Kreschollek v. Southern Stevedoring Co.

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit

3-18-1996

Kreschollek v. So Stevedoring Co
Precedential or Non-Precedential:

Docket 95-5253

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 UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

No. 95-5253

CARL KRESCHOLLEK,
Appellant

v.

SOUTHERN STEVEDORING COMPANY;
LUMBERMEN'S MUTUAL CASUALTY CO.;
ROBERT REICH, SECRETARY OF LABOR, and
R. DAVID LOTZ, REGIONAL DIRECTOR, REGION III,
OFFICE OF WORKERS' COMPENSATION PROGRAMS,
UNITED STATES DEPARTMENT OF LABOR

On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 93-cv-03903)

Argued December 4, 1995

Before: SLOVITER, Chief Judge,
STAPLETON and SAROKIN, Circuit Judges

(Opinion Filed March 18, 1996)

David M. Linker (Argued)
Freedman & Lorry
Philadelphia, PA 19106

Attorney for Appellant Carl Kreschollek

David R. Kunz
Post & Schell
Philadelphia, PA 19103

Attorney for Appellees Southern Stevedoring Co.
and Lumbermen's Mutual Casualty Co.

1
Steven J. Mandel
Allen H. Feldman
Deborah Greenfield (Argued)
United States Department of Labor
Washington, D.C. 20210

Attorneys for Appellee Secretary of Labor
and Regional Director, Offc. of Workers' Compensation
Programs

OPINION OF THE COURT

SLOVITER, Chief Judge.

Carl Kreschollek appeals from the district court's

order dismissing for lack of subject matter jurisdiction his

complaint interposing a facial challenge to the constitutionality

of section 14 of the Longshore and Harbor Workers' Compensation

Act (Longshore Act or Act). The district court so ruled after

concluding that Kreschollek's claim could be raised in his

pending administrative proceeding and thereafter on review in

this court. Although we have previously held that the

administrative review scheme provided in the Longshore Act

supplants district court jurisdiction over claims for benefits,

Kreschollek's claim presents a new twist on the question because

his challenge to the Longshore Act is a constitutional one and he

claims that the review process established by the Act is

insufficient to address his injuries.

I.

2
 Kreschollek suffered a work-related injury on or about

March 20, 1990 while employed as a longshoreman by Southern

Stevedoring Co. Southern did not controvert its liability for

benefits, and in late June of that same year it undertook

voluntary compensation for Kreschollek's disability pursuant to

33 U.S.C. § 914(b). It continued such payments until October 29,

1992. Thereafter, it filed a notice of controversion with the

District Director of the Office of Workers' Compensation

Programs, asserting that Kreschollek was now able to return to

work. Kreschollek contested the termination of compensation and,

after an informal conference produced no resolution, the District

Director, upon request by Kreschollek, transferred the case with

his recommendations to the Department of Labor for a formal

hearing before an Administrative Law Judge (ALJ). See 33 U.S.C.

§ 919(c), (d) (1994); 20 C.F.R. § 702.301 (1995). An ALJ held a

hearing on the case on December 15, 1993.

While the matter was pending before the ALJ,

Kreschollek filed this action in the United States District Court

for the District of New Jersey invoking jurisdiction under 28

U.S.C. § 1331 and alleging that the review procedure under the

Act is unconstitutional because it does not require a

predeprivation hearing before employers who voluntarily

compensated injured employees may terminate those benefits.

Kreschollek sought restoration of his benefits, a declaration

from the district court that section 14 of the Act, 33 U.S.C.

§914, is unconstitutional, an injunction against termination of

his benefits without a prior evidentiary hearing, and attorney's

3
fees and costs. Named as defendants were Southern Stevedoring

Co.; Robert Reich, Secretary of Labor; R. David Lotz, Regional

Director, Region III, Office of Workers' Compensation Programs;

and Lumberman Mutual Casualty Co. All defendants moved to

dismiss.

The ALJ's final decision on Kreschollek's

administrative claim for benefits and the district court's ruling

on the motion to dismiss were handed down within days of each

other in March 1995. The ALJ denied Kreschollek's request for

additional benefits. That ruling, which Kreschollek appealed to

the Benefits Review Board, is not before us at this time.

