Lead Opinion
The opinion of the court was delivered by
Cindy Robinson, a former employee of the City of Wichita, filed a claim for disability retirement benefits with the City of Wichita Employees’ Retirement Board of Trustees (Retirement Board). The Retirement Board calculated Robinson’s disability retirement benefit and then reduced it by the entire amount of a workers compensation award that Robinson had already obtained. This deduction resulted from the application of Section 2.28.150(d)(3) of the Wichita City Code (Wichita Code), which requires that “[a]ny amount received under the State Worker’s Compensation Act (except medical expenses) shall be deducted from the disability retirement benefit.” The issue before us is whether the amount to be deducted from the disability retirement benefit is the entire workers compensation award or the amount of the award remaining after payment of Robinson’s attorney fees.
We conclude the Retirement Board reasonably decided that Wichita Code Section 2.28.150(d)(3) does not except attorney fees from the deduction, properly rejected policy arguments in light of the unambiguous provision, and correctly refused to apply the common-law doctrine that requires sharing of attorney fees by those who benefit from a common fund. Therefore, we affirm the Retirement Board’s decision and reverse the district court’s decision, which in an administrative appeal had reversed the Retirement Board.
Facts
Robinson suffered employment-related injuries to her bilateral upper extremities as a gardener employed by the City of Wichita. The date of injury was April 5, 2002. Robinson filed a claim for workers compensation benefits and entered into an agreed award that totaled $125,000. Per a prior attorney fee agreement, approved
In June 2008, Robinson filed her disability retirement claim with the Retirement Board. The Retirement Board approved Robinson’s request, retroactively effective July 20,2002, but reduced the amount of available disability retirement benefits by $125,000, the entire amount awarded for workers compensation benefits. The Retirement Board determined that the deduction was required under Wichita Code Section 2.28.150(d)(3).
Robinson filed a request to modify the Retirement Board’s award, arguing that the deduction should not include the workers compensation attorney fees because, although she was awarded $125,000 in workers compensation benefits, she did not actually “receive” the portion that would be paid to her attorney. In other words, the workers compensation deduction should have been reduced to $93,750 ($125,000 minus $31,250 in attorney fees). The Retirement Board, after conducting a discussion and hearing statements of counsel on this matter of first impression, issued its final decision, denying Robinson’s request for modification and determining “to keep its current practices and ordinances in place.”
Robinson filed an appeal in the district court pursuant to K.S.A. 60-2101 (d). The district court agreed with Robinson and found that the Retirement Board incorrectly calculated her disability retirement benefits. The district court concluded the Retirement Board was only entitled to deduct the amount of workers compensation benefits “actually received” by Robinson and should not have included attorney fees in the deduction. In the district court’s journal entry of judgment, the court based its decision on five findings: (1) reducing the disability retirement benefit by the amount of the workers compensation attorney fees “creates a hardship” on Robinson “and will not be permitted because that action thwarts the very purpose of the disability retirement plan”; (2) “Kansas, along with virtually every other state and the federal courts, has adopted the common fund doctrine which permits a party who creates,
The district court reversed the Retirement Board’s decision and granted judgment for Robinson in the amount of $31,250 plus costs. The Retirement Board now makes a timely appeal. The case was transferred to this court pursuant to K.S.A. 20-3018(c).
Analysis
Robinson’s appeal from the Retirement Board’s decision is based on K.S.A. 60-2101(d). This statute confers jurisdiction on a district court to review the action of a political subdivision exercising “judicial or quasi-judicial functions.” In such circumstances, the district court is limited to determining if the Retirement Board’s decision was within its scope of authority, was substantially supported by evidence, or was fraudulent, arbitraiy, or capricious. On appeal from the district court, an appellate court reviews the Retirement Board’s decision as though the initial appeal had been made directly to the appellate court. See Butler v. U.S.D. No. 440,
In this case, Robinson has not argued that the Retirement Board acted outside its scope of authority. Nor, at least before us, is there any real controversy about the facts. The details of Robinson’s workers compensation and disability claims are not disputed, and the Retirement Board essentially agrees with the factual determinations regarding Robinson’s difficult financial situation and the first-impression nature of the Retirement Board’s ruling. Instead, her focus and the district court’s ruling is that the Retirement Board was arbitrary and capricious in its interpretation of the Wichita Code.
