Rivas v. Industrial Accident Commission

NOURSE, J. pro tem.* This is a proceeding to review, at the petition of Fred M. Rivas, an applicant for workmen’s compensation, an award of the respondent commission.

The sole question presented is: Has the respondent commission power to deduct from the credit to which a compensation insurance carrier is entitled under section 3861 of the Labor Code, attorneys’ fees paid by the applicant for legal services rendered in the prosecution and compromise of an action against a third party, in cases where the carrier has contracted with the applicant’s attorney to represent it in the prosecution of the said action. We have concluded that this question must be answered in the negative.

The facts: Rivas, petitioner here, on November 3, 1955, [674]sustained an injury arising out of and in the course of his employment. As a result, his employer’s compensation carrier, the respondent Industrial Indemnity Company hereinafter called “Industrial,” paid compensation in the form of medical treatment furnished the employee and weekly compensation disability benefits.

The injury in question was sustained in a highway accident and Rivas employed an attorney to prosecute an action against a third party to recover damages for the third party’s negligence, which he alleged was the proximate cause of his injury. He entered into a contract with this attorney to pay him a contingent fee. There is no express statement in the record here as to the basis upon which that fee was to be determined.

After the action had been commenced, Industrial entered into an agreement with Rivas’ attorney to represent it “in connection with subrogation recovery on subject claim.” This contract was evidenced by a letter written by Industrial to claimant’s attorney which reads as follows:

“You are hereby authorized to represent Industrial Indemnity Company in connection with subrogation recovery on subject claim. We hereby agree to a fixed fee of one-third of our lien claim, whether the recovery is made by settlement, or if the case goes to pre-trial.

“Our expenditures to date are as follows: Compensation $1,390.90, and our medical expenses up through January 29, 1957 are $1,871.43, our total expenditures are $3,262.33. Copies of the more recent medical bills are attached.

“In view of your fees in this matter, we are not inclined to compromise our lien. Please keep us advised of your proceedings, and forward a copy of the Complaint to us. Thank you.”