The district court, in the decision that is on appeal

to us, granted the motion to dismiss for lack of subject matter

jurisdiction, holding that in light of the detailed

administrative and judicial review procedure provided by the Act,

Kreschollek's constitutional challenge must be raised in the

court of appeals after exhaustion of administrative remedies,

rather than in the district court through 28 U.S.C. § 1331.

II.

A.

The sole issue on appeal is whether the Longshore and

Harbor Workers' Compensation Act, 33 U.S.C. § 901 et seq.,

precludes district court review of Kreschollek's constitutional

challenge to the Act. Although Kreschollek concedes that his

claim for benefits must be adjudicated through the Act's

administrative review procedure, he argues that the district

court nonetheless has jurisdiction over his collateral

4
constitutional challenge to the adjudicatory process provided

under the Act.

This court previously addressed the more general

question of whether the Longshore Act supplants district court

jurisdiction over claims challenging the Secretary's

interpretation of the Act. Although that case arose in the

context of the Black Lung Benefits Act, the Black Lung Benefits

Act incorporates the scheme of administrative and judicial review

of benefits determinations set forth in the Longshore and Harbor

Workers' Compensation Act, see 30 U.S.C. § 932(a) (1994), and

decisions thereunder are of obvious applicability.

In Compensation Department of District Five, United

Mine Workers of America v. Marshall, 667 F.2d 336 (3d Cir. 1981),

the United Mine Workers of America brought an action in federal

district court to enjoin the Secretary of Labor from rereading X-

rays of claimants seeking benefits pursuant to the Black Lung

Benefits Act. The Union contended that the Black Lung Act

required the Secretary, ALJ and Benefits Review Board (Board) to

accept the x-ray reading made by the claimant's medical expert.

The district court dismissed the action for lack of subject

matter jurisdiction and this court affirmed, determining that

"the scheme of review established by Congress for determinations

of black lung disability benefits was intended to be exclusive."

Id. at 340.

Several considerations led to our determination. First,

we noted the general rule that if "there exists a special

statutory review procedure, it is ordinarily supposed that

5
Congress intended that procedure to be the exclusive means of

obtaining judicial review in those cases to which it applies."

Id. (quoting City of Rochester v. Bond, 603 F.2d 927, 931 (D.C.

Cir. 1979)). Moreover, we recognized the "strong presumption

against the availability of simultaneous review in both the

district court and the court of appeals." Id. (quoting Sun

Enterprises, Ltd. v. Train, 532 F.2d 280, 287 (2d Cir. 1976)).

We next considered whether "the statute's legislative

history, purpose, and design" suggested that the circumstances of

the particular case should overcome the presumption, id., and

concluded that they did not. In reaching this conclusion, we

considered the following: 1) the Benefits Review Board was

created to provide uniformity in application of the Act and to

prevent duplication of review; 2) the Act was amended in 1972 in

part to oust the district courts from jurisdiction over benefits

claims; 3) Congress's provision for review of Board

determinations in the court of appeals reflected its intention to

require exhaustion of administrative remedies prior to seeking

judicial review; and 4) permitting the Board and district court

to consider the same issue would create a danger of duplicative

and conflicting litigation. We acknowledged, however, that in

certain circumstances, such as if the remedies available through

the statutory scheme of review are inadequate, a district court

might have subject matter jurisdiction over a complaint involving

the Black Lung Benefits Act. Id. at 341-44.

The issue of preclusion of district court jurisdiction

for claims arising under the Black Lung Act arose again in

6
Connors v. Tremont Mining Co., 835 F.2d 1028 (3d Cir. 1987). In

Connors, a union Benefit Plan and Trust sought reimbursement from

coal mine operators for medical benefits it had paid to a large

number of black lung claimants. The Plan argued that the issue

was governed by the terms of the Plan, which was covered by the

Employee Retirement Income Security Act, and therefore it invoked

federal question jurisdiction. We rejected the Plan's attempt to

assert jurisdiction in the district court, holding once again

that in a case involving disability benefits pursuant to the

Black Lung Benefits Act, federal question jurisdiction is

supplanted by the procedure established by the statute. Id. at

1030-31.

