Kelly v. Red Fox Companies of New Iberia Inc. , 123 F. App'x 595 ( 2005 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
February 2, 2005
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 04-60538
Summary Calendar
GERALD A. KELLY,
Petitioner,
versus
RED FOX COMPANIES OF NEW IBERIA INCORPORATED;
LOUISIANA WORKERS’ COMPENSATION CORPORATION;
DIRECTOR, OFFICE OF WORKERS’ COMPENSATION PROGRAMS, U.S.
DEPARTMENT OF LABOR;
Respondents.
______________________
Petition for Review of an Order
of the Benefits Review Board
No. 03-0505
______________________
Before REAVLEY, JOLLY, and HIGGINBOTHAM, Circuit Judges.
PER CURIAM:*
Gerald Kelly was injured during the course of his employment
with Red Fox Companies, and received medical and disability
benefits under the Longshore and Harbor Workers Compensation Act
(“LHWCA”) from Red Fox’s insurance carrier, Louisiana Worker’s
Compensation Corporation (“LWCC”). Kelly then filed a tort suit
against Red Fox and Diamond Offshore Drilling (“Diamond”) in which
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
LWCC intervened. Red Fox was dismissed from the suit on account of
its status in bankruptcy proceedings. Thereafter, LWCC filed a
motion to dismiss its intervention upon determining that Red Fox
had contractually waived its right of subrogation as to Diamond.
Following the dismissal of LWCC, Kelly and Diamond settled for
$25,000, and the court issued a full and final release and
dismissed the suit. LWCC subsequently terminated all benefits to
Kelly because he had failed to obtain LWCC’s prior written approval
for the third-party settlement.
Kelly challenged this termination of benefits, and the
administrative law judge granted Red Fox and LWCC’s motion for
summary judgment. On appeal, the Benefits Review Board affirmed,
finding that Kelly had failed to obtain written approval from
either Red Fox or LWCC for his settlement with Diamond as required
by 33 U.S.C. § 933(g)(1). In addition, the BRB found that LWCC was
not involved in the settlement negotiations to such an extent as to
render the requirements of § 933(g)(1) inoperative, and that Red
Fox’s waiver of its subrogation rights in its contract with Diamond
did not obviate LWCC’s § 933(g)(1) protections. We affirm.
Our review of a decision by the BRB is limited in scope to
“considering errors of law and making certain that the BRB adhered
to its statutory standard of review of factual determinations, that
is, whether the ALJ’s findings of fact are supported by substantial
2
evidence and [are] consistent with the law.”1 A person entitled to
compensation under the LHWCA may both recover compensation from his
or her employer, and pursue a separate negligence action against a
third party.2 If the person obtains damages from a third party,
the employer is entitled to a lien on the recovery or an offset
against such recovery.3 In the event that the person reaches a
settlement with a third party for an amount less than the person
would otherwise be entitled under the LHWCA, “written approval of
the settlement [must be] obtained from the employer and the
employer’s carrier, before the settlement is executed, and by the
person entitled to compensation.”4 If such written approval is not
obtained, “all rights to compensation and medical benefits under
[the LHWCA] shall be terminated, regardless of whether the employer
1
Ortco Contractors, Inc. v. Charpentier, 332 F.3d 283, 287
(5th Cir. 2003) (internal quotations marks and citations omitted).
2
33 U.S.C. § 933(a).
3
See Phillips v. W. Co. of N. Am., 953 F.2d 923, 931 n.9 (5th
Cir. 1992) (Under the LHWCA, “[t]he employer is compelled to pay
the benefits regardless of whether it was negligent or not. In
return, the employer takes a lien for the total amount of benefits
paid on any judgment or settlement the employee may later obtain.
Accordingly, the injured employee is fully – but not doubly –
compensated; the tortfeasor pays for the injuries for which it is
responsible and the employer recovers so much of its worker’s
compensation payments as is attributable to the tortfeasor’s
negligence.” (quoting Stifle v. Marathon Petroleum Co., 876 F.2d
552, 560 (7th Cir. 1989) (internal quotation marks omitted)); 33
U.S.C. § 933(f) (providing that an employer may offset an
employee’s third party recovery against its obligation to pay
compensation under the LHWCA).
4
33 U.S.C. § 933(g)(1).
3
or the employer’s insurer has made payments or acknowledged
entitlements to benefits under [the LHWCA].”5
In his first point of error, Kelly contends that the BRB
erroneously determined that LWCC’s awareness of and discussions
about the settlement with Diamond did not render the § 933(g) bar
inapplicable. Specifically, Kelly contends that the settlement was
discussed with counsel for LWCC prior to its finalization, and that
counsel for LWCC was knowledgeable of the settlement throughout the
negotiation process. However, Kelly does not argue – nor does the
record suggest – that LWCC or Red Fox directly participated in the
settlement negotiations or approved the final agreement.
Our court has consistently found that failure to obtain
written approval of a settlement with a third party places an
absolute bar on the receipt of further compensation from an
employer or the employer’s carrier under the LHWCA.6 This approach
was questioned but not disavowed by the Supreme Court in Estate of
5
33 U.S.C. § 933(g)(2).
6
See Nicklos Drilling Co. v. Cowart, 907 F.2d 1552, 1554 (5th
Cir. 1990) (“[W]e hold that there are no exceptions whatever to the
‘unqualified’ language of § 933.”), aff’d on reh’g, 927 F.2d 828(1991), aff’d Estate of Cowart v. Nicklos Drilling Co., 505 U.S.
