On April 28, 2016, the Florida Supreme Court issued its ruling on the Castellanos v. Next Door Company case. The issue in this case, as restated by the Court, is whether Section 440.34, Florida Statutes (2009), which mandates a conclusive fee schedule for awarding attorney’s fees to the claimant in a workers’ compensation case, is unconstitutional as a denial of due process under the Florida and United States Constitutions. It should be noted that the value of the petitioner’s claim in Castellanos was $822.70, though the petition sought attorney’s fees in the amount of $36,817.50, nearly 45 times the amount of the recovery as pointed out by Justice Canady in his dissent. The court also noted there are currently 18 additional cases that have been certified by the Florida Supreme Court on the same question.
In its ruling on Castellanos, the Florida Supreme Court, in a 5-to-2 decision, concluded "that the mandatory fee schedule found in Section 440.34 creates an irrebuttable presumption that precludes any consideration of whether the fee award is reasonable to compensate the attorney" and "is unconstitutional under both the Florida and United States Constitutions." It is their opinion that Section 440.34 does not allow for any discretion by the Judge of Compensation Claims (JCC) or reviewing court or an opportunity for the claimant to refute an unreasonable fee. The full ruling can be accessed through the following link:
So what does this mean?
Because Section 440.34, as enacted, is unconstitutional, the JCC is now required to award reasonable attorney’s fees without regard to the statutory schedule. The court did specifically state that the fee schedule in Section 440.43 remains the starting point, and that the revival of the predecessor statute does not mean that claimants’ attorneys will receive a windfall. However, the reviewing court should now follow the factors set forth in a 1968 case of Lee Engineering & Const. Co. v. Fellows, 209 So.2d 454 (Fla. 1968), if and until the legislature fixes the unconstitutionality of the Section 440.34. The factors in Lee Engineering include:
- Time and labor required, the novelty and difficulty of the questions involved, and the skill required.
- The likelihood, if apparent to the claimant, that the acceptance of the particular employment will preclude employment of the lawyer by others or cause antagonisms with other clients.
- Fee customarily charged in the locality for similar services.
- The amount involved in the controversy and benefits resulting.
- The time limitation imposed by the claimant or circumstances.
- The nature and length of the professional relationship.
- The experience, reputation, and ability of the lawyer performing the services.
- The contingency or certainty of a fee.
As a result of this ruling, we do expect increased requests by claimants and their attorneys for the JCC to rule on whether the attorney’s fees are reasonable. This may result in some prolonged litigation and, in some cases, additional costs both for our defense attorneys and in the money owed to claimants’ attorneys. Additionally, we’ve received correspondence from NCCI indicating they are evaluating the impact of this decision on Florida’s workers’ compensation system costs, which are expected to be significant.
We are continuing to analyze and assess the decision and will provide additional information as it develops.
Jon A. Miller, AIC, CPCU
AVP – Claims