United States Court of Appeals,
Fifth Circuit.
No. 94-40716.
INGALLS SHIPBUILDING, INC., et al., Petitioners,
v.
DIRECTOR, OFFICE OF WORKERS' COMPENSATION PROGRAMS, UNITED STATES
DEPARTMENT OF LABOR, and Maggie Yates (Widow of Jefferson Yates),
Respondents.
Oct. 3, 1995.
Petition for Review of a Final Order of the Benefits Review Board.
Before WISDOM, GARWOOD and DAVIS, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
Ingalls Shipbuilding (Ingalls) appeals the order of the
Benefits Review Board (BRB) awarding Maggie Yates death benefits
under section 9 of the Longshore and Harbor Workers Compensation
Act (the "Act"), 33 U.S.C. § 909. We affirm.
I.
Jefferson Yates worked periodically as a shipfitter for
Ingalls in Pascagoula, Mississippi, from 1953 until 1967, during
which time he was exposed to asbestos. He worked in unrelated
non-maritime employment from 1967 to 1974, when he voluntarily
retired at age 67. In March 1981, he was evaluated for
asbestos-related diseases and was later diagnosed as suffering from
asbestosis, chronic bronchitis, and possible malignancy of the
lungs. In April 1981, Mr. Yates filed a claim for disability
benefits under section 8 of the Act. 33 U.S.C. § 908. In May
1981, he filed a third-party lawsuit in a Mississippi federal
1
district court, seeking damages from twenty-three manufacturers and
sellers of asbestos products to which he was exposed while employed
at Ingalls.
In June 1982, Ingalls admitted the compensability of Jefferson
Yates's claim for disability benefits under the Act and tendered
benefits. In May 1983, Ingalls and Jefferson Yates executed a
settlement agreement pursuant to 33 U.S.C. § 908(i) under which
Ingalls agreed to pay Mr. Yates a lump sum payment of $15,000, give
him open medical benefits, and pay his attorney's fees. Ingalls
made payment consistent with a May 10, 1983 order of the deputy
commissioner. Between May 1981 and January 1984, Jefferson Yates
consummated settlement agreements with eight defendants in the
federal court suit (the pre-death settlements). Ingalls was not a
party to the pre-death settlements, and Jefferson Yates did not
obtain its approval before he made these settlements. Although
Maggie Yates was not named a party plaintiff in the federal court
suit, she signed releases in each of the pre-death settlements.
Although some of the earlier settlements limited Maggie Yates's
release to loss of consortium, other settlements foreclosed her
from bringing any future tort claim for her husband's wrongful
death.
On January 28, 1986, Jefferson Yates died from prostate
cancer. The parties stipulated that his asbestosis contributed to
his death. In addition to his wife, Jefferson Yates was survived
by six non-dependent children. In April 1986, Maggie Yates filed
a claim for death benefits under section 9 of the Act against
2
Ingalls and its carrier.1 Ingalls promptly controverted Mrs.
Yates's claim.
Maggie Yates and her six non-dependent children continued
Jefferson Yates's federal court suit, which was converted from a
personal injury action to a wrongful death action. Thereafter,
Maggie Yates and her six children entered into settlements with
Raymark, et al. on June 9, 1987, for $2,821; with Wellington, et
al. on April 5, 1989, for $60,000; and with Johns-Manville, et al.
on March 3, 1989, for $43,000 (the post-death settlements). In
accordance with section 33(g)(1), Mrs. Yates obtained Ingalls's
written approval for the three post-death settlements.
Ingalls defended Ms. Yates' claim for death benefits under the
Act on two fronts. It argued that Mrs. Yates' pre-death settlement
with the asbestos defendants was without its approval and her claim
for post-death benefits was therefore barred by § 33(g)(1) of the
Act as interpreted by the Supreme Court in Estate of Cowart v.
Nicklos Drilling Co., 505 U.S. 469, 112 S.Ct. 2589, 120 L.Ed.2d 379
(1992).
Ingalls also argued that once it took credit for all the net
proceeds of the post-death settlements against its potential
liability to Maggie Yates for death benefits under the Act, it was
mathematically impossible that it would be required to pay death
benefits to Mrs. Yates.
In an April 1992 decision and order, the Administrative Law
1
None of the six children filed claims for death benefits
under the Act.
3
Judge (ALJ) held that, at the time of the pre-death settlements,
Maggie Yates was not a person "entitled to compensation" under
section 33(g)(1) and was therefore exempt from that subsection's
written approval requirement. Thus, the ALJ concluded that Maggie
Yates's claim for death benefits under the Act was not barred by
section 33(g)(1).
