Attorneys’ Fees Permissible from California WCMSAs After All

Medicare Set-Aside Blog on July 12, 2012
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You may recall that in 2010, the California Workers’ Compensation Appeals Board ruled in Pratt v. Wells Fargo that attorneys’ fees could not be determined based upon MSAs. Although panel decisions are not binding, applicant attorneys throughout the state have been outraged nonetheless for some time and are looking for redress. Well, that day has come.

On June 22, 2012, the Board rendered a decision in Viale v. Lockheed Martin essentially overturning Pratt, if such a thing can even be said about a nonbinding precedent. In Viale, attorney John Bloom negotiated a global settlement of $638,982 from which $46,066 was to establish an MSA account and $175,514 was to fund the annuity making the annual deposits into the MSA. For this, the attorney requested a fee of $90,000 but only $40,000 was approved. The WCJ relied upon Pratt and reasoned that the MSA funds could only be used for treatment of the applicant’s industrial injuries, consistent with CMS’ position on the matter.

In the decision, $90,000 was found to be a reasonable fee pursuant to binding authority in Labor Code 4903, WCAB Rule 10775 and Policy and Procedural Manual Section 1.140; therefore, the Appeals Board reversed the WCJ decision and approved the fee. The panel reiterated that panel decisions are not binding despite Lexis’ designation of the decision as noteworthy. The opinion goes on to reject the Pratt panel’s rationale that because the applicant did not place herself in a more advantageous position by settling her medical benefits with an MSA, her attorney should not benefit thereby. It was determined that the motivations for settling ones claims are not for the WCJ to decide and there can be value in controlling one’s own treatment and not being subject to the work comp system. Furthermore, the remaining annuity and residual MSA funds become part of the applicant’s estate as opposed to benefits simply ending upon death as they do in comp. If settlement was what the applicant desired, then it was not up to the WCJ to determine that the MSA was of no value.

The opinion was written by Marguerite Sweeney, long time applicant attorney appointed to the Board in February 2012 by Governor Brown. Ms. Sweeney is also a long time lecturer on the topic of Medicare Set-asides, so none better could have written this opinion. It is of immense value having someone as knowledgable of the MSP issue in this position because decisions at the WCJ level continue to demonstrate erroneous assumptions about the MSP as spoon fed to the public by CMS over the past decade. Settlements involving MSP issues must be decided within the confines of the underlying state workers’ compensation law, absent compensability under which there is no reimbursement obligation to Medicare. It is bad enough when the parties lose sight of CMS’ actual authority, but when that misunderstanding comes from the agencies charged with implementing those laws, then we really have a problem. Thankfully in California we know that a voice of reason resides at the Appeals Board for Medicare Set-aside issues.

Robert Viale v. Lockheed Martin Corp.
Case Nos ADJ3845272 (SRO 0103733)
ADJ 1335789 (SRO 0121654)
Decided June 22, 2012