To the Victor, the Attorney’s Fees (Sometimes)

By Nicole Killoran

McNally v. Dep’t of PATH, 2011 VT 93 (mem.).

Remember our coverage of the gripping story of the “snow-shoveling incident” that came out last Fall?  No?  In case you’ve forgotten, the SCOV remanded a workers’ compensation decision to the Labor Commissioner, after chiding the Commissioner for making inadequate findings and conclusions, and for misapplying the law.  Today’s case is the second iteration of this controversy and considers whether Claimant McNally may recover costs and attorney’s fees for prevailing in her appeal.

The SCOV addresses costs first, noting three rules potentially governing cost reimbursement to Claimant.  First, 12 V.S.A. § 2131 grants costs to the prevailing party in a civil appeal to the Supreme Court.  Second, Rule 39(a) of the Vermont Rules of Appellate Procedure entitles the prevailing party to recover costs where the Court reverses for entry of a judgment or remands for a new trial.  Third, 21 V.S.A. § 678 awards to the prevailing party under subsection (a) costs incurred in proceedings before the Labor Commission in a workers’ compensation case, and under subsection (b) attorney’s fees incurred in superior and supreme court matters.

Employer argues that both V.R.A.P. Rule 39(a) and 21 V.S.A. § 678 bar Claimant’s recovery of costs in the appeal.  Because § 678(a) speaks only to costs incurred in proceedings before the Labor Commission, and § 678(b) is silent on costs, Employer claims the statute should not be read to permit recovery of costs for appeal of a Commissioner’s decision to the Supreme Court.  The SCOV holds that, while § 678(b) is silent as to costs, it does not preclude their recovery, especially in light of the prevailing party’s broad entitlement to recover costs in civil cases under Rule 39(a) and 12 V.S.A. § 2131.

Employer next argues that the language of Rule 39(a) precludes recovery where the result was not reversal outright or reversal with directions for a new trial.  The SCOV quickly dismisses this claim by noting that, while the language of Rule 39(a) does not explicitly grant costs in Claimant’s case, the substance of the proceedings on remand is the same.  Citing to the Reporter’s Notes to the 1981 V.R.A.P. Amendments, which state that the prevailing party in the Supreme Court should be awarded costs where the Court “reverses the lower court but orders further proceedings,” the SCOV concludes that Rule 39(a) permits cost recovery in Claimant’s case in the amount of $1,079.

Next up on the agenda is Claimant’s request for attorney’s fees, a more contentious issue.  Again, 21 V.S.A. § 678(b) entitles the prevailing party to recover attorney’s fees in proceedings before the Supreme Court.  Employer insists that Claimant must prevail on the merits of her claim or achieve at least “some success on a significant legal issue in the case” before she can recover attorney’s fees, citing to cases from other jurisdictions reaching the same conclusion.  The SCOV does not find this authority persuasive.  It notes that the authority cited by Employer does not concern workers’ compensation appeals, a beast of a different stripe in almost any legal comparison, and does not concern interpretation of a statute explicitly granting attorney’s fees to the prevailing party on appeal.  The Court interprets the phrase “prevails” within the context of the appellate proceedings, and not the underlying workers’ compensation proceedings.

For this conclusion, the SCOV dusts off its holding in Pollard v. Wheelock, 20 Vt. 370 (1848), a case where the Court found it equitable to treat appellate proceedings as a “distinct matter” and reward costs to the prevailing party “without reference to the final event of the case.”  The fact that this ancient case addresses costs, but not attorney’s fees, becomes a point of contention later on with the dissent.  The Court also cites to a U.S. Supreme Court decision, Buckhannon Board and Care Home, Inc. v. West Virginia Department of Health and Human Resources, 523 U.S. 598 (2001), which defines “prevailing party” as the party “in whose favor judgment is rendered. . . .”  After noting that Claimant was the prevailing party on appeal by this definition, and that the appeal was necessary to keep her claim for workers’ compensation “alive,” the SCOV concludes that Claimant is entitled to attorney’s fees under § 678(b).