A. Interpretation of Wichita Code Section 2.28.150(d)(3)
In arguing that the Retirement Board did not reasonably interpret Wichita Code Section 2.28.150(d)(3), Robinson insists that the phrase “any amount received” includes only the workers compensation benefits actually received by the injured employee after any attorney fees have been paid. Essentially, Robinson asserts that it was erroneous to use $125,000 in the calculation of the disability retirement benefits because she did not actually receive that amount, having elected to have her workers compensation award reduced by the amount of attorney fees related to the compensation hearing. In other words, she interprets the word “received” to mean “net receipts” as opposed to “any amount awarded.” See Faust v. Walker,
In response, the Retirement Board suggests that the district court and this court should grant deference to its interpretation of the provision and that its interpretation was reasonable and consistent with commonly accepted rules of statutory interpretation. As to the first point, this court has previously stated that “interpretation of a statute is a necessary and inherent function of an agency in its administration or application of that statute” and that “the legal interpretation of a statute by an administrative agency that is charged by the legislature with the authority to enforce the statute is entitled to great judicial deference.” Mitchell v. Liberty Mut. Ins. Co.,
Instead, the interpretation of Wichita Code Section 2.28.150(d)(3) presents a question of law over which we have unlimited review. See Double M Constr. v. Kansas Corporation Comm’n,
Applying these rules to the interpretation of similar statutes, courts in California, Kentucky, and Washington as well as the Tenth Circuit Court of Appeals have rejected arguments similar to Robinson s. As we will discuss, the reasoning of these cases applies to our interpretation of Wichita Code Section 2.28.150(d)(3).
In the California case of Garietz v. City of Oakland,
A city charter provided for the Police and Fire Retirement System, and the retirement provisions of the charter stated, in part:
“ ‘It is the intention of this section that allowances granted to or on account of members of the System for injury, illness or death incurred in the performance of duty shall not be cumulative with benefits under the Labor Code of California awarded as the result of the same injury, illness, or death . . .
“ ‘(a) If the amount [of benefits awarded] is paid in one sum or in installments equal to or greater than such salary, retirement allowance, or other benefit, such member or dependant shall not receive any salary, retirement allowance, or other benefit until the total amount of the salary, retirement allowance, or other benefit which would otherwise be payable equals the total amount received under the Labor Code.
“ ‘(b) If the amount [of benefits awarded] is paid in installments less than such salary, retirement allowance, or other benefit, the salary, retirement allowance or other benefit, shall be reduced so that the total salary, retirement allowance, or other benefit plus the amounts received under the Labor Code will equal the salary, retirement allowance or other benefit which would otherwise be due.
“ ‘(c) In either case any award specifically granted for medical, surgical, or hospital expenses shall not reduce the salary, retirement allowance, or other benefit.’ ” (Emphasis added.) Garietz,20 Cal. App. 3d at 118 n.l (quoting city charter section 249[2]).
The California Court of Appeals noted that the state’s Labor Code provided for certain hens against any sum ordered paid as compensation by the Workers’ Compensation Appeals Board. In addition to attorney fees, the Labor Code provided that the Board may “ ‘determine and allow as liens against any sum to be paid as compensation’ ” various other expenses incurred by or on behalf of the injured employee. Garietz,
In the Kentucky decision of Rue v. Kentucky Retirement Systems,
The Kentucky Court of Appeals observed that the plain language of the applicable Kentucky statute stated that the monthly disability benefit was to equal the employee’s final pay minus amounts received from federal social security or a workers compensation award. Spouses’ and children’s benefits were specifically excluded, but there was no mention of attorney fees. Noting that some specific exclusions were mentioned, the Rue court rejected the claimant’s contention that the amount used in establishing the workers compensation component of the combined monthly benefit should be reduced by the amount of attorney fees related to the workers compensation proceeding. The Rue court reasoned that the statute was clear in providing which allowances were not to be considered in calculating benefits. The legislature was capable of wording the statute in such a way as to express the intent to reduce the amount of workers compensation attorney fees, but it did not do so.
Additionally, the Rue court observed that Kentucky is not one of several states that treat attorney fees as an “add-on” or double benefit that the employer must pay in addition to the compensation award itself. Instead, under the Kentucky statutory scheme, the payment of legal fees remains at all times the personal responsibility of the claimant. “This is true,” said the Rue court, “despite the fact that our statutes require approval of the fee and offer a claimant the option of paying that obligation up-front’ through reduced monthly benefit proceeds.” Rue,
Noting that other jurisdictions with similar statutoiy schemes have reached comparable results, the Rue court held that to allow the claimant to deduct only his net workers compensation award
In Regnier v. Labor and Indus.,
Although the claimant had incurred medical and legal expenses in obtaining her social security disability benefits, the district court upheld the decision of the Board of Industrial Insurance Appeals to deny any credit or exemption for the medical and legal expenses.
