court should adopt a per se rule requiring the reasonable cost of collection to be divided pro rata between an injured employee's attorneys and a worker's compensation carrier's attorneys in proportion to their clients' respective recoveries.

         DISCUSSION

         I. Amount and division of the reasonable cost of collection

         ¶13 As noted above, the reasonable cost of collection in a third-party liability action includes "both the employee's and the worker's compensation carrier's attorneys' fees and costs," as long as both attorneys joined in the pressing of the claim. Anderson, 281 Wis.2d 66, ¶20; see also Wis. Stat. § 102.29(1)(c). In this case, it is undisputed that the Habush firm engaged in pressing the third-party liability claim on the Sinklers' behalf. In addition, the circuit court found-and it appears undisputed on appeal-that the Harmeyer firm joined in the pressing of the claim on behalf of EMC. It is further undisputed that the parties did not agree as to how the reasonable cost of collection should be divided. Therefore, § 102.29(1)(c) required the court to divide the reasonable cost of collection between the Habush and Harmeyer firms.

         ¶14 The division of the reasonable cost of collection in a third-party liability lawsuit is discretionary, and we will affirm the circuit court's ruling as long as the court properly exercised its discretion. See Anderson, 281 Wis.2d 66, ¶19. A court properly exercises its discretion when it employs a logical rationale based on the facts of record and the appropriate legal principles. Id. Our review of a circuit court's discretionary decisions may involve underlying questions of law and fact. See Covelli v. Covelli, 2006 WI.App. 121, ¶13, 293 Wis.2d 707, 718 N.W.2d 260. We review any questions of law independently, but we will not disturb the circuit court's factual findings unless they are clearly erroneous. See id.

         ¶15 In Anderson, our supreme court set forth a three-step process that a circuit court must follow when determining and apportioning the reasonable cost of collection in a third-party liability action. See Vande Corput v. Pekin Ins. Co., 2018 WI.App. 56, ¶17, 384 Wis.2d 252, 918 N.W.2d 117');">918 N.W.2d 117. First, the court determines the "reasonable value for each party's fees and costs." Anderson, 281 Wis.2d 66, ¶40. Second, the court must "evaluate the total cost of collection and determine whether that sum is reasonable, in light of, among other things, the recovery." Id. When making this determination, the court may consider factors such as the quality and quantity of the services provided and the posture of the case. Id., ¶41. "The sum of the attorneys' reasonable fees and costs may, but need not, equal a reasonable cost of collection." Id., ¶40. Under the third and final step of the analysis, "the court must direct, unless otherwise agreed, how the attorneys' fees are to be divided between the attorneys." Id., ¶42.

         ¶16 For the reasons explained below, we conclude the circuit court properly exercised its discretion with respect to each step of the Anderson analysis. As such, the court did not erroneously exercise its discretion by declining to award the Harmeyer firm any portion of the reasonable cost of collection.

         A. Step 1: The reasonable value of each party's attorney fees

         ¶17 Consistent with Anderson, the circuit court began by addressing the reasonable value of each party's attorney fees. When performing this step of the Anderson analysis, a court "is typically guided by the respective ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.