Next, the Court addresses the question of who should be responsible for calculating the award of attorney’s fees under this scheme.  On the one hand, in 1996 the Court amended V.R.A.P. Rule 39 to include subsection (f), directing parties to seek recovery of attorney’s fees by motion to the trial court, in this case the Labor Commissioner.  On the other hand, the SCOV’s precedent seems to indicate that the administrative or judicial body with knowledge of counsels’ “nature and extent of representation” should be the one to determine attorney’s fees.  The Court resolves this conflict by noting that Rule 39(f) is not applicable where the Legislature, under § 678(b), has placed the responsibility for determining attorney’s fees in workers’ compensation cases with the court that hears the appeal.  Considering that the Commissioner had “neither specific knowledge nor special expertise concerning” the attorney’s fees incurred on appeal, the SCOV finds itself to be the appropriate tribunal to determine the award.

Finally, before concluding that Claimant is entitled to attorney’s fees in the amount of $13,599, the SCOV holds that it is unnecessary to retain a “master” to resolve any fact-finding disputes over attorney’s fees because the employer had not contested the reasonableness of the fees claimed.  The SCOV sends the parties on their way, at least for now.

Justice Burgess’s dissent in this case, joined by Chief Justice Reiber, takes issue with the majority’s conclusion that Claimant need not prevail on the merits of her case before being awarded attorney’s fees for the appeal.  He voices concern that the SCOV’s holding will result in premature claims for attorney’s fees where lawyers score “legal points producing no compensation for claimants.”

The dissent argues that it is a mistake to label the Claimant in this case as the prevailing party before resolving the merits of her claim before the Commission, considering that Claimant would be entitled to full recovery of attorney’s fees if she prevailed below.  Justice Burgess warns that to allow recovery at an “intermediate,” rather than final, stage in the case is to penalize employers who fail to defend against appeals of “a procedural or substantive gaffe by the Commissioner.”  Burgess focuses on the language of the Workers’ Compensation Act, specifically § 678(b), which entitles the “prevailing party” to attorney’s fees, and interest on the portion of the award that was contested.  He argues that this language means claimant may not recover attorney’s fees until he or she receives an actual award of compensation on which interest can be assessed.  No harm would accrue, the dissent insists, if Claimant merely waits for her claim to resolve before recovering attorney’s fees.  If she prevails before the Commission, she will receive them; if she does not win on the merits, then in fairness she is not entitled to them.

Other jurisdictions provide support for the dissent’s preferred narrow interpretation of § 678.  The Oregon Supreme Court case reversed a very similar case, interpreting its equivalent statute as permitting an award of attorney’s fees only where the appellate proceedings effectively bring the controversy to an end.  Justice Burgess also notes the similarity between this conclusion and that of the U.S. Supreme Court in Hewitt v. Helms, 482 U.S. 755 (1987), where the SCOTUS concluded that a plaintiff must “receive at least some relief on the merits of his claim before he can be said to prevail.”  The Court in Hewitt expressed preference for awarding attorney’s fees where there is a conclusion that “affects the behavior of the defendant toward the plaintiff.”  The absence of such a conclusion in the present case, the dissent argues, likens the majority’s opinion to an unconstitutional advisory opinion, granting a “pyrrhic victory” to the appellant before the lower tribunal resolves the actual controversy, or if you like a “successful instant replay appeal of a referee’s call, even when the claimant fails to prevail at game’s end.”

The dissent also takes issue with the majority’s dismissal of other courts’ conclusions in similar interlocutory appeals because those cases did not involve a similar statutory scheme governing attorney’s fees in appeals of workers’ compensation cases.  Burgess distinguishes the authority relied on by the majority, noting that these cases involved either a final judgment in the tribunal below, an award of costs and not attorney’s fees in a case that hasn’t been cited in nearly 150 years (Pollard v. Wheelock), and precedent calling for judgment on the merits below before awarding attorney’s fees on appeal.  The dissent concludes that the SCOV should employ a similar approach and grant attorney’s fees only “in tandem with an order to pay an award of compensation.” 

But as with all dissents, this one falls short of the requisite votes for a majority, and so it for all its passion and reasoning, it lacks the effect of law.