Today, four United States contractors were found guilty of the manslaughter of a group of unarmed Iraqi civilians. The contractors, all of whom were former Blackwater employees, were involved in the Nisour Square massacre that occurred in September 2007. Seventeen Iraqis were killed and twenty were seriously injured. Additional news coverage can be found through the following links:
Here’s a tip for carriers that plan to apply for reimbursement under the War Hazards Compensation Act: don’t let your vendors charge flat fees. Why? Because the Division of Federal Employees’ Compensation will not reimburse flat fee charges, no matter what.
What are Flat Fees?
A flat fee, or flat rate, is a pricing structure where a single fixed fee is charged for a service, regardless of usage. These fees could arise for any number of services in Defense Base Act case. For instance, vendors may change flat rates for medical repatriation to the United States following an injury in Afghanistan; for surveillance or overseas document retrieval services; or even for legal fees.
Why are Flat Fees Denied Reimbursement?
Flat fees are not addressed in the War Hazards Compensation Act statutes. See 42 U.S.C. § 1701 et. seq. The regulations, however, do address flat fees. Specifically, 20 C.F.R. § 61.403, entitled “Approval of claims for legal and other services,” states:
(b) The Office shall not recognize a contract for a stipulated fee or for a fee on a contingent basis. No fee for services shall be approved except upon application supported by a sufficient statement of the extent and character of the necessary work done on behalf of the claimant. Except where the claimant was advised that the representation would be rendered on a gratuitous basis, the fee approved shall be reasonably commensurate with the actual necessary work performed by the representative, and with due regard to the capacity in which the representative appeared, the amount of compensation involved, and the circumstances of the claimant.
Based upon 20 C.F.R. § 61.403, the Division of Federal Employees’ Compensation takes the position that no flat fees are reimbursable, no matter whether the flat fee was charged by a lawyer or another vendor.
Should Flat Fees Be Reimbursed?
The Division of Federal Employees’ Compensation’s reference to 20 C.F.R. § 61.403 when denying reimbursement for flat fees begs the question whether flat fees are being improperly denied. There are good arguments that flat fees should be reimbursed, so long as those fees are not charged by a claimant’s attorney under Section 101(a) or Section 101(b) of the War Hazards Compensation Act.
For instance, the WHCA regulations are divided into 5 sections, Subparts A through E. Each Subpart has a specific purpose. Subpart B “describes the procedure by which an insurance carrier . . . shall file a claim for reimbursement . . . and describes the procedures for processing a claim for reimbursement and transferring a case for direct payment by the Department of Labor.” Subpart E, wherein 20 C.F.R. § 61.403 is found, “contains miscellaneous provisions concerning disclosure of program information, approval for claims for legal services, and assignment of claim.” See 20 C.F.R. § 61.3.
Consider the language used in 20 C.F.R. § 61.3: “approval for claims for legal services.” Id. Also, consider the language used in 20 C.F.R. § 61.403, which focuses entirely on fees for legal services. It appears that the regulations want to prohibit claimant’s attorneys from charging flat fees.
But not all claimant’s attorneys. The regulation only applies to attorneys who help a claimant file a direct claim for War Hazards Compensation Act relief, see 42 U.S.C. § 1701(a), or a detention benefits claim, see 42 U.S.C. § 1701(b). Claimant’s attorneys who are paid fees pursuant to Section 28 of the Longshore and Harbor Workers’ Compensation Act, as extended to the Defense Base Act, are not bound by the flat fee language contained in the War Hazards Compensation Act regulations.
Still, though, there is a problematic sentence in 20 C.F.R. § 61.403. The first sentence of subsection (b) reads, “The Office shall not recognize a contract for a stipulated fee or for a fee on a contingent basis.” The scope of this sentence has been extended beyond the regulation and Subpart in which it appears. The Division of Federal Employees’ Compensation applies it to all costs associated with a claim.
What Can Carriers Do to Avoid Denials?
There are more arguments that carriers can lodge to obtain reimbursement for flat fees, but the best practice is to avoid the problem in its entirety. Carriers should require their vendors to record task-specific and claim-specific charges instead of accepting invoices with flat fees. Use 20 C.F.R. § 61.101(b) as a template. Vendors should submit documentation that allows a carrier to “sufficient[ly] . . . establish the purpose of the payment, the name of the payee, the date(s) for which payment was made, and the amount of the payment.”
