In re Attorney's Fees to McLaren v. Paradise Inn Hawaii, Inc.Â

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Electronically Filed
Supreme Court
SCWC-11-0000460
21-FEB-2014
08:34 AM
IN THE SUPREME COURT OF THE STATE OF HAWAI#I
---o0o---
In the Matter of Attorney’s Fees Pertaining to
JOHN C. MCLAREN, Petitioner/Appellant,
in the case of ETSUKO FURUKAWA, Claimant,
vs.
PARADISE INN HAWAI#I LLC, Employer,
and
FIRST SECURITY INSURANCE COMPANY OF HAWAI#I, INC.,
Insurance Carrier.
SCWC-11-0000460
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-11-0000460; CASE NO. AB 2010-341 (2-07-45923))
FEBRUARY 21, 2014
RECKTENWALD, C.J., NAKAYAMA, ACOBA, McKENNA, AND POLLACK, JJ.
OPINION OF THE COURT BY McKENNA, J.
I. Introduction
This case concerns John C. McLaren’s attorney’s fee
request to the Director of the Department of Labor and Industrial
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Relations (“Director”) through the Disability Compensation
Division of the Department of Labor and Industrial Relations
(“DCD”), for his representation of a claimant in a workers’
compensation case. John C. McLaren (“McLaren”) presents the
following questions on certiorari:
A. Did the ICA gravely err in concluding that the September
7, 2010 appeal to the Labor and Industrial Relations Appeals
Board was untimely made?
B. Did the ICA gravely err in concluding that I have no
fundamental due process rights of notice and an opportunity
to be heard at the Disability Compensation Division (DCD) to
review and present evidence against its fee reduction?
C. Did the ICA gravely err in concluding that my three
requests to DCD for reconsideration were insufficiently
supported?
D. Did ICA gravely err in concluding that DCD does not have
to convene a contested case type hearing pursuant to my
three requests to review and explain its drastic reduction
in my attorney’s fees and costs?
As to questions (A) and (C), we hold that the ICA erred
in concluding that McLaren’s September 7, 2010 appeal to the
Labor and Industrial Relations Appeals Board (“LIRAB”) was
untimely made and that his requests to DCD for reconsideration
were insufficiently supported. As to questions (B) and (D), we
conclude that (1) McLaren did not have a right to have a
contested case hearing before the DCD, but (2) the DCD was
required to provide its reasons for reducing McLaren’s attorney’s
fees and costs request.
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II. Background
A. Facts
McLaren represented a claimant in a workers’
compensation case before the DCD that resulted in a stipulation
and settlement agreement order awarding the claimant $60,468.89
in benefits for disability and disfigurement. On March 1, 2010,
pursuant to Hawai#i Revised Statutes (“HRS”) § 386-94,1 McLaren
requested approval of $4,414.08 in attorney’s fees and $2,691.44
in costs for a total of $7,105.52. McLaren attached a fee
itemization listing the dates, services, hours, and charges for
his work on the claimant’s case. On June 10, 2010, in a document
titled, “Approval of Attorney’s Fees,” the Director2 approved
McLaren’s request, but reduced the amount to $3,729.63. The
decision informed McLaren that he could appeal by filing a
1
HRS § 386-94 (as amended in 2005) states in relevant part:
Claims for services shall not be valid unless approved by the
director or, if an appeal is had, by the appellate board or
court deciding the appeal. Any claim so approved shall be a
lien upon the compensation in the manner and to the extent
fixed by the director, the appellate board, or the court.
In approving fee requests, the director, appeals board, or
court may consider factors such as the attorney’s skill and
experience in state workers’ compensation matters, the amount
of time and effort required by the complexity of the case, the
novelty and difficulty of issues involved, the amount of fees
awarded in similar cases, benefits obtained for the claimant,
and the hourly rate customarily awarded attorneys possessing
similar skills and experience. In all cases, reasonable
attorney’s fees shall be awarded.
2
The decision was signed by the DCD Administrator.
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written notice of appeal within twenty days after the decision
had been sent.
Four days later, McLaren sent the DCD a letter
objecting to the reduction and requesting a written explanation
and/or a hearing on his attorney’s fees and costs request.
McLaren asserted that the fees approved were substantially less
than what he requested and did not appear to include any of the
$2,729.63 in costs he requested. On June 28, 2010, McLaren
submitted “Form WC-77 Application for Hearing” with the DCD
requesting a hearing on the reduction of his request for approval
of attorney’s fees because the reduction was not based on any:
(1) reasonable, meaningful review of the work actually performed;
(2) review of the actual records and files; (3) reasonable,
written, publicly available standards for reviewing requests for
approval of attorney’s fees; and (4) reasonable or written
factual findings. On July 19, 2010, McLaren requested access to
any DCD documents related to the review and approval of his
attorney’s fees request, pursuant to HRS §§ 92-113 and 92F-12.4
3
“Any final action taken in violation of [HRS] sections 92-3 and
92-7 may be voidable upon proof of violation. A suit to void any final action
shall be commenced within ninety days of the action.” HRS § 92-11 (as amended
in 2005).