The reasoning of Compensation Department and Connors is

consistent with the approach taken by the Supreme Court in its

recent decision in Thunder Basin Coal Co. v. Reich, 114 S. Ct.

771 (1994), raising a similar issue in the context of the Federal

Mine Safety and Health Amendments Act of 1977 (Mine Act). Thunder

Basin, a mine operator, sued in district court challenging the

Mine Safety and Health Administration's instruction that it post

the names of the two representatives its employees had chosen

pursuant to the Mine Act to participate in mine inspections,

obtain certain health and safety information and promote health

and safety enforcement. The mine operator's objection was that

the designated representatives were not its employees, but were

employed by the union. Although there was a statutory procedure

for administrative review of a citation for violation of such an

order, the mine operator challenged the Administration's

7
interpretation of the Mine Act as permitting such designations by

seeking a pre-enforcement injunction from the district court. It

argued that designation of union representatives who were not its

employees violated the principles of collective-bargaining

representation under the National Labor Relations Act and

infringed its right to exclude union organizers from its

property. It also argued that the Administrator's action

violated its Fifth Amendment due process rights by compelling it

to choose between violating the Act and enduring the irreparable

harm that it would allegedly suffer because of organizing

advantages the union would gain as a result of the designation.

A unanimous Supreme Court held that the district court

lacked jurisdiction over the pre-enforcement challenge. The

Court stated that determination of whether a statute is intended

to preclude initial judicial review is made from "the statute's

language, structure, and purpose, its legislative history, and

whether the claims can be afforded meaningful review." Thunder

Basin, 114 S. Ct. at 776 (citations omitted).

Although the Mine Act is silent on the question of pre-

enforcement claims, the Court looked at the detailed structure of

the Act, which requires a mine operator to challenge a citation

issued within 30 days; provides for review by an administrative

law judge (ALJ), and possibly thereafter by the Federal Mine

Safety and Health Review Commission (Commission), which must

expedite review if necessary; and gives a mine operator the

opportunity to challenge an adverse Commission decision in the

appropriate court of appeals. There is express provision for

8
district court jurisdiction in only two instances: one empowering

the Secretary to seek to enjoin habitual violations of health and

safety standards and the other to coerce payment of civil

penalties.

The Court concluded that the comprehensive review

process provided within the Act signified an intent by Congress

that most challenges would be heard within that process.

Moreover, there was an emphasis in the legislative history on the

need to improve penalties and enforcement measures and streamline

the review process. This totality of factors led the Supreme

Court to find that Congress intended to preclude district court

jurisdiction over ordinary challenges under the Mine Act. Id. at

777-79.

The Secretary argues that the reasoning of Thunder

Basin and the Court's treatment of the Mine Act lead ineluctably

to the conclusion that the district court lacked jurisdiction

over Kreschollek's claim under the Longshore Act. We agree that

Thunder Basin bolsters our earlier conclusion in Compensation

Department that Congress intended that district court

jurisdiction over most claims pertaining to benefits be

precluded. Certainly, the review scheme provided in the

Longshore Act is comparable in its comprehensiveness to that of

the Mine Act. Under section 14(h) of the Longshore Act, the

district director must initiate an investigation upon receiving

notice from the employer that "payments of compensation have been

stopped." 33 U.S.C. § 914(h) (1994). Where the parties' dispute

is not resolved by means of an informal conference, see 33 U.S.C.

9
§ 914(h) (1994); 20 C.F.R. § 702.301 (1995), then an ALJ must

conduct a full evidentiary hearing, 33 U.S.C. § 919(c), (d)

(1994); 20 C.F.R. §§ 702.316, 702.331-.351 (1995). Either party

may request review by the Benefits Review Board and thereafter by

the appropriate court of appeals. 33 U.S.C. § 921(b), (c)

(1994).

