Sentry Casualty Company v. Jennifer Bravin and Modjarrad and Associates, P.C.

• Court: Court of Appeals of Texas
• Decided: June 21, 2024
• Docket: 05-23-00869-CV
• Status: Published

Opinion

REVERSE and REMAND and Opinion Filed June 21, 2024

S In The Court of Appeals Fifth District of Texas at Dallas No. 05-23-00869-CV

SENTRY CASUALTY COMPANY, Appellant V. JENNIFER BRAVIN AND MODJARRAD AND ASSOCIATES, P.C., Appellees

On Appeal from the 101st Judicial District Court Dallas County, Texas Trial Court Cause No. DC-19-04454

MEMORANDUM OPINION Before Justices Smith, Miskel, and Breedlove Opinion by Justice Breedlove This is a dispute about the attorney’s fees due to an insurance company under

Chapter 417 of the Texas Labor Code. After a trial on stipulated facts, the trial court

rendered judgment that appellant Sentry Casualty Company owed attorney’s fees to

appellees Jennifer Bravin and Modjarrad and Associates, P.C. because Sentry did

not “actively participate” in litigation of Bravin’s third-party action. For the reasons

we discuss below, we conclude that proceeds from the assignment of Sentry’s lien

and cause of action do not constitute a “recovery of the insurance carrier’s interest”

for purposes of determining attorney’s fees under Texas Labor Code § 417.003(a)(1). We reverse the judgment and remand the case to the trial court for

further proceedings consistent with this opinion.

BACKGROUND

The parties presented joint stipulations of fact to the trial court. We rely on

those stipulations here.

Bravin was employed by Vitas Healthcare Corporation on May 23, 2016, and

was driving a vehicle in the course and scope of her employment on that date. Lindy

Lee Lankford rear-ended Bravin’s vehicle. Bravin was injured, and she received

worker’s compensation benefits from Vitas through Sentry, Vitas’s carrier, in the

amount of $ 42,303.56.

On June 15, 2016, Bravin entered into a contract with Modjarrad and

Associates, P.C. (referred to by the parties and here as “MAS”) to prosecute her

claim against Lankford. The contract provided for attorney’s fees of thirty-three and

one-third percent of all money collected, plus costs and expenses, or forty percent if

suit were filed.

Sentry notified MAS on December 1, 2016, that it had made payments on

Bravin’s behalf “and ha[d] become subrogated to the rights of recovery from the at-

fault party involved.” On May 23, 2017, Sentry notified MAS of its final worker’s

compensation lien of $ 42,303.56, requested an update on the status of settlement,

and gave MAS payment instructions.

–2– Lankford was an insured under an automobile insurance policy issued by

Germania Select Insurance Company. On January 23, 2018, MAS made a demand

on Germania to settle Bravin’s claims for the policy’s limits.

On April 16, 2018, Bravin filed suit against Lankford and Lance Lankford

(the vehicle’s owner) in Collin County (Bravin Lawsuit). Sentry sent a letter to MAS

confirming that Sentry was aware of the Bravin Lawsuit and advising of Sentry’s

lien under §§ 417.001–.003 of the Texas Labor Code. Sentry was not actively

represented by an attorney in the Bravin Lawsuit.

On January 28, 2019, Sentry sold and assigned its subrogation cause of action

and worker’s compensation lien to Germania for $ 25,000. Bravin/MAS became

aware of the assignment on February 1, 2019, through an email from Germania’s

counsel. In the email, Germania withdrew its prior offer to settle Bravin’s claim for

$ 30,700, and made a new offer of $ 5,700. Sentry advised MAS of the sale and

assignment on February 5, 2019.

On March 28, 2019, Bravin and MAS filed this suit against Sentry, seeking

attorney’s fees under § 417.003 of the Texas Labor Code and a declaratory judgment

and attorney’s fees under Chapter 37 of the Texas Civil Practice & Remedies Code.

Sentry answered and filed a counterclaim for attorney’s fees under Chapter 37.