HRS § 92-3 provides:
Every meeting of all boards shall be open to the public and
all persons shall be permitted to attend any meeting unless
(continued...)
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On August 4, 2010, McLaren sent the DCD a letter
stating that pursuant to Hawai#i Administrative Rules (“HAR”)
§ 2-71-13, agencies were required to respond to requests for
records within ten business days, and this period had expired on
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(...continued)
otherwise provided in the constitution or as closed pursuant
to sections 92-4 and 92-5; provided that the removal of any
person or persons who wilfully disrupts a meeting to prevent
and compromise the conduct of the meeting shall not be
prohibited. The boards shall afford all interested persons
an opportunity to submit data, views, or arguments, in
writing, on any agenda item. The boards shall also afford
all interested persons an opportunity to present oral
testimony on any agenda item. The boards may provide for
reasonable administration of oral testimony by rule.
HRS § 92-7 is a notice statute requiring any state agency, board, commission,
authority, or committee to give written public notice of any regular, special,
or rescheduled meeting, including an agenda of the items to be considered at
the meeting, the date, time, and place of the meeting.
4
In relevant part, HRS § 92F-12 (2007) states:
[E]ach agency shall make available for public inspection and
duplication during regular business hours:
(1) Rules of procedure, substantive rules of general
applicability, statements of general policy, and interpretations
of general applicability adopted by the agency;
(2) Final opinions, including concurring and dissenting opinions,
as well as orders made in the adjudication of cases, except to the
extent protected by section 92F-13(1); . . .
(7) Minutes of all agency meetings required by law to be public;
. . .
(15) Information collected and maintained for the purpose of
making information available to the general public; and
(16) Information contained in or compiled from a transcript,
minutes, report, or summary of a proceeding open to the public.
(b) Any provision to the contrary notwithstanding, each agency
shall also disclose:
(1) Any government record, if the requesting person has the prior
written consent of all individuals to whom the record refers;
(2) Government records which, pursuant to federal law or a statute
of this State, are expressly authorized to be disclosed to the
person requesting access[.]
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August 2, 2010. McLaren requested a response to his July 19,
2010 request to access the DCD’s records, and a Notice of Hearing
in response to his June 14, 2010 request for a hearing, so that
if necessary, McLaren could thereafter appeal to the LIRAB.
On August 17, 2010, a DCD staff member informed McLaren
that the DCD claim file was available for review. The only
record regarding McLaren’s fees and costs request in the DCD file
was apparently the fee itemization submitted by McLaren with
various hours and charges either slashed out or reduced, and a
paper adding machine tape.
On August 30, 2010, the DCD Administrator responded to
McLaren’s August 4, 2010 letter, stating that the DCD made
records available upon receipt of form WC-42, “Requests for
Information or Photo Copies,” at which time he would be advised
of the DCD’s procedures and arrangements for review of his file.
The DCD Administrator also responded that attorneys’ fee
approvals were generally not addressed via the hearings process
and that an appeal should be filed if there were any objections
to an approval. Based on McLaren’s August 4, 2010 letter, the
DCD Administrator informed McLaren that his claim would be
forwarded to the LIRAB for further action.
On September 7, 2010, McLaren sent a letter to the DCD
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Administrator stating that he used form WC-77 “Request to Access
Government Record” because unlike WC-42 “Request for Information
or Photocopies,” form W-77 imposed a time limit on the agency for
a response. McLaren also stated that he interpreted the DCD
Administrator’s letter to mean that the Director had waived his
right to exercise his authority pursuant to HRS § 386-735 over
McLaren’s request for a hearing and that there would be no
hearing scheduled in response to his request. Therefore, McLaren
requested that the instant correspondence and his June 14, 2010
objection to the approval be considered a timely appeal to the
LIRAB. On the same day, McLaren also filed an appeal with the
LIRAB appealing the Director’s June 8, 2010 reduced approval of
his attorney’s fees and costs request.
B. LIRAB Proceedings
1. McLaren’s Prehearing Memorandum
Before the LIRAB, on December 13, 2010, McLaren
submitted a Prehearing Memorandum arguing that the DCD violated
various provisions of the Hawai#i Administrative Procedures Act
(“HAPA”) and Hawaii’s Workers’ Compensation Laws when it: (1)
acted “arbitrarily and capriciously” and “ultra vires, i.e.,
5
HRS § 386-73 (as amended in 2004) grants the Director original
jurisdiction over all controversies and disputes arising under HRS chapter
386.
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beyond the scope of its authority” by reducing the $7,105.52
requested in attorney’s fees and costs by 48% to $3,729.63; and
(2) refused to hold a hearing upon McLaren’s timely Application
for Hearing.
In addition, McLaren argued that the DCD should have
approved the requested $7,105.52 in attorney’s fees and costs or
a substantially similar amount. McLaren argued that the DCD had
no substantive information from McLaren, his file, or from the
claimant; therefore, the DCD had “engaged in a perfunctory,
arbitrary[,] and capricious ex post facto determination” of
whether McLaren’s time and cost expenditures were necessary, and
had “made no reasonable determination of ‘whether, at the time
the work was performed, a reasonable attorney would have engaged
in similar time expenditures.’” McLaren asserted that the LIRAB
should conduct its own analysis of his fee request and “not give
the DCD’s perfunctory review any weight.”
