Could the Texas Industrial Accident Board limit workers' compensation attorney fees to 15% of a claimant's recovery unless the lawyer showed his hours justified more?

Texas AG Opinion JM-1147: Industrial Accident Board's Attorney Fee Rules

Plain-English summary

The Texas Industrial Accident Board, which had statutory authority under article 8306 to approve attorney's fees for claimants in workers' compensation cases, adopted new rules. One rule capped fees at 25% of the claimant's recovery, and further said the board would not approve anything over 15% unless the attorney showed that the time actually spent on the case justified a higher percentage. A state senator asked the Attorney General whether that rule, along with a rule requiring a board-prescribed representation agreement form and a rule requiring a signed disbursement statement whenever an attorney paid out settlement proceeds, were valid.

The Attorney General concluded the 15%-unless-time-justifies-more rule was invalid because it was unreasonable as a matter of law: Texas courts have long looked at multiple factors in setting a reasonable attorney's fee, including the nature of the litigation, the amount involved, the skill required, and the benefit to the client, not just hours logged, and a rule based solely on time would perversely reward less efficient lawyers and penalize experienced ones who resolved cases quickly. On the representation-agreement rule, the opinion found the board's fee-approval authority did not extend to dictating the specific contractual terms between an attorney and client, though the board could still require written evidence of the representation and fee information. On the disbursement-statement rule, the opinion found it a valid exercise of the board's approval authority, since requiring proof of how settlement funds were actually divided is a reasonable extension of the power to approve fees, subject to case-by-case factual disputes the opinion process could not resolve.

Currency note

This opinion was issued in 1990. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. The Texas workers' compensation system has since been substantially restructured, including replacement of the Industrial Accident Board by the Texas Workers' Compensation Commission and later the Division of Workers' Compensation. Verify current law before relying on any specific rule mentioned here.

Common questions

Could the board cap attorney fees at 15% unless the lawyer proved his hours justified more?
No. The opinion held that rule was unreasonable as a matter of law because it considered only time spent, ignoring other factors Texas courts have long used to judge a reasonable fee, such as case complexity, amount at stake, and attorney skill.

Could the board require attorneys to use a specific contract form with their clients?
Not exactly. The opinion found the board's fee-approval power did not include authority to mandate specific contractual arrangements between attorney and client, though the board could still require attorneys to submit written evidence of representation and fee-relevant information.

Could the board require a written disbursement statement when a settlement was paid out?
Yes. The opinion found this within the board's authority to approve attorney fees, since documentation of the actual disbursement is a reasonable tool for that approval function.

Did the board have the same fee-setting power as a court?
Not quite. The opinion noted the statute gives the board authority to "allow" and "approve" fees, while courts have authority to "allow" and "fix" fees, a distinction the opinion did not need to resolve further because it invalidated the rule on other grounds.

Background and statutory framework

Article 8306, section 7c, V.T.C.S., required all attorney's fees for representing workers' compensation claimants before the Industrial Accident Board to be approved by the board, capped at 25% of the total recovery plus reasonable expenses. The board's new rule, 28 T.A.C. § 64.10(c), required a showing that time expended justified any fee above 15%. The opinion tested that rule against the reasonableness standard from Allstate Ins. Co. v. State Bd. of Ins., 401 S.W.2d 131, 132 (Tex. Civ. App.-Austin 1966, writ ref'd n.r.e.), and against the multi-factor approach to reasonable attorney's fees reflected in Fitzgerald v. Van Buskirk, 188 S.W.2d 155, 160 (Tex. 1945), International & G.N.R. Co. v. Clark, 16 S.W. 631, 632 (Tex. 1891), and Fox v. Boese, 566 S.W.2d 682, 686 (Tex. Civ. App.-Houston [1st Dist.] 1978, writ ref'd n.r.e.), also citing Attorney General Opinions JM-512 (1986) and H-1162 (1978), and noting Texas Employers Insurance Association v. Motley, 491 S.W.2d 395 (Tex. 1973), on the board's authority to "allow" and "approve" fees as distinct from a court's power to "fix" them under article 8306, section 7d.

