USDOL OALJ LHWCA Benchbook, Topic 33, Compensation for Injuries Where Third Persons are Liable (2002)

33.1 SECTION 33(a): CLAIMANT'S ABILITY TO BRING SUIT

AGAINST A POTENTIALLY NEGLIGENT THIRD PARTY

     The third-party settlement was solely for the malpractice elements. The judge had noted that the settlement was not for the same disability . The Board looked to the states for guidance and held that where compensation is sought only for disability due to the primary injury, and not for subsequent aggravations resulting from medical treatment, and the third-party settlement relates solely to the latter, Section 33 does not apply. White , 29 BRBS 1 at 7-8. Importantly, no claim was being made for aggravation of the claimant's pre-existing back condition.

[ED. NOTE: Query: Had the malpractice consisted of the aggravating or the worsening of the back condition/disability, would the same result obtain? Look to whether or not the same disability is the subject of both the LHWCA claim and the third party settlement in order to determine if Section 33(g) is applicable. ]

33.2 ASSIGNMENT OF RIGHTS

     The LHWCA also needed, however, to grant the employee the ability to sue in tort for negligence. See Mitchell v. Scheepvaart Matschappij Trans-Ocean , 579 F.2d 1274 ( 5th Cir. 1978); 33 U.S.C. � 933(a). This need was met by granting the employer a 20 percent bounty on the remaining funds after distribution when the employee's right to pursue a third party had vested with the employer.

Pre-1984 Amendments

     The distribution in Section 33(e) prior to the 1984 Amendments was articulated by the Supreme Court in Bloomer v. Liberty Mutual Insurance Co. , 445 U.S. 74 (1980):

The Act makes explicit provisions for the distribution of any amount obtained by the [employer] in a suit brought pursuant to that assignment. The [employer] is entitled to reimbursement of all compensation paid to the employee, and its costs, including attorney fees. Of the remainder, four-fifths is distributed to the longshoreman, and one-fifth "shall belong to the employer."

Id . at 927-28 (citing 33 U.S.C. � 933(e)).

     Although the distribution appears to be a simple formula, Section 33(e) does not always fit the various fact-patterns, such as when a recovery is not large enough to fit the distribution pattern, or when a longshore worker exercises the right to sue a third person after having received compensation payments.

     In Caldwell v. Odgen Sea Transport, Inc. , 618 F.2d 1037 ( 4th Cir. 1980), the Fourth Circuit stated that the 1954 and 1972 Amendments gave the employer an incentive to sue. When the employee did not sue within six months, the right was turned over to the employer. The employer was given a 20 percent "bounty" to pursue the claim. Once this right reverted to the employer, it did not revert back to the claimant. This scheme was subsequently altered by the 1984 Amendments, which allowed the right to pursue a third-party claim to revert back to the employee if the employer did not exercise the right within the ninety days. See 33 U.S.C. � 933(b); see also Rodriguez v. Compass Shipping Co. , 451 U.S. 596 (1981).

     A problem arose when an employee opted to sue a third person prior to the employer's rights in the third-party suit vesting. If the claimant were successful, the employer would be entitled to an offset pursuant to Section 33(f), no matter how the claimant's attorney recovered the money. In Nacirema Operating Co., Inc. v. Oosting , 456 F.2d 956 ( 4th Cir. ), cert . denied , 409 U.S. 980 (1972), the Fourth Circuit held that, although Section 33(e) does not provide for the claimant's legal expenses, an employee's reasonable attorney fees and expenses must be deducted from the recovery.

     In such third-party suits, the Fifth Circuit recognized a right of subrogation by the employer to the extent that payments were made, thus allowing the employer to intervene in the claimant's third-party suit. See Allen v. Texaco, Inc. , 510 F.2d 977 ( 5th Cir. 1975) (citations omitted). "Absent a waiver of this subrogation, the effect of the settlement terms ... is simply to transfer the obligation automatically to reimburse the employer from the worker to the third party." Taylor v. Bunge Corp. , 843 F.2d 498 ( 5th Cir. ) (unpublished), cert . denied , 488 U.S. 910 (1988); see also Allen , 510 F.2d at 977.

     A waiver of the subrogation rights may bar a lien against, and participation in, the proceeds of a settlement between the employee and the third party. LeBlanc v. Petco, Inc. , 647 F.2d 617, 620 ( 5th Cir. ), cert . denied , 454 U.S. 1085 (1981); Allen , 510 F.2d at 977.

     In cases where the recovery in the third-party settlement is enough to permit the attorney's fee to be subtracted entirely from the longshore recovery, the employer was still obligated to pay some of the longshore employee's attorney fees. This obligation was due to the fact that the employer had benefitted by the employee's recovery. See Mitchell , 599 F.2d at 1276-77.

     The Ninth Circuit adopted a "pro-rata" rule rather than a "fund" rule. See Bachtel v. Mammoth Bulk Carriers, Ltd. , 605 F.2d 438 ( 9th Cir. 1979), vac'd , 451 U.S. 978 (1981). Under a pro-rata rule the stevedore/employer is taxed with a proportionate share of the reasonable fee of the longshore employee's attorney. Under the fund rule , attorney fees come off the top of the recovery, then the lien is paid in full and the injured party receives the residue.

     In Bloomer v. Liberty Mutual Insurance Co. , 445 U.S. 74, 75 (1980), the Supreme Court was faced with the question of whether a stevedore's lien must be reduced by a proportionate share of the longshoreman's expenses in obtaining recovery from the shipowner, or whether the stevedore is entitled to be reimbursed for the full amount of the compensation.

     The Supreme Court needed to reconcile differing formulations of Section 33(e) among the circuits. The Ninth and Fourth Circuits had held that the employer should bear part of the legal expenses of the employee. The First and Second Circuits had determined that the employer should not bear any of the costs. Finally, the Fifth Circuit had held that liability for legal expenses should be determined on a case-by-case basis. 445 U.S. at 77 n.3 (citing Bachtel v. Mammoth Bulk Carriers , 605 F.2d 438 ( 9th Cir. 1979); Swift v. Bolten , 517 F.2d 368 ( 4th Cir. 1975); Cella v. Partenreederei MS Ravenna , 529 F.2d 15 ( 1st Cir. 1975), cert . denied , 425 U.S. 975 (1976); Mitchell , 599 F.2d 1274).

     The Court determined that the claimant's attorney's fee cannot be extracted from the employer's lien on claimant's third-party recovery. The Court noted that the LHWCA does not make provisions for the employee to pay a portion of the employer's legal fees, even though the employee is due to receive 80 percent of the remainder after the formula in Section 33(e) has been satisfied. Bloomer , 445 U.S. at 80-85.

     The post- Bloomer cases dealt with the application of Bloomer to situations where the recovery was insufficient to cover both the attorney fee and the employer's lien. In Incorvaia v. Hellenic Lines , 668 F.2d 650 ( 2d Cir. 1982), cert . denied , 459 U.S. 967 (1982), the Second Circuit held that a reasonable attorney fee is given priority and the employer's lien is taken from the net amount.

     The Seventh Circuit , in Johnson v. Sioux City & New Orleans Barge Lines , 629 F.2d 1244 ( 7th Cir. ), cert . denied , 449 U.S. 987 (1980), held that the attorney fee is calculated based on the net remainder after the employer's compensation lien is satisfied. In Ochoa v. Employers National Insurance Co. , 724 F.2d 1171 ( 5th Cir. ), vacated , remanded , 469 U.S. 1082 (1984), on remand , 754 F.2d 1196 ( 5th Cir. 1985), the Fifth Circuit , siding with the Second Circuit , determined that Congress intended the compensation lien to come out of the net recovery.

     The Second Circuit questioned whether the employer would sue if the likelihood of recovery were not large enough to cover legal fees and compensation already paid. See Del Re v. Prudential Lines, Inc. , 669 F.2d 93 ( 2d Cir. ), cert . denied , 459 U.S. 836 (1982). Using a "ratification theory," the Second Circuit envisions the employer allowing the longshore worker to sue. This view creates a situation where the employer cannot lose: if the longshore worker wins, the employer receives the compensation already paid; if the longshore worker loses, the employer loses nothing. In both cases, the employer does not bear the costs of litigation pursuant to Section 33(e).

Post-1984 Amendments

     In 1984, the LHWCA was amended to exclude the 80/20 split in the excess profits on the remainder of the excess after the attorney fee and compensation liens are satisfied. The post-1984 application of Section 33(e) was set forth in Bartholomew v. CNG Producing Co. , 862 F.2d 555 ( 5th Cir. 1989). In that case, the Fifth Circuit stated:

First one must determine the net amount of recovery, which is defined under the statute as the total recovery ... minus ... legal expenses incurred. The net amount of recovery is then compared to the amount which was due as compensation. ... If the net amount of recovery exceeds the amount of compensation due to the employee ... the employer is not required to pay anything to the employee and any previous payments by the employer would have to be refunded by the employee from [his] recovery in accordance with 933(e).

Id . at 558. Also, the Bartholomew decision held that, pursuant to Section 33(f), the carrier is not required to bear a portion of a successful longshore attorney fee. Id . at 556.

     An award of interest by a bankruptcy court does not conflict with Section 16 or Section 33 of the LHWCA. Hudson v. Puerto Rico Marine, Inc. , 27 BRBS 183 (1993). The Board, in Hudson , noted that the employer's lien under Section 33(f) was on the proceeds of the third party settlement. As Section 33(a) refers to third party suits for "damages," no part of the employer's lien or the interest awarded thereon can be considered "compensation" within the meaning of Section 16. Hudson , 27 BRBS at 186. The Board noted that although Section 33(e) does not mention interest, that section is not applicable because it addresses a situation where an award has been issued and the rights of the person entitled to compensation to pursue a remedy for damages against a third party is assigned to the employer under Section 33(b).

33.6 EMPLOYER CREDIT FOR NET RECOVERY BY "PERSON ENTITLED TO COMPENSATION"

[ED. NOTE: This Section on 33(f) should be used in cooperation with Section 33.7 [which deals with Section 33(g) of the LHWCA]. Most of the jurisprudence dealt with in this section directly addresses Section 33(g) issues as well. ]

     Section 33(f) of the LHWCA provides:

If the person entitled to compensation institutes proceedings within a period prescribed in Section 33(b), the employer shall be required to pay as compensation under this Act a sum equal to the excess of the amount which the Secretary determines is payable on account of such injury or death over the net amount recovered against such third person. Such net amount shall be equal to the actual amount recovered less the expenses reasonably incurred by such person in respect to such proceedings (including reasonable attorney fees).

33 U.S.C. � 933(f).

     Under both Sections 3(e) and 33(f) , the statutory language provides that an employer's offset is limited to the net amount of the recovery from a settlement for the same injury, disability or death which is the subject of the claim under the LHWCA. See Bundens v. J.E. Brenneman Co. , 46 F.3d 292, 29 BRBS 52 (CRT) ( 3d Cir. 1995); Lustig v. United States Department of Labor , 881 F.2d 593, 22 BRBS 159 (CRT) ( 9th Cir. 1989). Prior to the enactment of Section 3(e) and amendment to Section 33(f) in 1984, case law provided a net credit to employers. See Ochoa v. Employers National Ins. Co. , 724 F.2d 1171 ( 5th Cir. 1984), reaff'd following remand , 754 F.2d 1196, 17 BRBS 49 (CRT) ( 5th Cir. 1985); Puget Sound Bridge & Dry Dock Co. v. O'Leary , 260 F. Supp. 260 ( D.C.Wash. 1966); Luke v. Petro-Weld, Inc. , 14 BRBS 269 (1981); Adams v. Parr Richmond Terminal Co. , 2 BRBS 303 (1975). Similarly, Section 14(j) refers to a credit for advance payments of compensation, which contemplates amounts paid to claimant, and the credit doctrine allows a credit for the actual amount of benefits paid. See Director, OWCP v. Bethlehem Steel Corp. (Brown) , 868 F.2d 759, 22 BRBS 47 (CRT) ( 5th Cir. 1989). An employer is entitled to credit from third party proceeds only when the injury for which benefits are paid under the LHWCA is the sole and same injury that gives rise to the third party recovery. Todd Shipyards Corp. v. Director, OWCP , 139 F.3d 1309 ( 9 ^th Cir. 1998).

