Settlement Offers Need to Be Airtight to Avoid Being Liable for Counsel Fees

The case of Holben v. Pepsi Bottling Ventures, LLC, 2018 Del. Super. LEXIS 1562 (Del.Super. Dec. 13, 2018) addresses the issue of what constitutes a valid settlement offer in the context of a termination petition in order to avoid being liable for counsel fees. The Superior Court has held that, although the claimant’s compensation award did not exceed the employer’s offer of a compensation amount, she was nevertheless entitled to attorney’s fees because she prevailed on the issue of medical witness fees, which the employer had exempted from its offer.

The claimant worked as an account manager for the employer when she sustained a work-related right knee injury. She underwent surgery and had a period of temporary total disability. The employer later filed a termination petition, alleging the claimant was partially recovered. At the Board hearing held in April 2018, the parties stipulated that the claimant was only partially disabled.

The Board issued a decision terminating the total disability benefits and awarding partial disability benefits effective July 25, 2017. The evidence before the Board on behalf of the claimant consisted of her live testimony and the deposition testimony of her treating physician. The employer’s evidence consisted of the deposition testimony of the defense medical expert and the live testimony of a vocational consultant. Although agreeing the claimant was only partially disabled, the parties disagreed as to the correct partial disability rate. The claimant had a pre-injury average weekly wage with the employer of $869.97. By the time of the hearing, she was doing part-time work for a new employer, earning $380 per week. The vocational consultant for the employer testified that in his opinion the claimant had an earning capacity at a much higher figure of $670.68 per week. The Board accepted this testimony as being more credible and awarded the claimant partial disability benefits, but only at the rate of $132.86 per week.

The evidence also showed that more than 30 days prior to the hearing, counsel for the employer had sent a settlement offer to counsel for the claimant proposing agreement to a partial disability rate that was ultimately more than the rate awarded by the Board. However, this offer did not include payment for any medical witness fees. The Board’s decision did, in fact, award the claimant medical witness fees, but denied the request for counsel fees since the employer’s settlement offer was greater than the Board’s award.

In the claimant’s appeal there were two issues before the Board. The first was the claimant’s contention that the Board erred in calculating her partial disability benefits based upon the Labor Market Survey evidence rather than her actual post-injury wages. The claimant argued that the Board should have applied a presumption that her post-injury wages equaled her post-injury earning power. The Board rejected that contention and held that, while the statute requires the Board to consider a claimant’s actual post-injury wages, there is no rebuttable presumption that they equal a claimant’s earning power. The court reasoned that in this case, the Board justifiably found that the Labor Market Survey evidence more accurately demonstrated the claimant’s true earning power.

The second issue was whether the Board had erred as a matter of law in denying the request for counsel fees made by the claimant’s attorney. The applicable statute, 19 Del. C. 2320 (10)b, provides that an attorney’s fee is not owing if a settlement offer is made in writing on behalf of the employer at least 30 days prior to the hearing date before the Board and if the settlement offer is equal to or greater than the amount ultimately awarded by the Board on the issue. Importantly, that provision further states: “The written offer shall also unequivocally state whether or not it includes medical witness fees and expenses and/or late cancellation fees relating to such medical witness fees and expenses.”

The claimant’s argument on this issue was that, since the Board awarded medical witness fees, they should also have awarded counsel fees to her attorney. The court stated at the outset that, although the amount of attorney’s fees to be awarded by the Board is discretionary, an award of attorney’s fees is mandatory when the claimant succeeds on an issue.

The court also noted several undisputed points in this case. First, when the employer made the settlement offer on January 24, 2018, the claimant had not yet incurred medical witness fees. Those fees were incurred on February 6, 2018, when the expert fee of the claimant’s medical witness became non-refundable. Ultimately, the deposition of the treating physician was taken on February 13, 2018. Second, the medical witness fees were incurred within 30 days of making the settlement offer, when the claimant’s medical expert testified by way of deposition. Third, medical witness fees, like attorney’s fees, are considered costs and are not compensation under the statute. Fourth, the claimant’s award of partial disability benefits did not exceed the settlement offer amount, but the claimant was also awarded medical witness fees by the Board, which were excluded from the settlement offer.

In construing the provisions of 19 Del. C. 2320 (10), the court concluded that if a claimant recovers an amount greater than an employer’s offer regarding any “issue,” then an award of attorney’s fees is required. The court further reasoned that the 30-day rule demonstrates that medical witness fees do qualify as an “issue.” This is so since the statute specifically states that the written offer must unequivocally state whether or not it includes medical witness fees and expenses. The court, therefore, reasoned that if a claimant recovers medical witness fees in a Board decision, it triggers the 30-day rule’s consequences. In other words, should a claimant recover medical witness fees in a Board decision that were excluded from a pre-hearing offer, the employer’s obligation to pay attorney’s fees under the statute has been triggered. The employer argued unsuccessfully that when it made its settlement offer, the claimant had not yet incurred the medical witness fees. However, the court rejected that argument, stating that under the statute, the claimant had a right to consider the settlement offer, including the medical witness fee issue, for a full 30 days after it was made.

In conclusion, the court found in favor of the claimant since she incurred necessary medical witness fees that the Board recognized as such when it found them to be recoverable. By having excluded medical witness fees from its settlement offer, the employer was now responsible for paying attorney’s fees. The court held that the Board committed legal error by not awarding attorney’s fees, and the case was remanded to the Board for an appropriate award of counsel fees.

*Paul is a shareholder in our Wilmington, Delaware office. He can be reached at 302.552.4035 or pvtatlow@mdwcg.com.

_{Defense Digest, Vol. 25, No. 3, September 2019. Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2019 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}