Many E/C’s do not consider ethics when negotiating a washout settlement with a Claimant attorney.  The goal is to get the claim over with, right?  And, the ethics of determining what is a fair fee to Claimant’s attorney is not of the E/C’s concern, right.  Wrong.

When offering a settlement lump sum to Claimant, and when an attorney fee under s. 440.34(3) is owed or alleged, the E/C is putting Claimant’s attorney in an ethical bind.  The E/C is essentially pitting the Claimant against her attorney, forcing the attorney into an ethical quandary: to carve a fee out of Claimant’s settlement monies.

When I negotiate a settlement and a fee is owed to Claimant attorney, I negotiate the two terms seperately.  In fact, almost all Claimant attorneys I deal with insist on negotiating the fee separately from the washout. 

But, when a Claimant attorney seeks a fee to be cut out of a washout settlement, and absolutely no benefits were obtained, or even paid for by the E/C, well that is plain old unethical.  Even if the E/C just wants to get the claim over with.

Last week, the First DCA responds to this last scenario, but not in ethical terms.

In Lanza v. Damien Carpentry, Claimant sought an appeal of a JCC’s order enforcing a settlement agreement.  Claimant filed a PFB seeking benefits and the E/C denied the petition on the grounds of the statute of limitations.  Claimant’s attorney subsequently made a washout demand of $17,500, inclusive of fees and costs [emphasis added].   The E/C promptly agreed.

Then the Claimant attorney forwarded a letter with the settlement “breakdown” that included fees and costs.  Claimant attorney wanted $10,000 to go Claimant with a statutory guideline fee of $1,750.  He then wanted a separate stipulation to pay an attorney’s fee of $5,750.  The catch, obviously, was that no benefits were ever paid.  This was a total denial, so the E/C refused to draft a stipulation agreeing to the fee.

Claimant attorney responded that the E/C should withdraw the denial, thereby providing the “benefits secured” to validate the $5,750 fee.  The adjuster, rightly, refused to cooperate and simply issued the entire check for $17,500 and shipped it to Claimant attorney.  The E/C then filed a motion to enforce settlement, which the JCC granted.*

The First DCA affirmed the decision, not on ethical grounds as stated earlier, but on contractual legal grounds.  The initial offer to settle from Claimant attorney for $17,500 “inclusive of fees and costs” was accepted by the E/C, thereby creating a binding contract between the parties.  The subsequent “breakdown” demanded by Claimant attorney was soundly rejected by the E/C.  This “breakdown” included non-essential terms of the contract that did not nullify the original agreement.  The E/C could reject these non-essential terms and still enforce the agreement.

From the ethical standpoint, I have to commend the E/C for refusing to cooperate with this “breakdown” which–let’s be honest–took money away from an injured worker to pay an undeserving fee.  While it is tempting for an E/C to go along with the stipulation just to close a file and move the matter along, it is not ethical and not in the best interests of either party to participate.  

*It is obvious from the order that the JCC knew what Claimant attorney was up to, hence her insistance that Claimant attorney show up in person to the motion hearing to enforce the settlement agreement.  How Claimant attorney responded is an example how NOT to respond to the requests of a judge.