SUMMERS v. A. Teichert & Sons, Inc., Intervenor and Respondent.

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Court of Appeal, Third District, California.

Rick B. SUMMERS et al., Plaintiffs and Appellants, v. Herbert F. NEWMAN et al., Defendants; A. Teichert & Sons, Inc., Intervenor and Respondent.

No. C023433.

Decided: April 02, 1997

McKinley & Smith, William C. McKinley, Timothy M. Smith and Evan Eickmeyer, Sacramento, for Plaintiffs and Appellants. No appearance for Defendants. Barkett, Gumpert & Reiner and Franklin G. Gumpert, Sacramento, for Intervenor and Respondent.

In this personal injury action in which an employer intervened to recover from a third party tortfeasor for workers' compensation benefits paid to its injured employee, plaintiffs Rick B. Summers and Annette Summers appeal from an order allowing Rick Summers' employer-plaintiff in intervention A. Teichert & Sons, Inc. (Teichert)-to recover its attorney's fees and costs from settlement proceeds paid by third party tortfeasors for injuries arising from a motor vehicle accident.   Plaintiffs contend (1) there was no legal basis for allowing Teichert to recover its attorney's fees and costs from the total settlement rather than Teichert's “share” (i.e., its workers' compensation recovery), and (2) the trial court had no jurisdiction to reconsider its prior decision denying Teichert's claim.

In an unpublished portion of the opinion, we conclude the appeal properly lies and the trial court properly granted the parties' motions for reconsideration.   In this published portion, we conclude the trial court properly awarded Teichert its attorney's fees out of the settlement proceeds.   We shall therefore affirm the judgment (order).

FACTUAL AND PROCEDURAL BACKGROUND

On September 9, 1992, Rick Summers was injured in a motor vehicle accident, while in the course of his work as a Teichert employee.   Teichert provided workers' compensation benefits to Summers, totaling $135,146.95.

In April 1993, plaintiffs filed suit against the other driver involved in the accident, Michael Smith, and various trucking companies alleged to be responsible for the injuries.

In October 1993, Teichert filed a complaint in intervention seeking recovery of all workers' compensation benefits provided to or on behalf of Summers, in the amount of $135,146.95.   Teichert also sought recovery of its costs and attorney's fees (which eventually totaled $25,634.18) pursuant to the Labor Code.   Teichert and plaintiffs were also named as cross-defendants in a cross-complaint by Michael Smith, but that cross-complaint was resolved by way of a pretrial summary judgment motion.

The defendants in the personal injury suit raised the affirmative defense of employer fault by Teichert and asserted defendant Michael Smith, was a sub-employee of Teichert.

In October 1994, trial was scheduled to begin, but settlement discussions with the judge resulted in a global settlement of $1 million, calling for an immediate cash payment of $575,000 and assignment to plaintiffs of defendants' claims against insurers.   Plaintiffs and Teichert were unable to reach agreement on Teichert's claim for reimbursement of attorney's fees and costs, and the parties stipulated the matter would be decided by the court.1

Teichert filed a motion for recovery of its attorney's fees and costs from the settlement proceeds, pursuant to Labor Code sections 3852 to 3860 (as well as entitlement to its full workers' compensation reimbursement).2  Plaintiffs opposed the motion, arguing Teichert was a “passive beneficiary” of the efforts of plaintiffs' counsel in obtaining the settlement.   Plaintiffs maintained all of Teichert's attorney's fees and costs had to be paid out of Teichert's workers' compensation recovery.

The court's tentative ruling granted Teichert's motion.   However, at the hearing on the matter the court vacated its tentative ruling and denied Teichert's request for attorney's fees and costs, ruling Teichert's attorney's fees and costs were to be paid out of its workers' compensation “lien” recovery.   However, the court also ruled at the same time that Teichert was an “active participant” in the litigation, and there was to be no reduction in its recovery of its workers' compensation “lien” of $135,146.95 to pay for plaintiffs' attorney's fees.   The court's order issued in November 1994.

