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Bayer v. Panduit Corp.

Supreme Court of Illinois

September 22, 2016

RONALD BAYER, Appellant,
v.
PANDUIT CORPORATION (Area Erectors, Inc., Appellee).

          JUSTICE KARMEIER delivered the judgment of the court, with opinion. Chief Justice Garman and Justices Freeman, Thomas, Kilbride, Burke, and Theis concurred in the judgment and opinion.

          OPINION

          KARMEIER, JUSTICE

         ¶ 1 Where attorneys for a worker covered by the Workers' Compensation Act (820 ILCS 305/1 et seq. (West 2006)) bring a successful action against a third party to recover damages for personal injuries sustained by the worker in the course of his employment, thereby enabling the worker's employer to obtain reimbursement of the compensation benefits it is obligated to pay under the Workers' Compensation Act, the Act requires the employer to pay 25% of the gross amount it obtains in reimbursement as attorney fees, absent other agreement. 820 ILCS 305/5(b) (West 2006). In Zuber v. Illinois Power Co., 135 Ill.2d 407 (1990), we held that the gross amount of reimbursement subject to attorney fees under this statute includes not only workers' compensation benefits already paid at the time of the third-party recovery but also the amount of such benefits the employer will be relieved from having to pay in the future by reason of the worker's recovery in the third-party action. Id. at 418. The question presented by the case before us today is whether the value of future medical care should be included in this calculation. For the reasons that follow, we hold that it should.

         ¶ 2 BACKGROUND

         ¶ 3 Plaintiff, Ronald Bayer, was employed as an ironworker by Area Erectors, Inc. Area Erectors was hired by Garbe Iron Works to help build warehouse facilities for Panduit Corporation. While working on the Panduit warehouse project for Area Erectors, Bayer fell and sustained serious and permanent injuries. He is now quadriplegic.

         ¶ 4 Bayer filed a claim against Area Erectors under the Workers' Compensation Act (820 ILCS 305/1 et seq. (West 2006)). The claim was honored by Area Erectors, which began making temporary total disability payments and payments for Bayer's medical expenses. These payments were substantial.

         ¶ 5 At the same time Bayer pursued his workers' compensation claim, he also brought an action in the circuit court of Cook County to recover damages from Panduit Corporation based on negligence. Bayer subsequently added Garbe Iron Works and a structural engineering company as additional defendants. Panduit, in turn, brought a third-party complaint for contribution against Area Erectors pursuant to the Joint Tortfeasor Contribution Act (740 ILCS 100/0.01 et seq. (West 2006)), alleging that the company had been negligent by failing to ensure the safety of its employees, including Bayer. Area Erectors was also sued for contribution and breach of contract by Garbe Iron Works.

         ¶ 6 Bayer settled with Area Erectors, and the two filed a joint motion for a finding that the settlement was in good faith and that the settlement should be approved. That motion was granted. Area Erectors was thereby discharged from liability for any contribution to Panduit or Garbe. 740 ILCS 100/2(d) (West 2006). Various other claims between the parties were ultimately dismissed or settled, leaving only Bayer's action for negligence against Panduit, which was tried before a jury in the fall of 2012. Bayer prevailed. Judgment was entered in his favor and against Panduit in the amount of $64 million.

         ¶ 7 Under section 5(b) of the Workers' Compensation Act (820 ILCS 305/5(b) (West 2006)), Area Erectors was entitled to recover out of that judgment the amount of compensation paid or to be paid by it to Bayer, including amounts paid or to be paid pursuant to subsection (a) of section 8 of the Act (820 ILCS 305/8(a) (West 2006)), which concerns medical expenses, vocational rehabilitation, and temporary partial disability benefits. [1] This right was incorporated into the settlement agreement between Area Erectors and Bayer. Area Erectors sought to enforce its right of recovery in a motion filed in December 2012. Its request was allowed in a pair of agreed orders entered by the circuit court in June 2013.

         ¶ 8 To protect an employer's rights to reimbursement under section 5(b) of the Act, courts may grant a credit to the employer for any amounts paid or to be paid by the employer to the injured worker under the Workers' Compensation Act or for which the employer has not been reimbursed and then suspend the employer's obligation to make future payments to the injured worker until the amount of the settlement or judgment obtained by the worker from a third party has been exhausted. Freer v. Hysan Corp., 108 Ill.2d 421, 425-28 (1985). That is precisely what the agreed orders entered in this case did. They confirmed Area Erectors' right to recover its past and future workers' compensation payments, set deadlines for determining the total amount of payments to which Area Erectors was entitled, and suspended future workers' compensation payments commencing on July 16, 2013.[2]

