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THE JUDGE'S PERSPECTIVE ON EVIDENCE OF FRAUD AT THE FORMAL HEARING

DAVID W. DI NARDI
ADMINISTRATIVE LAW JUDGE
BOSTON DISTRICT
OFFICE OF ADMINISTRATIVE LAW JUDGES
U.S. DEPARTMENT OF LABOR

OVERVIEW AND INDEX
WHAT IS FRAUD

SECTION 31(A) OF THE ACT

EMPLOYEE FRAUD

WHAT CONSTITUTES FRAUD JUSTIFYING REOPENING A PRIOR AWARD

REOPENING A SETTLEMENT

EXCLUSIVITY OF WORKER'S COMPENSATION

STATUTE VERSUS A TORT CLAIM

FIRST CATEGORY
SECOND CATEGORY

SECTION 26 OF THE ACT

COSTS NOT ALLOWED
COSTS NOT ALLOWED AGAINST THE SPECIAL FUND
WHAT ARE COSTS
WHO IS A PARTY
COSTS ALLOWED

RECOVERY OF ERRONEOUS PAYMENTS

SECTION 31(b) OF THE ACT

CONCLUSIONS

A FEW BAD APPLES
FRAUD HOW BIG A PROBLEM
WHAT CAN BE DONE

WHAT IS FRAUD

   ACCORDING TO BLACK'S LAW DICTIONARY, FRAUD IS A FALSE REPRESENTATION OF A MATTER OF FACT, WHETHER BY WORDS OR BY CONDUCT, BY FALSE OR MISLEADING ALLEGATIONS, OR BY CONCEALMENT OF THAT WHICH SHOULD HAVE BEEN DISCLOSED. AS DISTINGUISHED FROM NEGLIGENCE, IT IS ALWAYS POSITIVE, INTENTIONAL. FRAUD, A GENERIC TERM, EMBRACES ALL MULTIFARIOUS MEANS WHICH HUMAN INGENUITY CAN DEVISE AND INCLUDES ALL SURPRISE, TRICK, CUNNING, DISSEMBLING AND ANY UNFAIR WAY BY WHICH ANOTHER IS CHEATED. JOHNSON V. MCDONALD, 170 OK. 117, 39 P.2D 150.

   ACCORDING TO THE AMERICAN HERITAGE DICTIONARY OF THE ENGLISH LANGUAGE, "FRAUD" IS A DECEPTION DELIBERATELY PRACTICED IN ORDER TO SECURE UNFAIR OR UNLAWFUL GAIN. A PIECE OF TRICKERY; A SWINDLE; A CHEAT. ONE WHO ASSUMES A FALSE POSE; AN IMPOSTER; A SHAM.

   ON THE OTHER HAND, "MISREPRESENTATION" INVOLVES GIVING AN INCORRECT OR MISLEADING REPRESENTATION OF SOME IMPORTANT ELEMENT OR ITEM OR FACT RELATING TO THE CLAIM.

   THOSE DEFINITIONS PROVIDE US WITH A CONCISE SUMMARY OF THE PROBLEM OR ISSUE IN THE TOPIC ASSIGNED ME BY DEAN EBEL, NAMELY THE JUDGE 'S PERSPECTIVE ON EVIDENCE OF FRAUD AT THE FORMAL HEARING . 1

   AT THE OUTSET I WOULD NOTE THAT MY TALK WILL NOT DEAL WITH THOSE SITUATIONS WHEREIN THE EMPLOYEE HAS SUSTAINED A WORK-RELATED INJURY AND THE FORMAL HEARING BEFORE ME INVOLVES THE ISSUE OF THE NATURE AND EXTENT OF THE EMPLOYEE'S DISABILITY. OCCASIONALLY, I ENCOUNTER AN EMPLOYEE WHO, WHILE NOT NECESSARILY A ALINGERER, NEVERTHELESS EXAGGERATES HIS SYMPTOMS AS HE AMBULATES ABOUT THE COURTROOM AND NEEDLESSLY SHIFTS FROM SIDE-TO-SIDE IN THE WITNESS CHAIR FOR MY BENEFIT. THAT DOES NOT CONSTITUTE EVIDENCE OF FRAUD, WITHIN THE MEANING AND INTENT OF TODAY'S TOPIC, AND I DEAL WITH THAT ISSUE IN MY DECISION AS SUCH EXAGGERATION AND "SHOW-BOATING" BEAR ON THE WORKER'S CREDIBILITY AND DEMEANOR.

   IN MY YEARS AS AN ADMINISTRATIVE LAW JUDGE, INITIALLY HERE IN NEW ORLEANS (WHEN OUR OFFICES WERE IN THE F. EDWARD HEBERT BUILDING) AND NOW IN BOSTON, I HAVE SPECIFIC KNOWLEDGE OF ONLY ONE FRAUDULENT CLAIM HAVING BEEN FILED BY A SHIPYARD WORKER ALTHOUGH I SUSPECT THAT THERE HAVE BEEN OTHERS.

   SEVERAL YEARS AGO, AS I WAS ABOUT READY TO CONVENE A HEARING IN REGION I, THERE WERE SEATED IN THE COURTROOM THE EMPLOYEE, HIS ATTORNEY, THE EMPLOYER'S ATTORNEY AND, IN THE BACK OF THE COURT- ROOM, TWO WELL-DRESSED INDIVIDUALS WHO WERE NOT IDENTIFIED AS PROSPECTIVE WITNESSES ON EITHER PARTY'S PRE-HEARING STATEMENT. CLAIMANT'S ATTORNEY, REALIZING THAT HE HAD NOT CALLED THOSE INDIVIDUALS AS HIS WITNESSES, ASKED EMPLOYER'S COUNSEL TO IDENTIFY HIS WITNESSES. COUNSEL REPLIED THAT THEY WERE NOT WITNESSES BUT INSTEAD WERE "OBSERVERS," COUNSEL THEN DROPPING THE BOMBSHELL THAT ONE WAS FROM THE U.S. POSTAL SERVICE MAIL FRAUD UNIT AND THE OTHER WAS FROM THE OFFICE OF THE INSPECTOR GENERAL (OIG). APPARENTLY THE EMPLOYER HAD DEVELOPED EVIDENCE THAT THE ALLEGED SHIPYARD INJURY WAS FRAUDULENT RIGHT FROM THE "GET-GO" AND THAT THE CLAIM HAD BEEN FILED AND MAINTAINED FRAUDULENTLY AT THE LEVEL OF THE THEN DEPUTY COMMISSIONER IN REGION I. THE EMPLOYER THEN ALERTED APPROPRIATE AUTHORITIES AND THE TWO INDIVIDUALS WERE PRESENT IN THE COURTROOM AS OBSERVERS TO HEAR THE EMPLOYEE'S TESTIMONY UNDER OATH. IN FACT, THEY HAD MADE ARRANGEMENTS WITH THE COURT REPORTER TO OBTAIN A COPY OF THE HEARING TRANSCRIPT, A DOCUMENT WHICH IS PART OF THE PUBLIC RECORD IN ANY LONGSHORE CLAIM AND WHICH IS AVAILABLE TO ANYONE UPON REQUEST AND PAYMENT OF THE APPROPRIATE CHARGE.

   CLAIMANT'S ATTORNEY THEN REQUESTED A DELAY IN THE START OF THE HEARING TO CONFER WITH HIS CLIENT. AFTER ABOUT TEN MINUTES OR SO, BOTH RETURNED TO THE COURTROOM AND COUNSEL ADVISED THAT THE EMPLOYEE DID NOT WISH TO GO FORWARD WITH HIS HEARING AND THAT HE WANTED THE CLAIM TO BE REMANDED TO THE DEPUTY COMMISSIONER. THE CLAIM WAS REMANDED AND WHILE THAT ENDED MY PARTICIPATION IN THE CASE, THE MATTER WAS STILL VERY MUCH ALIVE AS THE EMPLOYEE HAD RECEIVED SIGNIFICANT AMOUNTS AS COMPENSATION AND MEDICAL BENEFITS. THE INVESTIGATIONS CONTINUED, THE EMPLOYEE WAS INDICTED FOR VIOLATION OF SECTION 31(A)(1) OF THE LONGSHORE ACT. A PLEA ARRANGEMENT WAS WORKED OUT AND THE SENTENCE INVOLVED PROBATION FOR SEVERAL YEARS IN A COURT APPROVED WORK RELEASE PROGRAM, AS WELL AS FINANCIAL AND PSYCHOLOGICAL COUNSELLING AND, MOST IMPORTANT, RESTITUTION OF THE BENEFITS HE HAD FRAUDULENTLY RECEIVED.

SECTION 31(A) OF THE ACT

    THE 1984 AMENDMENTS TO THE LONGSHORE ACT MADE SIGNIFICANT CHANGES IN THE FIELD OF WORKERS' COMPENSATION LAW AND THE CHANGE PERTINENT TO MY TALK TODAY IS REFLECTED IN SECTION 31. THIS CHANGE IS MOST IMPORTANT BECAUSE SECTION 31 NOW MAKES IT A FELONY TO ISREPRESENT ANY ASPECT OF A CLAIM AND HAS INCREASED THE PRISON TERM TO FIVE YEARS AND THE FINE TO $10,000.00. NEEDLESS TO SAY, THOSE ARE "BIG-LEAGUE" SANCTIONS AND BECAME EFFECTIVE ON SEPTEMBER 28, 1994.

   FIRST, LET US LOOK AT THE SPECIFIC PROSCRIPTIONS OF THAT SECTION.

SECTION 31(A) READS AS FOLLOWS:

    (A)(1) ANY CLAIMANT OR REPRESENTATIVE OF A CLAIMANT WHO KNOWINGLY AND WILLFULLY MAKES A FALSE STATEMENT OR REPRESENTATIVE FOR THE PURPOSE OF OBTAINING A BENEFIT OR PAYMENT UNDER THIS ACT SHALL BE GUILTY OF A FELONY, AND ON CONVICTION THEREOF SHALL BE PUNISHED BY A FINE NOT TO EXCEED $10,000, BY IMPRISONMENT NOT TO EXCEED FIVE YEARS, OR BY BOTH.

   (2) THB UNITED STATES ATTORNEY FOR THE DISTRICT IN WHICH THE INJURY IS ALLEGED TO HAVE OCCURRED SHALL MAKE EVERY REASONABLE EFFORT TO PROMPTLY INVESTIGATE EACH COMPLAINT MADE UNDER THIS SUBSECTION.
33 U.S.C. §931(A).

   ROBERT T. BRAHM, IN HIS LONGSHORE NEWSLETTER, TELLS US ABOUT AN INDIVIDUAL WHO IN THE 1960'S HAD FILED AT LEAST 24 COMPENSATION CLAIMS AS HE PERPETRATED A SERIES OF INJURY CLAIMS IN HIS YEARLY MIGRATIONS FROM LAKE TAHOE TO PALM SPRINGS. APPARENTLY THE CLAIMS WERE SETTLED AS NUISANCE CLAIMS BECAUSE THERE WAS NO FEAR OF PROSECUTION AND BECAUSE IT "WAS CHEAPER TO PAY THAN TO FIGHT A LOSING BATTLE."

   HOWEVER, TIMES HAVE CHANGED AND, AS SUCH ISREPRESENTATION NOW IS A FELONY, MR. BRAHM TELLS US ABOUT THE POST-AMENDMENT STEVEDORE WHO WAS INJURED ON THE JOB AND WHO HAD NOT RETURNED TO WORK SOME EIGHTEEN MONTHS LATER. SURVEILLANCE OF THE INDIVIDUAL REVEALED THAT HE WAS WORKING AT NIGHTS FOR ANOTHER EMPLOYER. BENEFITS WERE TERMINATED AND THE EMPLOYER REPORTED THE ATTER TO THE OIG OF THE DEPARTMENT OF LABOR. THE OIG CONDUCTED AN INVESTIGATION, CONFRONTED THE INDIVIDUAL WITH THE RESULTS AND THE EMPLOYEE READILY ADMITTED THAT HE HAD MISLED HIS TREATING PHYSICIAN, HIS ATTORNEY AND THE EMPLOYER. HE WAS SUBSEQUENTLY INDICTED FOR VIOLATING SECTION 31(A)(1), WAS CONVICTED AND SENTENCED TO FIVE YEARS IMPRISONMENT WITH ALL BUT SIX MONTHS SUSPENDED, FOLLOWED BY FIVE YEARS PROBATION. MOST IMPORTANT, THE JUDGE MANDATED RESTITUTION IN THE SUM OF $32,500 TO BE REPAID IN INSTALLMENTS ARRANGED BY THE U.S. PAROLE OFFICE. WHAT IS NOTEWORTHY IS THAT THE FAILURE TO MAKE RESTITUTION WILL RESULT IN CANCELLATION OF THE PROBATION AND IMPRISONMENT TO SERVE THE BALANCE OF THE FIVE YEAR TERM. LONGSHORE NEWSLETTER, VOLUME 3, ISSUE 6 (AUGUST, 1985), PP. 62-63

   WHAT HAPPENS WHEN FRAUDULENT ACTIONS TAKE PLACE IN A WORKERS' COMPENSATION PROCEEDING? DOES FRAUD VITIATE THE ENTIRE PROCEEDING? PART OF IT? CAN A SETTLEMENT AGREEMENT OBTAINED BY FRAUD BE REOPENED? DOES SUCH FRAUD GIVE RISE TO A CAUSE OF ACTION FOR INTENTIONAL AND WILLFUL CONDUCT BY EITHER PARTY? WHAT SANCTIONS ARE AVAILABLE TO DEAL WITH SUCH CONDUCT? MY TALK TODAY HOPEFULLY WILL ANSWER THOSE QUESTIONS AND PERHAPS SUGGEST SOME AVENUES OF APPROACH DEPENDING UPON YOUR PERSPECTIVE.

EMPLOYEE FRAUD

   THE LONGSHORE ACT CONTAINS NO PROVISION BARRING RECOVERY DUE TO MISREPRESENTATIONS IN PRE-EMPLOYMENT CIRCUMSTANCES. THE BOARD HAS CONSISTENTLY REFUSED TO READ A MISREPRESENTATION DEFENSE INTO THE ACT AND HAS HELD THAT CASES THAT IMPOSE A DUTY ON CLAIMANTS TO USE REASONABLE MEANS TO AVOID AN INJURY WERE APPLICABLE TO SITUATIONS INVOLVING ISSUES OF CAUSATION AND NOT TO SITUATIONS WHERE A MORE COMPLETE DISCLOSURE BY THE EMPLOYEE OF PRE-EXISTING CONDITIONS COULD ARGUABLY HAVE RESULTED IN MORE APPROPRIATE WORK FOR THE INJURED CLAIMANT. FOR EXAMPLE, ALTHOUGH CLAIMANT FAILED TO DISCLOSE A PREVIOUS KNEE INJURY FOR WHICH HE HAD RECEIVED COMPENSATION UNDER A STATE ACT, THE BOARD HELD THAT THIS NON- DISCLOSURE DID NOT PRECLUDE SECTION 8(F) RELIEF SINCE ALL THAT IS REQUIRED TO RENDER A PRE-EXISTING CONDITION "MANIFEST" IS THAT IT BE OBJECTIVELY DETERMINABLE FROM MEDICAL RECORDS. HALLFORD V. INGALLS SHIPBUILDING DIVISION, LITTON SYSTEMS INCORPORATED, 15 BRBS 112 (1982).

