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Silva v. Electrical Systems

September 24, 1998

RUDOLPH SILVA, APPELLEE, V. ELECTRICAL SYSTEMS,INC. (MIDWEST CONVEYOR COMPANY, INC., APPELLANT).


The opinion of the court was delivered by: Justice Harrison

Agenda 37-May 1998.

Under section 5(b) of the Workers' Compensation Act (820 ILCS 305/5(b) (West 1992)), an employer who is reimbursed for its workers' compensation payments out of the proceeds of the employee's action against a third party is required to pay the employee's attorney "25% of the gross amount of such reimbursement." The issue in this appeal is how the fee award should be computed where the third party has brought a successful action against the employer under the Joint Tortfeasor Contribution Act (Contribution Act) (740 ILCS 100/0.01 et seq. (West 1992)). The employer contends that its contribution liability should be deducted from the reimbursement amount and that it should be required to pay attorney fees only on the difference. Both the circuit court of Cook County and the appellate court rejected that contention, holding that the employer was not entitled to a credit for its contribution liability. We granted the employer's petition for leave to appeal (166 Ill. 2d R. 315) and now affirm.

The record before us shows that Rudolph Silva was employed as an iron worker by Midwest Conveyor Company, Inc. While working for Midwest Conveyor on a renovation project at a Ford Motor Company factory, Silva tripped and fell over some electrical conduit that was scattered across one of the aisles. The conduit was owned and maintained by Electrical Systems, Inc. (ESI), another contractor on the renovation project.At the time of his fall, Silva had a degenerative problem with his spine. The fall caused Silva's condition to become symptomatic and necessitated that he undergo a series of back surgeries. Silva received benefits from Midwest Conveyor in accordance with the Workers' Compensation Act (820 ILCS 305/1 et seq. (West 1992)), to compensate him for his lost earnings and medical expenses. Silva also brought a common law negligence action against Ford and ESI to recover damages for his injuries. *fn1 Ford and ESI, in turn, asserted claims against Midwest Conveyor under the Contribution Act.

Silva settled his claims against Ford for $66,000. The matter subsequently proceeded to a jury trial on Silva's negligence claim against ESI and on ESI's claim for contribution against Midwest Conveyor. At the Conclusion of the trial, the jury returned a verdict in favor of Silva. It found that Silva's total damages amounted to $472,710.26, but that his comparative fault was 19%, reducing his recoverable damages to $382,895.31. The court reduced this award by the amount paid by Ford in settlement (see 740 ILCS 100/2(c) (West 1992)), leaving a difference of $316,895.31.

With respect to ESI's contribution claim, the jury found in favor of ESI and against Midwest Conveyor. The jury apportioned fault between ESI and Midwest Conveyor based upon their relative culpability. Using the jury's findings, the circuit court determined that ESI was entitled to recover from Midwest Conveyor 32.09% of the $316,895.31 award owed to Silva. That figure was calculated to be $101,719.46.

Pursuant to section 5(b) of the Workers' Compensation Act (820 ILCS 305/5(b) (West 1992)), Midwest Conveyor was entitled to reimbursement of its workers' compensation payments out of the proceeds of Silva's action against ESI. At the time of trial, Midwest Conveyor's workers' compensation payments totaled approximately $400,000. Because that amount exceeded the $316,895.31 award recovered by Silva, Midwest Conveyor was entitled to recoup the full amount of the award.

Midwest Conveyor's ability to recoup workers' compensation payments meant that the company was obligated by section 5(b) of the Workers' Compensation Act to pay a pro rata share of Silva's litigation expenses, plus attorney fees. The circuit court determined that Midwest Conveyor's share of the costs was $15,290.73 and that it owed attorney fees to Silva's counsel at section 5(b)'s statutory rate of 25% on the full amount of the $316,895.31 award. The court rejected the notion that Midwest Conveyor should be excused from paying attorney fees on $101,719.46 of the award, the amount Midwest had to pay ESI in contribution. The court further held that Silva's attorneys were entitled to receive 33 1/3 % of the $66,000 in settlement proceeds Silva received from its settlement with Ford. The 33 1/3 % rate was based on Silva's contingency fee contract with his attorneys.

Silva, Midwest Conveyor, and ESI all appealed. The appellate court affirmed all aspects of the circuit court's judgment except the award of attorney fees and costs. Nos. 1-95-1024, 1-95-1450, 1-95-1662 cons. (unpublished order under Supreme Court Rule 23). The court agreed that Midwest Conveyor was obligated to pay 25% of $316,895.31 as fees to Silva's lawyers under section 5(b) of the Workers' Compensation Act and was not entitled to a credit for its contribution liability. The court held, however, that Silva's counsel were not entitled to 33 1/3 % of the $66,000 in settlement proceeds Silva received from its settlement with Ford. In the appellate court's view, the settlement proceeds were subject to section 5(b)'s lower statutory rate of 25%. The appellate court further held that the settlement proceeds were subject to the cost reimbursement provisions of section 5(b). Because it could not tell whether the costs awarded by the circuit court included costs associated with the settlement, the appellate court remanded for the limited purpose of determining whether Silva's attorneys were entitled to an additional award of costs for their work in procuring the settlement.

We allowed Midwest Conveyor's petition for leave to appeal to consider the limited question of whether the circuit and appellate courts were correct in holding that the company was required to pay fees to Silva's attorneys under section 5(b) of the Workers' Compensation Act based on the full $316,895.31 award, unreduced by the amount the company was obliged to pay in contribution. No other aspects of the circuit and appellate courts' judgments are contested. The mandate as to the remainder of the case has already issued to the circuit court for proceedings on remand as directed by the appellate court and for enforcement of the remainder of the judgment.

The relationship between section 5(b)'s attorney fee provision and the Contribution Act was addressed by this court in Ramsey v. Morrison, 175 Ill. 2d 218 (1997). In Ramsey, the employer's contribution liability to the third party, as found by the jury, exceeded its liability under the Workers' Compensation Act. The amount of contribution the employer actually had to pay was reduced to a sum equal to the employer's workers' compensation liability. The reduction was necessary because, under Kotecki v. Cyclops Welding Corp., 146 Ill. 2d 155 (1991), an employer cannot be liable in contribution for more than the amount of its workers' compensation liability.

The question presented in Ramsey was whether the employer's contribution liability should be further reduced by the amount of fees and costs it was required to pay plaintiff's attorneys under section 5(b) of the Workers' Compensation Act. The employer argued that its payments for attorney fees and costs should be credited against the amount of contribution it owed because without such a credit, it would end up having to pay an amount equal to 125% of its workers' compensation liability. In the employer's view, such a result would violate Kotecki.

We rejected the employer's contention. We construed Kotecki to mean that an employer's liability for contribution should be limited only by the amount of workers' compensation benefits paid. In our view, an employer's liability for attorney fees and costs under section 5(b) is not a component of its workers' compensation liability. As we stated, an employer's liability for attorney fees and costs under section 5(b)

"is irrelevant to the determination of the employer's workers' compensation liability, and is therefore irrelevant to the determination of the employer's contribution liability." Ramsey, 175 Ill. 2d at 239.

Accordingly, we concluded that an employer is not entitled to a reduction of his contribution liability based on his section 5(b) ...


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