On appeal, the claimant argued that in computing the reduction in state benefits, she should receive a credit for the medical and legal expenses she incurred in obtaining her federal benefits. This argument was based on 20 C.F.R. § 404.408(d), a regulation governing the computation of federal benefits in cases where a state has not enacted a statute regarding items that may be excluded when calculating a reduction. The claimant argued that this regulation excluded from the process actual legal and medical expenses incurred in gaining state benefits so that, in effect, the claimant would receive a credit. Regnier,
The Washington Supreme Court rejected this notion, unconvinced that the federal regulation required an exemption for medical and legal expenses to be taken from the amount of the reduction in federal benefits. Moreover, even if such an exemption was available from a federal reduction procedure, there was no similar provision under Washington law. Regardless, the Regnier court pointed to the well-known rule that “attorney fees may be recovered only where authorized by a statute, a private agreement be
Finding that the legislature “has not seen fit to provide benefits to cover die expenses of establishing eligibility for disability benefits,” the Regnier court held it would be inappropriate for the court to create such benefits. Regnier,
In a case discussed by the parties — Trujillo v. Cyprus Amax Minerals Ret. Plan Comm.,
On appeal, the Tenth Circuit held that the ERISA plan administrator did not act arbitrarily and capriciously in determining that the ERISA plan section, which stated that disability benefits would be reduced by the amount of workers compensation benefits “payable” to the participant, required the inclusion of the amount of attorney fees incurred by the participant in obtaining his or her workers compensation settlement. Drawing on definitions of “payable” in Black’s Law Dictionary, the Tenth Circuit observed that “payable” could mean “ ‘capable of being paid,’ ” “ ‘justly due,’ ” or “ ‘legally enforceable.’ ” Trujillo,
The Tenth Circuit rejected policy-based arguments advanced by the claimant. First, the claimant argued that the plan administrator’s decision effectively required him to pay the cost of reducing his own benefits under the plan. Second, he contended that the plan administrator’s decision would create “irreconcilable conflicts” between workers compensation attorneys and their clients and “ 'make it impossible for injured workers to obtain adequate, conflict-free representation.’ ” Trujillo,
Points from the analysis of these cases apply to the Wichita Code requirement that “[a]ny amount received under the State Worker’s Compensation Act” be deducted from the disability retirement award. Wichita Code Section 2.28.150(d)(3). First, like the provisions considered in the other jurisdictions, the language is inclusive, referring to ''[a]ny amount.” Second, like the California provision, the Wichita Code uses the term “received.” Black’s Law Dictionary does not contain a definition of “received,” but Webster’s New World Dictionary, Second College Edition, pp. 1884-85 (1974) defines the term as “to get, accept, take, or acquire something; be a recipient.” When that meaning is read in context of the entire phrase used in Wichita Code Section 2.28.150(d)(3), the meaning is much the same as the wording considered by the Tenth Circuit and other courts because it would be “[a]ny amount” the claimant gets, accepts, takes or acquires “under the State Worker’s Compensation Act.” Under the Kansas Workers Compensation Act (Kansas Act), Robinson got, accepted, took, or acquired the entire $125,000 in workers compensation benefits. This common understanding is reflected in a September 2008 letter from Robinson’s
Further, as with the provisions considered in the out-of-state cases we have discussed, the Kansas Act does not award attorney fees in addition to the workers compensation award or make the employer responsible for the attorney fees. The “American Rule” is well established in Kansas so that, in the absence of statutory or contractual authorization, each party to the litigation is responsible for his or her own attorney fees, and the Kansas Act does not create an exception. See Farm Bureau Mut. Ins. Co. v. Kurtenbach,
We also note that several provisions of the Kansas Act indicate that the award belongs to the claimant, not the attorney. As in the Kentucky statute, K.S.A. 44-536(b) provides that “[a]ny claims for attorney fees not in excess of the limits provided in this section and approved by the director shall be enforceable as a lien on the compensation due orto become due.” (Emphasis added.) Further, subject to exceptions not pertinent in this case, “[a]ll attorney fees for representation of an employee . . . shall be only recoverable from compensation actually paid to such employee.” (Emphasis added.) K.S.A. 44-536(f). In other words, under the Kansas Act the entire award is deemed to be actually paid, awarded to, and received by the claimant, who is responsible for payment of his or her attorney fees.