Based on the Mississippi wrongful death statute and Maggie
Yates's own testimony, the ALJ determined that the post-death
settlements were apportioned between Maggie Yates and the six
children, so that Maggie Yates only received one-seventh of the net
amount. The ALJ concluded that Ingalls was only entitled to a
credit for one-seventh of the post-death settlement under the Act.
However, the ALJ held that, based on the terms of the post-death
settlement agreements, Ingalls was contractually entitled to
receive credit under section 33(f) for the entire net amount of the
post-death settlements to offset its statutory liability for death
benefits. Accordingly, the ALJ awarded Maggie Yates death benefits
under section 9 of the Act and held that Ingalls was entitled to a
credit under section 33(f) for the entire net amount of the
post-death settlements.
Maggie Yates appealed the ALJ's decision to the BRB, and
Ingalls cross-appealed. The Director of the Office of Workers'
Compensation Programs (Director) responded to the appeals and
supported Maggie Yates's interpretations of both section 33(g)(1)
and 33(f). In a June 1994 decision, the BRB affirmed the ALJ's
holding that Maggie Yates's claim for death benefits was not barred
4
by section 33(g)(1) because she was not "a person entitled to
compensation" at the time of the pre-death settlements. The BRB
also affirmed the ALJ's order declining to give a credit as a
matter of law for settlement sums received by the Yates
non-dependent children against death benefits Ingalls owed under
the Act. A majority of the BRB held that no contractual basis
existed for allowing the offset of the entire net amount received
in the post-death settlements and reversed the ALJ on this point.
One member of the three judge panel dissented, arguing that, under
the terms of the post-death settlements, Maggie Yates waived her
right to apportionment.
Ingalls filed a timely petition for review with this Court.
The Director appeared as a respondent and filed a brief supporting
Maggie Yates's interpretations of sections 33(g)(1) and 33(f). We
consider below the issues presented in this appeal.
II.
A.
Ingalls argues first that § 33(g)(1) of the Act bars Mrs.
Yates' claim for death benefits because she entered into third
party settlements without Ingalls' approval before Mr. Yates'
death.2 This court's review of BRB decisions is limited to
2
Ingalls moved to strike the brief of the Director and
disallow any further participation, asserting that the Director
lacked standing. In Ingalls Shipbuilding Div., Litton Systems,
Inc. v. White, 681 F.2d 275, 281-84 (5th Cir.1982), overruled on
other grounds, Newpark Shipbuilding & Repair, Inc. v. Roundtree,
723 F.2d 399, 406-07 (5th Cir.) (en banc), cert. denied, 469 U.S.
818, 105 S.Ct. 88, 83 L.Ed.2d 35 (1984), this Court held that the
Director has standing to participate as a respondent in the
appeal of a BRB decision. In so holding, the court in White
5
considering errors of law and ensuring that the BRB adhered to its
statutory standard of review, namely, whether the ALJ's factual
findings are supported by substantial evidence. Tanner v. Ingalls
Shipbuilding, 2 F.3d 143, 144 (5th Cir.1993).
Section 33(g)(1) provides,
"If the person entitled to compensation (or the person's
representative) enters into a settlement with a third person
[other than an employer or person in his employ] for an amount
less than the compensation to which the person (or the
person's representative) would be entitled under this chapter,
the employer shall be liable for compensation as determined
under subsection (f) of this section only if written approval
of the settlement is obtained from the employer and the
employer's carrier, before the settlement is executed, and by
the person entitled to compensation (or by the person's
representative.)" 33 U.S.C. § 933(g)(1).
Section 33(f) governs third-party recovery by persons entitled to
compensation. If a person entitled to compensation enters into an
unapproved third-party settlement for an amount less than he is
entitled to under the Act, all rights to compensation under the Act
are terminated pursuant to section 33(g)(1). On the other hand, if
the person entitled to compensation enters a third-party settlement
rejected the line of cases relied on by Ingalls in this appeal,
namely, the Fourth Circuit's rule that the Director must show a
stake in the outcome of the controversy in order to respond to a
petition for review under 33 U.S.C. § 921(c). White, 681 F.2d at
281. In Director, Office of Workers' Compensation Programs v.
Newport News Shipbuilding and Dry Dock Co., --- U.S. ----, 115
S.Ct. 1278, 131 L.Ed.2d 160 (1995), the Supreme Court held that
the Director had no standing to petition the court of appeals
seeking reversal of a BRB decision. Id. at ----, 115 S.Ct. at
1288. The Court in Newport News Shipbuilding differentiated an
agency's entitlement to party-respondent status from its standing
to appeal and commented that the decision "intimates no view on
the party-respondent question." Id. at ---- n. 2, 115 S.Ct. at
1284 n. 2. Thus, White remains binding precedent in this Circuit
and forecloses Ingalls's argument that the Director has no
standing to respond in this case.
