Claimant’s “Second Claim” Did Not Entitle Him to Section 28(a) Attorney’s Fees

After the claimant suffered an ankle injury on October 7, 2004, the employer began paying temporary total disability (“TTD”) benefits immediately, until June 13, 2005.  Thereafter, when the claimant filed an additional claim for benefits, the employer controverted the claim but nonetheless paid additional TTD benefits within 30 days.  While the claimant was receiving these additional TTD benefits, he filed a “second claim,” stating that he also injured his back in the 2004 incident.  The employer controverted this new back claim, but it continued paying TTD benefits.

Two years after TTD benefits ended, the district director held an informal conference.  The only recommendations made were that (1) the claimant was not authorized to switch to another physician, and (2) that claimant should submit medical reports to his employer about the back condition.  Instead of submitting the medical reports, the claimant chose to refer the claim for a formal hearing.  Ultimately, the Administrative Law Judge (“ALJ”) determined that the claimant was entitled to TTD benefits, medical benefits for his back condition, and a new back physician.

The question presented to the Benefits Review Board (“BRB”) was whether the claimant was entitled to shift fees pursuant to Sections 28(a) or 28(b) of the Longshore and Harbor Workers’ Compensation Act.  The BRB denied fees.

Generally, Section 28(a) applies when an employer declines to pay any benefits within 30 days of receiving notice of the claim and the claimant successfully prosecutes his claim.  Here, the claimant received benefits within 30 days of the initial injury.  Further, the employer reinstated benefits within 30 days of its receipt of claimant’s claim for additional benefits.  It did not matter “[t]hat claimant subsequently sought additional benefits for a back injury arising out of the same work incident” because the employer paid benefits within 30 days of its receipt of a claim.   Payment of fees within the first 30 days, regardless of the “second claim” was determinative and rendered Section 28(a) inapplicable.

Section 28(b) was also inapplicable.  Pursuant to the Fifth Circuit, “the following are prerequisites to an employer’s liability under Section 28(b): (1) an informal conference; (2) a written recommendation from the district director; (3) the employer’s refusal to accept the written recommendation; and (4) the employee’s procuring of the services of an attorney to achieve a greater award than what the employer was willing to pay after the written recommendation.”  Here, the employer did not reject the district director’s recommendations; and instead of securing the back-related medical records–which is what the district director recommended–the claimant referred the claim for formal hearing.  Even though the claimant achieved success before the ALJ, that did not matter because the employer never rejected the director’s recommendation.  Without a rejection, Section 28(b) was inapplicable.

Simmons v. Northrup Grumman Ship Systems, Inc., BRB Nos. 11-0424, 11-0536 (BRB 03/09/2012) (unpublished).

Opinion: This would be a good case for the BRB to publish, particularly because of the BRB’s discussion of Section 28(a) and the “second claim.”

Does the Director Have a New Interpretation of Section 28(b)? Or Just a New Litigating Position?

A recent Court of Appeals filing from the Director of the Office of Workers’ Compensation Programs raises questions about whether the Director has a new interpretation of Section 28(b) of the Longshore and Harbor Workers’ Compensation Act (“LHWCA”) or whether the Director has taken inconsistent litigation positions.  You be the judge.

Attorneys fees can shift from a claimant to an employer or carrier pursuant to Section 28 of the LHWCA.  For purposes of this post, only Section 28(b) is relevant.  That statute states in pertinent part:

If the employer or carrier pays or tenders payment of compensation without an award pursuant to section 14(a) and (b) of this Act, and thereafter a controversy develops over the amount of additional compensation, if any, to which the employee may be entitled, the deputy commissioner or Board shall set the matter for an informal conference and following such conference the deputy commissioner or Board shall recommend in writing a disposition of the controversy.  If the employer or carrier refuse to accept such written recommendation, within fourteen days after its receipt by them, they shall pay or tender to the employee in writing the additional compensation, if any, to which they believe the employee is entitled.  If the employee refuses to accept such payment of tender of compensation, and thereafter utilizes the services of an attorney at law, and if the compensation thereafter awarded is greater than the amount paid or tendered by the employer or carrier, a reasonable attorney’s fees based solely on the difference between the amount awarded and the amount tendered or paid shall be awarded in addition to the amount of compensation. . . . In all other cases any claim for legal services shall not be assessed against the employer or carrier.