An additional consideration discussed in the Kentucky case applies to our analysis of Wichita Code Section 2.28.150(d)(3). That consideration is that the provision specifically mentions one exception but does not mention attorney fees. Specifically, the Wichita Code provides that disability retirement benefits will not be reduced by the portion of the workers compensation award that is for medical expenses. As aptly noted by the Kentucky court when discussing that its exemption for spouses’ and children’s benefits was silent regarding attorney fees, neither an agency (in this case, the Retirement Board), a district court, nor an appellate court is free to add words to a statute or ordinance in order to enlarge the scope beyond that which can be gleaned from a reading of the words used by the drafters. Rue,
Hence, we conclude the Retirement Board’s interpretation of Wichita Code Section 2.28.150(d)(3) was a reasonable interpreta
B. District Court’s Rationales for Determining Board’s Interpretation Was Arbitrary
Three of the rationales stated by the district court related to the question of whether the Retirement Board’s interpretation of Wichita Code Section 2.28.150(d)(3) was reasonable. First, the district court concluded such an interpretation was contrary to the stated purposes of the retirement disability fund. Second, the district court determined the interpretation was contrary to public policy because it penalized Robinson for the exercise of her rights under the Kansas Act. Third, the district court noted the Retirement Board had not previously determined the issue and, consequently, there was no long-standing policy.
1. Considering Purposes of Disability Benefits
In the first of these three rationales, the district court discounted the plain language of subsection (d)(3) of Wichita Code Section 2.28.150 and instead focused on the first half of the self-described “purpose” of the retirement plan, as laid out in Wichita Code Section 2.28.010, which states:
“The purpose of the Wichita employees’ retirement plan, hereinafter referred to as the ‘retirement plan,’ is to establish an orderly means whereby noncommissioned personnel employed by the city who have attained retirement age or who have become disabled as set forth in this chapter may be retired from active service without prejudice and without inflicting a hardship on the employees retired, and to enable employees to accumulate reserves for themselves and their dependents to provide for old age, disability, death and termination of employment, and for the purpose of effecting economy and efficiency in the administration of governmental affairs.”
Citing this provision, the district court specifically found that “[t]he reduction by the Board of the disability retirement benefits by the amount of attorney fees retained by petitioner’s counsel in
The district court did not explain, however, why Robinson’s personal financial status — a case-specific fact — requires the interpretation of “any amount received” under the Wichita Code to be the equivalent of “net receipts,” i.e., the award after deduction of attorney fees. Nowhere does Wichita Code Section 2.28.150(d)(3) require that the claimant’s personal financial status be considered. In addition, Robinson cites no authority for the notion that an individual’s disability income must meet a certain level of adequacy. Finally, as the Retirement Board argues, by emphasizing the purpose provision of the Wichita Code, the district court essentially found that the general purpose provision, Section 2.28.010, controls over the specific deduction provision of Wichita Code Section 2.28.150(d)(3). Yet, well-established rules of construction hold that specific statutes control over general ones. Ft. Hays St. Univ. v. University Ch., Am. Ass’n of Univ. Profs.,
Also, in focusing on the general purpose provision, the district court changed the universal applicability of the deduction provision because performing a prejudice and hardship analysis requires a case-by-case consideration. This could lead to inconsistent results, bypassing systematic calculations in order to consider the facts of each case. The Retirement Board argues that this case-by-case approach would jeopardize compliance with a different portion of Wichita Code Section 2.28.010, specifically that portion which states: “It is the intent that the Wichita employees’ retirement plan be established as a qualified governmental pension plan under Section 401(a) and 414(d) of the Internal Revenue code.” Section 401(a) of the Internal Revenue Code requires that actuarial assumptions be specified in a pension plan in order for the plan to qualify for tax exempt status. See 26 U.S.C. § 401(a) (25) (2006). Additionally, 26 C.F.R. § 1.401-l(b)(l)(i), which was issued under section 401(a) of the Internal Revenue Code, requires pension plans to provide “definitely determinable benefits” in order to
The Retirement Board makes a valid point. The district court did not consider the possibility that it is the City’s act of providing determinable disability retirement benefits to all eligible retirees which fulfills the purpose of the City’s retirement plan. Focusing on the terms “prejudice” and “hardship” in the purpose provision of the Wichita Code, the district court essentially ignored the plain language in Section 2.28.150(d)(3).
