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2000  WI  App  53
COURT OF APPEALS OF WISCONSIN
PUBLISHED OPINION
Case No.:                           98-3432
Complete Title
of Case:
SCOTT R. MEYER,
PLAINTIFF-RESPONDENT,
V.
MICHIGAN MUTUAL INSURANCE CO.,
A FOREIGN CORPORATION,
DEFENDANT-APPELLANT,
MILLERS CLASSIFIED INSURANCE CO.,
A FOREIGN CORPORATION,
DEFENDANT.
Opinion Filed:                      February 2, 2000
Submitted on Briefs:                October 22, 1999
JUDGES:                             Brown, P.J., Nettesheim and Snyder, JJ.
Concurred:
Dissented:




2000  WI  App  53
Appellant
ATTORNEYS:                                                            On behalf of the defendant-appellant, the cause was submitted on the
briefs of  Christopher D. Walther of Walther Law Offices, S.C. of
Milwaukee.
Respondent
ATTORNEYS:                                                            On behalf of the plaintiff-respondent, the cause was submitted on the
brief of Joseph G. Doherty of Bunk, Doherty & Griffin, S.C. of West
Bend.




COURT OF APPEALS
NOTICE
DECISION
DATED AND FILED
This  opinion  is  subject  to  further  editing.  If
published, the official version will appear in the
bound volume of the Official Reports.
February 2, 2000
                                                                                                              A  party  may  file  with  the  Supreme  Court  a
                                                                                                              petition  to  review  an  adverse  decision  by  the
                                                                             Cornelia G. Clark
                                                                                                              Court of Appeals.   See WIS. STAT. § 808.10 and
                                                                             Acting Clerk, Court of Appeals
                                                                                                              RULE 809.62.
                                                                             of Wisconsin
No.                                                                          98-3432
                                                                             STATE OF WISCONSIN               IN COURT OF APPEALS
                                                                             SCOTT R. MEYER,
                                                                             PLAINTIFF-RESPONDENT,
V.
MICHIGAN MUTUAL INSURANCE CO.,
A FOREIGN CORPORATION,
DEFENDANT-APPELLANT,
MILLERS CLASSIFIED INSURANCE CO.,
A FOREIGN CORPORATION,
DEFENDANT.
APPEAL  from  a  judgment  of  the  circuit  court  for  Washington
County:   LAWRENCE F. WADDICK, Judge.   Affirmed in part; reversed in part
and cause remanded with directions.
Before Brown, P.J., Nettesheim and Snyder, JJ.




No.   98-3432
¶1                                                                                              SNYDER,  J.      This  is  an  appeal  from  a  judgment  approving  a
settlement and distributing insurance proceeds pursuant to WIS. STAT. § 102.29(1)
(1995-96).1   Michigan Mutual Insurance Co. (Michigan Mutual) contends that the
circuit court improperly exercised its discretion in awarding Scott   R. Meyer a
one-third contingent attorneys’ fee as part of the “reasonable cost of collection”
under § 102.29(1).2   Michigan Mutual claims that the circuit court should have
considered  a  list  of  factors  under  SCR                                                    20:1.5(a)                                                                   (1999)  in  assessing  the
reasonableness of Meyer’s attorneys’ fees.   Because we conclude that the court
appropriately reviewed the SCR 20:1.5(a) factors, Michigan Mutual’s argument
fails.  We therefore affirm on this issue.
¶2                                                                                              Michigan  Mutual  also  contends  that  the  circuit  court  erred  as  a
matter of law in entering a judgment against it for $1 million, the limits of its
policy, when WIS. STAT. § 102.29(1) provides for the allocation of proceeds to
Meyer’s employer’s insurance carrier, Michigan Mutual.   We agree; therefore, on
this point of error we reverse and remand with directions that the circuit court
enter judgment consistent with this opinion.
BACKGROUND
¶3                                                                                              The facts of this case are lengthy but not particularly complicated.
On April 6, 1993, Meyer sustained severe physical injuries when he was hit by a
truck  driven  by  a  fellow  employee  and  owned  by  his  employer,  Milliken
1 All references to the Wisconsin Statutes are to the 1995-96 version.
2 Meyer also seeks insurance coverage from Millers Classified Insurance Co. (Millers).
In a separate appeal, this court recently determined that Meyer was entitled to coverage from
Millers’s underinsured motorist policies.   See Meyer v. Michigan Mut. Ins. Co., 2000 WI App
37, ___ Wis. 2d ___, ___ N.W.2d ___.
