Botelho v. Atlas Recycling Center, LLC.

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Electronically Filed
Supreme Court
SCWC-XX-XXXXXXX
04-MAY-2020
08:02 AM
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
---oOo---
REGINALD BOTELHO, Petitioner/Claimant-Appellant,
vs.
ATLAS RECYCLING CENTER, LLC and HAWAIʻI EMPLOYERS’ MUTUAL
INSURANCE COMPANY, Respondents/Employer/Insurance Carrier/
Appellees,
and
SPECIAL COMPENSATION FUND, Respondent/Appellee.
SCWC-XX-XXXXXXX
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-XX-XXXXXXX; CASE NO. AB 2009-334(H)(S)(DCD No. 1-06-
00818))
MAY 4, 2020
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
OPINION OF THE COURT BY McKENNA, J.
I. Introduction
This case concerns the Labor and Industrial Relations
Appeals Board’s (“LIRAB”) award of attorney’s fees to Stanford
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Masui (“Masui”) for his representation of Reginald Botelho
(“Botelho”) in a workers’ compensation case. Masui submitted a
request for attorney’s fees to LIRAB requesting an hourly rate
of $325. LIRAB approved Masui’s request for attorney’s fees,
but it reduced his hourly rate from $325 to $165. Masui
appealed LIRAB’s order reducing his requested hourly rate to the
Intermediate Court of Appeals (“ICA”), and the ICA affirmed
LIRAB’s order in a summary disposition order (“SDO”).
Masui’s application for certiorari (“Application”) presents
three questions:
1. Did the [ICA] gravely err in failing to construe sec.
386-94 HRS in light of its language and legislative
history, since the statute does not explicitly grant the
Labor and Industrial Relations Appeals Board (“LIRAB”) nor
the Director of Labor and Industrial Relations (“DLIR”)[]
the power of setting hourly fee rates for attorneys
providing services under the Workers’ Compensation chapter,
Chap. 386 HRS, but only allows the LIRAB and DLIR
(collectively, “agencies”) to “consider” hourly rates of
attorneys “possessing similar skills and experience?”
2. Did the ICA gravely err in utilizing the incorrect
standard of review of whether the LIRAB’s order was “ultra
vires”, i.e., should the ICA have applied the standard of
whether the LIRAB’s order was in “violation of
constitutional or statutory provisions”, and/or “in excess
of the statutory authority or jurisdiction of the agency”
instead of only an “abuse of discretion” standard as
required for statutory interpretation under Sec. 91-14 (g)
(1), (2), and (6) HRS ?
3. Did the ICA gravely err by failing to find that the
LIRAB Order was arbitrary, or capricious, or characterized
by abuse of discretion or clearly unwarranted exercise of
discretion since the LIRAB failed to articulate any
standard to establish hourly fee rate schedules for highly
specialized secondary workers’ compensation appeals, when
no standards are stated in the enabling fee statute, 386-94
HRS, nor any LIRAB Rules of Practice and Procedure, nor any
other justification for using an outdated hourly fee rate
from 2009 to 2012 for secondary appellate work.
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With regard to Masui’s first question on certiorari, we
hold that HRS § 386-94 (Supp. 2005) authorizes LIRAB to amend an
attorney’s requested hourly rate in awarding reasonable
attorney’s fees. Pursuant to the legislative intent of the 2005
amendment to HRS § 386-94, however, LIRAB is not authorized to
predetermine a workers’ compensation attorney’s “authorized”
hourly rate to be applied to that attorney’s future cases.
Therefore, the ICA erred to the extent it held that HRS § 386-94
authorizes LIRAB to predetermine an attorney’s hourly rate.
With regard to Masui’s second question, we hold that the
ICA implicitly determined that LIRAB’s order was not in
violation of constitutional or statutory provisions or in excess
of its statutory authority when it held that LIRAB did not abuse
its discretion. Therefore, the ICA did not err.
With regard to Masui’s third question, we hold that the ICA
erred in holding that LIRAB provided an adequate explanation for
its reduction of Masui’s requested attorney’s fee as required by
McLaren v. Paradise Inn Hawaiʻi LLC, 132 Hawaiʻi 320, 321 P.3d
671 (2014). In explaining its reduction of attorney’s fees,
LIRAB must provide more than a recitation of the factors it
considers. In order to enable review for abuse of discretion,
it must also provide some explanation as to how the factors
affected its determination.
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We therefore vacate the ICA’s December 6, 2019 judgment on
appeal and LIRAB’s April 20, 2016 attorney’s fee approval and
order and remand to LIRAB for further proceedings consistent
with this opinion.
II. Background
A. Department of Labor and Industrial Relations Disability
Compensation Division proceedings
On May 10, 2005, Botelho injured his wrist while working
for Atlas Recycling (“Atlas”). On August 8, 2006, Botelho filed
a claim for workers’ compensation benefits with the Department
of Labor and Industrial Relations Disability Compensation
Division (“DCD”), and he was represented by Masui. On January
30, 2007, DCD issued a decision ordering Atlas and HEMIC,
Atlas’s insurance carrier (collectively “Atlas/HEMIC”), to pay
for Botelho’s medical care.
On January 31, 2007, Masui sent HEMIC a letter calculating
Botelho’s temporary disability entitlement as $1,386.58. HEMIC
did not respond, and Botelho received no temporary disability
payments from HEMIC for approximately two years.
Thereafter, on May 15, 2009, DCD issued a decision ordering
Atlas/HEMIC to pay for Botelho’s medical care and temporary
total disability benefits. DCD also “assessed attorney’s fees
and costs” against Atlas/HEMIC pursuant to HRS § 386-93(a)
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(Supp. 2004) because Atlas/HEMIC “did not have reasonable
grounds to defend the covered issues.”1
B. LIRAB proceedings
On June 3, 2009, Atlas/HEMIC appealed DCD’s decision to
LIRAB. On October 16, 2009, Atlas/HEMIC filed a motion for
partial summary judgment, asserting it was not liable for
Botelho’s attorney’s fees because attorney’s fees were not part
of the “whole costs of the proceedings” under HRS § 386-93(a).
On November 16, 2009, LIRAB granted Atlas/HEMIC’s motion for
partial summary judgment.
Botelho appealed LIRAB’s decision to the ICA. On February
28, 2013, the ICA issued a memorandum opinion holding attorney’s
fees were part of the “whole costs of the proceedings” under HRS
§ 386-93(a). Botelho v. Atlas Recycling Centers, LLC, No.
30226, at 5 (App. Feb. 28, 2013) (mem.). The ICA vacated
LIRAB’s decision and remanded for further proceedings. Id.