6
for an amount greater than his statutory entitlement, then the
written approval requirement of section 33(g)(1) does not apply,
and the employer would be entitled to a 100% set-off under section
33(f).
Mrs. Yates concedes that the pre-death settlements were not
approved in writing by Ingalls but argues that when these
settlements were made, Mr. Yates was the only "person entitled to
compensation" and thus she was not a "person entitled to
compensation." She argues that because she had no right to
compensation she was not required to obtain Ingalls's written
approval for the pre-death settlements. On the other hand, Ingalls
argues that Maggie Yates, as a potential widow, qualifies as "a
person entitled to compensation" and that her failure to obtain
written approval of the pre-death settlements in accordance with
section 33(g) bars her claim for death benefits. Both the ALJ and
the BRB agreed with Maggie Yates's interpretation of the phrase "a
person entitled to compensation." The parties focus their
arguments on Estate of Cowart, 505 U.S. 469, 112 S.Ct. 2589, a
recent Supreme Court decision interpreting this phrase in section
33(g)(1).
In Cowart, the employee suffered a work-related hand injury,
and his employer paid temporary total disability benefits for ten
months but refused to pay permanent partial disability. During the
period when he was not receiving any benefits, Cowart settled a
third-party action without obtaining the written approval of his
employer. Cowart argued that he was not "a person entitled to
7
compensation" under section 33(g)(1) at the time of the settlement
because his employer was not voluntarily paying benefits and a
formal award of benefits had not been issued. Because he was not
"a person entitled to compensation," Cowart contended that he was
not required to obtain his employer's approval of the settlement
pursuant to § 33(g)(1).
Rejecting Cowart's argument, the Supreme Court held that he
became "a person entitled to compensation" at the time of the
work-related injury and that it was immaterial whether the employee
was receiving benefits at the time of the third-party settlement.
Id. at 476-77, 112 S.Ct. at 2594-95. The Court stated, "Cowart
suffered an injury which by the terms of the LHWCA gave him a right
to compensation from his employer. He became a person entitled to
compensation at the moment his right to recovery vested, not when
his employer admitted liability, an event yet to happen." Id. at
477, 112 S.Ct. at 2595 (emphasis added).
Both Maggie Yates and the Director argue that, under Cowart,
Maggie Yates was not "a person entitled to compensation" at the
time of the pre-death settlements because her right to recover
death benefits did not vest until her husband's death. See
Travelers Ins. Co. v. Marshall, 634 F.2d 843, 846 (5th Cir.1981)
(stating that "a cause of action for death benefits certainly does
not arise until death").
In response, Ingalls asserts that this panel should follow the
Ninth Circuit's interpretation of "a person entitled to
compensation" in a case very similar to the instant case. In
8
Cretan v. Bethlehem Steel Corp., 1 F.3d 843 (9th Cir.1993), cert.
denied, --- U.S. ----, 114 S.Ct. 2705, 129 L.Ed.2d 833 (1994), an
employee exposed to asbestos during his employment filed a claim
for disability benefits under the Act, and the employer disputed
liability. The employee also filed a product liability suit
against numerous asbestos manufacturers and entered into settlement
agreements with several of those manufacturers without obtaining
the written approval of his employer. Although his wife and
daughter were not named as parties in the third-party suit, both
settled their wrongful death claims against the manufacturers as
part of the settlement agreements. In addition, his wife settled
her loss of consortium claim in the same series of agreements.
After the employee died, an ALJ awarded disability benefits to his
wife and death benefits to his wife and daughter. The Ninth
Circuit held that the wife and daughter were "persons entitled to
compensation" and therefore could not recover death benefits under
the Act because they failed to obtain the written approval of the
employer for the pre-death settlements as required by section
33(g). Id. at 848.
The Cretan court considered the Supreme Court's language in
Cowart that the employee "became a person entitled to compensation
at the moment his right to recovery vested," and concluded that it
was dicta that was not binding on the court. The precise issue
presented in Cowart was the definition of "a person entitled to
compensation." The Court's determination that the employee
qualified under this statutory test when his right to recovery
9
vested is the core of the Supreme Court's holding. We therefore
disagree with the Cretan court's conclusion that this critical part
of the Supreme Court's opinion in Cowart is dicta.
