Robinson v. City of Wichita Retirement Bd. of Trustees

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IN THE SUPREME COURT OF THE STATE OF KANSAS

No. 102,217

CINDY L. ROBINSON,
Appellee,

v.

CITY OF WICHITA EMPLOYEES' RETIREMENT BOARD OF TRUSTEES
and THE CITY OF WICHITA, KANSAS,
Appellants.


SYLLABUS BY THE COURT

1.
District courts have jurisdiction under K.S.A. 60-2101(d) to review the action of a
political subdivision exercising judicial or quasi-judicial functions. In such
circumstances, a district court is limited to determining if the political subdivision's
decision was within its scope of authority, was substantially supported by evidence, or
was fraudulent, arbitrary, or capricious. On appeal from the district court, an appellate
court reviews the political subdivision's decision as though the initial appeal had been
made directly to the appellate court.

2.
Arbitrary, as applied to reviews under K.S.A. 60-2101(d), means without adequate
determining principles, not done or acting according to reason or judgment, and
capricious means changing, apparently without regard to any laws.

3.
Under the arbitrary and capricious standard applied to appellate review based on
K.S.A. 60-2101(d), a board or agency interpreting a statute, ordinance, or regulation is
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deemed to have acted arbitrarily and capriciously when its decision is not based on a
reasonable interpretation of the provision's terms and is not made in good faith.

4.
An administrative agency's interpretation of a statute is not conclusive, and final
construction of a statute always rests with the courts.

5.
The interpretation of a municipal ordinance presents a question of law over which
an appellate court has unlimited review.

6.
Courts apply the same rules when interpreting a municipal ordinance as applied
when interpreting a statute. Under those rules, when a statute or municipal ordinance is
plain and unambiguous, a court must give effect to express language, rather than
determine what the law should or should not be. A court will not speculate on legislative
intent and will not read the provision to add something not readily found in it. If the
provision's language is clear, there is no need to resort to statutory construction.

7.
Wichita City Code Section 2.28.150(d)(3), which provides that "[a]ny amount
received under the State Worker's Compensation Act (except medical expenses) shall be
deducted from the [City's] disability retirement benefit," clearly and unambiguously
means the disability retirement benefit will be reduced by the full amount of the workers
compensation award without exception for attorney fees incurred in obtaining the
workers compensation award.


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8.
Specific statutes control over general ones.

9.
Provisions allowing an award of attorney fees are not passed to benefit the
attorney or to burden litigants. Rather, they are passed to enable litigants to obtain
competent counsel.

10.
The common fund doctrine permits a party who creates, preserves, or increases the
value of a fund in which others have an interest to be reimbursed from that fund for
litigation expenses incurred, including attorney fees, and reflects the traditional practice
in courts of equity.

11.
The common fund doctrine stands as a well-recognized narrow exception to the
general principle that requires every litigant to bear his or her own attorney fees and rests
on the perception that persons who obtain the benefit of a lawsuit without contributing to
its cost are unjustly enriched at the successful litigant's expense. The rationale for
awarding attorney fees out of a common fund is that the attorney's services benefit the
fund by creating, increasing, or preserving the fund.

12.
The common fund doctrine does not apply when a clear and unambiguous
provision requires the reduction of a disability retirement award by the entire amount of a
workers compensation award, without specifically excluding attorney fees incurred in
obtaining the workers compensation award.

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Appeal from Sedgwick District Court; ERIC R. YOST, judge. Opinion filed October 8, 2010.
Reversed.

Brian K. McLeod, deputy city attorney, of Wichita, argued the cause and was on the briefs for
appellants.

David P. Calvert, of David P. Calvert, P.A., of Wichita, argued the cause and was on the brief for
appellee.

The opinion of the court was delivered by

Per Curiam: Cindy Robinson, a former employee of the City of Wichita, filed a
claim for disability retirement benefits with the City of Wichita Employees' Retirement
Board of Trustees (Retirement Board). The Retirement Board calculated Robinson's
disability retirement benefit and then reduced it by the entire amount of a workers
compensation award that Robinson had already obtained. This deduction resulted from
the application of Section 2.28.150(d)(3) of the Wichita City Code (Wichita Code),
which requires that "[a]ny amount received under the State Worker's Compensation Act
(except medical expenses) shall be deducted from the disability retirement benefit." The
issue before us is whether the amount to be deducted from the disability retirement
benefit is the entire workers compensation award or the amount of the award remaining
after payment of Robinson's attorney fees.

We conclude the Retirement Board reasonably decided that Wichita Code Section
2.28.150(d)(3) does not except attorney fees from the deduction, properly rejected policy
arguments in light of the unambiguous provision, and correctly refused to apply the
common-law doctrine that requires sharing of attorney fees by those who benefit from a
common fund. Therefore, we affirm the Retirement Board's decision and reverse the
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district court's decision, which in an administrative appeal had reversed the Retirement
Board.

FACTS

Robinson suffered employment-related injuries to her bilateral upper extremities
as a gardener employed by the City of Wichita. The date of injury was April 5, 2002.
Robinson filed a claim for workers compensation benefits and entered into an agreed
award that totaled $125,000. Per a prior attorney fee agreement, approved in the workers
compensation proceeding, Robinson's workers compensation attorney received a 25
percent contingency fee for his work on the case, or $31,250. This amount was paid out
of the workers compensation award, with a pro rata share deducted from Robinson's bi-
weekly temporary total disability benefits.

In June 2008, Robinson filed her disability retirement claim with the Retirement
Board. The Retirement Board approved Robinson's request, retroactively effective July
20, 2002, but reduced the amount of available disability retirement benefits by $125,000,
the entire amount awarded for workers compensation benefits. The Retirement Board
determined that the deduction was required under Wichita Code Section 2.28.150(d)(3).

Robinson filed a request to modify the Retirement Board's award, arguing that the
deduction should not include the workers compensation attorney fees because, although
she was awarded $125,000 in workers compensation benefits, she did not actually
"receive" the portion that would be paid to her attorney. In other words, the workers
compensation deduction should have been reduced to $93,750 ($125,000 minus $31,250
in attorney fees). The Retirement Board, after conducting a discussion and hearing
statements of counsel on this matter of first impression, issued its final decision, denying
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Robinson's request for modification and determining "to keep its current practices and
ordinances in place."

Robinson filed an appeal in the district court pursuant to K.S.A. 60-2101(d). The
district court agreed with Robinson and found that the Retirement Board incorrectly
calculated her disability retirement benefits. The district court concluded the Retirement
Board was only entitled to deduct the amount of workers compensation benefits "actually
received" by Robinson and should not have included attorney fees in the deduction. In the
district court's journal entry of judgment, the court based its decision on five findings: (1)
reducing the disability retirement benefit by the amount of the workers compensation
attorney fees "creates a hardship" on Robinson "and will not be permitted because that
action thwarts the very purpose of the disability retirement plan"; (2) "Kansas, along with
virtually every other state and the federal courts, has adopted the common fund doctrine
which permits a party who creates, preserves or increases the value of a fund in which
others have an interest, which includes the Respondent's retirement fund, to be
reimbursed from that fund for attorney fees"; (3) deducting the attorney fees penalizes
Robinson for exercising her statutory right to recover workers compensation benefits; (4)
the Retirement Board's action and its interpretation of the ordinance was arbitrary and
capricious; and (5) the Retirement Board could not rely on a "long-standing policy which
it contends permits it to deduct the entire $125,000 including attorney fees because there
is no such policy."

The district court reversed the Retirement Board's decision and granted judgment
for Robinson in the amount of $31,250 plus costs. The Retirement Board now makes a
timely appeal. The case was transferred to this court pursuant to K.S.A. 20-3018(c).





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ANALYSIS

Robinson's appeal from the Retirement Board's decision is based on K.S.A. 60-
2101(d). This statute confers jurisdiction on a district court to review the action of a
political subdivision exercising "judicial or quasi-judicial functions." In such
circumstances, the district court is limited to determining if the Retirement Board's
decision was within its scope of authority, was substantially supported by evidence, or
was fraudulent, arbitrary, or capricious. On appeal from the district court, an appellate
court reviews the Retirement Board's decision as though the initial appeal had been made
directly to the appellate court. See Butler v. U.S.D. No. 440, 244 Kan. 458, 464, 769 P.2d
651 (1989).

