Judge Eschews 'Khan Rule,' Focuses on Results in Attorney Fee Dispute

Originally published May 24, 2019 at WorkCompCentral.com authored by Eddie Curran

An administrative judge in Southern California eschewed a long-standing but informal rule used to divide fees when more than one attorney or firm represents an injured worker, instead focusing assessment of the results litigators obtained following a record-setting $8.9 million workers’ compensation settlement.

Shandler and Associates received about 11% of the $1.335 million in attorney fees after representing injured construction worker Antonio Enriquez for five years. Asvar, Odjaghian & Associates, which represented Enriquez for three years, received the bulk of the attorney fees in the case.

Los Angeles Workers’ Compensation Appeals Board Judge Daniel Dobrin, in his April 29 ruling, noted that his decision was arguably counterintuitive because the Shandler firm handled the case for longer, and the norm in these cases is for firms with the most time invested to receive the greater share of the fees.

But the judge said there was a significant contrast between the responsibility assumed by the competing Los Angeles law firms.

The long and the short of it is that during five years of handling the matter that, per Shandler, was destined to be a high value case, no individual from the firm with any clear credentials in workers’ compensation law ever met with the applicant or his father and future guardian, he found.

In comparison, the Asvar firm took an A-to-Z approach to the case and rendered an extraordinarily wide range of services, the judge wrote. Dobrin added that he found particularly impressive the extraordinary steps taken by Chris Asvar to assure that a mentally compromised individual endowed with an extraordinarily large sum of money would shepherd these resources in a responsible and gainful way.

Enriquez was 18 years old when he fell from scaffolding while working for North Hills-based Willie’s Painting in 2004 and suffered a traumatic brain injury. In January 2012, State Compensation Insurance Fund agreed to pay $8.9 million to settle the case.

A spokeswoman for State Fund said Enriquez’s age and the fact that he would need care for the rest of his life was a substantial factor in the settlement.

Asvar said he offered Jaclyn Shandler part of the $1.335 million in attorney fees from the settlement not long after the deal was executed. He didn’t specify a dollar amount, but said it was considerably more than the amount Dobrin awarded. Asvar said Shandler never responded to his offer.

Dobrin said Asvar was entitled to 88.6% of the fees, or $1.182 million. He awarded Shandler $152,643, or 11.4%.

Dobrin noted that the matter involved 14 days of trial testimony spread over three years, with the first trial date following several years of highly litigious and at times acrimonious pretrial discovery.

Much of his ruling was devoted to chronicling what he characterized as lackluster representation by Shandler.

Dobrin rejected Shandler’s assertion that she could have negotiated a far larger settlement than the $8.9 million Asvar secured. The judge stated that as far as he could tell, the Shandler firm played no role in achieving the substantial settlement.

“The results I am assessing are based on results brought by attorney work actually done, not just the fortuity of a severely disabled individual receiving intensive care and ongoing payments at the insurance carrier’s behest,” the judge wrote.

Dobrin wrote that the $8.9 million settlement strikes me as a notable achievement in advocacy, given that, among other factors, the plaintiff has a "normal" magnetic resonance image and a paucity of neurological findings.” The judge also said “Enriquez at trial was a very presentable and fairly articulate individual.”

Reached Wednesday, Shandler declined to provide comment beyond a brief statement indicating an appeal is likely.

“The case is pending and it’s unethical to speak about a pending case in a public forum,” she said.

Should Shandler appeal, it would be up to a three-judge panel of the Workers' Compensation Appeals Board. After that, any review would go to the California Court of Appeal.

Asvar on Wednesday said the delay in collecting the fee would be somewhat more tolerable if the money were accruing interest. He said the judge who blessed the 2012 settlement did not order State Fund to place the fee in an interest-bearing account.

He also said he anticipates an appeal.

”We’re definitely expecting Ms. Shandler to appeal the ruling,” Asvar said. “It would just be inconsistent with the tone of the litigation and the tone of the past seven years for her to just accept the judge’s finding.”