   CHIEF ADMINISTRATIVE APPEALS JUDGE RAMSEY "STRONGLY DISSENT(ED) FROM THE HOLDING THAT CLAIMANT HEREIN IS ENTITLED TO BENEFITS. CLAIMANT'S MISREPRESENTATION OF HIS PHYSICAL CONDITION ON HIS EMPLOYMENT APPLICATION PREVENTED EMPLOYER FROM TAKING ANY STEPS TO ACCOMMODATE CLAIMANT, TO PLACE HIM ON JOB RESTRICTIONS, OR TO EXERCISE ITS RIGHT TO DENY EMPLOYMENT TO CLAIMANT." ACCORDING TO CHIEF JUDGE RAMSEY, "CLAIMANT, NOT HAVING BEEN HONEST WITH EMPLOYER CONCERNING HIS MEDICAL HISTORY, SHOULD NOT BE ALLOWED TO PROFIT FROM HIS OWN WRONGDOING. SINCE THE EMPLOYER RELIED ON CLAIMANT'S MISREPRESENTATION TO ITS DETRIMENT AND SINCE THERE IS A DIRECT RELATIONSHIP BETWEEN CLAIMANT'S CONCEALED PRIOR KNEE INJURY AND HIS SUBSEQUENT WORK RELATED INJURY, (JUDGE RAMSEY) WOULD DENY." HALLFORD , SUPRA AT 114-115).

   AN EMPLOYER IS NOT RELIEVED OF COMPENSATION LIABILITY FOR AN EMPLOYMENT-RELATED INJURY WHERE THE EMPLOYEE MISREPRESENTED HIS MEDICAL HISTORY ON HIS EMPLOYMENT APPLICATION. SINCE THE ACT DOES NOT ENCOMPASS A MISREPRESENTATION EXCEPTION TO LIABILITY, THE FOURTH CIRCUIT REFUSED TO AMEND THE ACT UNDER THE GUISE OF "STATUTORY INTERPRETATION" AND REJECTED THE MISREPRESENTATION DEFENSE. NEWPORT NEWS SHIPBUILDING AND DRY DOCK COMPANY, 674 F.2D 248, 14 BRBS 641 (4TH CIR. 1982), AFF'G 13 BRBS 873 (1981). THE LONGSHORE ACT IS THE RESULT OF THE BALANCING OF THE INTERESTS OF EMPLOYEES AND EMPLOYERS AND ANY MISREPRESENTATION DEFENSE SHOULD BE THE SUBJECT FOR CONGRESSIONAL DEBATE.

WHAT CONSTITUTES FRAUD JUSTIFYING REOPENING A PRIOR AWARD?

   A WYOMING STATUTE PROVIDES THAT A CLAIM MAY BE REOPENED FOR, AMONG OTHER REASONS, FRAUD. THE WYOMING COURT CONCLUDED THAT "THE FRAUD MUST OCCUR IN CONNECTION WITH THE AWARD." THAT WAS NOT THE CASE IN A SITUATION WHERE THE EMPLOYER ALLEGED THAT THE CLAIMANT HAD BEEN FRAUDULENT IN HIS ANSWERS TO QUESTIONS ON HIS PRE- EMPLOYMENT APPLICATION FORM REGARDING PRIOR INJURIES AND AILMENTS. EVEN IF FRAUD ON THE APPLICATION COULD BE GROUNDS FOR REOPENING, THE COURT DETERMINED THAT THE CLAIMANT'S ANSWERS ON THE APPLICATION WERE NOT FRAUDULENT, BUT SIMPLY RESULTED FROM THE APPLICATION'S "IMPRECISE QUESTIONS." FORNI V. PATHFINDER MINES, 834 P.2D 688, 693 (WYO. 1992).

   ANOTHER INTERESTING CASE DID NOT INVOLVE ALLEGATIONS OF FRAUD, BUT THE CLAIMANT PETITIONED THE COMMISSIONER TO REOPEN PROCEEDINGS BASED ON AN ALLEGATION THAT THE EMPLOYER FAILED TO DISCLOSE FOUR LETTERS BETWEEN THE EMPLOYER AND THE PLAINTIFF'S PHYSICIAN. THE LETTERS, HOWEVER, DID NOT MEET THE TEST FOR THE COMMISSIONER TO OPEN A CLAIM: "WHETHER THE NEW EVIDENCE [IS] SUFFICIENT TO SHOW THAT AN INJUSTICE HAD BEEN DONE BY HIS AWARD AND THAT A DIFFERENT RESULT WOULD PROBABLY BE REACHED ON A NEW HEARING. TUTSKY V. YMCA OF GREENWICH 28 CONN. APP. 536, 612 A.2D 1222 (1992). SEE ALSO MEADOW V. WINCHESTER REPEATING ARMS CO., 134 CONN. 269 AT 275-76, 57 A.2D 138 (1948).

   THE LOUISIANA REPORTS MENTION A DELIVERY TRUCK DRIVER WHO SUSTAINED A BACK INJURY WHILE DELIVERING BEER IN THE FRENCH QUARTER. CLAIMANT, CITING NEWLY-DISCOVERED EVIDENCE, MOVED FOR A NEW TRIAL, ALLEGING THAT HE WAS PERMANENTLY AND TOTALLY DISABLED. THE TRIAL COURT DENIED THE MOTION. THE LOUISIANA STATUTE PROVIDES THAT A NEW TRIAL SHALL BE GRANTED WHEN THE PARTY HAS DISCOVERED, SINCE THE TRIAL , EVIDENCE IMPORTANT TO THE CAUSE, WHICH HE COULD NOT, WITH DUE DILIGENCE, HAVE DEVELOPED PRIOR TO THE TRIAL AND WHICH EVIDENCE IS PROBATIVE AND IS NOT MERELY CUMULATIVE EVIDENCE. FURTHERMORE, THIS "NEWLY DISCOVERED" EVIDENCE WOULD NOT HAVE CHANGED THE RESULT SINCE IT WAS OUTWEIGHED BY THE CONCLUSION OF FIVE ORTHOPEDIC SURGEONS WHO CONCLUDED THAT THE CLAIMANT WAS NOT DISABLED. VIDRINE V. MAGNOLIA LIQUOR CO., 533 SO.2D 1329 (LA. CT. APP. 1988).

I WOULD LIKE TO END THIS SECTION BY BRIEFLY MENTIONING THE WORKER WHO WAS RECEIVING TEMPORARY TOTAL DISABILITY BENEFITS FOR A LOWER BACK STRAIN. THE EMPLOYER'S SURVEILLANCE OF THE WORKER BY PRIVATE INVESTIGATOR REVEALED THAT THE EMPLOYEE WAS VIGOROUSLY PARTICIPATING IN A WEEKLY BOWLING LEAGUE WITHOUT ANY APPARENT PHYSICAL PROBLEMS AND THE EMPLOYER MOVED TO REOPEN THE AWARD. THE SUPREME COURT HELD THAT THE INDUSTRIAL COMMISSION LACKED JURIS - DICTION TO MODIFY THE AWARD BECAUSE THE DISCOVERY OF UNDISCLOSED BEHAVIOR WAS NOT EVIDENCE THAT THE CONDITION OF THE CLAIMANT HAD CHANGED. MOREOVER, THAT DISCOVERY DID NOT ESTABLISH THAT THE CLAIMANT HAD OBTAINED THE AWARD FRAUDULENTLY . I WOULD ADD THAT FOUR JUSTICES JOINED IN THE MAJORITY OPINION WHILE THREE JUSTICES FILED A VIGOROUS DISSENT. STATE EX REL. KEITH V. INDUSTRIAL COMM'N OF OHIO, 62 OHIO APP.3D 139, 580 N.E.2D 433 (1991), REH'G DENIED , 62 OHIO STATE 3D 1496, 583 N.E.2D 968 (1992).

   IN THEIR DISSENT, THE JUSTICES STATED THAT "THE INDUSTRIAL COMMISSION, AND THE EMPLOYER, ACTED ON PREVIOUSLY UNKNOWN, DRAMATIC EVIDENCE, REVEALED IN THE NEWS MEDIA, AND DID SO PROMPTLY. THE MODIFICATION OF THE PREVIOUS ORDER WAS AS FULLY JUSTIFIED AS WAS THE REFUSAL TO AWARD FURTHER BENEFITS. THE EFFECT OF THIS MODIFI- CATION (BY THE COMMISSION) WAS TO CONFORM THE AWARD OF BENEFITS TO THE TRUTH OF (THE EMPLOYEE'S) PHYSICAL ABILITIES, AND WAS IN NO WAY A VIOLATION OF THE LETTER OR INTENT OF THE CONTROLLING STATUTE."

   MOREOVER, ACCORDING TO THE DISSENT, "IT WOULD BE UNREASONABLE TO REWARD (EMPLOYEE'S) BEHAVIOR BY LIMITING" THE COMMISSION'S JURISDICTION TO TERMINATE FUTURE BENEFITS AND THIS RULING BY THE MAJORITY "CREATES A WINDFALL TO (THE EMPLOYEE) FOR A PERIOD DURING WHICH HE SUCCESSFULLY AVOIDED DISCOVERY OF HIS DILIGENT PRACTICE AND NOTABLE TRIUMPHS ON THE BOWLING LANES." STATE EX REL. KEITH, SUPRA.

    OCCASIONALLY FRAUD OR MISREPRESENTATION OCCURS IN EFFECTUATING A SETTLEMENT UNDER WORKERS' COMPENSATION STATUTES. THERE ARE NUMEROUS EXAMPLES REPORTED IN THE LAW BOOKS AND I SHALL JUST SELECT SEVERAL OF THOSE WHICH MAY BE OF INTEREST TO THOSE PARTICIPATING UNDER EITHER THE LONGSHORE ACT OR WITHIN THE TERRITORY OF THE FIFTH CIRCUIT COURT OF APPEALS.

CAN A SETTLEMENT AGREEMENT OBTAINED UNDER THE LONGSHORE ACT BE REOPENED?

   IN 1984 CONGRESS AMENDED SECTION 22 (THE PROVISION PERMITTING MODIFICATION OF DECISIONS) AND PROVIDED THAT "(T)HIS SECTION DOES NOT AUTHORIZE THE MODIFICATION OF SETTLEMENTS." THE BOARD HELD THAT THIS AMENDMENT DID NOT CHANGE THE LAW, BUT MERELY CODIFIED THE EXISTING PRACTICE. ACCORDINGLY, THE CLAIMANT COULD NOT REOPEN HER SETTLEMENT AGREEMENT, EVEN THOUGH IT HAD BEEN ENTERED INTO PRIOR TO THE EFFECTIVE DATE OF THAT PARTICULAR 1984 AMENDMENT. THE D.C. CIRCUIT COURT AFFIRMED. BONILLA V. DIRECTOR, OWCP, 859 F.2D 1484, 21 BRBS 185 (CRT) (D.C. CIR. 1988), AMENDED BY 866 F.2D 451 (D.C. CIR. 1989).

   THERE ARE A NUMBER OF STATES WHICH PROHIBIT REOPENING A SETTLEMENT AGREEMENT EVEN THOUGH CLAIMANT ALLEGES MISREPRESEN- TATION, A MISTAKE OF FACT OR A CHANGE OF CONDITION. SEE, E.G., OLSEN LOGGING CO. V. LAWSON, 856 P.2D 1155 (ALASKA 1993) (THE BOARD DOES NOT HAVE THE AUTHORITY TO MODIFY SETTLEMENT AGREEMENTS BECAUSE OF A MISTAKE OF FACT OF THE PARTIES); SAFEWAY STORES, INC. V. SENEY , 124 OR. APP. 450, 863 P.2D 528 (1993) (A CLAIMANT MAY NOT ESCAPE HIS BARGAIN BY RECHARACTERIZING HIS CLAIM AFTER THE FACT); UNDERWOOD V. ZURICH INS. CO. , 854 S.W.2D 94 (TENN. 1993) (LUMP-SUM AWARDS ARE FINAL AND MODIFICATION THEREOF FOR INCREASED DISABILITY DUE TO A CHANGE IN PHYSICAL CONDITION IS PROPER ONLY IF THE AWARD IS PAYABLE PERIODICALLY FOR MORE THAN SIX MONTHS).

   THE COLORADO APPELLATE COURT HAS HELD THAT A COMPROMISE SETTLEMENT AGREEMENT CONTAINING A WAIVER OF FUTURE EDICAL BENEFITS IS BINDING UPON THE CLAIMANT ABSENT FRAUD OR UTUAL MISTAKE OF MATERIAL FACT. COMMISKEY V. VALLEY FORGE INS. CO. , 781 P.2D 188 (COLD. CT. APP. 1989).

   AN INTERESTING CASE OCCURRED HERE IN LOUISIANA AND INVOLVED A COMPROMISE SETTLEMENT PROPOSAL WHICH WAS SUBMITTED TO THE OFFICE OF WORKERS' COMPENSATION (OWC) FOR APPROVAL BUT BEFORE THE APPROVAL, THE EMPLOYEE PASSED AWAY. THE DEPENDENTS DID NOT NOTIFY EITHER THE EMPLOYER OR THE OWC OF THE DEATH AND THE SETTLEMENT PROPOSAL WAS APPROVED. AS YOU MIGHT EXPECT, THE EMPLOYER LEARNED OF THE EMPLOYEE'S DEATH AND MOVED TO HAVE THE SETTLEMENT SET ASIDE. THE OWC AGREED WITH THE EMPLOYER BECAUSE THE EMPLOYEE'S AND HIS DEPENDENTS' RIGHTS TO COMPENSATION ENDED UPON THE EMPLOYEE'S DEATH AND THE DEPENDENTS' FAILURE TO NOTIFY THE EMPLOYER OF THE DEATH WAS A MISREPRESENTATION BY OMISSION. RYDER V. INDUSTRIAL CONSTR. CO. , 616 SO.2D 857 (CT. APP.), WRIT DENIED, 619 SO.2D 1068 (LA. 1993).

   IN A RECENT TEXAS CASE, THE CLAIMS ADJUSTER ALLEGEDLY ISREPRESENTED THE MAXIMUM LEVEL OF FUTURE MEDICAL PAYMENTS WHICH COULD BE MADE UNDER THE WORKERS' COMPENSATION STATEMENT AND THE EMPLOYEE AGREED TO A VOLUNTARY SETTLEMENT OF HIS CLAIM. HOWEVER, AFTER HE LEARNED OF THE MISREPRESENTATIONS, HE MOVED TO REOPEN HIS CLAIM AND TO SET ASIDE THE SETTLEMENT. THE COURT OF APPEALS HELD THAT SUCH MISREPRESENTATIONS WERE SUFFICIENT TO ALLOW REOPENING OF THE SETTLEMENT. FIDELITY & GUAR. INS. UNDERWRITERS, INC. V. SAENZ , 865 S.W.2D 103 (TEX. CT. APP. 1993), REHG OVERRULED, 1994 WL 12074 (1994).

