Quinn v. State of California

CLARK, J.

I dissent.

The majority, having framed the problem before us as one of statutory construction, decides that Labor Code section 3856, subdivision (b), 1 requires an employer to share the costs incurred in his employee’s action against a third party tortfeasor. I cannot agree.

In interpreting a statute we must begin with the guidance provided by the Legislature. The task of the courts “is simply to ascertain and declare what is in terms or in substance contained [in the statute], not to insert what has been omitted, or to omit what has been inserted; . . .” (Code Civ. Proc., § 1858.) While this is the short answer to the instant problem, more extended discussion is in order.

Section 3856 of the workers’ compensation law has a long history in this state. This history aids in ascertaining the statute’s proper construction. (In re Davis (1936) 18 Cal.App.2d 291, 295 [ 63 P.2d 853 ].) In Dodds v. Stellar (1947) 30 Cal.2d 496 [ 183 P.2d 658 ],. this court was confronted with the contention that, despite the absence of express statutory language so providing, the employee should be allowed attorney’s fees for that portion of the judgment going to satisfy the employer’s lien. Section 3856 then read in its entirety: “The court shall first apply, out of the entire amount of any judgment for any damage recovered by the employee a sufficient amount to reimburse the employer for the amount of his expenditures for compensation. If the employer has not joined in the action or has not brought action, or if his action has not been consolidated, the court, on his application, shall allow, as a first lien against the entire amount of any judgment for any damages recovered by the employee, the amount of the employer’s expenditures, for compensation.”

Rejecting plaintiff’s equitable common fund argument, this court stated in Dodds : “If such analogy were followed so as to impress a proportionate liability for attorney fees upon the employer’s or insurance carrier’s lien for ‘expenditures for compensation,’ its full reimbursement as accorded by statute would be to that extent nullified.” (Id., at p. 505.) *178 We continued: “If there is to be any change in these statutory provisions defining the rights of the parties, the suggestion for such change should be addressed to the Legislature rather than to the courts.” (Id., at p. 506.)

Two years later the Legislature amended section 3856 to provide for the sharing of attorney’s fees. (Stats. 1949, ch. 120, § 2, pp. 355-356.) But contrary to what the majority would infer, this legislative action cannot be read as an endorsement of wholesale application of the “concept of apportionment” to the workers’ compensation laws. Moreover, to say that the Legislature acted to provide the relief plaintiff sought in Dodds is far from saying that Dodds was wrongly decided. Indeed we indicated as much in R. E. Spriggs, Inc. v. Industrial Acc. Com. (1954) 42 Cal.2d 785 [ 269 P.2d 876 ], in which we were asked to determine whether the analogous section relating to settlements (§ 3860) provided for apportioned fees. It was contended that failure to modify section 3860 to provide for apportioned fees at the same time section 3856 was so amended was purely a legislative error. However, we concluded: “The amendments show no legislative intention to alter the reimbursement provisions relating to settlements, and there is nothing in them to warrant a conclusion that a failure to amend the applicable sections was due to a legislative oversight.” (Id, at p. 789.) We again proceeded to refer pleas for change to the representative branch of government—the Legislature.

In 1957, section 3860 was amended to provide for shared attorney’s fees. (Stats. 1957, ch. 615, § 1, p. 1825.) However, this provision was short-lived as in 1959 the Legislature modified and reorganized, inter alia, sections 3856 and 3860, deleting from both the language requiring apportionment of attorney’s fees. (Stats. 1959, ch. 1255, § 2, p. 3387.) Not surprisingly, the deletion of these provisions was regarded as signifying a change in the law. (See Carden v. Otto (1974) 37 Cal.App.3d 887, 893 [ 112 Cal.Rptr. 749 ]; Fuchs v. Western Oil Fields Supply (1972) 25 Cal.App.3d 728, 736 [ 102 Cal.Rptr. 74 ]; Moreno v. Venturini (1969) 1 Cal.App.3d 286, 290 [ 81 Cal.Rptr. 551 ]; Johnson v. L.D.S. Trucking Co. (1967) 254 Cal.App.2d 496, 499 [ 62 Cal.Rptr. 501 ]; Branscum v. State Comp. Ins. Fund (1965) 232 Cal.App.2d 352, 356 [ 42 Cal.Rptr. 682 ].) Ordinarily: “By deleting an express provision from an existing statute, a presumption arises that the Legislature intended a substantial change in the law.” (Wallace v. Department of Motor Vehicles (1970) 12 Cal.App.3d 356, 361 [ 90 Cal.Rptr. 657 ]; Clements v. T.R. Bechtel (1954) 43 Cal.2d 227, 231 [ 273 P.2d 5 ].) Today the majority, unimpressed and unabashed, reads these deleted provisions back into the law.