Agency deference is an important litigation concern.  Generally, when Congress has “explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation;” and “[s]uch legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute.”  Chevron, U.S.A., Inc. v. National Resources Defense Council, Inc., 467 U.S. 837, 843-44 (1984), quoted in Tualatin Valley Builders Supply, Inc. v. U.S., 522 F.3d 937, 941 (9th Cir. 2008).  Yet, Chevron deference is not always owed.  Pursuant to Skidmore v. Swift & Co., 323 U.S. 134, 139-140 (1944), the weight given to an agency’s interpretation of a statute depends on “the degree of the agency’s care, its consistency, formality, and relative expertness, and to the persuasiveness of the agency’s position.”  The weight applied to an agency interpretation can range from great respect to near indifference.  U.S. v. Mead Corp., 533 U.S. 218, 228 (2001).

While an agency is allowed to change its mind, “the consistency of an agency’s position is a factor in assessing the weight that position is due.”  Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 417 (1993).  The weight assigned to an agency’s interpretation depends on the facts of the case.  Id.  An agency’s conflicting interpretations are entitled to considerably less deference.  Id.  Deference to an “agency’s convenient litigation position would be entirely inappropriate.”  Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 213 (1988) (noting that Secretary’s litigation position was “[f]ar from being a reasoned and consistent view”).

To be sure, Section 28(b) has been the focus of much debate over the last decade because of a series of decisions out of the Fourth, Fifth and Sixth Circuits.  A circuit split developed with the Fourth, Fifth and Sixth Circuits on one side and the Ninth Circuit on the other.  To shift attorney’s fees under Section 928(b) in the so-called “strict” circuits, there must be (1) an informal conference; (2) a dispositive written recommendation from the deputy or Board; (3) the employer’s refusal to adopt the written recommendation; and, (4) claimant’s securing a lawyer to achieve a greater amount of compensation than what the employer was willing to pay after the recommendation.   Andrepont v. Murphy Exploration & Prod. Co., 566 F.3d 415, 418, 421 (5th Cir. 2009); Pittsburgh & Conneaut Dock Co. v. Dir., OWCP, 473 F.3d 253, 264-67 (6th Cir. 2007); Va. Int’l Terminals, Inc. v.  Edwards, 398 F.3d 313, 318 (4th Cir. 2005), cert. denied, 546 U.S. 960 (2005); Davis v. Eller & Co., 41 Ben. Rev. Bd. Serv. (MB) 58 (2007).

On the other side of the spectrum is the Ninth Circuit.  Proponents for a “looser” application of Section 28(b) want to apply the Ninth Circuit’s general rule—dating from 1979—that fees may be shifted whenever the extent of liability is controverted and the claimant successfully obtains increased compensation.  Nat’l Steel & Shipbuilding Co. v. U.S. Dept. of Labor, OWCP, 606 F.2d 875, 882 (9th Cir. 1979).  The Benefits Review Board is stuck in the middle.  In applies the “strict” approach unless Ninth Circuit law applies.  Davis v. Eller & Co., 41 Ben. Rev. Bd. Serv. (MB) 58 (2007).

But where does the Director stand?  Prior to the most recent filing, it appeared clear that the Director aligned himself with Fourth, Fifth and Sixth Circuit’s approach.  Consider the following paragraphs, which was taken from an Opposition the Director filed with the Supreme Court of the United States in Virginia International Terminals:

Contrary to petitioner’s principal contention (Pet. 10-15), the decision below does not clearly conflict with the decisions of the Ninth Circuit with respect to the question whether an informal conference and written recommendations are mandatory prerequisites to the award of attorney’s fees under Section 28(b).  In National Steel & Shipbuilding Co. v. United States Dep’t of Labor, 606 F.2d 875 (9th Cir. 1979), which is the primary basis for the claimed circuit conflict, the court affirmed an attorney’s fee award when the district director held an informal conference but did not issue a written recommendation following the conference.  Noting the congressional intent to limit attorney’s fee awards to cases in which parties dispute the existence or extent of liability, the court stated, “[w]e do not believe that the statute contemplates the making of a written recommendation by the deputy commissioner as a precondition to the imposition of liability for attorney’s fees.”  Id. at 882 (discussing H.R. Rep. No. 1441, 92d Cong., 2d Sess. 3 (1972)).  Further, the court reasoned that even if the “written recommendation” prerequisite was necessary, it was met, in that it was “evident” that the parties would have rejected any explicit recommendation because they had failed to reach an agreement at the informal conference, so that instead “[t]he recommendation following the informal conference * * * was for the matter to ‘be referred’” for a formal ALJ hearing “‘at the request of both parties.’”  Ibid. (citation omitted).  Under those circumstances, the court concluded that Section 28(b) provided the basis for an attorney’s fee award.

Unlike the parties in National Steel, petitioner and respondents did not participate in an informal conference, and thus the two cases do not squarely conflict.  There is no way to predict how the Ninth Circuit would have decided National Steel had there not been an informal conference.  If anything, the fact that the court relied on the conduct of the parties at the conference as evidence that a written recommendation would have been rejected suggests that the informal conference was critical to the disposition of that case.

Moreover, in Todd Shipyards Corp. v. Director, OWCP, 950 F.2d 607 (1991), a case expressly relied upon by the court of appeals below (Pet. App. 14), the Ninth Circuit subsequently distinguished National Steel and clarified the congressional intent behind Section 28 in a manner consistent with the Fourth Circuit’s decision here.  In that case, the only disputed issue following the informal conference was the claimant’s entitlement to an attorney’s fee for services rendered before the conference ended; the parties had reached an agreement at the informal conference on claimant’s entitlement to disability benefits.  950 F.2d at 608.  The court held that a fee award was not authorized in those circumstances, because Section 28(b) authorizes an attorney’s fee only when the record shows that, following an informal conference, the employer refused to accept the written recommendation of the claims examiner.  Id. at 610.  The court distinguished the case from National Steel, in which the parties continued to dispute “liability on the amount of compensation to be paid after the informal conference.” Id. at 611 (emphasis added).  The court explained:

While we believe that the intent of Congress is clear from a plain reading of the words used in [Section 28(b)], the legislative history explains unequivocally the very limited scope of attorneys’ fees awards under the statute.

“A new provision is added dealing with cases where payment of compensation is tendered and an unresolved controversy develops about the amount of additional compensation, despite the written recommendation of the deputy commissioner. The provision directs an award of a reasonable attorney’s fee . . . where the employer or carrier has refused to accept the recommendation. . . .”  In all cases other than those specified above, attorneys’ fees may not be assessed against the employer.

Id. at 610 (quoting H.R. Rep. No. 1441, supra, at 3).  Not only does this explanation call into question the continued viability of National Steel‘s holding regarding the dispensability of the written-recommendation requirement, but the Ninth Circuit’s analysis is completely consistent with the reasoning of the Fourth Circuit below.

As can be seen, the Director questioned the continued viability of National Steel when addressing Section 28(b) to the Supreme Court.  It appears that the Director supports the use of the four prerequisites recognized by the Fourth, Fifth and Sixth Circuits.  In fact, in a subsequent Brief to the United States Fifth Circuit Court of Appeals, which was submitted in Carey v. Ormet Primary Aluminum Corp., 627 F.3d 979 (5th Cir. 2010), the Director championed the use of the four prerequisites:

To shift attorney fee liability to an employer under section 28(b), a claimant must satisfy the following requirements: a) the district director must hold an informal conference; b) the district director must issue a written recommendation resolving the controversy; c) the employer must refuse to accept the recommendation; and d) the claimant must utilize the services of an attorney to obtain a greater award than that which the employer was willing to pay after the written recommendation.

Despite these statements to the Supreme Court (in 2004) and the Fifth Circuit (in 2010), the Director recently took a different tact with the United States Ninth Circuit Court of Appeals (in 2012):

It is firmly established in this Circuit that fee-shifting under Section 28(b) is not limited to situations where the employer rejects a district director’s written recommendation after an informal conference.  Indeed, fee-shifting does not depend on the existence of a written recommendation.  As the “seminal Ninth Circuit decision regarding Section [28(b)] held:

“We do not believe that the statute contemplates the making of a written recommendation by the [district director] as a precondition to the imposition of liability for attorney’s fees.  The congressional intent was to limit liability to cases in which the parties disputed the existence or extent of liability, whether or not the employer had actually rejected an administrative recommendation.”

