St. John v. Gering Public Schools , 923 N.W.2d 68 ( 2019 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
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Nebraska Supreme Court A dvance Sheets
302 Nebraska R eports
ST. JOHN v. GERING PUBLIC SCHOOLS
Cite as 302 Neb. 269
Edward St. John, appellee, James L. Zimmerman,
appellant, and Brenda L. Bartels and
Monte L. Neilan, appellees, v. Gering
Public Schools and NASB Workers
Compensation Pool, its workers’
compensation carrier , appellees.
___ N.W.2d ___
Filed February 15, 2019. No. S-17-898.
1. Workers’ Compensation: Appeal and Error. Pursuant to Neb. Rev.
Stat. § 48-185 (Cum. Supp. 2018), an appellate court may modify,
reverse, or set aside a Workers’ Compensation Court decision only when
(1) the compensation court acted without or in excess of its powers; (2)
the judgment, order, or award was procured by fraud; (3) there is not
sufficient competent evidence in the record to warrant the making of the
order, judgment, or award; or (4) the findings of fact by the compensa-
tion court do not support the order or award.
2. ____: ____. Determinations by a trial judge of the Workers’
Compensation Court will not be disturbed on appeal unless they are
contrary to law or depend on findings of fact which are clearly wrong in
light of the evidence.
3. Contracts: Attorney Fees. While a lawyer with a valid fee agreement is
entitled to recover what a fee agreement allows to the extent that amount
is reasonable, a lawyer is not entitled to recover more than a fee agree-
ment allows.
4. Contracts: Intent. A court should avoid interpreting contract provisions
in a manner that leads to unreasonable or absurd results that are obvi-
ously inconsistent with the parties’ intent.
Petition for further review from the Court of Appeals,
Moore, Chief Judge, and Pirtle and A rterburn, Judges, on
appeal thereto from the Workers’ Compensation Court: John R.
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ST. JOHN v. GERING PUBLIC SCHOOLS
Cite as 302 Neb. 269
Hoffert, Judge. Judgment of Court of Appeals reversed, and
cause remanded with directions.
James L. Zimmerman, of Zimmerman Law Firm, P.C.,
L.L.O., pro se.
Monte L. Neilan, pro se.
Brenda L. Bartels, of Hanes & Bartels, L.L.C., pro se.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
Papik, J.
During the course of his workers’ compensation action
against Gering Public Schools, Edward St. John switched
lawyers. St. John eventually settled his claim, but a dispute
remained as to how much St. John owed his lawyers. The
Workers’ Compensation Court held a hearing regarding the
attorney fee issue. After the hearing, the compensation court
entered an order directing that the lawyers that St. John dis-
charged, Brenda L. Bartels and Monte L. Neilan, receive
$82,500 and that the lawyer who represented St. John through
the settlement, James L. Zimmerman, receive $82,500. The
compensation court evaluated the attorneys’ representation of
St. John and found that one set of attorneys did not contribute
more to the end result than the other. The compensation court
did not analyze the attorneys’ entitlement to fees under their
written fee agreements with St. John. Zimmerman appealed,
and the Nebraska Court of Appeals affirmed.
We granted Zimmerman’s petition for further review. We
find that because Bartels and Neilan were entitled to less than
the amount awarded by the Workers’ Compensation Court
under the terms of their fee agreement with St. John, the
order splitting the fee evenly was erroneous. Accordingly, we
reverse, and remand with directions.
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ST. JOHN v. GERING PUBLIC SCHOOLS
Cite as 302 Neb. 269
I. BACKGROUND
1. St. John’s Workers’
Compensation Action
After suffering an injury in the course of his employment,
St. John retained Zimmerman in March 2013 by signing a con-
tingent fee agreement. Under the terms of that agreement, St.
John agreed to pay to Zimmerman one-third of any amounts
collected after suit.
St. John later moved to Colorado. Apparently desiring a
Colorado lawyer, St. John discharged Zimmerman and retained
Bartels, a Nebraska-licensed attorney based in Colorado.
Bartels, in turn, hired Neilan to assist her with St. John’s claim.