   ANOTHER NOTEWORTHY EXAMPLE IS THAT OF A WORKER WHO INJURED HIS BACK IN JULY OF 1985. HE VISITED THE COMPANY DOCTOR WHO REFERRED HIM TO AN ORTHOPEDIC SURGEON. TESTS BY THE SURGEON INDICATED NO ABNORMALITY AND THE CONDITION WAS DIAGNOSED AS BACK STRAIN. HE WAS GIVEN PAIN PILLS AND TOLD TO RETURN TO WORK. THE WORKER BELIEVING THAT HE SUFFERED ONLY MUSCLE STRAIN, SIGNED A COMPROMISE AGREEMENT WITH THE EMPLOYER'S CARRIER, WHICH AGREEMENT PROVIDED HIM WITH $3,500 AND ONE YEAR OF FUTURE MEDICAL EXPENSES. HOWEVER, HIS BACK PAIN WORSENED AND, AFTER MORE THAN ONE YEAR HAD PASSED, THE WORKER SOUGHT THE CARE OF A DIFFERENT PHYSICIAN. DIAGNOSTIC TESTS LED THE DOCTOR TO CONCLUDE THAT HE SUFFERED A HERNIATED DISC. THE WORKER SUED TO SET ASIDE THE AGREEMENT. THE JURY FOUND IN HIS FAVOR AND THE EMPLOYER AND CARRIER APPEALED. THE COURT OF APPEALS AFFIRMED. TEXAS EMPLOYERS' INS. ASS'N V. ALCANTARA, 764 S.W.2D 865 (TEX. CT. APP. 1989).

   IN TEXAS EMPLOYERS' INS. ASS'N V. REMY, 752 S.W.2D 617 (TEX. CT. APP. 1988), THE COURT OF APPEALS HELD THAT THE EMPLOYEE HAD BEEN THE VICTIM OF "CONSTRUCTIVE FRAUD" WHEN HE SOUGHT THE ADVICE OF A PHYSICIAN RECOMMENDED BY HIS EMPLOYER AND THE PHYSICIAN FAILED TO DISCLOSE A BACK CONDITION WHICH LATER REQUIRED SURGERY. SEE ALSO RODRIQUEZ V. AMERICAN HOME ASSURANCE CO., 735 S.W.2D 241 (TEX. 1987).

   ALSO NOTEWORTHY IS THE CASE OF A WORKER WHOSE TREATING PHYSICIAN ASSIGNED A 32% PERMANENT PARTIAL DISABILITY RATING TO THE ROTATOR CUFF TEAR IN HIS SHOULDER. THE CLAIMANT, WHO WAS NOT REPRESENTED BY AN EMPLOYER IN THE SETTLEMENT NEGOTIATIONS, ACCEPTED A SETTLEMENT OF HIS CLAIM AWARDING HIM BENEFITS FOR A SCHEDULED INJURY. THEN, BECAUSE OF THE INSURER'S FAILURE TO EXPLAIN TO HIM THE DIFFERENCE BETWEEN A SCHEDULED INJURY AND AN INDUSTRIAL INJURY, THE CLAIMANT PETITIONED THE COURT TO SET ASIDE THE AGREEMENT ON THE BASIS OF FRAUD. THE COURT, FINDING THAT THE INFORMATION PROVIDED BY THE CLAIMANT SUFFICIENTLY ADVISED HIM OF THE TERMS OF THE AGREEMENT AND OF HIS RIGHT TO OBTAIN ADDITIONAL INFORMATION FROM AN ATTORNEY OR FROM THE INDUSTRIAL COMMISSION, HELD THAT ALTHOUGH THE INSURER PERHAPS SHOULD HAVE DISCUSSED WITH HIM THE DIFFERENCE BETWEEN SCHEDULED AND NONSCHEDULED INJURIES, ITS FAILURE TO DO SO DID NOT AMOUNT TO FRAUD BECAUSE THERE WAS NO EVIDENCE THAT THE CLAIMS EXAMINER INTENDED TO DECEIVE THE CLAIMANT OR THAT SHE ACTED WITH RECKLESS DISREGARD OF THE TRUTH IN HER COMMUNICATIONS WITH THE CLAIMANT. MORTON V. UNDERWRITERS ADJUSTING CO. , 501 N.W.2D 72 (IOWA CT. APP. 1993).

EXCLUSIVITY OF WORKERS- COMPENSATION

STATUTE VERSUS A TORT CLAIM

   DOES THE WORKERS' COMPENSATION STATUTE PROVIDE THE EMPLOYEE OR EMPLOYER WITH THE ONLY OR EXCLUSIVE REMEDY FOR A WORK-RELATED INJURY? OR WILL THE COURTS PERMIT A CAUSE OF ACTION FOR THE TORT RESULTING FROM THE WILLFUL AND INTENTIONAL ACTIONS OF ONE OF THE PARTIES TO A WORKERS' COMPENSATION PROCEEDING?

   CASES INVOLVING ALLEGATIONS OF DECEIT, FRAUD AND ISREPRESENTATION CAN BEST BE SORTED OUT BY DISTINGUISHING THOSE IN WHICH THE DECEIT PRECEDES AND HELPS PRODUCE THE INJURY, AS OPPOSED TO THOSE IN WHICH THE DECEIT FOLLOWS THE INJURY AND PRODUCES A SECOND INJURY OR LOSS. IN THE FIRST CATEGORY, A TORT ACTION HAS USUALLY BEEN FOUND BARRED SINCE THE DECEIT MERGES INTO THE INJURY FOR WHICH A COMPENSATION REMEDY IS PROVIDED. IN THE LATTER CATEGORY, THE ACTION GIVES RISE TO A SECOND CAUSE OF ACTION FREE OF THE EXCLUSIVITY BAR.

FIRST CATEGORY

    THE TENTH CIRCUIT, IN AFFIRMING THE DISTRICT COURT, HELD THAT THE PLAINTIFFS, FORMER EMPLOYEES OF A NUCLEAR PLANT, WERE BARRED FROM SUING THEIR FORMER EMPLOYER IN TORT BECAUSE OF THE EXCLUSIVE REMEDY PROVISIONS OF THE COLORADO WORKER'S COMPENSATION ACT. ACCORDING TO THE COURT, THE FACT THAT THE ACT DID NOT PROVIDE ANY BENEFITS FOR SUCH CONDUCT WAS NOT CONTROLLING AND THE SUIT CANNOT BE CONSIDERED AN INTENTIONAL TORT ACTION. BUILDING AND CONSTR. DEPT. V. ROCKWELL INTERN'L CORP., 7 F.3D 1487 (10TH CIR. 1993). ACCORD, POLICE V. GEORGE AND ANNA PORTES CANCER PREVENTION CENTER OF CHICAGO, INC., 238 ILL. APP.3D 741, 606 N.E.2D 572 (1992), APPEAL ALLOWED, 149 ILL. 2D 661, 612 N.E.2D 524 (1993) (THE APPELLATE COURT AFFIRMED A DETERMINATION THAT THE ACTION WAS BARRED BY THE EXCLUSIVE REMEDY PROVISIONS OF THE WORKERS' COMPENSATION LAW AS THE INJURY AROSE OUT OF AND IN THE COURSE OF THE EMPLOYMENT AND NO TORT ACTION COULD BE MAINTAINED); DAVIS V. LOCKHEED CORP., 13 CAL. APP. 4TH 519, 17 CAL. RPTR.2D 233 (1993) (AN EMPLOYEE'S TORT CLAIM AGAINST HIS EMPLOYER FOR FRAUD WAS BARRED BY THE EXCLUSIVITY OF THE WORKERS' COMPENSATION STATUTE AS THE EMPLOYEE'S CANCER AND ITS AGGRAVATION WERE NOT THE RESULT OF THE EMPLOYER'S FRAUDULENT CONCEALMENT OF THE INJURY OF EXPOSING THE EMPLOYEE TO ASBESTOS).

   THE OHIO DISTRICT COURT, APPLYING OHIO LAW, DISMISSED THAT PORTION OF THE PLAINTIFF'S COMPLAINT WHICH ALLEGED THAT THE EMPLOYER HAD FRAUDULENTLY CONCEALED THE PLAINTIFF'S EXPOSURE TO EXCESSIVE LEVELS OF RADIOACTIVE AND OTHER HAZARDOUS MATERIALS BECAUSE THE CLAIMS FOR SUCH INJURIES WERE EXCLUSIVELY WITHIN THE WORKERS' COMPENSATION ACT. DAY V. NLO, INC., 811 F.SUPP. 1271 (S.D. OHIO 1992). ACCORD, SANTIAGO V. PENNSYLVANIA NATIONAL MUTUAL CASUALTY INS. CO. , 418 PA. SUPER. 178, 613 A.2D 1235 (1992) THE EMPLOYEE'S TORT CLAIM IS BARRED AS PENNSYLVANIA DOES NOT PROVIDE AN INTENTIONAL TORT EXCEPTION TO THE EXCLUSIVENESS DOCTRINE AND AS THE TORT CLAIM IS COMPLETELY INTERTWINED" WITH HIS ORIGINAL COMPENSABLE INJURY").

   A NOTEWORTHY LOUISIANA CASE OCCURRED WHEN THE PLAINTIFF FILED A TORT ACTION AGAINST HIS EMPLOYER AND THE COMPANY DOCTOR, ALLEGING THAT HE HAD EXPERIENCED A PROGRESSIVE DETERIORATION OF HIS LUNG CONDITION DUE TO THE CONDITIONS UNDER WHICH HE WORKED AND THE EMPLOYER'S FAILURE TO WARN HIM OF THE RESULTS OF HIS YEARLY PHYSICAL EXAMS, WHICH SHOWED A STEADY DECREASE IN HIS LUNG CAPACITY. THE COURT HELD THAT THE EXCLUSIVITY DEFENSE BARRED A CAUSE OF ACTION AGAINST THE EMPLOYER, STATING THAT PLAINTIFF'S RELIANCE ON DORNAK V. LAFAYETTE GENERAL HOSP., 399 SO.2D 168 (LA. 1981), WAS MISPLACED. IN DORNAK, THE SUPREME COURT OF LOUISIANA HAD UPHELD AN EMPLOYEE'S RIGHT TO SUE HER EMPLOYER, WHICH HAD DISCOVERED IN A PRE-EMPLOYMENT PHYSICAL THAT SHE WAS SUFFERING FROM TUBERCULOSIS BUT HAD FAILED TO DISCLOSE THAT INFORMATION TO HER. THIS COURT DISTINGUISHED DORNAK BY NOTING THAT THE SUPREME COURT HAD LIMITED ITS HOLDING THERE TO CASES INVOLVING PRE-EMPLOYMENT PHYSICAL EXAMS. THE COURT ALSO HELD THAT THE PLAINTIFF HAD NO CAUSE OF ACTION AGAINST THE PLANT DOCTOR ON THE GROUND THAT, SINCE THE DOCTOR EXAMINED THE PLAINTIFF ONLY FOR THE BENEFIT OF THE EMPLOYER, THERE WAS NO DOCTOR PATIENT RELATIONSHIP BETWEEN THEM. THOMAS V. KENTON , 425 SO.2D 396 (LA. CT. APP. 1982).

   A FOOTBALL PLAYER BROUGHT SUIT IN CONTRACT AGAINST HIS TEAM FOR FAILING TO INFORM HIM OF THE TRUE NATURE OF HIS INJURIES AND PHYSICAL CONDITION. THE DISTRICT COURT, APPLYING NEW YORK LAW, HELD THAT SUCH ACTION WAS BARRED BY THE PUBLIC POLICY OF EXCLUSIVITY OF WORKER'S COMPENSATION FOR WORK-RELATED INJURIES. ACCORDING TO THE COURT, JUST AS AN ACTION FOR BODILY INJURY IS BARRED, SO TOO IS AN ACTION FOR BODILY INJURY DUE TO NEGLIGENT MEDICAL TREATMENT. RIVERS V. NEW YORK JETS, 460 F.SUPP. 1233 (E.D. MO. 1978).

   A PAINTER SUED HIS EMPLOYER FOR FAILING TO WARN HIM ABOUT EXPOSURE TO ASBESTOS DURING WORK. ACCORDING TO THE COURT, EVEN IF THE INJURIES WERE CAUSED BY THE EMPLOYER'S INTENTIONAL MISREPRE- SENTATION OR FAILURE TO DISCLOSE, THE INJURIES WERE COMPENSABLE AND THE TORT CLAIMS FOR DAMAGES WERE BARRED BY THE EXCLUSIVITY PROVISIONS OF THE COMPENSATION ACT. MOREOVER, EVEN THOUGH THE PAINTER WAS SEEKING COMPENSATION FOR FINANCIAL, AS OPPOSED TO PHYSICAL, INJURIES, THE COURT FOUND THESE DAMAGE CLAIMS TO BE BASED ESSENTIALLY ON THE POTENTIAL FOR CURRENT PHYSICAL INJURY DUE TO OCCUPATIONAL DISEASE. JOHNSON V. HAMES CONTRACTING, INC., 208 GA. APP. 664, 431 S.E.2D 455 (1993).

   IN GIBSON V. SOUTHERN GUARANTY INS. CO. , 623 SO.2D 1065 (ALA. 1993), THE PLAINTIFF BROUGHT VARIOUS CLAIMS AGAINST THE WORKERS' COMPENSATION CARRIER, INCLUDING CLAIMS FOR BAD FAITH, FRAUD, CONSPIRACY, NEGLIGENCE AND OUTRAGEOUS CONDUCT. THE CLAIMS ALL CENTERED ON THE MANNER IN WHICH THE DEFENDANTS HAD HANDLED THE PLAINTIFF'S NEED FOR PSYCHOLOGICAL TESTING AND TREATMENT ARISING OUT OF HIS WORKPLACE INJURY. THE COURT HELD THAT THE TORT CLAIMS WERE BARRED BY THE EXCLUSIVITY PROVISIONS OF THE WORKERS' COMPENSATION STATUTES.

