Judge Anne Hwang, Case Number: 22STCV29959, Date: 2024-11-05 Tentative Ruling

PLEASE NOTE: Parties are encouraged to meet and confer concerning this tentative ruling to determine if a resolution may be reached. If the parties are unable to reach a resolution and a party intends to submit on this tentative ruling, the party must send an email to the Court at sscdept32@lacourt.org indicating that party’s intention to submit. The email shall include the case number, date and time of the hearing, counsel’s contact information (if applicable), and the identity of the party submitting on this tentative ruling. If the Court does not receive an email indicating the parties are submitting on this tentative ruling and there are no appearances at the hearing, the Court may place the motion off calendar or adopt the tentative ruling as the order of the Court. If all parties do not submit on this tentative ruling, they should arrange to appear in-person or remotely. Further, after the Court has posted/issued a tentative ruling, the Court has the inherent authority to prohibit the withdrawal of the subject motion and adopt the tentative ruling as the order of the Court.

On September 14, 2022, Plaintiff Rigoberto Zetina (“Plaintiff”) filed a complaint against Defendants Lyft, Inc., Cecilia Jeannette Herrera Hernandez, and Does 1 to 100 for negligence related to a motor vehicle accident that occurred on October 29, 2020.

On December 12, 2022, non-party Los Angeles Unified School District (“LAUSD”) filed a Notice of Subrogation Lien under Labor Code sections 3850 et seq. The Notice states that LAUSD employed Plaintiff at the time of the incident and had provided workers’ compensation benefits for her injury, and thus claimed a first lien upon any settlement or judgment in this case. At the time, the current amount of the lien was $103,148.01.

LAUSD now moves to apply or impress its lien against Plaintiff, which was not apportioned in the settlement. Plaintiff opposes and LAUSD replies.

“Where the tort of a third party causes injury to an employee . . . section 3852 permits the employee to sue the tortfeasor for all damages proximately resulting from the injury even though he or she has received from an employer workers' compensation benefits covering some of the same injuries and resulting disability. To prevent an employee from retaining both third party damages and workers' compensation benefits for the same injuries and disabilities, the Labor Code permits an employer to recover workers' compensation benefits it has become obligated to pay and/or has paid[.]” (American Home Assurance Co. v. Hagadorn (Hagadorn) (1996) 48 Cal.App.4^th 1898, 1901-02 [quoting Abdala v. Aziz (1992) 3 Cal.App.4^th 369, 374–375].)

“The claim of an employee…for compensation does not affect his or her claim or right of action for all damages proximately resulting from the injury or death against any person other than the employer. Any employer who pays, or becomes obligated to pay compensation, or who pays, or becomes obligated to pay salary in lieu of compensation…may likewise make a claim or bring an action against the third person. 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.”

“When an employer claims reimbursement rights because it has paid benefits to an injured worker, it may proceed against a third party tortfeasor by [1] bringing a direct action, [2] by intervening in an action brought by the employee or [3] by filing a lien in an action brought by the employee. [Citation]. (Aetna Casualty & Surety Co. v. Superior Court (1993) 20 Cal.App.4^th 1502, 1506-07.)

Labor Code section 3859 states:

“(a) No release or settlement of any claim under this chapter as to either the employee or the employer is valid without the written consent of both. Proof of service filed with the court is sufficient in any action or proceeding where such approval is required by law.

(b) Notwithstanding anything to the contrary contained in this chapter, an employee may settle and release any claim he may have against a third party without the consent of the employer. Such settlement or release shall be subject to the employer's right to proceed to recover compensation he has paid in accordance with Section 3852.”

And Labor Code section 3860 provides in relevant part:

“(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.

(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. . . . Where the employer and the employee are represented by separate attorneys they may propose to the court . . . for consideration and determination, the amount and division of such expenses and fees.”

Finally, Labor Code section 3856(b) provides: “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.”