On May 28, 2019, Sentry filed notice of the transfer of its cause of action and

lien to Germania in this lawsuit and in the Bravin Lawsuit. On July 5, 2019, Bravin

and MAS filed an amended petition in this lawsuit adding Germania as a defendant.

–3– On April 20, 2022, Bravin settled her claims against the Lankfords for

$ 11,000, finalized in a written settlement agreement and release dated May 16,

2022. The Bravin Lawsuit was dismissed with prejudice on June 3, 2022.

In this lawsuit, Bravin and MAS filed notices non-suiting Germania with

prejudice on June 17 and 28, 2022. Bravin/MAS and Sentry filed joint stipulations

of fact on December 5, 2022, and each filed a motion for judgment. Sentry argued

that its worker’s compensation lien was “freely assignable” and that Bravin/MAS

had no entitlement to attorney’s fees from Sentry. Bravin/MAS argued that Sentry’s

assignment of the lien to Germania for $ 25,000 was a “recovery” for purposes of

determining attorney’s fees under Texas Labor Code § 417.003(a).

In its judgment, the trial court concluded that (1) Sentry did not actively

participate in litigation of the third-party claim, (2) Sentry is required to pay one-

third attorney’s fees to Bravin/MAS in the amount of $ 8,333.33, (3) Sentry is

required to pay attorney’s fees of $ 10,000 to Bravin/MAS under civil practice and

remedies code Chapter 37, and (4) Bravin/MAS should recover pre- and

postjudgment interest and costs. Based on these conclusions, the trial court rendered

judgment for Bravin/MAS. This appeal followed.

ISSUES AND STANDARD OF REVIEW

Sentry contends the trial court erred by rendering judgment for Bravin/MAS

Law Firm by (1) awarding them attorney’s fees of $ 8,333.33 under § 417.003 of the

Labor Code, (2) awarding them attorney’s fees under the Texas Uniform Declaratory

–4– Judgment Act, and failing to award Sentry its fees under that Act, and (3) in the

alternative, by awarding Bravin/MAS attorney’s fees under labor code § 417.003 as

damages, and by awarding prejudgment interest on those fees.

The case was submitted to the trial court as an agreed case under rule 263,

Texas Rules of Civil Procedure. That rule provides:

Parties may submit matters in controversy to the court upon an agreed statement of facts filed with the clerk, upon which judgment shall be rendered as in other cases; and such agreed statement signed and certified by the court to be correct and the judgment rendered thereon shall constitute the record of the cause.

TEX. R. CIV. P. 263. In Patton v. Porterfield, we explained that a case tried on agreed

facts under rule 263 “is considered to have the nature of a special verdict and is a

request by the litigants for judgment in accordance with the applicable law.” 411

S.W.3d 147, 153–54 (Tex. App.—Dallas 2013, pet. denied) (internal quotation

omitted). The agreed facts are binding on the parties, the trial court, and the appellate

court. Id.

In an appeal of an “agreed” case, there are no presumed findings in favor of

the judgment and the pleadings are immaterial. Id. at 154. An appellate court

conclusively presumes that the parties have brought before the court all facts

necessary for the presentation and adjudication of the case. Id. We review de novo

whether the trial court properly applied the law to the agreed facts, but we do not

review the legal or factual sufficiency of the evidence. Id. The question on appeal is

–5– limited to the correctness of the trial court’s application of the law to the agreed

facts. Id.

DISCUSSION

The Texas Worker’s Compensation statute permits an employee to seek

damages from the third-party tortfeasor. TEX. LAB. CODE ANN. § 417.001(a). The

“first money” recovered by an injured worker from a tortfeasor, however, goes to

the worker’s compensation carrier until the carrier is paid in full. Hartford Accident

& Indem. Co. v. Francois, No. 05-21-00981-CV, 2023 WL 3595376, at *3 (Tex.