469 (1992); Jackson v. Land & Offshore Servs., Inc., 855 F.2d 244,
246 (5th Cir. 1988) (finding that the language of § 933(g)(1) does
not support a “waiver of subrogation” exception to the written
approval requirement); Petroleum Helicopters, Inc. v. Collier, 784
F.2d 644, 647 (5th Cir. 1986) (finding that both the language of
§ 933(g)(1) and its legislative history “admits no exception to the
written approval requirement”).
4
Cowart v. Nicklos Drilling Co.,7 in which the Court refused to
decide whether participation by an employer or its carrier in a
third party settlement serves to fulfill or even eliminate the
written notice requirement. The Court noted, however, that
§ 933(g)’s forfeiture penalty creates “a trap for the unwary,” and
presents the “stark and troubling possibility that significant
numbers of injured workers or their families may be stripped of
their LHWCA benefits by this statute.”8
In I.T.O. Corp. of Baltimore v. Sellman, the Fourth Circuit
refused to impose a complete bar on future compensation in the
absence of a written approval, finding that an employer’s failure
to provide written approval of a third party settlement agreement
did not serve to terminate the employer’s obligation to provide
compensation under the LHWCA when the employer directly and fully
participated in both the third party action and the settlement
negotiations leading to the execution of what amounted to a “joint”
settlement agreement.9 In addition, the BRB has found that an
employer’s participation in a third party settlement agreement can
serve to obviate the need for written approval of the agreement
7
505 U.S. 469 (1992).
8
Id. at 483.
9
954 F.2d 239, 242 (4th Cir. 1992).
5
under § 933(g)(1).10
We are compelled to abide by the precedent of this court.
Regardless, even if free to do so, the facts of this case would not
compel us to depart from our settled interpretation of § 933(g)(1).
Kelly has presented no evidence that LWCC directly participated in
the settlement negotiations with Diamond , or that LWCC approved of
the resulting agreement. Rather, Kelly alleges only that LWCC had
knowledge of the settlement negotiations, and that LWCC discussed
them with him on isolated occasions prior to their conclusion.
Assuming that these allegations are true, they fail to offer a
compelling reason for disregarding the clear and unambiguous
written notice requirement of § 933(g)(1).
In his second point of error, Kelly argues that § 933(g)(1)
should not apply in the present case because Red Fox contractually
waived its right to subrogation as to Diamond , and therefore was
not prejudiced by the settlement. Our court has held, however,
that § 933(g)(1) protects both the employer’s right to
reimbursement from any settlement fund created by the third party,
and a right to an off-set against compensation benefits for amounts
received by way of a third party settlement. An employer that has
waived its right to subrogation still has a significant interest in
the outcome of any third party settlement agreement as the proceeds
10
See Gremillion v. Gulf Coast Catering Co., 31 BRBS 163
(1997); Deville v. Oilfields Indus., 26 BRBS 123 (1992).
6
from such a settlement would be off-set against the employer’s
compensation liability. As a result, an employer’s waiver of its
right to subrogation does not serve to eliminate the written notice
requirement of § 933(g)(1).11 Kelly’s second point is unavailing.
In his third point of error, Kelly claims that LWCC violated
his due process right to attempt to re-open his claim in the
district court based on the issues raised in connection with
severance of benefits when it failed to timely copy him with the
written notice of suspension of benefits that was sent to the
Department of Labor pursuant to statutory requirements.12 Kelly has
failed to demonstrate how this action by LWCC, a private insurance
carrier, deprived him of a protected property interest without due
process of law.13 In addition, Kelly’s fourth point or error, that
11
See Jackson, 855 F.2d at 246 (“The employer has a right to
set-off the amount of the settlement against future payments. This
provision is independent of the right of an employer to
subrogation. The right is also protected by the notice provision.”
(citations omitted)); Petroleum Helicopters, Inc., 784 F.2d at 647(“[T]here is nothing in the language of § 933 to support a ‘waiver
of subrogation’ exception to the unqualified requirement that an
employee obtain the consent of the employer and carrier for an
settlement with a third party tortfeasor.”).
12
33 U.S.C. § 914(c) (“Upon making the first payment, and upon
suspension of payment for any cause, the employer shall immediately
notify the deputy commissioner, in accordance with a form
prescribed by the Secretary, that payment of compensation has begun
or has been suspended, as the case may be.”).
13
See In re Compensation Under the Longhore & Harbor Workers’
Compensation Act, 889 F.2d 626, 631 (5th Cir. 1990) (finding that
the review process for compensation orders issued under LHWCA
satisfied the requirements of due process); see also Kreschollek v.
S. Stevedoring Co., 223 F.3d 202, 206-7 (3d. Cir. 2000) (finding
7
the ALJ failed to consider his claim under equitable jurisdiction,
is without merit.
Finding no error in the judgment of the BRB, we AFFIRM.
that termination without notice by private insurer of LHWCA
benefits does not constitute a violation of employee-recipient’s
procedural due process rights).
8