In this case, Robinson has not argued that the Retirement Board acted outside its
scope of authority. Nor, at least before us, is there any real controversy about the facts.
The details of Robinson's workers compensation and disability claims are not disputed,
and the Retirement Board essentially agrees with the factual determinations regarding
Robinson's difficult financial situation and the first-impression nature of the Retirement
Board's ruling. Instead, her focus and the district court's ruling is that the Retirement
Board was arbitrary and capricious in its interpretation of the Wichita Code.

Consequently, we must examine whether the Retirement Board's actions met the
arbitrary and capricious standard that this court has adopted as a standard for appellate
review under K.S.A. 60-2101(d). "This court has defined 'arbitrary' to mean without
adequate determining principles, not done or acting according to reason or judgment; . . .
and 'capricious' as changing, apparently without regard to any laws." Dillon Stores v.
Board of Sedgwick County Comm'rs, 259 Kan. 295, Syl. ¶ 3, 912 P.2d 170 (1996). When
the standard is applied in the context of a board or agency interpreting a statute,
ordinance, or regulation, the board or agency is deemed to have acted arbitrarily and
capriciously when its decision was not based on a reasonable interpretation of the
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provision's terms and was not made in good faith. Trujillo v. Cyprus Amax Minerals Ret.
Plan Comm., 203 F.3d 733, 736 (10th Cir. 2000). As we apply this standard to the district
court's decision, we will first discuss the reasonableness of the Retirement Board's
interpretation of the Wichita Code provision. We will then consider the district court's
rationale for its determination that the action was arbitrary and capricious. Finally, we
will consider the common-law doctrine regarding the obligation to pay attorney fees
incurred in an action that establishes, preserves, or increases a common fund.

A. Interpretation of Wichita Code Section 2.28.150(d)(3)

In arguing that the Retirement Board did not reasonably interpret Wichita Code
Section 2.28.150(d)(3), Robinson insists that the phrase "any amount received" includes
only the workers compensation benefits actually received by the injured employee after
any attorney fees have been paid. Essentially, Robinson asserts that it was erroneous to
use $125,000 in the calculation of the disability retirement benefits because she did not
actually receive that amount, having elected to have her workers compensation award
reduced by the amount of attorney fees related to the compensation hearing. In other
words, she interprets the word "received" to mean "net receipts" as opposed to "any
amount awarded." See Faust v. Walker, 945 A.2d 212, 214 (Pa. Super. 2008) ("common
meaning of 'net proceeds' is '[t]he amount received in a transaction minus the costs of the
transaction [such as expenses or commissions]'").

In response, the Retirement Board suggests that the district court and this court
should grant deference to its interpretation of the provision and that its interpretation was
reasonable and consistent with commonly accepted rules of statutory interpretation. As to
the first point, this court has previously stated that "interpretation of a statute is a
necessary and inherent function of an agency in its administration or application of that
statute" and that "the legal interpretation of a statute by an administrative agency that is
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charged by the legislature with the authority to enforce the statute is entitled to great
judicial deference." Mitchell v. Liberty Mut. Ins. Co., 271 Kan. 684, Syl. ¶ 4, 24 P.3d 711
(2001). Nevertheless, we have recently been reluctant to apply the doctrine of operative
construction when faced with questions of law on undisputed facts. See Fieser v. Kansas
Bd. of Healing Arts, 281 Kan. 268, 270-71, 130 P.3d 555 (2006). Instead, we have
concluded that an administrative agency's interpretation of a statute is not conclusive, and
final construction of a statute always rests with the courts. Graham v. Dokter Trucking
Group, 284 Kan. 547, 554, 161 P.3d 695 (2007); Fieser, 281 Kan. at 270; Foos v.
Terminix, 277 Kan. 687, 692-93, 89 P.3d 546 (2004). Hence, we do not grant deference
to the Retirement Board's interpretation.

Instead, the interpretation of Wichita Code Section 2.28.150(d)(3) presents a
question of law over which we have unlimited review. See Double M Constr. v. Kansas
Corporation Comm'n, 288 Kan. 268, 271, 202 P.3d 7 (2009). In conducting that review, a
court applies the same rules to interpreting a municipal ordinance as we would when
interpreting a statute. Weeks v. City of Bonner Springs, 213 Kan. 622, 629, 518 P.2d 427
(1974). Under those rules, when a statute or municipal ordinance is plain and
unambiguous, the court must give effect to express language, rather than determine what
the law should or should not be. This court will not speculate on legislative intent and
will not read the provision to add something not readily found in it. If the provision's
language is clear, there is no need to resort to statutory construction. Graham, 284 Kan.
at 554; Steffes v. City of Lawrence, 284 Kan. 380, 386, 160 P.3d 843 (2007).

Applying these rules to the interpretation of similar statutes, courts in California,
Kentucky, and Washington as well as the Tenth Circuit Court of Appeals have rejected
arguments similar to Robinson's. As we will discuss, the reasoning of these cases applies
to our interpretation of Wichita Code Section 2.28.150(d)(3).

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In the California case of Garietz v. City of Oakland, 20 Cal. App. 3d 115, 97 Cal.
Rptr. 374 (1971), the claimants were former members of the police and fire departments
who sustained a disability in the course of employment and subsequently applied for and
received benefits under California labor codes. The claimants appealed when the City
deducted the total amount of workers compensation benefits, including attorney fees,
from the pension benefits. They pointed out that when the entire amount of the workers
compensation award is deducted from the disability retirement allowance, the claimant is
out of pocket the amount of workers compensation attorney fees.

A city charter provided for the Police and Fire Retirement System, and the
retirement provisions of the charter stated, in part:

"'It is the intention of this section that allowances granted to or on account of
members of the System for injury, illness or death incurred in the performance of duty
shall not be cumulative with benefits under the Labor Code of California awarded as the
result of the same injury, illness, or death . . .

"'(a) If the amount [of benefits awarded] is paid in one sum or in installments
equal to or greater than such salary, retirement allowance, or other benefit, such member
or dependant shall not receive any salary, retirement allowance, or other benefit until the
total amount of the salary, retirement allowance, or other benefit which would otherwise
be payable equals the total amount received under the Labor Code.

"'(b) If the amount [of benefits awarded] is paid in installments less than such
salary, retirement allowance, or other benefit, the salary, retirement allowance or other
benefit, shall be reduced so that the total salary, retirement allowance, or other benefit
plus the amounts received under the Labor Code will equal the salary, retirement
allowance or other benefit which would otherwise be due.

"'(c) In either case any award specifically granted for medical, surgical, or
hospital expenses shall not reduce the salary, retirement allowance, or other benefit.'"
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(Emphasis added.) Garietz, 20 Cal. App. 3d at 118 n.1 (quoting city charter section
249[2]).

The claimants contended that the language of the first paragraph prohibiting
cumulative benefits and the emphasis on "paid" and "received" in the subdivisions
created an ambiguity that had to be liberally construed in their favor to prohibit any
deduction from including the amount of attorney fees. The claimants argued that in the
absence of any language permitting the deduction of certain amounts, no deduction of
workers compensation attorney fees should be allowed and that the City should bear the
cost of the claimants' attorney fees.

The California Court of Appeals noted that the state's Labor Code provided for
certain liens against any sum ordered paid as compensation by the Workers'
Compensation Appeals Board. In addition to attorney fees, the Labor Code provided that
the Board may "'determine and allow as liens against any sum to be paid as
compensation'" various other expenses incurred by or on behalf of the injured employee.
Garietz, 20 Cal. App. 3d at 118 (quoting Labor Code Section 4903). The Garietz court
determined that the legislature did not intend that only the net amount "received" by the
employee may be considered in deducting the award from pension payment. If only the
net amount received could be considered, not only would attorney fees have to be
excluded, but other categories of statutory liens would also have to be excluded. The
Garietz court further observed that the workers compensation provision of the Labor
Code was in effect when the city charter was enacted; therefore, if there was any conflict
between the city charter and the workers compensation provisions, the latter must prevail.
Regardless, reading the city charter in this context, the Garietz court concluded there was
no ambiguity. This conclusion was also supported by the notion that an employee is not
entitled to a double recovery of indemnity for an industrial disability. Garietz, 20 Cal.
App. 3d at 119.
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In the Kentucky decision of Rue v. Kentucky Retirement Systems, 32 S.W.3d 87
(Ky. App. 2000), the claimant was unable to return to work after sustaining a back injury
in the course of his employment as a mechanic with the Kentucky State Police. In
addition to applying for disability retirement benefits, the claimant also applied for social
security benefits and workers compensation benefits. The claimant appealed the
retirement system's calculation of total benefits when it used the gross amount of his
workers compensation award instead of the reduced amount he would actually receive
after deducting attorney fees.