The Longshore Act, like the Mine Act construed in

Thunder Basin, confers jurisdiction in the district court only in

limited circumstances not applicable here. One such circumstance

covers the situation when an employer fails to comply with a

final compensation order making an award, and authorizes the

beneficiary of the award or the district director making the

order to apply to the district court for enforcement. 33 U.S.C.

§ 921(d) (1994). Another such provision allows the Secretary to

bring an action in district court to restrain violations of the

Act's safety rules and regulations. 33 U.S.C. § 941(e) (1994).

As in Thunder Basin, the comprehensive nature of the

administrative review scheme and its limited provision for

district court jurisdiction make "fairly discernible" a

Congressional intent to preclude district court jurisdiction over

most claims under the Act. 114 S. Ct. at 776 (quoting Block v.

Community Nutrition Inst., 467 U.S. 340, 351 (1984)).

The legislative history of the Longshore Act also

supports this reading. Before the Act was amended in 1972, it

provided for deputy commissioners to resolve disputed claims by

conducting evidentiary hearings and issuing initial decisions,

which were reviewable in district court and ultimately in the

10
courts of appeals. See Compensation Dept., 667 F.2d at 341;

Kalaris v. Donovan, 697 F.2d 376, 381-82 (D.C. Cir.), cert.

denied, 462 U.S. 1119 (1983). Although effort at informal

resolution of disputed claims continued to rest with deputy

commissioners (renamed as district directors, see 20 C.F.R.

§701.301(a)(7) (1995)), the 1972 amendments transferred to ALJs

the formal adjudication of claims. The ALJ's decision was made

reviewable by the Board to determine from the record developed

before the ALJ if the decision was in accordance with law and

supported by substantial evidence. Kalaris, 697 F.2d at 382. The

Board now performs the identical function that the district

courts performed before the 1972 amendments, eliminating the role

of the district courts in the claims process. See Compensation

Dept., 667 F.2d at 342. Thus, the changes effected by the 1972

amendments further support reading the Act to preclude district

court jurisdiction over ordinary challenges.

B.

This conclusion does not end our inquiry. We must

proceed to consider, as the Court did in Thunder Basin, whether

the claim asserted is of the type Congress intended to be

reviewed within the Act's statutory structure. See Thunder

Basin, 114 S. Ct. at 779. In that connection, the Court noted

its own precedent upholding district court jurisdiction over

"wholly collateral" claims, "particularly where a finding of

preclusion could foreclose all meaningful judicial review." Id.

at 779.

11
 The Court's own discussion in Thunder Basin of its

earlier cases permitting district court jurisdiction over

collateral claims serves as a useful textbook exegesis of the

situations in which district court jurisdiction is not deemed

precluded, and it is useful to quote it in full. The Court

stated:
This Court previously has upheld district
court jurisdiction over claims considered
"wholly 'collateral'" to a statute's review
provisions and outside the agency's
expertise, Heckler v. Ringer, 466 U.S. 602,
618, 104 S. Ct. 2013, 2023, 80 L. Ed. 2d 622
(1984), discussing Mathews v. Eldridge, 424
U.S. 319, 96 S. Ct. 893, 47 L. Ed. 2d 18
(1976), particularly where a finding of
preclusion could foreclose all meaningful
judicial review. See Traynor v. Turnage, 485
U.S. 535, 544-545, 108 S. Ct. 1372, 1380, 99
L. Ed. 2d 618 (1988) (statutory prohibition
of all judicial review of Veterans
Administration benefits determinations did
not preclude [district court] jurisdiction
over an otherwise unreviewable collateral
statutory claim); Bowen v. Michigan Academy
of Family Physicians, 476 U.S. 667, 678-680,
106 S. Ct. 2133, 2140-2141, 90 L. Ed. 2d 623
(1986); Johnson v. Robison, 415 U.S. 361,
373-374, 94 S. Ct. 1160, 1168-1169, 39 L. Ed.
2d 389 (1974); Oestereich v. Selective
Service Bd., 393 U.S. 233, 237-238, 89 S. Ct.
414, 416-417, 21 L. Ed. 2d 402 (1968); Leedom
v. Kyne, 358 U.S. 184, 190, 79 S. Ct. 180,
184, 3 L. Ed. 2d 210 (1958) (upholding
injunction [over otherwise unreviewable
bargaining unit determination] of agency
action where petitioners had "no other means
within their control . . . to protect and
enforce that right").

