On certification to the Superior Court, Appellate Division.
For affirmance -- Justices Sullivan, Pashman and Handler and Judge Conford. For reversal -- Justices Clifford and Schreiber. The opinion of the court was delivered by Sullivan, J. Schreiber, J., dissenting. Justice Clifford joins in this opinion.
These worker's compensation cases, consolidated on appeal, involve basically the single issue of how the employer's (or carrier's) obligation under N.J.S.A. 34:15-40, for its pro rata share of the attorney's fee in a third-party tort recovery is satisfied.
N.J.S.A. 34:15-40, a section of the Worker's Compensation Act, deals with the situation where there is a third-party tort recovery for the same injury or death for which there is compensation liability. Paragraph (b) of Section 40 provides that where the third-party recovery is greater than the employer's liability for compensation, the employer shall be released from such liability and shall be entitled to be reimbursed for the medical expenses incurred and compensation theretofore paid, less the employee's expenses of suit and "attorney's fee" which is defined as
In the Owens case, petitioner was found to have suffered a work-connected disability total and permanent in nature. The employer's compensation liability for the first 450 weeks, including temporary benefits and medical expenses, was found
to be $64,647.23. The third-party recovery was $71,000 with the counsel fee thereon calculated in accordance with the then provisions of R. 1:21-7(e). The Division Judge, on a motion pursuant to N.J.S.A. 34:15-40(b) and (e), ordered that the employer be released from such compensation liability upon payment to petitioner of a pro rata share of the counsel fee in the third-party recovery calculated to be $19,596.12, computed on the basis of 33-1/3% of the first $50,000 of released compensation exposure, and 20% of the balance of such released exposure. The employer was also ordered to reimburse the petitioner $200 for expenses.
In the Lee case, a worker's death dependency claim, the employer's compensation liability for the first 450 weeks was found to be $58,843.63. The third-party recovery was $95,000. The Division Judge, in releasing the employer from such compensation liability, ordered that respondent, pursuant to N.J.S.A. 34:15-40(b) and (e), pay petitioner a pro rata share of the counsel fee in the third-party recovery calculated to be $18,435.40, computed on the basis of 33-1/3% of $50,000, and 20% of the remaining $8,843.63 of released compensation exposure. The employer was also ordered to pay a funeral allowance of $750, and $200 in costs.
In each case the employer was ordered to pay the amount so calculated immediately. The employers appealed, claiming, inter alia, that such amount should be paid over the 450-week period,*fn1 and that if the erstwhile obligation to make compensation payments were to terminate for some statutory reason, its obligation to continue payments of the attorney's fee would cease. The Appellate Division, in an unreported opinion, affirmed the orders of the Division. Certification was granted by this Court in both cases. 75 N.J. 535 (1977). We affirm.
In Teller v. Major Sales, Inc., 64 N.J. 143 (1974), in interpreting N.J.S.A. 34:15-40, we held that employer should pay a pro rata share of the attorney's fee in the third-party tort recovery, measured by the amount of its compensation liability from which it has been released. In so holding, we cited Justice Heher's opinion in Dante v. Gotelli, 17 N.J. 254, 255 (1955) which states:
Where a third-party tort recovery is had by an injured workman entitled to compensation for the ensuing disability under 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.
Neither Teller nor Dante dealt precisely with the question of manner of payment. However, each decision stands squarely for the proposition that computation of the employer's pro rata share of the attorney's fee in the third-party recovery is to be measured by the amount of compensation ...