2. The LIRAB’s Decision and Order
The LIRAB dismissed McLaren’s September 7, 2010 appeal
as untimely. The LIRAB concluded that pursuant to HRS § 386-
87(a) (1985), “[a] decision of the director shall be final and
conclusive between the parties . . . unless within twenty days
after a copy has been sent to each party, either party appeals
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therefrom to the appellate board by filing a written notice of
appeal with the appellate board of the department.” The LIRAB
pointed out that this court in Kissell v. Labor and Industrial
Relations Appeal Board, 57 Haw. 37, 38, 549 P.2d 470 (1976) held
that the time for filing a written notice of appeal is mandatory.
Therefore, according to the LIRAB, it did not and could not
construe McLaren’s: (1) June 14, 2010 letter objecting to the
DCD’s approval and reduction of his attorney’s fees, or (2) June
28, 2010 request for a hearing as an appeal to the LIRAB of the
Director’s June 10, 2010 decision. In addition, the LIRAB found
that McLaren’s August 4, 2010 letter expressed his recognition
that an appeal had yet to be taken.
The LIRAB concluded that the only filing which it could
construe as an appeal was McLaren’s September 17, 2010 “Appeal
and Notice of Appeal” because it appealed the Director’s decision
with explicit citation to the statutory provision, HRS § 386-87,
governing appeals. The LIRAB found McLaren’s failure to use the
words, “appeal” or “notice of appeal” in his numerous prior
filings conscious, deliberate and intentional. The LIRAB
dismissed the appeal pursuant to the “mandatory nature of Section
386-87(a)” and concluded, “[g]iven the dismissal of the appeal,
the Board does not reach the issue of the reasonableness of the
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amount of attorney’s fees approved by the Director on June 8,
2010.”
3. Motion for Reconsideration
McLaren filed a “Motion for Reconsideration” and a
Memorandum in Support of the Motion (“Memorandum”) with the LIRAB
requesting reconsideration of its decision to dismiss McLaren’s
appeal. In the Memorandum, McLaren first argued that the
Director, through the DCD, had broad authority under various
provisions of HRS Chapter 386 and corresponding administrative
rules to schedule hearings in response to reasonable requests
based on its quasi-judicial, adjudicatory authority. McLaren
maintained that any reference to the contrary on any of the DCD’s
forms is “gratuitous and is ultra vires, and not a lawfully
promulgated administrative rule or practice pursuant to [HAPA],
and is accordingly, not lawful or binding upon anyone for any
purpose.”
McLaren further argued that because a claimant’s
attorney’s fees and costs approved by the DCD or the LIRAB are
subtracted from compensation otherwise payable to the claimant,
and because the approved amount is valuable income to the
claimant’s attorney, an HRS § 386-86 contested case hearing at
the DCD “is warranted in every attorney fee dispute or fee
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reduction, because the claimant’s attorney automatically becomes
a party to the claim for the purpose of the appropriate fee
determination.” McLaren argued that the DCD Administrator had
not provided any statute or rule prohibiting attorney’s fee
approvals from being addressed in the hearings process. McLaren
asserted that the August 30, 2010 letter from the DCD was an
unconditional waiver of the DCD’s original jurisdiction and
statutory right to convene a hearing; therefore, his September 7,
2010 appeal was timely filed following the waiver.
McLaren next argued that while many provisions in HRS
Chapter 386 contain no explicit procedural due process right to a
hearing, the DCD has the authority to convene hearings. He
asserted that “any arbitrary, drastic reduction by DCD in the
amount of a fee request without first holding a hearing and
conducting a competent, objective, fair[,] and honest review of
all of the evidence supporting the requested fee” was the
“equivalent of unlawfully assessing a significant penalty or fine
against the claimant’s attorney.” McLaren alleged that he had no
opportunity to investigate DCD’s rationale for its fee reduction.
He also argued that if a hearing was not warranted to review
reductions in attorney’s fees to provide reasonable explanations
of how and why the fee was reduced, the appeal process would add
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unnecessary time and expense when an appropriate, direct, and
fair resolution could be provided by the entity responsible for
creating the dispute.
Furthermore, McLaren asserted that the DCD convened
hearings for other parties under HRS Chapter 386, such as health
care providers, who can be sanctioned under Hawaii’s Workers’
Compensation Law only after a hearing is held. McLaren argued
that “it was plainly inconsistent and irrational” for the DCD to
“ignore long established and constitutionally protected concepts
of fundamental fairness and procedural due process” by denying a
hearing for attorney’s fees, while providing a hearing for health
care providers.
McLaren maintained that the opportunity at a hearing to
review a fee determination and present evidence and arguments
against a fee reduction was a crucial and indispensable
procedural due process protection because DCD’s decision to
approve or reduce an attorney’s fees dictated the result of the
LIRAB’s decision. McLaren asserted that despite the LIRAB’s de
novo authority over the DCD’s fee determinations, the LIRAB did
not provide independent, objective, fair, reasonable, or honest
reviews of attorney’s fee requests.
