WIEN AIR ALASKA v. ARANT

OPINION

BOOCHEVER, Chief Justice.

This case involves a claim by the wife and two children of a deceased worker for an increase in death benefit payments. We affirm the determination of the Workmen's Compensation Board and the Superior Court's decision that claimants are entitled to an increase. We hold that the formula set forth in AS 23.30.145(a) governs the attorney fee award for the Board proceeding and remand to the Board for a new determination of attorney's fees. We instruct the Superior Court to redetermine reasonable attorney's fees for the appeal, taking into account the Board's fee award.

The facts are little in dispute. William Arant was employed as a pilot by Wien Air Alaska at an average weekly wage of about $1,000.00.1 On August 30, 1975, he died in a work-related plane crash. His wife, Joyce Arant, and his two dependent children (hereinafter the Arants) started receiving workers' compensation payments of $198.40 a week eleven days after the accident.2

On February 13, 1976, the Workmen's Compensation Board received application for adjustment of claim from the Arants, requesting an increase in compensation payments to $357.59 per week. Wien denied that such an increase was due. After a hearing, the Board, applying the table of maximum benefits in AS 23.30.175(a), ruled that Wien should increase payments to $357.59 and awarded the then-successful Arant claimants $500.00 partial reimbursement for claimed attorney's fees.3

Wien appealed the Board's decision to the Superior Court, urging that the increasing maximums in AS 23.30.175 did not apply to death benefits both as a matter of statutory construction and constitutional compulsion; Wien claimed impairment of contract and denial of due process and equal protection.4 Alaska Air Carriers, as amicus curiae, argued against the increase on statutory grounds only. The Arants cross-appealed the award of attorney's fees, arguing that the statutory minimum fee schedule in AS 23.30.145(a) applied because the employer had controverted the claim.

The Superior Court, relying on decisions interpreting the federal Longshoremen's and Harbor Workers' Compensation Act, ruled that Alaska's statute, consistent with the constitution, provided for the increase in payments from $198.40 to $357.59. The court referred the $500.00 award of attorney's fees back to the Board "to conduct a hearing to establish reasonable attorney's fees" for the legal proceedings before it. Pursuant to Appellate Rule 29, the claimants made a motion for attorney's fees and costs for the appeal, and the court awarded $750.00 for attorney's fees and $33.37 for costs.

Wien timely noticed appeal and, before this court, renews only the statutory and the contract clause arguments. The Arants' cross-appeal argues the inadequacy of both the $500.00 award of attorney's fees for the Board proceeding and the $750.00 award for the appeal to the Superior Court.

I. THE INCREASE IN COMPENSATION PAYMENTS

A description of the structure of Alaska's workers' compensation statute is essential in order to understand the Arants' claim for an increase in compensation payments. Alaska has a two-step process for calculating compensation payments. One, the statute specifies a per cent of the deceased or injured employee's average weekly wage5 to which claimants are entitled. Two, the statute specifies a maximum limitation on the weekly award. If the result of the step one calculation, the dollar amount which represents the per cent of the worker's wage, is greater than the maximum limitation, the claimant receives only the maximum limitation.

AS 23.30.215 lays out the basic structure for death benefits. AS 23.30.215(a) indicates the percentage of the deceased employee's wages which specified claimants receive; the statute in effect in 1975, when Arant was killed, provided for an award of 85 per cent of the deceased employee's average weekly wages to a widow and two children.6 AS 23.30.215(b) tells how to calculate the maximum limitation. At the time of Arant's death in 1975, the statutory language provided:

The maximum limitation on temporary total disability payments is found in AS 23.30.175, which provided at the time of Arant's death:

          On                 The Rate Shall Be

July 1, 1975             80 per cent of the state's
                         average weekly wage

January 1, 1976          100 per cent of the state's
                         average weekly wage

January 1, 1977          133.3 per cent of the state's
                         average weekly wage

January 1, 1979          166.6 per cent of the state's
                         average weekly wage

January 1, 1981          200 per cent of the state's
                         average weekly wage.8

AS 23.30.175 thus determines the maximum limitation on death and disability payments9 by reference to increasing percentages of the state's average weekly wage. The statute has specified this method of calculation since 1975. Before 1975, the maximum limitation was a flat dollar amount.10 This recent structural change in the maximum limitation on death benefits is the heart of this controversy.

Wien admits its obligation to pay weekly payments of $198.40. This figure results from the calculation of the first figure in the AS 23.30.175(a) maximum rate table, 80 per cent of Alaska's average weekly wage. Wien contends that the 80 per cent figure is the maximum limitation for claims arising from July 1, 1975, to January 1, 1976. This would mean claims occurring between January 1, 1976, and January 1, 1977, are subject to a maximum limitation of 100 per cent of the state's average weekly wage; claims occurring between January 1, 1977, and January 1, 1979, are subject to a maximum limitation of 133.3 per cent of the state wage; and so forth. Since Mr. Arant died on August 30, 1975, Wien argues that the maximum limitation on the Arants' claim is fixed forever at 80 per cent of the state's average weekly wage.