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No.   98-3432
Millwork,  Inc.                                                                           (Milliken).                                                                     Meyer  subsequently  began  receiving  worker’s
                                                                                          compensation benefits from Milliken’s worker’s compensation insurer, Michigan
Mutual.
¶4                                                                                        On  February  16,  1996,  Meyer  filed  a  third-party liability action
against Milliken  and  the  employee  who drove  the  truck that hit  Meyer.    On
April 24, 1996, Meyer amended his complaint to include Michigan Mutual.3
¶5                                                                                        In July 1996, Michigan Mutual tendered a settlement to Meyer of its
liability policy limits of $1 million subject to its WIS. STAT. § 102.29(1) right of
reimbursement.   Meyer rejected the tender, and in August 1996, Michigan Mutual
filed a motion for declaratory judgment that the liability policy limits applicable in
this case were $1 million.
¶6                                                                                        In a nonfinal order entered on March 12, 1997, the circuit court ruled
that Michigan Mutual’s liability policy limits were $2 million.   Michigan Mutual
filed a petition for leave to appeal the circuit court’s nonfinal order.   The court of
appeals granted the petition, and on April 10, 1998, it issued a decision holding
that Michigan Mutual’s policy provided  $1 million in coverage.    The court of
appeals then remanded the case with directions to enter a declaratory judgment
determining that the policy provided $1 million of coverage.
¶7                                                                                        On June 29, 1998, Michigan Mutual informed Meyer that the tender
of its $1 million policy limits still remained on the table.   Meyer responded by
submitting to Michigan Mutual a proposed bill of costs and a stipulation and order
3 Michigan Mutual wrote both an auto liability policy and a worker’s compensation
policy for Milliken.
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No.   98-3432
for  approval  of  a  third-party claim  pursuant  to  WIS.  STAT.  §  102.29(1),  and
requesting  that Michigan Mutual forward a  settlement draft in the amount of
$1,001,255.87.    Michigan  Mutual  objected  to  Meyer’s  proposed  $333,333.33
attorneys’ fees, as well as the costs of collection.
¶8                                                                                       On August  21,  1998, Meyer accepted Michigan Mutual’s offer to
settle  the  case  for  the                                                              $1  million  policy  limits  subject  to  the  WIS.  STAT.
§ 102.29(1) distribution provision.   On the same day, Meyer filed a motion for a
protective order prohibiting Michigan Mutual’s discovery of documents relating to
Meyer’s attorneys’ fees.   The motion also sought approval of the settlement and
distribution of the third-party proceeds.
¶9                                                                                       On September  11,  1998, the circuit court conducted a hearing to
address  Meyer’s  motion.     At  the  hearing,  Meyer  produced  documentation
substantiating his itemization of expenses that Michigan Mutual had requested
through interrogatories and a request for production of documents.   The circuit
court granted Meyer’s motion for a protective order and his motion to approve the
distribution of the third-party settlement proceeds.   The court awarded Meyer’s
counsel  a  one-third  contingency fee  of  $333,333.33  and  costs  in  the  sum  of
$7209.09.   One-third of the balance was ordered paid to Meyer and the remainder
was allocated to Michigan Mutual to reimburse it for the worker’s compensation
benefits paid.   An order was entered to this effect on September 28, 1998.
¶10    On October 2, 1998, Meyer sent Michigan Mutual a proposed order
for judgment and judgment awarding Meyer $560,361.61, which was the total of
the attorneys’ fees, costs and one-third of the balance that the circuit court had
awarded him.   On October 5, he submitted a revised proposed order for judgment
and judgment in the amount of  $1 million.    Michigan Mutual objected to this
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No.   98-3432
revision; however, the court disagreed and entered a $1 million judgment against
Michigan Mutual on October 19, 1998.   After Michigan Mutual moved to amend
the judgment, the court denied its motion.   Michigan Mutual now appeals.
DISCUSSION
A.   Attorneys’ Fees
¶11    Michigan Mutual argues that the circuit court erroneously exercised
its discretion by awarding a one-third contingent attorneys’ fee to Meyer as part of
the reasonable cost of collection in dividing the proceeds of the settlement.   In
reviewing the circuit court’s ruling as to the value of attorney fees, we consider
whether the court properly exercised its discretion.   See Village of Shorewood v.