     "Under Section 33(f), if the person entitled to compensation institutes proceedings against a third party , the employer is entitled to credit the net recovery from the third party settlement against the compensation owed to the claimant under the LHWCA. The net amount is the amount actually recovered minus the expenses reasonably incurred, including attorney fees." Jones v. U.S. Steel Corp. , 25 BRBS 355, 356 n.2 (1992); see Jenkins v. Norfolk & Western Railway Co. , 30 BRBS 109 (1996) ("Attorney's fees are excluded in calculating the amount of the offset pursuant to Section � 33(f) because, as Claimant was never in receipt of the funds designated as attorney's fees, there is no danger of double recovery for the disability in question") (citing  Lustig v. United States Department of Labor , 881 F.2d 593, 595-96, 22 BRBS 159, 161 (CRT) ( 9th Cir. 1989)); see also Banks v. Chicago Grain Trimmers Ass'n , 390 U.S. 459 (1968); Taylor v. Plant Shipyards Corp. , 30 BRBS 90 (1996) ("Section 33(f) allows the employer to offset only that portion of a third-party settlement attributable to the claimant." (citing Force v. Director, OWCP , 938 F.2d 981, 985, 25 BRBS 13, 18-19 (CRT) ( 9th Cir. 1991)).

     According to the Fifth Circuit , if the claimant's third party recovery exceeds the amount of compensation due, the employer has no further compensation obligation. Bartholomew v. CNG Producing Co. , 862 F.2d 555 ( 5th Cir. 1989).

     Only the Third Circuit has addressed the issue of what constitutes a "third person." In Bundens v. J.E. Brenneman Co. , 29 BRBS 52 (CRT) (1995), 46 F.3d 292 ( 3d Cir. 1995), the Third Circuit held that when an employer, acting in its capacity as a vessel owner, settles a negligence suit under Section 5(b) (commonly called a "905(b) action" in practice), the employer is considered a third person . The Third Circuit stated that the only meaningful interpretation of Section 33(f) is to treat the employer as a third party whenever the employee recovers funds from the employer in other legal proceedings. The Third Circuit stated:

It seems clear that if an employer is able to offset his liability under the LHWCA with monies previously paid by others under a tort settlement, then there is even stronger reason to allow the employer to offset monies paid in a tort settlement when the employer is the one who previously paid the monies. Under Sec. 33(f), an employer who settles a tort suit as a vessel owner must be construed as a third party. To hold otherwise would create a perverse result: an employer would have to pay a double recovery simply because he is the owner of the vessel, whereas if another party is the owner of the vessel and the employee settles with that third party for a net sum which exceeds the amount to which he is entitled under the LHWCA, the employer would pay nothing.

29 BRBS at 69 (CRT), 46 F.2d at 303.

     An employer is entitled to a Section 33(f) credit only when a claimant receives some form of compensation based upon the injury for which the employer would be liable under the LHWCA. Chavez v. Todd Shipyards Corp. , 27 BRBS 80 (1993), aff'd on recon . en banc 28 BRBS 185 (1994), aff'd 139 F.3d 1309 ( 9th Cir. 1998).

     In Chavez , the claimant received a LHWCA disability award for a combination of hypertension and work-related asbestosis. Pursuant to Section 33(a), the claimant sued third-parties for the disability caused by asbestosis. The Board held that if only the claimant's asbestosis is work-related, then the employer may offset its liability against the entire net recovery from third-party litigation. Chavez , 27 BRBS at 87. According to the Board, if the claimant's hypertension alone, or if both the hypertension and asbestosis are work-related, then the employer is not entitled to offset its liability under Section 33(f) because the claimant could have sought benefits for the hypertension alone and received permanent total disability based on the aggravation rule. Id .

     On reconsideration in Chavez , the Board acknowledged that no case law had been cited which interprets Section 33 where a claimant has two potentially work-related disabling conditions and files suit against a third-party due to one of those conditions . Under those circumstances, the Board deferred to the "reasonable interpretation of the Director, who is the administrator of the Act" and affirmed its earlier holding.

[ED. NOTE: Compare the above with O'Berry v. Jacksonville Shipyards, Inc. (O'Berry I) , 21 BRBS 355 (1988), on recon . ( O'Berry II ), 22 BRBS 430 (1989), wherein the Board noted that two claims filed by the claimant related to the same disability because both asbestosis and siderosis (arc welder's disease) involve occupational lung disease resulting in respiratory impairment. The Board noted that Section 33(a) specifically refers not to injury but to suits resulting from disability but held that because the claimant was not receiving compensation at the time that he settled third-party suits resulting from his respiratory disability, Section 33(g) was not a bar. See supra , Topic 33.1 for a more thorough discussion of O'Berry . ]

     Judge McGranery strongly dissented, stating that the employer should be entitled to an offset for the entire net amount of the third-party settlements, as the settlements are for the "same disability" for which the claimant received compensation under the LHWCA. She further stated that the fact that the claimant may have another condition, work-related or not, is irrelevant to this inquiry.

     Judge McGranery opined that, given the fact that the employer is liable for the entire disability under the aggravation rule, whenever the disability is caused by a combination of disabilities, it makes no sense to deny the employer a credit if both injuries are work-related. She further stated that consistency mandates that the employer is always entitled to a credit for third-party settlements for a work-related injury whether or not that injury combined with another injury to create the compensable disability.

Calculating the Section 33(f) credit

     In order to calculate the Section 33(f) credit, one must break down a claimant's recovery to its net amount. This amount is calculated by taking a claimant's total recovery and subtracting the legal expenses incurred by the claimant. This net amount is then compared to the amount which is due as compensation. If the net amount of recovery exceeds the amount of compensation due, then the employer is not required to pay anything to the claimant. Any previous payments by the employer would be refunded from the claimant's recovery. Bartholomew v. CNG Producing Co. , 862 F.2d 555, 22 BRBS 42 (CRT) ( 5th Cir. 1989); see also Naciema Operating Co. v. Oosting , 456 F.2d 956 ( 4th Cir. ), cert . denied , 409 U.S. 980 (1972); Chavez , 27 BRBS at 81; 33 U.S.C. � 933(e).

     If the claimant's third-party recovery is less than what the employer would be required to pay, the employer only pays the difference between the third-party recovery and the compensation, see Inscoe v. Acton Corp. , 19 BRBS 97 (1986), provide that the provisions of Section 33(g) are complied with. Regardless of whether the recovery is more than or less than the compensation due, the employer is entitled to set off any net recovery from a third party. Jackson v. Land & Offshore Servs., Inc. , 855 F.2d 244, 21 BRBS 163 (CRT) ( 5th Cir. 1988); Treto v. Great Lakes Dredge & Dock Co. , 26 BRBS 193 (1993) (employer may waive its lien but this does not prejudice its right to the Section 33(f) offset).

     In Henderson v. Ingalls Shipbuilding, Inc. , 30 BRBS 150 (1996), the Board, relying upon the Fifth Circuit's opinion in Ingalls Shipbuilding, Inc. v. Director, OWCP (Yates) , 65 F.3d 460 ( 5th Cir. 1995) (affirmed by the Supreme Court on February 18, 1997, 519 U.S. 248 (1997)), stated that under Section 33(f), "the employer is entitled to credit only the net amount received from post-death third-party settlements by the non-dependent children." Id . oreover, the Board maintained that the employer bears the burden of proof regarding apportionment of third party settlements. First, the Board determined, notwithstanding the fact that "provisions contained in the post-death settlement releases provide a contractual basis for allowing employer to offset the net amount of the recoveries of both claimant and the non-dependent children," that the provisions did "not clearly indicate an intent to grant employer a credit against any larger portion of the settlement amount than would be subject to a compensation lien." Id . Second, "a compensation lien would be imposed on only the settlement proceeds received by the widow inasmuch as she was the only party to the settlement who was entitled to compensation." Id . With regard to pre-death settlements entered into by the claimant and decedent, the Board again cited to the Fifth Circuit's Yates decision and found that the claimant's right to death benefits had not, at that time, vested such that she was not "a person entitled to compensation" under the LHWCA for purposes of Section 33(f) and, therefore, employer was not entitled to "an offset against claimant's death benefits for the pre-death settlement recoveries." Id .

      In dealing with the Section 33(f) credit, the credit is not limited to the claimant's economic loss. The credit is also applied to such items as pain and suffering and death benefits. The employer's credit also includes payments for any future medical benefits for which the employer would be liable. Inscoe v. Acton Corp. , 19 BRBS 97 (1986).

     However, contrast this with the situation where a claimant's medical expenses are paid by a third party insurer, but the claimant, nevertheless, has the right to recover these from his employer and, thus, has the right to use the full amount of medical expenses to exhaust his third-party tort recovery credit. Texports Stevedores v. Director, OWCP , 28 BRBS 1 (CRT) (1991), 931 F.2d 331 ( 5th Cir. 1991).

      The computation of the Section 33(f) credit is not predicated on discounting accrued compensation to present value. Texports Stevedores v. Director, OWCP , 28 BRBS 1(CRT) (1991). 931 F.2d 331 ( 5th Cir. 1991); Gilliland v. E.J Bartells Co., Inc. , 270 F.3d 1259 ( 9 ^th Cir. 2001), upholding , 34 BRBS 21 (2000); Cretan v. Bethlehem Steel Corp. , 24 BRBS 35 (1990), aff'd in part and rev'd in part , 1 F.3d 843, 27 BRBS 93 (CRT)( 9th Cir. 1993), cert denied , 512 U.S. 1219 (1994)(Employer was entitled to an offset in the amount of the lump sum payment, plus a "continuing credit" based on the actual payments made each month to the claimant.); Gilliland .

[ED. NOTE: In Gilliland, the Board noted that although the Ninth Circuit's decision in Cretan was overruled by Ingalls Shipbuilding, Inc. v. Director, OWCP [Yates] , 519 U.S. 248, 31 BRBS 5 (CRT)(1997), neither court addressed the portion of the Board's decision relevant to the value issue. The Board's decision was based on its decision in Maples v. Textports Stevedores Co. , 23 BRBS 302, aff'd sub nom . Textports Stevedores Co. v. Director, OWCP , 931 F.2d 331, 28 BRBS 1 (CRT) ( 5 ^th Cir. 1991). The Ninth Circuit in Gilliand deferred to the Director's method (which supported the employer's position). The Ninth Circuit reasoned that Congress' failure to mandate a present-value computation in Section 33(f) suggests that it did not intend an award of a stream of payments to be discounted to present value.

The most compelling reason for not using the present value method of credit is to protect claimants. If the credit is taken only as the money is actually received, the risk for non-payment by the annuity company is placed on the employers and not on the claimants: i.e., if the credit is taken from the purchase price, the employer is free from liability from that point until the credit is expended, whereas, if the credit is taken against each payment, non-payment by the annuity company acts to reinstate the employer's liability sooner. Thus, claimants are protected from risk of loss and there will be no under compensation. ]

     The Fifth Circuit further noted that the consistent administrative practice under the LHWCA has always been to compute deficiency compensation by allowing only a dollar-for-dollar credit. The Fifth Circuit noted that, according to the Supreme Court , "[c]onsiderable weight should be accorded to an executive department's construction of a statutory scheme it is entrusted to administer." Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. , 467 U.S. 837, 844 (1984).