The Kentucky Court of Appeals observed that the plain language of the applicable
Kentucky statute stated that the monthly disability benefit was to equal the employee's
final pay minus amounts received from federal social security or a workers compensation
award. Spouses' and children's benefits were specifically excluded, but there was no
mention of attorney fees. Noting that some specific exclusions were mentioned, the Rue
court rejected the claimant's contention that the amount used in establishing the workers
compensation component of the combined monthly benefit should be reduced by the
amount of attorney fees related to the workers compensation proceeding. The Rue court
reasoned that the statute was clear in providing which allowances were not to be
considered in calculating benefits. The legislature was capable of wording the statute in
such a way as to express the intent to reduce the amount of workers compensation
attorney fees, but it did not do so.

Additionally, the Rue court observed that Kentucky is not one of several states that
treat attorney fees as an "add-on" or double benefit that the employer must pay in
addition to the compensation award itself. Instead, under the Kentucky statutory scheme,
the payment of legal fees remains at all times the personal responsibility of the claimant.
"This is true," said the Rue court, "despite the fact that our statutes require approval of the
fee and offer a claimant the option of paying that obligation 'up-front' through reduced
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monthly benefit proceeds." Rue, 32 S.W.3d at 89. The court characterized the reduction
of the claimant's workers compensation benefits as a mere "voluntary election as to the
manner he would pay that debt." Rue, 32 S.W.3d at 89. Also, permitting a claimant to
reduce his or her compensation award in order to satisfy the attorney's entitlement to a fee
"is, in reality, offered as a convenience to the claimant." Rue, 32 S.W.3d at 89.

Noting that other jurisdictions with similar statutory schemes have reached
comparable results, the Rue court held that to allow the claimant to deduct only his net
workers compensation award would provide a benefit not intended by the Kentucky
Legislature. Rue, 32 S.W.3d at 89.

In Regnier v. Labor and Indus., 110 Wash. 2d 60, 749 P.2d 1299 (1988), the
claimant was injured in the course of her employment, and she filed a claim for industrial
insurance. The state's Department of Labor and Industries (Department) awarded her
disability benefits. Subsequently, the claimant sought and obtained federal social security
disability benefits for her injury. As a result, the Department reduced the claimant's state
industrial insurance benefits under the language of the state statute which provided that
industrial insurance benefits "shall be reduced by an amount equal to the benefits payable
under the federal old-age, survivors and disability insurance act," not to exceed a certain
amount. Regnier, 110 Wash. 2d at 63.

Although the claimant had incurred medical and legal expenses in obtaining her
social security disability benefits, the district court upheld the decision of the Board of
Industrial Insurance Appeals to deny any credit or exemption for the medical and legal
expenses.

On appeal, the claimant argued that in computing the reduction in state benefits,
she should receive a credit for the medical and legal expenses she incurred in obtaining
14



her federal benefits. This argument was based on 20 C.F.R. § 404.408(d), a regulation
governing the computation of federal benefits in cases where a state has not enacted a
statute regarding items that may be excluded when calculating a reduction. The claimant
argued that this regulation excluded from the process actual legal and medical expenses
incurred in gaining state benefits so that, in effect, the claimant would receive a credit.
Regnier, 110 Wash. 2d at 63.

The Washington Supreme Court rejected this notion, unconvinced that the federal
regulation required an exemption for medical and legal expenses to be taken from the
amount of the reduction in federal benefits. Moreover, even if such an exemption was
available from a federal reduction procedure, there was no similar provision under
Washington law. Regardless, the Regnier court pointed to the well-known rule that
"attorney fees may be recovered only where authorized by a statute, a private agreement
between the parties, or a recognized equitable ground," none of which was present in the
case. Regnier, 110 Wash. 2d at 64.

Finding that the legislature "has not seen fit to provide benefits to cover the
expenses of establishing eligibility for disability benefits," the Regnier court held it
would be inappropriate for the court to create such benefits. Regnier, 110 Wash. 2d at 65;
cf. City of Clearwater v. Acker, 755 So. 2d 597, 600 (Fla. 1999) (increases in permanent
total disability supplemental benefits paid by employer annually should not be included
in calculation of disability benefit that is reduced by workers compensation benefits;
recalculating reduction every year, so as to include increase in supplemental benefits,
would frustrate intended purpose of supplemental benefits which was to give cost-of-
living benefit to workers); Waterman v. Caprio, 983 A.2d 841, 843 n.4 (R.I. 2009)
(workers compensation settlement, adjusted downward for 15 percent attorney fee, had to
be deducted from retirement benefit payments).

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In a case discussed by the parties—Trujillo v. Cyprus Amax Minerals Ret. Plan
Comm., 203 F.3d 733 (10th Cir. 2000)—the Tenth Circuit Court of Appeals also
considered whether attorney fees should be included in a deduction from disability
benefits. There, the claimant brought a state court action under the Employee Retirement
Income Security Act (ERISA), challenging the plan administrator's decision to reduce his
disability retirement benefits by the total amount of the workers compensation settlement
rather than the amount of the settlement minus attorney fees incurred in obtaining the
settlement. After the action was removed to federal court, the federal district court ruled
in favor of the claimant.

On appeal, the Tenth Circuit held that the ERISA plan administrator did not act
arbitrarily and capriciously in determining that the ERISA plan section, which stated that
disability benefits would be reduced by the amount of workers compensation benefits
"payable" to the participant, required the inclusion of the amount of attorney fees
incurred by the participant in obtaining his or her workers compensation settlement.
Drawing on definitions of "payable" in Black's Law Dictionary, the Tenth Circuit
observed that "payable" could mean "'capable of being paid,'" "'justly due,'" or "'legally
enforceable.'" Trujillo, 203 F.3d at 737 (quoting Black's Law Dictionary 1128 [6th ed.
1990]). Also, the court noted that attorney fees were not mentioned in the claimant's
settlement, indicating that he agreed to pay fees out of the total award received.

The Tenth Circuit rejected policy-based arguments advanced by the claimant.
First, the claimant argued that the plan administrator's decision effectively required him
to pay the cost of reducing his own benefits under the plan. Second, he contended that the
plan administrator's decision would create "irreconcilable conflicts" between workers
compensation attorneys and their clients and "'make it impossible for injured workers to
obtain adequate, conflict-free representation.'" Trujillo, 203 F.3d at 738. The Tenth
Circuit determined there was no authority to allow such policy arguments to trump the
16



plan administrator's reasonable interpretation of the plan's language. Finally, the Tenth
Circuit rejected the claimant's contention that the doctrine of unjust enrichment should
preclude the plan administrator from deducting the entire amount of the workers
compensation settlement without paying a share of the claimant's attorney fees. Trujillo,
203 F.3d at 738.

