Supreme Court Refuses to Hear Work Comp RICO Case

The Supreme Court of the United States refused certiorari in Jackson v. Sedgwick Claims Management Services, Inc., denying petitioner’s request for review.  The Jackson case questioned whether a plaintiff could recover under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) when an employer, its workers’ compensation benefits claims administrator, and an examining physician deny or terminate workers’ compensation benefits in an allegedly fraudulent manner.  Previously, an en banc Sixth Circuit denied relief, stating that the plaintiffs had “not pled an injury to their ‘business or property’ that is compensable under § 1964(c) . . . .”   RICO is “not a means for federalizing personal injury tort claims arising under state law.”

The Sixth Circuit’s opinion is here.

The Petition for Writ of Certiorari filed on behalf of petitioners Clifton Jackson and Christopher Scharnitzke is here.

The Brief of respondent Sedgwick Claims Management Services is here.

SCOTUSBlog’s case page, which includes amicus briefs, is here.

Note: Although this is not a Longshore or Defense Base Act claim, the denial is important for all workers’ compensation schemes including federal workers’ compensation schemes like the LHWCA or DBA.

Supreme Court Overturns the Port of Los Angeles’s Placard Requirement

From the Supreme Court’s syllabus in American Trucking Associations, Inc.  v. City of Los Angeles, California:

The Port of Los Angeles, a division of the City of Los Angeles, is run by a Board of Harbor Commissioners pursuant to a municipal ordinance known as a tariff.  The Port leases marine terminal facilities to operators that load cargo onto and unload it from docking ships.  Federally licensed short-haul trucks, called “drayage trucks,” assist in those operations by moving cargo into and out of the Port.  In 2007, in response to community concerns over the impact of a proposed port expansion on traffic, the environment, and safety, the Board implemented a Clean Truck Program.  As part of that program, the Board devised a standard-form “concession agreement” to govern the relationship between the Port and drayage companies.  The agreement requires a company to affix a placard on each truck with a phone number for reporting concerns, and to submit a plan listing off-street parking locations for each truck.  Other requirements relate to a company’s financial capacity, its maintenance of trucks, and its employment of drivers.  The concession agreement sets out penalties for violations, including possible suspension or revocation of the right to provide drayage services.  The Board also amended the Port’s tariff to ensure that every drayage company would enter into the agreement.  The amended tariff makes it a misdemeanor, punishable by fine or imprisonment, for a terminal operator to grant access to an unregistered drayage truck.

Petitioner American Trucking Associations, Inc. (ATA), whose members include many of the drayage companies at the Port, sued the Port and City, seeking an injunction against the concession agreement’s requirements.  ATA principally contended that the requirements are expressly preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA), see 49 U.S.C. § 14501(c)(1).  ATA also argued that even if the requirements are valid, Castle v. Hayes Freight Lines, Inc., 348 U.S. 61, 75 S.Ct. 191, 99 L.Ed. 68, prevents the Port from enforcing the requirements by withdrawing a defaulting company’s right to operate at the Port.  The District Court held that neither § 14501(c)(1) nor Castle prevented the Port from proceeding with its program.  The Ninth Circuit mainly affirmed, finding only the driver-employment provision preempted and rejecting petitioner’s Castle claim.

Held :

1.  The FAAAA expressly preempts the concession agreement’s placard and parking requirements. Section 14501(c)(1) preempts a state “law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier … with respect to the transportation of property.”  49 U.S.C. § 14501(c)(1).  Because the parties agree that the Port’s placard and parking requirements relate to a motor carrier’s price, route, or service with respect to transporting property, the only disputed question is whether those requirements “hav[e] the force and effect of law.”  Section 14501(c)(1) draws a line between a government’s exercise of regulatory authority and its own contract-based participation in a market.  The statute’s “force and effect of law” language excludes from the clause’s scope contractual arrangements made by a State when it acts as a market participant, not as a regulator.  See, e.g., American Airlines, Inc. v. Wolens, 513 U.S. 219, 229, 115 S.Ct. 817, 130 L.Ed.2d 715.  But here, the Port exercised classic regulatory authority in imposing the placard and parking requirements. It forced terminal operators—and through them, trucking companies—to alter their conduct by implementing a criminal prohibition punishable by imprisonment.  That counts as action “having the force and effect of law” if anything does.