Thus, applying Cowart 's definition we conclude that section
33(g)(1) does not bar Maggie Yates's death benefits claim because
she was not "a person entitled to compensation" at the time of the
pre-death settlements. At the time of the pre-death settlements,
Maggie Yates's claim for death benefits had not vested. Three
contingencies come to mind under which Maggie Yates's right to
death benefits under the Act would have never accrued. She could
have predeceased or divorced her husband, or Jefferson Yates could
have died from causes unrelated to his employment. Under any of
these scenarios, Maggie Yates's right to death benefits under the
Act would never have accrued. Because Mrs. Yates' right to death
benefits had not vested when the pre-death settlements were made,
her failure to obtain Ingalls's written approval of the pre-death
settlements is irrelevant.
B.
Ingalls argues next that the BRB erred in concluding that
Ingalls was not entitled to offset from death benefits due Ms.
Yates the entire amount of the post-death settlements. The ALJ
determined that Maggie Yates only received one-seventh of the net
amount of the three post-death settlements. He held, however,
that, as a matter of contract law, the settlement agreements Ms.
Yates executed permitted Ingalls to offset the entire net amount of
the post-death settlements. The BRB reversed and held that Ingalls
10
was only entitled to set-off the net amount received by Maggie
Yates.
We first consider the propriety of the BRB's offset under §
33(f) of the Act, without regard to the provisions of the
settlement agreement. Section 33(f) provides:
"If the person entitled to compensation institutes proceedings
... the employer shall be required to pay as compensation
under this chapter a sum equal to the excess of the amount
which the Secretary determines is payable on account of such
injury or death over the net amount recovered against such
third party. Such net amount shall be equal to the actual
amount recovered less the expenses reasonably incurred by such
person in respect to such proceedings (including reasonable
attorneys' fees). 33 U.S.C. § 933(f) (emphasis added).
Ingalls first argues that, as a matter of law, it is entitled
to a credit under section 33(f) for the net amount of all the
post-death settlements. Ingalls argues that the appropriate
set-off is the "amount recovered against the third party."
Respondents counter that the proper offset is the net amount
recovered by "such person" entitled to compensation. Several
courts have addressed this precise issue. In Force v. Director, an
employee's widow and her two children settled their potential
wrongful death action with third-parties. 938 F.2d 981 (9th
Cir.1991). In the widow's later claim for death benefits under the
Act, the employer argued that it was entitled to a credit for the
net amount the widow and her two children obtained in the
settlement agreements. Like the Yates children, the Force children
filed no claims for death benefits under the Act. Rejecting the
employer's argument, the Ninth Circuit stated,
"The offset provision [of section 33(f) ] applies to the third
party recovery obtained by "the person entitled to
11
compensation" under the Act. An employer is entitled to
offset its liability to a particular claimant only the third
party damages received by the claimant for the covered
occupational injury or death ... The Force children did not
file claims for LHWCA benefits and are not entitled to them;
section 933(f) simply does not apply to the children or their
third party recovery." Id. at 985 (emphasis added).3
The Fourth Circuit has also adopted this interpretation of
section 33(f) in determining apportionment among parties. See
I.T.O. Corp. of Baltimore v. Sellman, 967 F.2d 971 (4th Cir.),
cert. denied, --- U.S. ----, 113 S.Ct. 1579, 123 L.Ed.2d 147 (1993)
("Employer's offset rights [under section 33(g) ] are limited to
the portion intended for the claimant since the claimant is the
"person entitled to compensation.' "). See also Brown v. Forest
Oil Corp., 29 F.3d 966, 972 (5th Cir.1994) (in the context of an
employer's lien, "[e]mployer's offset rights are limited to the
portion of the recovery intended for the employee").
Based on the plain language of § 33(f) and the above
authorities, we conclude that Ingalls's argument that it is
entitled as a matter of law to a credit for the net amount received
by Mrs. Yates and her six children from the post-death settlements
must be rejected. Ingalls is only entitled to a credit under
section 33(f) for the net amount received by Mrs. Yates.
Relying on St. John Stevedoring Co. v. Wilfred, 818 F.2d 397
3
The settlement at issue in Force was executed before the
employee died. Because the court in Force also held that a
potential widow was a "person entitled to compensation" under
section 33(f), it applied section 33(f) to the pre-death
settlement. Although Ingalls argues that we should adopt Force
's definition of "a person entitled to compensation" for section
33(g), it does not argue that it is entitled to a set-off under
section 33(f) for the pre-death settlements.
12
(5th Cir.1987), Ingalls argues next that the provisions of the
post-death settlement agreements provide them with an independent
basis to obtain credit for the net amount of the settlements
received by Maggie Yates and her six children. The respondents
counter that the terms of the settlement agreement are ambiguous
and cannot be reasonably interpreted as a consent by Maggie Yates
to grant Ingalls a credit for the net amount of all third party
recoveries. In addition, the respondents assert that the BRB
properly held that Ingalls had no right to enforce the terms of the
settlement agreements.