2. Penalty
In a closely related analysis, the district court found that the Retirement Board’s action of “deducting [workers compensation] attorney fees from [Robinson’s] disability retirement penalizes her for exercising her statutory right to recover workers compensation benefits.” The court stated that “[b]ecause she sought to exercise her right to recover those [workers compensation] benefits as well as seek compensation and reimbursement for medical expenses, [Robinson] will actually end up with less because the Board has required her to pay the attorney fees to recover the money for the Board.” In other words, Robinson was prejudiced by the Retirement Board’s decision requiring her to pay the workers compensation attorney fees.
According to the minutes from the Retirement Board’s meeting on October 15,2008, Robinson’s city retirement disability payment was calculated to be $1,281.45 per month. Her workers compensation payment, before the 25 percent attorney fee deduction, was approximately $1,400 per month (after attorney fees, the monthly workers compensation payment was $1,050 per month). The Retirement Board acknowledged that Robinson’s outcome was negatively affected by the order in which she applied for both benefits. The Board noted:
*284 “The dollar amount collected over a period of year's through the Pension System [generally] exceeds the Worker’s Compensation settlement upon application of the required offset. . . . [Robinson] actually does come out a bit worse by virtue of having done things the way she did because the Worker’s Compensation benefit was higher, but it was not more than 25% higher.”
Even so, Robinson fails to show how her payment of workers compensation attorney fees, by itself, is a penalty. The provisions in the Wichita Code do not specifically show the intent to maximize the injured employee’s benefits. Further, Kansas appellate courts have determined that K.S.A. 2009 Supp. 44-501(h), which allows employer contributions in private pension plans, paid to retired injured workers, to be reduced by the amount of employer-funded workers compensation benefits paid to the same workers, is not a penal statute. See, e.g., Robinson v. Southwestern Bell Telephone Co.,
Further, provisions allowing an award of attorney fees are not passed to benefit the attorney or to burden litigants. Rather, they are passed to enable litigants to obtain competent counsel. Hatfield v. Wal-Mart Stores, Inc.,
Therefore, we conclude Robinson has not been penalized by having to pay her attorney a fee deemed reasonable by the workers compensation director.
In addition, the district court focused on the fact that the issue of including the attorney fees in the amount of the reduction had never been previously presented to the Retirement Board. Consequently, the district court questioned the Board’s statements that it hesitated to veer away from its “current practice” of utilizing the full workers compensation award in its calculation of available disability retirement benefits and that a deduction of workers compensation attorney fees might require a “written rule.”
Because the district court considered the Retirement Board’s interpretation of Wichita Code Section 2.28.150(d)(3) to be arbitrary and capricious, it did not consider the fact that the existence of the ordinance itself established a long-standing policy. Because we have reached the opposite conclusion and have found the Retirement Board’s interpretation to be reasonable, we do not have the same difficulty and can conclude the policy was long-standing, having been adopted on passage of the ordinance.
Further, the record discloses that the Retirement Board examined the statutes and regulations related to other public plans with similar deduction provisions. Our independent review of those provisions underscores the reasonableness of the Retirement Board’s decision because, in other Kansas contexts involving the reduction of one type of benefit because of the entitlement to another benefit, this court has consistently held that where two governmental benefits arise from a common cause, there is no entitlement to both. For example, the Kansas Act, specifically K.S.A. 2009 Supp. 44-501(h), provides:
“If the employee is receiving retirement benefits under the federal social security act or retirement benefits from any other retirement system, program or plan which is provided by the employer against which the claim is being made, any compensation benefit payments which the employee is eligible to receive under the workers compensation act for such claim shall be reduced by the weekly equivalent amount of the total amount of all such retirement benefits, less any portion of any such retirement benefit, other than retirement benefits under the federal social security act, that is attributable to payments or contributions made by the employee, but in no event shall the workers compensation benefit be less than the workers compensation benefit payable for the employee’s percentage of functional impairment.” (Emphasis added.)
Similarly, the Kansas Public Employees Retirement System Act (KPERS), K.S.A. 74-4901 et seq., deduction provisions do not provide for adjustments due to attorney fees. For example, disability payments for certain correctional employees are addressed in K.S.A. 74-4914e, which provides in part:
“Benefits payable under this section shall be reduced by the original amount of any disability benefits received under the federal social security act or the workers compensation act. ... In no case shall a correctional employee who is entitled to receive benefits under this section receive less than $100 per month.” (Emphasis added.) K.S.A. 74-4914e(ll).
The above statute references the “original amount” and does not provide for a reduction for any attorney fees the retiree incurred in pursuing social security or workers compensation benefits.
