Opinion
Richard E. Weiss, Small Snell Weisss&sComfort, P.S., Tacoma, for Appellant.
Diane Hunter Cornell, Labors&sIndustries Division, Office of Atty. Gen., Seattle, for Respondent.
SEINFELD, Chief Judge.
Maston Mullins, a recipient of workers' compensation benefits, challenges the Department of Labor and Industries' (Ls&sI) distribution formula regarding a third party settlement. We conclude that Ls&sI used the correct formula to calculate the distribution up to the date of the settlement. However, the retroactive application of RCW 51.24.060 requires an increase in Ls&sI's share of attorneys' fees related to its reimbursement for post-settlement benefits. Thus, we remand the matter to the superior court for entry of a corrected judgment.
FACTS
Mullins sustained an on-the-job injury that left him permanently and totally disabled. He then brought a third party cause of action and obtained a $165,000 settlement. After deducting attorneys' fees and costs of $61,575.88, his net recovery equaled $103,424.12. Pursuant to RCW 51.24.060, Mullins was entitled to retain $25,856.03, 25 percent of the net recovery. This left a $77,568.09 balance against which Ls&sI could assert a claim for reimbursement.
As of the date of settlement, Ls&sI had paid Mullins $94,581.65 in industrial insurance benefits and, thus, had lien rights against the third party recovery for that amount, minus its proportionate share of attorneys' fees, $35,295.29. This left Ls&sI with a net lien of $59,286.36, which Ls&sI subtracted from the $77,568.09 balance, leaving what we will refer to as a "remaining balance" of $18,281.73. This amount would go to the worker if Ls&sI paid no further benefits. However, Mullins continued to be eligible for benefits after the date of settlement. Thus, Ls&sI claimed the right to defer paying further benefits until their total value equalled the amount of the remaining balance.
Ls&sI's share of attorneys' fees and costs is calculated by multiplying the total attorneys' fees and costs by the ratio of benefits paid to the date of settlement compared to the gross recovery. RCW 51.24.060(c)(ii). Thus, we multiply the total attorneys' fees and costs ($61,575.88) by 57.32 percent (the ratio of benefits paid [$94,581.65] to the gross recovery [$165,000]. The product is $35,295.29, Ls&sI's share of attorneys' fees.
Mullins appealed L s&sI's decision to the Board of Industrial Insurance Appeals (BIIA). He contended that this offset for future benefits would deprive him of compensation for Ls&sI's pro rata share of attorneys' fees. The BIIA agreed with Mullins. It allowed Mullins to retain the entire remaining balance, depriving Ls&sI of any offset.
Ls&sI appealed the BIIA decision to superior court. The superior court approved Ls&sI's calculation and granted its motion for summary judgment. Mullins now appeals to this court, claiming that the superior court erred in concluding that RCW 51.24.060(1)(c) makes the entire remaining balance subject to offset.
I
The Industrial Insurance Act gives Ls&sI a right to the proceeds of a third party recovery "to the extent necessary to reimburse" it for benefits paid, minus Ls&sI's proportionate share of attorneys' fees and costs. RCW 51.24.060(1)(c)(i). The statute provides for distribution of a third party recovery in the following order: (1) pay attorneys' fees and costs; (2) pay 25 percent of the balance to the injured worker; (3) reimburse Ls&sI for benefits it has already paid, less its proportionate share of attorneys' fees and costs; and (4) pay any remaining balance to the injured worker. RCW 51.24.060(1)(a)-(e). Thereafter the injured worker may not receive any additional workers' compensation benefits "until the amount of any further compensation and benefits shall equal any such remaining balance minus [Ls&sI's] proportionate share of the costs and reasonable attorneys' fees in regards to the remaining balance." RCW 51.24.060(1)(e).
The Laws of 1993, ch. 496 § 2, rewrote subsection (1). Section 4 of ch. 496 provided, "[t]his act applies to all causes of action that the parties have not settled or in which judgment has not been entered prior to July 1, 1993."
Applying this scheme here, the result is as follows:
Third Party Recovery$165,000.00 Minus Attorneys' Fees and Costs61,575.88----------- Net Recovery103,424.12Less Mullins's 25 percent share 25,856.03----------- Balance77,568.09 Less Ls&sI's net reimbursement lien 59,286.36----------- Remaining Balance18,281.73The issue Before us pertains to the distribution of the remaining balance. Mullins, in claiming the entire amount, argues that the law does not entitle Ls&sI to an offset unless the remaining balance exceeds Ls&sI's share of attorneys' fees and costs. He urges a formula that would factor Ls&sI's share of attorneys' fees into the formula twice; first as a means of reducing Ls&sI's gross reimbursement lien for benefits paid Before settlement, and then again to reduce Ls&s I's reimbursement lien for post-settlement benefits.
Although Mullins's approach would appear to compensate him for Ls&s I's proportionate share of attorneys' fees, the second deduction of attorneys' fees would result in Ls&sI paying more than its proportionate share. Ls&sI's calculations and methods are consistent with the methodology set forth in RCW 51.24.060. See Longview Fibre Co. v. Department of Labors&sIndus., 58 Wash.App. 751, 754-55, 795 P.2d 699 (1989), review denied, 114 Wash.2d 1030, 793 P.2d 976 (1990) (to calculate remaining balance, first reduce Ls&sI's gross lien by the amount of its proportionate share of attorney's fees and costs; then subtracted the net lien from the net recovery minus the worker's 25 percent share).