         ¶ 9 The foregoing matters are not in dispute. The sole issue before us in this appeal is the amount of attorney fees Area Erectors must pay Bayer's lawyers for the work they performed in securing the judgment that enabled the company to recover the benefits it had previously paid and to suspend benefit payments going forward. Section 5(b) of the Workers' Compensation Act provides that where, as here, "the services of an attorney at law of the employee or dependents have resulted in or substantially contributed to the procurement by suit, settlement or otherwise of the proceeds out of which the employer is reimbursed, then, in the absence of other agreement, the employer shall pay such attorney 25% of the gross amount of such reimbursement." 820 ILCS 305/5(b) (West 2006). In this case, there was no question that Bayer's lawyers were entitled to fees equal to 25% of the amount Area Erectors had paid for lost wages, medical expenses, and other compensable items under the Workers' Compensation Act prior to the time the workers' compensation payments were suspended. The controversy before us centers solely on the recovery of attorney fees with respect to the value of compensable benefits incurred after Area Erectors' obligation to make benefit payments was suspended by the court.

         ¶ 10 More than 25 years ago, this court held that the "gross amount of such reimbursement" subject to attorney fees under section 5(b) of the Workers' Compensation Act (820 ILCS 305/5(b) (West 2006)) includes not only workers' compensation benefits already paid at the time of the third-party recovery but also the amount of such benefits the employer will be relieved from having to pay in the future by reason of the plaintiff's recovery in the third-party action. Zuber v. Illinois Power Co., 135 Ill.2d 407, 418 (1990). Based on this authority, Bayer's attorneys asked the circuit court to award them attorney fees equal to 25% of the weekly wage payments and future medical payments Area Erectors would have had to pay but for suspension of the company's obligations under the Workers' Compensation Act following the judgment they secured from Panduit. To avoid double recovery of fees, Bayer's lawyers also requested that Area Erectors be ordered to pay the fees directly to Bayer himself.

         ¶ 11 Area Erectors did not challenge the right of Bayer's attorneys to a fee based on the suspended wage payments. It objected, however, to any claim for fees based on future medical expenses, asserting that such a claim was not supported by Zuber or the relevant provisions of the Workers' Compensation Act. The circuit court found this objection to be without merit. Based on the reasoning in Zuber and the language of section 5(b) of the Act (820 ILCS 305/5(b) (West 2006)), the circuit court concluded that the employer should be required to pay the statutory 25% attorney fee on the value of all of the injured employee's future losses compensable under the Workers' Compensation Act, including the employee's medical bills. Contrary to the request by Bayer's lawyers, however, the circuit court further held that payment for the statutory 25% attorney fees should go to Bayer's lawyers rather than to Bayer himself. Citing this court's decision in In re Estate of Dierkes, 191 Ill.2d 326 (2000), the court opined that there "shall be no double recovery of attorney's fees" and that the statutory fees paid by Area Erectors to Bayer's attorneys were to assist Bayer in paying the fees he owed those attorneys under the contingency agreement he had with them with respect to the recovery against Panduit.

         ¶ 12 Following conclusion of the proceedings in the circuit court, Panduit filed an appeal challenging the circuit court's approval of the settlement agreement between Area Erectors and Bayer and dismissing its contribution claim against Area Erectors. Area Erectors also appealed. 2015 IL App (1st) 132252. Its appeal pertained solely to that portion of the circuit court's attorney fee award allowing recovery of fees based on the value of Bayer's future medical expenses. As it did in the circuit court, Area Erectors contended that such fees were not authorized by Illinois law and should not have been granted.

         ¶ 13 The appellate court affirmed the circuit court's judgment in part and reversed in part. Contrary to Panduit's contention, it concluded that the circuit court had not erred in approving the settlement agreement between Area Erectors and Bayer and dismissing the third-party contribution claim Panduit had filed against Area Erectors. 2015 IL App (1st) 132252, ¶¶ 33-35. The appellate court agreed with Area Erectors, however, with respect to the attorney fee issue. In the appellate court's view, this court's decisions in Zuber and In re Estate of Dierkes are distinguishable and do not support the circuit court's ruling. Relying on an Indiana case, Spangler, Jennings & Dougherty P.C. v. Indiana Insurance Co., 729 N.E.2d 117 (Ind. 2000), and interpreting the Workers' Compensation Act differently than the circuit court, the appellate court held that Area Erectors is not required to pay the statutory 25% attorney fee on the value of future medical expenses that it will be able to avoid paying as a result of the third-party action. 2015 IL App (1st) 132252, ¶¶ 46-50.

         ¶ 14 Bayer petitioned for leave to appeal (Ill. S.Ct. R. 315 (eff. Jan. 1, 2015)), which we allowed. We also granted a motion by the Illinois Trial Lawyers Association for leave to file a brief amicus curiae. Ill. S.Ct. R. 345 (eff. ...


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