Pacific Ship Repair & Fabrication Inc. v. Director, Office of Worker Compensation Programs

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

PACIFIC SHIP REPAIR AND 
FABRICATION INC.,
Petitioner, No. 11-70292
v.
 OWCP No.
10-0207
DIRECTOR, OFFICE OF WORKER
COMPENSATION PROGRAMS; DEBORAH OPINION
BENGE,
Respondents.

On Petition for Review of an Order of the
Benefits Review Board

Argued and Submitted
March 13, 2012—San Francisco, California

Filed July 24, 2012

Before: M. Margaret McKeown and Milan D. Smith, Jr.,
Circuit Judges, and Barbara Jacobs Rothstein,
Senior District Judge.*

Opinion by Judge McKeown

*The Honorable Barbara Jacobs Rothstein, Senior District Judge for the
District of Western Washington, sitting by designation.

8427
 PACIFIC SHIP REPAIR v. OWCP 8429

COUNSEL

Christopher M. Galichon and Scott Richard MacInnes
(argued), Galichon & MacInnes, APLC, San Diego, Califor-
nia, for the petitioner-appellant.

Joshua Thomas Gillelan, II (argued), Longshore Claimants’
National Law Center, Washington, DC; Rae Ellen James,
Mark A. Reinhalter and Jonathan Peter Rolfe (argued), Office
of the Solicitor, Washington, DC; Erick L. Richardson, U.S.
Department of Labor, Long Beach, California, for respondent-
appellee Office of Workers’ Compensation Programs.

Jeffrey Winter, Law Office of Jeffrey Winter, San Diego, Cal-
ifornia, for respondent-appellee Deborah Benge.
8430 PACIFIC SHIP REPAIR v. OWCP
OPINION

McKEOWN, Circuit Judge:

The meaning of “permanent” appears, at first blush, to be
clear. But just as a museum’s permanent collection does not
mean the works will stay in the collection for posterity and a
permanent hair wave does not last a lifetime, neither does the
term permanent necessarily mean forever. The word perma-
nent takes on meaning in context and, in this case, within a
statutory framework.

In the context of maritime employment, we consider an
issue of first impression in this circuit: whether a partial “per-
manent” disability may be re-characterized as “temporary”
during a period of recuperation. The label we affix does not
affect whether the disabled employee is entitled to disability
benefits; instead, it determines who pays the benefits—either
the employer or the special workers’ compensation fund. We
affirm the decision of the Department of Labor’s Benefits
Review Board (the “Board”) that an employee who has a per-
manent partial disability may be reclassified as temporarily
totally disabled during a recovery period following surgery.

BACKGROUND

Deborah Benge, a former employee of Pacific Ship Repair
and Fabrication Inc. (“Pacific”), suffered neck and back inju-
ries while working as a foreman on a ship in June 1999. Four
months later, she returned to work for Pacific as a clerk.

Benge filed a disability claim under the Longshore and
Harbor Workers’ Compensation Act (the “Longshore Act”),
33 U.S.C. § 901 et seq., seeking compensation from Pacific
for her work-related injury. The administrative law judge
(“ALJ”) found that Benge’s disability resulted from the over-
lay of her 1999 injury on her pre-existing back and neck inju-
ries. The parties stipulated that because Benge’s condition had
 PACIFIC SHIP REPAIR v. OWCP 8431
reached “maximum medical improvement,” she was incapa-
ble of returning to her previous position as a foreman; how-
ever, Benge retained residual wage-earning capacity in her
lower-paying clerk position. The parties also stipulated, and
the ALJ agreed, that because Benge still could work in some
capacity, her disability at the time was partial (and not total),
and that because her condition was not expected to improve,
her disability at the time was permanent (and not temporary).

The ALJ ordered Pacific to pay all disability compensation
due for the first two years of Benge’s partial permanent dis-
ability; thereafter, beginning January 2002, the Office of
Workers’ Compensation Programs (“OWCP”), was ordered to
make the payments. The Board affirmed the OWCP’s appeal
of the ALJ’s decision.

The OWCP made partial permanent disability payments to
Benge for the next five years. Benge’s condition continued to
deteriorate, and in 2007 she underwent a three-level discec-
tomy and fusion of her cervical spine. Although her doctor
anticipated that she would return to light-duty work after
recuperating, Benge was unable to return to work. There is no
dispute that, in the end, the surgery left Benge totally dis-
abled.