Steinberg, 174 Wis. 2d 191, 204, 496 N.W.2d 57 (1993).   A circuit court properly
exercises its discretion if it “employs a logical rationale based on the appropriate
legal principles and facts of record.”   Id. (quoting Petros v. City of Watertown,
152 Wis. 2d 692, 696, 449 N.W.2d 72 (Ct. App. 1989)).
¶12    The formula for dividing the proceeds of a settlement in a third-party
liability action when worker’s compensation benefits have been paid is set forth in
WIS. STAT. § 102.29(1).  That section states:
[T]he proceeds of such claim shall be divided as follows:
After deducting the reasonable cost of collection, one-third
of the remainder shall in any event be paid to the injured
employe .…   Out of the balance remaining, the employer,
insurance  carrier  or,  if  applicable,  uninsured  employers
fund shall be reimbursed for all payments made by it ….   A
settlement of any 3rd party claim shall be void unless said
settlement and the distribution of the proceeds thereof is
approved by the court before whom the action is pending
and if no action is pending, then by a court of record or by
the department.   (Emphasis added.)
The  statute                                                                           “requires  the  court  approving  the  settlement  to  determine  the
attorneys’ fees to be allowed.”   Diedrick v. Hartford Accident & Indem. Co., 62
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No.   98-3432
Wis.  2d  759,  763,  216 N.W.2d  193  (1974).    While  §  102.29(1) refers to the
“reasonable cost of collection,” it does not mandate what that cost should be.
¶13    Michigan  Mutual  argues  that  the  circuit  court  erred  by  only
considering  the  existence  of  Meyer’s  contingent  fee  contract.     In  support,
Michigan Mutual relies on Village of Shorewood.   In that case, the supreme court
reviewed an award of attorney fees under an eminent domain statute, WIS. STAT.
§ 32.28, authorizing a court to award “reasonable” and “necessary” attorney fees
under certain conditions.   The court held that for eminent domain cases, courts
should use “a contingency fee agreement as a guide only and must consider all the
circumstances of the case to determine whether the contingency fee amount is a
just and reasonable figure.”   Village of Shorewood, 174 Wis. 2d at 204.   The court
then  looked  to  SCR  20:1.5(a)  as  a  guide  for  assessing  the  reasonableness  of
attorney fees.4   See Village of Shorewood, 174 Wis. 2d at 204; see also Standard
Theatres, Inc. v. DOT, 118 Wis. 2d 730, 749 n.9, 349 N.W.2d 661 (1984).
4 Supreme Court Rule 20:1.5(a) (1999) provides:
A lawyer’s fee shall be reasonable.   The factors to be considered
in determining the reasonableness of a fee include the following:
(1) the time and labor required, the novelty and difficulty of
the questions involved, and the skill requisite to perform the
legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance
of the particular employment will preclude other employment by
the lawyer;
(3) the fee customarily charged in the locality for similar legal
services;
(4) the amount involved and the results obtained;
(5)  the  time  limitations  imposed  by  the  client  or  by  the
circumstances;
(6) the nature and length of the professional relationship with
the client;
(continued)
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No.   98-3432
¶14    The Village of Shorewood court reviewed six of the SCR 20:1.5(a)
factors in concluding that the attorney’s fees were reasonable.   While the court
pointed out that the attorney’s contingent fee was significantly higher than the
opposing party’s attorney’s fee—$108,867 compared with $13,757—it concluded
that the circuit court’s determination was properly grounded on the SCR 20:1.5(a)
factors.   The court added that “[i]f we were to review this case de novo, we might
make  a  different  determination,  but  because  the  circuit  court  is  in             ‘an
advantageous position to make a determination as to the reasonableness of a firm’s
rates,’ our review is limited to determining whether the circuit court properly
exercised its discretion.”    Village of Shorewood,  174 Wis.  2d at  206  (quoting
Standard Theatres, 118 Wis. 2d at 747) .
¶15    Although Meyer contends that Village of Shorewood is “not really
on point,” we find the opinion instructive.   WISCONSIN STAT. § 102.29 calls for a
“reasonable cost of collection,” and WIS. STAT. § 32.28 authorizes “reasonable”
and  “necessary”  attorney  fees.    In  both  instances,  the  SCR  20:1.5(a)  factors
provide an appropriate assessment of reasonable attorney fees.
¶16    Michigan Mutual claims that the court ignored all of the factors
except whether the attorneys’ fees were fixed or contingent.   We disagree.   While
the court’s decision was based in large part on the existence of a contingent fee
agreement, we observe that the court also considered the substantial hours and
effort expended by Meyer’s attorneys in this case, the amount of money involved
(7) the experience, reputation, and ability of the lawyer or
lawyers performing the services; and
(8) whether the fee is fixed or contingent.
7




No.   98-3432
and the attendant risks.    We therefore conclude that the circuit court did not
erroneously exercise its discretion.
¶17    At the September  11,  1998 motion hearing, the circuit court first
considered Meyer’s contingent fee contract.
There was a contingent fee agreement which is standard
and has been for probably  100 years.    One quarter, one
third  after  commencement  of  suit.    That  is  a  contract
between the client and the lawyer.