Accordingly, on remand, LIRAB modified its May 15, 2009 decision
and ordered Atlas/HEMIC to pay Botelho’s attorney’s fees on
November 9, 2015.
1 HRS § 386-93(a) provides: “If the director of labor and industrial
relations, appellate board or any court finds that proceedings under this
chapter have been brought, prosecuted, or defended without reasonable ground
the whole costs of the proceedings may be assessed against the party who has
so brought, prosecuted, or defended the proceedings.”
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Thus, on November 19, 2015, Masui submitted a request to
LIRAB for attorney’s fees for 88.6 hours of services at $325 per
hour rendered before the ICA, and requested a total of
$30,893.64 in fees as well as costs of $702.55.2 Masui’s request
stated he had “approximately 30 year’s [sic] experience in
workers’ compensation cases, participated in over 100 cases
before [DCD] over the last 3 years, and approximately 50 cases
before [LIRAB] over the last 3 years.”
On April 20, 2016, LIRAB issued an “attorney’s fee approval
and order” in response to Masui’s November 19, 2015 request
(“Order” or “LIRAB’s Order”), but reduced Masui’s hourly rate
from $325 to $165. LIRAB stated it did “not approve the
requested attorney hourly rate of $325.00,” and that Masui’s
“approved hourly rate for the period 2009 through 2012 was
$165.00 per hour.” LIRAB listed factors it considered in
reviewing and reducing Masui’s fee request, stating:
[i]n reviewing the subject fee request, the Board took into
account the benefits obtained for Claimant in this appeal,
the novelty and difficulty of issues involved on appeal,
the amount of fees awarded in similar appeals, and the
hourly rate customarily awarded workers’ compensation
attorneys possessing similar skills and experience,
including Attorney’s years of practice in the field of
workers’ compensation law, the number of clients
represented before the Board, as well as Attorney’s
responsiveness and timeliness.
2 As indicated by LIRAB, it appears the requested costs had been approved
through the first appeal to the ICA and are not at issue in this appeal.
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LIRAB noted that Masui had practiced workers’ compensation law
in Hawaiʻi for approximately 30 years and had represented
approximately 100 clients before the DCD and approximately 50
clients before LIRAB in the past three years. LIRAB stated
“[t]he total amount of $14,720.41 for Attorney’s fees is
reasonable,” and approved that amount.3
C. ICA Proceedings
1. Masui’s arguments
On April 23, 2016, Masui appealed LIRAB’s Order to the ICA.
On appeal, Masui argued the plain language of HRS § 386-94,
“Attorneys, physicians, other health care providers, and other
fees,” only authorized LIRAB to approve or disapprove attorneys’
fees, not to amend or set them.4 Masui maintained LIRAB did not
3 LIRAB’s Order also reduced Masui’s requested hours. However, Masui did
not appeal LIRAB’s reduction of his requested hours.
4 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.
(continued . . .)
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have implied power to amend hourly rates because such power was
“not reasonably necessary to effectuate the express power to
approve fees,” citing TIG Ins. Co. v. Kauhane, 101 Hawaiʻi 311,
67 P.3d 810 (App. 2003).
Masui also argued the legislative history of HRS § 386-94
indicated the legislature did not intend to give LIRAB the power
to set an attorney’s hourly rates. In this regard, Masui
pointed out that, in 2005, the Department of Labor and
Industrial Relations (“DLIR”) had proposed amendments to the
workers’ compensation administrative rules that would have
empowered the DLIR Director to “determine the maximum allowable
hourly rate” of attorneys and to “adjust the hourly rate and the
number of hours requested.” The legislature, however, rejected
this proposal and stated in a standing committee report that the
proposed amendment “represents a usurpation of legislative
authority.” H. Stand. Comm. Rep. No. 1527, in 2005 House
Journal, at 1633.
Masui contended that, in response to DLIR’s proposed
changes, the legislature introduced Senate Bill (“SB”) 1808,
with the purpose to: “(1) Codif[y] into law the existing HAR
that reflect the purpose and intent of the Legislature in
(continued. . .)
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.
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enacting chapter 386, HRS; [and] (2) Assure[] that the
Administration does not usurp the authority of the Legislature
in creating laws by limiting the Director’s rulemaking
authority . . . .” Id. The legislature further stated that,
while DLIR was allowed to review attorneys’ fees, “[t]hat
review . . . was not unfettered and fees that were reasonable
were to be approved.” Id. The legislature also expressed
concern that DLIR’s proposed amendments “would result in
claimants being unable to secure attorneys in disputed
compensability cases.” Id.
Masui asserted that SB 1808 “was subsequently passed into
law and reflects the current language contained in HRS
§ 386-94.” Masui argued that because the legislature rejected
DLIR’s Hawai‘i Administrative Rules (“HAR”) amendments and
because of the concerns it expressed in doing so, HRS § 386-94
“acknowledge[s] the lack power” to amend requested hourly rates.
Masui also argued that, because LIRAB did not have the power to
amend or set attorneys’ fees, it had engaged in improper
rulemaking pursuant to HRS chapter 91, and its “self-made rule
of setting hourly rates is invalid.”
Masui additionally asserted that, even if LIRAB had
authority to amend hourly rates, LIRAB did not adequately
explain its decision to amend his hourly rate. Masui cited
Pickett v. Cheesecake Factory Rests., Inc., CAAP-XX-XXXXXXX, at
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7 (App. Aug. 31, 2016) (mem.), in which the ICA ruled that a
“recitation of factors enumerated in HRS § 386-94 is not an
explanation” for a reduction of an attorney’s hourly rate and
that LIRAB was “required to apply those factors based on
evidence submitted to it so that a reviewing body may adequately
assess whether the LIRAB abused its discretion.”
Finally, Masui argued LIRAB abused its discretion by
considering factors not expressly enumerated in HRS § 386-94
when it considered the “number of clients represented before the
Board, as well as Attorney’s responsiveness and timeliness.”
2. Atlas/HEMIC’s arguments
Atlas/HEMIC argued that LIRAB “retains the authority to
determine reasonable attorney’s fees and costs,” and that if the
legislature had intended to limit DLIR’s discretion, the
legislature “would have initiated these statutory changes.”
Atlas/HEMIC also contended that courts “should defer to the
agency expertise of LIRAB acting within its area of expertise,”
citing Nakamura v. State, 98 Hawaiʻi 263, 270-71, 47 P.3d 730,
737-38 (2002) and Igawa v. Koa House Rest., 97 Hawaiʻi 402, 409-
10, 38 P.3d 570, 577-78 (2001).
3. SDO
On October 8, 2019, the ICA issued its SDO affirming
LIRAB’s Order. Botelho v. Atlas Recycling Center, LLC, CAAP-16-
0000349 (App. Oct. 8, 2019) (SDO).