SECOND CATEGORY

   A FORMER EMPLOYEE FILED AN ACTION IN STATE COURT TO RECOVER DAMAGES FROM A FORMER EMPLOYER BECAUSE OF THE LATTER'S ALLEGED FRAUDULENT CONSPIRACY WITH A PHYSICIAN TO DEPRIVE THE EMPLOYEE OF HIS STATUTORY RIGHTS UNDER THE LONGSHORE ACT TO OBTAIN COMPENSATION AND FURTHER MEDICAL BENEFITS FOR HIS WORK-RELATED INJURY. THE EMPLOYER MOVED TO DISMISS THE CLAIM ON THE GROUNDS THAT SECTION S OF THE LONGSHORE ACT PROVIDES CLAIMANT HIS ONLY REMEDY AND THAT THE TORT CLAIM WAS A COLLATERAL ATTACK UPON THE FINDINGS OF THE OWCP. THE NEW YORK SUPREME COURT REJECTED THE ARGUMENTS, HOLDING THAT THE LONGSHORE ACT IS EXCLUSIVE ONLY WHERE IT IN FACT PROVIDES A REMEDY AND THE TORT CHARGED AGAINST THE EMPLOYER OCCURRED IN APRIL OF 1952 WHEN THE EMPLOYER WRONGFULLY INTERFERED WITH THE EMPLOYEE'S RIGHT TO BE COMPENSATED FOR HIS INJURY BY CAUSING A FALSE REPORT OF HIS PHYSICAL CONDITION TO BE PREPARED AND SUBMITTED TO THE DEPUTY COMMISSIONER WITH THE SOLE PURPOSE OF DEFEATING HIS RIGHT TO COMPENSATION AND MEDICAL BENEFITS. MOREOVER, THE PROCEEDING UNDER THE LONGSHORE ACT ONLY DEALT WITH THE MARCH, 1950 WORK-RELATED ACCIDENTAL INJURY AND NOT WITH SUBSEQUENT EVENTS INVOLVING WILLFUL AND INTENTIONAL ACTIONS BY THE EMPLOYER. FLAMM V. BETHLEHEM STEEL COMPANY, 185 N.Y.S.2D 136 (1959). THE APPELLATE DIVISION AFFIRMED DENIAL OF THE MOTION TO DISMISS AT 202 N.Y.S.2D 222 (1960).

   IN HARRIS V. LYKES BROS. STEAMSHIP CO., INC., 375 F.SUPP. 1155 (1974), THE STEVEDORE BROUGHT AN ADMIRALTY CAUSE OF ACTION AGAINST THE VESSEL OWNER TO RECOVER DAMAGES FOR PERSONAL INJURIES SUSTAINED UNLOADING BALED COTTON. THE STEVEDORE ALLEGED THAT THE VESSEL OWNER HAD OBTAINED FROM HIM A RELEASE ABSOLVING THE VESSEL OWNER FROM ANY LIABILITY BY MEANS OF FRAUD, COERCION OR MISTAKE. CHIEF JUDGE J. J. FISHER HELD THAT THE EMPLOYEE HAD THE BURDEN OF PROOF WITH RESPECT TO THE VALIDITY OF THE RELEASE, THAT THE EVIDENCE ESTABLISHED THAT THERE WAS NO FRAUD OR OVERREACHING CONDUCT ON THE PART OF THE EMPLOYER IN SECURING THE RELEASE AND THAT THE EIGHTYEAR LAPSE BETWEEN THE INJURY AND THE FILING OF THE SUIT SUBJECTED THE SUIT TO THE DEFENSE OF LACHES AS THE EMPLOYEE FAILED TO OVERCOME THE PRESUMPTION OF PREJUDICE TO THE EMPLOYER FROM THE INEXCUSABLE DELAY. THE COURT DID NOTE THAT THE BURDEN OF PROOF WAS ON THE SHIPOWNER TO PROVE THAT A RELEASE GIVEN BY A SEAMAN WAS EXECUTED WITHOUT DECEPTION OR COERCION AND WITH A -FULL UNDERSTANDING OF HIS RIGHTS AND THAT SUCH BURDEN IS PLACED ON SHIPOWNERS FOR THE PROTECTION OF SEAMEN, WHO HAVE TRADITIONALLY BEEN CHARACTERIZED AS WARDS OF THE COURT DUE TO THEIR NOMADIC NATURE AND THE PERILS THEY ENCOUNTER WHILE AT SEA.

   PLAINTIFF'S ACTION AGAINST THE EMPLOYER AND THE INSURER FOR FRAUD WAS SEPARATE AND DISTINCT FROM HER EARLIER WORKER'S COMPEN- SATION CLAIM FOR INJURIES SUSTAINED IN A FALL ON THE PREMISES OF THE EMPLOYER. ACCORDINGLY, THE TEXAS COURT OF APPEALS HELD THAT THE CIVIL ACTION WAS NOT BARRED BY THE EXCLUSIVE REMEDY PROVISIONS OF THE COMPENSATION ACT. MORRIS V. VARO, INC., 814 S.W.2D 520 (TEX. CT. APP. 1991).

   AN INTERESTING CASE OCCURRED,IN CALIFORNIA IN THE LATE 1950'S WHEN THE EMPLOYEE SUED HIS OWN EMPLOYER, A PETROLEUM COMPANY, AND A THIRD PARTY, A DRILLING COMPANY, CHARGING A CONSPIRACY BETWEEN THEM TO CONCEAL THE EXISTENCE OF THE EMPLOYEE'S COMMON-LAW ACTION AGAINST THE DRILLING COMPANY. THE EMPLOYEE WAS INJURED, ACCORDING TO THE COMPLAINT, WHILE WORKING IN AN OIL FIELD, DUE TO THE NEGLIGENCE OF THE DRILLING COMPANY. TWO DAYS AFTER THE ACCIDENT, REPRESENTATIVES OF THE EMPLOYER TOLD HIM THAT IT HAD BEEN HIS OWN EMPLOYER'S EMPLOYEES THAT HAD CAUSED THE ACCIDENT. THE EMPLOYER HAD A HOLD-HARMLESS AGREEMENT WITH THE DRILLING COMPANY TO REIMBURSE IT FOR ANY TORT LIABILITY RESULTING FROM THE DRILLING OPERATIONS. THE COURT SHARPLY DISTINGUISHED BETWEEN THE TWO INJURIES INVOLVED; FIRST, THE PERSONAL AND PHYSICAL INJURY COMPENSATED BY THE ACT; AND SECOND, THE FRAUD INJURY DESTROYING A VALUABLE RIGHT OF ACTION AGAINST THE THIRD PARTY BY CAUSING IT TO LAPSE BECAUSE OF THE RUNNING OF THE STATUTE OF LIMITATIONS. THIS INJURY ACTUALLY OCCURRED TWO DAYS AFTER THE FIRST, JUST AS THE CONSPIRACY INJURY IN FLAMM SUPRA , HAD OCCURRED TWO YEARS AFTER THE COMPENSABLE INJURY. RAMEY V. GENERAL PETROLEUM CORP., 173 CAL. APP.2D 386, 343 P.2D 787 (1959).

   A TORT CLAIM WAS PERMITTED IN A CASE WHERE THE EMPLOYER TOOK CHEST X-RAYS OF THE EMPLOYEE AND THEN WITHHELD FOR FIFTEEN YEARS THE FACT THAT THE EMPLOYEE HAD CONTRACTED EMPLOYMENT-RELATED PNEUMOCONIOSIS. ACCORDINGLY, THE COURT REVERSED A SUMMARY JUDGMENT IN FAVOR OF THE EMPLOYER BECAUSE THE FRAUDULENT ACTS WERE NOT A HAZARD OF THE EMPLOYMENT. MOREOVER, THE DUAL CAPACITY DOCTRINE REQUIRED REVERSAL BECAUSE THE EMPLOYER-SPONSORED PHYSICAL EXAMINATIONS CONFERRED UPON THE EMPLOYER OBLIGATIONS IMPOSED UPON THE EMPLOYER AS AN EMPLOYER. DELAMOTTE V. UNITCAST DIVISION OF MIDLAND ROSS CORP., 64 OHIO APP.2D 159, 411 N.E.2D 814 (1978).

    IN MCGINN V. VALLOTI, 363 PA. SUPER 88, 525 A.2D 732 (1987), APPEAL DENIED, 538 A.2D 500 (PA. 1988), A TORT ACTION WAS PERMITTED BECAUSE THE EMPLOYEE IS LIKELY TO EXPECT AN UNSAFE ENVIRONMENT IN THE WORKPLACE BUT HE OR SHE IS NOT LIKELY TO EXPECT ACTUAL MISREPRESENTATIONS SUCH AS THAT ALLEGED BY THE EMPLOYEE. SUCH ISREPRESENTATIONS BROUGHT THE HARM OUTSIDE THE CONFINES OF THE WORKERS' COMPENSATION ACT; FOSTER V. XEROX CORP., 40 CAL. 3D 306, 219 CAL. RPTR. 485, 707 P.2D 858 (1985) (EMPLOYEE ALLEGED THAT THE EMPLOYEE HAD CONTRACTED ARSENIC POISONING AND CONCEALED THAT INFORMATION FROM HIM, AGGRAVATING HIS ILLNESS. THE COURT HELD THAT THE ALLEGATIONS STATED A CAUSE OF ACTION); MILLISON V. E.I. DU PONT DE NEMOUR8 & CO. , 101 N.J. 161, 501 A.2D 505 (1985) (THERE IS A DIFFERENCE BETWEEN, ON THE ONE HAND, TOLERATING IN THE WORKPLACE CONDITIONS THAT WILL RESULT IN A CERTAIN NUMBER OF INJURIES OR ILLNESSES AND, ON THE OTHER, ACTIVELY ISLEADING EMPLOYEES WHO HAVE ALREADY FALLEN VICTIM TO THOSE RISKS OF THE WORKPLACE. AN EMPLOYER'S FRAUDULENT CONCEALMENT OF.DISEASES ALREADY DEVELOPED IS NOT ONE OF THE RISKS AN EMPLOYEE SHOULD HAVE TO ASSUME AS SUCH INTENTIONALLY DECEITFUL ACTION GOES BEYOND THE BARGAIN STRUCK BY THE COMPENSATION ACT).

   WHEN AN INSURER ENGAGES IN OUTRAGEOUS CONDUCT, THE INSURER "STEPS OUT OF THE SHOES" OF THE EMPLOYER AND IS NO LONGER PROTECTED BY THE EXCLUSIVE REMEDY CLAUSE. UNRUH V. TRUCK INS. EXCH., 7 CAL. APP.3D 616, 498 P.2D 1063 (1972).

   IN 1974, THE FIRST CIRCUIT HELD THAT THE EXCLUSIVE REMEDY AND PENALTY PROVISIONS OF THE ACT DID NOT BAR A STATE LAW ACTION AGAINST AN INSURER FOR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS IN TERMINATING COMPENSATION PAYMENTS. MARTIN V. TRAVELERS INS. CO., 497 F.2D 329 (1ST CIR. 1974). THIS CASE IS A GOOD EXAMPLE OF THE TYPE OF CONDUCT REQUIRED BY THE APPELLATE COURTS TO PERMIT A WAIVER OF THE EXCLUSIVE REMEDY CLAUSE OF SECTION 5 OF THE ACT. IN MARTIN, THE EMPLOYEE, AN INJURED STEVEDORE, HAD RECEIVED THREE CHECKS FROM THE INSURER TOTALLING $5700 IN SETTLEMENT OF HIS WORKERS' COMPENSATION CLAIM. HOWEVER, TWO WEEKS AFTER THE EMPLOYEE DEPOSITED THE CHECKS AND BEGAN MAKING WITHDRAWALS ON THEM, THE INSURER STOPPED PAYMENT ON THE CHECKS AND FILED AN APPEAL OF THE AGENCY'S DECISION. THE COMPLAINT ALLEGED THAT THE INSURER'S ACTIONS VIOLATED THE TERMS OF THE LONGSHORE ACT AND HAD SUBJECTED HIM TO FINANCIAL EMBARRASSMENT SINCE HE HAD WRITTEN CHECKS THAT HAD BECOME WORTHLESS, ESPECIALLY SINCE THE INSURER KNEW THAT HE HAD A "GRIEVOUS AND LIFE-THREATENING DISEASE" WHICH COULD BE AGGRAVATED BY THE INSURER'S ACTIONS INTO ANOTHER "DISABLING ATTACK AND SEVERE PHYSICAL IMPAIRMENT." MARTIN, SUPRA AT 331.

   HOWEVER, IN SAMPLE V. JOHNS0N, 771 F.2D 1335 (9TH CIR. 1985), CERT. DENIED, 106 S.CT. 1206 (1986), THE NINTH CIRCUIT HELD THAT THE LONGSHORE ACT BARS AN ACTION FOR BAD FAITH TERMINATION OF BENEFITS, THE COURT DISTINGUISHING MARTIN, SUPRA, AS A CASE INVOLVING "CONSPICUOUSLY CONTEMPTIBLE" CONDUCT. ANOTHER DISTINGUISHING FACTOR IS THAT THE LONGSHORE WORKER SOUGHT TO BRING AN ACTION FOR BAD FAITH UNDER FEDERAL MARITIME LAW.

   OTHER PERTINENT CASES PERMITTING A TORT CLAIM ARE MCCAIN V. NORTHWESTERN NAT'L INS. CO. , 484 SO.2D 1001, 1002 (MISS. 1986); SOUTHERN FARM BUREAU CASUALTY INS. CO. , 469 SO.2D 5S, 58-59 (MISS. 1984); MASSEY V. AMOCO STEEL CO., 652 S.W.2D 932, 933-34 (TEX. 1983) (REVERSING DISMISSAL OF CLAIMS FOR BAD FAITH AND INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS TO ALLOW PLAINTIFF TO AMEND THE COMPLAINT, SINCE TEXAS ALLOWS A COMMON LAW ACTION FOR AN INTENTIONAL TORT THAT IS INDEPENDENT OF THE ORIGINAL INJURY); BEAUCHAMP V. DOW CHEM. CO. , 398 N.W.2D 882, 893 (MICH. 1986) (THE EXCLUSIVITY PROVISION DOES NOT APPLY IF THE EMPLOYER KNEW THAT THE INJURY WAS SUBSTANTIALLY CERTAIN TO OCCUR AND INTENDED THE ACT WHICH CAUSED THE INJURY). SEE ALSO JONES V. VIP DEV. CO. , 472 N.W.2D 1046, 1055 (OHIO 1984); MANDOLIDIS V. ELAINE INDUS., 246 S.E.2 907, 914 (W.VA. 1978).

   MOREOVER, INJURED WORKERS HAVE PREVAILED WHEN THEIR INJURIES WERE AGGRAVATED BY THE EMPLOYER'S FRAUDULENT FAILURE TO DISCLOSE KNOWN SAFETY RISKS. SEE, E.G., JOHNS KANVILLB PROD. CORP. V. CONTRA COSTA SUPERIOR CT., 612 P..2D 948, 956 (CAL. 1980) (THE EMPLOYER WAS HELD LIABLE FOR FRAUDULENTLY CONCEALING HAZARDOUS CONDITIONS FROM THE EMPLOYEE AND THE EMPLOYEE'S DOCTOR); MILLISON V. E.I. DUPONT DE NEMOURS & CO., 501 A.2D 505, 516-17 (N.J. 1985) (THE EMPLOYER WAS RESPONSIBLE FOR FRAUDULENTLY CONCEALING KNOWLEDGE OF ALREADY CONTRACTED DISEASES); MARTIN V. LANCASTER BATTERY CO., 606 A.2D 444, 447-48 (PA. 1992) (THE EMPLOYER'S FRAUDULENT MISREPRESENTATION RESULTING IN A DELAY WHICH AGGRAVATED A WORK RELATED INJURY DID NOT FALL WITHIN THE EXCLUSIVITY PROVISION).