Plaintiffs, in a motion entitled “MOTION FOR REDUCTION OF LIEN,” in essence sought reconsideration of the trial court's determination that Teichert was an active participant in the case.   Plaintiffs submitted a declaration from defense counsel indicating settlement was reached through the efforts of plaintiffs' attorney, not Teichert's attorney.   Plaintiffs also asserted Teichert was a “burr in [their] side” during litigation because Teichert assertedly accused plaintiff of malingering and refused to accommodate his disability upon his return to work.   Plaintiffs argued Teichert's activity in the litigation was limited to its own defense against the cross-complaint filed by the defendants.

Teichert separately moved for reconsideration of the November 1994 order insofar as it required Teichert to recover its attorney's fees and costs from the amount recovered for its workers' compensation benefits.   Teichert argued the trial court's finding that Teichert was an active participant entitled Teichert to recover its attorney's fees and costs out of the settlement proceeds, over and above its workers' compensation recovery.

The trial court granted “each side's motion for reconsideration” and vacated the November 1994 order.   The court denied plaintiffs' request for a reduction in Teichert's lien and granted Teichert's request for its attorney's fees and costs to be paid out of the settlement proceeds in addition to its workers' compensation recovery, pursuant to section 3860, subdivision (e).   The court found Teichert's counsel had actively participated in securing a recovery through trial, during which the settlement was secured.   On December 21, 1994, the trial court issued its order allowing Teichert to recover “reasonable” attorney's fees and costs, without specifying the amount.

Plaintiffs appealed from the December 1994 order, in our case No. C020142 (Summers v. Newman (Jan. 16, 1996) C020142 [nonpub. opn.] ).

On January 16, 1996, we dismissed the appeal in C020142, because the amount of attorney's fees had yet to be determined by the trial court, such that the order was interlocutory and not a final, appealable order.

Plaintiffs thereafter filed a motion in the trial court seeking an order establishing the amount of attorney's fees and costs.   Plaintiffs' motion conceded that the amount claimed by Teichert ($25,634.18) was reasonable.

On February 28, 1996, the trial court filed an “ORDER ESTABLISHING THE AMOUNT OF REASONABLE ATTORNEYS FEES AND COSTS.”   The order stated in part:  “This court, having previously ordered on December 21, 1994, that plaintiffs RICK B. SUMMERS and ANNETTE SUMMERS shall pay[ 3 ] complainant in intervention A. TEICHERT & SON, INC. (1) reasonable expenses incurred in effecting settlement of the underlying action, and (2) reasonable attorneys fees similarly incurred, this court finds that the reasonable amount of such fees and costs is ․ $25,634.18․  It is further ordered that said amount shall be paid to complainant in intervention A. TEICHERT & SONS, INC. in full satisfaction of the court's December 21, 1994 order.”

On March 29, 1996, plaintiffs filed a notice of appeal from the February 28, 1996, order.

DISCUSSION

I. Scope of Appeal**

II. Standard of Review

Plaintiff contends our review is de novo, because this appeal involves only questions of law on undisputed facts.   Teichert urges an abuse of discretion standard.   They are both right.

 “ ‘An award of attorney fees is a matter within the sound discretion of the trial court and absent a manifest abuse of discretion the determination of the trial court will not be disturbed.’  [Citation.]”  (Bussey v. Affleck (1990) 225 Cal.App.3d 1162, 1165, 275 Cal.Rptr. 646.)

Plaintiffs point out Bussey further stated the reviewing court could independently assess a trial court's legal conclusion that a fee award was precluded as a matter of law.  (Bussey v. Affleck, supra, 225 Cal.App.3d at pp. 1165-1166, 275 Cal.Rptr. 646.)

However, this is but an application of the principle that an error of law constitutes an abuse of discretion.   As we explained in City of Sacramento v. Drew (1989) 207 Cal.App.3d 1287, 255 Cal.Rptr. 704:  “The scope of discretion always resides in the particular law being applied, i.e., in the ‘legal principles governing the subject of [the] action․’  Action that transgresses the confines of the applicable principles of law is outside the scope of discretion and we call such action an ‘abuse’ of discretion.   [Citation.]”  (Id. at pp. 1297-1298, 255 Cal.Rptr. 704.)