33.6.1 "Person Entitled to Compensation" Pursuant to Section 33(f)

      Historically , the term "person entitled to compensation" represented two different interpretations pursuant to Section 33(f) and 33(g) . (This might still be true. See Ingalls Shipbuilding, Inc. v. Director, OWCP (Yates) , 519 U.S. 248 (1997), discussed infra .) As to Section 33(f), a claimant did not have to be receiving payments at the time the third-party dispute was resolved in order to qualify as a "person entitled to compensation." Armand v. American Marine Corp. , 21 BRBS 305 (1988); but see Castorina v. Lykes Bros. Steamship Co. , 21 BRBS 136 (1988). This determination that a claimant was a "person entitled to compensation" could be made at any particular time. The most important aspect is to determine if the claimant will recover twice from the same injury. See Force v. Director, OWCP , 938 F.2d 981 ( 9th Cir. 1991).

     Therefore, if a claimant makes a settlement with a third party two years prior to bringing a claim, assuming no Section 33(g) problems, the employer may nonetheless request a set off. Again, if a claimant enters into a settlement two years after receiving a compensation order, at that point the employer may request a credit and, for Section 33(f) purposes, the claimant has become a "person entitled to compensation."

     Compare this reading to that of Section 33(g) prior to Estate of Cowart v. Nicklos Drilling Co. , 505 U.S. 469 (1992). The Board, for purposes of Section 33(g), had held that "one must be receiving benefits either voluntarily or pursuant to an award" in order to be a "person entitled to compensation." See O'Leary v. Southeast Stevedoring Co. , 7 BRBS 144 (1977). Subsequently, the Supreme Court defined the term "person entitled to compensation" as a person whose right to compensation vests upon injury. Cowart , 505 U.S. at 477. Importantly, the Supreme Court , in Cowart , stated that similar terms must be read the same within the LHWCA and, therefore, Section 33(g) and Section 33(f) must be read similarly. However, the Ninth Circuit , as noted below, decided that this standard was dicta .

     The Ninth Circuit dealt with the post- Cowart definition of "person entitled to compensation" in Cretan v. Bethlehem Steel Corp. , 1 F.3d 843 ( 9th Cir. 1993), cert . denied , 512 U.S. 1219 (1994).

     The Ninth Circuit decided that this statement was dicta because it would read out the purpose of Section 33(f). The court opined that the Supreme Court had not contemplated this situation when it decided Cowart . As a result, the Ninth Circuit upheld Force v. Director, OWCP , 938 F.2d 981 ( 9th Cir. 1991). Therefore, a widow signing third-party settlements while her husband was alive, was a "person entitled to compensation." Id .

     Following Ninth Circuit precedent, the Board in Force v. Kaiser Aluminum and Chemical Corp. , 30 BRBS 128 (1996) reiterated that "an injured employee's spouse and daughter were persons 'entitled to compensation' under both Sections 33(g)(1) and 33(f) of the [LHWCA] � at the time they settled their potential wrongful death actions prior to the death of the employee." Kaiser , 30 BRBS 128 (1996). Thus, Section 33(f) could be "applied to provide employer with any offset [of the settlement proceeds] against [the Claimant's] death benefits." Id .

      But, the Fifth Circuit (and now the Supreme Court ) disagrees with the Ninth Circuit . See Ingalls Shipbuilding, Inc. v. Director, OWCP (Yates) , 65 F.3d 460 ( 5th Cir. 1995), aff'd 519 U.S. 248 (1997). In noting this circuit court conflict, the U.S. Supreme Court granted certiorari to hear the issue and made their ruling on February 18, 1997 in Yates .

The Yates Decision

[ED. NOTE: The issue of whether the "sins" of the employee/claimant can be transferred to the spouse (widow/widower) was initially raised in Kaye v. California Stevedore & Ballast , 28 BRBS 240, 251 (1994). In Kaye , the Board, in noting that some of the third-party settlements in question had been entered into solely with the now-deceased employee/husband, stated: "[I]t is questionable whether these settlements have any bearing on whether claimant's claim is subject to the provisions of Section 33(g)(1). We need not enter this thicket today, however..." Id . But, this "thicket" was entered into recently by the United States Supreme Court in Ingalls Shipbuilding, Inc. v. Director, OWCP (Yates) , 519 U.S. 248 (1997). ]

     On February 18, 1997, the Supreme Court resolved the conflict between the Ninth Circuit in Cretan v. Bethlehem Steel Corp. , 1 F.3d 643, 27 BRBS 93 (CRT) ( 9th Cir. 1993), cert.   denied , 512 U.S. 1219 (1994) and the Fifth Circuit in Ingalls Shipbuilding, Inc. v. Director, OWCP , 65 F.3d 460, 29 BRBS 113 (CRT) ( 5th Cir. 1995) when it entered its decision in Ingalls Shipbuilding, Inc. v. Director, OWCP (Yates) , 519 U.S. 248 (1997). In Yates , the wife of the living employee/claimant entered into pre-death settlements of her husband's third party lawsuits without obtaining the employer's approval. Affirming the Fifth Circuit's decision, the Supreme Court concluded that Section 33(g) did not bar the respondent's death benefits claim because she was not "a person entitled to compensation" at the time of the pre-death settlements. See Travelers Ins. Co. v. Marshall , 634 F.2d 843, 846 ( 5th Cir. 1981) ("a cause of action for death benefits certainly does not arise until death.").

     The Yates Court determined that, in conformance with Cowart and with the plain language of the statute, one must be a "person entitled to compensation" at the time of the third party settlement. Yates , 519 U.S. at 255. Thereafter, the Court held that in order to be a "person entitled to compensation" under 33(g), the wife must be able to satisfy the prerequisites for obtaining death benefits at the time of the settlement. Therefore, since a death claim does not arise until the death of the employee, the widow was not yet "a person entitled to compensation" when she entered into the third party settlement and, thus, had no duty to obtain her husband's employer's consent to the third party settlement pursuant to Section 33(g).  Id . In so holding, the Court stated that the "relevant time for examining whether a person is 'entitled to compensation' is the time of the settlement." Id .

     In addition, the Yates Court inferred that its decision is not necessarily limited to 33(g) and that the phrase "person entitled to compensation" could, in fact, be interpreted differently for purposes of Section 33(f). Id . at 255. ("This entire argument, however, presupposes that the definition we today give to 'person entitled to compensation' under � 33(g) applies without qualification to � 33(f) as well. This is a question we have yet to decide, and is one we leave for another day." Id .)

"Person Entitled to Compensation" as it Applies to "Retirees" in Occupational Disease Claims

     Further, the Board held that the forfeiture provision of Section 33(g) applies only if the third-party settlement obtained without employer's prior written approval is for an amount less than the compensation to which the person . . . would be entitled under the LHWCA. 33 U.S.C. � 933(g)(1)." In this vein, the Board reaffirmed its holding that the term compensation, as used in Section 33(g), does not include medical benefits. The Board also reaffirmed its prior holding that the aggregate third-party settlements should be used in making the less than comparison.

     However, the Board vacated its prior holding that the less than determination is a comparison between the net amount of the third-party settlement recoveries and the amount of compensation to which the claimant would be entitled. Instead, the Board adopted the Third Circuit's reasoning in Bundens v. J.E. Brenneman , 46 F.3d 292, 305 ( 3d Cir. 1995), that the LHWCA specifies net amount in Section 33(f), but not in Section 33(g), and therefore the gross amount of the aggregate third- party settlement recoveries should be used for comparison under Section 33(g). This implies the comparing of the gross amount of the settlement to the compensation benefits for purposes of Section 33(g) while using the net amount for purposes of the offset provision of Section 33(f)).

     The Board also affirmed its holding that, where the forfeiture provision of Section 33(g) does not apply, the offset provision of Section 33(f) does not extinguish the employer's total statutory liability. Instead, Section 33(f) merely provides an employer with a credit in the amount of the net third-party recovery against its liability for both compensation and medical benefits. While this may have the practical effect of extinguishing the employer's liability in many cases, if there is ongoing liability for medical benefits, it may not.

Effect of Filing a Claim

     There have been instances where workers allegedly exposed to asbestos have filed LHWCA claims, filed third-party actions, and entered into "unauthorized" [as per Section 33(g)] third-party settlements. What effect these filings and third-party settlements have on their outstanding LHWCA claims became an issue in the mid 1990s. In what has become know as the "Gladney group" of cases there were approximately 3,000 cases filed by claimants who were allegedly exposed to asbestos during the course of their employment with Ingalls Shipyard. After the cases were transferred to OALJ, the employer filed a motion for summary judgment for the consolidated cases, and the claimants were ordered to show cause why the motion should not be granted. Ingalls contended that the claimants entered into third-party settlements without its prior approval and that, therefore, all were barred from seeking compensation under the LHWCA pursuant to Section 33(g).

     The Ninth Circuit , affirming the Board and the judge, reasoned that Mobley's settlements were for an amount that exceeded compensation as he was found not to be entitled to compensation. Id . Therefore, a settlement for $1.00 would have been greater than the compensation to which Mobley was entitled.

     In this respect, the Ninth Circuit's pre- Cowart holding placed it at odds with the Fifth Circuit . The Ninth Circuit's position was that an employee-claimant was a "person entitled to compensation" only after a court awarded the employee-claimant benefits, or the employer voluntarily pays benefits. The Fifth Circuit , on the other hand, took the position that an employee-claimant was a "person entitled to compensation" at the time the injury occurs, regardless of whether the employee-claimant ever receives compensation.

     Under either approach, if a claimant received written approval of a settlement and was later determined not to be disabled, the employer would pay nothing. Similarly, if a claimant had written approval, and was found to be disabled, the employer would either owe nothing if the third-party settlements exceeded employer's liability, or, at a minimum, the employer would receive a credit for previously paid compensation and, therefore, would owe much less than if the claimant had not entered into a third-party settlement, provided of course, he had received the employer's written approval of the settlement.

     This is accomplished largely through court cases, and through provisions in the LHWCA, when the employer has already discharged its compensation liability. See Villanueva v. CNA Ins. Cos. , 868 F.2d 684 ( 5th Cir. 1989); Peters v. North River Ins. Co. , 764 F.2d 306, 312 ( 5th Cir. 1985); Allen v. Texaco, Inc. , 510 F.2d 977, 979-80 ( 5th Cir. 1975).

     Using Marshall v. Pletz , 317 U.S. 383 (1943), the Ninth Circuit stated that medical benefits were not compensation , as the LHWCA sets out a definition of compensation that does not include medical benefits. The court also pointed to the fact that, although Section 33(g)(2) mentions medical benefits, Section 33(g)(1) does not. According to the Ninth Circuit , if Congress had wanted medical benefits to be attributable to 33(g)(1), Congress could have included the phrase in both subsections. Mobley , 920 F.2d at 560-61.

[ED. NOTE: The Board's position is in accord with this. See Harris I , 28 BRBS at 264 (1994), aff'd and modified on recon . en banc , Harris II , 30 BRBS at 16 (1996). In fact, in Harris II , the en banc Board stated that if at the time of third-party settlements a claimant was entitled only to medical benefits, the claimant's failure to comply with Section 33(g)(1) cannot bar the claim as the claimant was not a "person entitled to compensation." Harris II , 30 BRBS at 16 (1996) (en banc). ]

     In determining whether proper notice was given, the Ninth Circuit adopted the position of the Board that "[s]o long as the employer has notice of the settlement before it has made any payments and before the Agency orders it to make payments, the purposes of the statute are satisfied." Id . at 561. This notice requirement will not result in prejudice to the employer. See Mobley v. Bethlehem Steel Corp. , 20 BRBS 239 (1988). It enables the employer to protect its right to a set-off of future obligations and to protect its right to reimbursement from proceeds already paid. Mobley , 920 F.2d at 561 (citing Bloomer v. Liberty Mut. Ins. Co. , 445 U.S. 74 (1980)); Dodge v. Mitsui Shintaku Ginko K.K. Tokyo , 528 F.2d 669 ( 9th Cir. 1975), cert . denied , 425 U.S. 944 (1976).

     The Ninth Circuit had also held that a claimant who files a civil suit against a third party, which suit is later consolidated and settled as a whole, is not barred under Section 33(g)(1). This holding, however, was based on the particular facts of the case: there was no evidence that the agreement was signed by any of the parties; the claimant had not accepted any settlement amounts; his attorney did not approve; and any check received was returned. Chavez v. Director, OWCP , 961 F.2d 1409, 1413 ( 9th Cir. 1992), aff'd 139 F.3d 1309 ( 9th Cir. 1998).