*179 The majority correctly observes that “the Legislature used significant portions of the former statute verbatim, thus inviting reference to the former interpretation” (ante, p. 172). But the majority fails to draw the correct inference from this fact. The former interpretation to which "reference is invited is the interpretation given the statute in the absence of an express provision regarding apportionment of fees, i.e., the interpretation of this court in Dodds and R E. Spriggs, Inc.

The only meaning the majority ascribes to the Legislature’s 1959 recodification of the statutes is the establishment of the priority of attorney’s fees, and, in sections 3858 and 3861, the provision for offsetting future compensation awards by the amount which the worker recovers from a third-party. The alteration of the priority of payments does not explain deletion of the fee apportionment language. Nor do the reasons for changing sections 3858 and 3861 explain the modification of sections 3856 and 3860.

The majority opinion relies on the failure of legislative commentators to discuss the deletion of the apportionment provisions as supporting the proposition that the Legislature intended to continue the mandate for apportionment of attorney’s fees. (Ante, p. 172.) One wonders why, if legislative inaction in the face of wayward statutory interpretation is “a slim reed upon which to lean” (ante, p. 175), the absence of authoritative discussion of new legislation should support any more weight.

Moreover, consideration of the “contemporaneous construction” of section 3856, subdivision (b), as that term is used in the case cited by the majority, First Nat. Bank v. Kinslow (1937) 8 Cal.2d 339 [65 P.2d 796 ], does not support the majority’s conclusion. In Kinslow the term “contemporaneous construction” was used to describe the interpretation of a statute accepted by practitioners over a period of time. (Id., at p. 346.) Applying that description here, the “contemporaneous construction” of section 3856, subdivision (b), has been that, absent express provision therefor, the section does not permit apportionment of fees.

Uncertain of its path but sure of its goal, the majority asserts: “The instant case . . . might well constitute an appropriate situation for the application of the rule of apportionment, even without reference to the statute.” (Ante, p. 168). The majority then proceeds to argue that the Legislature actually incorporated this principle into section 3856, subdivision (b). This conclusion is reached by stressing certain language of the section—“reasonable attorney’s fee,” and “the services rendered both for *180 the benefit of the employee and the employer”—and the rule of liberal construction of the workers’ compensation laws (§ 3202).

The provision for assessment of a reasonable fee is only to be expected. Presumably the Legislature decided against establishing a fee schedule in the workers’ compensation sphere. Having done so, what standard other than “reasonable” was to be established? And the fee, to be reasonable, must take into account the recovery awarded in the action, i.e., the benefit to both employer and employee. (See, e.g., In re Osofsky (S.D.N.Y. 1931) 50 F.2d 925, 927 .) 2 The internal logic of this language precludes the innovative reading given it by the majority.

Finally, the statutory rule of liberal construction, relied on by the majority, does not invest this court with power to administer workers’ compensation as we see fit. (Ruiz v. Industrial Acc. Com. (1955) 45 Cal.2d 409, 413 [ 289 P.2d 229 ].) Once we refused, as we should now refuse, to use this rule to escape the clear effect of statutory language, even if the Legislature might not have fully appreciated the significance of its nomenclature. (Earl Ranch, Ltd. v. Industrial Acc. Com. (1935) 4 Cal.2d 767, 769 [ 53 P.2d 154 ].) “California has authorized a liberal construction of its law, to be sure; but how far in that direction ‘liberality’ may extend would seem to depend upon two considerations: (1) the latitude permitted by the wording of the statute which is to be construed; and (2) the latitude permitted, within such limitations, by the views of the reviewing tribunal. The first is a limitation of an objective character; the second is a subjective or personal limitation. When the latter ignores the former, question may well arise as to where liberal interpretation ends and nullification begins.” (2 Hanna, Cal. Law of Employee Injuries and Workmen’s Compensation (2d ed. 1975) p. 8-15.) We must eschew the temptation to become crusaders. (Id., at pp. 8-11 to 8-12.)

The majority’s emphasis throughout is on the applicability of the “common fund” concept to the facts at hand. Accordingly, I turn to this argument.