McLaren also alleged that the LIRAB routinely upheld
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DCD’s determination of attorney’s fees, which reinforces
arbitrary, capricious, dishonest, and punitive decisions on fee
requests, “rather than fostering objective, fair, reasonable[,]
and honest reviews of these requests based on the actual quality
and quantity of the work performed and the results obtained.”
McLaren maintained that this system was therefore, “deficient,
defective, and dysfunctional.”
Finally, McLaren argued that it was impossible for
anyone at DCD to satisfy the evaluation required by HRS § 386-94
and HAR § 12-10-69 without first convening a hearing to review
the entire claim, including the attorney’s skill, experience, and
particulars of the case. McLaren asserted that the DCD lacked
access to information that would have allowed the DCD to make a
rational conclusion regarding the reasonableness of his requested
fees and costs. He argued that the DCD therefore acted
arbitrarily and capriciously, and that its refusal to schedule a
hearing was a manifest abuse of discretion.
4. The LIRAB’s Order Denying McLaren’s Motion for
Reconsideration
The LIRAB concluded that the “purpose of a motion for
reconsideration is to allow the parties to present new evidence
and/or arguments that could not have been presented earlier.”
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(Citing Amfac, Inc. v. Waikiki Beachcomber Inv. Co., 74 Haw. 85,
114, 839 P.2d 10, 27 (1992)). In addition, the LIRAB concluded,
“a motion for reconsideration is not the time to relitigate old
matters.” (Citing Briggs v. Hotel Corp. of the Pac., Inc., 73
Haw. 276, 287 n.7, 831 P.2d 1335, 1342, n.7 (1992)]
The LIRAB found that McLaren’s arguments failed to
present new evidence and/or arguments that could not have been
presented earlier. In addition, the LIRAB concluded that McLaren
failed to demonstrate that HRS Chapter 91’s requirements were
applicable to the DCD. The LIRAB reiterated that McLaren’s
argument regarding timeliness of his appeal was without merit
because it required a conclusion that the Director had issued a
decision after the June 8, 2010 approval of attorney’s fees, or
in the alternative, that McLaren filed an appeal before his
actual September 7, 2010 appeal to the LIRAB. The LIRAB
concluded that neither scenario was supported by the record, and
denied McLaren’s Motion for Reconsideration.
C. The ICA’s Memorandum Opinion
McLaren basically reiterated his arguments to the LIRAB
on appeal to the ICA, but additionally argued that his letters to
the DCD should be construed as an application to reopen his case
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pursuant to HRS § 386-89.6 The ICA concluded that an order
awarding or denying attorney’s fees and costs pursuant to HRS §
6
HRS § 386-89 (1993) provides as follows:
(a) In the absence of an appeal and within twenty days
after a copy of the decision has been sent to each party,
the director of labor and industrial relations may upon the
director’s own motion or upon the application of any party
reopen a case to permit the introduction of newly discovered
evidence, and may render a revised decision.
(b) The director may at any time, either of the director’s
own motion or upon the application of any party, reopen any
case on the ground that fraud has been practiced on the
director or on any party and render such decision as is
proper under the circumstances.
(c) On the application of any party in interest, supported
by a showing of substantial evidence, on the ground of a
change in or of a mistake in a determination of fact related
to the physical condition of the injured employee, the
director may, at any time prior to eight years after date of
the last payment of compensation, whether or not a decision
awarding compensation has been issued, or at any time prior
to eight years after the rejection of a claim, review a
compensation case and issue a decision which may award,
terminate, continue, reinstate, increase, or decrease
compensation. No compensation case may be reviewed oftener
than once in six months and no case in which a claim has
been rejected shall be reviewed more than once if on such
review the claim is again rejected. The decision shall not
affect any compensation previously paid, except that an
increase of the compensation may be made effective from the
date of the injury, and if any part of the compensation due
or to become due is unpaid, a decrease of the compensation
may be made effective from the date of the injury, and any
payment made prior thereto in excess of such decreased
compensation shall be deducted from any unpaid compensation
in such manner and by such method as may be determined by
the director. In the event any such decision increases the
compensation in a case where the employee has received
damages from a third party pursuant to section 386-8 in
excess of compensation previously awarded, the amount of
such excess shall constitute a pro tanto satisfaction of the
amount of the additional compensation awarded. This
subsection shall not apply when the employer’s liability for
compensation has been discharged in whole by the payment of
a lump sum in accordance with section 386-54.
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386-94 is a final order for the purposes of appeal in workers’
compensation cases. In Re Furukawa, (“Furukawa”) No. CAAP-11-460
(App. June 27, 2013) (mem.) at 3-4 (citing Lindinha v. Hilo Coast
Processing Co., 104 Hawai#i 164, 169, 86 P.3d 973, 978 (2004)).
