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decided: September 25, 1986.


Appeal from the Order dated May 13, 1985 of the Commonwealth Court acting as a court of original jurisdiction, at No. 2659 C.D. 1984


Michael L. Harvey, Harrisburg, for appellants.

Robert E.J. Curran, William J. Winning, Media, for appellees.

Nix, C.j., and Larsen, Flaherty, McDermott, Hutchinson, Zappala and Papadakos, JJ. Larsen, J., files a dissenting opinion.

Author: Mcdermott

[ 511 Pa. Page 536]


This is an appeal from an order of the Commonwealth Court awarding counsel fees and expenses to the law firm which represented appellee, Carol Jones, in a suit commenced by her in Commonwealth Court. The subject of the suit involved the establishment of the Catastrophic Loss Trust Fund (CAT Fund).

[ 511 Pa. Page 537]

On February 12, 1984, the General Assembly enacted the Motor Vehicle Financial Responsibility Law.*fn1 In part the Act established the CAT Fund, which was designed to provide certain benefits to Commonwealth residents for medical treatment and rehabilitative services for injuries arising out of the maintenance or use of a motor vehicle in the United States or Canada. See 75 Pa.C.S. §§ 1761-1769. The CAT Fund was to be funded by levying an initial charge of $5 upon motor vehicles registered in the Commonwealth. 75 Pa.C.S. § 1762. The Act directed that this charge was to be remitted to an agent designated by the Insurance Department, who in turn would remit the charge to the Insurance Department for deposit in the trust fund. Id. To enforce payment the Act directed PennDOT to refuse registration, renewal, or transfer of registration of any motor vehicle to which the charge attached until there was proof that the charge had been paid. 75 Pa.C.S. § 1763. The effective date of the Act was October 1, 1984.

Pursuant to the Act's direction to appoint a party to collect the $5 charge, the Insurance Department promulgated proposed regulations which designated individual insurance companies to collect the charge from their automobile policyholders. The Department's rationale for this procedure was to create a mechanism to match the roster of persons having purchased automobile insurance and paid the CAT Fund charge, against the roster of automobile registrants, and thereby discover both uninsured motorists and those failing to pay the CAT Fund charge. The regulations were presented to the Independent Regulatory Review Commission (IRRC)*fn2 on August 2, 1984. In a 5-0 vote the

[ 511 Pa. Page 538]

IRRC rejected the proposed regulations on August 16, 1984. Thereafter, the proposed regulations were revised in an attempt to meet the IRRC's concerns and resubmitted to the IRRC on September 1, 1984. On September 6, 1984, in a 3-2 vote the IRRC again rejected the proposed regulations. The Insurance Department then began working toward proposing and submitting revised regulations in time for the next scheduled meeting before the IRRC on September 20, 1984.

However, on September 7, 1984, appellee, Carol Jones, filed in Commonwealth Court a Complaint in Equity and Petition for Special Injunction, seeking a mandatory injunction directing PennDOT to collect the CAT Fund charges as part of the Department's motor vehicle registration and renewal fee collection program. The complaint also sought payment of appellee's costs and counsel fees. That same day President Judge Crumlish granted a temporary injunction requiring PennDOT to collect the charges. Thereafter, on September 12th and 18th, hearings were held on the merits of the injunction. Proceedings on appellee's complaint were consolidated with proceedings on a similar complaint filed on behalf of the Insurance Federation of Pennsylvania and certain insurance companies.

During this time the Insurance Department submitted an administrative order for publication of the rejected regulations in the Pennsylvania Bulletin, with a view toward obtaining a certification from the Governor that the regulations were required to meet an emergency, thereby making the regulations effective for up to 120 days while being reviewed by the General Assembly. This was permitted by the terms of the Regulatory Review Act,*fn3 71 P.S. § 745.6(b). On September 26, 1984, Governor Thornburgh issued such an emergency certification. That same day, however,

[ 511 Pa. Page 539]

Judge Crumlish entered a preliminary injunction directing the Insurance Commissioner to designate PennDOT as the agent to collect the $5 fee, and to present regulations to the IRRC governing collection of the fee.

Appellants*fn4 took an appeal from that order to this Court. In a four-to-three vote we affirmed Judge Crumlish's direction that PennDOT temporarily collect the CAT fund charge,*fn5 and remanded the action to Commonwealth Court for final disposition on the merits.

While final hearing on the merits was still pending, the parties entered into a settlement agreement on December 7, 1984, which provided for collection of the CAT Fund charge by an independent, non-profit corporation. Because appellants disputed appellee's alleged right to attorney's fees the parties agreed that that issue would be decided later, upon appellee's application to the Commonwealth Court.

On January 18, 1985, appellee filed an application for counsel fees and costs. After a hearing on the matter Judge Colins of the Commonwealth Court issued an order awarding $37,887.50 as counsel fees, and $481.75 as costs and expenses to appellee's attorneys. These fees and costs were to be paid from the CAT Fund. Judge Colins based the entitlement to an award of counsel fees on his finding that the attorneys' efforts resulted in the implementation of a system for the funding of the CAT Fund. Characterizing these efforts as "creating" the fund, the court held that the attorneys were entitled to an award under the equitable, or "common" fund, doctrine.

[ 511 Pa. Page 540]

On appeal of the award to this Court*fn6 appellants raise various challenges to the lower court's order. Because of our resolution of the question of whether the equitable fund doctrine should apply to justify an award of attorney's fees in this case we need not address all of those challenges.*fn7

The Judicial Code establishes allowable costs for the conduct of litigation:

The governing authority shall prescribe by general rule the standards governing the imposition and taxation of costs, including the items which constitute taxable costs, the litigants who shall bear such costs, and the discretion vested in the courts to modify the amount and responsibility for costs in specific matters. All system and related personnel shall be bound by such general rules. In prescribing such general rules, the governing authority shall be guided by the following considerations, among others:

(1) Attorney's fees are not an item of taxable costs except to the extent authorized by section 2503 (relating to right of participants to receive counsel fees).

(2) The prevailing party should recover his costs from the unsuccessful litigant except where the:

(i) Costs relate to the existence, possession or disposition of a fund and the costs should be borne by the fund.

(ii) Question involved is a public question or where the applicable law is uncertain and the purpose of the litigants is primarily to clarify the law.

(iii) Application of the rule would work substantial injustice.

[ 511 Pa. Page 541]

(3) The imposition of actual costs or a multiple thereof may be used as a penalty for violation of general rules or rules of court.

(emphasis added) 42 Pa.C.S. § 1726.*fn8

The authority for awarding attorney's fees is contained in Section 2503 of the Judicial Code, which ...

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