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First, the ICA rejected Masui’s argument that HRS § 386-94
did not authorize LIRAB to amend or set attorneys’ hourly rates.
Botelho, SDO at 5. The ICA reasoned that the “plain language of
HRS § 386-94” authorized LIRAB to consider a list of factors,
including “those usually and customarily taken into account in
setting an attorney’s hourly billing rate . . . .” Botelho, SDO
at 6. The ICA also noted that Masui had previously argued that
LIRAB was not allowed to “set” hourly rates in DeMello v. Gas
Co., CAAP-XX-XXXXXXX (App. Aug. 12, 2016) (mem.), and it cited a
portion of DeMello stating that “[n]othing in HRS § 386-94
precludes [LIRAB] from employing the ‘lodestar method’ of
calculating reasonable attorney’s fees, under which reasonable
attorney’s fees are calculated by [multiplying] the number of
hours reasonably expended by a reasonable hourly rate.”
Botelho, SDO at 6 (quoting DeMello, mem. op. at 3). Therefore,
the ICA held that HRS § 386-94 gave “LIRAB discretion to vary
the requesting attorney’s hourly billing rate . . . .” Id.
Second, the ICA determined LIRAB had provided a reasonable
explanation for its decision to reduce Masui’s attorney’s fees.
Id. The ICA stated that the “burden is on the party seeking
attorneys[’] fees to prove such fees were reasonably and
necessarily incurred,” citing DFS Group L.P. v. Paiea
Properties, 110 Hawaiʻi 217, 226, 131 P.3d 500, 509 (2006) (Moon,
CJ., concurring). Botelho, SDO at 7. The ICA noted that
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Masui’s fee application did not provide information about his
experience in workers’ compensation secondary appeals, his level
of experience in civil, criminal, family, or administrative
agency appellate practice, the usual or customary hourly billing
rates of Hawaiʻi lawyers who practice workers’ compensation
secondary appeals, or the hourly billing rates of any Hawaiʻi
appellate practitioners. Id. Therefore, the ICA held LIRAB had
not abused its discretion in reducing Masui’s hourly billing
rate based on the record before it. Botelho, SDO at 7-8.
Third, the ICA held LIRAB did not abuse its discretion by
considering factors not expressly enumerated by HRS § 386-94
because the “statute’s use of the phrase ‘such as’” indicated
that the list of factors was not exhaustive. Botelho, SDO at 8.
The ICA entered judgment on December 6, 2019.
D. Application for writ of certiorari
In his first question on certiorari, Masui argues the ICA
erred in interpreting HRS § 386-94 because the plain language of
the statute only allows LIRAB to “consider” the reasonableness
of attorneys’ hourly rates, not to establish or set attorneys’
hourly rates. Masui argues that even if the statute is
ambiguous, the legislature “specifically declined to amend the
law to give the DLIR the power to set hourly rates” in 2005.
In his second question, Masui argues the ICA failed to use
the correct standard of agency review under HRS § 91-14(g)
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(2016), “thus failing to consider if the LIRAB acted ultra
vires.” Masui contends the proper standard of review is whether
LIRAB’s decision was “in violation of [a] constitutional or
statutory provision” or “in excess of statutory authority or
jurisdiction of the agency,” not the abuse of discretion
standard. Masui also asserts that LIRAB had relied on a “fee
schedule” and had “been setting hourly rates for all workers’
compensation attorneys for a period of years, (including Masui)
without explanation . . . .” Masui argues that this practice
is effectively a “rule” pursuant to HRS § 91-1 (Supp. 2017) and
that LIRAB therefore “engaged in improper rulemaking” by acting
in excess of its statutory powers.
In his third question, Masui argues the ICA erred by
failing to find LIRAB’s Order was arbitrary, capricious, or
characterized by an abuse of discretion pursuant to HRS
§ 91-14(g). Masui asserts the ICA’s SDO is “inconsistent with
its other rulings regarding attorneys’ fees awarded” by LIRAB,
and that the “mere recitation of statutory criteria that may be
considered for fee approval” without further explanation of the
fee reduction is an abuse of discretion.
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III. Standards of Review
A. Administrative agency appeals
“Appellate review of a LIRAB decision is governed by HRS
§ 91-14(g)[.]” Igawa, 97 Hawaiʻi at 405-06, 38 P.3d at 573-74.
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;
(2) In excess of the statutory authority or
jurisdiction of the agency;
(3) Made upon unlawful procedure;
(4) Affected by other error of law;
(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.
B. Statutory interpretation
“The interpretation of a statute is a question of law that
is reviewed de novo.” Morgan v. Planning Dept., Cty. of Kaua‘i,
104 Hawaiʻi 173, 179, 86 P.3d 982, 988 (2004) (quoting State v.
Mara, 98 Hawai‘i 1, 10, 41 P.3d 157, 166 (2002)).
When construing a statute, our foremost obligation is to
ascertain and give effect to the intention of the
legislature, which is to be obtained primarily from the
language contained in the statute itself. And we must read
statutory language in the context of the entire statute and
construe it in a manner consistent with its purpose.
When there is doubt, doubleness of meaning, or
indistinctiveness or uncertainty of an expression used in a
statute, an ambiguity exists . . . .
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In construing an ambiguous statute, 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.
Moreover, the courts may resort to extrinsic aids in
determining legislative intent. One avenue is the use of
legislative history as an interpretive tool.
104 Hawaiʻi at 179-80, 86 P.3d at 988-89 (quoting State v.
Sullivan, 97 Hawai‘i 259, 262, 36 P.3d 803, 806 (2001)).
IV. Discussion
A. The ICA did not fail to utilize the correct standard of
agency review
We address Masui’s second question first because it
concerns the applicable standard of agency review. Masui argues
the ICA erred in “failing to use the correct standard of agency
review” by only applying the abuse of discretion standard to
LIRAB’s Order. Masui asserts the ICA should have considered
whether LIRAB’s actions were “in violation of constitutional or
statutory provisions” or “in excess of the statutory authority
or jurisdiction of the agency” pursuant to HRS § 91-14(g)(1) and
(2).
Because the issue before the ICA was whether HRS § 386-94
authorized LIRAB to amend or set attorneys’ requested hourly
rates, the proper standard of review under HRS § 91-14(g) was
whether LIRAB acted in excess of its statutory authority. The
ICA did not specifically discuss this standard. The ICA
implicitly determined, however, that it was within LIRAB’s
statutory authority to amend Masui’s hourly rate when it held
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that LIRAB did not abuse its discretion in doing so. The ICA
examined the plain language of HRS § 386-94 and determined that
it authorized LIRAB to consider “the hourly rate customarily
awarded attorneys possessing similar skills and experience,” and
other factors including those “customarily taken into account in
setting an attorney’s hourly billing rate . . . .” Botelho, SDO
at 6. Thus, in this regard, the ICA did not err.