The ICA found that McLaren did not dispute that his September 7,
2010 appeal to the LIRAB was an appeal of the Director’s June 8,
2010 decision. Furukawa, mem. op. at 4. The ICA concluded that
the time for filing a notice of appeal to the LIRAB is mandatory
and that the LIRAB had therefore correctly concluded that
McLaren’s appeal was untimely. Id. The ICA held that McLaren’s
appeal of the Director’s decision was barred by HRS § 386-87(a),
which provides that a Director’s decision is final and
conclusive, except as provided by HRS § 389-89, unless a written
notice of appeal is filed with the appellate board of the
department. Id. The ICA rejected McLaren’s argument that “his
filings to the DLIR constituted applications to reopen the case
pursuant to HRS § 389-89[.]” Id. The ICA found that none of
McLaren’s filings asserted newly discovered evidence or fraud;
therefore, the time to appeal the Director’s decision was not
tolled. Furukawa, mem. op. at 4-5.
Lastly, in regard to McLaren’s argument that the DCD
was required to provide a contested case hearing, the ICA
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concluded that pursuant to HRS § 91-1, a “contested case” is “a
proceeding in which the legal rights, duties, or privileges of
specific parties are required by law to be determined after an
opportunity for agency hearing.” Furukawa, mem. op. at 5 (citing
HRS § 91-1 (2012 Repl.) (emphasis in original)). The ICA found
that McLaren had not cited to any legal authority that provided
that requests for attorney’s fees had to be determined after an
opportunity for an agency hearing. Id. The ICA concluded
McLaren’s due process rights had not been infringed because
McLaren had an opportunity to appeal the reduction of his
attorney’s fees request to LIRAB pursuant to HRS § 386-87,7 but
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HRS § 386-87 provides:
(a) A decision of the director shall be final and conclusive
between the parties, except as provided in section 386-89,
unless within twenty days after a copy has been sent to each
party, either party appeals therefrom to the appellate board
by filing a written notice of appeal with the appellate
board or the department. In all cases of appeal filed with
the department the appellate board shall be notified of the
pendency thereof by the director. No compromise shall be
effected in the appeal except in compliance with section
386-78.
(b) The appellate board shall hold a full hearing de novo on
the appeal.
(c) The appellate board shall have power to review the
findings of fact, conclusions of law and exercise of
discretion by the director in hearing, determining or
otherwise handling of any compensation case and may affirm,
reverse or modify any compensation case upon review, or
remand the case to the director for further proceedings and
action.
(d) In the absence of an appeal and within thirty days after
mailing of a certified copy of the appellate board’s
decision or order, the appellate board may, upon the
(continued...)
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had failed to timely seek an appeal. Id. Accordingly, the ICA
affirmed the LIRAB’s Decision and Order dismissing McLaren’s
appeal as untimely and the LIRAB’s Order denying McLaren’s Motion
for Reconsideration.
III. Standards of Review
A. Statutory Interpretation
The interpretation of a statute is a question of law
reviewable de novo. Lindinha, 104 Hawai#i at 171, 86 P.3d at 980(citation omitted). When construing a statute, this court’s
foremost obligation is to be obtained primarily from the language
contained in the statute itself. Id. (citation omitted). Where
the statutory language is plain and unambiguous, this court’s
sole duty is to give effect to its plain and obvious meaning.•
Schmidt v. Bd. of Directors of Ass’n of Apartment Owners of Marco
Polo Apartments, 73 Haw. 526, 531-32, 836 P.2d 479, 482 (1992).
Implicit in the task of statutory construction is our
foremost obligation to ascertain and give effect to the intention
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application of the director or any other party, or upon its
own motion, reopen the matter and thereupon may take further
evidence or may modify its findings, conclusions or
decisions. The time to initiate judicial review shall run
from the date of mailing of the further decision if the
matter has been reopened. If the application for reopening
is denied, the time to initiate judicial review shall run
from the date of mailing of the denial decision.
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of the legislature, which is to be obtained primarily from the
language contained in the statute itself; however, when there is
doubt, doubleness of meaning, or indistinctiveness or uncertainty
of an expression used in a statute, an ambiguity exists. Awakuni
v. Awana, 115 Hawai#i 126, 133, 165 P.3d 1027, 1034 (2007)
(citation omitted). Pursuant to HRS § 1-15 (1985):
Where the words of a law are ambiguous:
(1) The meaning of the ambiguous words may be sought by
examining the context, with which the ambiguous words,
phrases, and sentences may be compared, in order to
ascertain their true meaning.
(2) The reason and spirit of the law, and the cause which
induced the legislature to enact it, may be considered to
discover its true meaning.
(3) Every construction which leads to an absurdity shall be
rejected.
B. Interpretation of Administrative Rules
The general principles of construction which apply to statutes
also apply to administrative rules. . . . As in statutory
construction, courts look first at an administrative rule’s
language. . . . If an administrative rule’s language is
unambiguous, and its literal application is neither
inconsistent with the policies of the statute the rule
implements nor produces an absurd or unjust result, courts
enforce the rule’s plain meaning.
Int’l Bhd. of Elec. Workers, Local 1357 v. Hawaiian Tel. Co., 68
Haw. 316, 323, 713 P.2d 943, 950 (1986) (citations omitted).