In January 2014, St. John executed a single contingent fee
agreement with the respective law firms of Bartels and Neilan.
Like his agreement with Zimmerman, St. John agreed to pay
Bartels and Neilan one-third of any amounts recovered from
Gering Public Schools. Paragraph 8 of the agreement, however,
also included the following language:
Should CLIENT choose to discharge ATTORNEYS
prior to final settlement or judgment, CLIENT agrees to
pay ATTORNEYS a fee equal to [one-third] of the “gross
amount recovered”, OR on an hourly basis of $175.00 per
hour for his/her time and, in addition, $75 per hour for
paralegal time from the date of this Agreement to the date
of discharge, or the above percentage of ATTORNEYS’
fee from any settlement offer made prior to discharge,
whichever is greater.
(Emphasis in original.)
Bartels and Neilan thereafter filed a workers’ compensa-
tion claim against Gering Public Schools on St. John’s behalf.
They continued to represent him until later in 2014, when St.
John became dissatisfied with their representation and dis-
charged them and again retained Zimmerman. At that time,
St. John re-signed his original contingent fee agreement with
Zimmerman. In December 2014, Zimmerman entered his
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ST. JOHN v. GERING PUBLIC SCHOOLS
Cite as 302 Neb. 269
appearance and Bartels and Neilan filed a notice of attorney’s
lien in the workers’ compensation case.
Over 2 years later, the parties to the workers’ compensation
claim, with St. John now represented by Zimmerman, filed an
application for approval of a final lump-sum settlement. The
parties asked that the compensation court approve a settlement
whereby St. John’s claim would be settled for $500,000, with
$335,000 being paid to St. John and the remaining $165,000
being held in trust for subsequent distribution to his attor-
neys. The application provided that Bartels and Neilan and
Zimmerman all agreed that the $165,000 satisfied any attorney
liens in the case.
In an order, the compensation court approved the lump-sum
settlement. The court noted the existence of the dispute involv-
ing claimed attorney liens and ordered that any of the attor-
neys claiming entitlement to attorney fees could petition the
court for a hearing to address distribution of the funds placed
in trust. Zimmerman filed a motion, requesting that the court
determine the amount necessary to satisfy the attorney lien of
Bartels and Neilan.
2. Workers’ Compensation Court’s
R esolution of Fee Dispute
The compensation court convened a hearing on the dispute
regarding the fees due to attorneys. The court heard testimony
and received various exhibits. St. John and his ex-wife gener-
ally testified that they were dissatisfied with the services of
Bartels and Neilan. The exhibits included the fee agreement
between St. John and Zimmerman and the fee agreement
between St. John and Bartels and Neilan, along with documen-
tary evidence of legal services provided.
The compensation court entered an order dividing the
$165,000 equally between Zimmerman, on the one hand,
and Bartels and Neilan on the other. The compensation court
explained that the factors for determining the reasonableness of
attorney fees set forth in Neb. Ct. R. of Prof. Cond. § 3-501.5
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guided its analysis. In applying those factors, the compensa-
tion court found that both Bartels and Neilan and Zimmerman
“played a role of importance” in representing St. John and
that it could not conclude that either Bartels and Neilan or
Zimmerman contributed more than the other.
3. Court of A ppeals
Zimmerman appealed. In his appeal, Zimmerman argued
that the compensation court erred by admitting an affidavit of
an expert witness offered by Bartels and Neilan and by order-
ing that Bartels and Neilan and Zimmerman each receive the
same fee. Zimmerman argued that the compensation court’s
order splitting the fees evenly was erroneous, because the
court should have relied on the provision in the written fee
agreement with Bartels and Neilan regarding payment due
when the attorneys are discharged prior to final settlement
or judgment.
The Court of Appeals affirmed. In its memorandum opinion,
the Court of Appeals did not analyze the provision in the writ-
ten fee agreement between St. John and Bartels and Neilan
regarding payment due upon an early discharge. It did state
that Bartels and Neilan’s “contingent fee contract . . . provided
a basis for determining Bartels and Neilan’s fee in the event of
their discharge prior to conclusion of the case,” that “[t]here
was sufficient evidence in the record for the compensation
court to make a determination as to the reasonableness of that
fee,” and that the compensation court’s findings as to what was
a reasonable fee were not clearly erroneous. St. John v. Gering
Public Schools, No. A-17-898, 2018 WL 1831068 at *7 (Neb.