33.7.1.3 Fourth Circuit

     The second agreement was to the Sellmans in satisfaction of any claims brought against the defendants. The amount here was for $250,000. One of the actions was initiated by Mrs. Sellman for loss of consortium. The same parties signed this agreement with the exception of I.T.O. Corporation. Both settlements integrated sections of the other. Id .

     A petition for approval by the Baltimore Circuit Court was drafted containing provisions that differed from the settlement agreements. The settlements were silent as to whether I.T.O. could suspend compensation, or receive an offset from the proceeds of the settlement, yet the petition agreement stated that I.T.O. would not terminate compensation and medical benefits, and would not receive an offset as the proceeds of the settlement were for Mrs. Sellman's loss of consortium. Id .

     The judge determined that the petition was incorporated into the settlement agreement and relied on documentary and testimonial evidence that I.T.O. intended to continue payments. The judge also found that Mr. Sellman was excused from filing the government form of third-party approval (LS-33) and that the funds were for Mrs. Sellman's loss of consortium and thus not subject to offset. The Board affirmed. I.T.O. appealed the finding that it could not terminate compensation and medical benefits, or that it was not entitled to an offset. Id . at 240-41.

     The broad purpose of Section 33(g) is to protect the employer from an employee accepting too little for the cause of action against the third party. Banks v. Chicago Grain Trimmers Ass'n, Inc. , 390 U.S. 459 (1968). The Fourth Circuit saw that this purpose would be ill-served if the employer were able to participate in and help negotiate the settlement, then refuse to approve the settlement and terminate benefit payments, especially when the employer's settlement was intermeshed with the claimant's . Sellman , 954 F.2d at 242. The court appeared to limit this denial of Section 33(g) relief, however, to those instances where the employer participates in the settlement.

     In Brown & Root, Inc. v. Sain , 162 F.3d 813 ( 4 ^th Cir. 1998), the Fourth Circuit considered when a claimant who had suffered an occupational disease became a "person entitled to compensation." In Sain , the employee was exposed to asbestos during the course of his employment with the employer. In 1988, he was diagnosed with asbestosis and filed a civil suit against several asbestos manufacturers, but continued to work full time until his retirement in 1993 and part-time thereafter. In 1994, the employee was diagnosed with advanced mesothelioma and died later that year. Between 1988 and 1994, the employee and his wife entered into several third-party settlements without the written approval of the employer. The court rejected the employer's contention that the employee became a "person entitled to compensation" either at the time of his last exposure to asbestos in 1976, or at the time of his asbestosis in 1998.

     The Fourth Circuit , in Sain , also held that medical benefits are not to be taken into account in the Section 33(g)(1) calculation, since the term "medical benefits" is used in Section 33(g)(2) but not in Section 33(g)(1). The court, in Sain , also rejected the employer's contention that the net amount of the third-party settlements, not the gross amount, should be used in the Section 33(g)(1) calculation.

     The Fourth Circuit also held that Metropolitan Stevedore Co. v. Rambo [Rambo II] , 521 U.S. 121 (1997)(Although employee's injuries had not diminished his present wage-earning capacity, he could be entitled to a nominal award if there is evidence of a significant potential that the injury will cause diminished earning capacity under future conditions.), was unavailable to the employer as it had failed to establish that, at the time of the diagnosis of the employee's asbestosis, there was a significant potential that the injury would cause diminished wage-earning capacity in the future, as required by Rambo II. Sain , 162 F.3d at 817. Because the employee was not entitled even to a nominal award under the LHWCA at the time of his asbestosis diagnosis, the court held that the employee did not become a "person entitled to compensation " until his diagnosis of mesothelioma in 1994.

33.7.1.4 Third Circuit

     In Bundens v. J.E. Brenneman Co. , 29 BRBS 52(CRT) (1995), 46 F.3d 292 (3d Cir. 1995), the Third Circuit held that it is the gross not net, settlement amount , to which to look when determining whether claimants had to obtain written approval of settlements under Section 33(g). The court noted that while there was the inclusion of "net" and its definition in Section 33(f) as part of the comprehensive 1984 overhaul of Section 33, Congress, though rewriting Section 33(g), did not elect to include the "net" language that it carefully place in Section 33(f). The Third Circuit noted several compelling arguments for reading Section 33(g) to mean "net." See Bundens , 29 BRBS at 72 n. 28(CRT), 46 F.3d at 305, n. 28. However, since its task was to interpret and not to create law, the Third Circuit felt compelled to conclude that in applying Section 33(g) one should consider the gross, and not the net amount .

     In Ingalls Shipbuilding Inc., Director, OWCP (Yates) , 519 U.S. 248 (1997), references are made to "net" third-party settlement recovery, although this was not litigated.

33.7.2 The Supreme Court and Section 33(g)

     In light of the differing interpretations of Section 33(g), it was inevitable that the matter would reach the Supreme Court . In Estate of Cowart v. Nicklos Drilling Co. , 505 U.S. 469 (1992), the Court decided "whether the forfeiture provision [of Section 33(g)] applies to a worker whose employer, at the time the worker settles with a third party, is neither paying compensation to the worker nor is yet subject to an order to pay under the Act." Cowart , 505 U.S. at 471.

     In Cowart , the claimant suffered a work-related injury for which the employer's carrier paid him temporary total disability until May 21, 1984, when the claimant was released to return to work. On July 1, 1985, without the written approval of the employer or its carrier, claimant settled his third-party claim against Transco for $45,000. The third-party settlement occurred at a time when the claimant was not receiving longshore benefits. Also, the third-party settlement amounted to less than the compensation to which the claimant was entitled. After settling his third-party claim, Cowart filed a longshore claim seeking disability compensation from his employer, Nicklos. 505 U.S. at 472.

     The judge in Cowart determined that Section 33(g) did not apply as the claimant was not a "person entitled to compensation" at the time of the third-party settlement. In so holding, the judge relied on the Board's decision in O'Leary v. Southeast Stevedoring Co. , 7 BRBS 144 (1977) (holding that "person entitled to compensation" refers only to injured employees whose employers are paying compensation, either voluntarily or pursuant to an award).

[ED. NOTE: Interestingly, the Board reaffirmed its position following the 1984 Amendments in Dorsey v. Cooper Stevedoring Co., Inc. , 18 BRBS 25 (1986) (relying on the principle that, even though Congress added subsection 33(g)(2), since Congress did not alter the existing language of the section, Congress implicitly adopted the Board's previous interpretation). ]

The judge awarded the claimant $35,592.77, less the net recovery from Transco of $29,350.60, for a total award of $6,242.17, not including interest, attorney fees, and future medical benefits. The Board affirmed.

     The Fifth Circuit held that Section 33(g) contains no exceptions to its written approval requirement. Nicklos Drilling Co. v. Cowart , 907 F.2d 1552 ( 5th Cir. 1990). On rehearing en banc , a majority of the Fifth Circuit affirmed the holding of the panel, stating that the plain language of the statute is unambiguous. Nicklos Drilling Co. v. Estate of Cowart , 927 F.2d 828 ( 5th Cir. 1991).

     Upon examining the statute, the Supreme Court focused on the plain language enacted by Congress, as well as the decision of the Fifth Circuit , in order to overturn the Board's definition of a "person entitled to compensation." The Court reasoned that longshore benefits are an entitlement. Therefore, to be a "person entitled to compensation," a longshore worker need only satisfy the prerequisites attached to the right. In other words, one becomes a "person entitled to compensation" the moment that the right to recovery vests, not when an employer admits liability. Cowart , 505 U.S. at 474. Accordingly, one needs only to be injured while working in covered employment in order to satisfy the Supreme Court's definition of a "person entitled to compensation." Indeed, Cowart was a case wherein the injured employee, who suffered a work-related traumatic injury, settled his own third-party case without securing a formal written approval of the settlement from his employer and was denied permanent compensation benefits.

     The Court also relied on the 1984 Amendments to Section 33(g) in order to illustrate how Section 33(g) has been narrowed for claimants. Although acknowledging that Section 33(g)(1) remained essentially what Section 33(g) had been, the Court found that Section 33(g)(2) altered the meaning of the section. The addition of the phrase "regardless of whether the employer or the employer's insurer has made payments or acknowledges entitlement to benefits under this chapter," altered Section 33(g)(1) in such a way as to rule out the Board's interpretation of "person entitled to compensation" as stated in Dorsey and O'Leary . Cowart , 505 U.S. at 478.

[ED. NOTE: The Supreme Court acknowledged that an employer does not have to admit liability, and may even use Section 33(g) to avoid liability. (The LHWCA does not require the employer/carrier to provide any justification for a refusal to consent to a settlement under Section 33(g).) This acknowledgment creates a dilemma in light of the humanitarian goals of the LHWCA. Although the Court noted that Section 33(g) is designed to protect the employer, the Court failed to recognize that Section 33(g) is premised, at least in part, on the employer voluntarily paying compensation. An employer that is not voluntarily paying compensation will not receive any funds to offset what it has paid the claimant since it has paid nothing. In addition, what if an administrative law judge decides that the person is not entitled to benefits under the LHWCA? Prior to an award, it is impossible to determine whether a claimant is entitled to compensation since there may be unresolved issues involving covered employer, fraud, or other credibility issues. The Court's decision encourages employers not to pay compensation. This encouragement may force claimants to settle claims for less than they otherwise would have, since they may have no other source of income. ]

"Qualifying" for Benefits

     The Court analyzed "person entitled to compensation" using the phrase's context in other sections of the LHWCA. Applying Cowart 's and the Board's interpretation of the phrase to other sections of the LHWCA, the Court determined that this interpretation would not make sense. See 33 U.S.C. 914(h), 933(f). The Board had previously rejected applying the Section 33(g) interpretation of the phrase to Section 33(f). See Cowart , 505 U.S. at 480; Force v. Kaiser Aluminum & Chem. Corp. , 23 BRBS 1, 4-5 (1989). The Court would, however, bend their position when they determined that the drafters of the LHWCA used the terms "employee" and "person entitled to compensation" synonymously. Cowart , 505 U.S. at 480.

[ED. NOTE: In oral argument before the Supreme Court , the Department of Labor altered its interpretation of the phrase "person entitled to compensation." Until the Fifth Circuit issued its decision in this case, the Director had interpreted this phrase to limit the provisions of Section 33(g) to only those claimants who were receiving longshore benefits at the time of the third-party settlement. Subsequent to the Fifth Circuit's en banc decision, the Director changed his position in support of extending the forfeiture clause to all employees regardless of whether they were receiving benefits at the time of the settlement. In Cowart , the Supreme Court stated that it could not, under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc. , 467 U.S. 837 (1984), give deference to the agency's interpretation of this statute because the Director had changed his earlier position of 14 years. (The Board had also interpreted this phrase to mean a person receiving benefits at the time of the third-party settlement.) The Supreme Court went on to state that a reviewing court should not defer to an agency position which is contrary to the intent of Congress expressed in unambiguous terms, implying that, even if the Director had not changed his position, the outcome would have been the same. ]

     Therefore, in order for the Section 33(g)(1) bar to take place:

It is agreed among the parties that Liberty Mutual Insurance Company and Gulf Coast Catering Company waive their rights to reimbursement ... in connection with the settlement herein, and to dismiss its intervention in the aforementioned lawsuit. (italics in original).

     The Board affirmed the ALJ's finding that the employer's participation in the third-party suit was tantamount to a constructive approval of the settlement. It further noted that, in the Release, the employer's offset rights under the LHWCA were protected and this constituted further evidence of its approval of the settlement.

     The Board then vacated the ALJ's finding that the employer's credit, as set forth in the Release, is limited "to the net amount of claimant's settlement recovery." Specifically, the Board determined that the terms of the Release "appear ... to grant employer an offset which exceeds claimant's net settlement recovery." It concluded that such a provision is permissible "if the administrative law judge finds it clearly and unambiguously demonstrates such an intent."