The question is whether the trial court's actions are consistent with the substantive law and, if so, whether the application of law to the facts of the case is within the range of discretion conferred upon the trial court.   (City of Sacramento v. Drew, supra, 207 Cal.App.3d at p. 1298, 255 Cal.Rptr. 704.)

 The standard of review is the same for plaintiffs' contention that the trial court improperly granted Teichert's motion for reconsideration.   Where the trial court exercises discretion to determine whether grounds exist for reconsideration, the appropriate standard of review is for abuse of discretion.  (Gilberd v. AC Transit (1995) 32 Cal.App.4th 1494, 1500, fn. 2, 38 Cal.Rptr.2d 626.)

III. Reconsideration***

IV. Right To Attorney's Fees And Costs

Plaintiffs contend there is no legal basis for awarding Teichert its attorney's fees and costs out of the total settlement proceeds, rather than requiring Teichert to take its attorney's fees out of its workers' compensation recovery.   According to plaintiffs, the court's order in effect requires them to pay the employer's attorney's fees and costs.   We disagree.

 In their appellate brief, plaintiffs make factual assertions insinuating Teichert did not actively participate in the litigation (other than to defend itself against the cross-complaint).   Under the heading “There Is No Legal Basis For Awarding TEICHERT Attorney's Fees and Costs” (which challenges the trial court's statutory construction), plaintiffs cite Kindt v. Otis Elevator Co. (1995) 32 Cal.App.4th 452, 38 Cal.Rptr.2d 121, in an apparent argument challenging the trial court's factual finding that Teichert was not an active participant.   However, the issue is waived for failure properly to brief it under a separate heading.  (Cal.Rules of Court, rule 15(a);  Live Oak Publishing Co. v. Cohagan (1991) 234 Cal.App.3d 1277, 1291, 286 Cal.Rptr. 198.)   Moreover, in their reply brief, plaintiffs state Teichert's active participation “is not at issue on appeal.”   We therefore proceed on the assumption Teichert was an active participant as the trial court found.

Code of Civil Procedure section 1021 provides:  “Except as attorney's fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties;  but parties to actions or proceedings are entitled to their costs, as hereinafter provided.”  (Italics added.)

Here, Teichert sought its attorney's fees pursuant to statutory provisions of the Labor Code.

Plaintiffs boldly assert no court has ever awarded attorney's fees and costs to an employer where the employer and employee were both active in the litigation.   We presume plaintiffs refer to an absence of published appellate opinions on the subject.   However, the dearth of case authority would not resolve the matter in plaintiffs' favor.   We look to the statutes to see whether they authorized the award in this case.

Section 3852 provides that an employer who has paid workers' compensation benefits to or on behalf of an injured employee may seek reimbursement from any third party responsible for the injury.4  The same provision also allows the employee to sue the third party.

 Section 3860 (attached as Appendix A) sets forth provisions governing attorney's fees in cases where an action against the third party is settled.   Pursuant to section 3860, subdivision (b), the entire amount of the settlement is subject to the employer's full claim for reimbursement and attorney's fees “subject to the limitations in this section set forth.”   Where settlement is reached solely through the efforts of the employee's attorney (as where the employer merely files a workers' compensation lien or files a complaint in intervention but remains passive in the litigation), the employee's legal fees are deducted from the settlement proceeds before the employer is reimbursed for its workers' compensation. (§ 3860, subd. (c).)  Where settlement is effected solely through efforts of the employer's attorney, then the employer's legal fees are deducted from the settlement proceeds before the workers' compensation reimbursement.  (§ 3860, subd. (d).)

