Flat Fees Are Not Reimbursed Under the War Hazards Compensation Act

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.”

The Supreme Court Refused to Review Lincoln v. Director, OWCP

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.

This link will take you to the Fourth Circuit’s Lincoln decision.

This link will take you to the Benefits Review Board’s Lincoln decision.

Trial Court Disbelieved Plaintiff, Determined He Was Not a Seaman

Last week, Louisiana’s Third Circuit published a Jones Act decision wherein it affirmed the lower court’s decision that Plaintiff failed to carry his burden of proof that he was a Jones Act seaman.  Plaintiff began working for his employer in a land-based warehouse, but he expressed interest in offshore work.  Soon thereafter, Plaintiff began working as a helper on a platform fixed to the outer continental shelf; but he ate, slept, and used the restroom facilities on a vessel called the RAM VII.  Plaintiff was injured when a Teflon pipe weighing two-and-a-half pounds struck him in the face.  Plaintiff then filed a petition for damages wherein he alleged entitlement to compensation based on his status as a seaman under the Jones Act.  The trial court disagreed.

On appeal, Louisiana’s Third Circuit discussed Chandris, and the Supreme Court’s test for seaman status.  Essentially, Plaintiff complained that the “trial court incorrectly based its finding that he failed to carry his burden to prove that he was a Jones Act seaman solely based upon how much time he physically spent on a vessel.”  The appellate court disagreed:

Our review of the record does not indicate that the trial court found [Plaintiff] was not a seaman based solely because he was not working on the RAM VII 50% of the time.  Rather, it is clear that the trial court determined that [Plaintiff] was not credible and, as such, it did not give credence to his assertion that he spent 50% of his time working on the RAM VII.  The trial court then cited testimony contrary to [Plaintiff's] assertion that he spent 50% of his time physically on the RAM VII.

In essence, the trial court did not believe Plaintiff’s allegations that he spent 50% of his time on a vessel.  Because the Supreme Court’s Chandris test requires consideration of the amount of time a seaman is on a vessel, Plaintiff’s lack of credibility was fatal to his claim.

But that’s not all.  The appellate court also discussed the evidence that refuted Plaintiff’s claims that he was a seaman.  The court cited testimony of a former employee, a present employee, and the employer’s safety manager.  The testimony refuted Plaintiff’s allegations that he worked 50% of the time on the RAM VII.  Indeed, “[t]he summation of the witness testimony can reasonably be interpreted that [Plaintiff's] connection to the RAM VII was tenuous and, therefore, not substantial in duration or nature as required by the second prong of the Chandris test.”  Accordingly, Plaintiff was not a seaman and the trial court did not err.

Troglen v. Hydraulic Well Control, 2014-308 (La. App. 3 Cir. 10/8/14); — So. 3d —-.

The Supreme Court Denied Review in Dize and Other Maritime Cases

The Supreme Court is back in session.  On October 6, 2014, the Court issued its Orders list, wherein a large number of cases were denied certiorari.  Accordingly, the Court will not review:

Dize v. Association of Maryland Pilots.  The question presented in Dize was whether, when applying the Chandris, Inc. v. Latsis thirty-percent rule–that, ordinarily, a qualifying “seaman” under the Jones Act must spend thirty percent or more of his time in service of a vessel in navigation–a court may consider the time a maritime worker spends in the service of a vessel in navigation that is moored, dockside, or ashore, as the Third, Fifth, Sixth, and Ninth Circuits have held, or whether a court must categorically exclude such time, as the Eleventh Circuit and the Maryland Court of Appeals have held.

Gonzalvez v. Celebrity Cruises, Inc.  The petitioners asked the Court to consider whether seamen are statutorily exempt from the 3-month limitations period under Chapter 1 of the Federal Arbitration Act.  This case arose from dispute about sharing gratuities under the Seaman’s Wage Act.  This link will take you to Lisa Schaeffer’s Lexis article “U.S. Supreme Court Denies Cert for Celebrity Cruise Line Workers.”

Downer v. Royal Caribbean Cruises, Ltd.  This case asked inter alia whether the Eleventh Circuit’s decision compelling arbitration for seafarers’ claims against a cruise line, under foreign law, deprives them of their American statutory rights in violation of the “effective vindication doctrine.”

Lyles v. Seacor Marine.  In Lyles, the plaintiff lost a Jones Act and maintenance and cure claim nearly ten years before trying to reassert his claims.  The Fifth Circuit denied the plaintiff’s claims and also admonished the plaintiff, writing that “future frivolous, repetitive, or otherwise abusive filings may result in the imposition of sanctions, including dismissal, monetary sanctions, and restrictions on his ability to file pleadings in this court or any court subject to [Fifth Circuit] jurisdiction.”