Asvar and his partner, Tina Odjaghian, dissolved their firm shortly after the settlement. The two have since settled their differences and agreed to split the Enriquez fee award evenly.

Asvar said Dobrin’s ruling contradicted a long-standing but informal practice, known as the “Kahn rule,” which was used for years to resolve fee splits between attorneys.

The rule devised by and named after retired WCAB chief judge Mark Kahn awarded between 25% to 35% of the fee to the firm that settled the case. The rest was split, pro-rata, based on the length of time each firm had the case.

“It seems to work OK, if all firms put in the same kind of effort,” Asvar said. “The dark side of the Kahn rule is that if a firm does nothing, or close to nothing and sits there and wastes the client’s time, for years and years, then the rule actually rewards that kind of behavior.

Asvar said Kahn was willing to testify that the rule bearing his name should not apply to all cases, and certainly not this one. Dobrin, though, determined that there was no need to have another judge give an opinion on a case he was handling.

“And there was no need,” said Asvar. “What we didn’t know then is that Judge Dobrin had no inclination to follow that formula anyway.”

For his part, Kahn said Thursday that the rule named after him, which he is forever hearing about, did not reflect his philosophy of settling such disputes, but was a misinterpretation of a tactic he frequently used to prompt parties to better lay out their reasoning for their claims.

Kahn, who now serves as a mediator, said that for more than three years, he handled such disputes, generally in informal settings and for total fees that were a fraction of those at play in the Enriquez case.

In one such instance, he suggested to the battling lawyers that the one who reached the settlement receive 25% off the top. For reasons beyond his control, that single instance became a key component of the so-called Kahn rule or Kahn formula,” he said.

“It had only to do with that case. I never wrote a rule, or said a rule,” Kahn said.

Frequently, he would spell out the time each party spent on a case, such as to suggest the one who had it longer might deserve a greater percentage. But he said he did that only as a means of getting the ball rolling and compelling lawyers to really make their case as to why their claim was valid.

There are so many factors that go into representing a client, and time “especially a focus on months or years as opposed to actual hours spent on a case - is but one component,” he said.

One lawyer could put a case in place for a settlement, and a second might take over at the last minute and settle for the same amount. If that were the case, the first lawyer would deserve the greater share, he said.

On the other hand, a lawyer could have a case for four years and do nothing, only to have a second lawyer take control of the case, cross-examine the agreed medical evaluator and get him to change his opinion, and lead to a far greater result for the client.

“The actual rule is, what is fair based on the facts and the law,” Kahn said.

Dobrin, while not mentioning the Kahn rule in his decision, did address the general premise of the guideline, and his decision not to apply it to this case.

“Obviously, there is no one size fits all approach to equitably awarding attorney’s fees,” Dobrin wrote.

Continuing, he said, “I have decided that the fairest way to allocate fees is to assess the value of the various components’ of applicant’s settlement, determine the relative contribution of each firm to this portion of the outcome, and awards fees accordingly.”

Alan Gurvey, managing partner of applicants’ firm Rowen, Gurvey & Win in Sherman Oaks, praised Dobrin for distinguishing between practitioners who treat injured workers’ as part of a business, nameless and faceless, and those who develop relationships with clients, thoroughly litigate cases and spending considerable time getting the best possible result.

Gurvey and Asvar both noted that the trial court-level decision is not binding. But Gurvey said there may still be “some precedential value because there are now guidelines to use for fee splits, discouraging simple focus on time on the file.”

He said the Legislature should consider increasing the percentage of fees awarded in certain complex cases to discourage volume businesses and inappropriate behaviors such as those Dobrin judge talked about in the decision.

Because attorney fees in comp cases are limited to 15% of recovery, many lawyers feel compelled to build a volume practice, and for some, “that means taking shortcuts and settling cases for a fraction of the value,” he said.

“It also means that some injured workers are not obtaining the medical treatment that they need because of the time constraints,” Gurvey said.