These rules are an application of the “common fund” theory, which evolved to reward a litigant whose efforts benefit a passive beneficiary.   (Walsh v. Woods [Walsh ] (1986) 187 Cal.App.3d 1273, 1279, 232 Cal.Rptr. 629.)   Where there is no passive beneficiary, the common fund theory does not apply.  (Id. at pp. 1276-1279, 232 Cal.Rptr. 629.)

However, section 3860 also contains a provision for attorney's fees where, as here, both employer and employee are active in the litigation.   Thus, section 3860, subdivision (e), (hereafter § 3860(e)), provides in part:  “Where both the employer and the employee are represented by the same agreed attorney or by separate attorneys in effecting a settlement, with or without suit, prior to reimbursement of the employer, as provided in subdivision (b) hereof, there shall be deducted from the amount of the settlement the reasonable expenses incurred by both the employer and the employee or on behalf of either, including costs of suit, if any, together with reasonable attorney's fees to be paid to the respective attorneys for the employer and the employee, based upon the respective services rendered in securing and effecting settlement for the benefit of the party represented․”  (Italics added.)

Thus, where neither the employer nor the employee is passive in the litigation against the third party tortfeasor, the statute plainly calls for payment of both the employer's and the employee's legal fees from the settlement proceeds before reimbursement of the employer's workers' compensation payments.   The statute does not call for the settlement funds to be divided into (1) workers' compensation recovery to the employer, and (2) damages to the employee, with employer and employee each taking their legal fees out of their respective “share.”

 Thus, the statute on its face defeats plaintiff's contentions that the employer must take its attorney's fees out of its workers' compensation recovery.   When, after a fair reading, a statute is unambiguous on its face, we are obliged to take the statute as we find it and not embark upon a quest to determine the legislative intent.  (Morse v. Municipal Court (1974) 13 Cal.3d 149, 155-156, 118 Cal.Rptr. 14, 529 P.2d 46;  Wells Fargo Bank v. Bank of America (1995) 32 Cal.App.4th 424, 433-434, 38 Cal.Rptr.2d 521.)

Plaintiffs cite various cases involving a comparable provision, section 3856 (attached as Appendix B), which applies when the case proceeds to judgment rather than settling.

Thus, plaintiffs cite Quinn v. State of California (1975) 15 Cal.3d 162, 124 Cal.Rptr. 1, 539 P.2d 761, which construed section 3856.   Subdivision (b) of that section provides that where the action is prosecuted by the employee alone, the employee's legal fees are paid from the judgment and then the employer recovers its workers' compensation.  Quinn, which dealt with the distinct situation of a passive employer, held the statute nevertheless required the trial court equitably to reduce the passive employer's worker's compensation recovery to pay the employee's legal fees.   Plaintiffs cite other cases applying the same principle.

However, those cases are distinguishable because they were decided on equitable principles of the common fund doctrine, which deals with passive parties.   Thus, Quinn decided the statute did not affect “the courts' historical equity practice of apportioning attorneys' fees among those who are the beneficiaries of funds created by the activities of similarly situated litigants.”  (Id. 15 Cal.3d at p. 167, 124 Cal.Rptr. 1, 539 P.2d 761.)   The common fund doctrine is inapplicable where there is no passive beneficiary.   (Walsh, supra, 187 Cal.App.3d at pp. 1276-1279, 232 Cal.Rptr. 629.)   Indeed, Quinn noted:  “Only when each party separately employs his own attorney does the statute direct the court to relinquish this duty of equitable apportionment, a legislative mandate fully in keeping with the development of a case law in this area.  [Citations.]”  (Quinn v. State of California, supra, 15 Cal.3d at p. 176, fn. 19, 124 Cal.Rptr. 1, 539 P.2d 761.)

Thus, contrary to plaintiffs' assertion, the result in this case does not constitute an improper application of the minority view of the dissenting opinion in Quinn.   The cited cases do not control here, and we are left with the plain language of section 3860(e).