“In Quinn v. State of California, 15 Cal.3d 162, 124 Cal.Rptr. 1, 539 P.2d 761 the injured employee pursued an action against a third party tortfeasor, and his employer's workers' compensation insurer as subrogee filed therein a statutory lien but did not otherwise participate in the litigation on behalf of plaintiff. A judgment was rendered for plaintiff out of which the lien was satisfied, and he moved for an order apportioning his attorney's fee between himself and his employer. The Supreme Court framed the issue, ‘(W)hether this statute (Labor Code, s 3856) incorporates the principle that an active litigant (here the worker) may require the passive beneficiary of his efforts (here the employer) to contribute toward the payment for the services of litigant's attorney which produced the recovery.’ [Citation]. The court held at pages 169-170 that the Legislature had incorporated into the statute the equitable ‘common fund’ doctrine according to which ‘(O)ne who expends attorneys' fees in winning a suit which creates a fund from which others derive benefits, may require those passive beneficiaries to bear a fair share of the litigation costs.’ [Citations.]” (Kaplan v. Industrial Indem. Co. (1978) 79 Cal.App.3d 700, 705.)[1]

In Kaplan, the Court of Appeal applied the reasoning in Quinn (which pertained to section 3856 for judgments) to section 3860, which applies to settlements. (Kaplan, supra, 79 Cal.App.3d at 705-06.) “Our analysis of section 3860, subdivision [e] and its analogue in section 3856, subdivision (c), viewed in light of the holding of Quinn, leads us to conclude that the principle of equitable apportionment of attorneys' fees applies even where both both employee and employer retain separate attorneys so long as the resulting fund is produced through the efforts of only one of them.” (Id. at 709.) The court in Kaplan also observed that retaining an attorney to file a lien or to file a complaint in intervention is not “active” in contributing to the creation of the reimbursement fund. (Id.)

To apportion attorney fees on equitable principles, “the court should proceed first to calculate a reasonable attorney's fee, a fee which reflects the total services rendered to both beneficiaries of the recovery. Having fixed that fee, the court must then make a reasonable apportionment of it between the parties benefitted by the recovery. Such an apportionment will, of course, often involve only a relatively simple proportional calculation, but such simplicity will not be the invariable rule. The court should consider, for instance, whether the worker's attorney's efforts in disproving a defense under the rule announced in Witt v. Jackson (1961) 57 Cal.2d 57, 17 Cal.Rptr. 369, 366 P.2d 641, have accounted for a disproportionate amount of the litigation. Other factors may suggest themselves to the sound discretion of the courts, acting always under the guidance of the traditional equitable a principles whose application we have examined above.” (Quinn v. State of California (1975) 15 Cal.3d 162, 175-76.)

The parties in this case (Plaintiff, Lyft, and Hernandez) have settled for $500,000. LAUSD asserts no apportionment was made for its lien. LAUSD asserts its lien currently amounts to $110,059.70. Plaintiff’s attorney is claiming attorney fees for 40% of the settlement: $200,000. Litigation costs total $7,000, and medical liens for treatment obtained outside of workers’ compensation totals approximately $100,000.

It appears this motion arose after Plaintiff’s counsel asked LAUSD to reduce its lien amount. In response, LAUSD argues Plaintiff’s counsel should lower his attorney fees amount.

In opposition, Plaintiff does not dispute LAUSD’s lien rights but argues the lien should be reduced by the attorney fees and litigation expenses incurred in this lawsuit since it did not participate in the litigation process; Plaintiff asserts that despite agreeing to the contrary, LAUSD’s counsel did not appear or participate at the mediation where the parties settled. Plaintiff also argues that 40% attorney fees is a reasonable fee and argues that under the common fund doctrine, since LAUSD is a passive beneficiary, it should reduce its lien by 40% to account for the work of Plaintiff’s attorney.

In reply, LAUSD, argues the 40% attorney fee is unconscionable, and argues it would be warranted if the case had gone to trial. Instead, since this case settled after mediation, Plaintiff’s attorney fees should be 20% to 30%. LAUSD then argues that it should not have to reduce its lien amount since the amount Plaintiff would recover (approximately $82,940.30) would be an appropriate apportionment for general damages.