App. Apr. 17, 2018) (selected for posting to court website). We
granted Zimmerman’s petition for further review.
II. ASSIGNMENTS OF ERROR
Zimmerman assigns error to the Court of Appeals’ deter-
mination that Bartels and Neilan and Zimmerman should
each receive $82,500 for their representation of St. John.
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ST. JOHN v. GERING PUBLIC SCHOOLS
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Zimmerman also claims that the Court of Appeals erred when
it rejected his assignment of error regarding the admission of
the expert witness affidavit. We find no error in the Court of
Appeals’ admission of the affidavit and see no need to further
comment on the issue. Our analysis is thus limited to the com-
pensation court’s ultimate disposition of the fee dispute.
III. STANDARD OF REVIEW
[1,2] Pursuant to Neb. Rev. Stat. § 48-185 (Cum. Supp.
2018), an appellate court may modify, reverse, or set aside
a Workers’ Compensation Court decision only when (1) the
compensation court acted without or in excess of its powers;
(2) the judgment, order, or award was procured by fraud; (3)
there is not sufficient competent evidence in the record to
warrant the making of the order, judgment, or award; or (4)
the findings of fact by the compensation court do not support
the order or award. Gimple v. Student Transp. of America,
300 Neb. 708, 915 N.W.2d 606 (2018). Determinations by a
trial judge of the Workers’ Compensation Court will not be
disturbed on appeal unless they are contrary to law or depend
on findings of fact which are clearly wrong in light of the
evidence. Id.
IV. ANALYSIS
1. Jurisdiction of Workers’ Compensation
Court to Decide Fee Dispute
We begin with the question of whether the Workers’
Compensation Court had the authority to resolve the fee dis-
pute. As we often say, the Workers’ Compensation Court is
“a tribunal of limited and special jurisdiction and has only
such authority as has been conferred on it by statute.” In re
Estate of Evertson, 295 Neb. 301, 311, 889 N.W.2d 73, 81
(2016). Given the limits on the compensation court’s authority,
one might reasonably question whether it has the authority to
resolve competing attorneys’ claims to fees after the approval
of a lump-sum settlement, as the compensation court did in
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this case. In fact, at one point, the Court of Appeals concluded
that the compensation court lacked jurisdiction to resolve such
a dispute. See Wells v. Goodyear Tire & Rubber Co., 14 Neb.
App. 384, 707 N.W.2d 438 (2005), disapproved in part, Foster
v. BryanLGH Med. Ctr. East, 272 Neb. 918, 725 N.W.2d
839 (2007).
We settled any question as to whether the Workers’
Compensation Court has jurisdiction to resolve such a dispute
in Foster, supra. In Foster, much like this case, a workers’
compensation plaintiff discharged her attorney in the middle of
the case. After the plaintiff, represented by a new attorney, was
awarded benefits from her employer, the discharged attorney
filed a motion to establish the amount of his attorney’s lien.
The Court of Appeals, citing Wells, supra, held that the com-
pensation court lacked jurisdiction to resolve the discharged
attorney’s motion.
On further review, we reversed. We explained that Neb. Rev.
Stat. § 48-108 (Reissue 2010) provides the compensation court
with authority to determine “fees payable to an attorney for the
services rendered while representing the claimant before the
Workers’ Compensation Court” and that the authority extended
to fees claimed by attorneys who are discharged prior to the
conclusion of the case. Foster, 272 Neb. at 922, 725 N.W.2d
at 844. We observed that the compensation court is “the most
sensible venue for such determinations,” given its familiarity
with the efforts of each attorney involved in the dispute. Id.
at 923, 725 N.W.2d at 844. We also recognized that under the
circumstances in Foster, “as in most instances, the fee dispute
with former counsel is inextricably related to the issue of
fees for the claimant’s current counsel.” 272 Neb. at 922, 725
N.W.2d at 844.