It is true, as plaintiffs note, that Walsh, supra, 187 Cal.App.3d 1273, 232 Cal.Rptr. 629, in applying the comparable provision of section 3856, held that where both employer and employee actively participate, the common fund theory is inapplicable, and “[e]ach party's attorney fees must come out of the party's respective share of the ultimate judgment.”  (Id. at p. 1278, 232 Cal.Rptr. 629.)   However, what the court was deciding in that case was that the employer need not pay for legal services provided by the employee's attorney, and vice versa.  (Ibid.) Walsh did not directly address the issue presented by the present appeal.

 Plaintiffs cite section 3751 5 for the proposition that the employer must bear the cost of recovering its lien.   However, “ ‘It is well settled ․ that a general provision is controlled by one that is special, the latter being treated as an exception to the former.   A specific provision relating to a particular subject will govern in respect to that subject, as against a general provision, although the latter, standing alone, would be broad enough to include the subject to which the more particular provision relates.’ ”  (San Francisco Taxpayers Assn. v. Board of Supervisors (1992) 2 Cal.4th 571, 577, 7 Cal.Rptr.2d 245, 828 P.2d 147, quoting Rose v. State of California (1942) 19 Cal.2d 713, 723-724, 123 P.2d 505.)   Here, section 3860 plainly controls as the more specific statute.

Plaintiff cites Quinn 's statement that one of the costs of compensation benefits is the cost of recovering judgments against third parties whose negligence necessitated the payment of those benefits, and section 3856 should not be construed in a way that would negate the intent of section 3751.  (Quinn v. State of California, supra, 15 Cal.3d at pp. 170-171, 124 Cal.Rptr. 1, 539 P.2d 761.)   However, to construe section 3860(e) in the manner suggested by plaintiffs would effectively render the subdivision void, in violation of the rule that we are not to ignore statutory provisions.  (Fuentes v. Workers' Comp. Appeals Bd. (1976) 16 Cal.3d 1, 7, 128 Cal.Rptr. 673, 547 P.2d 449.)

Plaintiffs also cite section 3202, which instructs the courts that the workers' compensation statutes “shall be liberally construed by the courts with the purpose of extending their benefits for the protection of persons injured in the course of their employment.”   However, we cannot ignore the plain language of section 3860(e).

 Plaintiffs contend the result of the court's order is to treat plaintiffs as if they had been passive in the litigation, an inequitable result since they actively participated in the case.   However, plaintiffs are incorrect.   Where the employee is passive in the litigation, the court distributes the settlement proceeds in the following order:  (1) attorney's fees to employer (subject to equitable allocation under common fund principles), (2) reimbursement of workers' compensation to employer, and (3) remainder, if any, to employee.   In contrast, what happens in a case such as the one before us where both the employer and employee have actively participated, is that the settlement proceeds are distributed in the following order:  (1) attorney's fees to employer and employee, (2) reimbursement of workers' compensation to employer, and (3) remainder, if any, to employee.   Thus, there is a difference, contrary to plaintiffs' assertion.

Here, the order did not specify recovery of plaintiffs' attorney's fees from the settlement proceeds, because plaintiffs did not request such an order.   Plaintiffs only requested that their attorney's fees come out of Teichert 's lien recovery, a request which was properly denied and which plaintiffs do not challenge on appeal.   Had plaintiffs requested an order for their attorney's fees, the order would have said such fees were to come out of the settlement funds.   Such an order would have significance where the settlement proceeds were insufficient to cover both sides' attorney's fees plus reimbursement of the workers' compensation benefits.   However, that is not the case in the instant appeal.

DISPOSITION

The judgment (order) is affirmed.

I concur in the judgment.

At issue is whether, under section 3860, subdivision (e), the employer's attorney fees should be deducted from the employer's lien share of the settlement in a third party action.   In my view there is a compelling equitable argument to be made that they should because otherwise such fees must be paid out of the employee's share of the settlement.   However, because the statute says otherwise equity does not prevail.