Thunder Basin, 114 S. Ct. at 779.
The cases referred to by the Court in the above

discussion provide the legal authority for Kreschollek's argument

12
that there is district court jurisdiction over his claim. In

Mathews v. Eldridge, 424 U.S. 319 (1976), the Court held that the

provision of the Social Security Act that required exhaustion of

administrative remedies before the denial of benefits could be

challenged in district court was not intended to bar federal

jurisdiction over a due process challenge to the lack of a

pretermination hearing. The Court explained that that issue was

"entirely collateral" to the denial of benefits, and the claimant

had made a colorable showing that he could not obtain full relief

at a postdeprivation hearing. Id. at 330.

In McNary v. Haitian Refugee Center, Inc., 498 U.S. 479

(1991), also referred to in Thunder Basin, the Court held that an

alien could challenge in district court the constitutionality of

Immigration and Naturalization Service (INS) procedures used to

process claims of alien farmworkers for "special agricultural

worker" status under the Immigration Reform and Control Act, even

though the Immigration and Naturalization Act expressly barred

judicial review of individual determinations except in

deportation and exclusion proceedings. The McNary Court held

that the preclusion of review applied only to denials of

individual applications, and not to a constitutional claim

alleging a broad "pattern and practice" that was collateral to

petitioners' substantive claim for special status. 498 U.S. at

491-94.

The Court in Thunder Basin distinguished this long line

of earlier cases from Thunder Basin's situation. First, it

explained that Thunder Basin's challenge to the designation of

13
nonemployees as the miners' representatives required

interpretation of the parties' rights and duties under the Mine

Act and its regulations, thus implicating subjects within the

Commission's expertise. Second, although constitutional

challenges were generally considered beyond the jurisdiction of

administrative agencies, under the Mine Act the reviewing body

was not the agency itself but an independent commission created

to review agency decisions, and in any event Thunder Basin would

have an opportunity to present its claims to the appropriate

court of appeals. Thunder Basin, 114 S. Ct. at 779-80.

Of course, Kreschollek's claim, and the statute and

circumstances involved, bear some similarity to those in Thunder

Basin. Like the Commission at issue in Thunder Basin, the

Benefits Review Board is competent to hear claimants' legal

contentions, see 33 U.S.C. § 921(b)(3) (1994) ("The Board shall

be authorized to hear and determine appeals raising a substantial

question of law or fact taken by any party in interest . . . with

respect to claims" under the Longshore Act). Like the

complainant mine operator in Thunder Basin, Kreschollek may seek

review in the court of appeals, see 33 U.S.C. § 921(c) (1994)

("Any person adversely affected or aggrieved by a final order of

the Board may obtain a review of that order in the United States

court of appeals . . . ."). And the Longshore Act does contain

an express preclusion provision: "Proceedings for suspending,

setting aside, or enforcing a compensation order, whether

rejecting a claim or making an award, shall not be instituted

otherwise than as provided in this section and section 918 of

14
this title." § 921(e). The Act is silent, however, as to

whether constitutional challenges to the Act must be brought

within the administrative claim process.

Although there have been instances in which

administrative agencies have been deemed capable of dealing with

constitutional issues in the first instance, see, e.g., Thunder

Basin, 114 S. Ct. at 780, "[a]djudication of the

constitutionality of congressional enactments has generally been

thought beyond the jurisdiction of administrative agencies,"

Johnson v. Robison, 415 U.S. 361, 368 (1974) (quoting Oestereich

v. Selective Service Bd., 393 U.S. 233, 242 (1968) (Harlan, J.,

concurring in result). This point was also made in Califano v.