   THUS, THE TREND IN THESE DECISIONS SEEMED TO BE LARGELY OTIVATED BY CONCERNS THAT WANTON DISREGARD OF WORKPLACE SAFETY SHOULD NOT BE PROTECTED BY THE MANTLE OF IMMUNITY BESTOWED BY WORKERS' COMPENSATION STATUTES AND THE DOCTRINE OF EXCLUSIVITY. THE DISTINCTION SEEMS TO BE THE OUTRAGEOUS AND INTENTIONAL NATURE OF THE INSURER'S CONDUCT AND THE MORE OUTRAGEOUS AN INSURER'S CONDUCT AND THE MORE HARM THAT RESULTS, THE MORE LIKELY THAT THE SUBSEQUENT INJURY WILL BE SEPARATE AND DISTINCT FROM THE ORIGINAL INJURY. THE 1984 AMENDMENTS TO THE LONGSHORE ACT INCLUDED THE ADDITION OF PROVISIONS FOR BAD FAITH CONDUCT BY EMPLOYERS IN REPORTING INJURIES. SECTION 30(e) (PROVIDES FOR A FINE UP TO $10,000.00).

   SOME COMMENTATORS ARGUE AGAINST THE CREATION OF AN INDEPENDENT TORT ACTION FOR EMOTIONAL DISTRESS BECAUSE SECTION 14(A) OF THE ACT GIVES THE EMPLOYER THE OPTION OF PAYING BENEFITS TO THE EMPLOYEE OR CONTROVERTING ENTITLEMENT TO BENEFITS. CONGRESS, IN BALANCING THE INTERESTS OF THE EMPLOYEE AND EMPLOYER, MITIGATED THE BURDEN ON THE EMPLOYEE BY PROVIDING FOR THE AWARD OF PENALTIES, INTEREST ON THE AMOUNTS UNPAID AND ATTORNEYS' FEES AND LITIGATION EXPENSES ASSESSED AGAINST THE EMPLOYER.

SECTION 26 OF THE ACT

    A QUESTION I WILL NOW POSE IS WHETHER OR NOT SECTION 26 OF THE LONGSHORE ACT PROVIDES A REMEDY TO THE AGGRIEVED EMPLOYER.

SECTION 26 PROVIDES:

IF THE COURT HAVING JURISDICTION OF PROCEEDINGS IN RESPECT OF ANY CLAIM OR COMPENSATION ORDER DETERMINES THAT THE PROCEEDINGS IN RESPECT OF SUCH CLAIM OR ORDER HAVE BEEN INSTITUTED OR CONTINUED WITHOUT REASONABLE GROUND, THE COSTS OF SUCH PROCEEDINGS SHALL BE ASSESSED AGAINST THE PARTY WHO HAS SO INSTITUTED OR CONTINUED SUCH PROCEEDINGS.
33 U.S.C. § 926.

COSTS NOT ALLOWED

    THAT SEEMS TO BE RATHER SPECIFIC LANGUAGE AND SEEMS TO PROVIDE A SANCTION AGAINST A PARTY IN THE SO-CALLED VEXATIOUS OR FRIVOLOUS CLAIMS. HOWEVER, THERE ARE SOME INTERESTING DECISIONS INTERPRETING THAT PROVISION AND I WOULD LIKE TO BEGIN THE JOURNEY WITH THE DECISION OF THE NINTH CIRCUIT IN METROPOLITAN STETEDORE CO. V. BRICRNER; DIRECTOR, OWCP, 11 F. 3D 887, 27 BRBS 132 (CRT) (9TH CIR. 1993), WHEREIN THE COURT HELD THAT NEITHER THE DEPUTY COMMISSIONER (NOW DISTRICT DIRECTOR), NOR THE ADMINISTRATIVE LAW JUDGE NOR THE BRB HAS THE AUTHORITY TO IMPOSE COSTS UNDER SECTION 26 SINCE THE PLAIN LANGUAGE OF THE SECTION REFERS TO "THE COURT HAVING JURISDICTION." IT IS NOTEWORTHY THAT THE NINTH CIRCUIT AGREED WITH THE BRB THAT SECTION 26, WHICH ALLOWS A SANCTION FOR UNREASONABLE CLAIMS AGAINST EITHER PARTY, IMPLIEDLY PRECLUDES A SANCTION FOR BAD FAITH CLAIMS AND THAT FEDERAL RULE OF CIVIL PROCEDURE 11 SHOULD NOT BE INCORPORATED INTO ADMINISTRATIVE PROCEEDINGS UNDER THE LONGSHORE ACT.

   THE NINTH CIRCUIT, REFERRING TO THE LEGISLATIVE HISTORY OF THE ACT, NOTED THAT THE ORIGINAL DRAFT OF SECTION 26 WOULD HAVE AUTHORIZED THE DEPUTY COMMISSIONER OR THE COURT TO IMPOSE COSTS BUT WHEN THE SECTION WAS FINALLY ENACTED THE REFERENCE TO THE DEPUTY COMMISSIONER HAD BEEN REMOVED. THEREFORE, IT WAS OBVIOUS THAT ONLY A FEDERAL COURT COULD EXERCISE AUTHORITY UNDER SECTION 26. BRICKNER, SUPRA, 11 F.3D AT 890, 27 BRBS AT 137 (CRT).

   I NOTE THAT THE DIRECTOR, OWCP, ARGUED FOR THE POSITION IN BRICKNER THAT THE NINTH CIRCUIT ADOPTED. THUS, IF ADOPTED BY OTHER CIRCUITS, SECTION 26 MAY TURN OUT TO BE A "PAPER TIGER" AS IT IS A TEDIOUS AND COSTLY PROCEDURE TO SEEK SUCH COSTS IN FEDERAL DISTRICT COURT.

   A SECTION 26 ISSUE SHOULD BE RAISED BEFORE THE ADMINISTRATIVE LAW JUDGE TO PERFECT THE ISSUE FOR APPEAL BEFORE THE BOARD. PINELL V. PATTERSON SERVICE, 22 BRBS 61, 66 (1989). IN INTERPRETING THIS SECTION, THE JUDGE MUST DETERMINE, FROM A PRE-HEARING PERSPECTIVE, WHETHER THE CLAIMANT HAD SOME REASONABLE BASIS FOR INITIATING OR PURSUING THE CLAIM. THE TEST IS AN OBJECTIVE ONE AND REQUIRES CONSIDERATION OF WHETHER THE EVIDENCE COULD JUSTIFY THE RELIEF REQUESTED. SEE, E.G., BOLDEN V. U.S. STEVENDORES CORPORATION, 18 BRBS 172, 174 (1986). ,

   AN INTERESTING BOARD DECISION IS CONTAINED IN FREIWILLIG V. TRIPLE A SOUTH, 23 BRBS 371, 374-375 (1990). IN THAT CASE, THE EMPLOYER SOUGHT SANCTIONS UNDER SECTION 26 BECAUSE POST-INJURY THE EMPLOYEE EARNED SIGNIFICANTLY HIGHER WAGES THAN HIS AVERAGE WEEKLY WAGE AND BECAUSE HE FAILED TO REPORT THOSE WAGES TO THE DISTRICT DIRECTOR. THE ALJ CONCLUDED THAT THE PROCEEDINGS WERE INITIATED AND CONTINUED BY THE EMPLOYEE WITHOUT REASONABLE GROUNDS AND THAT THE EMPLOYEE WAS DIRECTED TO REIMBURSE THE EMPLOYER IN THE AMOUNT OF $26,S97.24 FOR ITS COSTS AND ATTORNEY'S FEES RELATED TO DEFENDING THE CLAIM. THE ALJ STATED THAT "THIS IS A CONTRIVED CLAIM FROM A PREHEARING PERSPECTIVE," THAT THE EMPLOYEE "KNEW OR SHOULD HAVE KNOWN, AS OF THE DATE OF HIS DEPOSITION, IF NOT EARLIER, (THAT THE CLAIM) WAS DOOMED TO FAILURE." THE ALJ FURTHER CONCLUDED "THAT CLAIMANT HAD ENGAGED IN MANIPULATIVE AND DECEPTIVE CONDUCT THROUGHOUT THE PROCEEDINGS, THAT CLAIMANT HAD BEEN ENGAGED IN POST-INJURY SELF-EMPLOYMENT, OPERATING A TRUCKING BUSINESS, WHICH HE ATTEMPTED TO DISGUISE AS AN OPERATION BELONGING TO HIS WIFE, THAT CLAIMANT'S POST-INJURY SELF-EMPLOYMENT YIELDED WAGES IN EXCESS OF HIS AVERAGE WEEKLY WAGE AT THE TIME OF HIS INJURY AND THAT CLAIMANT CONCEALED HIS SELF-EMPLOYMENT WAGES IN VIOLATION OF SECTION 8(J) OF THE ACT."

   CLAIMANT APPEALED FROM THE DECISION DENYING BENEFITS AND THE BOARD VACATED THE SECTION 26 SANCTIONS BECAUSE "(T)HE MERE FACT THAT A CLAIMANT IS EARNING HIGHER WAGES POST-INJURY IS INSUFFICIENT TO DEMONSTRATE THAT HE HAS NO LOSS OF WAGE-EARNING CAPACITY" AS HE MAY STILL BE ENTITLED TO BENEFITS FOR PARTIAL DISABILITY, PURSUANT TO SECTION 8(C)(21). THUS, ACCORDING TO THE BOARD, HIGHER POSTINJURY WAGES ARE "INSUFFICIENT TO ESTABLISH THAT CLAIMANT'S CLAIM WAS 'DOOMED TO FAILURE'," ESPECIALLY SINCE IT WAS "CONCEIVABLE THAT AN ADMINISTRATIVE LAW JUDGE COULD HAVE CREDITED THE MEDICAL EVIDENCE THAT CLAIMANT HAD A CONTINUING IMPAIRMENT TO HIS BACK AS A RESULT OF HIS WORK INJURY AND (COULD HAVE) FOUND THAT HIS POSTINJURY WAGES WERE NOT REPRESENTATIVE OF HIS WAGE-EARNING CAPACITY." MOREOVER, ACCORDING TO THE BOARD, "THIS CASE IS NOT ONE WHERE CLAIMANT HAD NO INJURY OR MEDICAL EVIDENCE TO SUPPORT A CLAIM. AN HONEST PRESENTATION OF THE FACTS AND EVIDENCE PROVIDES REASONABLE GROUNDS FOR PURSUING A CLAIM. THE ADMINISTRATIVE LAW JUDGE'S APPLICATION OF SECTION 26 HERE IS FOUNDED NOT ON CLAIMANT'S LACK OF BASIS FOR A CLAIM FOR BENEFITS BUT ON HIS WILLFUL MISREPRESENTATIONS-REGARDING POST-INJURY EARNINGS. WE DO NOT QUESTION HER FINDING THAT CLAIMANT DID WILLFULLY SEEK TO CONCEAL HIS POST-INJURY EARNINGS. THE SANCTIONS FOR THIS CONDUCT, HOWEVER' ARE IN SECTION 8(J), WHICH PROVIDES FOR THE SUSPENSION OF BENEFITS, AND IN SECTION 31 . . . WHICH PROVIDES THAT A CLAIMANT MAY BE FOUND GUILTY OF A FELONY FOR KNOWINGLY AND WILLFULLY MAKING A FALSE STATEMENT FOR THE PURPOSE OF OBTAINING A BENEFITS UNDER THE ACT." FREILLING, SUPRA AT 373-375.

   IN WILLIAMS V. JOHN JONES D/B/A NICOLE ENTERPRISES, 11 F.3D 247, 27 BRBS 142 (CRT) (1ST CIR.,,1993), THE CLAIMANT HAD SOUGHT ENFORCEMENT OF A COMPENSATION ORDER IN U.S. DISTRICT COURT, PURSUANT TO 21(D) OF THE ACT. THE COURT GRANTED ENFORCEMENT THEREOF BUT THE COURT OF APPEALS FOR THE FIRST CIRCUIT VACATED THE ENFORCEMENT ORDER DUE TO A LACK OF COMPLIANCE WITH THE SERVICE OF PROCESS REQUIREMENTS IMPOSED BY FED.R.CIV.P. 4 AND 81(A)(6). THE EMPLOYER HAD DEFENDED ITS ACTIONS IN REFUSING TO PAY THE COMPENSATION ORDER "ON THE GROUNDS THAT 'NEWLY-DISCOVERED' EVIDENCE REVEALED THAT WILLIAMS SECURED THE AWARD THROUGH PERJURY AND FRAUD." THE FIRST CIRCUIT INITIALLY POINTED OUT THAT A COURT OF EQUITY WILL NOT ENFORCE A JUDGMENT OBTAINED BY FRAUD. SEE RESTATEMENT (SECOND) OF JUDGEMENT, §70, CMT. A (1982). FRAUD AND "UNCLEAN HANDS" HISTORICALLY HAVE BEEN REGARDED AS VALID EQUITABLE DEFENSES TO INJUNCTIVE RELIEF, SUCH AS THAT SOUGHT IN A SECTION 21(D) PROCEEDING. HOWEVER' THE FIRST CIRCUIT POINTED OUT THAT THE NEWLY-DISCOVERED EVIDENCE SHOULD BE CONSIDERED BY THE ALJ' PURSUANT TO SECTION 22' AS THE ALJ HAS BROAD DISCRETION TO CORRECT MISTAKES OF FACT AND AS THE OVER-ARCHING CRITERION FOR REOPENING A COMPENSATION AWARD UNDER THE ACT IS WHETHER REEXAMINATION WOULD SERVE THE "INTERESTS OF JUSTICE." O'KEEFE V. AEROJET-GENERAL SHIPYARDS, INC., 404 U.S. 254 (1971).

   ACCORDING TO THE FIRST CIRCUIT, "PERJURED TESTIMONY RESULTING IN AN ERRONEOUS FINDING OF FACT CONCERNING THE NATURE OR EXTENT OF AN EMPLOYEE'S DISABILITY WOULD SEEM TO COME SQUARELY WITHIN THE REALM -OF A 'MISTAKE OF FACT'," THE COURT CONCLUDING THAT THE AFFIRMATIVE DEFENSES RAISED BY THE EMPLOYER COULD BEST BE RESOLVED BY THE DEPARTMENT OF LABOR AND N (T)O ALLOW THE SECTION 922 AND THE SECTION 921(D) PROCEEDINGS TO GO FORWARD SIMULTANEOUSLY WOULD OPEN UP THE POSSIBILITY OF INCONSISTENT RULINGS ON THE FRAUD CLAIM, WHICH ULTIMATELY WOULD HAVE TO BE RESOLVED BY THE COURT OF APPEALS IN EITHER EVENT." WILLIAMS, SUPRA.

