Attorney Fees Not Owed When Claim Settled for No Money

The U.S. Ninth Circuit Court of Appeals refused to disturb a ruling by the Benefits Review Board that attorneys' fees were not owed when a claimant settled his Longshore claim for no money.  

In a March 5, 2018, unpublished decision in Castro and Dupree v. SSA Terminals, LLC, 16-73170 (9th Cir. 2018), the Ninth Circuit denied the petition for review of the claimant's former attorney of the dismissal of his fee petition.  Earlier, the Board had affirmed the administrative law judge's denial of the claimant's attorney's fee petition.  The dispute arose after the attorney withdrew from representation of the claimant.  The claimant then settled his claim for Longshore benefits and his companion claim for California state workers' compensation benefits.  The claimant settled his state claim for $4,000.  After further negotiations, the claimant agreed to settle the Longshore claim for no additional funds, with the employer claiming credit under Section 3(e) for the $4,000 paid in the state claim.  Additionally, the settlement specified that the claimant "will receive a lump sum payment of $0.00" to settle his Longshore claim.  After these settlements, the claimant's attorney filed a fee petition 

The ALJ concluded that no attorney fee was owed under Section 28(a) because there was no successful prosecution of the claim.  The Board affirmed, noting that a "successful prosecution" of a claim, as required by Section 28(a), requires the claimant's attorney to obtain "some actual relief that 'materially alters the legal relationship between the parties by modifying the defendant's behavior in a way that directly benefits the plaintiff.'"  Because the settlement agreement recited that the claimant received no additional money to settle his Longshore claim, the ALJ ruled that the employer had no liability to the claimant and the employer's behavior to the claimant was not modified in any way.  Because the ALJ interpreted the settlement as proving that the employer had no liability to the claimant, the ALJ found that the claimed Section 3(e) credit was moot.

The Ninth Circuit confirmed the ruling by the ALJ and the Board by denying the attorney's petition for review.  The court accepted that substantial evidence supported the conclusion that the parties did not intend for the $4,000 payment to serve as consideration for the release of the claimant's Longshore claim.  Moreover, recognizing the likelihood that the "parties structured the agreement to avoid fees under the Act," the court ruled that such an agreement was permissible.