The Arants' position implies that the entire table governs their claim, not just the first line. They claim entitlement to payments up to the maximum limitation in the right-hand column, as of the date indicated in the left-hand column. This means that as of January 1, 1976, the limitation on their death compensation payments would rise to 100 per cent of the state's average weekly wage; after January 1, 1977, the limitation would rise to 133.3 per cent of the state wage; and so forth.

This dispute requires construction of the workers' compensation statute. The court in Hood v. State, Workmen's Compensation Board, 574 P.2d 811, 813 (Alaska 1978), enunciated the standard of review for such a question:

The meaning of a statutory provision is determined by the language of the particular provision construed in light of the purpose of the whole instrument.12

Wien's position requires that the dates in the left-hand column not only specify when the new rates will apply but also what claims the new rates shall apply to. The Arants' position requires that the dates in the left-hand column be construed to serve a timing function only and that the effective date of the act, May 22, 1975,13 be construed to indicate that all claims arising thereafter shall be subject to the new series of maximum limitations. The language of the provision, the purpose of workers' compensation, and the purpose of the new maximum rate table all coincide in favor of the Arants' position.14 We hold that all claims arising after May 22, 1975 are governed by the increasing rates in the maximum table in AS 23.30.175(a).15

The language of the section favors the Arants' position. The maximum table seems to phase in a new maximum rate for all claimants. AS 23.30.175(a) does not have a third column, which might read as follows:

On               The Rate Shall Be           For All Claims

July 1, 1975     80 per cent of the state's  arising after July 1, 1975,
                 average weekly wage         and before January 1, 1976

January 1, 1976  100 percent of the state's  arising after January 1,
                 average weekly wage         1976, and prior to January 1,
                                             1977

Had the legislature intended Wien's construction, it is likely they would have expressly so indicated. The effective date of the act is the natural date for establishing when the new rates go into effect.

The purpose of workers' compensation is to compensate the victims of work-rated injury for a part of their economic loss, measured by the wage loss to the worker or the surviving family.16 Congress, as part of the Occupational Safety and Health Act,17 created the National Commission on State Workmen's Compensation Laws "to determine if such laws provide an adequate, prompt, and equitable system of compensation for injury or death arising out of or in the course of employment."18 The Commission's report in 1972 found that "[t]he inescapable conclusion is that State workmen's compensation laws in general are inadequate and inequitable."19 It made eighty-four specific recommendations, nineteen of which were designated as "essential" for adequate compensation systems.20 Although there was some sentiment that workers' compensation should be immediately federalized,21 the Commission urged that the progress of the states in implementing the essential recommendations be evaluated on July 1, 1975; and if necessary, Congress should at that time guarantee compliance with the essential recommendations.22

The essential recommendations included an increase in the maximum limitation on death benefit to 200 per cent of the statewide average weekly wage achieved through a phase-in.23 The Council of State Governments stated:

Alaska and other states enacted many of the Commission's recommendations, including the increases in maximum benefit limitations.25 The impetus for action probably came both from the shortcomings revealed by the Commission's report and from the states' desire to avoid federal takeover of the program.26

Alaska's situation illustrates why the Commission found workers' compensation "inadequate and inequitable." In 1975, before the new maximum rates went into effect, the maximum limitation on compensation payments was $175.00,27 but in Alaska, the average weekly wage was $248.00.28 Thus, prior to the 1975 amendments, the statute theoretically granted recipients of death benefits 85 per cent of the deceased worker's wage,29 but most claimants instead received the maximum limitation. The maximum limitations on death benefits frustrated achievement of the purpose of workers' compensation to secure adequate compensation.

Wien's position would leave many workers inadequately compensated. Claimants such as the Arants would be frozen at an amount that did not achieve the purposes of the statute. Really, no workers would receive a phased-in increase; each successive group of workers would be subject to different maximum rates. Wien's position makes the phase-in a device to limit the number of claimants who would have the benefit of an adequate maximum limitation.

The Arants' position accords with the origin of the new rate table and with the purpose of workers' compensation. In AS 23.30.175(a), the legislature adopted the Commission's recommendations for an increase, phasing in an adequate maximum rate for all workers. The large increase restores protection to the worker, while the phase-in protects the employer from the adverse impact that a large, one-step increase might cause.

