May 13, 2015

Under What Circumstances Can Unreasonable Contest Attorney’s Fees Be Awarded to the Employer?

The Commonwealth Court of Pennsylvania recently decided a fascinating case, involving what was described as a “frivolous” appeal filed by the claimant. The most stunning element of the decision was the fact that even though attorney’s fees were not specifically requested by the employer, the court unilaterally ordered the claimant to reimburse attorney’s fees to the employer. While this was an extreme measure by the court, there are several important practical tips for employers and their representatives to be aware of.

By way of background, according to Section 440 of the Pennsylvania Workers’ Compensation Act, it is the employer’s burden of proof to establish that it had a reasonable basis to contest a claimant’s petition or file its own petition, to avoid having to pay for a claimant’s attorney’s fees. Nowhere in the Act does it provide for attorney’s fees to be awarded to the employer and against the claimant.

It took a set of extreme circumstances for the Commonwealth to make such an award in Smith v. WCAB (Consolidated Freightways, Inc.), No. 606 CD 2014, filed March 9, 2015. The procedural history of the case began in 1996 when the claimant filed a claim petition alleging an injury due to exposure to chemicals while driving a truck. The Workers’ Compensation judge denied the petition, the WCAB affirmed the judge’s decision, and no further appeals were taken by either party.

The claimant then filed a series of six review petitions thereafter, which can be summarized as the claimant’s attempt to re-litigate the same issue as was previously decided by the WCAB. All of these petitions were denied through litigation because they were barred by res judicata/collateral estoppel. These principles hold generally that once a final decision has been reached on a particular issue, neither party can attempt to re-litigate that same issue, which is what the claimant attempted.

The 2015 Commonwealth Court decision was the fifth time that this court was called upon to decide the claimant’s appeals. Furthermore, the claimant had previously filed in the Pennsylvania Supreme Court and the United States Supreme Court, both of which declined to accept jurisdiction. In the decision, the court characterized the claimant’s appeals as “frivolous” and the conduct of the claimant’s counsel “obdurate and vexatious.” The court also noted that without awarding attorney’s fees to the employer in this case, “there is no way for our courts to curb the sort of flagrant abuse of the system engaged in here.”

In rendering this award, the court looked to two previous workers’ compensation cases, but did not cite to the Act itself. Rather, the court cited to a 1987 workers’ compensation case that resulted from the filing of three separate claim petitions and the same number of appeals. Patel v. WCAB (Saquoit Fibers Company), 520 A.2d 525 (Pa.Cmwlth. 1987). The court also cited to Pennsylvania Rule of Appellate Procedure 2744, which provides that in addition to fees and costs specifically authorized by statute, the court is permitted to award fees, costs and interest “if it determines that an appeal is frivolous or taken solely for delay or that the conduct of the participant against whom costs are to be imposed is dilatory, obdurate or vexatious.” The court clearly found all three elements present in this appeal. In the Patel case, only litigation costs, not attorney’s fees, were awarded to the employer, although the court mentioned that attorney’s fees may have been appropriate if a request had been made.

What It Means to You

There are a number of practical points to take from this extreme example:

  1. There is now precedent for an award of attorney’s fees to an employer where a claimant’s conduct in filing an appeal is considered “frivolous.”
  2. Therefore, employers should at least consider making the request for attorney’s fees in such instances. The Smith case makes clear that it will expect formal requests before considering an extreme measure in the future. The court did note in this case that the award was appropriate even without a formal request, because the employer would not have reasonably known that it had to do so, given the contents of the Act and prior case law.
  3. Employers and their counsel should consider documenting their attorney’s fees through an evidentiary exhibit when a potentially frivolous appeal is filed.
  4. The court awarded only the attorney’s fees for the appeal itself, not the earlier underlying litigation, suggesting that making this argument on a petition before the judge will not be successful.