The equitable argument logically flows from the rationale of the majority opinion in Quinn v. State of California (1975) 15 Cal.3d 162, 124 Cal.Rptr. 1, 539 P.2d 761.   It holds, as to Labor Code section 3856 and by an explicit dictum as to section 3860,1 that the doctrine of equitable allocation of fees and costs requires the employer to bear the costs, including attorney fees, of recovering the employer's outlays of workers' compensation from a judgment or settlement in a third party action where a single attorney represents the employee, the employer or, by agreement, both.2  It makes no sense to me to say the employee should not bear the employer's attorney fees where the employer is entirely passive, or is the only active party, or is partially active through a single attorney representing both parties, but should bear that burden when separate attorneys represent each party.   It is true that the common fund doctrine, upon which Quinn relies, does not extend to the latter circumstance.   However, the common fund doctrine is applied against the background of the American rule under which, absent an exception, parties pay their own attorney fees.  (See Estate of Korthe (1970) 9 Cal.App.3d 572, 577, 88 Cal.Rptr. 465, referred to in Quinn, supra, at p. 176, fn. 19, 124 Cal.Rptr. 1, 539 P.2d 761.)   Thus, with regard to the payment of attorney fees, the doctrine of equitable apportionment merely extends the American rule to single attorney cases.

This payment of attorney fees by the party benefited also flows from Quinn' s application of Labor Code section 3751 as an interpretive principle in construing sections 3856 and 3860.   Under section 3751 it is a misdemeanor for an employer to “exact or receive from any employee any contribution ․ either directly or indirectly” to cover the costs of workers' compensation benefits.  Quinn reads this broadly to include the compulsory payment of attorney fees to recover the lien amount.   It says that section 3856 should be read in the light of section 3751 to require the apportionment of fees and costs to the beneficiaries.  “One of the costs of compensation benefits is the cost of recovering judgments against third parties whose negligence necessitated the payment of those compensation benefits.”   (15 Cal.3d at pp. 170-171, 124 Cal.Rptr. 1, 539 P.2d 761.)

This principle is not limited to cases within the doctrine of equitable apportionment.  Section 3751 applies whenever the cost of recovery is passed to the employee.   This necessarily includes the case in which employer and employee are both represented.   The majority opinion implicitly agrees but would avoid the consequence on the theory that section 3860 is a special case which overrides the general case of section 3751.   The problem is that Quinn applied section 3751 as an interpretive principle not only to section 3856 but also, by explicit dicta, to section 3860 as well.   The theory thus reduces to the claim that the special/general argument can be made to apply to a part of a statute, since the only provision in section 3860 not affected by Quinn is subdivision (e).   I do not understand in what way the special/general distinction applies to a portion of a statute.

Nonetheless, Quinn says that its analysis does not apply to cases in which each party is separately represented.  “Only when each party separately employs his own attorney does the statute direct the court to relinquish this duty [to apply equitable apportionment], a legislative mandate fully in keeping with the development of a case law in this area.”  (15 Cal.3d at p. 176, fn. 19, 124 Cal.Rptr. 1, 539 P.2d 761.)   We are told to apply the language of the statute in the case of representation by separate attorneys, as here, subdivision (e) of section 3860.   We are thus freed from the interpretive restraints otherwise applied.

Section 3860 is abundantly clear that the employee must bear the cost of the employer's attorney fees in all cases of settlement.   Subdivision (b) provides that “the entire amount of such settlement ․ is subject to the employer's full claim for reimbursement for compensation he has paid ․ together with expenses and attorney fees ․ subject to the limitations in this section set forth.”  (Emphasis added.)   The reference is to the attorney fee provisions of subdivisions (c),(d) and (e).   The “limitations” apply only to the measure of the attorney fee awards, not the source of their payment.3  Each subdivision expressly requires that all attorney fees be deducted from the settlement “prior to the reimbursement of the employer, as provided in subdivision (b)․”  (Emphasis added.)   Thus, attorney fees must first be paid from the settlement followed by the employer's “full claim for reimbursement․”  It necessarily follows that what is left, the employee's share of the recovery, necessarily bears the costs of the employer's attorney fees in every case.