The court then explained its familiarity with worker’s compensation cases and the
role of the contingent fee agreement.
And I spent a number of years in the practice of law
involving worker’s compensation, personal injury, and am
very  familiar  with  how  it  works  and  how                                        [§] 102.29
distributions  are  paid  and  how  reasonable  costs  of
collection are determined.
….
And even if [Michigan Mutual] were successful in [its]
argument  I’m  afraid  that  it  would  have  a  grossly
dampening  effect  upon  all  lawyers  and  upon  clients  in
worker’s compensation cases that they would be impaired
in getting experienced, capable, competent legal counsel….
… Ordinarily in a comp case there’s a limited amount
that attorneys charge in that case, and oftentimes their time
is  at  a  low  hourly  rate  if  it’s  to  be  figured  as  to  the
recovery.
¶18    After addressing the contingent fee arrangement pursuant to SCR
20:1.5(a)(8), the court pointed out the significant amount of time and effort spent
by Meyer’s counsel.
[Counsel  for  Meyer]  has  spent,  I’m  sure,  hundreds  and
hundreds of hours in litigation such as this and in worker’s
compensation.    The  value  of  those  services  cannot  be
measured in dollars per hour.
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No.   98-3432
These  comments  reflect  the  court’s  consideration  of  the  first  SCR         20:1.5(a)
factor—the time and labor required to represent the client.
¶19    The court then addressed the amount of money involved in this case
pursuant to SCR 20:1.5(a)(4).
[H]ere we’re talking about very, very substantial amounts
of money that can go to the benefit of this client.   And it is
not just the contingent  fee  that must be  considered  any
more than should be just the hours.
¶20    The court additionally commented on the risks attendant to worker’s
compensation cases.   See Village of Shorewood, 174 Wis. 2d at 206.
I am very well aware of how plaintiff’s counsel can
come into court after spending hundreds and hundreds of
hours, if not thousands in some cases, to be stuck with the
costs and no compensation.   And one third contingent fee is
not  designed  to  in  each  and  every  case  specifically
compensate the lawyer for the work that had been done on
an hourly basis orit’s a gamble.   And sometimes I think
lawyers are foolish.   And I was one of them at times with
taking cases, because it would have been better spending
the money in Las Vegas.   The odds would have been better
maybe.
As a final point, the court recognized the case as being “obviously a very, very
serious injury case.”
¶21    In the end, the court found the one-third contingent fee to be a
reasonable cost of collection under WIS. STAT. § 102.29.
And when you find out the [§] 102.29 phraseology of
reasonable costs of collection is not meant nor is it to be
interpreted as that ... attorney[s] must prove on an hourly
basis or a work time sheet that they had put in that time and
that effort to equal that amount that had been gained under
the contingent fee contract.   Reasonable costs of collection
for attorney fees includes whether the arrangement that had
been  made  between  the  client  and  the  lawyer  was
reasonable.
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No.   98-3432
And I can take judicial notice that it is reasonable to
have a contingent fee agreement ...
¶22    As was the case in Village of Shorewood, each and every SCR
20:1.5(a)  factor  need  not  be  examined,  but  the  court  shall  review                 “all  the
circumstances of the case to determine whether the contingency fee amount is a
just and reasonable figure.”   Village of Shorewood, 174 Wis. 2d at 204.   Here, the
court considered several factors, including the existence of the contingent fee
contract, the time spent by the attorneys, the amount of money at stake and the
risks inherent to the case.    We are satisfied that the court’s rationale was not
erroneous.
¶23    Michigan   Mutual  argues  that  the   contingent  fee   award   of
$333,333.33 is unreasonable because this case was “a mine run accident case with
substantial damages.”   Apart from Meyer’s separate worker’s compensation claim,
his  WIS.  STAT.  §  102.29(1)  third-party  liability  action  involved  the  filing  of
numerous  summonses  and  complaints,  limited  discovery  and  engaging  in
settlement negotiations.    In addition, the record shows that Meyer’s attorneys
handled three separate appeals involving third-party liability—the first dealt with
Michigan  Mutual’s appeal of  the  circuit court’s nonfinal order  concerning  its
policy  limits;  the  second  involved  the  dismissal  of  another  insurance  carrier,
United  States  Fire  Insurance  Co.;  and  the  third  addressed  Millers  Classified
Insurance Co.’s duty to indemnify.    While we recognize that one-third of  $1
million is a particularly large sum to compensate Meyer’s lawyers for their efforts
on behalf of his claim, our judgment is tempered by the circuit court’s better
position  to  determine  the  reasonableness  of  attorneys’  fees.    See  Village  of
Shorewood, 174 Wis. 2d at 206.   We are satisfied that the circuit court examined
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No.   98-3432
the circumstances and properly exercised its discretion in awarding attorneys’ fees
to Meyer’s counsel.5
B.   $1 Million Judgment
¶24    Michigan Mutual next argues that the circuit court erred as a matter
of law in ordering the entry of a $1 million judgment to Meyer where WIS. STAT.
