Attorney’s Fees for Failing to Introduce Evidence at Hearing in Support of Endorsed Issue

Section 8-43-211 (2)(d) provides “if any person requests a hearing or files a notice to set a hearing on issues which are not ripe for adjudication at the time such request or filing is made, such person shall be assessed the reasonable attorney fees and costs of the opposing party in preparing for such hearing or setting.” Although the statute does not define “ripe for adjudication,” the Colorado Court of Appeals has stated that “[g]enerally, ripeness tests whether an issue is real, immediate, and fit for adjudication. Under that doctrine, adjudication should be withheld for uncertain or contingent future matters that suppose a speculative injury which may never occur.” Olivas-Soto v. Industrial Claim Appeals Office, 143 P.3d 1178 (Colo. App. 2006). Generally the courts have held that attorney’s fees may be awarded when a party has sought a judicial determination an issue which the party was precluded from litigating because of a procedural prerequisite, such as filing an Application for Hearing on the issue of Maximum Medical Improvement without first obtaining a Division IME.

The Industrial Claim Appeals Office recently expanded the application of the statute to award attorney’s fees where a party endorses an issue for hearing for which the party is not procedurally barred from litigating, but presents no evidence at hearing in support of that issue. McKeekin v. Memorial Gardens, W.C. No. 4-384-910 (November 15, 2012). In McKeekin, the respondents endorsed several issues for hearing, including authorized treating physician, but at the hearing the respondents presented no evidence on the issue of authorized treating physician. The claimant’s attorney sought attorney’s fees pursuant to §8-43-211(2)(d). The Administrative Law Judge found that although the respondents endorsed the issue in the application for hearing, they did not put forth any evidence or argument on that issue. Therefore, the Administrative Law Judge concluded that this issue was not ripe at the time of filing the application for hearing and awarded attorney fees.

On appeal, the respondents argued that “there was a ‘concern that claimant may be treating with unauthorized medical providers when the Application for Hearing was filed.’” The Industrial Claim Appeals Office concluded that the respondents, however, never produced any factual basis to indicate an actual controversy capable of adjudication, and that, therefore, under these circumstances “the respondents sought a hearing on a matter that was not ready to be heard because at the time of applying for the hearing the respondents had no factual basis to support their claim that the claimant was treating with an unauthorized provider and they failed to produce evidence at the hearing to support their assertion. Thus, the respondents presented no real and immediate controversy. At best, the respondents identified an issue that was uncertain and speculative and, in our view, the ALJ did not commit reversible error in awarding attorney fees and costs for this issue.”

This decision could have far-reaching effects. It is not uncommon that a client, either claimant or respondent, to retain counsel only days before the deadline to file an Application for Hearing or Response to Application for Hearing to preserve one or more issues. Not having the benefit of a complete review of the file, attorneys often endorse all issues on the Application for Hearing, or endorse multiple common affirmative defenses, in order to increase the likelihood that issues will be preserved for future determination. If the attorney later fails to dismiss those issues which that attorney later determines there is no basis to proceed to hearing, the party of that attorney may face attorney’s fees for endorsing the issue which was “uncertain and speculative.”

Additionally, it is not clear at what point in the litigation process the party or attorney endorsing the issue might face attorney’s fees, even if the party later dismisses those issues before hearing. For instance, if a party endorses an “uncertain and speculative’ issue on the Application for Hearing but, after several months and several thousands of dollars incurred in discovery, the party eventually dismisses the issue, it is not clear whether the opposing party can seek attorney’s fees for the issue eventually dismissed. In the McKeekin decision, the Industrial Claim Appeals Office in part bases its decision on the fact that the matter proceeded to hearing. However, there is nothing in the decision which requires a party to proceed to hearing without presenting any evidence before an award of attorney’s fees. In fact, since the statute permits attorney’s fees only on for “issues which are not ripe for adjudication at the time such request or filing is made”, arguably the Administrative Law Judge should look only to whether the party had any evidence to support the issue being endorsed on the Application for Hearing or Response to Application for Hearing, rather than to whether the party ultimately proceeded to hearing. After all, it was the act of endorsing the issue for hearing without any supporting evidence that caused the opposing party to incur attorney fees. The issue of whether the matter proceeded to hearing only goes to the amount of attorney’s fees that should be awarded, rather than whether they should be awarded.

This issue becomes even more troubling when analyzed in conjunction with the Almanza v. Johnson case discussed in my previous post. In that case, the respondents sought an extension of time to comply with a statutory deadline to challenge the opinion of the Division IME physician, so that the respondents could engage in discovery to determine whether there was a factual or legal basis to challenge the opinion. The Industrial Claim Appeals Office held that the Administrative Law Judge had no jurisdiction to grant an extension of time to comply with the deadline to file an Application for Hearing challenging the Division IME physician’s opinion, and that failure to file the Application for Hearing within the statutory deadline resulted in a waiver of the right to challenge the opinion. The effect of that decision requires a party to file an Application for Hearing to challenge the opinion even when that party acknowledges that it does not have enough information to determine whether a real controversy exists. The party is caught between the two decisions - it must file an Application for Hearing to preserve its right to challenge the opinion of the Division IME physician, but later faces the possibility of the opposing party requesting attorney’s fees for endorsing an issue not ripe for adjudication because the issue was “uncertain and speculative” at the time the party filed the Application for Hearing.

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