     The Board has held that it was error for an ALJ to apply the Section 33(g) bar where there was "no third-party defendant or civil suit for damages involved" in the claim for state workers' compensation benefits. The Board concluded that "[t]he state compensation claim does not fall within the provisions of Section 33 as it was not brought against a third-party in a civil suit for tort damages." See Redmond v. Sea Ray Boats, Inc. , 32 BRBS 1 (1998).

Employer's Execution of LS-33 (Section 33(g) Waiver) Inextricably Intertwined with Section 8(i) Settlement

     In Casciani v. St. John's Shipyard , 35 BRBS 583 (ALJ)(2001), the ALJ found that the employer's execution of the LS-33 (Section 33(g) waiver) was inextricably intertwined with a Section 8(i) settlement. Although the waiver itself contained no contingency, he found that the parties mutually intended to enter into a settlement which embodied the employer's waiver of its lien against the proceeds of the third-party settlement ($500,000) along with a payment to the claimant in the amount of $45,000. For the reasons noted below, the ALJ found that the Section 8(i) settlement was a binding agreement which was not, under the circumstances, subject to disapproval by the District Director or an ALJ, and therefore, must be reinstated. The LS-33 was found to also remain in full force and effect with respect to the proceeds of the third party settlement.

     When both parties are represented by counsel, the statutory time limit for disapproving a settlement is 30 days from the date of submission. The ALJ found the District Director was free to reconsider her own approval within the statutory 30-day time limit, but, having failed to disapprove the settlement within the 30-days of its submission, the District Director's disapproval was untimely and unauthorized. The ALJ found that under the applicable statutory provision, a compensation order approving a settlement is not like any other order, the binding effect of which is, by regulation, stayed for 30 days. [The ALJ specifically noted that, "Whether or not orders approving a settlement are reviewable need not here be decided, although it may be noted that Section 8(i)(1) and (2) suggest that only orders disapproving a settlement are reviewable."] The ALJ noted that Congress directed both the Director and ALJs to either disapprove an agreement in 30 days or stand aside. "To be timely and consistent with the statutory time limit, the administrative process of review, approval, reconsideration, and disapproval or deficiency notice issued in respect to a settlement agreement filed by parties represented by counsel must be complete within 30 days of submission or the option for administrative action to disapprove it expires."

33.7.4 Medical Benefits

     One of the many issues that was not addressed in the Cowart decision is the role that medical benefits play in the forfeiture provisions of Section 33(g). The basic question that must be addressed is whether medical benefits are compensation or a separate category altogether. This question usually arises in two situations under Section 33:

1) when a claimant requests only medical benefits (without compensation) after the claimant has entered into an unapproved third-party settlement; or

2) when the claimant is receiving medical benefits (with or without compensation) and has entered into a third-party settlement, and an employer requests forfeiture of medical benefits as well as future compensation.

     The problem arises due to the wording of the section. Section 33(g)(1) only uses the term "compensation." Compensation refers to whom the section applies (a person entitled to compensation), to what the third-party settlement is to be compared (an amount less than the compensation to which the person would have been entitled), and to the amount for which the employer will be held liable if the provisions are followed (the employer shall be liable for compensation ... only if written approval is obtained). See 33 U.S.C. � 933(g)(1). Nowhere in this subsection are medical benefits mentioned.

     In contrast, subsection 33(g)(2) uses both terms. If there is no written approval, or if the employee fails to notify the employer, the employee loses all rights to compensation and medical benefits. See 33 U.S.C. � 933(g)(2).

     The confusion between the terms "compensation" and "medical benefits" is compounded by Section 2(12) of the LHWCA, which defines compensation as "the money allowance payable to an employee or to his dependents as provided for in this LHWCA, and includes funeral benefits provided therein." 33 U.S.C. � 902(12). Nowhere in Section 2 are medical benefits mentioned even though it expressly sets forth funeral expenses as compensation. Problems still arise since medical benefits and compensation can be either separate or synonymous, depending on the interpretation. Generally, interest and penalties are added to past due compensation at appropriate times, but not past due medical benefits. But see Hunt v. Director, OWCP , 999 F.2d 419, 27 BRBS 84 (CRT) ( 9th Cir. 1993)

[ED. NOTE: At the Supreme Court level, several questions remain unanswered: Are medical benefits included in determining whether a settlement is less than or greater that the compensation? ]

     The United States Supreme Court dealt with the problem of medical benefits in Marshall v. Pletz , 317 U.S. 383 (1943). In the context of Section 13(a), the Court determined that medical benefits are not payment of compensation. The Court based this determination, in part, on the definition of compensation in Section 2(12) which does not equate compensation with medical benefits. The Court also went on to discuss the differences between compensation and medical benefits within the LHWCA. Marshall , 317 U.S. at 390-91. See 33 U.S.C. 906(a), 907, 908, 910, 914. See , e.g. , Bethlehem Steel Corp. v. Mobley , 912 F.2d 1084, amended , 920 F.2d 558 ( 9th Cir. 1990) ("The fact that the ALJ and the Board awarded ... medical expenses is not material. ... [C]ompensation and medical benefits are distinct terms under the Act." citing Marshall v. Pletz , 317 U.S. at 390). The Court has never expressly overruled this case.

     The Board's position is in accord with this. See Harris I , 28 BRBS at 264 (1994), aff'd and modified on recon . en banc , Harris II , 30 BRBS at 16 (1996). In fact, in Harris II , the en banc Board stated that if at the time of third-party settlements a claimant was entitled only to medical benefits, the claimant's failure to comply with Section 33(g)(1) cannot bar the claim as the claimant was not a "person entitled to compensation." Harris II , 30 BRBS at 16 (1996) (en banc); see also Hillman v. Ingalls Shipbuilding, Inc. , BRB Nos. 93-152 (not published) (July 29, 1996) ("� medical benefits � are not considered compensation �")

     In Estate of Cowart v. Nicklos Drilling Co. , 505 U.S. 469 (1992), the Court mentioned that, if a third-party claim is settled without the employer's written approval, all future benefits, including medical benefits, are forfeited. Id . Although the Court does not address the issue of whether medical benefits are included in the term "compensation," Cowart is notable for two reasons. The first is that the Court , when setting forth what Section 33(g) does, sets medical benefits apart from compensation. Secondly, the Court in Cowart affirmed the Fifth Circuit's conclusion that "a person entitled to compensation need not be receiving compensation or have had an adjudication in his favor."

     However, whether medical benefits are "compensation" was not at issue in Cowart . The Board has concluded that, "given the precedent on this issue, the issue cannot be said to be resolved based on a few words [in Cowart ] with no discussion of the issue or caselaw." Harris I , 28 BRBS at 264, recon . and modified en banc Harris II , 30 BRBS at 12 (1996).

[ED. NOTE: Cowart's seemingly "off-the-cuff" conclusion could have a devastating effect on claimants receiving benefits. If medical benefits and compensation are separate, a claimant may apply for future medical benefits. If "compensation" includes medical benefits, however, then the moment that one is injured and settles a third-party claim without the employer's written approval, all future benefits, medical or otherwise, are forfeited. ]

[ED. NOTE: If compensation and medical benefits are distinct and one is not entitled to compensation at that time, as with an occupational disease, will a claimant still be entitled to future medical benefits as the amount of compensation is zero, and the medical benefits have no value? As such, any settlement would be for more than the "compensation" due under the LHWCA. What if the claimant requires present medical treatment but is not entitled to compensation because he does not presently suffer a disability? Could he enter into a third-party settlement without his employer's consent with the assurance that he would suffer no future Section 33(9) bar? ]

     Prior to Cowart , the Board had held that Section 33(g)(1) cannot relieve an employer from medical benefits, only Section 33(g)(2) can be used for this purpose. See Sellman v. I.T.O. Corp. of Baltimore , 24 BRBS 11 (1990); Pinnell v. Patterson Serv. , 22 BRBS 61 (1989). But see Mobley v. Bethlehem Steel Corp. , 20 BRBS 239 (1988).

     In Beesley v. Alabama Dry Dock , 27 BRBS 269 (ALJ) (1993), the ALJ relied on the plain meaning of the statute to determine that medical benefits and compensation are two totally separate recoveries when a claimant who has entered into a third-party settlement only requests future medical benefits. The key to this determination is that Section 2(12) does not include medical benefits within its definition of compensation. Although some sections do incorporate medical benefits as compensation as the Fifth Circuit did in Lazarus v. Chevron USA, Inc. , 958 F.2d 1297 ( 5th Cir. 1992), some sections do not. See also Hunt v. Director, OWCP , 999 F.2d 419 ( 9th Cir. 1993). The judge analogized Beesley to Lazarus , however, because the Fifth Circuit read medical benefits into the term "compensation" in order to compel payment of a medical bill.

[ED. NOTE: Public policy considerations involving health care reform may ultimately statutorily effect whether future medical benefits will be considered compensation. ]

     The Beesley order also relied on basic statutory construction. The fact that medical benefits are mentioned in Section 33(g)(2) and not in 33(g)(1), although compensation is mentioned in both subsections, lends credence to the notion that compensation does not include medical benefits.

     The concept of compensation including medical benefits was discussed in the context of Section 33(e) and 33(f) in Hintz v. Todd Pacific Shipyards Corp. , 27 BRBS 305 (ALJ) (1993). Unlike Beesley , the Hintz decision relied mainly on case law. Bloomer v. Liberty Mut. Ins. Co. , 445 U.S. 74 (1980); Inscoe v. Acton Corp. , 19 BRBS 97 (1986); Webb v. Santa Fe Drilling Co. , 2 BRBS 367 (1975); Fontana v. Pennsylvania R. Co. , 106 F. Supp. 461 ( D.N.Y. 1952), aff'd sub nom . Fontana v. Grace Line , 205 F.2d 151 ( 2d Cir. ), cert . denied , 346 U.S. 886 (1953). Beesley relied on the fact that Section 2(12) does not mention medical benefits, nor does Section 33(e), but Section 33(e) separately mentions Section 7 medical benefits.

[ED. NOTE: The Hintz order mentions that the courts have lumped compensation and medical benefits together under the title "compensation benefits." Section 33(g) speaks only in terms of compensation and uses medical benefits separately. As such, it can be argued that compensation and medical benefits may only be categorized together under compensation benefits. When only compensation is mentioned, it refers to the LHWCA's definition of "compensation" in Section 2(12). However, note Texports Stevedores below, wherein the Fifth Circuit discussed medical benefits under Section 33(f) without any explanation. ]

     In Texports Stevedores v. Director, OWCP , 28 BRBS 1 (CRT) (1991), 931 F.2d 331, ( 5th Cir. 1991), the Fifth Circuit held that medical expenses reimbursed by a third party insurance carrier could be used by a claimant to offset his tort recovery even though he would receive a double recovery. Relying on Turner v. New Orleans (Gulfwide) Stevedores , 5 BRBS (1977), rev'd on other grounds , 661 F.2d 1031 ( 5th Cir. Unit A 1981), a Section 7 case in which there was no tort recovery and the employer directly provided medical services, the Fifth Circuit opined that Section 33(f) dictates the same result: "Section 33(f) focuses on what the employer would have had to pay but for the tort recovery." Turner , 28 BRBS at 4 (CRT), 931 F.2d at 335.

33.7.5 What Constitutes Notice under Section 33(g)(2)

     The Cowart decision did not address the Board's holding as to what constitutes proper notice under Section 33(g)(2). Therefore, for the Board's purposes, notice is good if made prior to the employer making any voluntary payments or prior to the announcement of the judgment when a claimant has entered into a settlement for more than the compensation to which the claimant is entitled. See , e.g. , Cowart v. Nicklos Drilling Co. , 23 BRBS 42 (1989), rev'd on other grounds , 907 F.2d 1552 ( 5th Cir. 1990), aff'd , on reh'g , en banc , 927 F.2d 828 ( 5th Cir. 1991), aff'd , 505 U.S. 469 (1992); Blake v. Bethlehem Steel Corp. , 21 BRBS 49 (1988); Chavez v. Todd Shipyards Corp. , 21 BRBS 272 (1988). Also, in a related issue, estoppel does not apply to Section 33 . See Nesmith v. Farrell American Station , 19 BRBS 176 (1986) (affirming the ALJ's rejection of oral approval of settlement from employer's claims adjuster).