    THE FACTS OF THE WILLIAMS CASE ARE MOST INTERESTING AND REFLECT THAT THE EMPLOYEE WAS INJURED IN 1978 "AS A RESULT OF A FALL FROM THE BOOM OF A FISHING VESSEL OWNED BY HIS EMPLOYER," THAT THE ALJ AWARDED COMPENSATION BENEFITS COMMENCING ON THE DAY OF THE INJURY, THAT THE EMPLOYER PREVAILED AFTER TWO SUCCESSFUL APPEALS TO THE BRB' 15 BRBS-453 (1983), 19 BRBS 66 (1986), AND ULTIMATELY THE BRB AFFIRMED A COMPENSATION AWARD IN FAVOR OF THE EMPLOYEE. 21 BRBS 164 (1988). THE FIRST CIRCUIT DENIED EMPLOYER'S PETITION FOR JUDICIAL REVIEW IN 1990 AND, NOTWITHSTANDING THE FINALITY OF THE COMPENSATION AWARD, CLAIMANT "ALLEGES THAT HE HAS RECEIVED ONLY $450 IN BENEFIT PAYMENTS FROM JONES TO DATE," AND THAT PAYMENT APPARENTLY WAS MADE BY THE EMPLOYER AFTER CLAIMANT HAD FILED A SECTION 21(D) ENFORCEMENT PROVISION AND SHORTLY BEFORE THE EMPLOYER FILED A PETITION FOR MODIFICATION, PURSUANT TO SECTION 22. WHY ONLY $450 IN BENEFITS TO CLAIMANT? THE FIRST CIRCUIT COURT RECOGNIZED, IN FOOTNOTE 10, 27 BRBS AT 153 (CRT), "UNDER THE LHWCA, EMPLOYERS MAY RECOUP OVERPAYMENTS ONLY AS CREDITS AGAINST COMPENSATION PAYMENTS DUE THE EMPLOYEE IN THE FUTURE. (CITATIONS OMITTED). THUS, IF A COMPENSATION ORDER IS VACATED IN ITS ENTIRETY, PAYMENTS PREVIOUSLY ADE ARE ESSENTIALLY UNRECOVERABLE."

   IN TOSCANO V. SUN SHIP INCORPORATED, 24 BRBS 207, 211 (1991), THE BOARD HELD THAT ATTORNEY'S FEES MAY NOT BE CONSIDERED COSTS WITHIN THE MEANING OF SECTION 26 AND, THUS, CANNOT BE ASSESSED AGAINST ANY PARTY TO THE PROCEEDING. THE BOARD'S DECISION IS BASED UPON THE SO-CALLED "AMERICAN RULE," I.E., ABSENT STATUTORY LANGUAGE OR AN ENFORCEABLE CONTRACT, OR ONE OF THE WELL-RECOGNIZED EXCEPTIONS SUCH AS PROCEEDINGS INVOLVING BAD FAITH OR ABUSIVE LITIGATION, LITIGANTS PAY THEIR OWN ATTORNEYS' FEES AND SUCH FEES ARE NOT RECOVERABLE AS COSTS. ALYESKA PIPE LINE SERVICE CO. V. WILDERNESS, 412 U.S. 240 (1975). MOREOVER, AN ATTORNEY'S FEE CANNOT BE ASSESSED AGAINST THE SPECIAL FUND, EITHER PURSUANT TO SECTION 26, TOSCANO, SUPRA AT 212, OR PURSUANT TO SECTION 28, MEDRANO V. BETHLEHEM STEEL CORP., 18 BRBS 229 (1986).

   IN FULLER V. MATSON TERMINALS, 24 BRBS 252, 256 (1991), THE BOARD HELD THAT THE EMPLOYER, AS A MATTER OF LAW, WAS NOT ENTITLED TO A REIMBURSEMENT OF ITS COSTS, PURSUANT TO SECTION 26, SINCE THE LEGAL THEORY ADVANCED BY CLAIMANT CONCERNING WHETHER A SETTLEMENT WAS REACHED, PURSUANT TO SECTION 8(I), WAS NOT UNREASONABLE. THE RECORD REFLECTED THAT, AT THE TIME OF THE EMPLOYEE'S DEATH, THE SETTLEMENT AGREEMENT HAD NOT BEEN SIGNED BY THE EMPLOYEE OR EMPLOYER AND HAD NOT BEEN SUBMITTED TO THE DEPUTY COMMISSIONER FOR APPROVAL. THUS, THERE WAS NO ENFORCEABLE SETTLEMENT AGREEMENT.

   IN AN EARLY CASE UNDER THE LONGSHORE ACT AS EXTENDED BY THE DEFENSE BASE ACT, THE DECEASED EMPLOYEE'S ESTATE RAISED THE ISSUE OF MALICIOUS PROSECUTION BY THE EMPLOYER AND, PURSUANT TO SECTION 26, SOUGHT TO HAVE THE EMPLOYER HELD LIABLE FOR THE COST OF LEGAL FEES INCURRED TO DEFEND THE AWARD TO THE EMPLOYEE'S ESTATE. THE COURT DENIED THE REQUEST HOLDING AS FOLLOWS:

LEGAL FEES STAND ON A DIFFERENT FOOTING. ALTHOUGH WE BELIEVE THE ACTION LACKING IN MERIT, WE CANNOT SAY THAT PLAINTIFFS' POSITION WAS FRIVOLOUS OR MALICIOUS. UNDER ALL THE CIRCUMSTANCES, EACH PARTY SHOULD BEAR HIS OWN LEGAL FEES IN THIS COURT.
OVERSEAS AFRICAN CONSTRUCTION CORP, V. MCMULLEN, 367 F.SUPP 202, 207 (S.D.N.Y. 1973).

   THE EMPLOYER AND CARRIER (RESPONDENTS) APPEALED AND THE SECOND CIRCUIT COURT, IN REVIEWING THE QUESTION OF ASSESSMENT OF THE ATTORNEY'S FEES UNDER SECTION 26, HELD THAT THE LOWER COURT HAD ERRED IN FAILING TO FIND THAT THE RESPONDENTS SHOULD PAY THOSE FEES BECAUSE THE RESPONDENTS' JURISDICTIONAL CLAIM WAS "SO INSUBSTAN- TIAL" AS TO REQUIRE THE RESPONDENTS TO BEAR THE EXPENSE OF THE LEGAL FEES IN THE DISTRICT COURT. HOWEVER, AS SECTION 28 HAD BEEN ADDED TO THE LONGSHORE ACT BY THE 1972 AMENDMENTS AND AS THE ATTORNEY FEE WAS NOW PAYABLE BY THE RESPONDENTS, THE SECOND CIRCUIT HELD THAT THE ATTORNEY FEE AWARDED BY THE DISTRICT COURT SHOULD BE PAID BY RESPONDENTS, PURSUANT TO SECTIONS 28(A) AND (C). OVERSEAS AFRICAN CONSTRUCTION CORP. V. MCMULLEN, 500 F.2D 1291, 1297 (2D CIR. 1974).

   AFTER MCMULLEN , THE NEXT REPORTED CLAIM DEALING WITH SECTION 26 WAS THE BOARD'S DECISION IN BOLDEN V. U.S. STEVEDORES CORP., 18 BRBS 172 (1985), WHEREIN THE CLAIM WAS REMANDED TO THE ALJ FOR CONSIDERATION OF THE ISSUE AS THE ALJ HAD REFUSED TO CONSIDER THE ISSUE AS THE EMPLOYER HAD NOT IDENTIFIED THAT ISSUE ON ITS FORM LS18, THE PRE-HEARING STATEMENT.

   WHERE THERE WAS NO EVIDENCE INDICATING CLAIMANT CONTINUED THE CLAIM WITHOUT A GOOD FAITH, REASONABLE BASIS, AND WHERE THE APPEAL TO THE BOARD WAS NOT COMPLETELY GROUNDLESS IN LIGHT OF THE NOVEL ISSUE RAISED, THE BOARD HAS AFFIRMED THE DENIAL OF SECTION 26 COSTS. OLSEN V. GENERAL ENGINEERING AND MACHINE WORKS, 25 BRBS 169, 173 (1991), PINNELL V. PATTERSON SERVICES, 22 BRBS 261 (1989).

COSTS NOT ALLOWED AGAINST THE SPECIAL FUND

    IN RIHNER V. BOLAND MARINE AND ANUFACTURING COMPANY, 24 BRBS 84 (1990), THE BOARD REVERSED AND VACATED AN AWARD OF COSTS AGAINST THE SPECIAL FUND BECAUSE THE EMPLOYER'S ACTIONS IN TERMINATING VOLUNTARY PAYMENTS TO CLAIMANT NECESSITATED A FORMAL HEARING, AND ITS CONTROVERSION OF TWO ISSUES REQUIRED CLAIMANT'S PARTICIPATION IN THE HEARING. MOREOVER, THE DIRECTOR CANNOT BE SAID TO HAVE CONTINUED THE PROCEEDINGS WITHOUT REASONABLE GROUND SOLELY ON THE BASIS OF HIS RULINGS ON THE APPLICABILITY OF SECTION 8(F) IN THAT CASE. THUS, THE EMPLOYER WAS HELD LIABLE FOR THE ATTORNEY'S FEE, UNDER SECTION 28(B), FOR THE WORK PERFORMED BEFORE THE ADMINISTRATIVE LAW JUDGE. I NOTE THAT THE DEPUTY COMMISSIONER (NOW THE DISTRICT DIRECTOR) HAD TWICE RECOMMENDED TO THE ASSOCIATE DIRECTOR AT THE NATIONAL OFFICE OF THE OWCP THAT SECTION 8(F) RELIEF BE GRANTED BUT THE RECOMMENDATIONS WERE REJECTED BECAUSE "(I)T COULD BE CONCLUDED THAT THE (DECEASED'S) DEMISE AS RESULT OF A FATAL HEART ATTACK] WAS A NATURAL PROGRESSION OF HIS UNDERLYING [CARDIOVASCULAR] CONDITION." RIHNER, SUPRA AT 85.

   IN DIRECTOR, OWCP V. ROBERTSON , 625 F.2D 873, 12 BRBS 550 (9TH CIR. 1980), THE NINTH CIRCUIT HELD THAT THE ACT DID NOT PROVIDE FOR PAYMENT OF ATTORNEY'S FEES FROM THE SPECIAL FUND. THE ELEVENTH CIRCUIT ADOPTED THIS REASONING IN DIRECTOR, OWCP V. ALABAMA DRY DOCK & SHIPBUILDING CO., 672 F.2D 415, 14 BRBS 669 (llTH CIR. 1982), AS DID THE FIFTH CIRCUIT IN HOLIDAY V. TODD SHIPYARDS CORP ., 654 F.2D 415, 13 BRBS 741 (5TH CIR. 1981).

   PURSUANT TO SECTION 26, THE ATTORNEY FEE AWARD CANNOT BE ASSESSED AGAINST THE SPECIAL FUND. MOREOVER, THE EMPLOYER'S PARTICIPATION IN THE CASE WAS NECESSARY AS THE EMPLOYER IS AN INDISPENSABLE PARTY TO THE PROCEEDING WHEREAS THE DIRECTOR'S PARTICIPATION IN THE HEARING WAS NOT MANDATED AND THERE WAS NO SHOWING THAT THE DIRECTOR OTHERWISE INSTITUTED OR CONTINUED THE PROCEEDINGS IN THE CASE WITHOUT REASONABLE GROUND. MEDRANO V. BETHLEHEM STEEL CORP., 23 BRBS 223, 226 (1990). THE PURPOSE OF THIS SECTION IS TO DISCOURAGE UNNECESSARY LITIGATION. MEDRANO, SUPRA AT 226. SEE ALSO BINGHAM V. GENERAL DYNAMICS CORP ., 20 BRBS 198 (1988).

WHAT ARE COSTS?

    AN ATTORNEY'S FEE MAY NOT BE CONSIDERED COSTS UNDER SECTION 26 AND, THUS, CANNOT BE ASSESSED AGAINST ANY PARTY, PURSUANT TO THAT SECTION. MOREOVER, SINCE THE ACT CONTAINS SPECIFIC PROVISIONS FOR AWARDING ATTORNEY FEES AND SINCE THE ACT DOES NOT INCLUDE A PROVISION FOR HOLDING THE SPECIAL FUND LIABLE FOR SUCH FEES, THE FUND CANNOT BE ASSESSED THE EMPLOYER'S ATTORNEY FEE PURSUANT TO SECTION 26, THE OALJ'S RULES OF PRACTICE AND PROCEDURE, THE FEDERAL RULES OF CIVIL PROCEDURE AND THE EQUAL ACCESS TO JUSTICE ACT. BORDELON V. REPUBLIC BULK STEVEDORE, 27 BRBS 280, 283-285 (1994).

   IT IS WELL-SETTLED THAT ATTORNEY'S FEES MAY NOT BE CONSIDERED COSTS WITHIN THE MEANING OF SECTION 26, AND THUS CANNOT BE ASSESSED AGAINST ANY PARTY PURSUANT TO THAT SECTION. STEED V. CONTAINER STEVEDORING COMPANY, 25 BRBS 210, 221 (1991); MACKEY V. MARINE TERMINALS CORP., 21 BRBS 129, 131 (1988)(SECTION 26 MAKES NO ENTION OF ATTORNEY FEES AND THEY WERE "NOT RECOVERABLE AS COSTS IN THE ABSENCE OF A STATUTORY PROVISION OR ENFORCEABLE CONTRACT").

WHO IS A PARTY?

    THE BOARD HAS HELD THAT CLAIMANT'S COUNSEL WAS NOT A "PARTY" FOR PURPOSES OF SECTION 26, AS HE WAS NOT NECESSARY FOR A FORMAL HEARING, NOR WAS HE AN ENTITY WHO SOUGHT RELIEF OR AGAINST WHOM RELIEF WAS SOUGHT. THUS, WHERE CLAIMANT WITHDREW HIS CLAIM, THE BOARD REVERSED THE JUDGE'S ASSESSMENT OF EMPLOYER'S ATTORNEY'S FEE AND COSTS AGAINST CLAIMANT'S COUNSEL. SECTION 26 PROVIDES THAT "THE COSTS OF SUCH PROCEEDINGS SHALL BE ASSESSED AGAINST THE PARTY WHO HAS INSTITUTED OR CONTINUED SUCH PROCEEDINGS "WITHOUT REASONABLE GROUND THEREFOR. FLETCHER V. SLATTERY ASSOCIATES , 22 BRBS 70, 71 (1989).

