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Vitac Corp. V. W.C.A.B. (Rozanc), 2004 Pa. Lexis 1695 (Supreme Ct. 07-22-04)

In a case of impression, the Supreme Court of Pennsylvania held that a request for imposition of attorneys' fees, payable by defendant/employer/insurer pursuant to §440, may include reasonable charges for legal work performed by paraprofessionals (paralegals, law clerks, recent law graduates) for the claimant attorney.

The underlying facts reflect that the workers' compensation judge granted defendant's Modification Petition based upon a modified duty job offer, which was not accepted by claimant. The judge also awarded payment of attorneys' fees by defendant/employer/insurer, as an additional cost, based upon a finding of an unreasonable contest of defendant's concurrent Petition for Suspension, for claimant's alleged refusal to undergo reasonable medical treatment. Claimant requested pre-authorization for carpal tunnel surgery, which defendant refused to "pre-authorize." The award by the workers' compensation judge was limited to the professional time incurred by the claimant attorney alone.

The Workers' Compensation Appeal Board affirmed the modification and suspension orders, but reversed the conclusion that the entire contest of both petitions was unreasonable. Importantly, the Workers' Compensation Appeal Board remand order included instructions to limit the award of attorneys' fees to the Suspension Petition litigation. These instructions included the approval of claimant's recovery of any paraprofessional fees. The Commonwealth Court affirmed the Workers' Compensation Appeal Board order with the modification to exclude paraprofessional fees.

The Supreme Court adopted claimant's argument that reasonable attorneys' fees awarded pursuant to §440 should include paraprofessional fees, as they are a cost-effective measure to ensure that some of the tasks will be assigned to lower cost personnel. The Court reasoned that the claimant attorney could pass along the overhead incurred for paraprofessional expenses by increasing his hourly attorneys' fee rate. Therefore, there was no reason to discourage reimbursement for a separate billing entry. The Supreme Court rejected the employer's strict literal statutory construction argument that §440 only referred to "attorneys' fees" and did not include any reference to paraprofessional fees. The Court emphasized that all fee awards must meet the requirement of reasonableness. This standard addresses the concerns raised regarding potential unfair billing practices. The Court seemed persuaded by claimant's arguments that the apportionment of fees between attorneys and paraprofessional charges would result in a cost-effective award, rather than a double recovery.

PRACTICE POINTER: Remember that §440 allows the assessment of attorneys' fees as a cost payable by defendant/employer/insurer in all cases, unless there is a finding that there was a reasonable basis for the contest of the depending litigation.

Therefore, in all cases, defense counsel and the worker compensation claim representative must require the submission of a Quantum Meruitum specification of the attorneys' fees requested. Based upon this Supreme Court decision, the attorneys' fees request must be reviewed for the proper inclusion of "reasonable" paraprofessional fees. Note: Defendant may argue that the attorneys' fees hourly rate may be the subject of a reduction by the workers' compensation judge if the claimant attorney is recovering "overhead" costs such as paraprofessional fees.