Under Foster, the Workers’ Compensation Court had author-
ity to resolve the competing attorney liens asserted in this
case. See, also, Stueve v. Valmont Indus., 277 Neb. 292, 297,
761 N.W.2d 544, 549 (2009) (“[i]n Foster, we stated that
the Workers’ Compensation Court was an appropriate forum
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for determining fees payable to a claimant’s current or prior
attorney for services that the attorney rendered while repre-
senting the claimant before the court”). We thus proceed to
consider Zimmerman’s claim that the compensation court erred
in doing so.
2. Merits of Fee Dispute
Zimmerman’s primary contention on appeal is that the com-
pensation court erred by focusing solely on the respective
contributions of the attorneys under the factors set out in
the Nebraska Rules of Professional Conduct for determining
whether a fee is unreasonable. Zimmerman contends that to
determine the attorneys’ entitlement to fees, the compensation
court was required to begin with the terms of the respective fee
agreements with St. John. Specifically, Zimmerman urges that
Bartels and Neilan’s recovery must be limited to that allowed
by the terms of the provision in their fee agreement addressing
the amount they were to receive if St. John discharged them
before the case was over. In order to address this argument,
we begin by setting forth the general principles that govern an
action by an attorney to recover a fee.
(a) General Principles Regarding
Actions for Attorney Fees
As we have previously observed, attorney fee agreements
are different from ordinary commercial contracts. See, e.g.,
Hauptman, O’Brien v. Turco, 273 Neb. 924, 735 N.W.2d 368
(2007). The difference arises from the fact that an attorney
may not recover for services rendered if those services are
rendered in contradiction to the requirements of professional
responsibility. Id. Because of that principle and because pro-
fessional responsibility rules prohibit a lawyer from charging
or collecting an unreasonable fee, in an action to recover a
fee, an attorney can recover only a reasonable fee, as deter-
mined by “‘the extent and value of the lawyer’s services.’”
Id. at 931, 735 N.W.2d at 374. The burden is on the lawyer to
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introduce evidence as to the extent and value of the services
provided. Id. We have said that the eight factors listed in
§ 3-501.5 of the professional conduct rules are to be consid-
ered as guides in determining the reasonableness of a fee. See
Stueve, supra.
But while the reasonable value of an attorney’s services is
relevant in an action to recover attorney fees, it is not the only
relevant factor. In an action to recover a fee, a lawyer has the
burden of proving not only the extent and value of the services
provided, but also “‘the existence and terms of any fee con-
tract.’” Hauptman, O’Brien, 273 Neb. at 931, 735 N.W.2d at
374. This is because when an attorney and a client enter into a
valid fee agreement, the attorney is not automatically entitled
to the reasonable value of the services provided. The attorney’s
recovery is limited by the terms of the fee agreement.
[3] As the U.S. Court of Appeals for the Seventh Circuit has
helpfully explained the issue, a lawyer working under a valid
fee agreement does not have a quantum meruit cause of action
for whatever the reasonable value of the services provided hap-
pened to be; rather, the quantum meruit principle functions as a
“ceiling on contractual recovery.” Maksym v. Loesch, 937 F.2d
1237, 1247 (7th Cir. 1991). See, also, McNamee, Lochner, Titus
& Williams v. Higher Educ., 50 F.3d 120 (2d Cir. 1995) (hold-
ing that attorney was not entitled to quantum meruit recovery
when contract addressed compensation); Hamilton v. Ford
Motor Co., 636 F.2d 745, 748 (D.C. Cir. 1980) (“[i]t is ele-
mentary that an attorney may not seek compensation from the
client in addition to that provided in the contract between the
attorney and the client”). Put another way, while a lawyer with
a valid fee agreement is entitled to recover from a client what
a fee agreement allows to the extent that amount is reasonable,
a lawyer is not entitled to recover from a client more than a fee
agreement allows. Having set forth the principles governing an
attorney’s claim to an unpaid fee, we proceed to consider how
those principles should be applied in this case.