App.—Dallas May 23, 2023, no pet.) (mem. op.); Allison v. Serv. Lloyds Ins. Co.,

437 S.W.3d 589, 594–95 (Tex. App.—Houston [14th Dist.] 2014, pet. denied).

“Rather than the employee owning the money and being forced to disgorge it, the

carrier is first entitled to the money up to the total amount of benefits it has paid.”

Francois, 2023 WL 3595376, at *3 (internal quotation omitted).

But as we explained in Francois, “a ‘first money’ recovery does not always

result in an insurer recovering the full amount of the settlement.” Id. When an injured

employee pursues a claim against the third party and the worker’s compensation

carrier is not actively represented by an attorney in that proceeding, the carrier is

required to pay a fee to the employee’s attorney. TEX. LAB. CODE ANN. § 417.003(a);

see also Resolution Oversight Corp. v. Garza, No. 03-08-00481-CV, 2009 WL

1981424, at *5 (Tex. App.—Austin July 10, 2009, no pet.) (mem. op.). The purpose

of § 417.003 is to pay a worker’s attorney for the benefit accruing to the carrier as a

–6– result of the attorney’s efforts. See, e.g., Caesar v. Bohacek, 176 S.W.3d 282, 285

(Tex. App.—Houston [14th Dist.] 2004, no pet.) (“By enacting section 417.003, the

legislature intended to compensate claimants who perform work for the benefit of a

subrogated insurance carrier and to prohibit the worker’s compensation carrier from

obtaining a ‘free ride’ from the efforts of the claimant’s attorney.”) (citing Prewitt

& Sampson v. City of Dallas, 713 S.W.2d 720, 723 (Tex. App.—Dallas 1986, writ

ref’d n.r.e.)).

A worker’s compensation carrier may alter its subrogation rights by contract.

Brandon v. Am. Sterilizer Co., 880 S.W.2d 488, 495 (Tex. App.—Austin 1994, no

writ). Here, Sentry sold and assigned its worker’s compensation lien to Germania,

Lankford’s insurer. If Bravin prevailed at trial and recovered $ 42,303.56 or more,

then Germania could recoup the lien from the judgment, reducing any amount

Germania owed to Bravin within its own policy limits. If Lankford prevailed at trial,

Germania would not recoup anything on its $ 42,303.56 subrogation interest that it

purchased from Sentry for $ 25,000. See id. (under the assignment, the tortfeasor

was taking a risk that it would lose the entire subrogation interest if the plaintiff

prevailed at trial).

The question in this appeal is whether proceeds from Sentry’s sale and

assignment of its subrogation cause of action and lien was a “recovery of the

insurance carrier’s interest” for purposes of determining attorney’s fees under labor

code § 417.003(a). The trial court concluded that because Sentry did not actively

–7– participate in the Bravin Lawsuit, “the plain language of Section 417.003(a) is in

favor of [Bravin/MAS’s] rights to attorneys’ fees.” The trial court reasoned that

Sentry’s lien and subrogation claims were “strictly derivative to [Bravin’s] causes

of action against the Lankfords and Germania,” and noted, “‘there is but one cause

of action against the third-party tortfeasor—that of [Plaintiffs], who own it—

burdened by the right of [Sentry] to recoup for itself compensation paid,’” quoting

Guillot v. Hix, 838 S.W.2d 230, 232 (Tex. 1992). The trial court concluded that

Sentry did not “actively participate” in the Bravin Lawsuit, and accordingly,

§ 417.003(a) required Sentry to pay Bravin/MAS “a reasonable fee for recovery of

the insurance carrier’s interest,” not to “exceed one-third of the insurance carrier’s

recovery,” plus “a proportionate share of expenses.” See TEX. LAB. CODE ANN.

§ 417.003(a)(1), (2).