. . .

Contrary to [Employer's] suggestion, this Court’s later decisions have not retreated from [National Steel's] clear holding.  In Todd Shipyards…a panel held that a claimant was not entitled to attorney’s fees under Section 928(b).  But it did so not because of a lack of a recommendation from the district director, but because the only issue that remained in the case after the informal conference was entitlement to attorney’s fees for work performed prior to formal litigation.  The [Todd Shipyards] panel plainly reiterated the holding of [National Steel] that the purpose of Setion 28(b) is to authorize assessment of legal fees where liability is contested and an attorney secures higher compensation in formal proceedings.  950 F.2d at 610.  And it distinguished [National Steel] only because:

“In this matter, there was no controversy concerning liability on the amount of compensation to be paid after the informal conference.  These issues were resolved by Todd’s concession and the parties’ stipulation.  Section 928(b) does not authorize the payment of attorneys’ fees if the only unresolved issue is whether attorneys’ fees awarded should be for services performed prior to the successful termination of the informal conference.  That is the only issue that was unresolved after the informal conference in this matter.”

. . .

Any doubt about [National Steel's] continuing viability is eliminated by Matulic v. Director, OWCP, 154 F.3d 1052, 1061 (9th Cir. 1998)…

So what do you think?  Has the Director’s position changed?  The continued viability of National Steel was questionable in 2004; yet in 2012 the Director has no doubt about the continuing viability of National Steel because of the Matulic decision.  Yet, Matulic was issued in 1998, six years before the Director questioned the viability of National Steel in a brief to the Supreme Court.  Or maybe the Director’s position has not changed, and he was just analyzing Ninth Circuit law.  Perhaps that is why he used the phrase “in this Circuit.”  If that is the case, however, the Director is not entitled to deference because he is not interpreting a statute or regulation, he is instead interpreting case law.

As mentioned earlier, agency deference is a powerful tool.  But, courts will not defer to a “convenient litigating position,” especially one that lacks consistency with an agency’s prior position.   It will be interesting to see how much deference is offered to the Director’s interpretation of Section 28(b) going forward.

Passenger Vessel Responsibility

In recent months the cruise industry has been in the headlines.  Not so much due to the lifestyle of fun, luxury and glamour which is the trademark of the brand, but due to casualties that have resulted in loss of life and injury.

Forty-five years ago, in 1967, the United States Congress passed legislation to protect the interests of those persons sailing on commercial vessels used in the passenger trade.  The initial House Bill was introduced in 1965 with the intent to provide passengers a means of recovery in the event that their cruise was cancelled or otherwise interrupted due to financial insolvency of the cruise ship owner.  Then in late 1965 and early 1966 two foreign flagged cruise ships with U.S. citizens onboard caught fire in the Caribbean.  One fire resulted in the death of ninety passengers, causing Congress to become increasingly concerned for the safety of the American traveling public and lack of industry safety concerns.  Then President Johnson ordered several executive agencies, including the Department of Commerce, Maritime Administration, State Department, Treasury Department, U.S. Coast Guard and the Federal Maritime Commission to collaborate in creation of legislation to not only protect the financial interests of passengers who have lost the cost of their tickets in the event of the vessel owner’s insolvency, but to also protect the financial interests of passengers who are killed or injured.  After lengthy debate, the Act, known as the Passenger Vessel Financial Responsibility Act, became law.  46 C.F.R. 540.

The modern cruise industry bears little resemblance to that which existed in 1967.  Since the 1970’s the cruise industry has experienced an increasing popularization, becoming a major part of the tourism sector, and reaching a level of enormous significance world wide as an economic factor.  It has matured and is one of the most outstanding examples of globalization, with an increasing number of ports of call and new destinations around the globe, multinational clientele, and new vessels whose size and passenger capacity was not imaginable twenty years ago.  The industry has made the cruise the vacation of choice for those who would not have considered it in past decades.  As a consequence, the Act is more relevant than ever.