In response to the National Commission's report, Congress in 1972 enacted amendments fixing new maximum limitations on death and disability payments in the Longshoremen's and Harbor Workers' Compensation Act,30 similar to the maximums in AS 23.30.175(a).31 The purpose of this legislation further supports the Arants' position. The House Committee Report states:

Wien asserts that the intent of one legislature does not determine the intent of another. Both Congress and the Alaska legislature, however, were responding to a similar factual situation: maximum limitations which cut off most compensation claims.33 Both statutes were enacted in response to the critique of the National Commission and embodied its recommendations. The intent of another legislature facing a similar problem and enacting a similar statute is a long-accepted and helpful aid in statutory construction.34 Further, in AS 23.30.175, the Alaska legislature has specifically utilized the federal Longshoremen's Act.35 In a number of instances, this court has referred to federal decisions construing provisions of the Longshoremen's Act which are similar to the Alaska Workmen's Compensation Act.36

Wien and amicus offer two alleged obstacles to the Arants' interpretation: AS 23.30.172 and the impairment of contract clauses of the federal and Alaska constitutions. The mainstay of their argument is an interpretation of AS 23.30.172, which stated:

The scope of this section was decreased in 1976,38 and the section was eliminated entirely in 1977.39 As originally drafted, one version of AS 23.30.172 read: "Benefits for temporary and permanent disability or death shall be calculated..." (emphasis added).40 Wien argues that the elimination of the phrase "or death" from AS 23.30.172 means that AS 23.30.175 does not authorize the Arants' payments to rise beyond their initial level.

Wien's argument involves four analytical steps: the Arants' claim for increased death benefits is a claim for a retroactive increase in benefits; section 172 is the only section that provides for retroactive application of compensation rates; section 172 does not include death benefits; therefore, AS 23.30.172 precludes application of the increasing maximum limitations in AS 23.30.175 to the Arants' death benefit payments. This argument is seriously flawed.

First, and foremost, the Arants do not seek a retroactive increase in benefits. The statute enacting the maximum rate table was passed and became effective on May 22, 1975, fully three months before Mr. Arant's death. Assuming, as Wien maintains, that compensation rates irrevocably vest at the time of injury, the Arants' claim is that these increasing rates of compensation vested at the time of injury. We may assume that removal of death benefits from AS 23.30.172 meant that death benefits would not receive retroactive increases. Under this theory, all compensation claims from deaths which occurred before May 22, 1975, could not rise to the new maximums. Mr. Arant died after May 22, 1975.41

Second, Wien's interpretation of legislative intent is unreasonable. Neither Wien nor amicus point to any direct evidence for their interpretation of the rather exotic interplay between AS 23.30.172 and .175. Their inference of this relationship requires the following construction of events: in 1975, the legislature enacted a new method of calculating maximum limitations, explicitly used words applying the new limitation to death benefits, but, at the same time, intended that a 1974 amendment that doesn't even mention death benefits countermand the explicit language of the 1975 statute. Further, since AS 23.30.175 uses a new method for calculating maximum limitations, Wien credits the legislature with uncanny foresight to anticipate, in 1974, the new type of rate table it would adopt in 1975.

The substantive intent attributed by Wien to the legislature is that disability payments should gradually increase but that death benefits should not. This interpretation is inconsistent with the specific events that spawned the new rate structure. The National Commission's critique of workers' compensation maximum limitations applied with equal force to death and disability payments42 and the legislature expressly included death benefits within the language of AS 23.30.175.

Finally, by Wien's logic, the increasing maximum rates in AS 23.30.175 no longer apply to disability payments. Wien and amicus maintain that any increase of a maximum limitation is a retroactive increase and that only AS 23.30.172 grants retroactive increases. AS 23.30.172, however, was repealed in 1977.43 Wien's position means that the increasing maximum rates now do not even apply to disability payments since the necessary authority for the "retroactive" increases, AS 23.30.172, no longer exists.44

Both the Alaska and the United States Constitutions forbid laws that impair obligation of contract.45 Wien has an insurance policy whereby Wien pays premiums and the carrier agrees to pay the compensation awards of Wien's employees. Wien argues, on behalf of Underwriters Adjusting Company, that the maximum rate table impairs obligations under its insurance contract for two reasons. First, Wien argues that the table provides for retroactive increases. We have already discussed this argument. The maximum rate table prospectively phases in an increase. It has no retroactive effect because it does not grant increases to claimants injured before the new maximum rates were passed.46 Wien and its insurance carrier were on notice that any injury resulting from Mr. Arant's employment would be subject to the increasing maximum rates in AS 23.30.175(a).47

Second, Wien argues that the increasing maximums impair contract because they tie compensation payments to an unknown variable, Alaska's future average weekly wage, changes in which "could not be fairly or accurately contemplated by appellant and its carrier at the time the policies were written." It is true that as between the employer and the insurance company, the insurance contract will now have to allocate the risk of changes in the statewide average weekly wage. An important aspect of all contracts, however, is allocating the risk of future change.48

Wien's interpretation would mean that any maximum limitation other than a flat dollar amount would be unconstitutional; a percentage of anything would almost always be uncertain. The legislature, according to Wien, could not set maximum limitations that automatically adjust to the future economic situation. All Wien expresses is its understandable preference for the certainty of the dollar amount maximum limitations. The new method of calculating maximums represents a legislative judgment that the certainty provided by the dollar amounts was at the cost of inadequately compensating workers and their families.