Points from the analysis of these cases apply to the Wichita Code requirement that
"[a]ny amount received under the State Worker's Compensation Act" be deducted from
the disability retirement award. Wichita Code Section 2.28.150(d)(3). First, like the
provisions considered in the other jurisdictions, the language is inclusive, referring to
"[a]ny amount." Second, like the California provision, the Wichita Code uses the term
"received." Black's Law Dictionary does not contain a definition of "received," but
Webster's New World Dictionary, Second College Edition, pp. 1884-85 (1974) defines
the term as "to get, accept, take, or acquire something; be a recipient." When that
meaning is read in context of the entire phrase used in Wichita Code Section
2.28.150(d)(3), the meaning is much the same as the wording considered by the Tenth
Circuit and other courts because it would be "[a]ny amount" the claimant gets, accepts,
takes or acquires "under the State Worker's Compensation Act." Under the Kansas
Workers Compensation Act (Kansas Act), Robinson got, accepted, took, or acquired the
entire $125,000 in workers compensation benefits. This common understanding is
reflected in a September 2008 letter from Robinson's workers compensation attorney to
opposing counsel, in which he stated: "I have taken a fee of 25% of all temporary total
disability checks received. The gross amount of those checks is $700.12 every two
weeks." (Emphasis added.) Hence, the provision's language supports the Retirement
Board's interpretation.

Further, as with the provisions considered in the out-of-state cases we have
discussed, the Kansas Act does not award attorney fees in addition to the workers
17



compensation award or make the employer responsible for the attorney fees. The
"American Rule" is well established in Kansas so that, in the absence of statutory or
contractual authorization, each party to the litigation is responsible for his or her own
attorney fees, and the Kansas Act does not create an exception. See Farm Bureau Mut.
Ins. Co. v. Kurtenbach, 265 Kan. 465, 479-80, 961 P.2d 53 (1998) (the "'American rule' .
. . which is well established in Kansas, is that in the absence of statutory or contractual
authorization, each party to litigation is responsible for his or her own attorney fees"); 8
Larson's Workers' Compensation Law §133.01 ("The obligation to bear one's own legal
fees, then, has become established as a necessary evil, which each client must contrive to
bear as cheerfully as he or she can."); see also Hodges v. Johnson, 288 Kan. 56, 70, 199
P.3d 1251 (2009) ("In Kansas, courts are not permitted to award attorney fees without
specific statutory authorization.").

We also note that several provisions of the Kansas Act indicate that the award
belongs to the claimant, not the attorney. As in the Kentucky statute, K.S.A. 44-536(b)
provides that "[a]ny claims for attorney fees not in excess of the limits provided in this
section and approved by the director shall be enforceable as a lien on the compensation
due or to become due." (Emphasis added.) Further, subject to exceptions not pertinent in
this case, "[a]ll attorney fees for representation of an employee . . . shall be only
recoverable from compensation actually paid to such employee." (Emphasis added.)
K.S.A. 44-536(f). In other words, under the Kansas Act the entire award is deemed to be
actually paid, awarded to, and received by the claimant, who is responsible for payment
of his or her attorney fees.

In addition, as with the Kentucky statute, the Kansas Act requires the filing of an
attorney fee contract with the director of workers compensation and provides that both
the contract and the claimed attorney fees must be reviewed and approved. K.S.A. 44-
536(b). Once the contract is approved, the Kansas Act facilitates the payment of the
18



attorney fees by allowing a deduction from the award that is sent directly to the
attorney—a type of bill payer service. K.S.A. 44-536. Yet, the claimant remains
responsible for paying the attorney fees and discharging his or her obligation to the
attorney. See Feissner v. Prince George's Co., 282 Md. 413, 417-18, 384 A.2d 742
(1978) (conducting comparable analysis, court concludes statutory lien for attorney fees
merely alters the manner in which liability for fees is discharged; it makes employee no
less responsible for payment of fee). Thus, a claimant gets, acquires, or takes the full
amount of the award.

An additional consideration discussed in the Kentucky case applies to our analysis
of Wichita Code Section 2.28.150(d)(3). That consideration is that the provision
specifically mentions one exception but does not mention attorney fees. Specifically, the
Wichita Code provides that disability retirement benefits will not be reduced by the
portion of the workers compensation award that is for medical expenses. As aptly noted
by the Kentucky court when discussing that its exemption for spouses' and children's
benefits was silent regarding attorney fees, neither an agency (in this case, the Retirement
Board), a district court, nor an appellate court is free to add words to a statute or
ordinance in order to enlarge the scope beyond that which can be gleaned from a reading
of the words used by the drafters. Rue, 32 S.W.3d at 89; see Zimmerman v. Board of
Wabaunsee County Comm'rs, 289 Kan. 926, 939-40, 218 P.3d 400 (2009) (when statute
is plain and unambiguous, an appellate court merely interprets the language as it appears;
it is not free to speculate and cannot read into the statute language not readily found
there). Here, the Wichita Code makes no reference to excluding attorney fees and does
not contain language regarding "net proceeds."

Hence, we conclude the Retirement Board's interpretation of Wichita Code
Section 2.28.150(d)(3) was a reasonable interpretation in that it was consistent with
principles of statutory interpretation and the interpretation of similar provisions by other
19



courts. The Retirement Board's interpretation was not arbitrary or capricious. See Dillon
Stores v. Board of Sedgwick County Comm'rs, 259 Kan. 295, Syl. ¶ 3, 912 P.2d 170
(1996) (defining arbitrary or capricious).

B. District Court's Rationales for Determining Board's Interpretation Was Arbitrary

Three of the rationales stated by the district court related to the question of
whether the Retirement Board's interpretation of Wichita Code Section 2.28.150(d)(3)
was reasonable. First, the district court concluded such an interpretation was contrary to
the stated purposes of the retirement disability fund. Second, the district court determined
the interpretation was contrary to public policy because it penalized Robinson for the
exercise of her rights under the Kansas Act. Third, the district court noted the Retirement
Board had not previously determined the issue and, consequently, there was no long-
standing policy.

1. Considering Purposes of Disability Benefits

In the first of these three rationales, the district court discounted the plain language
of subsection (d)(3) of Wichita Code Section 2.28.150 and instead focused on the first
half of the self-described "purpose" of the retirement plan, as laid out in Wichita Code
Section 2.28.010, which states:

"The purpose of the Wichita employees' retirement plan, hereinafter referred to
as the 'retirement plan,' is to establish an orderly means whereby noncommissioned
personnel employed by the city who have attained retirement age or who have become
disabled as set forth in this chapter may be retired from active service without prejudice
and without inflicting a hardship on the employees retired, and to enable employees to
accumulate reserves for themselves and their dependents to provide for old age,
disability, death and termination of employment, and for the purpose of effecting
economy and efficiency in the administration of governmental affairs."
20




Citing this provision, the district court specifically found that "[t]he reduction by
the Board of the disability retirement benefits by the amount of attorney fees retained by
petitioner's counsel in her workers compensation case creates a hardship on the petitioner
and will not be permitted because that action thwarts the very purpose of the disability
retirement plan." In support of this finding, the court detailed Robinson's difficult
financial situation.

The district court did not explain, however, why Robinson's personal financial
status—a case-specific fact—requires the interpretation of "any amount received" under
the Wichita Code to be the equivalent of "net receipts," i.e., the award after deduction of
attorney fees. Nowhere does Wichita Code Section 2.28.150(d)(3) require that the
claimant's personal financial status be considered. In addition, Robinson cites no
authority for the notion that an individual's disability income must meet a certain level of
adequacy. Finally, as the Retirement Board argues, by emphasizing the purpose provision
of the Wichita Code, the district court essentially found that the general purpose
provision, Section 2.28.010, controls over the specific deduction provision of Wichita
Code Section 2.28.150(d)(3). Yet, well-established rules of construction hold that specific
statutes control over general ones. Ft. Hays St. Univ. v. University Ch., Am. Ass'n of Univ.
Profs., 290 Kan. 446, 228 P.3d 403 (2010).

Also, in focusing on the general purpose provision, the district court changed the
universal applicability of the deduction provision because performing a prejudice and
hardship analysis requires a case-by-case consideration. This could lead to inconsistent
results, bypassing systematic calculations in order to consider the facts of each case. The
Retirement Board argues that this case-by-case approach would jeopardize compliance
with a different portion of Wichita Code Section 2.28.010, specifically that portion which
states: "It is the intent that the Wichita employees' retirement plan be established as a
21



qualified governmental pension plan under Section 401(a) and 414(d) of the Internal
Revenue code." Section 401(a) of the Internal Revenue Code requires that actuarial
assumptions be specified in a pension plan in order for the plan to qualify for tax exempt
status. See 26 U.S.C. § 401(a) (25) (2006). Additionally, 26 C.F.R. § 1.401-1(b)(1)(i),
which was issued under section 401(a) of the Internal Revenue Code, requires pension
plans to provide "definitely determinable benefits" in order to meet the requirements for
special tax treatment. Eaton v. Onan Corp., 117 F. Supp. 2d 812, 847 (S.D. Ind. 2000).
The Retirement Board contends that this objective would be defeated, and the tax status
of the retirement plan imperiled, if the Board or the courts were to apply the general
purpose provision of the Wichita Code to use discretion in calculating benefits for
individuals based on hardship.