We also note that the Kansas Legislature has obviously become aware of the attomey-fee-adjustment argument in the context of KPERS and has clearly rejected it, as seen in another provision, K.S.A. 2009 Supp. 74-4927(l)(B). That statute provides for the
Hence, although the Retirement Board had not considered the attorney fee issue, its interpretation of Wichita Code Section 2.28.150(d) was consistent with similar provisions in Kansas law and with the language of the provision. Because the Retirement Board applied the clear language of the provision, the fact that the interpretation was a matter of first impression does not render it arbitrary. Consequently, we conclude none of the rationales stated by the district court established that the Board’s interpretation was unreasonable or contrary to established principles.
C. Common Fund
In addition to considering the interpretation of Wichita Code Section 2.28.150(d)(3), the district court relied on another concept — the common fund doctrine. In essence, the district court reasoned that regardless of the code provision this common-law concept entitled Robinson to recover the attorney fees from the Retirement Board. The Board urges this court to reject this doctrine in light of the language in Wichita Code Section 2.28.150(d)(3).
The common fund doctrine permits a party who creates, preserves, or increases the value of a fund in which others have an interest to be reimbursed from that fund for litigation expenses incurred, including attorney fees. The doctrine reflects the traditional practice in courts of equity, and it stands as a well-recognized narrow exception to the general principle that requires every litigant to bear his or her own attorney fees. Gigot v. Cities Service Oil Co.,
The common fund doctrine relied on by the district court in this case was not mentioned in the California, Kentucky, or Washington cases, or the Tenth Circuit case we previously discussed, which were based on common rules of statutory interpretation. (The Tenth Circuit did consider and reject the doctrine of unjust enrichment.) Nevertheless, the common fund doctrine has been discussed in similar cases, and two lines of cases have emerged.
In support of Robinson’s argument, she cites Leonard v. Southwestern Bell Corp. Disability,
Additionally, the Leonard court was concerned with the inequitable results this practice could produce. “Assuming that an employer is not self-insured for worker’s compensation, Southwestern Bell’s argument would result in a windfall to an employee benefit plan and a detriment to an employee when the employee elects to
Given these two concerns, the Leonard court refused to allow the reduction to include the amount a plan participant had to pay in attorney fees and costs to obtain nonplan benefits, absent an explicit statement in the plan that administrators had discretion to treat fee and cost portions of such payments as the “same general character” as plan benefits. Leonard,
The common fund doctrine was also applied in Young v. Mory,
Under the Illinois Pension Code, SERS was entitled to a deduction from benefits for any workers compensation award. Young,
The Illinois Court of Appeals found that the regulation was invalid because SERS clearly benefited from the services of Young’s attorney in that SERS would be able to reduce the pension award by the full amount of the workers compensation award, including the amount paid for attorney fees. As such, the common fund doctrine applied and SERS was responsible for the fees incurred by the claimant in seeking workers compensation benefits.
The Workers Compensation Court rejected the claimant’s attorney fee claim for three reasons. First, it cited Stahl v. Ramsey Construction Co.,
On appeal from the rulings of the Workers Compensation Court, the Montana Supreme Court in its Flynn decision also discussed Stahl, where the claimant incurred attorney fees to recover social security disability benefits and the Social Security Administration withheld a percentage of the award for direct payment of his attorney fees. Following the Stahl claimant’s social security disability award, the State Fund determined that it was entitled to reduce its future payment of benefits to account for the retroactive social
The Flynn court noted that the Stahl claimant did not argue for application of the common fund doctrine and presented a different theory for relief than was presented in Flynn. The Flynn court, therefore, did not find Stahl to be dispositive. Next, the court summarized the elements of the common fund doctrine as follows:
“(1) an active beneficiary must create, reserve, or increase a common fund; (2) the active beneficiary must incur legal fees in establishing the common fund; and (3) the common fund must benefit ascertainable, non-participating beneficiaries. We enforce this doctrine because equity demands that all parties receiving a benefit from the common fund share in the cost of its creation. [Citation omitted.]” Flynn,312 Mont, at 414 .
