Castellanos v. Next Door Co.: Assuring Reasonable Compensation for Workers’ Compensation Attorneys and their Clients
By Kluger Kaplan May 26, 2016
By James Diamond
In April 2016, the Florida Supreme Court issued an important ruling in Castellanos v. Next Door Co., significantly impacting Florida’s workers’ compensation statute. The high court struck down the fixed amount of attorneys’ fees that successful workers’ compensation claimants are entitled to under Fla. Stat. § 440.34 on due process grounds, opening the possibility for successful workers’ compensation claimants to obtain increased attorneys’ fees awards.
Prior to the Castellanos decision, Section 440.34(1) strictly limited successful claimants’ recovery of attorneys’ fees based upon the amount of workers’ compensation benefits obtained. Specifically, a judge of compensation claims (“JCC”)—a judge responsible for adjudicating disputes over workers compensation benefits—could only award attorneys’ fees in an amount not exceeding 20% of the first $5,000.00 of the benefits secured, 15% of the next $5,000.00 of benefits, 10% of the remaining amount of the benefits secured to be provided during the first 10 years after the date the claim is filed, and 5% of the benefits secured after 10 years. Furthermore, Section 440.34(1) created an irrebuttable presumption that precluded consideration of whether the statutory attorneys’ fee award was reasonable.
Oftentimes, the statutory fee schedule resulted in unjust and absurd results for successful workers’ compensation claimants. For example, in the Castellanos case, the claimant, Marvin Castellanos, was injured during the course of his employment with the Defendant, Next Door Company. Castellanos prevailed in his workers’ compensation claim, successfully refuting numerous defenses raised by Next Door Company and its insurance carrier. Castellanos’ attorney spent 107.2 billable hours to achieve the award. Nevertheless, because Section 440.34 limited Castellanos’ ability to recover attorneys’ fees, the fee awarded by the JCC amounted to only $1.53 per hour for the 107.2 hours of work. The First District Court of Appeals upheld the JCC’s ruling based upon Section 440.34.
Castellanos appealed the decision to the Florida Supreme Court, challenging the constitutionality of the irrebuttable presumption in Section 440.34. The Supreme Court sided with Castellanos, holding that the conclusive fee schedule in Section 440.34 was unconstitutional because it violated state and federal constitutional guarantees of due process. Accordingly, the Court held that the $1.53 hourly fee award was patently unreasonable and directed that the case be remanded to the JCC for entry of reasonable attorneys’ fees.
So why is the Court’s decision in Castellanos so important? First, because the fixed fee schedule in Section 440.34 is now unconstitutional, the Statute’s prior attorneys’ fees rule has been revived. Pursuant to the Florida Supreme Court’s interpretation of that rule, a JCC must allow a successful claimant to present evidence to show that application of the statutory fee schedule would be unreasonable. In other words, post-Castellanos, as a starting point, the JCC will still make an award of attorneys’ fees pursuant to the statutory fee schedule. However, where the claimant can demonstrate that application of the fee schedule would be unreasonable under the circumstances—such as was the case in Castellanos—the claimant’s attorney will be entitled to an increased fee.
Second, the Castellanos decision may discourage employers from unnecessarily opposing meritorious claims for benefits. Post-Castellanos, successful claimants, even those with small cases, can seek increased attorneys’ fees, which will come out of the employer’s or the employer’s insurance carriers’ pocket. The ability to recover increased attorneys’ fees may enable an injured employee who has not received an equitable compensation award to engage competent legal representation and penalize a recalcitrant employer.
Finally, the prospect of being awarded increased attorneys’ fees may attract more attorneys to practice in the area of workers’ compensation litigation, and may lessen the inequity in compensation between claimant and defense lawyers. More attorneys practicing in the area could lead to more competition between plaintiffs’ counsel, which could increase the overall quality of representation, in turn creating better results for those clients.
It will be interesting to see if and how the Legislature may respond to the Florida Supreme Court’s recent decision in Castellanos. The Legislature could call a special session to re-write the law. In the meantime, however, Castellanos serves as an important milestone for successful workers’ compensation claimants and their attorneys, assuring that they are awarded the reasonable fees to which they are rightfully entitled.