The Retirement Board makes a valid point. The district court did not consider the
possibility that it is the City's act of providing determinable disability retirement benefits
to all eligible retirees which fulfills the purpose of the City's retirement plan. Focusing on
the terms "prejudice" and "hardship" in the purpose provision of the Wichita Code, the
district court essentially ignored the plain language in Section 2.28.150(d)(3).

2. Penalty

In a closely related analysis, the district court found that the Retirement Board's
action of "deducting [workers compensation] attorney fees from [Robinson's] disability
retirement penalizes her for exercising her statutory right to recover workers
compensation benefits." The court stated that "[b]ecause she sought to exercise her right
to recover those [workers compensation] benefits as well as seek compensation and
reimbursement for medical expenses, [Robinson] will actually end up with less because
the Board has required her to pay the attorney fees to recover the money for the Board."
22



In other words, Robinson was prejudiced by the Retirement Board's decision requiring
her to pay the workers compensation attorney fees.

According to the minutes from the Retirement Board's meeting on October 15,
2008, Robinson's city retirement disability payment was calculated to be $1,281.45 per
month. Her workers compensation payment, before the 25 percent attorney fee deduction,
was approximately $1,400 per month (after attorney fees, the monthly workers
compensation payment was $1,050 per month). The Retirement Board acknowledged that
Robinson's outcome was negatively affected by the order in which she applied for both
benefits. The Board noted:

"The dollar amount collected over a period of years through the Pension System
[generally] exceeds the Worker's Compensation settlement upon application of the
required offset. . . . [Robinson] actually does come out a bit worse by virtue of having
done things the way she did because the Worker's Compensation benefit was higher, but
it was not more than 25% higher."

Even so, Robinson fails to show how her payment of workers compensation
attorney fees, by itself, is a penalty. The provisions in the Wichita Code do not
specifically show the intent to maximize the injured employee's benefits. Further, Kansas
appellate courts have determined that K.S.A. 2009 Supp. 44-501(h), which allows
employer contributions in private pension plans, paid to retired injured workers, to be
reduced by the amount of employer-funded workers compensation benefits paid to the
same workers, is not a penal statute. See, e.g., Robinson v. Southwestern Bell Telephone
Co., 39 Kan. App. 2d 342, 347, 180 P.3d 597 (2008), overruled on other grounds
Bergstrom v. Spears Manufacturing Co., 289 Kan. 605, 214 P.3d 676 (2009). The
statutory purpose and function is much the same as the ordinance at issue in this case and,
therefore, to suggest that the Wichita Code at issue imposes a penalty upon former City
employees would be contrary to the analysis in Robinson.
23




Further, provisions allowing an award of attorney fees are not passed to benefit the
attorney or to burden litigants. Rather, they are passed to enable litigants to obtain
competent counsel. Hatfield v. Wal-Mart Stores, Inc., 14 Kan. App. 2d 193, 199, 786
P.2d 618 (1990); see Grendel's Den, Inc. v. Larkin, 749 F.2d 945, 950 (1st Cir. 1984);
Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 719 (5th Cir. 1974), abrogated
on other grounds Blanchard v. Bergeron, 489 U.S. 87, 103 L. Ed. 2d 67, 109 S. Ct. 939
(1989). Robinson's contingency fee contract enabled her to obtain counsel, and she
received economic benefits by hiring counsel in her workers compensation case.

Therefore, we conclude Robinson has not been penalized by having to pay her
attorney a fee deemed reasonable by the workers compensation director.

3. No Long-standing Policy

In addition, the district court focused on the fact that the issue of including the
attorney fees in the amount of the reduction had never been previously presented to the
Retirement Board. Consequently, the district court questioned the Board's statements that
it hesitated to veer away from its "current practice" of utilizing the full workers
compensation award in its calculation of available disability retirement benefits and that a
deduction of workers compensation attorney fees might require a "written rule."

Because the district court considered the Retirement Board's interpretation of
Wichita Code Section 2.28.150(d)(3) to be arbitrary and capricious, it did not consider
the fact that the existence of the ordinance itself established a long-standing policy.
Because we have reached the opposite conclusion and have found the Retirement Board's
interpretation to be reasonable, we do not have the same difficulty and can conclude the
policy was long-standing, having been adopted on passage of the ordinance.
24




Further, the record discloses that the Retirement Board examined the statutes and
regulations related to other public plans with similar deduction provisions. Our
independent review of those provisions underscores the reasonableness of the Retirement
Board's decision because, in other Kansas contexts involving the reduction of one type of
benefit because of the entitlement to another benefit, this court has consistently held that
where two governmental benefits arise from a common cause, there is no entitlement to
both. For example, the Kansas Act, specifically K.S.A. 2009 Supp. 44-501(h), provides:

"If the employee is receiving retirement benefits under the federal social security
act or retirement benefits from any other retirement system, program or plan which is
provided by the employer against which the claim is being made, any compensation
benefit payments which the employee is eligible to receive under the workers
compensation act for such claim shall be reduced by the weekly equivalent amount of the
total amount of all such retirement benefits, less any portion of any such retirement
benefit, other than retirement benefits under the federal social security act, that is
attributable to payments or contributions made by the employee, but in no event shall the
workers compensation benefit be less than the workers compensation benefit payable for
the employee's percentage of functional impairment." (Emphasis added.)

Applying this provision, this court and the Court of Appeals have noted that the
purpose of this statutory reduction is to prevent wage loss duplication. Injured Workers of
Kansas v. Franklin, 262 Kan. 840, 872, 942 P.2d 591 (1997); Lleras v. Via Christi
Regional Med. Center, 37 Kan. App. 2d 580, Syl. ¶ 5, 154 P.3d 1130 (2007); McIntosh v.
Sedgwick County, 32 Kan. App. 2d 889, 897, 91 P.3d 545, rev. denied 278 Kan. 846
(2004). If a claimant is injured before he or she retires, the employer is entitled to the
statutory reduction, as an injured employee is not entitled to recover both retirement
benefits and workers compensation benefits beyond the value of the functional
impairment. McIntosh, 32 Kan. App. 2d at 894, 897-98. Conversely, if an employee
retires and then returns to work to supplement his or her income, the reduction does not
25



apply, as the employee's receipt of both workers compensation benefits and social
security retirement benefits are not duplicative. Dickens v. Pizza Co., 266 Kan. 1066,
1071, 974 P.2d 601 (1999). Neither K.S.A. 2009 Supp. 44-501(h) nor Wichita Code
Section 2.28.150(d)(3) contains a provision requiring the deduction to be reduced by the
amount of attorney fees incurred in obtaining the benefits that reduce the pension or
disability retirement benefit.

Similarly, the Kansas Public Employees Retirement System Act (KPERS), K.S.A.
74-4901 et seq., deduction provisions do not provide for adjustments due to attorney fees.
For example, disability payments for certain correctional employees are addressed in
K.S.A. 74-4914e, which provides in part:

"Benefits payable under this section shall be reduced by the original amount of
any disability benefits received under the federal social security act or the workers
compensation act. . . . In no case shall a correctional employee who is entitled to receive
benefits under this section receive less than $100 per month." (Emphasis added.) K.S.A.
74-4914e(11).

The above statute references the "original amount" and does not provide for a reduction
for any attorney fees the retiree incurred in pursuing social security or workers
compensation benefits.