§ 102.29(1) expressly calls for the distribution of funds to the employer or the
employer’s insurance carrier.   Meyer responds that his right to recover $1 million
in insurance proceeds is unaffected by the § 102.29(1) formula for distribution.
We conclude that the judgment entered in favor of Meyer should include only the
amount he is entitled to under § 102.29(1).
¶25    In an August 21, 1998 letter to Michigan Mutual, Meyer “accepted
Michigan Mutual’s offer to settle this case for $1,000,000 policy limits subject to
the § 102.29 distribution provisions.”   On September 28, 1998, the court issued an
order approving the parties’ settlement.  The order provided the following:
A. $ 1,000,000.00                                                                                                  The total amount of the settlement;
B.                                                                                                  $ 333,333.33   To plaintiff’s attorney as attorney fees;
                                                                                                    7,209.09       To  plaintiff’s  attorney  as  costs  of
                                                                                                                   collection;
                                                                                                    $ 340,542.42   Balance;
C.                                                                                                  $ 219,819.19   One-third of balance to employee;
5 In a related argument, Michigan Mutual contends that because the circuit court only
considered the contingent fee contract, it erroneously granted Meyer’s motion for a protective
order from Michigan Mutual’s request for discovery regarding Meyer’s attorneys’ fees.   We
reject this argument for the same reason that we reject Michigan Mutual’s contention that the
circuit  court  erroneously  awarded  a  one-third  contingent  attorney  fee  under  WIS.  STAT.
§ 102.29(1).    The court examined several SCR  20:1.5(a) factors as directed by Village of
Shorewood v. Steinberg, 174 Wis. 2d 191, 496 N.W.2d 57 (1993).
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No.   98-3432
D.                                                                                     $ 439,638.39           To worker’s compensation insurance
carrier, Michigan Mutual Insurance
Company,  as  reimbursement  for
benefits previously paid.
¶26    On  October  2,  1998,  Meyer  sent  Michigan  Mutual  a  proposed
judgment awarding Meyer $560,361.61, which was the total of the attorneys’ fees,
costs and one-third of the balance that the circuit court had awarded him.   On
October                                                                                5,                     1998,  however,  Meyer  submitted  a  revised  proposed  judgment
awarding him $1 million.   Michigan Mutual objected to this revised amount.   At a
November                                                                               30,                    1998  motion  to  amend  judgment  hearing,  the  circuit  court
determined that  “Scott Meyer was entitled to one million dollars.   He was not
entitled to 200-some thousand dollars.”
¶27    Both  parties  agree  that  the  distribution  of  the  Michigan  Mutual
policy proceeds is governed by WIS. STAT. §  102.29(1).                                “After deducting the
reasonable cost of collection, one-third of the remainder shall in any event be paid
to the injured employe .…   Out of the balance remaining, the employer, insurance
carrier or, if applicable, uninsured employers fund shall be reimbursed for all
payments made by it ....”   Id.   As the court’s September 28, 1998 order reflected,
the cost of collection is first deducted from the proceeds.   The cost of collection
was $340,542.42, which comprised Meyer’s attorneys’ one-third share plus their
costs.   Out of the remaining $659,457.58, one-third is to be paid to the injured
employee,  Meyer.    That  amount  totals  $219,819.19.    The  remaining  balance,
$439,638.39, goes to Michigan Mutual, the employer’s insurer, to reimburse it for
its payments to Meyer.   As Meyer has conceded, “the worker’s comp carrier has
paid far in excess of $440,000.”
¶28    This distribution is prescribed by WIS. STAT.  §  102.29(1) and is
consistent with the court’s original September 28, 1998 order.   The amount of the
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No.   98-3432
judgment entered against Michigan Mutual should also be the amount provided for
under § 102.29(1).   A $1 million judgment award in this case is improper because
Michigan Mutual only owes Meyer the cost of collection and one-third of the
remainder, totaling $560,361.61.
¶29    In sum, we affirm the circuit court’s assessment of attorneys’ fees
but reverse the judgment and remand to the circuit court with directions to enter
judgment against Michigan Mutual for $560,361.61 plus interest.
¶30    Costs are denied to all parties.
By the Court.—Judgment affirmed in part; reversed in part and cause
remanded with directions.
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