“The announced purpose of the ‘common fund’ device for awarding fees is to reach and prévent a peculiar form of unjust enrichment. . . .” (Dawson, Lawyers and Involuntary Clients: Attorney Fees From Funds (1974) 87 Harv.L.Rev. 1597, 1625-1626.) One may question wherein the *181 employer’s recovery prior to this decision was unjust, inasmuch as he received back only what he had paid—no more and, until today, no less. While it is true that California courts have long applied this principle of apportionment, it is equally true that they have done so only in very limited circumstances, e.g., trust or probate matters. 3

The bases of the equitable rule—“fairness to the successful litigant who might otherwise receive no benefit... ; correlative prevention of an unfair advantage to the others . . . ; encouragement of the attorney for the successful litigant. . . ” 4 —are not present in the peculiar setting of workers’ compensation. An employer, unlike the ordinary claimant to a common fund, is not interested in getting a share of the fund, but in getting back what he has paid owing to the fault of a third party. The majority chooses to attribute no significance to the Legislature’s characterization of the employer as a “lien creditor.” I submit that a more natural construction leads to the conclusion that the employer was meant to be regarded as a true lien creditor at such time as the injured employee recovers judgment from a third-party tortfeasor. When an ordinary plaintiff recovers in tort, he is allowed no offset of his attorney’s fees against his creditors, even though the suit indirectly created the fund for repayment. It is to this analogy that the characterization of the employer as a “lien creditor” should lead.

The ultimate strength of the majority position is neither law nor logic, but rather its implicit appeal to some ill-defined sense of fairness. A closer analysis of the result, however, dispels this deceptive aura. Consider a situation in which the injured employee is awarded a $30,000 judgment against a third-party tortfeasor. Reasonable attorney’s fees (and costs) amount to $10,000, and $15,000 is repayable to the employer as the amount paid in workers’ compensation benefits. If attorney’s fees are apportioned, the employee will receive $10,000 of the judgment, leaving $10,000 for the employer. If fees are not apportioned the employer will receive his full $15,000, leaving only $5,000 for the employee. But it must be recalled that the employee has already received $15,000 in compensation benefits, giving him a total award of $20,000—just what he would have received if there had been no worker’s compensation benefits. Apportionment gives him a total of $25,000 while the employer is out of pocket $5,000. (See Lasky, Subrogation Under the California Workmen’s Compensation Laws—Rules, Remedies and Side *182 Effects (1972) 12 Santa Clara Law. 1, 19.) Concepts of equity cannot be viewed as sanctioning such a result.

The primary purpose of the workers’ compensation law is indisputable. It is “to insure to the injured employee and those dependent upon him adequate means of subsistence while he is unable to work and also to bring about his recovery as soon as possible in order that he may be returned to the ranks of productive labor.” (Union Iron Wks. v. Industrial Acc. Com. (1922) 190 Cal. 33, 39 [ 210 P. 410 ].) The holding of the majority—by admission—does' nothing to further this purpose. “To be sure, [the majority’s] interpretation will increase the plaintiff’s present tort recovery and decrease the employer’s recoupment of past benefits, but to characterize this result as an increase in compensation benefits is to ignore reality.” (Ante, p.. 174.) Unfortunately, the holding is not just neutral with respect to the concerns of workers’ compensation. “In the legislative policy dealing with workmen’s compensation, concern for the cost of the system has always been an important element.” (Lasky, supra, 12 Santa Clara Law. at p. 2.) This concern is expressed in the subrogation provisions of the act. Whenever possible, the employer is to be made whole. By so providing the Legislature has clearly struck a balance between the protection of the injured employee and the burden on the employer and ultimately the consuming public. This court should refrain from strained interpretation of legislative intent upsetting this balance. “A decision considered solely in terms of eliminating ‘the compensation carrier’s free ride’ . . . can have many side-effects which go far beyond the range of such a simplistic analysis.” (Id., at p. 35.)

There are undoubtedly those who would ridicule a decision which, following Dodds and R. E. Spriggs, Inc., refers the employee to the Legislature for the relief he seeks. But it is not the province of this court to anticipate legislative direction. To anticipate the Legislature here, correctly or not, is necessarily to usurp the legislative function.

McComb, J., concurred.

Unless otherwise noted, all code sections cited hereinafter are found in the Labor Code.

If the employee’s attorney succeeds in obtaining a judgment, a portion of which is repayable to the employer, surely a reasonable fee would be based on the total recovery, not just the amount remaining after the employer’s portion had been subtracted.

See California cases cited by the majority. (Ante. p. 167. fn. 8.)

Estate of Stauffer (1959) 53 Cal.2d 124, 132 [ 346 P.2d 748 ].)