On the representation-agreement rule (Inds. Acc. Bd., Prop. Rule 14, Tex. Reg. 4681 (1989)), the opinion cited Fidelity Casualty Co. v. Dagerman, 53 S.W.2d 845 (Tex. Civ. App.-Amarillo, writ ref'd), for the principle that an attorney-client fee contract is not binding against the board's fee-approval authority, and Government Code section 82.065, requiring contingent-fee contracts to be in writing. On the disbursement-statement rule (28 T.A.C. § 64.20), the opinion found the board's limited disciplinary authority over attorneys (V.T.C.S. art. 8307, § 4(d)) and its fee-approval power together supported requiring documented evidence of disbursement, referencing an existing board rule on lump-sum payment transmittal letters (28 T.A.C. § 53.40) as a comparable precedent.

Citations

Statutory provisions:

• V.T.C.S. art. 8306, §§ 7c, 7d
• V.T.C.S. art. 8307, § 4(d)
• 28 T.A.C. §§ 53.40, 64.10, 64.10(a), 64.10(c), 64.20
• TEX. GOV'T CODE § 82.065

Cases:

• Allstate Ins. Co. v. State Bd. of Ins., 401 S.W.2d 131, 132 (Tex. Civ. App.-Austin 1966, writ ref'd n.r.e.)
• Fitzgerald v. Van Buskirk, 188 S.W.2d 155, 160 (Tex. 1945)
• International & G.N.R. Co. v. Clark, 16 S.W. 631, 632 (Tex. 1891)
• Fox v. Boese, 566 S.W.2d 682, 686 (Tex. Civ. App.-Houston [1st Dist.] 1978, writ ref'd n.r.e.)
• Texas Employers Insurance Association v. Motley, 491 S.W.2d 395 (Tex. 1973)
• Fidelity Casualty Co. v. Dagerman, 53 S.W.2d 845 (Tex. Civ. App.-Amarillo, writ ref'd)

Prior Attorney General opinions cited: JM-512 (1986); H-1162 (1978).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1147
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1990/jm1147.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

March 19, 1990

Honorable Hugh Parmer
Chairman
Intergovernmental Relations Committee
Texas State Senate
P. O. Box 12068
Austin, Texas 78711

Opinion No. JM-1147

Re: Rules of the Industrial Accident Board (RQ-1813)

Dear Senator Parmer:

You have requested an opinion about the validity of several rules adopted recently by the Industrial Accident Board.

One of the rules you ask about deals with board approval of attorney fees in worker's compensation cases. 28 T.A.C. § 64.10. Section 7c of article 8306, V.T.C.S., provides in part:

All fees of attorneys for representing claimants before the [Industrial Accident] Board under the provisions of this law shall be subject to the approval of the Board. No attorneys' fees for representing claimants before the Board shall be allowed or approved against any party or parties not represented by such attorney, nor exceeding an amount equal to twenty-five per cent (25%) of the total recovery, in addition to the reasonable expenses incurred by the attorney in the preparation and presentation of the said claim before the Board, such expenses to be allowed by the Board.

The new board rule provides:

(1) Attorney fees shall not total more than 25% of the claimant's recovery.

(2) A percentage fee of more than 15% of the claimant's recovery will not be approved unless the board determines that a higher percentage is justified by the time expended by an attorney on the claim.

28 T.A.C. § 64.10(c). In other words, the board rule provides that attorney fees will be limited to an amount not to exceed 15% of the claimant's recovery unless the attorney shows that his time involved in the matter justifies a higher percentage. We think that rule is unreasonable as a matter of law. See Allstate Ins. Co. v. State Bd. of Ins., 401 S.W.2d 131, 132 (Tex. Civ. App.-Austin 1966, writ ref'd n.r.e.) (administrative rules must be reasonable).