II
However the proper application of RCW 51.24.060(1)(e), as amended in 1993, to post-settlement benefits is an issue of first impression. Ls&sI asserts that the amended statute does not apply retroactively to this case.
The amendment applies to cases "not settled or in which judgment has not been entered prior to July 1, 1993." RCW 4.22.070. Settle means "to agree, to approve, to arrange." Black's Law Dictionary 1372 (6th ed.1990). Since both parties continued to adjudicate the issue after July 1, 1993, the matter was not "settled" Before this date.
A judgment is a "[d]etermination or sentence of the law, pronounced by a competent judge or court, as the result of an action or proceeding instituted in such court, affirming that, upon the matters submitted for its decision, a legal duty or liability does or does not exist." Black's Law Dictionary 842 (6th ed.1990). The decisions and rulings of Ls&sI and BIIA are not judgments as contemplated by the statute, and the superior court did not enter its judgment until May 6, 1994. Therefore, the amendment to RCW 51.24.060 governs this case. See RCW 4.22.070.
The amended language of RCW 51.24.060(1)(e) reflects the Legislature's intent that Ls&sI be liable for its proportionate share of attorneys' fees and costs with respect to the remaining balance:
(e) Thereafter no payment shall be made to or on behalf of a worker or beneficiary by the department and/or self-insurer for such injury until the amount of any further compensation and benefits shall equal any such remaining balance minus the department's and/or self-insurer's proportionate share of the costs and reasonable attorneys' fees in regards to the remaining balance. This proportionate share shall be determined by dividing the gross recovery amount into the remaining balance amount and multiplying this percentage times the costs and reasonable attorneys' fees incurred by the worker or beneficiary. Thereafter, such benefits shall be paid by the department and/or self-insurer to or on behalf of the worker or beneficiary as though no recovery had been made from a third person.
(Emphasis added.)
The statute's requirement that there be a deduction from the remaining balance of Ls&sI's "proportionate share of the costs and reasonable attorneys' fees in regards to the remaining balance" clearly refers to an amount in addition to the attorneys' fees previously calculated on pre-settlement benefits. We distinguish Davis v. Department of Labors&sIndus., 71 Wash.App. 360, 858 P.2d 1117 (1993), review denied, 123 Wash.2d 1016, 871 P.2d 600 (1994), cited by Ls&sI. Davis involved a judgment entered Before July 1, 1993; consequently, the 1993 amendment to the statute was not Before it.
Applying the amendment, we first calculate Ls&sI's share of attorneys' fees related to the remaining balance. Using the formula set forth above, that figure is $6,822.61. Subtracting that from Ls&sI's gross reimbursement lien for post-settlement benefits of $18,281.73, we arrive at a net lien of $11,459.12.
Ls&sI's total share of attorneys' fees related to both pre-settlement benefits and post-settlement benefits now totals $42,117.90 ($6,822.61 plus $35,295.29). This increases Ls&sI's percentage share of total attorneys' fees to 68.40 percent. Consequently, Mullins's share of attorneys' fees is reduced to 31.60 percent of the total, or $19,457.98.
To satisfy the statutory requirement that Ls&sI's proportion of attorneys' fees be in proportion to its recovery, Ls&s I's recovery must be limited to approximately 68.40 percent of the net recovery, or $70,745.48. RCW 51.24.060(1)(e). This means that Mullins's net recovery must equal approximately 31.60 percent of the net recovery, or $32,678.64. It does exactly that when we add the $6,822.61 final balance ($18,281.73 remaining balance minus Ls&sI's $11,459.12 net lien) to Mullins's original 25 percent award of $25,856.03.
The result of this methodology will be that Ls&sI's percentage share of attorneys' fees and costs equals its percentage share of the net recovery, 68.40 percent in both instances. Likewise, Mullins's proportional contribution towards attorneys' fees and costs, 31.60 percent, will equal his proportional receipt of funds from the net recovery.
The distribution of the remaining balance, then, is as follows:
Remaining Balance$18,281.73 Minus Ls&sI's net reimbursement 11,459.12 lien related to remaining balance---------- Final Balance owing to Mullins 6,822.61In summary, the superior court properly determined that Ls&sI is not required to deduct its proportionate share of attorneys' fees and costs related to Mullins's pre-settlement benefits from the remaining balance Before it determines the amount subject to set off. However, due to the 1993 amendment of RCW 51.24.060(1)(e), Ls&sI must pay its proportionate share of attorneys' fees and costs related to post-settlement benefits in order to obtain reimbursement for those sums from Mullins's third party recovery. Thus, it may offset no more than $11,459.12 of the remaining balance Before resuming benefit payments to Mullins. We remand the matter to the superior court for entry of an amended judgment consistent with this opinion.
We affirm in part, reverse in part, and remand for a corrected judgment consistent with this opinion.
MORGAN, J., and CONOLY, J. Pro Tem., concur.