COSTS ALLOWED UNDER SECTION 26

    WHILE THE PRECEDING RECITES NUMEROUS EXAMPLES WHEREIN SECTION 26 COSTS HAVE BEEN DENIED FOR VARIOUS REASONS, THERE ARE ISOLATED CASES WHERE COSTS HAVE BEEN ALLOWED.AND THEY ARE AS FOLLOWS:

   SECTION 26 COSTS TO THE EMPLOYER'S ATTORNEY WERE ALLOWED IN A PROCEEDING WHERE THE ADMINISTRATIVE LAW JUDGE HELD THE CLAIMANT WAS NOT ENTITLED TO MODIFICATION BASED ON RELATING BACK HIS EARNINGS IN HIS PRESENT JOB TO THE WAGE LEVEL AT THE TIME OF HIS INJURY SINCE CLAIMANT'S INITIAL AWARD OF BENEFITS WAS BASED NOT ON THIS JOB OR ON AN ACTUAL LOSS OF WAGE-EARNING CAPACITY, BUT ON THE LIKELIHOOD OF A FUTURE DECREASE IN EARNINGS BECAUSE OF HIS BACK INJURY . . . . THE ADMINISTRATIVE LAW JUDGE ALSO HELD THAT THE OPINION OF CLAIMANT'S PHYSICIAN PROVIDED NO SUPPORT FOR HIS ASSERTION THAT THERE HAD BEEN A CHANGE IN HIS PHYSICAL CONDITION. THE RECORD REFLECTED THAT THE CLAIMANT HAD FAILED TO REPORT HIS INCOME FOR 27.5 MONTHS NOT ONLY TO THE IRS BUT ALSO TO THE EMPLOYER ON THE FORM LS-200. THE BOARD AFFIRMED THE DECISION AND THE AWARD OF SECTION 26 COSTS OF $818.00 BECAUSE THE ADMINISTRATIVE LAW JUDGE RATIONALLY CONCLUDED THAT FROM A PRE-HEARING PERSPECTIVE CLAIMANT COULD NOT SUCCEED IN HIS ODIFICATION PROCEEDING. ZEPEDA V. NATIONAL STEEL AND SHIPBUILDING COMPANY, 24 BRBS 163 (1991).

   AN INTERESTING CASE IS THE TRAVELERS INSURANCE COMPANY V. THOMPSON, 20 BRBS 77 (CRT) (W.D. WASH. 1987), WHEREIN THE EMPLOYEE SOUGHT AND OBTAINED AN AWARD OF BENEFITS UNDER THE ACT. HE THEN SOUGHT AND OBTAINED COMMUTATION OF THAT AWARD. HOWEVER, THE BENEFITS REVIEW BOARD VACATED THE COMMUTATION ORDER AND THE INSURER SUED TO RECOVER THE LUMP SUM PAID TO THE EMPLOYEE. THE DISTRICT COURT HELD THAT THE DEFENDANT HAD NO LEGITIMATE BASIS FOR REFUSING TO RETURN THE LUMP SUM PAYMENT TO THE INSURER, THAT THE INSTANT LITIGATION SHOULD NOT HAVE BEEN NECESSARY AND, ONCE BROUGHT, ITS CONTINUATION WAS WITHOUT REASONABLE GROUND. ACCORDINGLY, THE INSURER WAS ENTITLED TO RECOVER ITS REASONABLE ATTORNEY'S FEES, PURSUANT TO SECTION 26, AND THE COURT APPROVED THE AMOUNT OF $5,565.83 AS "ADEQUATELY DOCUMENTED AND REASONABLE IN AMOUNT." ID. AT 78 (CRT).

RECOVERY OF ERRONEOUS PAYMENTS

   OTHER THAN UTILIZING THE FELONY PROVISIONS OF SECTION 31(A)(1) AND WAITING FOR THE WEEKLY INSTALLMENTS MANDATED BY AN OBLIGATION ON THE PART OF THE EMPLOYEE TO MAKE RESTITUTION, WHAT ELSE CAN THE EMPLOYER DO TO RECOVER COMPENSATION AND MEDICAL BENEFITS ERRONEOUSLY PAID TO AN EMPLOYEE AS A RESULT OF FRAUD OR MISREPRE- SENTATION? WHAT ABOUT THE POSSIBILITY OF A CLAIM UNDER THE LONGSHORE ACT FOR THOSE ERRONEOUS PAYMENTS? LOGICALLY, THERE SHOULD BE SOME REMEDY TO PREVENT SUCH UNJUST ENRICHMENT.

   HOWEVER, THE COURTS AND THE BRB HAVE CONSISTENTLY ANSWERED THIS QUESTION IN THE NEGATIVE. SEE, E.G., CERES GULF V. DIRECTOR, OWCP (COOPER), 957 F.2D ll99, 25 BRBS 12S (CRT) (9TH CIR. l992); STEVEDORING SERVICES OF AMERICA V. EGGERT, 953 F.2D SS2, 2S BRBS 92 (9TH CIR. 1992), CERT. DENIED, 112 S.CT. 3056 (1992); VITOLA V. NAVY RESALE AND SUPPORT OFFICE, 26 BRBS 88, 96-97 (1992). THOSE DECISIONS UNIFORMLY HOLD THAT THE LONGSHORE ACT DOES NOT PROVIDE AN EMPLOYER WITH A RIGHT TO RECOVER ADVANCE PAYMENTS ERRONEOUSLY PAID, SUCH AS THROUGH FRAUD, WHEN NO ADDITIONAL COMPENSATION IS DUE THE EMPLOYEE.

   IN STEVEDORING SERVICES OF AMERICA V. EGGERT, THE EMPLOYER SUED THE EMPLOYEE IN U.S. DISTRICT COURT TO RECOVER THE AMOUNT OF $96,6S1.22, REPRESENTING SEVEN YEARS OF OVERPAYMENTS TO THE EMPLOYEE, AS WELL AS FOR ITS ATTORNEY'S FEE AND COSTS, PURSUANT TO SECTION 26. BOTH SIDES MOVED FOR SUMMARY JUDGMENT, CLAIMANT POSITING THAT THE DOCTRINE OF "PRIMARY JURISDICTION" DIVESTED THE COURT OF ANY JURISDICTION AND THAT THE ACT DOES NOT CONTEMPLATE THE ENTRY OF ORDERS REQUIRING AN INJURED WORKER TO REIMBURSE HIS EMPLOYER FOR ANY OVERPAYMENT OF BENEFITS WHEN NO ADDITIONAL BENEFITS ARE OWED. THE COURT GRANTED EMPLOYER'S MOTION FOR SUMMARY JUDGMENT AS THE DECISION OF THE ALJ WAS NOT APPEALED AND HAD BECOME A FINAL ORDER BY OPERATION OF LAW. THE COURT REJECTED THE EMPLOYEE'S INTERPRETATION OF SECTION 14(J) BECAUSE THE PAYMENTS MADE TO HIM WERE NOT "ADVANCE PAYMENTS" AS THEY WERE MADE PURSUANT TO THE ALJ'S DECISION AND ORDER AND, MOST IMPORTANT, BECAUSE "THERE IS NOTHING IN THE ACT TO INDICATE THAT THIS (SUBSECTION) WAS INTENDED TO BE THE EMPLOYER'S EXCLUSIVE REMEDY FOR AN OVERPAYMENT OF BENEFITS. BUT FINALLY, AND MOST FUNDAMENTALLY, (THE EMPLOYEE'S) CONSTRUCTION OF THE STATUTE WOULD BE UNCONSCIONABLY UNFAIR TO EMPLOYERS" AND "WOULD EMASCULATE STEVEDORE'S APPEAL RIGHTS, AND PROVIDE (THE EMPLOYEE) AN UNCONSCIONABLE WINDFALL" OF APPROXIMATELY $100,000, THE COURT CONCLUDING, "THIS WOULD NOT HAVE BEEN THE INTENT OF THE DRAFTERS OF § 914(J)." STEVEDORING SERVICES OF AMERICA, SUPRA , 23 BRBS 25, 28-29 (CRT) (WASH. WESTERN DISTRICT AT SEATTLE 1989) (NON-PUBLISHED). (AS NOTED ABOVE, THE NINTH CIRCUIT REVERSED THIS DECISION FOR WANT OF SUBJECT MATTER JURISDICTION.)

SECTION 14(J) OF THE ACT PROVIDES THAT AN EMPLOYER WHO HAS MADE ADVANCE PAYMENTS OF COMPENSATION "SHALL BE ENTITLED TO BE REIMBURSED OUT OF ANY UNPAID INSTALLMENTS OR INSTALLMENTS OF COMPENSATION DUE." (EMPHASIS ADDED)

SECTION 31(B) OF THE ACT

   I WOULD ALSO LIKE TO BRING TO YOUR ATTENTION AN IMPORTANT PROVISION ADDED TO THE LONGSHORE ACT BY THE 1984 AMENDMENTS AT SECTION 31 AS FOLLOWS:

    (B)(1) NO REPRESENTATION FEE OF A CLAIMANT'S REPRESENTATIVE SHALL BE APPROVED BY THE DEPUTY COMMISSIONER (NOW THE DISTRICT DIRECTOR), AN ADMINISTRATIVE LAW JUDGE, THE BOARD, OR A COURT PURSUANT TO SECTION 28 OF THIS ACT, IF THE CLAIMANT'S REPRESENTATIVE IS ON THE LIST OF INDIVIDUALS WHO ARE DISQUALIFIED FROM REPRESENTING CLAIMANTS UNDER THIS ACT MAINTAINED BY THE SECRETARY PURSUANT TO PARAGRAPH (2) OF THIS SUBSECTION.

(2) (A) THE SECRETARY SHALL ANNUALLY PREPARE A LIST OF THOSE INDIVIDUALS IN EACH COMPENSATION DISTRICT WHO HAVE REPRESENTED CLAIMANTS FOR A FEE IN CASES UNDER THIS ACT AND WHO ARE NOT AUTHORIZED TO REPRESENT CLAIMANTS. THE NAMES OF INDIVIDUALS CONTAINED ON THE LIST REQUIRED UNDER THIS SUBPARAGRAPH SHALL BE MADE AVAILABLE TO EMPLOYEES AND EMPLOYERS IN EACH COMPENSATION DISTRICT THROUGH POSTING AND IN SUCH OTHER FORMS AS THE SECRETARY MAY PRESCRIBE.

   (B) INDIVIDUALS SHALL BE INCLUDED ON THE LIST OF THOSE NOT AUTHORIZED TO REPRESENT CLAIMANTS UNDER THIS ACT IF THE SECRETARY DETERMINES UNDER THIS SECTION, IN ACCORDANCE WITH THE PROCEDURE PROVIDED IN SUBSECTION (J) OF SECTION 7 OF THIS ACT, THAT SUCH INDIVIDUAL-

(I) HAS BEEN CONVICTED (WITHOUT REGARD TO PENDING APPEAL) OF ANY CRIME IN CONNECTION WITH THE REPRESENTATION OF A CLAIMANT UNDER THIS ACT OR ANY WORKERS' COMPENSATION STATUTE;

(II) HAS ENGAGED IN FRAUD IN CONNECTION WITH THE PRESENTATION OF A CLAIM UNDER THIS OR ANY WORKERS' COMPENSATION STATUTE, INCLUDING, BUT NOT LIMITED TO, KNOWINGLY MAKING FALSE REPRESENTATIONS, CONCEALING OR ATTEMPTING TO CONCEAL MATERIAL FACTS WITH RESPECT TO A CLAIM, OR SOLICITING OR OTHERWISE PROCURING FALSE TESTIMONY;

(III) HAS BEEN PROHIBITED FROM REPRESENTING CLAIMANTS BEFORE ANY OTHER WORKERS' COMPENSATION AGENCY FOR REASONS OF PROFESSIONAL MISCONDUCT WHICH ARE SIMILAR IN NATURE TO THOSE WHICH WOULD BE GROUNDS FOR DISQUALIFICATION UNDER THIS PARAGRAPH; OR

(IV) HAS ACCEPTED FEES FOR REPRESENTING CLAIMANTS UNDER THIS ACT WHICH WERE NOT APPROVED, OR WHICH WERE IN EXCESS OF THE AMOUNT APPROVED PURSUANT TO SECTION 28.

   (C) NOTWITHSTANDING SUBPARAGRAPH (B), NO INDIVIDUAL WHO IS ON THE LIST REQUIRED TO BE MAINTAINED BY THE SECRETARY PURSUANT TO THIS SECTION SHALL BE PROHIBITED FROM PRESENTING HIS OR HER OWN CLAIM OR FROM REPRESENTING WITHOUT FEE, A CLAIMANT WHO IS A SPOUSE, MOTHER, FATHER, SISTER, BROTHER, OR CHILD OF SUCH INDIVIDUAL.

   (D) A DETERMINATION UNDER SUBPARAGRAPH (A) SHALL REMAIN IN EFFECT FOR A PERIOD OF NOT LESS THAN THREE YEARS AND UNTIL THE SECRETARY FINDS AND GIVES NOTICE TO THE PUBLIC THAT THERE IS REASONABLE ASSURANCE THAT THE BASIS FOR THE DETERMINATION WILL NOT REOCCUR.

(3) NO EMPLOYEE SHALL BE LIABLE TO PAY A REPRESENTATION FEE TO ANY REPRESENTATIVE WHOSE FEE HAS BEEN DISALLOWED BY REASON OF THE OPERATION OF THIS PARAGRAPH.

(4) THE SECRETARY SHALL ISSUE RULES AND REGULATIONS AS ARE NECESSARY TO CARRY OUT THIS SECTION.

   THUS, ACCORDING TO SECTION 31(B), THE SECRETARY OF LABOR IS AUTHORIZED TO PREPARE AND MAINTAIN A LIST OF PERSONS WHO HAVE PREVIOUSLY REPRESENTED CLAIMANTS FOR A FEE IN CASES UNDER THE ACT AND WHO ARE NOT AUTHORIZED TO REPRESENT CLAIMANTS. SUCH PERSONS MAY NOT RECEIVE A REPRESENTATION FEE.

    DISQUALIFIED REPRESENTATIVES INCLUDE PERSONS WHO HAVE BEEN CONVICTED OF ANY CRIME IN CONNECTION WITH THE REPRESENTATION OF A CLAIMANT UNDER THE ACT OR ANY WORKERS' COMPENSATION STATUTE, WHO HAVE ENGAGED IN FRAUD IN CONNECTION WITH THE REPRESENTATION OF A WORKERS' COMPENSATION CLAIM, WHO HAVE BEEN PROHIBITED FROM REPRESENTING CLAIMANTS BEFORE ANY OTHER WORKERS' COMPENSATION AGENCY FOR REASONS OF PROFESSIONAL ISCONDUCT SIMILAR TO THOSE ENUMERATED HERE OR WHO HAVE ACCEPTED FEES FOR REPRESENTING CLAIMANTS UNDER THE ACT WHICH WERE NOT APPROVED OR WERE IN EXCESS OF THE AMOUNT APPROVED UNDER SECTION 28. 33 U.S.C. §931(B)(2)(B)(I)-(IV).

