Draper v. Aceto

Summary

The Supreme Court of California held that when separately represented employee and employer attorneys actively secure a third-party settlement, each attorney's fee is based on the benefit achieved for that attorney's own client. Because the settlement in this case was insufficient to reimburse the employer's workers' compensation costs, leaving the employee with no recovery, the employee's attorney was not entitled to fees from the settlement proceeds. The court affirmed the Court of Appeal, with the Chief Justice dissenting.

Holdings

1. Under Labor Code section 3860, subdivision (e), when separately represented employer and employee attorneys actively participate in securing a third-party settlement, each attorney's fee is based on the benefit achieved for that attorney's own client and is paid from that client's share of the recovery. If the employee receives nothing because the settlement is less than the employer's reimbursable compensation costs, the employee's attorney may not recover fees from the settlement proceeds.

Questions Presented

1. When an employee and employer are separately represented and both attorneys actively participate in obtaining a third-party settlement, may the employee's attorney recover fees from the settlement when the settlement proceeds are insufficient to reimburse the employer fully and the employee receives no share of the recovery?

Disposition

affirmed