C. Administrative Appeals
“Review of a decision made by a court upon its review
of an administrative decision is a secondary appeal. The
standard of review is one in which this court must determine
whether the court under review was right or wrong in its
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decision.” Brescia v. N. Shore Ohana, 115 Hawai#i 477, 491, 168
P.3d 929, 943 (2007) (citations omitted). The standards set
forth in HRS § 91-14(g) (1993) apply to the agency’s decision.
Id.
HRS § 91–14(g) provides:
Upon review of the record the court may affirm the decision of
the agency or remand the case with instructions for further
proceedings; or it may reverse or modify the decision and
order if the substantial rights of the petitioners may have
been prejudiced because the administrative findings,
conclusions, decisions, or orders are:
(1) In violation of constitutional or statutory provisions; or
(2) In excess of the statutory authority or jurisdiction of
the agency; or
(3) Made upon unlawful procedure; or
(4) Affected by other error of law; or
(5) Clearly erroneous in view of the reliable, probative, and
substantial evidence on the whole record; or
(6) Arbitrary, or capricious, or characterized by abuse of
discretion or clearly unwarranted exercise of discretion.
“Under HRS § 91–14(g), conclusions of law are reviewable under
subsections (1), (2), and (4); questions regarding procedural
defects are reviewable under subsection (3); findings of fact are
reviewable under subsection (5); and an agency’s exercise of
discretion is reviewable under subsection (6).” Alvarez v.
Liberty House, 85 Hawai#i 275, 277, 942 P.2d 539, 541 (1997).
IV. Discussion
A. McLaren’s Appeal Was Timely Because His Letters Constituted
A Request To Reopen Under HRS § 386-89
As to McLaren’s first and third questions on
certiorari, HRS § 386-87 provides, “[a] decision of the director
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shall be final and conclusive, except as provided in HRS § 386-
89, unless within twenty days after a copy has been sent to each
party, a party appeals to the appellate board by filing a written
notice of appeal.” (Emphasis added). Under HRS § 386-89, the
director may reopen the case on the following grounds: (1) to
permit the introduction of newly discovered evidence, (2) that
fraud has been practiced on the director or any party, or (3) a
change in or a mistake in a determination of fact related to the
physical condition of the injured employee that is supported by a
showing of substantial evidence.
The ICA concluded that none of McLaren’s filings
asserted newly discovered evidence or fraud; therefore, none of
his filings constituted applications to reopen the case pursuant
to HRS § 386-89.
HRS § 386-89, however, does not specify a format for an
application to reopen a case. DLIR’s administrative rule
governing reopening of cases, HAR § 12-10-63, provides, “[a]n
application for reopening of a case pursuant to § 386-89, HRS,
shall be in writing, shall state specifically the grounds upon
which the application is based, and shall be served upon each
party at the time of filing with the director.” “If an
administrative rule’s language is unambiguous, and its literal
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application is neither inconsistent with the policies of the
statute the rule implements nor produces an absurd or unjust
result, courts enforce the rule’s plain meaning.” Hawaiian Tel.
Co., 68 Haw. at 323, 713 P.2d at 950 (citation omitted).
McLaren argues that applications to reopen a final DCD
decision are typically submitted in letter format. His June 14,
2010 letter objecting to the DCD’s approval of his attorney’s
fees is (1) clearly in writing; (2) specifically states the
grounds upon which the application is based, that the approved
amount was substantially less than what he requested; and (3) was
served on the necessary party, the DCD. In addition, McLaren
submitted three additional requests with the DCD: (1) an
application for a hearing on June 28, 2010, which refers to his
June 14, 2010 letter, stating that the DCD’s reduction of his
request was without foundation, and not based on any reasonable
meaningful review of the work actually performed or the actual
records and files on the workers’ compensation claim; (2) a
“Request for Access to Government Records” on July 19, 2010,
requesting access to the DCD’s records on its review and approval
of McLaren’s attorney’s fee request; and (3) a letter following
up on his July 19, 2010 request to access DCD’s records on August
4, 2010, and informing the DCD that he would appreciate prompt
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notice of when he could review the documents, or a Notice of
Hearing so that if necessary, he could appeal to the LIRAB.
Through these requests, McLaren sought to introduce new
information that was not previously available because the DCD had
not provided any information on the reasons for reducing his
attorney’s fees. McLaren sought access to the DCD files in order
to present information he previously would have been unable to
provide -- the reasons for DCD’s reduction of his request for
fees and costs, and his responses to those revisions. Therefore,
McLaren’s June 14, 2010 letter to the DCD, objecting to the
Director’s June 8, 2010 approval of his attorney’s fees and
requesting a hearing, followed by his subsequent letters, was an
application to reopen his case pursuant to HRS § 386-89(a) to
permit the introduction of newly discovered evidence.
In Alvarez v. Liberty House, 85 Hawai#i 275, 942 P.2d
539 (1997), we held that an application to reopen a case pursuant
to HRS § 386-89 tolls the twenty day time limitation to file an
appeal. We concluded that a “director’s decision obviously
cannot be ‘final and conclusive’ while the HRS § 386-89 motion to
reopen is pending because HRS § 386-89 clearly states that the
director’s decision is subject to revision in the event the
motion to reopen is granted. Id. at 278, 942 P.2d at 542.