Sentry argues, however, that proceeds from the sale and assignment of the

subrogation cause of action did not constitute the first money recovered by the

claimant, Bravin, as required for recovery of attorney’s fees under labor code

§ 417.003. Sentry also argues that its sale and assignment was binding on Bravin

and MAS, so any liability for attorney’s fees under § 417.003 would be borne by

Germania, not Sentry. Sentry contends that Bravin and MAS were not entitled to any

recovery from Germania because they non-suited Germania with prejudice. Sentry

also argues that § 417.003 does not apply because “no attorney’s fees would be owed

based on any percentage of the amount of Sentry’s lien.”

–8– We do not disagree with the trial court’s conclusion that Sentry “did not

actively participate” in the Bravin Lawsuit. But we further conclude that Sentry’s

sale of the lien to Germania transferred both the obligation to pay attorney’s fees

under § 417.003(a) and the right to recover, under § 417.002, the amount of benefits

paid by the worker’s compensation carrier “for the compensable injury.” See TEX.

LAB. CODE ANN. §§ 417.002(a); 417.003(a).

Although Germania paid less than the amount of the lien to acquire it, the sale

did nothing to affect the amount of the lien itself. Sentry sold the entire lien,

transferring one hundred percent of its $ 42,303.56 subrogation interest to Germania.

Because of the assignment, Germania could recover, as “first money,” the full

$ 42,303.56 less “a reasonable fee for recovery of the insurance carrier’s interest.”

TEX. LAB. CODE ANN. § 417.003(a)(1). Sentry conveyed its entire interest to

Germania:

NOW, THEREFORE, for and in consideration of the recitals set forth above, and the total sum of TWENTY-FIVE THOUSAND and 00/100THS DOLLARS ($25,000.00) paid to SENTRY CASUALTY COMPANY by GERMANIA SELECT INSURANCE COMPANY ....

SENTRY CASUALTY COMPANY has this day sold, conveyed, and assigned and by this instrument does hereby sell, convey, and assign to GERMANIA SELECT INSURANCE COMPANY any and all rights, title, and interest of any kind in or arising from the referenced Sentry Casualty Company workers’ compensation lien (Claim No. 55C277629-602), at common law, statutory, or otherwise, which SENTRY CASUALTY COMPANY has or might have, known or unknown, now existing or that might arise hereafter, directly or indirectly attributable to the above-described incident, the lien claim, and/or the referenced present transaction. . . . –9– Assignment: SENTRY CASUALTY COMPANY further agrees to not assert or prosecute any further claims or lawsuits arising out of the LIEN in question, against anyone whomsoever, whether or not herein otherwise named, described or identified. Any and all such claims and interests are hereby conveyed and assigned in full to GERMANIA SELECT INSURANCE COMPANY. . . .

As holder of the lien, Germania was subrogated to Bravin’s rights and held a

subrogation interest “limited to the amount of the total benefits paid or assumed by

the carrier to the employee . . . .” TEX. LAB. CODE ANN. § 417.001(b). Although the

lien’s ownership changed upon assignment, its value did not, and the entire interest

became Germania’s, not Sentry’s. Accordingly, Germania also owned the

corresponding obligation to pay attorney’s fees under § 417.003. In Brandon, the

court rejected Brandon’s argument that granting the full amount of the insurer’s

subrogation interest would amount to a “windfall” for the tortfeasor, because the

tortfeasor “was taking a risk that it would lose that entire amount if Brandon did not

prevail at trial.” Brandon, 880 S.W.2d at 495.

In addition, Bravin/MAS’s attorney-fee recovery under § 417.003(a)(1) was

not limited by the assignment. If Bravin had pursued her claim against the Lankfords

at trial and obtained a judgment, MAS could have been awarded up to one-third of

that amount as its “reasonable fee” under § 417.003(a)(1), which Germania would

have been obligated to pay. Instead, she settled her claims for $ 11,000 and released

the Lankfords. Then both Bravin and MAS non-suited their claims against Germania

in this lawsuit with prejudice.