There are a number of factors other than time that are commonly considered by courts in approving attorney fee awards. See Fitzgerald v. Van Buskirk, 188 S.W.2d 155, 160 (Tex. 1945) (holding that in ascertaining reasonable value of attorneys' services jury should consider nature of litigation, amount involved, interests at stake, capacity and fitness of lawyers for work, services and labor, time involved, benefit to clients): International & G.N.R. Co. v. Clark, 16 S.W. 631, 632 (Tex. 1891); Fox v. Boese, 566 S.W.2d 682, 686 (Tex. Civ. App.-Houston [1st Dist.] 1978, writ ref'd n.r.e.). The rule in question disregards those factors and allows consideration only of time spent on a case. Under that rule an experienced worker's compensation lawyer who, by virtue of his experience and expertise, could handle a case in fewer than average hours would be limited to a fee of 15 percent of his client's recovery. A lawyer handling his first worker's compensation case who had to spend a number of hours learning the rudiments of worker's compensation law might receive more than 15 percent of his client's recovery. Consequently, we think that the rule in question is unreasonable as a matter of law. See generally Attorney General Opinions JM-512 (1986); H-1162 (1978).

We also note that the board has authority to "allow" and "approve" attorney fees in worker compensation cases, whereas courts have authority to "allow" and "fix" attorney fees. V.T.C.S. art. 8306, § 7d. See generally Texas Employers Insurance Association v. Motley, 491 S.W.2d 395 (Tex. 1973) (comparing authority of courts and Industrial Accident Board in regard to attorney fees in worker's compensation cases). Because we conclude that the board's new rule is invalid for a different reason, we need not consider the argument raised that the new rule is an invalid attempt to fix attorney fees.

You also ask about a board rule that would require an attorney and a client in a worker's compensation case to enter into an agreement for representation on a form prescribed by the board.[1] Inds. Acc. Bd., Prop. Rule 14, Tex. Reg. 4681 (1989). Section 7c of article 8306, V.T.C.S., provides that the board shall approve attorney fees for representing claimants before the board. Certainly the authority to approve fees would authorize the board to require attorneys to provide to the board written evidence of representation and information relevant to the fees attorneys are seeking in a particular worker's compensation case. Even though the board's approval power would allow it to disregard agreements between an attorney and a client that would authorize fees not approved by the board, we do not think that the authority to approve fees implies the authority to mandate specific contractual arrangements between lawyers and their clients. See generally Fidelity Casualty Co. v. Dagerman, 53 S.W.2d 845 (Tex. Civ. App.-Amarillo, writ ref'd.) (contract for fee in worker's compensation case not binding in light of court's authority to fix fees); Gov't Code § 82.065 (contingent fee contract for legal services must be in writing and signed by attorney and client).

You also ask about section 64.20 of the board rules, which provides:

(a) On the date the attorney disburses the proceeds of a workers' compensation claim, the attorney shall present the claimant with a written disbursement statement, on a form prescribed by the board, setting out:

(1) the monetary amount received by the claimant(s); and

(2) the monetary amounts retained by the attorney, itemized by specific charge.

(b) The claimant(s) and the attorney shall sign the disbursement statement.

(c) The attorney shall retain the disbursement statement for four years from the date of disbursement.

(d) The board may request the disbursement statement at any time within the retention period established in subsection (c) of this section. The attorney shall comply within 10 days of receiving a request.

Although the board has only limited disciplinary authority over attorneys, see V.T.C.S. art. 8307, § 4(d) (board may bar persons guilty of fraudulent or unethical conduct from practicing before the board), we think that the board's authority to approve attorney fees includes the authority to require some evidence of disbursement. Whether the rules set out above are reasonable also involves resolution of fact issues. We cannot resolve those issues in the opinions process.

You also ask about a new board rule that defines "recovery" for purposes of calculating attorney fees. 28 T.A.C. § 64.10(a). The historical interpretation of section 7c is relevant to your question. Because the briefs submitted to us in regard to your request did not address that aspect of the question, we will reserve answering the question until interested parties have had an opportunity to respond. In addition, you ask us to determine whether certain types of rules would conflict with the worker's compensation statutes. In the absence of specific rules, we cannot make those determinations.

SUMMARY

A rule adopted by the Industrial Accident Board to govern the amount of attorney fees in worker's compensation cases is unreasonable as a matter of law and therefore invalid. The board can require written evidence of representation and disbursement of attorney fees in a worker's compensation case.

Very truly yours,

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Sarah Woelk
Assistant Attorney General

[1] We understand that the board has not adopted by rule a particular form contract. See 28 T.A.C. § 53.40 (specifying exact wording of transmittal letter by which a carrier tenders a lump sum payment for medical disabilities to a claimant).