The Act consists of two parts.   Subpart A provides the passenger with financial security in the event that the vessel owner ceases operations due to insolvency or otherwise and the passenger’s cruise (for which he has already paid) is cancelled or interrupted.  Subpart B provides the passenger with similar financial security should he be injured or killed while on the voyage and the vessel owner claim financial hardship.

To provide this security, the Act requires persons in the United States who arrange, offer, advertise, or provide passage on a vessel having berth or stateroom accommodations for fifty or more passengers and embarking passengers at U.S. ports to provide proof of financial responsibility that is filed with the Federal Maritime Commission.  Such a passenger vessel may not call on U.S. ports unless it has filed an application with the Federal Maritime Commission which demonstrates it has the financial ability to respond to passenger’s claims.  By its application, the vessel owner is guaranteeing that it has the financial wherewithal to respond to its passenger’s claims.  The guaranty is backed by proof of either insurance, a surety bond, self- insurance or an escrow account.  The amount of the guaranty depends on the number of passenger accommodations aboard the vessel and evidence of the owner’s passenger revenue collected in the two prior fiscal years.  After its analysis of the application, if the FMC finds that the cruise line’s proof of financial solvency is backed by the appropriate security, it will issue Certificates of Performance and Casualty to the owner.  Only then will the cruise line be allowed to call on U.S. parts and take on passengers.  Should a passenger have grounds to make a claim against the cruise and the cruise line is out of business or otherwise unable to or refuses to respond, the passenger can contact the FMC to procure the information necessary to make his claim against the guaranty or security posted by the owner.

The Act makes no distinction as to the citizenship of the passenger or the flag of the ship.  Any person who embarks on a voyage from a U.S. port aboard a ship of any nation is protected.  The security or guaranty to reimburse the passenger for non-performance or indemnification due to injury or death remains outside the reach of the bankruptcy courts.  In other words, insolvency of the cruise line does not constitute a defense to the insurer that has provided the guaranty and the insurer agrees to pay any unsatisfied final judgments obtained on such claims.

Subpart B is more expansive in the class of individuals who may be covered by the guaranty.  It provides that the security posted must be sufficient to meet any liability which may be incurred for death of injury to passengers and “other persons” on voyages to or from U.S. ports.  Unfortunately, the Act does not define “other persons with any degree of certainty.  This raises the question of whether crew (the traditional Jones Act seaman) is covered.  Passengers, however, are defined as “any persons not necessary to the business, operation or navigation of the vessel.”  No courts have been asked to determine who “other persons” are.  The FMC, on its website, states that “other persons” “include, but are not limited to visitors, crew and temporary workers aboard ship.”  However, this statement does not carry the weight of law and who exactly is an “other person” has yet to be tested in a court of law.

The public should be aware of the act and the remedies it provides.  I would venture to say that the majority of the public is not.  The FMC provides significant information on its website. www.fmc.gov/ .

Considering a vacation cruise?  Take a few minutes, visit the website, and become informed.

Bon Voyage!!

What is Reimbursable Under the War Hazards Compensation Act? And When is it Reimbursable?

The Defense Base Act (“DBA”) is a system of federal workers’ compensation applied to United States contractors working abroad on U.S. bases or pursuant to a U.S. contract.  When these contractors sustain a work-related injury, they are entitled to benefits.  In some instances, the event that caused the contractor’s injury qualifies as a “war-risk hazard.”  See 42 U.S.C. 1711 and 20 C.F.R. 61.4.  Generally, “war-risk hazards” include the discharge of weapons; any action by a hostile force or person, including insurrection or rebellion; the discharge of munitions intended for use in war; the collision of vessels and aircraft operating without customary navigation aids; and the operation of a vessel or aircraft in a zone of hostility or engaged in war activities.  The benefits paid to a DBA claimant because of injuries caused by a ”war-risk hazard” qualifies the employer, insurance carrier, or compensation fund that paid benefits to reimbursement under the War Hazards Compensation Act (“WHCA”).