According to the ALJ, the surgery was immediately fol-
lowed by a nine-month “period of healing.” Benge’s condi-
tion then “abated” and reached “stationary status,” at which
point it became both total and permanent. Noting that under
Board law, “a period of recuperation or healing” is character-
istic of a temporary disability, the ALJ determined that the
nine-month total disability immediately following the surgery
was temporary in nature. This determination absolved the
OWCP from making disability payments during this time
period; instead, Pacific was liable for the payments.

Pacific appealed to the Board, contending that Benge’s pre-
surgery partial permanent disability remained permanent fol-
8432 PACIFIC SHIP REPAIR v. OWCP
lowing her surgery because a disability once deemed perma-
nent cannot transform into a temporary disability. The Board
affirmed the ALJ, concluding that even if a disability is
declared permanent, it may be later re-characterized as tempo-
rary when the underlying condition worsens and re-stabilizes
following a surgical procedure.1

ANALYSIS

The Longshore Act establishes a federal worker’s compen-
sation system for employees disabled or killed in the course
of covered maritime employment. See generally 33 U.S.C.
§§ 908, 909. It requires an injured worker’s employer to pay
all disability compensation owed to the employee, except in
certain cases. Where a pre-existing condition contributes to
the employee’s post-injury permanent disability, § 8(f) of the
Longshore Act limits an employer’s liability for post-injury
permanent disability payments to 104 weeks. 33 U.S.C.
§ 908(f). Thereafter, based on this pre-existing injury excep-
tion, an industry-financed “special fund,” administered by the
OWCP, pays the remaining permanent disability benefits due.
Id. This special fund does not pay temporary disability bene-
fits, whether partial or total. See id. § 944.

[1] Under the Longshore Act, there are four different cate-
gories of disabilities: permanent total disability; temporary
total disability; permanent partial disability; and temporary
partial disability. Id. § 908(a)-(c), (e). We have previously
explained the statutory scheme:
1
Even though the ALJ has yet to affix an amount of attorney’s fees,
Pacific also claims the ALJ improperly determined liability for attorney’s
fees. Because there is no final order regarding attorney’s fees, this issue
is not yet ripe for review and we do not address it in this appeal. See
Budinich v. Becton Dickinson & Co., 486 U.S. 196, 200 (1988) (“[W]e
think it indisputable that a claim for attorney’s fees is not part of the merits
of the action to which the fees pertain”).
 PACIFIC SHIP REPAIR v. OWCP 8433
This statutory structure indicates two independent
areas of analysis—nature (or duration) of disability
and degree of disability. Temporary and permanent
go to the nature of the disability. Total and partial go
to the degree of the disability. This differentiation
leads us to find maximum medical improvement to
be an indication of permanent versus temporary dis-
ability and availability of suitable alternative
employment to be an indication of partial versus
total disability.

Stevens v. Dir., Office of Workers’ Compensation Programs,
909 F.2d 1256, 1259 (9th Cir. 1990). We address here only
the “nature (or duration)” of Benge’s disability, not its degree.

[2] The terms temporary and permanent are not defined in
the Longshore Act. In Stevens, we stated that a disability is
temporary “so long as there [is] a possibility or likelihood of
improvement through normal and natural healing.” Id. at 1259
(citing Watson v. Gulf Stevedore Corp., 400 F.2d 649, 654
(5th Cir. 1968)). In other words, a disability remains tempo-
rary until the time the claimant reaches “maximum medical
improvement,” after which normal and natural healing is no
longer likely. Id. at 1258; Gen. Constr. Co. v. Castro, 401
F.3d 963, 968 (9th Cir. 2005) (“After a claimant is shown to
have attained maximum medical improvement, however, the
remaining disability is classified as permanent.” (internal quo-
tation marks omitted)). The maximum medical improvement
date “triggers a change in the classification of a claimant’s
disability from temporary to permanent.” Haw. Stevedores,
Inc. v. Ogawa, 608 F.3d 642, 653 (9th Cir. 2010).