The Port’s primary argument to the contrary focuses on motives rather than means.  But the Port’s proprietary intentions do not control.  When the government employs a coercive mechanism, available to no private party, it acts with the force and effect of law, whether or not it does so to turn a profit.  Only if it forgoes the (distinctively governmental) exercise of legal authority may it escape § 14501(c)(1)’s preemptive scope.  That the criminal sanctions fall on terminal operators, not directly on the trucking companies, also makes no difference.  See, e.g., Rowe v. New Hampshire Motor Transp. Assn., 552 U.S. 364, 371–373, 128 S.Ct. 989, 169 L.Ed.2d 933.

2.  This Court declines to decide in the case’s present, pre-enforcement posture whether Castle limits the way the Port can enforce the financial-capacity and truck-maintenance requirements upheld by the Ninth Circuit.  Castle rebuffed a State’s attempt to bar a federally licensed motor carrier from its highways for past infringements of state safety regulations.  But Castle does not prevent a State from taking off the road a vehicle that is contemporaneously out of compliance with such regulations.  And at this juncture, there is no basis for finding that the Port will actually use the concession agreement’s penalty provision as Castle proscribes.

Supreme Court Refuses to Review Minton. Punitive Damages Are Not Available Under the LHWCA.

Yesterday the Supreme Court of the United States denied certiorari in Minton v. Exxon Mobil Corp.  That means that the Court will not review the Virginia Supreme Court’s determination that punitive damages are unavailable in Section 905(b) actions.  Specifically, the Virginia Supreme Court stated that because “punitive damages are not a remedy made available within the terms of the LHWCA, and the language plainly restricts the damages to those remedies explicitly made available, they are extinguished as a category of recovery in LHWCA claims.”

Click here for the Supreme Court’s Order List where it denied certiorari.

Click here for Virginia’s Exxon Mobil Corp. v. Minton, — S.E.2s —-, 2013 WL 119661 (Va. 2013).

Will the Supreme Court Address Defense Base Act Average Weekly Wages?

A petition for certiorari has been filed in Blackwater Security Consulting, LLC v. Dir., OWCP.  The petition asks the Supreme Court of the United States to review a Ninth Circuit decision that held that an administrative law judge cannot consider a claimant’s intention to make their war-zone employment temporary when establishing the claimant’s average weekly wage.  The question presented is “[w]hether the Administrative Law Judge properly considered the temporary and unusual nature of war-zone employment as a factor when setting claimant’s lifetime workers’ compensation benefits rate.”

This is a good petition that is well worth the read.  It addresses many of the problems with average weekly wage calculations for Defense Base Act (“DBA”) claims.  The petition highlights:

1.The explosion of DBA claims and the expense associated with those claims, including the expense to the U.S. taxpayer via the War Hazards Compensation Act (“WHCA”).  More likely than not, Congress did not anticipate the increased use of defense contractors in war zones when it enacted Section 10 of the Longshore and Harbor Workers’ Compensation Act (“LHWCA”).  The Benefits Review Board’s rigid AWW rule, as expressed in the recently vacated K.S. decision, “systematically overcompensates an entire class of employees.”

2. The conflict between the Board’s K.S. rule and the plain language of the LHWCA.  Section 10(c) requires AWW determinations to be “reasonable and fair.”  An ALJ has wide discretion to determine the injured worker’s “reasonable and fair” AWW.  The BRB’s K.S. rule essentially trumps and obviates ALJ discretion in favor for an automated AWW formula.  But, “[n]othing in the Longshore Act requires a strict comparison of war-zone wages with hazard pay and post-differential pay to unenhanced domestic earnings.”

3. The split in authorities across federal jurisdictions now that the Southern District of Texas vacated the Board’s K.S. decision.

4. The apparent conflict between the Ninth Circuit’s decision and the Supreme Court’s Metropolitan Stevedore Co. v. Rambo, 521 U.S. 121 (1997) (“Rambo II”).  Rambo II allows ALJs to “re-calibrate a claimant’s average weekly wages at the time of injury based upon future events that would have changed regardless of injury.”  The Ninth Circuit’s decision treats future events as irrelevant.

Overall, the petition takes a conservative, reasonable approach that is hard to argue against.  An ALJ should have discretion to calculate a claimant’s AWW.  Plain and simple, without overreaching.  The petition for certiorari is available at 2013 WL 1177273.

Note: At the Annual Longshore Conference, the attendees were informed that the Director’s position is that K.S. should apply to war zone AWW calculations.  This is not surprising considering the Solicitor’s brief in another Ninth Circuit case, Service Employees Int’l, Inc. v. Dir., OWCP.

Opinion: I like that the petition for certiorari addressed the interplay between the DBA and the WHCA.  The Director has taken a position recently that is hostile towards the WHCA.  This petition does a good job of demonstrating how it is impossible to surgically separate the DBA from the WHCA.