Because we are persuaded that the respondents' first argument
is meritorious, we do not reach their remaining contentions. For
the reasons explained below, we conclude that the language in these
contracts does not clearly and unambiguously require Mrs. Yates to
give Ingalls a credit for any sums that exceed the net amount she
received from the settlements.
Three separate settlements were reached in this case and three
separate releases were executed. The settlement with Raymark
Industries et al. was signed on June 9, 1987. Mrs. Yates and her
six children are named in the body of the release and referred to
collectively as "Releasors." The critical paragraph provides in
part that if any claim for worker's compensation benefits ... [1]
"shall hereafter be filed and be successful, and the amounts
ordered to be paid are found to be a lien against the consideration
paid herein, then any employer or its insurance carrier paying or
ordered to pay such compensation benefits to any Releasor shall
13
first be given credit for the consideration paid to Releasors under
this agreement, less reasonable costs of collection, and [2] shall
make no payment of any compensation benefits to any Releasor until
the consideration paid to Releasors under this agreement is
exhausted." The initial clause quoted above reflects an intent to
give the employer a credit to the extent any compensation payments
to the Releasors constitute "a lien against the consideration paid
herein." Obviously the only portion of the third party settlement
which could be subject to a lien are for sums paid to a person
"entitled to compensation." No compensation lien can be imposed on
settlement sums paid by a third party to an employee not entitled
to compensation. See 33 U.S.C. § 917. Thus, the language in the
release which purports to give the employer a set-off against
settlement sums subject to a compensation lien reflects an intent
to limit the set-off to the portion of the settlement paid to a
party entitled to compensation.
This supports the director and Mrs. Yates' argument that the
language of the instrument does not reflect an intent to grant a
set-off for the total amount of the settlement. The second clause
in the above quoted provision ("and shall make no payment of any
compensation benefits to any Releasor until the consideration paid
to Releasors under this agreement is exhausted") could, if read in
isolation, reflect an intent to grant the employer a credit for the
total consideration paid to all Releasors under the settlement
agreement. But the second clause does not clearly indicate an
intent to grant a credit for sums not covered by a compensation
14
lien. The second clause can reasonably be read to grant a credit
to the employer against sums paid to all "Releasors" for all
settlement sums subject to a compensation lien.4 The settlement
instrument does not evidence an intent to grant Ingalls a set-off
in derogation of § 33(f) of the Act with sufficient clarity to
permit enforcement.
Language almost identical to that quoted above in the Raymark
release is included in the other two instruments. In the
Wellington settlement, the release provides that if any claim for
workmen's compensation shall be filed and be successful ... "and
the amounts ordered to be paid are found to be a lien against the
consideration paid herein, then any employer or its insurance
carrier paying or ordered to pay such compensation benefits to
either of the undersigned shall first be given credit for the
consideration paid to the undersigned under this agreement...."
The Manville settlement contains an almost identical provision.5
4
In the Raymark settlement, the third party tort defendants
obtained an individual "acknowledgement" from Maggie Yates giving
Litton systems "credit for the amount of money paid to me by the
above named defendant." It stated further that "Litton Systems
will owe me no workmen's compensation benefits or medical
benefits under the Longshore & Harbor Workers' Compensation Act
until the amount received by me from the above mentioned
defendant has been exhausted based on the weekly benefits due me
from Litton Systems, Inc...." This instrument, prepared for Mrs.
Yates' signature, makes no reference to Mrs. Yates' children;
and Mrs. Yates' children signed no separate acknowledgement
similar to the one signed by Mrs. Yates. (emphasis added) See
page 17 of RX 21.
5
Neither the Wellington nor the Manville settlement papers
include a separate document similar to the "Acknowledgement"
signed by Mrs. Yates in the Raymark settlement and discussed in
note 4.
15
For the reasons stated above, we conclude that the language
in these three instruments do not reflect with sufficient clarity
an intent to grant Ingalls a credit against any larger portion of
the settlement sum than would be subject to a compensation lien.
A compensation lien would only be imposed on the settlement sums
received by Mrs. Yates since she was the only settling party who
was entitled to compensation.6
For the reasons stated above, we affirm the order of the BRB.
AFFIRMED.
6
Although Mrs. Yates was not entitled to compensation at the
time of the pre-death settlements, her right to compensation
under the Act accrued upon Mr. Yates' death. See 33 U.S.C. §
909.
16