B. The ICA’s statutory interpretation of HRS § 386-94
1. HRS § 386-94 authorizes LIRAB to adjust attorneys’
requested hourly rates in awarding reasonable fees
Masui’s first question on certiorari is whether the ICA
erred in failing to construe HRS § 386-94 in light of the
statute’s legislative history. The ICA held that HRS § 386-94
authorizes LIRAB to “vary the requesting attorney’s hourly
billing rate to arrive at an award of ‘reasonable attorney’s
fees[.]’” Botelho, SDO at 6 (brackets in original). Masui
argues the ICA erred in interpreting HRS § 386-94 because the
plain language of the statute “only allows agencies to ‘examine’
or ‘inspect,’ among other factors, the reasonableness of the
hourly rate that a workers’ compensation attorney may establish
in their fee agreements with their clients.” Masui contends
that even if the statute’s language is ambiguous, the
legislative history and intent behind HRS § 386-94 “was to
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specifically deprive the agencies of the power to set attorneys’
hourly fee rates in workers’ compensation cases.”
“The interpretation of a statute is a question of law that
is reviewed de novo.” Morgan, 104 Hawaiʻi at 179, 86 P.3d at
988. “When construing a statute, our foremost obligation is to
ascertain and give effect to the intention of the legislature,
which is obtained primarily from the language contained in the
statute itself.” Id. (quoting Sullivan, 97 Hawai‘i at 262, 36
P.3d at 806). Pursuant to HRS § 91-14(g)(2), courts may reverse
or modify an agency’s decision “if the substantial rights of the
petitioner[] may have been prejudiced because the
administrative . . . order[ is] . . . [i]n excess of the
statutory authority or jurisdiction of the agency[.]”
HRS § 386-94 provides that “[c]laims 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.” HRS
§ 386-94 additionally provides factors LIRAB may consider “[i]n
approving fee requests,” stating:
[T]he director,[5] 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.
5 HRS § 386-1 (2017) provides that “‘[d]irector’ means the director of
labor and industrial relations” for the purposes of HRS chapter 386.
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(Emphasis added.)
HRS § 386-94 explicitly allows LIRAB, the director, as well
as the courts, to consider hourly rates customarily awarded to
attorneys possessing similar skills and experience in
determining what constitutes a reasonable attorney’s fee. Thus,
the statute clearly allows LIRAB to adjust an attorney’s
requested hourly rate in approving reasonable attorney’s fees.
The sentence, “In all cases, reasonable attorney’s fees shall be
awarded[,]” also requires LIRAB to reduce an attorney’s hourly
rate if it is unreasonably high. Thus, HRS § 386-94 is not
ambiguous.
Even if HRS § 386-94 was ambiguous, however, an examination
of the statute’s legislative history shows that the
legislature’s intent is consistent with the statute’s plain
language.
Hawaiʻi’s workers’ compensation law was enacted in 1915, and
the section addressing attorneys’ fees provided, in relevant
part, “Claims of attorneys and of physicians for services under
this Act shall be subject to the approval of the board.”
Revised Laws of Hawaiʻi (“RLH”) Act 221 § 45 (1915). In 1955,
that section was amended to provide that “[c]laims of attorneys
and physicians . . . shall not be valid unless approved by the
director, or . . . unless approved by such court.” RLH § 4453
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(1955). When the statute was again amended in 1985, a
conference committee report noted that, “[c]laimant attorney and
witness fees need to be regulated by the Director to protect the
claimant against any excessive charges since such fees are
enforced as a lien against the compensation awarded the
claimant.” Conf. Comm. Rep. No. 74, in 1985 House Journal, at
946-47 (emphasis added).
In 2005, DLIR amended HAR § 12-10-69,6 “Attorney’s fees,” by
adding language to allow the DLIR director to “determine the
maximum allowable hourly rate” of attorneys’ fees and “to adjust
the hourly rate and the number of hours requested,” and adding
factors the director may consider in doing so. Dept. of Labor &
Indus. Relations, Recommendation to the Governor on Proposed
Rules for Workers’ Compensation Reform 2005 120 (2005) (available
at http://dlir.state.hi.us/labor/pdf/wc_recomm.pdf) (hereinafter
“DLIR, Recommendation”). The amendment to HAR § 12-10-69(b)
read:
The director shall determine the maximum allowable hourly
rate of the attorney and reasonable time allowable on each
workers’ compensation case. In approving attorney’s fee
requests, the director will consider the approved hourly
rate of the attorney and the number of hours approved.
Factors to be considered in determining an attorney’s
approved hourly rate include the number of years practicing
as an attorney, the number of cases representing workers’
compensation claimants during the last three years, and any
other pertinent factors that should be considered in
determining the hourly rate. Factors considered in
determining the number of hours allowable include the time
and effort required by the complexity of the case, novelty
6 HAR § 12-10-69 implements HRS § 386-94. See HAR § 12-10-69 (2011).
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and difficulty of issues, benefits obtained for the injured
employee, and arguments made by the attorney and injured
employee. The director reserves the right to adjust the
hourly rate and the number of hours requested.
(Emphasis added.)
Prior to DLIR’s 2005 amendments, HAR § 12-10-69(b) had
provided:
In approving fee requests, the director may consider
factors such as: the attorney’s skill and experience in
Hawaii workers’ compensation matters; time and effort
required by the complexity of the case; novelty and
difficulty of issues; fees awarded in similar cases;
benefits obtained for the claimant; hourly rate customarily
awarded attorneys possessing similar skill and experience;
and fees awarded in compensation cases usually come out of
the employee’s award.
Based on its concern regarding DLIR’s 2005 amendments to
the workers’ compensation administrative rules, including the
amendment to HAR § 12-10-69(b), in 2005, the legislature passed
SB 1808 amending sections of HRS chapter 386 to “[a]ssure[] that
the Administration does not usurp the authority of the
Legislature in creating laws by limiting the Director’s
rulemaking authority . . . .” H. Stand. Comm. Rep. No. 1527, in
2005 House Journal, at 1634. In a standing committee report,
the Committee on Finance specified:
The intent of this measure is to protect the constitutional
mandate that the Legislature draft the laws to establish
policies governing the people of Hawaii. Any delegation of
our legislative powers to the Executive Branch for
rulemaking is administrative in nature and does not give
the Executive Branch the power to make or change the laws
through rulemaking.