Sanders, 430 U.S. 99, 109 (1977), where the Court noted that

"[c]onstitutional questions obviously are unsuited to resolution

in administrative hearing procedures . . . ." This principle

could most aptly be applied if judicial review would not

otherwise be available, see, e.g., Bowen v. Michigan Academy of

Family Physicians, 476 U.S. 667, 678-680 (1986), but it is

equally pertinent in this case because the result, albeit not

necessarily the absence of any judicial review at all, might well

be the absence of any effective judicial review.

Kreschollek argues with some persuasiveness that in

this respect his case shares more important similarities with the

Mathews v. Eldridge line of cases than with Thunder Basin. As in

Mathews, Kreschollek's claim that he has a constitutional right

to a pretermination hearing is entirely collateral to his claim

of entitlement to benefits. Moreover, unlike the situation

15
presented in Thunder Basin, where the mine operator sought to

circumvent the administrative procedure and enjoin enforcement

proceedings, Kreschollek's attempt to seek a declaration of his

right to a pretermination hearing is in no way inimical to the

purpose of the Act and its amendments, which is to create an

effective process of providing adequate benefits to injured

employees, see Schmit v. ITT Fed. Elec. Int'l, 986 F.2d 1103,

1106 (7th Cir. 1993); see also H.R. Rep. No. 1441, 92d Cong., 2d

Sess. 3, reprinted in 1972 U.S.C.C.A.N. 4698, 4698-99, 4711.

The critical distinction, however, is that in this case

the administrative process is insufficient to provide Kreschollek

the full relief to which he may be entitled. In Mathews, the

Court noted that "[a] claim to a predeprivation hearing as a

matter of constitutional right rests on the proposition that full

relief cannot be obtained at a postdeprivation hearing." 424

U.S. at 331. In Thunder Basin, the Court rejected the operator's

argument that due process required district court review because

it found that "neither compliance with, nor continued violation

of, the statute will subject [Thunder Basin] to a serious

prehearing deprivation." Thunder Basin, 114 S. Ct. at 781.

Kreschollek, on the other hand, is more clearly at risk of

irreparable harm due to the lack of a pretermination hearing.

Kreschollek's benefits were terminated on October 29, 1992, and

he contends he has been unable to return to work due to his

disability. App. at 56. Thus he was deprived of all earned

income for almost two-and-a-half years from the time that his

16
benefits were terminated until the ALJ issued a decision in March

of 1995.

The inadequacy of the administrative review scheme to

address the harm at issue - here, the lack of a pretermination

hearing - is precisely the sort of situation which we envisioned

in Compensation Department would permit a district court to

exercise jurisdiction over a claim involving the Act. See

Compensation Dept., 667 F.2d at 343. Notably, unlike the Mine

Act involved in Thunder Basin, the Longshore and Harbor Workers'

Compensation Act does not provide for expedited review of

benefits determinations. As in Mathews, Kreschollek "has raised

at least a colorable claim that because of his physical condition

17
and dependency upon the disability benefits, an erroneous

termination would damage him in a way not recompensable through

retroactive payments." Mathews, 424 U.S. at 331. It follows

that Kreschollek has alleged a sufficiently serious irreparable

injury to lead us to conclude that the administrative review

process is insufficient to afford him full relief.

Although Kreschollek has presented the same

constitutional questions in the administrative proceeding, the

danger of conflicting and duplicative litigation over which the

Supreme Court expressed concern in Whitney National Bank v. Bank

of New Orleans & Trust Co., 379 U.S. 411, 422 (1965), and which

factored into our decision in Compensation Department is

minimized in this case. By addressing only the constitutional

claims, the district court decision will have no bearing upon the

merits of Kreschollek's claim of entitlement to continuing

disability benefits. Thus, the procedural problems presented by

a pending district court claim should not present an

insurmountable barrier to the exercise of district court

jurisdiction. We are confident that the district court and the

parties can fashion a workable solution should the issue arise.

Kreschollek's counsel conceded at oral argument that at some

point he may have to make a decision as to his forum.

18
 III.

For the reasons set forth above, we will reverse the

order of dismissal and remand to the district court for

proceedings consistent with this opinion.

19