We also note that the Kansas Legislature has obviously become aware of the
attorney-fee-adjustment argument in the context of KPERS and has clearly rejected it, as
seen in another provision, K.S.A. 2009 Supp. 74-4927(1)(B). That statute provides for the
deduction of social security and workers compensation benefits from long-term disability
benefit payments and specifically states: "As used in this section, 'workers compensation
benefits' means the total award of disability benefits payments under the workers
compensation act notwithstanding any payment of attorney fees from such benefits as
26



provided in the workers compensation act." (Emphasis added.) K.S.A. 2009 Supp. 74-
4927(1)(B).

Hence, although the Retirement Board had not considered the attorney fee issue,
its interpretation of Wichita Code Section 2.28.150(d) was consistent with similar
provisions in Kansas law and with the language of the provision. Because the Retirement
Board applied the clear language of the provision, the fact that the interpretation was a
matter of first impression does not render it arbitrary. Consequently, we conclude none of
the rationales stated by the district court established that the Board's interpretation was
unreasonable or contrary to established principles.

C. Common Fund

In addition to considering the interpretation of Wichita Code Section
2.28.150(d)(3), the district court relied on another concept—the common fund doctrine.
In essence, the district court reasoned that regardless of the code provision this common-
law concept entitled Robinson to recover the attorney fees from the Retirement Board.
The Board urges this court to reject this doctrine in light of the language in Wichita Code
Section 2.28.150(d)(3).

The common fund doctrine permits a party who creates, preserves, or increases the
value of a fund in which others have an interest to be reimbursed from that fund for
litigation expenses incurred, including attorney fees. The doctrine reflects the traditional
practice in courts of equity, and it stands as a well-recognized narrow exception to the
general principle that requires every litigant to bear his or her own attorney fees. Gigot v.
Cities Service Oil Co., 241 Kan. 304, 737 P.2d 18 (1987). "The doctrine rests on the
perception that persons who obtain the benefit of a lawsuit without contributing to its cost
are unjustly enriched at the successful litigant's expense. [Citation omitted.]" Gigot, 241
Kan. at 313. For example, the common fund doctrine generally provides the basis for
27



awarding attorney fees in class actions. The rationale for awarding attorney fees out of a
common fund is that the attorney's services benefit the fund by creating, increasing, or
preserving the fund. Moore v. St. Paul Fire Mercury Ins. Co., 269 Kan. 272, 277, 3 P.3d
81 (2000); see County Workers Comp. Pool v. Davis, 817 P.2d 521, 526 (Colo. 1991)
(basic rule of equity permits apportionment of attorney fees and costs under
circumstances where party has been successful in creating a fund from which other
"passive beneficiaries" derive monetary benefit).

The common fund doctrine relied on by the district court in this case was not
mentioned in the California, Kentucky, or Washington cases, or the Tenth Circuit case we
previously discussed, which were based on common rules of statutory interpretation.
(The Tenth Circuit did consider and reject the doctrine of unjust enrichment.)
Nevertheless, the common fund doctrine has been discussed in similar cases, and two
lines of cases have emerged.

In support of Robinson's argument, she cites Leonard v. Southwestern Bell Corp.
Disability, 341 F.3d 696 (8th Cir. 2003), which is representative of one line of cases.
There, Southwestern Bell had reduced the claimant's disability retirement plan by the
entire workers compensation award of $100,000. Southwestern Bell argued that the goal
of employee benefit plans is to provide a safety net for employees, i.e., to provide a
minimum amount of compensation for disabled employees. The Eighth Circuit Court of
Appeals stated that allowing the plan to reduce the award by the amount of the workers
compensation award and the attorneys fees and costs incurred by the employee in
obtaining that award contradicts this goal. "Such a practice would place employees in
worse positions than they would have been in had they not tried to obtain a worker's
compensation award in the first place." Leonard, 341 F.3d at 705.

28



Additionally, the Leonard court was concerned with the inequitable results this
practice could produce. "Assuming that an employer is not self-insured for worker's
compensation, Southwestern Bell's argument would result in a windfall to an employee
benefit plan and a detriment to an employee when the employee elects to assert rights
under a worker's compensation law." Leonard, 341 F.3d at 705. The employer would be
able to reduce benefits, dollar for dollar, for the total amount of the workers
compensation award, while the employee, who asserted statutory rights and obtained an
additional recovery, would be worse off, having only received the amount of the award
remaining after payment of attorney fees and costs. Leonard, 341 F.3d at 705-06.

Given these two concerns, the Leonard court refused to allow the reduction to
include the amount a plan participant had to pay in attorney fees and costs to obtain
nonplan benefits, absent an explicit statement in the plan that administrators had
discretion to treat fee and cost portions of such payments as the "same general character"
as plan benefits. Leonard, 341 F.3d at 706.

The common fund doctrine was also applied in Young v. Mory, 294 Ill. App. 3d
839, 690 N.E.2d 1040 (1998). There, Young had reached a tentative settlement of
workers compensation claims with his employer for $100,000, of which $20,000 was for
attorney fees. Young also sought occupational disability benefits from the State
Employees' Retirement System of Illinois (SERS). Before finalizing the settlement,
Young sought a declaratory judgment to enjoin SERS from reducing his retirement
benefits by the attorney fees portion of the pending settlement.

Under the Illinois Pension Code, SERS was entitled to a deduction from benefits
for any workers compensation award. Young, 294 Ill. App. 3d at 847 (citing 40 ILCS
5/14-129 [West 1996]). SERS had adopted a regulation which provided that the amount
considered for the purpose of a deduction would not be reduced by any legal expenses
29



granted in the workers compensation award. Hence, the pension benefit was reduced by
the entire workers compensations award, including the attorney fees.

The Illinois Court of Appeals found that the regulation was invalid because SERS
clearly benefited from the services of Young's attorney in that SERS would be able to
reduce the pension award by the full amount of the workers compensation award,
including the amount paid for attorney fees. As such, the common fund doctrine applied
and SERS was responsible for the fees incurred by the claimant in seeking workers
compensation benefits.

The common fund doctrine was also applied in a Montana case quite similar to the
one at hand. In Flynn v. State Compensation Ins. Fund, 312 Mont. 410, 60 P.3d 397
(2002), the claimant suffered repetitive work-related injuries and began receiving
workers compensation benefits. He subsequently filed a claim for and began receiving
social security disability benefits. Because of the disability benefits, the State
Compensation Insurance Fund notified the claimant that his workers compensation
payments would be reduced. The claimant filed a petition in the Workers Compensation
Court in which he alleged that the State Fund should pay a proportionate share of the
attorney fees he incurred to recover social security disability benefits. He reasoned that
the State Fund benefited from his social security disability award as much as he did
because it could now reduce the workers compensation benefits paid to him by one-half
the amount of the social security disability award.

The Workers Compensation Court rejected the claimant's attorney fee claim for
three reasons. First, it cited Stahl v. Ramsey Construction Co., 248 Mont. 271, 811 P.2d
546 (1991), for the proposition that no statutory or contractual authority supported the
apportionment claim. Second, the court found that the common fund doctrine "'has no
application here [because] Claimant is not seeking attorney fees for others who may
30



benefit by this decision, rather he is seeking attorney fees with respect to his own
entitlement.' [Citation omitted.]" Flynn, 312 Mont. at 413. Finally, the court based its
decision on statutory preemption, holding that "'[w]here a conflict arises between the
common law and a statute, the common law must yield.' [Citation omitted.]" Flynn, 312
Mont. at 414.

On appeal from the rulings of the Workers Compensation Court, the Montana
Supreme Court in its Flynn decision also discussed Stahl, where the claimant incurred
attorney fees to recover social security disability benefits and the Social Security
Administration withheld a percentage of the award for direct payment of his attorney
fees. Following the Stahl claimant's social security disability award, the State Fund
determined that it was entitled to reduce its future payment of benefits to account for the
retroactive social security disability award. The claimant contended that since he had not
received the amount withheld for attorney fees, it should not be included in the
overpayment calculation.

The Flynn court noted that the Stahl claimant did not argue for application of the
common fund doctrine and presented a different theory for relief than was presented in
Flynn. The Flynn court, therefore, did not find Stahl to be dispositive. Next, the court
summarized the elements of the common fund doctrine as follows:

"(1) an active beneficiary must create, reserve, or increase a common fund; (2) the active
beneficiary must incur legal fees in establishing the common fund; and (3) the common
fund must benefit ascertainable, non-participating beneficiaries. We enforce this doctrine
because equity demands that all parties receiving a benefit from the common fund share
in the cost of its creation. [Citation omitted.]" Flynn, 312 Mont. at 414.