H. Stand. Comm. Rep. No. 1527, in 2005 House Journal, at 1633.
In another standing committee report, the Committee on Ways and
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Means stated, “The purpose of this measure is to invalidate
workers’ compensation rules adopted on or after January 1, 2005”
and to “codif[y] administrative rules that were in effect prior
to January 1, 2005, which fairly and reasonably implemented the
underlying statutes.” Stand. Comm. Rep. No. 993, in 2005 Senate
Journal, at 1500 (emphasis added).
The Committee on Finance stated that DLIR’s rule amendments
regarding the payment of attorneys’ fees were “in direct
conflict with existing statutory law, rules, policies and case
law.” The Committee on Finance appeared to focus, however, on
DLIR’s proposed factors for the director to consider in awarding
fees and a cap on attorneys’ fees that was not actually adopted
in the 2005 HAR amendments,7 stating:
[t]he Legislature provided for payment of attorney fees
upon review by the Director. (Section 386-94, HRS.) That
review, however, was not unfettered and fees that were
reasonable were to be approved. (See section 386-93(a),
HRS.) The Administration proposes to impose factors that
are not relevant in determining if fees are reasonable.
(See proposed changes to section 12-10-69(b), HAR.)
Arbitrarily limiting claimant attorney fees to 15 percent
of the compensation paid would result in no payment if the
claimant loses on compensability and arbitrarily reduce
legal payments in other disputed areas of a claim.
H. Stand. Comm. Rep. No. 1527, in 2005 House Journal, at 1634.
The Committee on Finance also expressed concern that limitations
7 It appears DLIR initially proposed amending HAR § 12-10-69 to cap “the
maximum allowable attorney’s fees to be no greater than 15% of the benefits
awarded to claimants . . . .” DLIR, Recommendation at 37. However, this
provision was withdrawn from DLIR’s proposed amendment based on testimony
opposing the 15% cap. Id. at 38.
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on attorneys’ fees may discourage attorneys from practicing in
workers’ compensation, stating, “In practicality, the proposed
changes would result in claimants being unable to secure
attorneys in disputed compensability cases . . . .” Id. None
of the standing committee reports for SB 1808 discussed whether
the power to “approve” reasonable attorneys’ fees included the
power to adjust attorneys’ hourly rates.
The legislature then amended HRS § 386-72 (Supp. 2005)
(repealed and reenacted 2007) to prevent all of DLIR’s 2005 rule
amendments, including the amendment to HAR § 12-10-69(b), from
having “the force and effect of law.” Importantly, however, the
legislature also amended HRS § 386-94 by incorporating the pre-
DLIR amendment version of HAR § 12-10-69(b) factors into the
statute. Before DLIR’s 2005 amendments, HAR § 12-10-69(b)
provided:
In approving fee requests, the director may consider
factors such as: the attorney’s skill and experience in
Hawaii workers’ compensation matters; time and effort
required by the complexity of the case; novelty and
difficulty of issues; fees awarded in similar cases;
benefits obtained for the claimant; hourly rate customarily
awarded attorneys possessing similar skill and experience;
and fees awarded in compensation cases usually come out of
the employee’s award.
SB 1808 amended HRS § 386-94 to include language almost
identical to the pre-DLIR amendment version of HAR
§ 12-10-69(b), outlining factors that may be considered in
approving attorneys’ fees. The amended HRS § 386-94 added the
following language:
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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.
Thus, the legislative history of HRS § 386-94 shows that
the legislature intended to give LIRAB the ability to adjust
attorneys’ requested hourly rates. The 2005 amendment to HRS
§ 386-94 explicitly authorized the director to adjust requested
hourly rates in approving reasonable attorneys’ fees. The
legislature also adopted most of the pre-2005 amendment HAR
§ 12-10-69 factors when it amended HRS § 386-94 in 2005. Those
factors permit the director, LIRAB, or a court to consider “the
hourly rate customarily awarded attorneys possessing similar
skills and experience,” indicating an attorney’s requested
hourly rate can be adjusted by the director, LIRAB, or a court
when approving attorneys’ fees.
Although the legislature nullified DLIR’s 2005 amendments
to HAR § 12-10-69, which explicitly articulated the director’s
power to adjust hourly rates and added new factors to consider
in approving fees, that blanket nullification applied to all of
DLIR’s 2005 rule amendments, not just HAR § 12-10-69.
Additionally, the legislature’s opposition to DLIR’s rule
amendments focused on the addition of “factors that are not
relevant in determining if fees are reasonable” through
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rulemaking and arbitrary caps on attorneys’ fees. Yet, the
legislature included language patterned on the pre-amendment
version of HAR § 12-10-69(b) in amending HRS § 386-94. The
legislature also stated that its amendments to HRS chapter 386
were meant to codify the pre-2005 amendment version of the
workers’ compensation administrative rules, “which fairly and
reasonably implemented the underlying statutes.” Stand Comm.
Rep. No. 993, in 2005 Senate Journal, at 1500. Thus, the
director or LIRAB can adjust attorneys’ requested hourly rates
in approving reasonable attorneys’ fees.
We also note that HRS § 386-94 provides that courts may
approve attorneys’ fees when “deciding [an] appeal.” It would
be absurd to interpret HRS § 386-94 as prohibiting courts, which
regularly review attorneys’ fee requests, from adjusting hourly
rates.8 Awarding attorneys’ fees is also a judicial function.
See In re Malone, 886 A.2d 181, 184 (N.J. Supp. Ct. App. Div.
2005) (“Setting an award of counsel fees is, in our opinion, in
the nature of a judicial function.”); see also Hoffert v.
General Motors Corp., 656 F.2d 161, 165 (5th Cir. 1981) (holding
the district court’s review of the reasonableness of attorney’s
fees in approving the terms of a settlement agreement “was
essential to the district court’s disposition of the case
8 This is especially true for this court, which has the authority to
prescribe and enforce rules governing the reasonableness of attorney’s fees.
See Hawai‘i Rules of Professional Conduct Rule 1.5 (2019).
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presented to it for decision.”); Joseph v. C.C. Oliphant Roofing
Co., 711 A.2d 805, 808 (1997) (holding that “regulation of
attorney’s fees is a judicial function[.]”). Thus, prohibiting
courts from reviewing the reasonableness of attorneys’ fees and
from adjusting hourly rates would abrogate a judicial function.
Neither the language of HRS § 386-94 nor the statute’s
legislative history indicates any such legislative intent.
Therefore, the ICA did not err in interpreting HRS § 386-94
as granting “LIRAB discretion to vary the requesting attorney’s
hourly billing rate to arrive at an award of ‘reasonable
attorney’s fees[.]’” Botelho, SDO at 6.
