“Equitable Apportionment” Doctrine To Be Applied on Remand.
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In Eby v. DeJong, Case No. A118498 (1st Dist., Div. 5 Sept. 26, 2008) (unpublished), plaintiff was driving a City pickup in the course of his duties as a municipal employee when he collided with defendant’s vehicle. Plaintiff brought a negligence suit against defendant, with City intervening to seek reimbursement for workers’ compensation benefits of $46,783.37 paid out to plaintiff. City then assigned its lien rights to defendant as part of a settlement between these two parties only. A jury later awarded plaintiff a net judgment (after apportioning negligence) of $27,182.40 against defendant. Defendant, as City’s assignee, filed a motion to offset the lien against the judgment. Plaintiff opposed the motion on the basis he was entitled to priority payment of his reasonable litigation expenses and attorney’s fees under Labor Code section 3856(b), which incorporates the doctrine of equitable apportionment. (BLOG NOTE–When an employer benefits from a judgment obtained through the employee’s efforts alone, the trial court must apportion reasonable fees and expenses incurred in effecting the recovery, which is a priority payout from the recovery—before offsetting for employer lien rights. See, e.g., Quinn v. State of California, 15 Cal.3d 162, 166, 169-173 (1975). However, if the separate attorneys of the employee and employer are both active in producing the result, the apportionment doctrine does not apply and the fees come out of the client’s share of the recovery. See Crampton v. Takegoshi, 17 Cal.App.4th 308, 318 (1993), overruled on other grounds in Phelps v. Stostad, 16 Cal.4th 23, 34 (1997).) The trial court granted defendant’s lien offset request and denied plaintiff’s claim for priority payment of fees and expenses.
Plaintiff appealed these adverse determinations, and obtained a reversal upon review.
Judge Reardon, sitting by assignment from the Alameda County Superior Court and authoring a 3-0 decision, determined the focal factual issue was whether City’s counsel played an active role in obtaining the judgment in plaintiff’s favor. Even under the deferential substantial evidence review standard, the appellate court could find no evidence of active participation by City’s counsel in the litigation. It rejected these proffers as bases for finding active participation:
· A conclusory assertion that does not demonstrate anything more than a “tag along,” failing to describe the employer’s attorney’s services and hours expended (Hartwig v. Zacky Farms, 2 Cal.App.4th 1550, 1556-1557 (1992));
· Actively participating in the case, but failing to actively participate so as to help procure a recovery (Luque v. Herrera, 81 Cal.App.4th 558, 562 (2000));
· Merely retaining separate counsel or filing a complaint in intervention or a lien (Hartwig, supra, 2 Cal.App.4th at 1556);
· Token attendance at a deposition in which only a few questions were asked (Kindt v. Otis Elevator Co., 32 Cal.App.4th 452, 459-460 (1995));
· Plaintiff’s failure to obtain a net recovery in light of the fact that the employer still obtains a benefit from the judgment (Draper v. Aceto, 26 Cal.4th 1086, 1088-1089, 1094-1095 (2001)); or
· The rules applicable to noticed motions for attorney’s fees under California Rules of Court, rule 3.1702, are applicable to the allocation of judgment proceeds between a workers’ compensation lien and fees/costs incurred by an employee plaintiff in producing a result that benefits the employer.
The case was remanded for the lower court to apply the equitable apportionment doctrine and requiring the determined sum to be paid out first from the judgment.