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Accordingly, we held that the twenty-day time limitation to
appeal does not commence until the Director formally denies an
HRS § 386-89 application to reopen. Id.
The DCD did not respond to McLaren’s letters until
August 30, 2010. In its response, the DCD stated that McLaren
should have submitted the DCD form, WC-42 (Request for
Information or Photo Copies), and upon submission of the form, he
would be advised of the DCD’s procedures and arrangements for
review of his file. The DCD then stated that attorney’s fees
approvals were not generally addressed via the hearings process,
and informed him that, based on the indications of his August 4,
2010 letter, his claim would be forwarded to the LIRAB for
further action. Pursuant to Alvarez, the DCD’s August 30, 2010
letter was the Director’s final decision denying McLaren’s
application to reopen his case. Therefore, McLaren’s September
7, 2010 appeal to the LIRAB was timely.
B. The DCD Was Not Required To Hold A Contested Case Hearing On
McLaren’s Request To Reopen, But Was Required To Set Forth Its
Reasoning
With respect to his second and fourth questions on
certiorari, McLaren argues that he has fundamental due process
rights of notice and an opportunity to be heard at the DCD to
review and present evidence against the DCD’s fee reduction;
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therefore, the DCD should have convened a formal hearing as a
simple procedural due process protection before imposing what
“clearly amounts to a penalty in the form of an attorney fee
reduction.” Alternatively, McLaren argues that the DCD’s
decisions should include Findings of Fact and Conclusions of Law
with some form of review standard to facilitate hearing officers
in their decisions.
HRS § 91-1 defines “contested case” to mean “a
proceeding in which the legal rights, duties, or privileges of
specific parties are required by law to be determined after an
opportunity for agency hearing.” (Emphasis added). An
“‘[a]gency hearing’ refers only to such hearing held by an agency
immediately prior to a judicial review of a contested case as
provided in section 91-14.” HRS § 91-1 (emphasis added).
HRS § 386-87 provides that the LIRAB “shall hold a full hearing
de novo on appeal.” HRS § 386-88 states that the “decision or
order of the appellate board [i.e. LIRAB] shall be final and
conclusive, except as provided in section 386-89, unless within
thirty days after mailing of a certified copy of the decision or
order, the director or any other party appeals to the
intermediate appellate court. Here, the legislature expressly
decided to provide a hearing before the LIRAB, and not the DCD,
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because it is the hearing immediately before judicial review.
Moreover, the legislature expressly decided to require
contested case hearings before the LIRAB to keep DCD proceedings
informal, and to allow claimants and adjusters to represent
themselves before the DCD. In 2004, the legislature amended
various portions of the Hawaii’s Worker’s Compensation Law, HRS
Chapter 386, in response to proposed changes to the HAR on
workers’ compensation. Conf. Comm. Rep. No. 130, in 2004 House
Journal, at 1792. The Director sought, among other things, to
establish contested hearing type cases at the DCD level with
formal discovery and hearing procedures. Id. at 1793. The
legislature rejected this proposal stating:
The Legislature intended that all processing of claims at
the Disability Compensation Division (DCD) level and
proceedings before the Director be informal, not contested
case hearings under chapter 91, HRS. To the degree possible,
this allows claimants and adjusters to represent themselves
at the DCD level. For that reason, the Labor and Industrial
Relations Appeals Board was given de novo review on any
appeal. (Section 386-87, HRS). The administrative rules
until now have been consistent with this intent by barring
discovery procedures typically associated at the appeals
board level and civil litigation and only allowing the
discovery with approval by the Director upon showing of good
cause. (Sections 12-10-65 to 12-10-67, HAR). . . . These
proposed changes which seek to establish contested hearing
type cases at the DCD level are in conflict with the
legislative intent of an informal process at the DCD level.
Id. Thus, the legislature expressly required the LIRAB to hold a
full hearing de novo on appeal, and rejected the proposal to
require such hearings at the DCD level. We hold, therefore, that
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the ICA did not err in concluding that the DCD was not required
to hold a contested case hearing on McLaren’s request to reopen
his attorney’s fees and costs request.
Although the DCD was not required to provide a
contested case hearing on McLaren’s request to reopen, it was
required to set forth its reasons for reducing McLaren’s
attorney’s fees and costs. In In re Bettencourt, 126 Hawai#i 26,
32, 265 P.3d 1122, 1128 (2011), we vacated and remanded an
administrative judge’s order awarding fees under HRS § 802-5(b)8
because, while the trial court had certified the entire amount
requested by the attorney, the administrative judge reduced the
total amount of fees by 31% without providing any notations or
explanation for the reduction. We rejected the State’s argument
that the administrative judge had unfettered discretion to grant
or deny excess attorney’s fees and was not required to set forth
reasons for reducing the attorney’s fees. Id. We concluded that
HRS § 802-5(b) granted the administrative judge the authority to
independently determine whether a fee award was “fair
compensation.” Id. at 27, 265 P.3d at 1123. Moreover, because
8
HRS § 802-5 (1993 & Supp. 2010) governs the appointment of counsel
and compensation for services provided to indigent criminal defendants. HRS
§ 802-5(b) provides that the court shall determine the amount of reasonable
compensation to appointed counsel, based on the rate of $90 an hour. In
addition, it provides a maximum allowable fee schedule for the different types
of criminal cases (e.g. felony cases, misdemeanor, and appeals).