With those elements in mind, the Flynn court observed that by obtaining a social
security disability award the claimant enabled the State Fund to reduce his weekly
31



workers compensation benefits. Also, as a result of the claimant's litigation efforts, funds
were recovered which accrued to the substantial benefit of the State Fund. While the
State Fund reaped the benefit of the claimant's efforts, it was not required to intervene,
risk expense, or hire an attorney throughout the litigation proceedings. As a result, the
Flynn court held that the claimant's social security disability award constituted an
existing, identifiable monetary fund or benefit in which an ascertainable, nonparticipating
beneficiary maintained an interest. Flynn, 312 Mont. at 415.

The state's high court acknowledged that the common law is preempted where the
law is statutorily declared. But it stated that "the Workers' Compensation Act is silent on
the issue of attorney fee apportionment following benefit recoupment." Flynn, 312 Mont.
at 415. Thus, the Flynn court found there was no statutory declaration preempting the
equitable principles of the common fund doctrine.

A dissent, however, took the view that the common fund doctrine had no
application. First, the dissenting justice observed that there is no "common fund" because
the governmental agency involved in that case was not a party to the administrative
proceeding, made no claim, and did not share a claim with Flynn, the claimant. Indeed,
"Flynn's SSD award is personal to him and all funds obtained thereunder are entirely
under his control. The State Fund has no claim of entitlement to, or power to control the
disbursement of, any funds paid to Flynn by the Social Security Administration." Flynn,
312 Mont. at 417-18. (Rice, J., concurring part and dissenting in part). In addition, the
dissenting justice concluded there was not a common interest because the "[f]und is not a
beneficiary with a common claim to federal benefits." Flynn, 312 Mont. at 418 (Rice, J.,
concurring in part and dissenting in part).

In support of the position, the dissent cited Neal v. County of Stanislaus, 141 Cal.
App. 3d 534, 190 Cal. Rptr. 324 (1983). In Neal, the court discussed the development of
32



the common fund doctrine and noted the existence of contractual obligations which
furthered the doctrine. Neal, 141 Cal. App. 3d at 538. In so doing, the court stated:

"The mere fact that defendant [county] benefits from plaintiff's efforts does not in itself
entitle plaintiff to fees from defendant. In County of Tulare v. City of Dinuba,[ 205 Cal.
111, 270 P. 201 (1928)], the Supreme Court stated:

'The underlying principle in all the cases where one has been allowed
compensation out of a common fund belonging to others for expenses
incurred and services rendered on behalf of the common interest is the
principle of representation or agency. . . . The fact that one may be
benefitted by an action brought by another is not of itself sufficient to
justify a court in assessing costs against the one who also profits by said
action. Some contractual relation or some equitable reason sufficient to
support an allowance of costs must be shown to exist to justify a court of
equity in making such assessment.'

"Here, there is no contractual relation or overriding equitable rationale of
unfairness to plaintiff which supports an allowance of fees." Neal, 141 Cal. App. 3d at
539.

Adopting this reasoning, the dissenting justice in the Montana case further noted
that the common fund doctrine is "'rooted in the equitable concept of quasi-contract.'
[Citations omitted.] It is applied in cases involving 'principle[s] of representation or
agency.' [Citation omitted.]" Flynn, 312 Mont. at 419. It does not, however, apply simply
because one benefits from the efforts of another.

The dissent in Flynn is consistent with the second line of cases applying the
common fund doctrine in situations similar to the one before us. In one such case, the
Nebraska Supreme Court adopted similar reasoning to the dissent in Flynn when it
33



refused to apply the common fund doctrine and included attorney fees in the amount of a
benefit reduction. In Kindred v. City of Omaha Emp. Ret. Sys., 252 Neb. 658, 564
N.W.2d 592 (1997), the claimant sought reimbursement from the City's retirement
system under the common fund doctrine for attorney fees that he incurred in a workers
compensation action after the retirement system offset those benefits from his disability
retirement pension. Omaha Municipal Code Section 22-35 stated, in relevant part:

"'Any member of the system who has at least five (5) years of service credit and has
sustained and/or shall sustain injuries or sickness, which immediately or after a lapse of
time permanently unfit such member for active duty, shall receive a monthly disability
pension as long as he or she remains unfit for active duty or until he or she reaches age
sixty-five (65), whichever event occurs first. Such monthly disability pension in
combination with workers' compensation and social security shall not exceed sixty (60)
percent of such member's base compensation for the last full month prior to disability.'"
Kindred, 252 Neb. at 659-60.

The parties agreed that the language of the city ordinance allowed the Retirement
System to deduct the full amount of the claimant's workers compensation award from the
retirement pension. The claimant's attorney appeared before the Retirement System's
board of trustees and requested that one-third of the amount of workers compensation
benefits that were deducted from the claimant's disability retirement pension be returned
to him as reimbursement for attorney fees incurred in the workers compensation case.
The board of trustees agreed to reimburse the claimant for attorney fees and costs with
respect to some of his permanent partial disability benefits in the total amount of $5,991
but denied his claim for reimbursement of other attorney fees.

Unsatisfied, the claimant brought an appeal to the district court, contending that
the Retirement System had benefited by reducing his service-connected disability pension
entitlement by the full amount of the workers compensation benefits. The Retirement
System, therefore, should be required under the common fund doctrine to reimburse the
34



claimant for the full amount of attorney fees which he paid with respect to those benefits.
The district court ruled in favor of the Retirement System, concluding the attorney's
efforts had not created a common fund but instead had merely resulted in workers
compensation benefits that reduced the claimant's disability retirement pension. The
district court found the claimant was receiving all of the workers compensation and
disability retirement benefits to which he was entitled and that it would be unfair to
require the Retirement System to pay the fee which the claimant contracted to pay his
attorney in the workers compensation case, especially since there was no language in the
city ordinance creating such an obligation.

On appeal, the Nebraska Supreme Court observed that prior precedent held that
"the common fund doctrine 'presupposes the existence of a fund.'" Kindred, 252 Neb. at
663. In the situation before it, the court concluded here was no "common fund" upon
which application of the common fund doctrine could be predicated. The claimant
received his workers compensation benefits and paid his attorney in full pursuant to their
contract. The Kindred court noted that the Retirement System did not claim or receive a
disbursement of money from any source, and there was no fund within the jurisdiction of
the district court from which it could have ordered disbursements. Kindred, 252 Neb. at
664.

Instead, the Retirement System simply calculated the claimant's disability
retirement pension benefits in the manner prescribed by the city ordinance, deducting the
full amount of workers compensation benefits from his monthly disability retirement
entitlement. "It is undisputed that this is exactly what the ordinance required," stated the
Kindred court. Kindred, 252 Neb. at 664. Further, the city ordinance defining disability
retirement pension benefits contained no permissive language similar to a Nebraska
statute, which provided that attorney fees incurred in obtaining a recovery from a third
party could be prorated between an injured employee and the subrogated employer or
35



workers compensation insurer. Kindred, 252 Neb. at 664 (citing previous version of Neb.
Rev. St. § 48-118). Observing that the city ordinance did not provide for excluding the
attorney fees from the workers compensation reduction, the Kindred court determined
that the district court correctly found that the common fund doctrine afforded no basis for
judicial imposition of such a requirement. Kindred, 252 Neb. at 664; see Dear v. Union
Cent. Life Ins. Co., 573 F. Supp. 2d 958, 963 (W.D. Tex. 2008) (holding that under Texas
law as predicted by federal court, common fund doctrine did not apply to limit group
accident insurer's contractual subrogation right to recover its payments from proceeds of
employee's settlement with third-party tortfeasor by amount of its fair share of attorney
fees and expenses incurred in securing recovery); Kramer v. State Retirement Bd., 195
P.3d 925, 931-32 (Utah App. 2008) (holding that common fund doctrine did not apply to
invalidate subrogation provision of public employee health insurance policy).

