On certified appeal from the Appellate Division of the Superior Court.
For modification -- Chief Justice Vanderbilt, and Justices Heher, Oliphant, Wachenfeld, Burling, Jacobs and Brennan. Opposed -- None. The opinion of the court was delivered by Heher, J.
The basic question here has been resolved in Caputo v. The Best Foods, Inc., 17 N.J. 259.
Where a third-party tort recovery is had by an injured workman entitled to compensation for the ensuing disability under the Workmen's Compensation Act, R.S. 34:15-7 et seq., the employer is assessable in virtue of R.S. 34:15-40, as amended by L. 1951, c. 169, for his proportionate share of the attorney's fee, but not in excess of 33 1/3% of the portion of the recovery which inured to him, i.e., his total compensation liability under the act, however much the obligation may remain unfulfilled at the time of the third-party recovery, rather than the compensation payments then actually made to the workman.
But there is a subordinate question involving the application of the statutory principle. The case falls within subdivision (b) of the amendment. The tort recovery exceeds the employer's full liability under the Compensation Act,
established by the judgment of the Compensation Division. The accident occurred December 16, 1950. There was judgment in the Compensation Division on November 15, 1951, awarding the employee compensation for permanent disability of 40% of total, 220 weeks at $25 per week, aggregating $5,500, and for 19 5/7 weeks of temporary disability, or $789.28, then paid, all aggregating $6,289.28. The common-law tort action later brought against George A. Fuller Construction Co. and Anheuser-Busch, Inc. was settled for $13,164, measured, it is said, by the sum total then paid by the employer under the compensation award, $3,164, plus $10,000, paid in two checks at the instance of the employee's attorney, one for $3,164, and the other for $10,000, and from the proceeds of the latter check the employee's attorney received a fee of $3,500. The employee's attorney in this compensation proceeding was also his attorney in the third-party action. Presumably, he had agreed with his client for the payment of a contingent fee of 35% of the third-party recovery. Thereupon, on February 6, 1953, there was entered in this proceeding, by consent, an order satisfying the judgment for compensation and providing that the excess of the recovery above the compensation award be credited on any future award for increased disability.
Controversy then arose as to the measure of the employer's responsibility for attorney's fees, i.e., whether it was confined to the benefit had from the reimbursement of payments actually made or extended also to the whole compensation liability; and the employee presented a petition to the administrative tribunal praying that the consent order satisfying the judgment for compensation be vacated and the award reinstated, to the end that there be a determination of the attorney's fees and expenses of suit due the employee under R.S. 34:15-40, and so deductible from the "reimbursement" to the employer. The holding there was, after due hearing, that the employee's attorney is entitled to one-third of $6,289.28, the total amount of the employer's compensation liability, plus $200 for expenses of suit, or $2,296.43, and also one-third of the difference between
$13,164 and $6,289.28, or $2,291.57, or a total sum due the employee's attorney of $4,588, and the attorney, "having already received $3,500, is entitled to an additional $1,088" from the employer, and the employee "is entitled to the difference between $2,291.57 and $1,088, or $1,208.43." The employer was directed to "deduct $200" from the attorney's share "and pay same" to the employee "for the reasons above stated," and the employer was ordered to pay the attorney $1,088 and the sum of $1,208.43" to the employee. The deputy director of the Division was of the view that under the statute, R.S. 34:15-40(b)(e), the "charge for investigation and preparation up to $200 should be" directed to the employer's insurer and not the employee.
The County Court reversed and directed judgment fixing the attorney's fee at "$2,096.43, which is 1/3 of the amount of the compensation award plus statutory costs of $200"; and the Appellate Division affirmed.
The case is here by certification at the instance of the employer.
The essential principle of the County Court judgment, affirmed by the Appellate Division, i.e., the statutory one-third ratio of the whole compensation award plus $200 for costs of suit, serves the statutory policy. But it is contended that the application of the principle here defeats this policy. And it is said that "quite often" the attorney for an employee in a civil action against a third-party tortfeasor insists that he is "entitled to his legal fee from all the third-party funds and also to charge the ...