However, LAUSD does not address Plaintiff’s arguments regarding the common fund doctrine. The motion itself only cites to Summers v. Newman (1999) 20 Cal.4th 1021, which addresses apportionment when the employer is an active beneficiary, rather than passive, and from there the motion argues that after the attorney’s fees and costs are deducted, LAUSD is entitled to the total amount of the lien. (See Motion at pp. 6-7.) LAUSD misapplies the common fund doctrine. As Quinn makes clear, section 3856 “incorporates the principle that an active litigant (here the worker) may require the passive beneficiary of his efforts (here the employer) to contribute toward the payment for the services of litigant’s attorney which produced the recovery.” (15 Cal.3d at 165.) “[T]he conclusion that the employer should bear his share of such fees rests upon the equitable principle of apportionment long applied by the courts and upon the Legislature’s incorporation of such principle into section 3856.” (Id.) “Both the directive to assess a reasonable fee and the mandate to consider the benefit to both active and passive beneficiaries of the recovery call for apportionment.” (Id. at 170 [emphasis in original].) Moreover, the Quinn court further made clear that its interpretation “will increase the plaintiff’s present tort recovery and decrease the employer’s recoupment of past benefits.” (Id. at 174.) “The fact that the employer must pay some portion of his recoupment to the worker as a share of the attorney’s fee does not make this payment additional worker’s compensation: the employer’s payment does not fulfill his obligation under the compensation statute; it recompenses the attorney for his services.” (Id. at 174 [emphasis in original].)

Here, LAUSD does not appear to dispute that it is a passive beneficiary, and presents no evidence to the contrary. The declaration of Stanley Escalante discusses no efforts made to litigate the case, other than as they relate to protecting the lien. Accordingly, the Court finds that the common fund doctrine applies and the amount due to LAUSD must be reasonably apportioned upon proper motion.

However, Plaintiff has requested apportionment in opposition to LAUSD’s motion, rather than file a motion to apportion attorney’s fees. In particular, no fee agreement or documentation regarding the costs have been provided to the Court and the parties generally dispute what constitutes a reasonable attorney’s fee in this case, without much specificity. Moreover, Plaintiff offers no explanation why 40% should be deducted from LAUSD’s lien amount. Rather, the proper calculation is for the Court to determine a reasonable attorney’s fee, “a fee which reflects the total services rendered to both beneficiaries of the recovery,” and then make a reasonable apportionment of that amount between the parties that benefitted by the recovery. (Quinn, supra, 15 Cal.3d at 175-76 [discussing factors for the court to consider in determining apportionment].) As the parties do not sufficiently address the issue, the Court does not engage in the apportionment analysis at this time. For purposes of this motion, the Court agrees with Plaintiff that the full amount of the lien is not recoverable to LAUSD. The parties shall first meet and confer to determine if an agreement may be reached.

Therefore, the Court DENIES Los Angeles Unified School District’s Motion for an Order Granting its Request to Apply or Impress its Lien Against Rigoberto Zetina’s Settlement.

[1] The bases of the equitable common fund doctrine are: “(1) fairness to the successful litigant, who might otherwise receive no benefit because his recovery might be consumed by the expenses, (2) correlative prevention of an unfair advantage to the others who are entitled to share in the fund and who should bear their share of the burden of its recovery, and (3) encouragement of the attorney for the successful litigant, who will be more willing to undertake and diligently prosecute proper litigation for the protection or recovery of the fund if he is assured that he will be promptly and directly compensated should his efforts be successful.” (Kaplan, supra, 79 Cal.App.3d at 710.)

DEPT:	32
HEARING DATE:	November 5, 2024
CASE NUMBER:	22STCV29959
MOTIONS:	Motion for an Order Granting its Request to Apply or Impress its Lien Against Rigoberto Zetina’s Settlement
MOVING PARTY:	Lienholder Los Angeles Unified School District
OPPOSING PARTY:	Plaintiff Rigoberto Zetina