33.8 SECTION 33(h)

     Section 33(h) of the LHWCA provides:

Where the employer is insured and the insurance carrier assumed the payment of the compensation, the insurance carrier shall be subrogated to all the rights of the employer under this section.

33 U.S.C. � 933(h).

     For mention of Section 33(h), see Peters v. North River Insurance Co. of Morristown, NJ , 764 F.2d 306 ( 5th Cir. 1985).

33.9 EXCLUSIVE REMEDY AGAINST OFFICERS OR FELLOW SERVANTS OF EMPLOYER

     Section 33(i) of the LHWCA provides:

The right to compensation or benefits under the Act shall be the exclusive remedy to an employee when he is injured, or to his eligible survivors or legal representatives if he is killed, by the negligence or wrong of any other person or persons in the same employ: Provided, That this provision shall not affect the liability of a person other that an officer or employee of the employer.

33 U.S.C. � 933(i).

     The constitutionality of the provision immunizing the officers and employees from suit was challenged in Keller v. Dravo Corp. , 441 F.2d 1239 ( 5th Cir. 1971), cert . denied , 404 U.S. (1972). The claimant contended that Section 33(i) denied him a property right to sue a fellow servant. The Fifth Circuit noted that he was injured after the enactment of Section 33(i) and therefore had no vested right.

33.10 MISCELLANEOUS AREAS WITHIN SECTION 33

33.10.1 When can a Section 33(g) issue be raised?

     A successor employer or carrier may raise the issue of Section 33(g) in a subsequent proceeding when it did not know of its liability until after the initial hearing because a formal hearing must be conducted in order to allow all parties a reasonable opportunity to be heard. Deville v. Oilfield Indus. , 26 BRBS 123 (1992) (citing Sans v. Todd Shipyards Corp. , 19 BRBS 24 (1986)).

33.10.2 When is a settlement a settlement for purposes of Section 33(g)?

     An "agreement to settle" is not a settlement. Shoop v. Waterman Steamship Corp. , 28 BRBS 370 (ALJ) (1994).

     In Barkley v. J.T. Thorpe & Sons, Inc. , 29 BRBS 448(ALJ) (1995), a rescinded third-party settlement was found to restore the claimant to the same position she was in before the agreements were entered into, namely she was a person entitled to compensation who had not entered into any third-party settlement that could bar her LHWCA claim. The judge acknowledged that it was very likely that the claimant engaged in an ex post facto recission of the third-party settlements for the purpose of avoiding the operation of Section 33(g). However, he explained:

[T]his forum is not the appropriate one in which to raise those contentions. This court has no jurisdiction to determine the validity of the recission or to dictate to the California Superior Court how it ought to rule on a matter of California contract law. This court only has the authority to recognize that a California court has rescinded the settlement and to determine how that recission affects [claimant's] longshore case.

29 BRBS at 455 (ALJ).

The judge further noted that to rule that the provision of Section 33(g) immediately took effect would be a harsh interpretation of Section 33(g) and goes against the purpose of the section and the liberal interpretation of the LHWCA. The judge emphasized that the respondents have not suffered any material loss and retained all of the rights and defenses that they originally had at their disposal.

      Good Faith Settlement Orders set forth by a court do not terminate a claimant's right to compensation under Section 33(g), as there is no actual settlement agreement. In order to determine if there is a settlement, one can use testimony of the participants to the action. Chavez v. Director, OWCP , 961 F.2d 1409 ( 9th Cir. 1992).

     In Formoso v. Tracor Marine, Inc. , 29 BRBS 105 (1995), a state court judge, sui sponte , issued a Final Order of Dismissal finding that there has been a settlement and stating that "the Court having been notified that the matter was amicably resolved, ...this matter...is...dismissed with prejudice." The Board found that the plain language of this statement, however, indicates only a finding that the court received notice of a settlement and is not unambiguous evidence that the parties actually executed a settlement. 29 BRBS at 107. The Board went on to state:

Moreover, the Florida Circuit Court's order does not indicate that the issue of the existence of a third-party settlement was actually litigated and decided before it, nor does that order affirmatively state that there was an executed settlement. The record contains contradictory evidence that the parties to this third-party action argued against dismissal with prejudice before the circuit court judge prior to issuance of the Final Order of Dismissal.

29 BRBS at 107.

     In Banks v. Chicago Grain Trimmers Association , 340 U.S. 459 (1968), the Supreme Court determined that an order of remittitur is not the equivalent of a settlement . In Banks , the claimant had consented to a remittitur of his third-party wrongful death judgement in lieu of a new trial order. The Court stated:

An order of remittitur is a judicial determination of recoverable damages; it is not an agreement among the parties involving mutual concessions. Section 33(g) protects the employer against his employee's accepting too little for his cause of action against a third party. That danger is not present when damages are determined, not by negotiations between the employee and the third party, but rather by the independent evaluation of a trial judge.

Id . at 467.

     A fixed payment under a reorganization plan-similar to a judgment and remittitur-is not a "settlement" for Section 33(g) purposes. Williams v. Ingalls Shipbuilding, Inc. , 35 BRBS 92 (2001).

     In contrast to an order of remittitur, a judgement obtained under Federal Rule of Civil Procedure 68 ( offer of judgement ) does not result from a "judicial determination of recoverable damages," nor from the "independent evaluation of a trial judge." Under Rule 68, the party defending a claim dictates the terms of the offer, and no evaluation by the trial judge is involved.

     Also in contrast to an order of remittitur, a judgment under Rule 68 does result from "an agreement among the parties involving mutual concessions." The Supreme Court has held that "[t]he purpose of Rule 68 is to encourage the settlement of litigation. ... [T]he adverse consequences of potential defeat provide both parties with an incentive to settle in advance of trial. ... Rule 68 imposes a special burden on the plaintiff to whom a formal settlement offer is made." Delta Airlines v. August , 450 U.S. 346, 352 (1981), as cited in Broussard v. Houma Land & Offshore , 91-LHC-2260 (December 31, 1991) (unpublished).

     In Broussard v. Houma Land & Offshore , 30 BRBS 53 (1996), the Board held that a Rule 68 Offer of Judgment is tantamount to a formal settlement and, thus, is a "compromise" for purposes of Section 33(g)(1). The Board noted that the claimant clearly had the option to reject the defendant's offer and have his case heard on its merits. The Board also noted that a key factor in determining the applicability of Section 33(g)(1) is the relevant involvement of the parties and the district court judge in the resolution of the third-party claim.

     Thus, the Board has loosely stated a two criteria analysis to determine whether a "settlement" is a settlement for purposes of Section 33(g) :

(1) Can the claimant "opt out" of the contract? Is there an objective manifestation of mutual assent for offer and acceptance to create a binding judgment?

(2) What is the relevant involvement of the parties and the district court judge in the resolution of the third-party claim. Does the objective manifestation of mutual assent occur between the parties completely independent of any tribunal officers, reflecting the nature of a settlement?

     In Broussard , the Board also held that the claimant is not being penalized for following the procedures of the court by entering into the Offer of Judgment. (Possible sanctions = an "additional inducement" for claimant to settle rather than litigate.) The Board reasoned that the claimant's denial of additional compensation benefits under the LHWCA is not immediately due to his execution of the Offer of Judgment. According to the Board, the claimant could have entered into such an agreement and remained eligible for additional compensation under the LHWCA by obtaining employer/carrier's approval of the agreement.

[ED. NOTE: What are the practicalities involved in obtaining the employer/carrier's written approval of a third-party agreement? A claimant may argue that he may be subjected to possible liability for costs under Rule 68 if the offer is refused and a lesser amount is later awarded to the claimant. However, while Rule 68 gives a plaintiff an added incentive to accept the defendant's offer, this statutory penalty does not change the nature of a judgment under Rule 68 from a settlement to a judicial determination. ]

     Likewise, in Pool v. General American Oil Co. , 30 BRBS 183 (1996), the Board held that the compromise satisfaction of a jury verdict constituted a settlement which required the employer's consent. Specifically, the Board stated that "[i]t is the substance of the parties' actions rather than the title of the document ending the litigation that controls the applicability of Section 33(g)(1)." 30 BRBS at 187. "Because the 'judgment' herein was not final, and because claimant thereafter negotiated an agreement with the third parties," the Board affirmed the ALJ's "determination that the 'satisfaction of judgment' in this case is actually a 'compromise' or 'settlement' within the meaning of Section 33(g)." Id .

     Additionally, the Board held that mere intervention by the employer in the third party case is not tantamount to implied consent to the third party settlement where the facts indicated that the employer did not join in or agree to the settlement. Specifically, the Board stated that although the "[e]mployer, through its carrier, intervened in the third-party case and participated, to some degree, in the settlement process," carrier did not "appear on the side of the claimant, did not sign the actual settlement and in fact specifically declined to do so." Thus, the Board affirmed the ALJ's finding that the employer's participation was "insufficient to preclude application of Section 33(g)(1)." 30 BRBS at 188.

     In Gremillion v. Gulf Coast Catering Co. , 31 BRBS 163 (1997), the Board held that the employer's participation in third-party litigation rendered Section 33(g) inapplicable. The Board noted that "Employer, through its carrier in this case, participated in the third-party litigation both as a party-defendant and intervener." Moreover, the Board stated that the claimant and his spouse signed a Release in the third party suit and, importantly, the employer joined in the Joint Motion for Partial Dismissal with Prejudice based upon the Release. The Board noted that the Release executed by the claimant states, in part, the following:

It is agreed among the parties that Liberty Mutual Insurance Company and Gulf Coast Catering Company waive their rights to reimbursement...in connections with the settlement herein, and to dismiss its intervention in the aforementioned lawsuit.

(Italics in original). The Board affirmed the ALJ's finding that the employer's participation in the third-party suit amounted to a constructive approval of the settlement. It further noted that, in the Release, the employer's offset rights under the LHWCA were protected and this constituted further evidence of its approval of the settlement. The Board then vacated the ALJ's finding that the employer's credit as set forth in the Release is limited "to the net amount of clamant's settlement recovery." Specifically, the Board determined that the terms of the Release "appear to grant employer an offset which exceeds claimant's net settlement recovery." It concluded that such a provision is permissible "if the administrative law judge finds it clearly and unambiguously demonstrates such an intent."

     Even incentive provided by a trial judge who encourages settlement at the pre-trial stage of litigation does not change the nature of that settlement into a judicial determination for purposes of Section 33(g). Morauer & Hartzell, Inc. v. Woodworth , 439 F.2d 550, 553 ( D.C. Cir. 1970), cert . denied , 404 U.S. 16 (1971) ( consent judgment was not a judicial determination but rather a "compromise" within the meaning of Section 33(g)); Gibson v. ITO Corp. of Ameriport , 18 BRBS 162, 164 (1986); Zamarripa v. Bilco Tools, Inc. , 27 BRBS 586 (ALJ) (1994) ("Entry of a consent judgement on agreement or stipulation of the parties...constitutes a settlement under the provisions of 33 U.S.C. �933(g)."). The judge reasoned that to hold otherwise would provide a simple way for claimants to avoid the intended application of Section 33(g) by having their settlements memorialized in a settlement judgment entered by a court. Entry of such settlement judgments are a common practice and do not reflect a decision by the court.

     Where a claimant's third-party attorney received funds as a proposed settlement but the claimant had not been informed of the offer and had neither accepted nor rejected it, the Board held that the claimant was not barred by Section 33(g) from further LHWCA compensations. Stadtmiller v. Mallott & Peterson , 28 BRBS 304 (1994). In Stadtmiller , the claimant's third-party suit had been consolidated with other similar actions. Subsequent to the third-party attorney receiving the funds, the monies were returned and the dismissal of the claim was ultimately vacated by the California Superior Court.