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ST. JOHN v. GERING PUBLIC SCHOOLS
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(b) Application of Principles
in This Case
As explained above, where an attorney and client have a
valid fee agreement, the terms of that agreement are essential
to determining the amount to which the attorney is entitled. In
this case, however, even though the fee agreements with both
sets of lawyers were received at the hearing, the compensa-
tion court did not analyze them. Rather, it focused solely on
the respective value of the services provided by the lawyers.
Bartels and Neilan contend the compensation court was cor-
rect to do so because of an agreement between the parties and
because this approach was consistent with our precedent. As
explained below, we disagree with both arguments.
First, Bartels and Neilan argue that the parties effectively
stipulated to trying the fee dispute on the basis of the value
of the attorney’s respective contributions alone in the applica-
tion for approval of the lump-sum settlement. That applica-
tion stated that “[i]t is also agreed to by all necessary parties
and attorneys that the amount of $165,000.00, however later
distributed, satisfies any attorney liens owed by [St. John].”
We do not believe that this language demonstrates an agree-
ment to withdraw the fee agreements from the compensation
court’s consideration. By its terms, the parties agreed only
that $165,000, however distributed, would satisfy St. John’s
obligations to his attorneys. We understand this language to
merely set an upper limit of the amount St. John was required
to pay the attorneys.
Neither was the compensation court’s decision to limit its
consideration to the reasonable value of the services pro-
vided justified by Baker v. Zikas, 176 Neb. 290, 125 N.W.2d
715 (1964), and Stueve v. Valmont Indus., 277 Neb. 292, 761
N.W.2d 544 (2009), as Bartels and Neilan contend. In those
cases, attorneys who were working under a contingent fee
agreement, which agreement did not address what the attor-
neys were to receive if discharged prior to recovery, were dis-
charged prior to recovery. In those circumstances, we allowed
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the attorney to recover based on the reasonable value of the
serv­ices provided, on the grounds that the original contingent
fee contract was no longer in effect following the client’s ter-
mination of the lawyer’s services.
Unlike the fee agreements in Baker and Stueve, Bartels and
Neilan’s fee agreement explicitly addressed what they were
entitled to be paid in the event of an early discharge. In this
respect, this case is more like another case decided by the
Court of Appeals, Byrne v. Hauptman, O’Brien, 9 Neb. Ct. App.
77, 608 N.W.2d 208 (2000). In that case, like this one, an attor-
ney’s contingent fee agreement explicitly provided a method
for calculating the fee owed in the event the attorney was
discharged before the end of the case. The Court of Appeals
distinguished the fee agreement from the one at issue in Baker
and held that the attorney could recover the amount allowed by
the contract, subject to the attorney’s burden to show that the
amount was reasonable.
We believe the Court of Appeals’ opinion in Byrne cor-
rectly applied the principles governing actions for recovery
of attorney fees in circumstances such as this. Accordingly,
to determine the amount to which the attorneys are entitled,
we must first determine the amount the attorneys are allowed
under their fee agreements and then determine if that amount is
reasonable. We proceed to that analysis below, beginning with
Bartels and Neilan.
(c) Bartels and Neilan’s Recovery
As mentioned above, paragraph 8 of Bartels and Neilan’s
fee agreement governs the amount they are entitled to receive
from St. John because they were discharged prior to final
settlement or judgment. That provision directs that Bartels
and Neilan receive the highest of three potential amounts: (1)
“[one-third] of the ‘gross amount recovered,’” (2) a recovery
based on the hours they expended at specified rates, or (3) a
percentage of any settlement offer made prior to discharge.
Bartels and Neilan concede that there was no settlement
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offer made prior to discharge, and thus that provision is
inapplicable.
Bartels and Neilan contend that under the terms of the
fee agreement, they are entitled to receive one-third of the
$500,000 lump-sum settlement, subject to some minor adjust-
ments for costs. Although they do not specifically tie this argu-
ment to the language of paragraph 8 of their fee agreement, we
presume that they are contending that they are entitled to this
amount because $500,000 is the “gross amount recovered.”
This argument, however, rests on the premise that for purposes
of paragraph 8, “gross amount recovered” refers to the amount
ultimately recovered at the conclusion of the case. For reasons
explained below, we reject that premise.