[3] Our case law discusses only the transformation of a
disability from temporary to permanent. While it is intuitively
logical that a disability may transform from temporary to per-
manent once maximum medical improvement is reached, we
must determine whether the transformation from permanent to
temporary also passes muster.
8434 PACIFIC SHIP REPAIR v. OWCP
The notion that a “permanent” disability is immutable has
common-sense and linguistic appeal; re-characterization of a
once-permanent disability as temporary may seem absurd. On
the other hand, the fallacy of holding initial characterizations
to be immutable is also apparent if a once-permanent disabil-
ity improves or is completely cured, whether due to a remark-
able recovery, advances in medical science, or other reasons.
In other words, re-characterization of a disability may be nec-
essary due to changed circumstances. Pacific’s position that
permanency is not a “fluid concept” ignores temporal
changes.

[4] The Longshore Act permits the modification of a dis-
ability award order if the individual’s condition changes over
time. 33 U.S.C. § 922 (within certain time limits, “on the
ground of a change in conditions . . . the deputy commissioner
may . . . review a compensation case . . . [and] issue a new
compensation order which may terminate, continue, reinstate,
increase, or decrease such compensation, or award compensa-
tion”). Other circuits also endorse re-characterization of a dis-
ability based on changed circumstances: “If an employee’s
condition does improve after he or she has been determined
to be permanently disabled,” the employer may have the
employee’s condition reevaluated. Pittsburgh & Conneaut
Dock Co. v. Dir., Office of Workers’ Compensation Pro-
grams, 473 F.3d 253, 259 n.1 (6th Cir. 2007); Watson, 400
F.2d at 655 (“The determination that Watson is permanently
disabled does not foreclose the possibility that his condition
may change.”). Neither the initial determination of the nature
nor the degree of the disability appears to be cast in stone.

[5] A disability initially deemed permanent is not immuta-
bly so. An initial finding of medical stability may be later
proven wrong or warrant reassessment depending on changed
circumstances. Nothing in the Longshore Act limits re-
characterizations to a one-way street from temporary to per-
manent; instead, the statute’s broad thoroughfare allows for
two-way traffic.
 PACIFIC SHIP REPAIR v. OWCP 8435
[6] This interpretation of the Longshore Act is consistent
with the Director’s position, which is cogently summarized in
his brief:

For more than two decades, the Director has consis-
tently taken the view in administrative proceedings
—and the Board has consistently held—that a per-
manent disability may become temporary during a
period of exacerbation and healing of the underlying
condition, regardless of whether the condition will
be cured.

We “accord considerable weight to the construction of the
statute urged by the Director of the Office of Workers’ Com-
pensation Programs, as he is charged with administering it.
We will defer to the Director’s view unless it constitutes an
unreasonable reading of the statute or is contrary to legislative
intent.” Price v. Stevedoring Servs. of Am., Inc., 627 F.3d
1145, 1148 (9th Cir. 2010) (internal quotation marks and cita-
tions omitted).

The Director focuses on the potential for improvement of
a condition—not on the prospect of a complete cure of the
underlying injury—as the decisive factor in determining
whether a disability should be categorized as temporary under
the Longshore Act. The Director’s view is unsurprising since
the state where “recovery merely awaits a normal healing
period” is the definition of a temporary disability. Watson,
400 F.2d at 654. To be sure, this definition is uncontroversial
in the mine-run case—where a claimant is recovering from an
initial injury—but the Director invokes the same principle for
a permanent disability that undergoes a period of healing: dur-
ing such state of healing, the employee’s disability may be re-
characterized as temporary for purposes of apportioning lia-
bility under the Longshore Act. Put another way, initiation of
a healing period serves as a “reset” button for a disability
previously-determined to be permanent.
8436 PACIFIC SHIP REPAIR v. OWCP
Characterizing an individual as temporarily disabled while
she undergoes a healing process comports with our view that
a disability is temporary “so long as there [is] a possibility or
likelihood of improvement through normal and natural heal-
ing.” Stevens, 909 F.2d at 1259 (citing Watson, 400 F.2d at
654). The prospect of a new maximum medical improvement
point demonstrates the reasonableness of the Director’s posi-
tion. If an employee’s partial permanent disability deteriorates
and medical intervention leads to a new healing period, the
employee’s maximum medical improvement point can no lon-
ger be known a fortiori. Periods of healing related to a flare-
up, relapse, surgery, or other major treatment could all lead to
a new and unknown maximum medical improvement point
based on the vicissitudes of the individual’s responsiveness to
medical treatment.2 Of course, the temporary nature of the
disability will again transform to permanent status when nor-
mal and natural healing is no longer likely. See Ogawa, 608
F.3d at 653.