   THERE ARE EXCEPTIONS , HOWEVER, UNDER WHICH A DISQUALIFIED REPRESENTATIVE MAY NEVERTHELESS SERVE AS A REPRESENTATIVE IN A LIMITED CAPACITY . A DISQUALIFIED INDIVIDUAL IS NOT PROHIBITED FROM REPRESENTING HIMSELF OR FROM REPRESENTING WITHOUT A FEE A CLAIMANT WHO IS A SPOUSE, MOTHER, FATHER, SISTER, BROTHER, OR CHILD OF SUCH INDIVIDUAL.

   A DETERMINATION THAT AN INDIVIDUAL IS A DISQUALIFIED REPRESENTATIVE REMAINS IN EFFECT FOR AT LEAST THREE YEARS. 33 U.S.C. §931(B)(2)(D). UNDER SECTION 31(B)(3), NO EMPLOYEE IS LIABLE TO PAY A REPRESENTATIVE FEE TO ANY REPRESENTATIVE WHOSE FEE HAS BEEN DISALLOWED UNDER THIS SECTION.

SECTION 31(C) OF THE ACT READS AS FOLLOWS:

(C) A PERSON INCLUDING, BUT NOT LIMITED TO, AN EMPLOYER, HIS DULY AUTHORIZED AGENT, OR AN EMPLOYEE OF AN INSURANCE CARRIER WHO KNOWINGLY AND WILLFULLY MAKES A FALSE STATEMENT OR REPRESENTATION FOR THE PURPOSE OF REDUCING, DENYING, OR TERMINATING BENEFITS TO AN INJURED EMPLOYEE, OR HIS DEPENDENTS PURSUANT TO SECTION 9 IF THE INJURY RESULTS IN DEATH, SHALL BE PUNISHED BY A FINE NOT TO EXCEED $10,000, BY IMPRISONMENT NOT TO EXCEED FIVE YEARS, OR BY BOTH.

   SECTION 31(C), AN IMPORTANT SANCTION UNDER THE ACT, PROVIDES THAT A PERSON, INCLUDING BUT NOT LIMITED TO, AN EMPLOYER, HIS AUTHORIZED AGENT, OR AN EMPLOYER OF AN INSURANCE CARRIER WHO KNOWINGLY AND WILLFULLY MAKES A FALSE STATEMENT OR REPRESENTATION FOR THE PURPOSE OF REDUCING, DENYING OR TERMINATING BENEFITS IS SUBJECT TO A FINE NOT TO EXCEED $10,000, FIVE YEARS IMPRISONMENT OR BOTH.

CONCLUSIONS

A FEW BAD APPLES

   SOME COMMENTATORS POSIT THAT SOME DOCTORS AND LAWYERS CAN AND DO MANIPULATE WORKERS' COMPENSATION PROCEEDINGS TO THEIR ADVANTAGE. IT IS OBVIOUS THAT DOCTORS, KEY PERSONAGES IN MOST DISABILITY PROGRAMS, HAVE A PROFOUND INFLUENCE ON THE COST OF BOTH EDICAL TREATMENT AND WORKERS' BENEFITS. AS A RESULT, SOME DOCTORS ARE PAINTED AS PROFESSIONALS WHO TEND TO OVERTREAT, OVERCHARGE AND OFFER OPINIONS WHICH ARE INFLUENCED MORE BY THE SOURCE OF THE PAYMENT THAN BY THE ACTUAL CONDITION OF THE PATIENT. SOME EMPLOYERS AND INSURERS NOW VIEW MEDICAL COSTS AS THE PRIMARY CAUSE OF WORKERS' COMPENSATION PROBLEMS AND, THEREFORE, ARE PUTTING CONSIDERABLE ENERGY INTO HEALTH CARE COST CONTAINMENT STRATEGIES.

   WHILE I AM RELUCTANT TO MENTION THIS TOPIC, I SHALL NOW GIVE EQUAL TIME TO THOSE FEW LAWYERS WHO EITHER MAY ENCOURAGE THE FILING OF FRAUDULENT CLAIMS OR WHO MAY CONDONE SUCH ACTIONS ONCE FILED. SOME ATTORNEYS ARE BELIEVED TO INSTIGATE THE FILING OF FRAUDULENT, WEAK OR UNNECESSARY CLAIMS AND TO ORGANIZE INAPPROPRIATE SCREENINGS TO LOCATE AND IDENTIFY WORKERS WHO ARE THEN ENCOURAGED TO FILE NUISANCE CLAIMS. THE SELF INTEREST OF THESE FEW ATTORNEYS, WHOSE FEES RISE WITH INCREASES IN BENEFITS, TENDS TO TARNISH THE IMAGE OF THE OVERWHELMING W ORITY OF THE ATTORNEYS. THE LEGAL PROFESSION SHOULD POLICE ITSELF IN THIS AREA TO PREVENT CHANGES IN THE ATTORNEY FEE PROVISIONS OF DISABILITY STATUTES, CHANGES WHICH WILL BE DETRIMENTAL TO ALL ATTORNEYS PRACTICING IN THIS FIELD.

WHAT ARE STATES DOING TO DEAL WITH WORKERS' COMPENSATION COSTS?

   IN 1992 ALONE, CONNECTICUT, MINNESOTA AND OKLAHOMA ESTABLISHED FRAUD UNITS AND ALABAMA, MISSOURI AND RHODE ISLAND HAVE STIFFENED THEIR FRAUD PENALTY PROVISIONS. STATES HAVE ALSO ATTACKED THE PROBLEM OF USING WORKERS' COMPENSATION COSTS BY REDUCING BENEFIT LEVELS, BY REDUCING MEDICAL COST INFLATION THROUGH A VARIETY OF COST CONTAINMENT STRATEGIES (I.E., MEDICAL FEE SCHEDULES, AUTHORIZING ANAGED CARE OPTIONS, RESTRICTING THE RIGHT TO CHANGE PHYSICIANS) OR BY EMPHASIZING EFFORTS AT REHABILITATION AND RETURNTO-WORK PROGRAMS. I WOULD ALSO ADD MY OWN VIEW THAT SAFETY IN THE WORKPLACE IS THE MOST DIRECT, EFFECTIVE METHOD OF CONTROLLING WORKERS' COMPENSATION CASELOADS AND COSTS FOR EMPLOYERS, FOR THE STATES AND FOR ALL CONCERNED AT THE FEDERAL LEVEL.

FRAUD--HOW BIG A PROBLEM?

   SOME COMMENTATORS HAVE STATED THAT THERE IS AN INCREASE IN THE FILING OF COMPENSATION CLAIMS IN DIRECT PROPORTION TO THE INCREASE IN BENEFIT LEVELS. THESE SAME COMMENTATORS SUGGEST THAT BENEFITS ADEQUACY SHOULD BE TEMPERED TO REMOVE OR, AT LEASE, MINIMIZE THIS TREND. TO THE EXTENT THAT THIS INCREASE IN FILING CLAIMS REFLECTS AN INCREASE IN THE FILING OF UNNECESSARY OR FRAUDULENT CLAIMS, EMPLOYERS SHOULD BE ENCOURAGED TO REDUCE COSTS BY CONTROVERTING SUSPECTED CLAIMS MORE DILIGENTLY THROUGH AGGRESSIVE LITIGATION ONCE THESE CLAIMS ARE FILED. FRAUD, IN THIS CONTEXT,~MEANS THE FILING OF CLAIMS WHICH INVOLVE OUTRIGHT LIES. I REFER TO "FRAUD" AS INVOLVING SCHEMES WHEREBY UNINJURED WORKERS COLLECT WORKERS' COMPENSATION BENEFITS BY CONCOCTING EVIDENCE OR BY FABRICATING EDICAL EVIDENCE. I REFER TO THOSE WORKERS WHO CLAIM THEY HAVE DISABILITIES THAT IN FACT DO NOT EXIST OR WHO ALLEGE THAT THEIR DISABILITIES WERE CAUSED AT WORK WHEN, IN FACT, THE INJURIES OCCURRED AT HOME. THE THREAD THROUGHOUT THESE FRAUDULENT CLAIMS IS ANUFACTURING DISABILITY WHERE NONE EXISTS OR THE INAPPROPRIATE LINKING OF DISABILITY TO OCCUPATIONAL ETIOLOGY.

   MY RESEARCH HAS LED TO THE TENTATIVE CONCLUSION THAT WHILE ALLEGATIONS OF FRAUD ARE LONG ON ANECDOTAL STORIES, ALLEGATIONS OF WIDESPREAD FRAUD ARE NOT DOCUMENTED BY CASE PRECEDENTS NOT ONLY AT THE OALJ BUT AT THE STATE LEVEL. THERE COULD BE SEVERAL ANSWERS FOR THAT DEARTH OF DATA. INITIALLY, IT COULD BE THAT THESE CLAIMS ARE WEEDED OUT BY THE CLAIMS EXAMINER AT THE INITIAL LEVEL WHERE A CLAIM IS FIRST PROCESSED. OR IT COULD BE THAT SUSPICIOUS CLAIMS ARE NOT AGGRESSIVELY DEFENDED BY THE EMPLOYER, EITHER BECAUSE OF THE EXPENSES INVOLVED IN EMPLOYING SEVERAL PRIVATE INVESTIGATORS FOR ONE WEEK TO CONDUCT SURVEILLANCE OF THE WORKER OR BECAUSE THE EMPLOYER IS CONTENT WITH PAYING 104 WEEKS OF PERMANENT DISABILITY BENEFITS WITH THE SPECIAL FUND BECOMING, IN EFFECT, THE EMPLOYER OF LAST RESORT.

   FRAUDULENT CLAIMS, WHATEVER THEIR NUMBER AND FREQUENCY, ARE GIVING THE WORKERS' COMPENSATION SYSTEM A BAD NAME AND ARGUMENTS THAT FRAUD IS RUINING THE SYSTEM SEEM TO HAVE A PARTICULAR ATTRACTION WITHIN THE FRAMEWORK OF WORKERS' COMPENSATION POLITICAL DEBATES, JUST AS WE DAILY READ IN DEBATES REGARDING SOCIAL WELFARE PROGRAMS. ATTACKS ON BENEFIT LEVELS OR ELIGIBILITY CRITERIA FOR SOCIAL PROGRAMS ARE EASIER TO COUNTENANCE IF THE PEOPLE WHO ARE EXCLUDED FROM THE PROGRAMS ARE PERCEIVED TO BE ALINGERERS AND CHEATS.

WHAT CAN BE DONE

   MY TALK TODAY MAY LEAD SOME TO INFER THAT THE LONGSHORE ACT MAY NOT FULLY BE ABLE TO DEAL WITH FRAUDULENT CONDUCT BY ANY PARTY TO THE PROCEEDING.

   EMPLOYERS ARE ENCOURAGED TO CONTROL WORKERS' COMPENSATION COSTS BY CHALLENGING AND CONTROVERTING ANY AND ALL CLAIMS THAT ARE NOT WORK-RELATED, OR ARE FRIVOLOUS OR FRAUDULENT. JUST LETTING THROUGH THE SYSTEM ONE SUCH CLAIM WILL RESULT IN AN INCREASE IN INSURANCE PREMIUMS THAT WILL COST EACH EMPLOYER THOUSANDS OF DOLLARS. BUT THIS BILL IS REALLY PAID BY THE TAXPAYERS AS THE EMPLOYERS PASS ON THESE COSTS TO THEIR CUSTOMERS.

   "IT MUST BE REMEMBERED ONCE AGAIN THAT THIS (WORKERS' COMPENSATION STATUTE) IS A NON-FAULT SYSTEM AS TO BOTH EMPLOYER AND EMPLOYEE. UNJUST RESULTS, BY CONVENTIONAL STANDARDS, ARE COMMONPLACE." 2A ARTHUR LARSON, WORKMEN'S COMPENSATION LAW, SECTION 68.15(E), AT 13-108. TO THOSE WORDS OF WISDOM I WOULD ADD Y OWN POSTSCRIPT: SOME "UNJUST" RESULTS CAN BE RESOLVED BY AN ADMINISTRATIVE LAW JUDGE. HOWEVER, SOME "UNJUST" RESULTS CAN BEST BE RESOLVED IN THE LEGISLATIVE ARENA, WHETHER ON THE STATE LEVEL OR IN CONGRESS, AFTER HEARINGS AND DUE DELIBERATION, AS WAS DONE IN 1972 AND 1984. ON A TWELVE YEAR CYCLED PERHAPS THE TIME IS RIPE.

   I WOULD LIKE TO END WITH THE WORDS OF THE NINTH CIRCUIT IN THE BRICKNER CASE:

WHAT WE DO KNOW IS THAT IF CLAIMANTS CONTINUE PROCEEDINGS IN THE COURTS WITHOUT REASONABLE GROUND, CONGRESS HAS SEEN FIT TO PROVIDE FOR THE IMPOSITION OF COSTS AS A SANCTION. IT HAS DONE NO MORE. IF THE DIRECTOR, THE BOARD OR OTHERS FEEL THE NEED FOR A FURTHER COST OR ATTORNEY FEE PROVISION, THEY MUST SEEK IT IN CONGRESS.

METROPOLITAN STEVEDORE COMPANY V. BRICKNER; DIRECTOR, OWCP, 11 F.3D 887, 27 BRBS AT 138 (CRT)(9TH CIR. 1993).

CURRICULUM VITAE

DAVID W. DI NARDI
ADMINISTRATIVE LAW JUDGE
U.S. DEPARTMENT OF LABOR
J.W. MCCOMACK POCH RM 507
BOSTON, MA 02109
(617) 223-9355

PROFESSIONAL EXPERIENCE :

1982 TO PRESENT

ADMINISTRATIVE LAW JUDGE
U.S. DEPARTMENT OF LABOR
Boston, MA 02109

1978 to 1982

ADMINISTRATIVE LAW JUDGE
F. Edward Hebert Building
New Orleans, Louisiana

1965 TO 1978

SENIOR STAFF ATTORNEY
FEDERAL TRADE COMMISSION
Boston Regional Office
Boston, MA 02222

ADMISSIONS:

assachusetts Bar (1962); U.S. Court of Military Appeals (1963); U.S. District Court of assachusetts (1965); U.S. Supreme Court (1966) .

EDUCATION:

Georgetown University Law Center Washington, DC 20001 LL.M. Degree (1965)

Boston College Law School Newton CENTRE, MA 02159 J.D. Degree (1962) ember: Boston College Industrial and Commercial Law Review (B.C. Law Review), Moot Court Competition

Boston College Chestnut Hill, MA B.A. Degree (1959)

MILITARY:

U.S. Army Military Intelligence Fort Meade, Maryland, 1962-1964

MEMBERSHIP:

A.B.A., Conference of Administrative Law Judges,
Federal Administrative Law Judges Conference, Boston Bar Association

[ENDNOTES]

1 At the outset, I issue the usual disclaimer that the comments made in this paper, as well as my answers to your questions, are my own and do not necessarily reflect those of anyone else at the Office of Administrative Law Judges or at the Department of Labor.