Although there are other instances when the WHCA applies the focus of this post is reimbursement.  The pertinent provision for reimbursement is 42 U.S.C. 1704, which states in pertinent part:

(a) Where any employer or his insurance carrier or compensation fund pays or is required to pay benefits–

(1) to any person or fund on account of injury or death of any person coming within the purview of this Act or sections 1-4 of the Defense Base Act if such injury or death arose from a war-risk hazard, which are payable under any workmen’s compensation law of the United States or of any State, Territory, or possession of the United States or other jurisdiction; or

. . .

(3) . . . such employer, carrier, or fund shall be entitled to be reimbursed for all benefits so paid or payable, including funeral and burial expenses, medical, hospital, or other similar costs for treatment and care; and reasonable and necessary claims expense in connection therewith.

The WHCA sets forth the precise category of items that are reimbursable.  A employer, carrier, or compensation fund can seek a dollar-for-dollar reimbursement of all medical benefits, indemnity benefits, and funeral benefits it was required to pay to a DBA claimant.  See 33 U.S.C. 907, 908, 909.  Further, the employer, carrier, or compensation fund is entitled to reimbursement of reasonable and necessary claims expense.  Pursuant to the Code of Federal Regulations, claims expenses can be allocated or unallocated.  See 20 C.F.R. 61.104.  Allocated claims expenses include “reasonable attorneys’ fees, court and litigation costs, expenses of witnesses and expert testimony, examinations, autopsies and other items of that were reasonably incurred in determining liability under the Defense Base Act . . . .”  Id.  Unallocated expenses are expenses that cannot be specifically itemized or documented.  To account for reimbursement, 15% of the sum of the reimbursable payments is added to the reimbursement amount.  Id.  In practice, the Division of Federal Employees Compensation, which is the agency charged with administering the WHCA, applies the unallocated expense provision only to medical, indemnity, and funeral benefits–but not to future indemnity benefits incurred as a result of a commutation request.  See FECA Bulletin No. 12-01.

To be sure, anything that is paid pursuant to the DBA is reimbursable.  Not only are the claimant’s benefits reimbursable, but so are the litigation costs associated with the claimant’s DBA case.  Although there is debate in the Longshore community about the necessary scope of litigation for DBA injuries caused by a “war-risk hazard,” the WHCA makes it clear that a carrier must litigate each claim just as it would if the WHCA did not apply.  An employer and insurance carrier must “take reasonable measures to contest, reduce, or terminate its liability by appropriate available procedure under workers’ compensation law or otherwise . . . .”  See 20 C.F.R. 61.102.

The moment when an employer becomes entitled to reimbursement has also been debated in the Longshore community.  The answer to that debate is contained in the the reimbursement statute.  It says that an employer, carrier, or compensation fund shall be entitled to reimbursement when it is required to pay DBA benefits.  See 42 U.S.C. 1704.  In other words, when a DBA claimant’s entitlement to DBA benefits accrues, the employer, carrier, or compensation funds right to WHCA reimbursement accrues too.  There is no provision in the WHCA that tolls the entitlement to reimbursement to some later point in time, like the date when the claimant reaches maximum medical improvement or is released to return to work.  When a DBA claimant is entitled to receive his first dollar in benefits, the WHCA allows reimbursement of that dollar.  Compare 33 U.S.C. 914 and 42 U.S.C. 1704cf. Roberts v. Sea-Land Services, — S. Ct. —-, 2012 WL 912953 (2012).  And while the practice is to secure a DBA compensation order prior to requesting reimbursement, there is no statutory or regulatory requirement for an employer and carrier to secure an order prior to requesting reimbursement, which the Office of Workers’ Compensation Program recognized in OWCP Bulletin No. 05-01.

In closing, the WHCA reimburses an employer, carrier, or compensation fund–presumably the Special Fund established by the Longshore Act, see 33 U.S.C. 944 and 33 U.S.C. 908(f)–for the medical, indemnity and funeral expenses paid to a DBA claimant injured by a “war-risk hazard.”  Further, the DBA reimburses litigation costs and other claims expenses incurred in determining DBA liability.  The entitlement to reimbursement accrues at the moment the employer, carrier, or insurance fund is required to pay benefits–which is the date the claimant becomes entitled to benefits.