     The Board found that the third-party attorney was not claimant's "legal representative" as that term is used in Section 33(g)(1) . Furthermore, the Board found that a claimant as principal, is only bound by acts of the attorney-agent within the scope of the agent's actual authority (expressed or implied); apparent or ostensible authority; or by unauthorized acts ratified by the client-principal. Since an attorney must be specifically authorized to settle and compromise a claim (at least in California), and this one was not, the claimant's third-party attorney did not enter into a settlement agreement with the third-party.

     Compare Stadtmiller with the California case of Barnes v. General Ship Service , 30 BRBS 193 (1996) where the Board found that the claimant's counsel had express authority to enter into a third-party agreement and to accept settlement funds on the claimant's behalf, and thereby bind the claimant.

[ED. NOTE: One would normally argue that the employer was being made to prove a "negative fact" in this burden of proof scheme. However, a close examination reveals the Board's position as much more reasonable than it appears at first glance. In Flanagan , for instance, the sole evidence of record on this issue was the claimant's testimony; when asked whether employer's written approval was obtained, the claimant testified that he had "no knowledge" of that issue. The employer submitted no other evidence to establish that it did not give written approval of the settlement agreement. Thus, there was a complete lack of evidence that the claimant did not obtain employer's written approval of the third-party settlement. The Board specifically found that the employer failed to utilize routine discovery tools on the approval issue, or to produce its own witnesses to testify that approval was not sought or given.]

[ED. NOTE: Care should be taken not to apply the Stadtmiller agency-principal theory indiscriminately. For example, in Villaneuva v. CNA Insurance Companies , 868 F.2d 684 ( 5th Cir. 1989), the Fifth Circuit , while dealing with a Section 33(g) issue, looked to Louisiana law for a definition/description of "transactions" or "compromises." The Fifth Circuit noted that, "in Louisiana, attorneys are presumed to have authority to negotiate settlement agreements for their clients." Villanueva , 868 F.2d at 686. (citations omitted.) "Absent evidence that the client's consent was not clear and express, the agreement is binding." Id . ]

      Mere termination of a third-party action is not a settlement within the meaning of Section 33(g). Mills v. Marine Repair Serv. , 22 BRBS 335 (1989); Rosario v. M.I. Stevedores , 17 BRBS 150 (1985).

      Ripeness concerns should be given less weight in an agency adjudication than in a judicial one. Chavez , 961 F.2d at 1409 (citing Central Freight Lines v. ICC , 899 F.2d 413, 417-19 ( 5th Cir. 1990)). Therefore, it is possible that an employer may come into a "claim" seeking a declaratory judgment that any potential claim that an employee has is barred by Section 33(g), even before a claim is actually filed. But see Parker v. Ingalls Shipbuilding, Inc. , 28 BRBS 339 (1994), where the Board found that "common sense dictates that where a claimant has settled his claim for compensation and has not requested medical benefits, there is no claim pending; there can be no issues to decide." Parker , 28 BRBS at 341. In Parker , subsequent to the LHWCA settlement for compensation, the claimant entered into unapproved third-party settlements. The Board found that since medicals had not been requested, the issue as to whether Section 33(g) bars a potential claim for medical benefits, is premature. See also Garrett v. Ingalls Shipbuilding, Inc. , 26 BRBS 478 (ALJ) (1992); Deakle v. Ingalls Shipbuilding, Inc. , 28 BRBS 343 (1994).

33.10.4 Once a Party Requests a Formal Hearing, the District Director is Without Jurisdiction to Rule on Motions to Withdraw

     In Boone v. Ingalls Shipbuilding, Inc. , 28 BRBS 119 (1994) (Brown, J., concurring) aff'g on recon . en banc 27 BRBS 250 (1993) (Brown, J., concurring) [reversed by Fifth Circuit on December 19, 1996, Ingalls Shipbuilding, Inc. v. Director, OWCP (Boone) , 102 F.3d 1385 ( 5th Cir. 1996)), see infra ], the Board held that the district director properly addressed and approved a claimant's motion to withdraw his claim, instead of transferring the case to the OALJ. The Board further found that the employer was not prejudiced by such action in that the claim was not ripe. The Employer had argued that the claimant's "admission" that he had failed to comply with Section 33(g) provisions should bar any further claims related to asbestos exposure. The employer also argued that it was aggrieved in that it would suffer financial loss.

     In Boone , the claimant had filed a claim for compensation under the LHWCA in 1987 alleging work-related asbestos exposure resulting in asbestosis and asbestos-related lung disease. Subsequently, he entered into multiple third-party settlements with asbestos manufacturers and distributors.

     In November of 1990, the employer filed a pre-hearing statement with the district director, requesting referral of the case to OALJ for hearing. The employer also filed a Motion for Summary Decision and Brief in Support with OALJ. On February 19, 1993, claimant filed a Motion to Withdraw his claim with the district director. On March 18, 1993, the district director issued an Order approving the withdrawal as being for a proper purpose and in the claimant's best interest. The district director found that the claimant does not have a disability or permanent impairment and has not suffered a diminution of his wage-earning capacity. The approved withdrawal was without prejudice but subject to Section 13 time limitations in accord with 20 C.F.R. § 702.225. The employer appealed, challenging approval of the withdrawal as an abuse of discretion. The Board determined that there was no controversy ripe for adjudication, stating that "[E]mployer will not be adversely affected or aggrieved unless or until a new claim is filed." Boone , 102 F.3d 1385 (quoting Boone , 27 BRBS 250, 251 (1993)). The employer moved for reconsideration.

     Subsequent to the Board's first decision in Boone , the Fifth Circuit issued its decision in Ingalls Shipbuilding, Inc. v. Asbestos Health Claimants , 17 F.3d 130 ( 5th Cir. 1994), wherein it held that Section 19 of the LHWCA imposes a mandatory duty on the district director to transfer the case to OALJ upon the request of a party.

     The Board stated that the employer in Boone can not be aggrieved by the district director's action until a new claim is filed. Boone , 102 F.3d 1385 (citing Boone , 27 BRBS at 251). The Board went on to state:

As claimant in this case is not entitled to compensation under the Act, because he withdrew his claim and has no compensation disability, he clearly could not settle his third-party claims for less than what he is entitled to under the Act, thus, if the previously filed claim were adjudicated, Section 33(g)(1) would not bar claimant's recovery.

28 BRBS at 124.

     On December 19, 1996, the Fifth Circuit , however, the court reversed the decision of the Board. Ingalls Shipbuilding, Inc. v. Director, OWCP (Boone) , 102 F.3d 1385 ( 5th Cir. 1996). Reiterating the fact that the district director was obligated by the LHWCA to transfer the claim to the OALJ, and that the failure to do so denies the employer a procedural right to which it is entitled, the court found that Ingalls is "adversely affected or aggrieved" by the order and thus has standing under Section 921(c) of the LHWCA to seek review of the Board's decision. Id . at 1388. The Fifth Circuit emphasized that "procedure is the essential safeguard that protects substantive rights," and that, therefore, the district director denied Ingalls (employer) that protection by approving the claimant's motion for withdrawal. Id . at 1390.

      See also W.G. McLeod v. Ingalls Shipbuilding, Inc. , BRB No. 94-3786 (April 1, 1997) (In light of Boone , Board's prior Order vacating the district director's approval of claimant's motion to withdraw and remanding to OALJ is correct); Milton E. Lamb, Sr. v. Ingalls Shipbuilding, Inc ., BRB No. 94-2842 (unpublished) (Sep. 5, 1996) ("� [ Boone ] � is dispositive of employer's appeal"); William J. Gore v. Ingalls Shipbuilding, Inc ., BRB No. 94-2633 (unpublished) (Aug. 1, 1996) ("� [ Boone ] � is dispositive of employer's appeal").

[ED. NOTE: The rule of Boone is defined as follows: While a case is pending before the OWCP, and the respondent subsequently files a pre-hearing motion, a motion for withdrawal may not be acted upon until such time as the claim is transferred to the OALJ. In other words, once a party requests a formal hearing, the district director is without jurisdiction to rule on motions to withdraw.]

     In Downs v. Ingalls Shipbuilding, Inc. , 30 BRBS 99 (1996), the claim was transferred to the OALJ for consideration of the employer's motion for summary decision seeking to have the claim barred by Section 33(g). Prior to the hearing, claimant filed a motion to withdraw his claim pursuant to 20 C.F.R. § 702.225(a) as "he has no present disability and is not seeking medical benefits under the Act." Id . Employer opposed the motion for withdrawal alleging that it is improper in light of its motion for summary decision. Citing Ingalls Shipbuilding v. Asbestos Health Claimants , 17 F.3d 130, 28 BRBS 12 (CRT), the Director, OWCP, supported claimant's withdrawal motion. The ALJ found that claimant had complied with Section 702.225(a) and permitted claimant to withdraw his claim without prejudice, citing the Board's decision in Boone v. Ingalls Shipbuilding, Inc ., 28 BRBS 119 (1994) (Decision and Order on Recon. en banc ) (Brown, J., concurring). Downs v. Ingalls Shipbuilding, Inc. , 94-LHC-2274 (Romero, ALJ).

     The ALJ in Downs  then remanded the case to the district director "for further appropriate action consistent with this order to permit claimant to withdraw his claim pursuant to 20 C.F.R. § 702.225(a)." Id . On appeal, the Board affirmed the ALJ's ruling. The Board distinguished this case from Boone , 81 F.3d 561 ( 5th Cir. 1994), stating that Boone specifically held that once a party requests a formal hearing, the district director is without jurisdiction to rule on motions to withdraw. The employer was aggrieved by the district director's action because it lost the procedural right to have the motion to withdraw considered in an adjudicative forum. Boone , 81 F.3d 561. In Downs , however, the motion to withdrawal was considered by the ALJ "as intended by the district court." Downs , 30 BRBS at 100. "Employer's procedural right to a decision in an adjudicative forum, which formed the basis for the court's finding that employer was aggrieved in Boone , was fully protected by the consideration of claimant's motion in the proper forum." Id . (citing Boone , 81 F.3d at 566-67). Thus, the ALJ's finding was affirmed as within the scope of the district court's mandamus order and the ALJ's discretion. Id. at 101 (citing Boone , 81 F.3d at 566; Asbestos Health Claimants , 17 F.3d at 135-36, n.14, 28 BRBS at 17, n.14 (CRT) (noting that withdrawal "would be an unsurprising choice, particularly for those who suffer no current disability and thus only made protective filings").).

[ED. NOTE: When Boone was before the Board, the Board determined that the issues presented by the employer were not ripe for adjudication. The Board in Boone cited and relied upon Chavez v. Director, OWCP , 961 F.2d 1409, 25 BRBS 134 (CRT) ( 9th Cir. 1992) (doctrine of ripeness has a justifiable place in longshore cases). Chavez discussed the "traditional ripeness test." The first prong of this test (fitness issue) is determined by whether the issues are "purely legal" and "sufficiently developed factually." The second prong of the test (hardship on the parties) is determined by whether there is a "direct and immediate hardship [which] would entail more than possible financial loss. Chavez , 961 F.2d at 1414, 25 BRBS at 141. However, on appeal, the Fifth Circuit determined that because "the District Director's violation of Ingalls' procedural right to have the claim decided by an ALJ constitutes an injury that provides standing, it is unnecessary for us to consider� whether allowing Boone to withdraw his claim is an issue ripe for adjudication." 102 F.3d at 1390, n. 8. ]

33.10.4 CALCULATIONS

Multiple settlements: To aggregate or not

     As to whether the amount of multiple settlements is for greater or less than the amount of compensation, a judge will need to determine whether all of the settlements should be aggregated or taken separately. In Harris , the Board noted that the employer is entitled to offset the entire net amount of the third-party recoveries under Section 33(f) in the aggregate and is liable for deficiency compensation in the event that the aggregate recovery is less that its liability. Furthermore, the Board noted that, although not specifically addressed, the recent cases discussing Section 33(g) do not distinguish between fact patterns where there is one third-party settlement and when there are multiple third-party settlements.