As noted, Quinn reaches a contrary result, except in the case “when each party separately employs his own attorney.”   That provoked a dissent by Justice Clark.  (See 15 Cal.3d at pp. 177-182, 124 Cal.Rptr. 1, 539 P.2d 761, diss. opn. of Justice Clark;  see also, Attorney's Fees in Third Party Actions (1970) 21 Hastings L.J. 717.)   This means that we are directed to apply the statute in the case of subdivision (e).   That being the case, I am compelled to concur in the judgment despite its inequitable result.

APPENDIX A

§ 3860.  Requirements for release or settlement;  Employer's claim for reimbursement;  Expenses;  Attorney's fees

(a) No release or settlement under this chapter, with or without suit, is valid or binding as to any party thereto without notice to both the employer and the employee, with opportunity to the employer to recover the amount of compensation he has paid or become obligated to pay and any special damages to which he may be entitled under Section 3852, and opportunity to the employee to recover all damages he has suffered and with provision for determination of expenses and attorney's fees as herein provided.

(b) Except as provided in Section 3859, the entire amount of such settlement, with or without suit, is subject to the employer's full claim for reimbursement for compensation he has paid or become obligated to pay and any special damages to which he may be entitled under Section 3852, together with expenses and attorney fees, if any, subject to the limitations in this section set forth.

(c) Where settlement is effected, with or without suit, solely through the efforts of the employee's attorney, then prior to the reimbursement of the employer, as provided in subdivision (b) hereof, there shall be deducted from the amount of the settlement the reasonable expenses incurred in effecting such settlement, including costs of suit, if any, together with a reasonable attorney's fee to be paid to the employee's attorney, for his services in securing and effecting settlement for the benefit of both the employer and the employee.

(d) Where settlement is effected, with or without suit, solely through the efforts of the employer's attorney, then, prior to the reimbursement of the employer as provided in subdivision (b) hereof, there shall be deducted from the amount of the settlement the reasonable expenses incurred in effecting such settlement, including costs of suit, if any, together with a reasonable attorney's fee to be paid to the employer's attorney, for his services in securing and effecting settlement for the benefit of both the employer and the employee.

(e) Where both the employer and the employee are represented by the same agreed attorney or by separate attorneys in effecting a settlement, with or without suit, prior to reimbursement of the employer, as provided in subdivision (b) hereof, there shall be deducted from the amount of the settlement the reasonable expenses incurred by both the employer and the employee or on behalf of either, including costs of suit, if any, together with reasonable attorneys' fees to be paid to the respective attorneys for the employer and the employee, based upon the respective services rendered in securing and effecting settlement for the benefit of the party represented.   In the event both parties are represented by the same attorney, by agreement, the attorney's fee shall be based on the services rendered for the benefit of both.

(f) The amount of expenses and attorneys' fees referred to in this section shall, on settlement of suit, or on any settlement requiring court approval, be set by the court.   In all other cases these amounts shall be set by the appeals board.   Where the employer and the employee are represented by separate attorneys they may propose to the court or the appeals board, for consideration and determination, the amount and division of such expenses and fees.

APPENDIX B

§ 3856.  Allocation of payments from judgment for damages

In the event of suit against such third party:

(a) If the action is prosecuted by the employer alone, the court shall first order paid from any judgment for damages recovered the reasonable litigation expenses incurred in preparation and prosecution of such action, together with a reasonable attorney's fee which shall be based solely upon the services rendered by the employer's attorney in effecting recovery both for the benefit of the employer and the employee.   After the payment of such expenses and attorney's fees, the court shall apply out of the amount of such judgment an amount sufficient to reimburse the employer for the amount of his expenditure for compensation together with any amounts to which he may be entitled as special damages under Section 3852 and shall order any excess paid to the injured employee or other person entitled thereto.

(b) If the action is prosecuted by the employee alone, the court shall first order paid from any judgment for damages recovered the reasonable litigation expenses incurred in preparation and prosecution of such action, together with a reasonable attorney's fee which shall be based solely upon the services rendered by the employee's attorney in effecting recovery both for the benefit of the employee and the employer.   After the payment of such expenses and attorney's fee the court shall, on application of the employer, allow as a first lien against the amount of such judgment for damages, the amount of the employer's expenditure for compensation together with any amounts to which he may be entitled as special damages under Section 3852.