–10– We conclude that because Sentry conveyed its entire subrogation cause of

action and lien to Germania, and Bravin/MAS nonsuited their claims against

Germania, the trial court erred by ruling that Sentry owed $ 8,333.33 (one-third of

the consideration paid by Germania to Sentry for the assignment) in attorney’s fees

to Bravin/MAS under § 417.003. Nothing in Chapter 417 addresses purchase or sale

of the carrier’s lien. See TEX. LAB. CODE ANN. §§ 417.001–.003. After Sentry’s

conveyance to Germania, Germania held the entire lien, and accordingly, the

statutory right to reimbursement of the entire amount. See id.; see also Performance

Ins. Co. v. Frans, 902 S.W.2d 582, 584–85 (Tex. App.—Houston [1st Dist.] 1995,

writ denied) (“When a third-party tortfeasor pays a settlement or judgment to an

employee who has been receiving worker’s compensation benefits, the tortfeasor

and the employee are jointly and severally liable to the compensation carrier for its

entire subrogation claim.”); Erivas v. State Farm Mut. Auto. Ins. Co., 141 S.W.3d

671, 672–73, 677–78 (Tex. App.—El Paso 2004, no pet.) (after similar assignment

of lien, assignee was obligated to pay plaintiff’s fees based on amount of lien, not

on amount paid for assignment, and assignor was dismissed from suit).

We further conclude that remand is required for reconsideration of the

$ 10,000 in attorney’s fees awarded to Bravin/MAS under the Declaratory

Judgments Act. See TEX. CIV. PRAC. & REM. CODE ANN. § 37.009 (“In any

proceeding under this chapter, the court may award costs and reasonable and

necessary attorney’s fees as are equitable and just.”). In Farmers Group, Inc. v.

–11– Geter, 620 S.W.3d 702, 712–13 (Tex. 2021), the court explained that “[w]here the

extent to which a party prevailed has changed on appeal, our practice has been to

remand the issue of attorney fees to the trial court for reconsideration of what is

equitable and just.” Although the plaintiff in that case initially prevailed, the

judgment was reversed on appeal and the supreme court rendered judgment that the

plaintiff take nothing. Id. at 714. The supreme court then reversed the award of

attorney’s fees and remanded the issue for the trial court’s reconsideration. Id. The

court instructed that “[o]n remand, ‘the degree of success obtained’ should, as

always, be ‘the most critical factor in determining reasonableness of a fee award.”

Id. at 713 (quoting Smith v. Patrick W.Y. Tam Tr., 296 S.W.3d 545, 548 (Tex. 2009)).

We sustain Sentry’s first issue challenging the trial court’s award of

$ 8,333.33 under labor code § 417.003. We sustain Sentry’s second issue

challenging the award of attorney’s fees to Bravin/MAS under the declaratory

judgment act and failing to award Sentry its fees under that act, and remand that

issue to the trial court for reconsideration. Given our disposition of these issues, we

need not consider Sentry’s third issue. See TEX. R. APP. P. 47.1 (court of appeals

must address issues “necessary to final disposition of the appeal”).

–12– CONCLUSION

We reverse the trial court’s judgment and remand for determination of

attorney’s fees under § 37.009 of the Texas Civil Practice and Remedies Code.

/Maricela Breedlove/ MARICELA BREEDLOVE JUSTICE 230869F.P05

–13– S Court of Appeals Fifth District of Texas at Dallas JUDGMENT

SENTRY CASUALTY COMPANY, On Appeal from the 101st Judicial Appellant District Court, Dallas County, Texas Trial Court Cause No. DC-19-04454. No. 05-23-00869-CV V. Opinion delivered by Justice Breedlove. Justices Smith and Miskel JENNIFER BRAVIN AND participating. MODJARRAD AND ASSOCIATES, P.C., Appellees

In accordance with this Court’s opinion of this date, the judgment of the trial court is REVERSED and this cause is REMANDED to the trial court for determination of attorney’s fees consistent with the Court’s opinion.

It is ORDERED that appellant Sentry Casualty Company recover its costs of this appeal from appellee Jennifer Bravin and Modjarrad and Associates, P.C.

Judgment entered June 21, 2024

–14–