2. HRS § 386-94 does not authorize DCD or LIRAB to
predetermine hourly rates for workers’ compensation
attorneys
In his first question on certiorari, Masui also argues the
ICA erred in interpreting HRS § 386-94 because the plain
language of the statute does not allow LIRAB to set attorneys’
hourly rates or establish a “rate schedule,” and LIRAB “acted in
excess of its statutory powers” when it “assumed the power to
set attorneys’ hourly fee rates.” Masui notes that a “critical
fact” is that LIRAB and the ICA “relied on [LIRAB’s] ‘approved
hourly rate’ schedule (over a period of 2009-2012) for [him].”
Masui contends that this “fee schedule” “clearly discloses that
[LIRAB] has been setting hourly rates for all workers’
compensation attorneys for a period of years, (including Masui)
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without explanation . . . nor any other source of statutory
authority for rate-setting.”
While Masui argued before the ICA that HRS § 386-94 did
not give LIRAB the power to “amend or set” an attorney’s hourly
rate, the ICA’s holding implies that HRS § 386-94 authorizes
LIRAB to set attorneys’ hourly rates. In addressing Masui’s
argument that LIRAB did not have the power to “amend or set”
hourly rates, the ICA simply stated, “[w]e disagree.” Botelho,
SDO at 5 (emphasis added). The ICA then noted that Masui had
made this argument in DeMello, and quoted the following portion
of that case:
DeMello argues that the LIRAB is not allowed to set hourly
rates, and must only consider the hourly rate customarily
awarded attorneys possessing similar skills and
experience. Nothing in HRS § 386–94 precludes the LIRAB
from employing the “lodestar method” of calculating
reasonable attorney’s fees, under which reasonable
attorney’s fees are calculated by the number of hours
reasonably expended by a reasonable hourly rate.
DeMello, mem. op. at 3 (emphasis added). This quote’s
discussion of the “lodestar method” does not, however, actually
address Masui’s contention that HRS § 386-94 does not authorize
LIRAB to set hourly rates. The ICA then discussed LIRAB’s
ability to “vary the requesting attorney’s hourly billing rate”
when awarding attorneys’ fees, but it did not otherwise directly
address whether LIRAB had a practice of setting, not just
adjusting, workers’ compensation attorneys’ hourly rates.
Botelho, SDO at 6.
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It appears, however, that DCD and LIRAB have a practice of
predetermining workers’ compensation attorneys’ hourly rates to
be applied to future cases. A downloadable form titled
“Attorney Hourly Rate Increase Request” currently appears on
DCD’s website under the “Attorney Fee Request” form.9 The form
quotes HRS § 386-94’s factors that the director, LIRAB, or
courts may consider in awarding attorneys’ fees. The form then
states: “Please complete the information below which will assist
us in determining your authorized hourly rate as required under
section 386-94, HRS.” The form asks for attorneys to provide
information regarding the date they were licensed, the number of
years they have practiced law in Hawaiʻi, their years of Hawaiʻi
workers’ compensation experience, the number of Hawaiʻi workers’
compensation cases they handled in the last ten years, their
last three workers’ compensation cases, their “current rate,”
and the “rate being requested.” (Emphasis added.) The form
also provides space for the attorney’s “approved hourly rate”
and for the signature of the official approving that rate. DCD
has apparently used some version of this form since at least
2012, as Pickett, a case also involving Masui, makes reference
9 See DCD, Forms, https://labor.hawaii.gov/dcd/forms/ (last visited Mar.
23, 2020) (form available at https://perma.cc/HJ29-8KFA). This form is not
included in the record. However, as the availability of this form on DCD’s
website is “capable of accurate and ready determination by resort to sources
whose accuracy cannot reasonably be questioned,” this court takes judicial
notice of the form. Hawaiʻi Rules of Evidence Rule 201 (1980).
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to a “DCD document, dated July 25, 2012, approving Masui’s
request for an increase in his hourly rate to $160.” Pickett,
mem. op. at 3 (emphasis added).
As discussed in Pickett, mem. op. at 2, the then-DCD
director Dwight Takamine apparently approved Masui’s request for
an increase of his hourly rate from $160 to $210. However,
LIRAB reduced Masui’s requested hourly rate of $210 to $165.
Masui filed a motion for reconsideration, arguing that the
“artificially low rates” in workers’ compensation cases had
reduced “access to legal representation for injured workers.”
Pickett, mem. op. at 3. He also asserted that LIRAB’s “past
practice” had followed DCD’s hourly rates by “adding an
additional $5.00 per hour, which is an arbitrary method.” Id.
LIRAB denied Masui’s motion for reconsideration, stating:
[T]here is no statutory requirement that the [LIRAB] must
automatically increase attorney hourly rates in tandem with
DCD rate increases. Furthermore, the [LIRAB] refuses to
cede its statutory authority to review and approve fee
requests and attorney hourly rates based on a unilateral
rate increase by the former Director that was tied solely
to years of experience.
Pickett, mem. op. at 6. LIRAB then determined that an hourly
rate of $165 for work before LIRAB was the rate “customarily
awarded attorneys possessing similar skills and experience.”
Pickett, mem. op. at 5. LIRAB also noted that it “receives
annual or semiannual requests from attorneys seeking to increase
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their hourly rates for legal work on appeal.” Pickett, mem. op.
at 4 (emphasis added).
Although LIRAB correctly stated that there is “no statutory
requirement that [LIRAB] must automatically increase attorney
hourly rates in tandem with DCD rate increases,” LIRAB appeared
to rely on a previously set “approved hourly rate of $165.00”
for work before LIRAB in awarding attorney’s fees to Masui.
Pickett, mem. op. at 5-6. Notably, this approved rate of $165
was $5 above DCD’s pre-increase rate of $160—consistent with
Masui’s assertion that it was LIRAB’s practice to set hourly
rates $5 above DCD’s hourly rates. See Pickett, mem. op. at 3.
Furthermore, LIRAB acknowledged that it received requests from
attorneys seeking “increases” to their hourly rates, suggesting
LIRAB had a practice of prospectively setting workers’
compensation attorneys’ hourly rates. Pickett, mem. op. at 4.
This practice of predetermining hourly rates was also
alluded to in DeMello, in which Masui argued that an hourly rate
of $210 had been “approved by the DCD,” and that “the [LIRAB]
rate” has “historically been $5 to $10 above the DCD rate.”
DeMello, mem. op. at 1. Masui also stated that he “continue[d]
to reserve [his] objection to the setting of hourly rates by the
DCD and [LIRAB].” DeMello, mem. op. at 2 (emphasis added). In
addressing an argument by the employer in that case, Masui noted
that “[i]f hourly [rates] were freely established such rates
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would also parallel hourly rates customarily charged in the
legal community,” suggesting workers’ compensation attorneys
were not free to set their own hourly rates. Id. (emphasis
added).
