Must law firms exhaust administrative remedies before suing for workers' compensation attorney fees? Davis & Sanchez v. University of Utah Health Care Explained

In Davis & Sanchez v. University of Utah Health Care, the Utah Court of Appeals addressed whether a law firm must exhaust administrative remedies before pursuing attorney fees from a third party that benefited from the firm’s workers’ compensation representation.

Background and Facts

Davis & Sanchez represented Alvaro Diaz in a workers’ compensation claim against his employer and the Workers’ Compensation Fund (WCF). The firm sought but did not receive consent to represent University of Utah Health Care’s interests in the proceeding. Through mediation, the parties reached a settlement where WCF agreed to pay Diaz a lump sum including attorney fees, and to hold him harmless for outstanding medical bills. This settlement resulted in WCF paying the hospital approximately $347,000 for Diaz’s medical expenses.

Key Legal Issues

The central issue was whether Utah Code section 34A-1-309 required the law firm to seek attorney fees from the hospital through the Labor Commission rather than filing a direct lawsuit in district court. The statute grants the commission “full power to regulate and fix the fees of the attorney” employed “in a case before the commission.”

Court’s Analysis and Holding

The Court of Appeals applied plain meaning interpretation to section 34A-1-309. The court found that because the law firm’s attorney fee claim arose from Mr. Diaz’s workers’ compensation case, and the firm was employed “in a case before the commission,” the statute’s plain language applied regardless of whether fees were sought from the injured worker or a third party beneficiary. The court emphasized the exhaustion of administrative remedies doctrine, noting that parties must exhaust administrative remedies before seeking judicial review to allow agencies to perform functions within their special competence.

Practice Implications

This decision establishes that attorney fee claims arising from workers’ compensation proceedings must first be pursued through the Labor Commission, even when seeking fees from third parties who benefited from the representation. Practitioners should file applications under section 34A-1-309(2) with the Division of Adjudication before pursuing judicial remedies to avoid jurisdictional dismissal.