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03/04/88 Zuber, Deceased, v. Power Company


March 4, 1988

ZUBER, DECEASED, PLAINTIFF-APPELLANT

v.

ILLINOIS POWER COMPANY, A CORPORATION, DEFENDANT-THIRD-PARTY PLAINTIFF,

v.

R. DRON ELECTRICAL COMPANY, INC., A CORPORATION, AND THE UNITED STATES FIDELITY AND GUARANTY

APPELLATE COURT OF ILLINOIS, FIFTH DISTRICT VIRGINIA ZUBER, Administratrix of the Estate of Ralph

COMPANY, a corporation, Third-Party, Defendants-Appellees

520 N.E.2d 1194, 117 Ill. Dec. 843 1988.IL.299

Appeal from the Circuit Court of St. Clair County, Honorable William Starnes, Judge Presiding.

APPELLATE Judges:

HARRISON, P.J., CALVO1 and LEWIS, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE HARRISON

HARRISON, Presiding Justice:

Plaintiff, Virginia Zuber, as Administratrix of the Estate of Ralph Zuber, petitioned this court for rehearing pursuant to Supreme Court Rule 367 (107 Ill. 2d R.367). In her petition, plaintiff argues that this court misinterpreted certain statements made by her counsel at oral argument. Specifically, plaintiff asserts that her attorney did not in fact indicate that no claim to additional attorneys fees was being made, as we indicated in the last sentence of the first full paragraph of page 12 of our slip opinion. Accordingly, plaintiff asks that we delete that sentence, which reads:

"Since plaintiff's attorneys have already been reimbursed out of the settlement for these litigation costs, and since plaintiff's attorney at oral argument stated that the attorneys make no claim to additional attorneys fees, the employer's weekly payments shall be made to plaintiff directly."

In its place, plaintiff argues that we should substitute the following language:

"Since plaintiff's attorneys have already been reimbursed out of the settlement for these litigation costs, the employer shall pay $14.32 per week to plaintiff directly, and the balance of $56.10 per week to plaintiff's attorneys."

We granted the petition for rehearing. After holding oral argument on the issue raised by that petition and upon consideration of the parties' briefs, the record, and the applicable law, we now agree that we were incorrect in believing that plaintiff's attorneys meant to make no claim to additional attorneys fees. Nevertheless, we adhere to our Conclusion that the weekly payments for attorneys fees, as well as costs, which the employer must continue to make should be paid directly to plaintiff. We therefore cannot accept the substitute language proffered by plaintiff's counsel.

As we have noted, plaintiff's third-party action against Illinois Power yielded a settlement of $388,995.54. The settlement consisted of a lump-sum payment of $302,466.54 and an annuity which cost $86,529. Pursuant to an agreement between plaintiff and her attorney, the attorneys were to keep 33 1/3% of this total recovery. They did not do so. Instead, they claimed a fee of $100,822.18, approximately 26% of the amount they recovered. Plaintiff's attorneys now suggest that they actually charged nothing to plaintiff for the annuity portion of the settlement and that their fee was based solely on the lump-sum payment. In our view, this is merely an accounting fiction and is of no consequence. Plaintiff's attorneys were free to reduce their fees however they saw fit. The reality remains that the fee paid by plaintiff covered all of the benefits she received in the settlement, and her attorneys could not now claim additional sums from her for the services they performed in securing that settlement or any portion of it.

The attorneys fees, along with costs, were deducted by plaintiff's counsel from the settlement fund before it was paid over to plaintiff. Thus, those fees and costs were borne directly by plaintiff. Plaintiff, however, was not the only party to derive benefit from the litigation. The employer profited as well, because the third-party action created a fund from which the employer (actually, the employer's insurer) could obtain reimbursement for past workers' compensation payments, and the employer was excused from making future payments.

There was no agreement between plaintiff's employer and plaintiff or her attorney for payment of attorneys fees by the employer for the services performed by plaintiff's attorneys which enabled the employer to secure these benefits. Pursuant to section 5(b) of the Workers' Compensation Act (Ill. Rev. Stat. 1983, ch. 48, par. 138.5(b)), the employer was therefore required to pay 25% of the gross amount of the reimbursement it received as its share of the attorneys fees incurred in connection with the third-party claim, just as it was obligated to pay its pro rata share of costs and reasonably necessary... expenses in connection with that claim.

Contrary to the argument now made by plaintiff's attorneys, they cannot recover fees from plaintiff by taking 26% "off the top" of the settlement fund obtained on plaintiff's behalf, and at the same time recover statutory fees of 25% from the employer out of the gross amount of the reimbursement which the employer is now able to receive. To hold otherwise would mean that plaintiff's attorneys would end up recovering fees twice for the same services, once from plaintiff and once from the employer.

That this is so is easily illustrated. Plaintiff was charged a fee of about 26%. This means that of every dollar she got in the settlement, she had to pay her lawyers 26 cents. This fee was paid even on the $73,128.63 which plaintiff had to use to satisfy the employer's workers' compensation lien. Thus, plaintiff paid her attorneys about $19,013.44 (.26 x $73,128.63) out of the $100,822.18 total fee for getting her this money. Of course, not all of the $73,128.63 was paid to the employer. Plaintiff's attorneys held back 25%, the statutory rate, yielding an additional fee of $18,282.15 on the same $73,128.63 for which plaintiff had already paid them $19,013.44. We do not believe that the attorneys fees provision of section 5(b) of the Act (Ill. Rev. Stat. 1983, ch. 48, par. 138.5(b)) was intended to countenance such double recovery.

This issue of double recovery with respect to the workers' compensation lien on past benefits has not been raised. As to future payments, however, the problem remains. We have determined that the employer must still make payments for fees and costs, yet plaintiff's attorneys have already been paid more than the statutory rate by plaintiff for the work which has entitled them to these fees. With respect to these future payments, double recovery can be avoided only by ordering that the weekly payments of $56.10 in attorneys fees, like the weekly payments of costs in the amount of $14.32, be paid directly to plaintiff, as we have done in our original opinion.

For the foregoing reasons, our original opinion is hereby modified by deleting the last sentence of the first full paragraph on page 12 of the slip opinion and replacing it with the following:

"Since plaintiff's attorneys have already been reimbursed out of the settlement for these litigation costs, and since plaintiff's attorneys have already received their fees from that settlement, the employer's weekly payments shall be made to plaintiff directly."

CALVO and LEWIS, JJ., concur.

CASE RESOLUTION

Opinion modified.

APPELLATE Judges: FOOTNOTES

1 Justice Calvo replaces Justice Kasserman, who retired after entry of Court's opinion and prior to its decision on rehearing.

19880304

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