Apart from challenging the concept of a permanent disabil-
ity transforming into a temporary disability, Pacific also
claims that the Director’s position is unreasonable in this
instance because Benge’s maximum medical improvement
point has always been clear. Because surgery was not
expected to improve Benge’s condition, the permanency of
the underlying partial disability was never expected to
change; therefore, Pacific argues, Benge’s partial disability
remained permanent and should not be re-characterized as
temporary.

Although we have yet to address Pacific’s claim, the Board
was confronted with this very argument three decades ago:
2
The nature of a disability may change due to surgery, and nothing in
Stevens—which discusses transformation only from a total disability to
partial—limits re-characterization solely to where there is a “second injury
or aggravation.” The Board correctly rejected this argument because
Pacific was “responsible for the resultant disability in either case.”
 PACIFIC SHIP REPAIR v. OWCP 8437
[A]lthough a temporary total award will subsume a
permanent partial award for the same injury, an
underlying permanent disability does not disappear
during periods of temporary exacerbation. It stands
to reason that if claimant is adjudged to have reached
a state of permanent disability, a subsequent tempo-
rary exacerbation will not necessarily alter that find-
ing. The 10 percent permanent partial disability
finding in the instant case presupposed that claimant
would retain at least a 10 percent partial disability,
even though his condition might deteriorate either
temporarily or permanently.

Leech v. Serv. Eng’g Co., 15 B.R.B.S. 18, 22 (1982). The
Board reasoned that even though the permanent disability
itself persists through periods of “temporary exacerbation,” an
award for temporary total disability “will subsume” an award
for a permanent partial disability stemming from the same
injury because a total disability presupposes the loss of all
wage-earning capacity. Id. at 21-22. The Board thus drew a
critical difference between Longshore Act awards for tempo-
rary and permanent disabilities, and the disabilities them-
selves.

[7] Assuming Benge’s underlying partial permanent dis-
ability was not expected to improve due to the surgery, Leech
supports the determination that Benge was temporarily totally
disabled under the Longshore Act because Benge lost all
wage-earning capacity. The Board’s decision relies on Leech,
which mirrors the Director’s interpretation. Taking into
account the “considerable weight” we accord the Director’s
interpretation, we conclude that the Director’s position—that
an award for total temporary disability trumps, or subsumes,
an award for any underlying permanent partial disability—is
reasonable. We abide by the limitation that we “will not sub-
stitute our own construction for a reasonable interpretation
made by the administrator of an agency.” Price, 627 F.3d at
1148 (internal quotation marks omitted).
8438 PACIFIC SHIP REPAIR v. OWCP
[8] There is no real dispute about the ALJ’s factual finding
that Benge was totally disabled following the surgery; rather,
the appeal centers on transformation of a permanent disability
into a temporary disability. We affirm the Board’s decision
and hold that under the Longshore Act, a prior finding of par-
tial permanent disability does not preclude a later finding of
temporary disability for the same underlying injury during a
period of recovery following surgery. Because Benge’s partial
disability, which became permanent when she reached maxi-
mum medical improvement, may properly be re-characterized
as a temporary total disability in accord with changed circum-
stances, Pacific is responsible for the temporary total disabil-
ity payments.3 Given the Board’s long-standing position on
this issue, we reject Pacific’s claim that affirming the Board’s
decision will create unacceptable levels of uncertainty for
employers. Similarly, we are not swayed by Pacific’s some-
what surprising claim that sustaining the Board’s position will
dissuade potential employers from hiring individuals with dis-
abilities. Apart from being a policy argument best made else-
where, we trust that, as a practical matter, employers will
respect legal constraints prohibiting discrimination against the
disabled. See, e.g., Americans with Disabilities Act, 42 U.S.C.
§§ 12101 et seq.; California Fair Employment and Housing
Act, Cal. Gov’t Code § 12900 et seq.

PETITION DENIED.

3
Under the Longshore Act, “the employer shall provide in addition to
compensation under subsections (b) [temporary total disability] and (e)
[temporary partial disability] of this section, [disability] compensation . . .
for one hundred and four weeks only.” 33 U.S.C. § 908(f)(1) (emphasis
added); see also Sizemore v. Seal & Co., 23 B.R.B.S. 101, 103 (1989)
(“Section 8(f) does not exempt employers from liability for paying tempo-
rary total disability benefits arising from an injury following the comple-
tion of the 104-week period of permanent partial disability liability for the
same injury.”).