In this case, it appears LIRAB similarly relied on a
predetermined “approved hourly rate,” as it stated in its Order
reducing Masui’s requested hourly rate from $325 to $165 that
“[Masui’s] approved hourly rate for the period 2009 through 2012
was $165.00 per hour,” indicating that LIRAB had set Masui’s
hourly rate at $165 for those four years.
HRS § 386-94 authorizes DCD and LIRAB to adjust an
attorney’s hourly rate when approving an attorney’s request for
fees. The plain language of HRS § 386-94 provides factors that
may be considered, such as an attorney’s experience in workers’
compensation and the hourly rate customarily awarded to
attorneys possessing similar skills and experience, “[i]n
approving fee requests.” The language of the statute does not
state, however, that DCD or LIRAB are authorized to set an
attorney’s hourly rate before a request for attorneys’ fees has
been submitted.
Even if it could be argued that the statute’s language is
ambiguous in this regard, the legislative history of HRS
§ 386-94 clearly shows that the legislature did not intend to
allow DCD or LIRAB to set an attorney’s hourly rate before a
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request for attorneys’ fees has been submitted. In adopting the
amended version of HRS § 386-94 in 2005, as noted, the
legislature explicitly rejected and abrogated the 2005 amendment
to HAR § 12-10-69(b) stating “The director shall determine the
maximum allowable hourly rate of the attorney and reasonable
time[10] allowable on each workers’ compensation case.” The
legislature also rejected DLIR’s attempt to impose “arbitrary”
caps on attorneys’ fees out of concern that it would result in
“claimants being unable to secure attorneys” in workers’
compensation cases. See H. Stand. Comm. Rep. No. 1527, in 2005
House Journal, at 1634. As expressed by the legislature,
predetermining workers’ compensation attorneys’ hourly rates,
especially at rates lower than those approved in other types of
civil cases, may well discourage attorneys from accepting
workers’ compensation cases.
Thus, the DCD and LIRAB are not authorized by HRS § 386-94
to predetermine workers’ compensation attorneys’ hourly rates,
and the DCD “Attorney Hourly Rate Increase Request” form’s
statement that HRS § 386-94 “requires” DCD to determine workers’
compensation attorneys’ “authorized” hourly rates is
10 We note that in this case, Masui’s hours were also reduced, but that
Masui has not challenged this basis of his fee reduction.
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unauthorized.11 See Haole v. State, 111 Hawai‘i 144, 152, 140
P.3d 377, 385 (2006) (“Administrative rules and regulations
which exceed the scope of the statutory enactment they were
devised to implement are invalid and must be struck down.”)
(citations omitted).
LIRAB’s Order indicates LIRAB predetermined Masui’s hourly
rate “for the period 2009 through 2012” at $165. Because it is
not within LIRAB’s statutory authority to predetermine an
attorney’s hourly rate to be applied to future cases, to the
extent LIRAB relied on a predetermined hourly rate for Masui in
reducing his requested hourly rate, it acted beyond its
statutory authority and abused its discretion.
C. The ICA erred in holding that LIRAB adequately explained
its reduction of Masui’s attorney’s fees
Masui’s third question on certiorari is whether the ICA
erred in failing to find that LIRAB’s Order was arbitrary,
capricious, or characterized by an abuse of discretion. In
order to determine whether LIRAB abused its discretion by
reducing Masui’s requested hourly rate, we must first determine
whether LIRAB’s explanation for its reduction is adequate to
enable judicial review.
11 While the amount awarded to the individual attorney in past cases may
be a relevant consideration in evaluating a fee request, particularly if
their qualifications have not changed, DCD and LIRAB nonetheless must make an
individualized determination of what constitutes “reasonable” fees in a given
case.
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In its SDO, the ICA held LIRAB’s explanation for its
reduction of Masui’s hourly rate was adequate because “[t]he
burden is on the party seeking attorneys[’] fees to prove such
fees were reasonably and necessarily incurred,” citing a
concurrence in a non-workers’ compensation case. Botelho, SDO
at 6 (citing DFS Group. L.P., 110 Hawaiʻi at 226, 131 P.3d at 509
(Moon, C.J., concurring)). The ICA determined that because
Masui’s request for attorneys’ fees did not provide the
customary billing rates of Hawaiʻi lawyers practicing workers’
compensation secondary appeals or the customary billing rates of
any Hawai‘i appellate practitioners, LIRAB’s explanation was
adequate “based on the record before it.” Botelho, SDO at 7.
The ICA erred in holding that it was Masui’s burden to
prove that his requested fees were reasonable and by suggesting
that Masui should have submitted information regarding the
hourly rates of Hawaiʻi attorneys practicing workers’
compensation secondary appeals and the customary billing rates
of Hawai‘i appellate practitioners. Botelho, SDO at 7. HRS
§ 386-94 does not place a burden on the attorney seeking fees to
prove that such fees were reasonable. Rather, the statute gives
the director, LIRAB, and courts the power to review fee requests
and provides factors that may be considered in awarding
reasonable attorneys’ fees. The statute also does not require
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attorneys’ fee requests to include information about other
attorneys’ hourly billing rates.
HAR § 12-10-69(a), which implements HRS § 386-94, similarly
contains no requirement that attorneys’ provide information
about other attorneys’ rates. HAR § 12-10-69(a) requires
attorneys’ requests for fees to include a “breakdown of the time
expended and cost incurred in each activity up to and including
the date of the decision,” and it notes that the director “may
require additional details and justification of time billed or
costs claims.” Furthermore, DLIR’s standard “request for
approval of attorney’s fees” form only lists as “required
attorney information” an attorney’s years of experience in
workers’ compensation cases, the number of cases that attorney
participated in before DCD in the last three years, and the
number of cases that attorney participated in before LIRAB in
the last three years.12 These requirements are permitted by
statute, as HRS § 386-94 allows for consideration of an
attorney’s experience in state workers’ compensation matters.
However, neither HAR § 12-10-69 nor DLIR’s “request for approval
of attorney’s fees” form requires attorneys to provide
information about other attorneys’ hourly rates.
12 Masui provided the “required attorney information” in his request for
attorney’s fees. Masui also attached a “breakdown of time expended and cost
incurred in each activity” related to the representation, as required by HAR
§ 12-10-69.
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Therefore, no statute or rule required Masui to provide
information about the customary billing rates of Hawaiʻi lawyers
practicing workers’ compensation secondary appeals or of Hawai‘i
appellate practitioners. Although HRS § 386-94 explicitly
allows consideration of “the hourly rate customarily awarded
attorneys possessing similar skills and experience” in awarding
attorneys’ fees, it appears it would be the director, LIRAB, and
the courts, and not individual attorneys, that have access to
that information, and attorneys may not know what other
attorneys charge per hour.
