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Slippery slope of sliding scale

Slippery slope of sliding scale

September 23
08:50 2019

Slippery slope of sliding scale

In 2012, José Rodriguez was injured in the course of his employment at Sabert Corporation. Liberty Mutual Insurance Company was Sabert’s workers compensation carrier. Liberty paid Rodriguez $148,590.40 in workers compensation benefits. A $1.2 million settlement was reached with the party responsible for causing Rodriguez’s injuries. Liberty asserted its rights to reimbursement from the third-party settlement.

Rodriguez’s law firm sent Liberty a check for $98,310.26, which amounted to only 66.67% of the $148,590.40 in workers compensation benefits, and not the 69.44% Liberty claimed it was owed.

In 2002, Rodriguez had entered into an agreement to provide legal services that provided that the law firm would receive a fee under a sliding scale in accordance with the 2012 version of a state rule that sets standards for attorney fees in contingency cases. The rule specified:

(1) 33[.33]% of the first $500,000 recovered;

(2) 30% on the next $500,000 recovered;

(3) 25% on the next $500,000 recovered;

(4) 20% on the next $500,000 recovered; and

(5) on all amounts recovered in excess of the above by application for a reasonable fee in accordance with the provisions of paragraph (f) hereof.

Liberty filed an order to show cause and verified complaint on behalf of Sabert seeking reimbursement of the difference, $4,120.91, claiming that the percentage should be calculated based on the actual attorney fee paid and not the settlement recovered. Rodriguez opposed the application.

The judge determined that:

[Rodriguez] paid $366,666.67 in attorney fees, which constituted 30.56[%] of his settlement. This 30.56[%] was less than the 33[.33]% limit of the relevant statute and therefore represented the percentage of attorney fees that [Rodriguez] was responsible for. The fee ratio should not exceed that actually borne by the insured.

Accordingly, the [c]ourt found that [Rodriguez] was to reimburse $102,431.17 for the worker[s’] compensation benefits to [Liberty] based on a reimbursement rate of 69.44[%] and subtracting $750 of court expenses.

As [Rodriguez] had already reimbursed [Liberty] in the amount of $98,310.26, the [c]ourt ordered [Rodriguez] to reimburse [Liberty] the outstanding $4,120.91.

Rodriguez was assessed a 69.44% credit against future workers compensation benefits paid on his behalf. He appealed.

In his appeal, Rodriguez argued that the trial judge erred in ruling that the pro rata share of attorney fees should be calculated using a gross average of the sliding scale attorney fees paid in the third-party case rather than the sliding scale basis set forth in the relevant state statute and the agreement to provide legal services. Liberty argued that Rodriguez ignored the fact that the total percentage of fees paid equaled 30.56% of the $1.2 million settlement ($1,200,000 divided by $366,666.67 equals 30.56%), and not at the sliding scale rate of 33.33% applicable to the first level of the sliding scale, which was the first $500,000 recovered.

Citing case law, the appellate court was convinced that Rodriguez’s arguments lacked merit. The judgment of the trial court was affirmed.

Liberty Mutual Insurance Company o/b/o Sabert Corporation v. Rodriguez-Superior Court of New Jersey, Appellate Division-April 2, 2019-No. A-0112-17T4.

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