Bartels and Neilan’s fee agreement defines “gross amount
recovered” to include “the amount recovered before any sub-
traction of expenses and disbursements [and] specially awarded
attorneys’ fees and costs awarded to CLIENT.” (Emphasis
in original.) But it does not specifically indicate whether the
“gross amount recovered” referred to in paragraph 8 is the
amount eventually recovered at the end of the case or the
amount recovered as of the attorney’s discharge. The fact that
“gross amount recovered” appears in a provision concerning
early discharge, however, suggests that in that context, it refers
to the amount recovered as of the discharge.
[4] Furthermore, it strikes us as unreasonable and highly
unlikely that a client would agree to pay a lawyer one-third of
his or her recovery if the lawyer represented the client through
the entirety of the case but also agree to pay a lawyer the same
percentage of the total amount recovered if that lawyer is dis-
charged and another lawyer ultimately secures the recovery
for the client. On the other hand, it would be quite reasonable
for a contractual provision regarding payment to a discharged
attorney to allow the attorney to recover a percentage of any
amounts already recovered on behalf of the client through
partial settlement as of the date of discharge. A court should
avoid interpreting contract provisions in a manner that leads to
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unreasonable or absurd results that are obviously inconsistent
with the parties’ intent. Timberlake v. Douglas County, 291
Neb. 387, 865 N.W.2d 788 (2015). With that principle in mind,
we find that, the “gross amount recovered” in paragraph 8 of
Bartels and Neilan’s fee agreement refers to the amount recov-
ered as of the attorney’s discharge.
Having interpreted paragraph 8 of the Bartels and Neilan
contingent fee agreement, we find that Bartels and Neilan are
entitled to a fee based on the hourly calculation set forth in
the paragraph. Bartels and Neilan make no argument that they
are entitled to a fee based on amounts recovered prior to their
discharge; their arguments are exclusively focused on a right
to recovery arising out of the $500,000 lump-sum settlement.
That settlement, however, was agreed to well after their dis-
charge. And, as noted above, they concede there was no settle-
ment offer prior to discharge.
Evidence in the record does show that Bartels documented
79.9 hours of work, Neilan documented 81 hours of work, and
paralegals working under their direction recorded 25.6 hours of
work. Applying those hours to the rates set forth in the agree-
ment, we find that Bartels and Neilan were entitled to receive
$30,077.50 under the terms of their agreement with St. John.
Given the hourly rates and their representation of St. John in
the context of this case, we also find this amount to be a rea-
sonable fee. In addition, Bartels and Neilan claim a right to be
reimbursed for $2,500 paid in costs on behalf of St. John, and
there appears to be no dispute on this issue. Accordingly, we
find that Bartels and Neilan were entitled to receive $32,577.50
to satisfy their lien.
(d) Zimmerman’s Recovery
This leaves the calculation of Zimmerman’s fee. We apply
the same analysis to his claim, and so we must begin with his
contingent fee agreement. Zimmerman’s contingent fee agree-
ment entitled him to one-third of any lump-sum settlement. In
this case, that amounts to $166,666.67. As mentioned above,
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however, the attorneys agreed that St. John would have to pay
no more than $165,000 to satisfy the attorneys’ liens. Given
that agreement and our finding that Bartels and Neilan are
entitled to receive $32,577.50, the most Zimmerman is entitled
to receive is $132,422.50.
In addition, we find this figure to be a reasonable fee. As the
compensation court observed, “the ultimate settlement figure
secured by . . . Zimmerman for [St. John] did exceed the settle-
ment value provided by attorney Neilan to [St. John] several
years prior. In so doing, attorney Zimmerman obviously per-
suaded the defendants that a significant permanent disability
had befallen . . . St. John.” Under these circumstances, we find
$132,422.50 to be a reasonable fee.
V. CONCLUSION
As explained above, we find that Bartels and Neilan were
entitled to receive $32,577.50 and Zimmerman was entitled
to receive $132,422.50. Accordingly, we reverse the judgment
of the Court of Appeals and remand the cause with directions
to reverse the order of the Workers’ Compensation Court and
remand the cause to that court with directions to enter judg-
ment in conformity with this opinion.
R eversed and remanded with directions.