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an order granting or denying attorney’s fees under HRS § 802-5
was an appealable final order, we held the following: (1) the
administrative judge’s order awarding fees was a judicial act
subject to appellate review under the abuse of discretion
standard; and (2) “to enable appellate review of excess fee
awards, if a fee request is reduced, it is necessary for the
judge reducing the request to set forth reasons for the
reduction.” Id.
Although Bettencourt is distinguishable because it
involved attorney’s fees for a court appointed attorney in a
criminal case before an administrative judge and involved an
award for “excess” fees, its rationale is relevant to the instant
case. HRS § 386-94 provides:
Claims for services shall not be valid unless approved by
the director or, if an appeal is had, by the appellate board
or court deciding the appeal. Any claim so approved shall be
a lien upon the compensation in the manner and to the extent
fixed by the director, the appellate board, or the court.
In approving fee requests, the director, appeals board, or
court may consider factors such as the attorney’s skill and
experience in state workers’ compensation matters, the
amount of time and effort required by the complexity of the
case, the novelty and difficulty of issues involved, the
amount of fees awarded in similar cases, benefits obtained
for the claimant, and the hourly rate customarily awarded
attorneys possessing similar skills and experience. In all
cases, reasonable attorney’s fees shall be awarded. Any
person who receives any fee, other consideration, or
gratuity on account of services so rendered, without
approval, in conformity with the preceding paragraph, shall
be fined by the director not more than $10,000.
(Emphasis added). Similar to the attorney’s fees request in
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Bettencourt, the DCD reviews an attorney’s fee request to
determine whether a fee request is “reasonable.” Upon appeal,
pursuant to HRS § 386-87(b), “[t]he [LIRAB] shall hold a full
hearing de novo on the appeal[,]” and HRS § 386-87(c) provides:
The appellate board shall have power to review the findings
of fact, conclusions of law and exercise of discretion by
the director in hearing, determining or otherwise handling
of any compensation case and may affirm, reverse or modify
any compensation case upon review, or remand the case to the
director for further proceedings and action.
(Emphasis added). Thus, the LIRAB reviews a DCD award of
attorney’s fees and costs for abuse of discretion, but does so
after a full hearing de novo, pursuant to HRS § 386-87.
In the instant case, McLaren submitted a detailed
breakdown of his attorney’s fees and costs to the DCD. The DCD
appears to have reduced or denied specific charges on his
detailed breakdown with various slash marks, but similar to
Bettencourt, failed to set forth any reasons for the 47%
reduction of McLaren’s attorney’s fee request. Thus, the LIRAB
would have been unable to ascertain whether the DCD abused its
discretion in awarding “reasonable attorney’s fees” pursuant to
HRS § 386-94.
We therefore hold that the DCD must set forth its
reasons for reducing an attorney’s fee request for appropriate
LIRAB and possible judicial review of the reduction pursuant to
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HRS § 91-14. In so holding, however, we do not agree with
McLaren’s alternative assertion that DCD was required to prepare
formal findings of fact and conclusions of law to explain its
reduction. Rather, the format of a DCD order reducing attorney’s
fees and/or costs need only be sufficient to enable appropriate
review for abuse of discretion. In this case, no reasons were
provided for the reduction.
V. Conclusion
We hold that McLaren’s appeal to the LIRAB was timely
because his June 14, 2010 letter objecting to the DCD’s reduction
of his attorney’s fee request and requesting a hearing or an
explanation for his request, followed by his subsequent
correspondence, constituted an application to reopen his case
pursuant to HRS § 386-89. Therefore, the ICA erred in holding
that McLaren’s appeal was untimely.
In addition, we hold that the DCD’s exercise of its
discretion pursuant to HRS § 386-94 in awarding reasonable
attorney’s fees or costs is subject to LIRAB and judicial review
under the abuse of discretion standard; therefore, to enable
appropriate review of any reductions in such requests, the DCD
must appropriately set forth its reasons for the reductions.
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Accordingly, we vacate the ICA’s Judgment on Appeal
affirming the LIRAB’s March 21, 2011 “Decision and Order” and May
11, 2011 “Order Denying John C. McLaren’s Motion For
Reconsideration of Decision and Order Filed March 21, 2011,” and
remand the case to the DCD for further proceedings consistent
with this opinion.
John C. McLaren, /s/ Mark E. Recktenwald
petitioner pro se
/s/ Paula A. Nakayama
Frances E.H. Lum,
Deputy Attorney General /s/ Simeon R. Acoba, Jr.
for respondent
/s/ Sabrina S. McKenna
/s/ Richard W. Pollack
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