On Unearned 5710 Fees
Happy Wednesday dear readers!
Here we are again, working hard on getting those claims denied and those files closed. So, let’s talk Labor Code section 5710 fees for a minute.
Applicant attorneys will demand the defense pay their time under LC 5710 for preparing applicants for depositions and sitting in on the deposition as well. Sometimes we get crazy demands for things like reviewing the notice of deposition or preparing to prepare the applicant for the deposition and so on and so forth.
But 5710 fees are due for a deposition, what happens when applicant’s counsel demands 5710 fees for a deposition that didn’t happen, or hasn’t happened yet?
Early settlement of a claim is often desirable, so imagine a scenario where applicant’s counsel threatens, or impliedly threatens, to hold up settlement unless there is a payment of 5710 fees. After all, if there is a settlement without a deposition, applicant’s counsel will be out those fees, no?
Well, your humble blogger was forwarded an Order Suspending Action, issued by a judge in Sacramento, which provides an excellent analysis of this practice of applicant’s demand 5710 fees without a deposition, and, equally inappropriate, defendants paying 5710 fees without a deposition.
Per the OSA, “[w]hat appears to be entirely inappropriate is that defendant proposes to pay applicant’s attorney an additional $800 for negotiating the settlement of this matter. This appears to be an unearned attorney’s fee.” The WCJ also cites the Rules of Professional Conduct prohibiting an attorney from developing an interest adverse to his or her client.
How does this all pan out? Well, if defendant offers $X for a C&R, and the applicant attorney would recommend $X for a C&R, that should be the end of the transaction. But if applicant’s counsel refuses to communicate or recommend the C&R unless the attorney is PAID to do so, such as with a promise of unearned 5710 fees, then the applicant attorney has an unavoidable conflict because the AA’s interests (of getting 5710 fees) might conflict with the applicant’s interest (of a reasonable C&R).
The WCJ’s OSA was not particularly fond of either AA or the DA in this case, for coming to this arrangement. The same thing could happen on the defense side too, of course – what happens if a disreputable defense attorney declines a settlement demand that is within his authority in order to bill more hours? Such an unethical breach of duty to one’s client is completely unacceptable, whether it happens on the defense side or the applicant side.
Ultimately, the WCJ provided additional instruction to the parties, and gave a stern warning that “[p]aying an attorney an unearned fee as inducement to settle a workers’ compensation case is a fraud. I would further note to defense counsel that where there is extrinsic fraud, i.e. fraud upon the court, the Appeals Board may alter or rescind an award at any time.”
So, what do we do when applicant’s counsel offers a C&R demand contingent on paying unearned 5710 fees? This might be very tempting, especially as $800 in 5710 fees is a lot cheaper than $2,000 in QME fees and a lot faster too. Don’t you do it!
Such a suggestion, as pointed out by the WCJ in the OSA, is not ethical, and could be the basis for sanctions. The attorneys so engaged could be reported to the State Bar for ethical violations. Such demands should be confirmed in writing, and, potentially, should be referred to the state bar and brought to the attention of the WCAB.
Be on the look out for these instances, and don’t fall into the trap of playing along!
Till next time, dear readers…