In addition, LIRAB has an obligation to provide an adequate
explanation for its reduction of his rate pursuant to McLaren.13
In McLaren, this court held that DCD was “required to set forth
its reasons for reducing [an] attorney’s fees and costs” in
order to “enable appropriate review for abuse of discretion” in
awarding attorneys’ fees. 132 Hawaiʻi at 330-32, 321 P.3d at
681-82. McLaren involved DCD’s unexplained reduction of an
attorney’s requested fees by 47%. 132 Hawaiʻi at 331, 321 P.3d
at 683. This court reasoned that, because LIRAB may review
DCD’s award of attorneys’ fees for an abuse of discretion after
a de novo hearing pursuant to HRS § 386-87 (1993), DCD was
13 Notably, while the ICA determined that Masui’s application for
attorney’s fees did not provide relevant information, LIRAB’s Order did not
cite this lack of information as a reason for its reduction of Masui’s
requested hourly rate.
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required to “set forth its reasons for reducing an attorney’s
fee request for appropriate LIRAB and possible judicial review
of the reduction pursuant to HRS § 91-14.” 132 Hawaiʻi at 331,
321 P.3d at 682. As HRS § 368-88 (2015) provides for judicial
review of LIRAB decisions, LIRAB must also provide an
explanation “sufficient to enable appropriate review for abuse
of discretion” when it amends an attorney’s requested fees. 132
Hawaiʻi at 331-32, 321 P.3d at 682-83.
Following our decision in McLaren, the ICA appropriately
held in Pickett that an adequate explanation for a reduction of
fees requires more than a recitation of the factors LIRAB
considered. Pickett, mem. op. at 9. In Pickett, a case also
involving Masui, LIRAB reduced Masui’s requested hourly rate of
$210 to $165. Pickett, mem. op. at 1-2. While LIRAB provided
some explanation for its reduction, that explanation consisted
of factors LIRAB considered in determining Masui’s attorney’s
fees, a statement of Masui’s experience in workers’ compensation
and the number of clients he had represented before DCD and
LIRAB in the last three years, and a statement that the reduced
hourly rate was reasonable and “consistent with that customarily
awarded to attorneys possessing similar skills and experience
before the [LIRAB].” Pickett, mem. op. at 2.
The ICA held that LIRAB’s “recitation of factors enumerated
in HRS § 386-94 is not an explanation” for a decision to reduce
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requested attorneys’ fees, and that “LIRAB must base its
decision to award or reduce [an] attorney’s fees on properly
submitted evidence and its application of relevant factors in
arriving at a reasonable fee, not just conclusory statements or
beliefs about the factors it considers.” Pickett, mem. op. at
7-8.
Although Pickett was an unpublished disposition, the ICA’s
reasoning in that regard was sound. Requiring LIRAB to do more
than recite its considerations and to explain how it applied
those considerations to its decision to reduce an attorney’s
requested hourly rate and fees is consistent with both the
legislature’s intent for DLIR to regulate claimant attorneys’
fees and its concern that arbitrary limitations on attorneys’
fees may result in claimants being unable to procure
representation. While HRS § 386-94 does not require LIRAB to
consider the factors listed in the statute, judicial review for
an abuse of discretion requires that LIRAB provide reasoning for
how it awarded attorneys’ fees. We therefore hold that, in
explaining its approval of attorney’s fees, LIRAB must provide
more than a recitation of the factors it considers, and it must
articulate how its considerations affected its ultimate
determination of attorneys’ fees.
We note that while Pickett held that “LIRAB must base its
decision to award or reduce [an] attorney’s fees on properly
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submitted evidence,” HRS § 386-94 does not limit LIRAB’s
considerations to submitted evidence. Pickett, mem. op. at 8.
Rather, HRS § 386-94 provides a non-exhaustive list14 of factors
the director, LIRAB, or courts may consider, including “the
amount of fees awarded in similar cases, and “the hourly rate
customarily awarded attorneys possessing similar skills and
experience.” Therefore, while LIRAB should consider the record
in awarding attorneys’ fees, its considerations are not limited
to the evidence.
LIRAB’s explanation for its reduction of Masui’s hourly
rate in this case is almost identical to but even less detailed
than its explanation in Pickett, which was held insufficient.
Pickett, mem. op. at 1-2. In Pickett, LIRAB stated that an
hourly rate of $165 was reasonable and “consistent with that
customarily awarded to attorneys possessing similar skills and
experience before the [LIRAB].” Pickett, mem. op. at 2. In
this case, LIRAB reduced Masui’s hourly rate to $165 without any
statement that such a rate was reasonable or consistent with
rates customarily awarded to attorneys of similar skill and
experience. Instead, LIRAB stated that “[Masui’s] approved
hourly rate for the period 2009 through 2012 was $165.00 per
14 HRS § 386-94 states that DCD, LIRAB, or the court “may consider factors
such as” those listed. Therefore, according to the plain language of HRS
§ 386-94, the factors listed are not exhaustive.
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hour,” making it clear it relied on a predetermined hourly rate
in reducing Masui’s requested hourly rate.
As in Pickett, LIRAB also recited its considerations in
reviewing Masui’s fee request. Those factors included:
[T]he benefits obtained for Claimant in this appeal, the
novelty and difficulty of issues involved on appeal, the
amount of fees awarded in similar appeals, and the hourly
rate customarily awarded workers’ compensation attorneys
possessing similar skills and experience, including
Attorney’s years of practice in the field of workers’
compensation law, the number of clients represented before
the Board, as well as Attorney’s responsiveness and
timeliness.
LIRAB also acknowledged that Masui had practiced workers’
compensation law for approximately 30 years and that he had
represented approximately 100 clients before DCD and 50 clients
before LIRAB in the past three years. LIRAB did not, however,
explain how these considerations affected its decision to reduce
Masui’s requested hourly rate and attorney’s fees.
Because LIRAB recited factors it considered in reducing
Masui’s requested attorney’s fees without explaining how it
applied these factors, LIRAB’s explanation for its reduction of
Masui’s hourly rate was inadequate. Therefore, the ICA erred in
holding that LIRAB’s explanation was adequate, and we are unable
to review whether LIRAB abused its discretion in reducing
Masui’s requested hourly rate.
V. Conclusion
We therefore vacate the ICA’s December 6, 2019 judgment on
appeal and LIRAB’s April 20, 2016 attorney’s fee approval and
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order. This case is remanded to LIRAB for further proceedings
consistent with this opinion.
Stanford H. Masui /s/ Mark E. Recktenwald
for Petitioner
/s/ Paula A. Nakayama
Brian G.S. Choy and
Keith M. Yonamine /s/ Sabrina S. McKenna
for Respondents
/s/ Richard W. Pollack
/s/ Michael D. Wilson
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