“Flotilla Doctrine” Applied and the Court Granted Claimant’s Motion to Increase Security in a Limitation Action
The flotilla doctrine applies where vessels are owned by the same person, engaged in a common enterprise, and under a single command. The flotilla doctrine requires, for limitation for liability purposes, the owner’s tender of all the vessels in the flotilla, or the value thereof, pending resolution of the underlying claims.
Claimant was allegedly injured when a third party’s vessel collided with the M/V CROSBY MARINER. Claimant was a crewmember assigned to the M/V CROSBY MARINER. The M/V CROSBY EXPRESS were transporting a barge together at the time of the accident. Crosby Marine Transportation, LLC (“Crosby”) owned both the M/V CROSBY EXPRESS and the M/V CROSBY MARINER. The M/V CROSBY EXPRESS was the lead tug while the M/V CROSBY MARINER was attached to the port side of the barge to stabilize it while under tow. The decisions pertaining to the speed of the tow and navigation came from the captain of the M/V CROSBY EXPRESS.
Claimant sued Crosby and the owners of the third party vessel. Crosby filed a limitation action pursuant to the Limitation of Liability Act and supplied security in accordance with the value of the M/V CROSBY MARINER and its pending freight. Claimant filed a Motion to Increase Security arguing the applicability of the flotilla doctrine.
The Magistrate agreed with the Claimant.
Here, the CROSBY MARINER and the CROSBY EXPRESS were both owned by the same owner, Crosby. Additionally, both were engaged in a common enterprise, that is, towing the same barge. Further, both vessels were under Captain Naccio’s command. Accordingly, the Court finds that the flotilla doctrine applies in this case.
Accordingly, the Court ordered an appraisal of the M/V CROSBY EXPRESS and M/V CROSBY MARINER by a Court-appointed appraiser or for the parties to stipulate and agree to the valuation of both vessels and the freight involved.
Crosby Marine Transp., LLC v. Triton Diving Servs., LLC, CIV. 13-2399, 2014 WL 5026070 (W.D. La. Oct. 8, 2014)
On October 14, 2014, the Court issued its second Order List for the 2014 term. One of the cases that the Supreme Court denied was Lincoln v. Director, OWCP.
Lincoln was an interesting case that involved the attorneys fee provision of the Longshore and Harbor Workers’ Compensation Act (“LHWCA”) and the meaning of the term “compensation.” The facts of Lincoln are fairly straight forward. The employee filed a hearing loss claim on May 24, 2011. Initially, the employer filed a notice of controversion stating that the hearing loss was noise-induced, but it needed additional information to determine the correct disability payment. On June 14, 2011, the district director served notice that the claim was filed. Then, on July 7, 2011, the employer voluntarily paid employee $1,256.84, amounting to compensation for “0.5% [binaural] hearing loss” and the equivalent of one week of permanent partial disability benefits under the maximum compensation rate.
The dispute in this case arose after the claimant’s attorney filed a petition for attorney’s fees. The employer opposed the petition, arguing that fees were not owed due to non-compliance with the LHWCA’s attorney fee statute, 33 U.S.C. § 928. Fees were not owed under Section 28(a) because “compensation” had been paid within thirty days of receiving notice of the claim from the district director. Further, the employer argued that fees were not owed under Section 28(b) because an informal conference had never taken place. The district director, Benefits Review Board, and the United States Court of Appeals for the Fourth Circuit disagreed.
The Fourth Circuit’s decision explores the definition of “compensation.” The claimant argued that the $1,256.84 payment was not an actual payment of “compensation,” as intended by the LHWCA. The argument was reminiscent of a fairly recent case, Green v. Ceres Marine Terminals, where the employer paid $1 in “compensation,” but the BRB held that the $1 payment was not “true” compensation. The Fourth Circuit distinguished Lincoln from Green, finding that the $1 payment in Green was “untethered to the underlying claim,” but that the $1,256.84 payment in Lincoln was “directly tied to Lincoln’s alleged injury.”
Now that the Supreme Court has denied review, Lincoln is over.