II. ATTORNEY'S FEES

We will consider in turn the fee award for the Board proceeding and for the Superior Court appeal.

AS 23.30.145 provides for award of attorney's fees in workers' compensation cases. AS 23.30.145(a) specifies a formula:

AS 23.30.145(b) grants a reasonable attorney fee:

In Haile v. Pan American World Airways, Inc., 505 P.2d 838 (Alaska 1973), we held that the section 145(a) formula only applies to "controverted" claims and the section 145(b) grant of reasonable attorney fees applies to an employer who otherwise fails to make payment of compensation.49 The Arants maintain that Wien controverted the claim. Wien maintains that while it "resisted" payment of the increased amount, it did not "controvert" the claim.

The Board's decision makes no mention of the controversion issue. It simply concludes:

We hold that Wien controverted the Arants' claim and remand the case to the Board to compute attorney's fees according to the statutory formula in AS 23.30.145(a).

Wien's reliance on Haile is misplaced. There, the employer never denied its obligation to pay compensation, it simply delayed payments, and prior to the hearing, the employer informed the Board that it was not contesting the claims. We held that the delay in payments did not constitute a controversion.51 Wien, however, has consistently denied and litigated its obligation to pay the increase sought, and eventually received by, the Arants.52

Wien's failure to file a notice of controversion is not dispositive on the question of attorney's fees. AS 23.30.145(a) requires a finding by the Board of whether there has been controversion in fact. If failure to file a notice of controversion made the employer liable for lower attorney's fees, the employer would benefit from noncompliance with the statute and few notices would be filed. This backward incentive contrasts with the working of AS 23.30.155, which requires the employer to file a notice of controversion and penalizes the employer who does not comply.53 To hold that there is no controversion due solely to the failure to file the notice would be to place form above substance. We hold that a notice of controversion by the employer is not required for an award of attorney's fees under AS 23.30.145(a).54

AS 23.30.145 seeks to insure that attorney's fee awards in compensation cases are sufficient to compensate counsel for work performed. Otherwise, workers will have difficulty finding counsel willing to argue their claims.55 Also, high awards for successful claims may be necessary for an adequate overall rate of compensation, when counsel's work on unsuccessful claims is considered. Taking into account these factors, however, we are still concerned that, in some cases, application of AS 23.30.145(a) results in a fee award that is "out of all proportion to the services performed." Haile v. Pan American World Airways, Inc., 505 P.2d 838, 840 (Alaska 1973). The remedy for this is statutory change by the legislature, not "interpretation" by the courts. The legislature may wish to examine whether the formula in AS 23.30.145(a) sometimes results in excessive fee awards, awards higher than are necessary to attract counsel into the compensation area.

For the appeal of the Board's decision, the Superior Court granted the Arants $750.00 in attorney's fees. Before making this award, the court received a motion for $6,033.75 in attorney's fees from the Arants and a supporting memorandum, stating that counsel had worked 80 plus hours at an hourly billing rate of $75.00. The Arants appeal the $750.00 award as an abuse of discretion.

An award of attorney's fees is subject to the broad discretion of the trial court.56 "An abuse of discretion is established where it appears that the trial court's determination as to attorney's fees was manifestly unreasonable." Palfy v. Rice, 473 P.2d 606, 613 (Alaska 1970). The Superior Court's fee award for the appeal should provide for realistic compensation, taking into account the same factors that the Workmen's Compensation Board considers when it grants attorney's fees for non-controverted claims: "the nature, length and complexity of the services performed, transportation charges, and the benefits resulting from the services to the compensation beneficiaries."57 Additionally, though, the Superior Court should consider the Board's fee award. This is relevant where application of the formula in AS 23.30.145(a) has produced a disproportionately large award for the Board proceeding.58

We remand to the Superior Court with directions that it remand to the Board for a determination of attorney's fees. The Superior Court shall make its determination of the fees to be granted because of the appeal after the Workmen's Compensation Board makes its fee award.

The Superior Court's decision upholding the Board's increase in compensation is AFFIRMED. The question of attorney's fees for the Board proceeding and the appeal is REMANDED for further proceedings consistent with this opinion.