With those elements in mind, the Flynn court observed that by obtaining a social security disability award the claimant enabled the State Fund to reduce his weekly workers compensation benefits. Also, as a result of the claimant’s litigation efforts, funds were recovered which accrued to the substantial benefit of the State Fund. While the State Fund reaped the benefit of the claimant’s efforts, it was not required to intervene, risk expense, or hire an attorney throughout the litigation proceedings. As a result, the Flynn court held that the claimant’s social security disability award constituted an existing, identifiable monetary fund or benefit in which an ascertainable, nonparticipating beneficiary maintained an interest. Flynn,
The state’s high court acknowledged that the common law is preempted where the law is statutorily declared. But it stated that “the Workers’ Compensation Act is silent on the issue of attorney fee apportionment following benefit recoupment.” Flynn,
A dissent, however, took the view that the common fund doctrine had no application. First, the dissenting justice observed that there is no “common fund” because the governmental agency involved in that case was not a party to the administrative proceeding,
In support of the position, the dissent cited Neal v. County of Stanislaus,
“The mere fact that defendant [county] benefits from plaintiff s efforts does not in itself entitle plaintiff to fees from defendant. In County of Tulare v. City of Dinuba,[205 Cal. 111 ,270 P. 201 (1928)], the Supreme Court stated:
‘The underlying principle in all the cases where one has been allowed compensation out of a common fund belonging to others for expenses incurred and services rendered on behalf of the common interest is the principle of representation or agency----The fact that one may be benefitted by an action brought by another is not of itself sufficient to justify a court in assessing costs against the one who also profits by said action. Some contractual relation or some equitable reason sufficient to support an allowance of costs must be shown to exist to justify a court of equity in making such assessment.’
“Here, there is no contractual relation or overriding equitable rationale of unfairness to plaintiff which supports an allowance of fees.” Neal,141 Cal. App. 3d at 539 .
Adopting this reasoning, the dissenting justice in the Montana case further noted that the common fund doctrine is “ ‘rooted in the equitable concept of quasi-contract.’ [Citations omitted.] It is applied in cases involving ‘principle^] of representation or agency.’ [Citation omitted.]” Flynn,
The dissent in Flynn is consistent with the second line of cases applying the common fund doctrine in situations similar to the one
“ ‘Any member of the system who has at least five (5) years of service credit and has sustained and/or shall sustain injuries or sickness, which immediately or after a lapse of time permanently unfit such member for active duty, shall receive a monthly disability pension as long as he or she remains unfit for active duty or until he or she reaches age sixty-five (65), whichever event occurs first. Such monthly disability pension in combination with workers’ compensation and social security shall not exceed sixty (60) percent of such member’s base compensation for the last full month prior to disability.’ ” Kindred,252 Neb. at 659-60 .
The parties agreed that the language of the city ordinance allowed the Retirement System to deduct the full amount of the claimant’s workers compensation award from the retirement pension. The claimant’s attorney appeared before the Retirement System’s board of trustees and requested that one-third of the amount of workers compensation benefits that were deducted from the claimant’s disability retirement pension be returned to him as reimbursement for attorney fees incurred in the workers compensation case. The board of trustees agreed to reimburse the claimant for attorney fees and costs with respect to some of his permanent partial disability benefits in the total amount of $5,991 but denied his claim for reimbursement of other attorney fees.
Unsatisfied, the claimant brought an appeal to the district court, contending that the Retirement System had benefited by reducing his service-connected disability pension entitlement by the full amount of the workers compensation benefits. The Retirement System, therefore, should be required under the common fund doctrine to reimburse the claimant for the full amount of attorney fees which he paid with respect to those benefits. The district court
On appeal, the Nebraska Supreme Court observed that prior precedent held that “the common fund doctrine presupposes the existence of a fund.’ ” Kindred,
Instead, the Retirement System simply calculated the claimant’s disability retirement pension benefits in the manner prescribed by the city ordinance, deducting the full amount of workers compensation benefits from his monthly disability retirement entitlement. “It is undisputed that this is exactly what the ordinance required,” stated the Kindred court. Kindred,
As we consider these two divergent lines of cases, we find the view represented by the Nebraska Supreme Court’s decision and the dissent in Flynn to be more persuasive. While the equitable approach adopted in the cases using the common fund doctrine is somewhat alluring, its application under these circumstances is contrary to the rule. The Retirement Board had no interest in Robinson’s workers compensation award and did not have an agency or contractual relationship with her. There was no “common fund” or “common interest” in the workers compensation award. Further, although Wichita’s retirement fund did not have to pay out as much as it would have had Robinson not received workers compensation benefits, the puipose of the common fund doctrine is not to require the sharing of attorney fees with everyone who derives a financial benefit from a claimant’s settlement or award. Further, as we have discussed, Wichita Code Section 2.28.150(d)(3) is clear and unambiguous and does not create an exception for attorney fees. Hence, the Retirement Board appropriately applied the provision by reducing the retirement disability benefit by the entire workers compensation award, including the attorney fees.
