Hartford Accident & Indemnity Company v. Janery Francois

CourtCourt of Appeals of Texas
DecidedMay 23, 2023
Docket05-21-00981-CV
StatusPublished

This text of Hartford Accident & Indemnity Company v. Janery Francois (Hartford Accident & Indemnity Company v. Janery Francois) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hartford Accident & Indemnity Company v. Janery Francois, (Tex. Ct. App. 2023).

Opinion

Reversed, Rendered, and Opinion Filed May 23, 2023

In The Court of Appeals Fifth District of Texas at Dallas No. 05-21-00981-CV

HARTFORD ACCIDENT & INDEMNITY COMPANY, Appellant V. JANERY FRANCOIS, Appellee

On Appeal from the 68th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-17-08336

MEMORANDUM OPINION Before Justices Partida-Kipness, Nowell, and Wright1 Opinion by Justice Partida-Kipness This appeal involves a dispute over the allocation of a third-party settlement

in a workers’ compensation case. Appellant Hartford Accident & Indemnity

Company, the workers’ compensation carrier, appeals the trial court’s judgment

following a bench trial. Hartford challenges the trial court’s allocation of the

settlement amount and award of additional attorney’s fees of $10,000. We conclude

the trial court’s allocation was erroneous and the additional award of attorney’s fees

1 The Hon. Carolyn Wright, Justice, Assigned was an abuse of discretion. We reverse the judgment and render the judgment the

trial court should have rendered.

BACKGROUND Appellee Janery Francois sustained a work-related injury in 2015. Hartford

paid Francois $356,669.73 in medical and indemnity benefits under her employer’s

workers’ compensation policy. Francois sued the owner and operator of the building

where she sustained her injury, Parmenter Realty & Investment Company, Inc., and

settled that claim for $150,000. Hartford then intervened in the lawsuit and asserted

its subrogation rights. Hartford and Francois disagreed on how the $150,000

settlement should be allocated in relation to the workers’ compensation lien. At the

center of the dispute was the parties’ disagreement of how to calculate “the net

amount recovered” by Francois under section 417.002(a) of the Texas Labor Code.

See TEX. LAB. CODE § 417.002(a) (“The net amount recovered by a claimant in a

third-party action shall be used to reimburse the insurance carrier for benefits,

including medical benefits, that have been paid for the compensable injury.”). The

dispute proceeded to a bench trial.

At trial, Francois’s counsel maintained the “net recovery”2 is determined after

counsel’s 40% contingency fee is taken out of the gross settlement. Using this

framework, Francois calculated the “net recovery” to be $85,206.03 as follows:

2 Francois’s counsel referred to the “net amount recovered” of section 417.002(a) as the “net recovery” at trial. These terms are not interchangeable. To accurately reflect the parties’ arguments, however, we will use the term “net recovery” in this opinion when that is the term used by Francois below. –2– $150,000 (𝑔𝑟𝑜𝑠𝑠 𝑠𝑒𝑡𝑡𝑙𝑒𝑚𝑒𝑛𝑡) − $60,000 (40% 𝑐𝑜𝑛𝑡𝑖𝑛𝑔𝑒𝑛𝑐𝑦 𝑓𝑒𝑒) −$4,793.97 (𝑝𝑟𝑜 𝑟𝑎𝑡𝑎 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠) $85,206.03 (𝑛𝑒𝑡 𝑟𝑒𝑐𝑜𝑣𝑒𝑟𝑦)

Counsel next argued that the trial court could award him additional attorney’s

fees under section 417.003 because Hartford did not participate in the lawsuit against

Parmenter Realty. See TEX. LAB. CODE § 417.003(a).3 Francois’s counsel agreed any

fees awarded under section 417.003 could not exceed one-third of the “net

recovery.” See id. § 417.003(a)(1). Using that formula, counsel concluded he was

entitled to an award of $28,117.98 as section 417.003 attorney’s fees, which was

one-third of the net recovery of $85,206.03. By subtracting the section 417.003 fees

from the net recovery, Francois’s counsel argued Hartford’s recovery should be

$58,088.05:

$85,206.03 (𝑛𝑒𝑡 𝑟𝑒𝑐𝑜𝑣𝑒𝑟𝑦) −$28,117.99 (§ 417.003 𝑓𝑒𝑒𝑠) $58,088.04 (𝐻𝑎𝑟𝑡𝑓𝑜𝑟𝑑 ′ 𝑠 𝑟𝑒𝑐𝑜𝑣𝑒𝑟𝑦)

Finally, Francois’s counsel argued he was entitled to attorney’s fees of

$10,000 defending the intervention and participating in the bench trial. He sought

3 Section 417.003(a) of the labor code provides: (a) An insurance carrier whose interest is not actively represented by an attorney in a third-party action shall pay a fee to an attorney representing the claimant in the amount agreed on between the attorney and the insurance carrier. In the absence of an agreement, the court shall award to the attorney payable out of the insurance carrier's recovery: (1) a reasonable fee for recovery of the insurance carrier’s interest that may not exceed one-third of the insurance carrier’s recovery; and (2) a proportionate share of expenses. TEX. LAB. CODE § 417.003(a). –3– those fees under section 37.009 of the Texas Civil Practice and Remedies Code and

maintained he was entitled to such fees because Hartford refused to negotiate a lesser

recovery. Francois characterized Hartford’s unwillingness to negotiate a lower

subrogation lien as an improper tactic and intentional failure to follow established

law.

Hartford, in contrast, argued that under the “first money” rule, Hartford’s

recovery is calculated by subtracting section 417.003 fees and expenses from the

gross settlement. Hartford’s calculation was simple:

$150,000 (𝑔𝑟𝑜𝑠𝑠 𝑠𝑒𝑡𝑡𝑙𝑒𝑚𝑒𝑛𝑡) −$50,000 (§ 417.003 𝑓𝑒𝑒𝑠) −$4,793.97 (𝑝𝑟𝑜 𝑟𝑎𝑡𝑎 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠) $95,206.03 (𝐻𝑎𝑟𝑡𝑓𝑜𝑟𝑑 ′ 𝑠 𝑟𝑒𝑐𝑜𝑣𝑒𝑟𝑦)

The trial court adopted Francois’s proposed allocation. Following a bench

trial, the trial court rendered judgment on Hartford’s declaratory judgment claim and

awarded $57,088.04 of the settlement to Hartford, and $92,911.96 to Francois and

her counsel. The $92,911.96 awarded to Francois and her counsel was comprised of

the following: (1) attorney’s fees of $60,000, which was 40% of the gross settlement,

(2) reasonable and necessary expenses of $4,793.97, and (3) section 417.003 fees of

$28,117.99, which was one-third of the “net recovery” calculated by the court. The

trial court also awarded Francois’s counsel additional attorney’s fees of $10,000

pursuant to TEX. CIV. PRAC. & REM. CODE § 37.009. This appeal followed.

–4– ANALYSIS Hartford brings two issues on appeal. First, Hartford challenges the trial

court’s allocation of the settlement amount. Second, Hartford contends the trial court

abused its discretion by awarding Francois’s counsel $10,000 in additional

attorney’s fees.

I. Allocation of Settlement In its first issue, Hartford contends the trial court’s settlement allocation failed

to award Hartford the statutorily-required “first money” from Francois’s third-party

settlement. Hartford maintains it should have recovered $95,206.03, not $57,088.04

as awarded in the judgment. We review this issue de novo because it presents the

Court with a question of law concerning statutory interpretation and application.

Empower Texans, Inc. v. Dallas Cnty., 648 S.W.3d 664, 669 (Tex. App.—Dallas

2022, pet. denied) (citing Bush v. Lone Oak Club, LLC, 601 S.W.3d 639, 647 (Tex.

2020)).

An employee may seek damages from a third party who is liable for an injury

that is compensable under the labor code. TEX. LAB. CODE § 417.001(a). When a

benefit is claimed by an injured employee, the insurance carrier is subrogated to the

rights of the injured employee. Id. § 417.001(b). The distribution of the proceeds

recovered from third parties is governed by section 417.002, which provides:

(a) The net amount recovered by a claimant in a third-party action shall be used to reimburse the insurance carrier for benefits, including medical benefits, that have been paid for the compensable injury.

–5– Id. § 417.002(a).

It is well-established that an insurance carrier is entitled to recover all benefits

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