(c) If the action is prosecuted both by the employee and the employer, in a single action or in consolidated actions, and they are represented by the same agreed attorney or by separate attorneys, the court shall first order paid from any judgment for damages recovered, the reasonable litigation expenses incurred in preparation and prosecution of such action or actions, together with reasonable attorneys' fees based solely on the services rendered for the benefit of both parties where they are represented by the same attorney, and where they are represented by separate attorneys, based solely upon the service rendered in each instance by the attorney in effecting recovery for the benefit of the party represented.   After the payment of such expenses and attorneys' fees the court shall apply out of the amount of such judgment for damages an amount sufficient to reimburse the employer for the amount of his expenditures for compensation together with any other amounts to which he may be entitled as special damages under Section 3852.

(d) The amount of reasonable litigation expenses and the amount of attorneys' fees under subdivisions (a), (b), and (c) of this section shall be fixed by the court.   Where the employer and employee are represented by separate attorneys they may propose to the court, for its consideration and determination, the amount and division of such expenses and fees.

FOOTNOTES

1.   Contrary to Teichert's implication on appeal, plaintiffs did not agree Teichert was entitled to attorney's fees, leaving only the amount to be decided by the court.

2.   Undesignated statutory references are to the Labor Code.

3.   By stipulation of the parties, plaintiffs held the disputed funds pending the trial court's decision.

FOOTNOTE.   See footnote *, ante.

FOOTNOTE.   See footnote *, ante.

4.   Section 3852 provides in part:  “․ Any employer who pays, or becomes obligated to pay compensation, or who pays, or becomes obligated to pay salary in lieu of compensation, or who pays or becomes obligated to pay an amount to the Department of Industrial Relations ․, may likewise make a claim or bring an action against the third person [proximately causing injury to an employee].   In the latter event the employer may recover in the same suit, in addition to the total amount of compensation, damages for which he or she was liable including all salary, wage, pension, or other emolument paid to the employee or to his or her dependents․”

5.   Section 3751 provides in part:  “(a) No employer shall exact or receive from any employee any contribution, or make or take any deduction from the earnings of any employee, either directly or indirectly, to cover the whole or any part of the cost of compensation under this division.   Violation of this subdivision is a misdemeanor․”

1.   The court said:  “[B]ecause section 3860, like section 3856, calls on the court ․ to look to ‘the benefit of both the employer and the employee’ in apportioning fees, the considerations set forth in this opinion as to section 3856 apply equally to section 3860.”   (Id. at p. 176, fn. 20, 124 Cal.Rptr. 1, 539 P.2d 761.)

2.   The court said:  “[T]he principle of equitable allocation of fees does not confine itself to the situation to which section 3856, subdivision (b), addresses itself [action prosecuted by employee alone];  in like manner it will apply to the remainder of the subdivisions of section 3856.   Thus when the employer's attorney bears the entire litigative burden, the judge on proper motion will make the same reasonable allocation of fee and litigation costs between the employer and the worker, taking into account the service performed for the benefit of each.  (§ 3856, subd. (a).)  And likewise when the employer and worker arrange to receive representation from the same attorney;  the same adjustment of fee in terms of the service rendered to the two clients and apportionment of this fee between those benefited follows from the statute.  (§ 3856, subd.(c).)”  (15 Cal.3d at p. 176, fn. 19, 124 Cal.Rptr. 1, 539 P.2d 761;  orig. emphasis.)

3.   Quinn's interpretation turns on the provisions which require that the attorney fees be reasonable and proportioned to the benefits conferred on the employer and employee.   This, however, has nothing to do with the allocation of fees to the parties.   The payment of employer fees from the employee's share of recovery flows from the order of payment regardless how the attorney fees are measured.

SIMS, Associate Justice.

SPARKS, J., concurs.