The district court’s decision directing the Retirement Board to reduce the workers compensation deduction by the amount of attorney fees and costs incurred in Robinson’s workers compensation case is reversed. The Retirement Board’s calculation of retirement disability benefits in which it utilized the full amount ($125,000) of workers compensation benefits received by Robinson is affirmed.
Dissenting Opinion
dissenting: I respectfully dissent from the majority’s conclusion that the common fund doctrine does not apply in this case. The majority adopts the view of the Nebraska Supreme Court in Kindred v. City of Omaha Emp. Ret. Sys.,
In defining and applying the common fund doctrine, this court has looked to decisions of the United States Supreme Court. See, e.g., Gigot v. Cities Service Oil Co.,
For example, the limited view of what comprises a “common fund” that was adopted by the Nebraska Supreme Court has been rejected by the United States Supreme Court. The Nebraska court in Kindred,
In Mills, the United States Supreme Court focused on whether the action that resulted in attorney fees benefited others who had
“have departed further from the traditional metes and bounds of the [common fund] doctrine, to permit reimbursement in cases where the litigation has conferred a substantial benefit on the members of an ascertainable class, and where the court’s jurisdiction over the subject matter of the suit makes possible an award that will operate to spread the costs proportionately among them.” Mills,396 U.S. at 393-94 .
As such, the Court concluded the failure to create a fund that was the subject of the lawsuit did not prevent application of the doctrine. The Court stated:
“The fact that this suit has not yet produced, and may never produce, a monetary recovery from which the fees could be paid does not preclude an award based on this rationale. Although the earliest cases recognizing a right to reimbursement involved litigation that had produced or preserved a ‘common fund’ for the benefit of a group, nothing in these cases indicates that the suit must actually bring money into the court as a prerequisite to the court’s power to order reimbursement of expenses. ... This Court in Sprague [v. Ticonic Nat. Bank,307 U.S. 161 , 166,83 L. Ed. 1184 ,59 S. Ct. 777 (1939)], upheld the District Court’s power to grant reimbursement for a plaintiff s litigation expenses even though she had sued only on her own behalf and not for a class, because her success would have a stare decisis effect entitling others to recover out of specific assets of the same defendant. Although those others were not parties before the court, they could be forced to contribute to the costs of the suit by an order reimbursing the plaintiff from the defendant’s assets out of which their recoveries later would have to come. The Court observed that ‘the absence of an avowed class suit or the creation of a fund, as it were, through stare decisis rather than through a decree — hardly toucbfes] the power of equity in doing justice as between a party and the beneficiaries of his litigation.’ [Sprague, 307 U.S.] at 167.” Mills,396 U.S. at 392-93 .
The Court emphasized that equity was the principle concern, stating that “[t]o allow the others to obtain full benefit from the plaintiffs efforts without contributing equally to the litigation expenses would be to enrich the others unjustly at the plaintiff s expense.” Mills,
While the facts and circumstances of Mills are clearly distinguishable from this case, I view the decision as indicating the common fund doctrine need not be adhered to with the rigid view that constrained the Nebraska Supreme Court. Reflecting this shift,
A second rationale of the Nebraska Supreme Court and the dissent in Flynn that was adopted by the majority in this case is that the clear language of the provision controls and does not create an exception for attorney fees. This rationale ignores K.S.A. 77-109, which states in part: “The common law as modified by constitutional and statutory law, judicial decisions, and the conditions and wants of the people, shall remain in force in aid of the General Statutes of this state.” In other words, when the legislature intends to abolish a common-law rule, it must do so in an explicit manner. “In the absence of such an expression of legislative intent, the common law remains part of our law.” American General Financial Services, Inc. v. Carter,
In my view, an explicit abolition of the common fund doctrine can be found in a provision cited by the majority, K.S.A. 2009 Supp. 74-4927(l)(B). As noted by the majority, K.S.A. 2009 Supp. 74-4927(1)(B) specifically states: “As used in this section, workers compensation benefits’ means the total award of disability benefits payments under the workers compensation act notwithstanding any payment of attorney fees from such benefits as provided in the workers compensation act.” (Emphasis added.) This clear language, I would conclude, is sufficient to abrogate the application of the common fund doctrine. On the other hand, Wichita Code Section 2.28.150(d)(3) lacks this clarity and does not displace the doctrine.
Hence, the common fund doctrine can apply, and it is appropriate to do so in this case because Robinson’s efforts saved the