As we consider these two divergent lines of cases, we find the view represented by
the Nebraska Supreme Court's decision and the dissent in Flynn to be more persuasive.
While the equitable approach adopted in the cases using the common fund doctrine is
somewhat alluring, its application under these circumstances is contrary to the rule. The
Retirement Board had no interest in Robinson's workers compensation award and did not
have an agency or contractual relationship with her. There was no "common fund" or
"common interest" in the workers compensation award. Further, although Wichita's
retirement fund did not have to pay out as much as it would have had Robinson not
received workers compensation benefits, the purpose of the common fund doctrine is not
to require the sharing of attorney fees with everyone who derives a financial benefit from
a claimant's settlement or award. Further, as we have discussed, Wichita Code Section
2.28.150(d)(3) is clear and unambiguous and does not create an exception for attorney
fees. Hence, the Retirement Board appropriately applied the provision by reducing the
retirement disability benefit by the entire workers compensation award, including the
attorney fees.
36



The district court's decision directing the Retirement Board to reduce the workers
compensation deduction by the amount of attorney fees and costs incurred in Robinson's
workers compensation case is reversed. The Retirement Board's calculation of retirement
disability benefits in which it utilized the full amount ($125,000) of workers
compensation benefits received by Robinson is affirmed.

* * *

LUCKERT, J., dissenting: I respectfully dissent from the majority's conclusion that
the common fund doctrine does not apply in this case. The majority adopts the view of
the Nebraska Supreme Court in Kindred v. City of Omaha Emp. Ret. Sys., 252 Neb. 658,
564 N.W.2d 592 (1997), and the dissent in Flynn v. State Compensation Ins. Fund, 312
Mont. 410, 60 P.3d 397 (2002), both of which adhere to the early roots of the common
fund doctrine and reject a less rigid equitable view that is more consistent with this
court's application of the doctrine. I would adopt the holdings and rationale of the courts
in Leonard v. Southwestern Bell Corp. Disability, 341 F.3d 696 (8th Cir. 2003); Young v.
Mory, 294 Ill. App. 3d 839, 690 N.E.2d 1040 (1998), and the majority in Flynn, 312
Mont. 410, which better express views consistent with this court's past applications of the
common fund doctrine.

In defining and applying the common fund doctrine, this court has looked to
decisions of the United States Supreme Court. See, e.g., Gigot v. Cities Service Oil Co.,
241 Kan. 304, 313-14, 737 P.2d 18 (1987). A review of those decisions reveals that the
driving principle is one of equity, and formalistic rules based on the early common-law
roots of the common fund doctrine, such as applied by the Nebraska Supreme Court and
the dissenting justice in Flynn, have been modified to allow equitable outcomes.

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For example, the limited view of what comprises a "common fund" that was
adopted by the Nebraska Supreme Court has been rejected by the United States Supreme
Court. The Nebraska court in Kindred, 252 Neb. 658, required the attorney's efforts
impact a common fund that is subject to the jurisdiction of the court; the Nebraska
Supreme Court reasoned that the attorney's efforts resulted in the workers compensation
award and that award was not within the jurisdiction of the court. Yet, in Mills v. Electric
Auto-Lite, 396 U.S. 375, 24 L. Ed. 2d 593, 90 S. Ct. 616 (1970)—which is cited in Gigot,
241 Kan. at 313—the United States Supreme Court concluded that a "fund" need not
even be created.

In Mills, the United States Supreme Court focused on whether the action that
resulted in attorney fees benefited others who had not paid the attorney fees and
discounted the importance of the attorney's efforts having resulted in a "fund." The Court
noted that its past cases

"have departed further from the traditional metes and bounds of the [common fund]
doctrine, to permit reimbursement in cases where the litigation has conferred a substantial
benefit on the members of an ascertainable class, and where the court's jurisdiction over
the subject matter of the suit makes possible an award that will operate to spread the costs
proportionately among them."

Mills, 396 U.S. at 393-94. As such, the Court concluded the failure to create
a fund that was the subject of the lawsuit did not prevent application of the
doctrine. The Court stated:

"The fact that this suit has not yet produced, and may never produce, a monetary
recovery from which the fees could be paid does not preclude an award based on this
rationale. Although the earliest cases recognizing a right to reimbursement involved
litigation that had produced or preserved a 'common fund' for the benefit of a group,
nothing in these cases indicates that the suit must actually bring money into the court as a
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prerequisite to the court's power to order reimbursement of expenses. . . . This Court in
Sprague [v. Ticonic Nat. Bank, 307 U.S. 161, 166, 83 L. Ed. 1184, 59 S. Ct. 777 (1939)],
upheld the District Court's power to grant reimbursement for a plaintiff's litigation
expenses even though she had sued only on her own behalf and not for a class, because
her success would have a stare decisis effect entitling others to recover out of specific
assets of the same defendant. Although those others were not parties before the court,
they could be forced to contribute to the costs of the suit by an order reimbursing the
plaintiff from the defendant's assets out of which their recoveries later would have to
come. The Court observed that 'the absence of an avowed class suit or the creation of a
fund, as it were, through stare decisis rather than through a decree―hardly touch[es] the
power of equity in doing justice as between a party and the beneficiaries of his litigation.'
[Sprague, 307 U.S.] at 167." Mills, 396 U.S. at 392-93.

The Court emphasized that equity was the principle concern, stating that "[t]o
allow the others to obtain full benefit from the plaintiff's efforts without contributing
equally to the litigation expenses would be to enrich the others unjustly at the plaintiff's
expense." Mills, 396 U.S. at 392.

While the facts and circumstances of Mills are clearly distinguishable from this
case, I view the decision as indicating the common fund doctrine need not be adhered to
with the rigid view that constrained the Nebraska Supreme Court. Reflecting this shift,
some courts have suggested that using the term the "common benefit" doctrine better
describes a Mills-type application. See, e.g., Petow v. Warehime, 996 A.2d 1083 (Pa.
Super. 2010). Regardless of how the doctrine is labeled, the focus is on whether the
efforts provide a common benefit in a fund in which both parties have an interest, such as
the retirement pension fund. The Mills-type view is better reflected in the analysis in
Leonard, 341 F.3d 696; Young, 294 Ill. App. 3d 839; and the majority opinion in Flynn,
312 Mont. 410.

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A second rationale of the Nebraska Supreme Court and the dissent in Flynn that
was adopted by the majority in this case is that the clear language of the provision
controls and does not create an exception for attorney fees. This rationale ignores K.S.A.
77-109, which states in part: "The common law as modified by constitutional and
statutory law, judicial decisions, and the conditions and wants of the people, shall remain
in force in aid of the General Statutes of this state." In other words, when the legislature
intends to abolish a common-law rule, it must do so in an explicit manner. "In the
absence of such an expression of legislative intent, the common law remains part of our
law." American General Financial Services, Inc. v. Carter, 39 Kan. App. 2d 683, 687,
184 P.3d 273 (2008); see In re Estate of Mettee, 10 Kan. App. 2d 184, 187, 694 P.2d
1325, aff'd 237 Kan. 652, 702 P.2d 1381 (1985).

In my view, an explicit abolition of the common fund doctrine can be found in a
provision cited by the majority, K.S.A. 2009 Supp. 74-4927(1)(B). As noted by the
majority, K.S.A. 2009 Supp. 74-4927(1)(B) specifically states: "As used in this section,
'workers compensation benefits' means the total award of disability benefits payments
under the workers compensation act notwithstanding any payment of attorney fees from
such benefits as provided in the workers compensation act." (Emphasis added.) This clear
language, I would conclude, is sufficient to abrogate the application of the common fund
doctrine. On the other hand, Wichita Code Section 2.28.150(d)(3) lacks this clarity and
does not displace the doctrine.

Hence, the common fund doctrine can apply, and it is appropriate to do so in this
case because Robinson's efforts saved the Retirement Board the $93,750 it would have
owed to Robinson if she had not received her workers compensation award. This $93,750
is now available to the Retirement Board, which has benefited from the efforts of
Robinson's attorney. Consequently, I would affirm the district court.

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JOHNSON, J., joins in the foregoing dissent.