     For aggregated settlements , see Harris I , 28 BRBS at 266, Harris II , 30 BRBS at 17 (en banc), Beesley v. Alabama Dry Dock , 92-LHC-1220 (unpublished). For separate settlements , see Patton v. Ingalls Shipbuilding, Inc. , 25 BRBS 247 (ALJ) (1992). In Hintz v. Todd Pac. Shipyards Corp. , 27 BRBS 305 (ALJ) (1993), the judge rejected the contention that it is the aggregate of all third-party settlements entered into that should be considered rather than any one settlement, since to do otherwise, the power to determine the adequacy of any particular third-party settlement would be vested in the employee rather than the employer, contrary to the purpose for which Section 33(g) was designed.

Turning Third-Party Recoveries and Lifetime Compensation Awards into Numerical Calculations for the Section 33(g) Formula

     In Villanueva , the Fifth Circuit noted that while the lack of findings make it impossible to tell whether the settlement agreement was for more or less than the amount of compensation to which the claimant was entitled, there can be but one result: no further liability for compensation benefits.

     The Board reasoned that Section 33(f) does not necessarily "wipe out" or extinguish an employer's total liability in every case, although this may be the practical effect in many cases. Harris I , 28 BRBS at 268. Compensation and medical benefits are suspended until the net recovery is exhausted. Maples v. Texports Stevedores Co. , 23 BRBS 302 (1990), aff'd sub nom . Texports Stevedores Co. v. Director, OWCP , 931 F.2d 331, 28 BRBS 1 (CRT) ( 5th Cir. 1991).

     In Harris I , the Board specifically stated that it disagreed with the view that Cowart and Cretan stand for the proposition that Section 33(f) extinguishes an employer's total liability in all cases. Harris I , 28 BRBS at 268. According to the Board, the facts of those cases did not present the issue nor do they lead to that result. Id . In Cowart , the claimant was deceased by the time the case reached the Supreme Court and the claim was for a scheduled injury. Id . Therefore, according to the Board, the discussion on this topic is dicta because the Supreme Court did not have to consider the long-term effect of medical treatment or worsening disability in an occupational disease case in discussing the applicability of an offset pursuant to Section 33(f). In Cretan , the employee was also deceased, and therefore the court did not have to consider the effect of the employer's liability for ongoing medical benefits which could exhaust the employer's credit against the third-party recovery.

     Under Section 33(f), the employer is required to pay as compensation under the LHWCA "a sum equal to the excess of the amount which the Secretary determines is payable on account of such injury or death over the net amount recovered against such third-person." 33 U.S.C. � 933(f). The Board felt that the language of Section 33(f) indicates that Congress has provided for the eventuality of a deficiency judgment to be paid by the employer. Harris II , 30 BRBS at 20 (en banc).

     In Harris II , 30 BRBS at 20 (en banc), the Board reaffirmed its Harris I holding that where the forfeiture provisions of Section 33(g) does not apply, the offset provision under Section 33(f) does not "extinguish" employer's total statutory liability, but rather provides employer a credit in the amount of the net third-party recovery against both employer's liability for both compensation and medical benefits under the LHWCA.

[ED. NOTE: Harris was appealed to the Ninth Circuit , but on August 2, 1996 , the Ninth Circuit dismissed the employer's appeal stating that the employer was not allowed to appeal from a non-final order (as the Board in its original D&O of 1994 [ Harris I , 28 BRBS 254 (1994)] had remanded to the ALJ, and the Board in Harris II , 30 BRBS 5 (1996), had reinstated that remand.). Thus, in accordance with the Board's original decision and in accordance with their reinstatement of the same, the case was remanded to the ALJ level. On April 3, 1997 the Board sent the file/record to the OALJ. Another Decision and Order has yet to be issued by the OALJ.

Cowart does not specifically overrule Villanueva . In fact, some of Cowart's language itself indicates that the premise of Villanueva remains. For instance, the Supreme Court in Cowart states: "And in cases where the employee settles for greater than the employer's liability, the employer is protected regardless of the precise amount of the settlement because his liability for compensation is wiped out." Cowart , 26 BRBS at 53 (CRT), 505 U.S. at 482 (emphasis added). It should be noted that in Villanueva , there seemed to be a finite amount of medical benefits. In fact, the claimant, by cross-claim against the carrier for reimbursement of unpaid medical expenses, raised the Section 33(g)(1) bar. ]

     In Linton v. Container Stevedoring Co. , 28 BRBS 282 (1994), the Board determined how the amount of compensation due is to be calculated where the award is for continuing disability benefits. The Board held that the total amount of compensation to which a claimant would be entitled over his lifetime is the relevant figure to be compared with the amount of the claimant's third-party settlement. Linton , 28 BRBS at 287. The Board opined that any interpretation of Section 33(g)(1) which limits consideration of compensation entitlement under the LHWCA only to accrued compensation would undercut the purpose behind the Section 33(g)(1) forfeiture provision. Linton , 28 BRBS at 288.

     In arriving at an amount determinative of a claimant's lifetime entitlement, the ALJ, as factfinder, may "use any reasonable method" to calculate the amount of compensation to which the claimant would be entitled over his lifetime. Linton , 28 BRBS at 288. To that end, the ALJ may consider medical testimony, reports regarding the claimant's physical condition, actuarial tables, and any other probative evidence to project the claimant's lifetime compensation. Additionally, to make the comparison, the judge must calculate the amount of the claimant's third-party recovery .

      Linton also held that the necessary comparison entails consideration of the third-party settlements in the aggregate . See also Harris I and II as noted above. Furthermore, the Board noted that in arriving at the amount of the claimant's third-party recovery for Section 33(g)(1) purposes, the net amounts of claimant's multiple third-party settlements, in the aggregate, must be compared to the amount of compensation to which the claimant would be entitled. Linton , 28 BRBS at 289. See also Harris I and II .

     In Glenn v. Todd Pac. Shipyards , 26 BRBS 186 (1993), the Board held that the claimant settled with third-parties for an amount greater than the amount to which she is entitled under the LHWCA where claimant would be nearly 109 years old before her disability benefits would exceed the net third-party settlement recovery.

     In Moriarty v. Todd Pac. Shipyards Corp. , 28 BRBS 410 (ALJ) (1994) the claimant had argued that at the time of the unapproved third-party settlements, the liability of the employer/carrier had not been determined. The judge, however, found the argument to be unpersuasive and ruled in favor of the employer.

33.10.5 Claims Pending on the Effective date of the 1984 Amendments

     The amended version of Section 33(g) applies to a claim that was pending before the judge on September 28, 1984--the effective date of the 1984 Amendments to the LHWCA--or later. Pinnell v. Patterson Serv. , 22 BRBS 61 (1989). The outcome is not altered by the fact that the claimant relied on statutory and case law at the time the settlement was entered into prior to the effective date of the 1984 amendments. Monette v. Chevron U.S.A., Inc. , 29 BRBS 112 (1995). A claimant who entered into third-party settlements pre- Cowart can not argue equity as a Section 33(9) defense. Clark v. National Steel & Shipbuilding Co. , 29 BRBS 281 (ALJ) (1995) ("This is a harsh result considering the history of this case but it is an obligatory one which I am mandated to find.")

      Section 33(g) applies prospectively to terminate a claimant's right to additional compensation as of the date of the settlement . See Shoemaker v. Schiavone & Sons, Inc. , 20 BRBS 166 (1988).

33.11 SECTION 33 CHECKLIST

Keep in mind:

(1) While Sections 33(f) and (g) should be read together, they do pertain to different issues--one to set-off (equity) and the other as a bar to compensation recovery (security).

(2) The LHWCA itself should be liberally construed in favor of the claimant, but the purpose of Section 33 is to insure that the Employer/Carrier's rights are protected.

I. IS THERE A THIRD-PARTY (3rd-P) SETTLEMENT ?

(Two part analysis: 1) Can Claimant (CL) opt out? Offer and acceptance? 2) Relevant involvement of parties and 3rd-P judge?

     1. An "agreement to settle" is not a settlement. Shoop v. Waterman Steamship Corp. , 28 BRBS 370 (ALJ) (1994).

     2. A rescinded 3rd-P settlement is not a settlement. Barkley v. J.T. Thorpe & Sons, Inc. , 29 BRBS 448 (ALJ) (1995).

     3. Good faith settlement orders set forth by a court do not equal an actual settlement agreement. Chavez v. Director, OWCP , 961 F.2d 1409 ( 9th Cir . 1992).

     4. Sua sponte final order of dismissal holding that there has been a settlement , is not a settlement. Formoso v. Tracor Marine, Inc. , 29 BRBS 105 (1995).

     5. An order of remittitur is not a settlement. Banks v. Chicago Grain Trimmers Assoc. , 390 U.S. 459 (1968).

     6. Acceptance of an offer of judgment is a settlement. Broussard v. Houma Land & Offshore , 30 BRBS 53 (1996).

     7. An incentive provided by a trial judge does not change the nature of a settlement into a judicial determination. ( consent judgment = compromise = settlement) Morauer & Hartzell, Inc. v. Woodworth , 439 F. 2d 550, 553 ( D.C. Cir. 1970), cert . denied , 404 U.S. 16 (1971).

     8. An attorney must be specifically authorized to settle and compromise a claim in California. Stadtmiller v. Mallott & Peterson , 28 BRBS 304 (1994). But see Barnes v. General Ship Service , 30 BRBS 193 (1996) (Board specifically found express authorization) and Villanueva v. CNA Insurance Companies , 868 F.2d 684 ( 5th Cir. 1989) (La. attorneys presumed to have authority).

     9. Terminating a 3rd-P action is not a "settlement." Rosario v. M.I. Stevedores , 17 BRBS 150 (1985).

     10. Retaining money as consideration. Casey v. Georgetown University Medical Center , 31 BRBS 147 (1997).

II. IS THERE A THIRD PARTY ?

Employer (ER) acting in its capacity as a vessel owner and settling a �905(b) Action is a "third person." Bundens v. J.E. Brenneman Co. , 29 BRBS 52 (CRT) (1995), 46 F.3d. 292 ( 3d Cir. 1995).

III. DO YOU HAVE A PERSON ENTITLED TO COMPENSATION (PETC) ?

Estate of Cowart v. Nicklos Drilling Co. , 505 U.S. 469 (1992) (a person whose right to compensation vests upon injury).

Ingalls Shipbuilding, Inc. v. Director, OWCP (Yates) , 519 U.S. 248 (1997) (wife who settled 3rd-P claim while husband-employee was still alive is not PETC at time of the pre-death settlements).

Cretan v. Bethlehem Steel Corp. , 1 F.3d 843 ( 9th Cir. 1993), cert denied , 512 U.S. 1219 (1994) (Wife and daughter who settled 3rd-P claim while husband-employee was still alive were PETC), overruled by Ingalls Shipbuilding, Inc. v. Director, OWCP (Yates) , 519 U.S. 248, 31 BRBS 5 (CRT) (1997).

Bethlehem Steel Corp. v. Mobley , 920 F.2d 558 ( 9th Cir. 1990) (only have PETC after a court awards a CL benefits, or ER voluntarily pays benefits).

Harris v. Todd Pac. Shipyards Corp. ( Harris I ), 28 BRBS 254 (1994), aff'd and modified on recon . en banc Harris II , 30 BRBS 5 (1996) (Brown and McGranery, JJ., concurring and dissenting) ( for a voluntary retiree to be a PETC, he must be aware of the relationship between his disease, his employment and his permanent physical impairment; for a CL who is not a retiree , he must be aware of a work-related disease which has caused a loss in his wage-earning capacity).

Harris , en banc : "We hold that establishing that claimant has merely filed a claim is not sufficient to establish that claimant is 'entitled to compensation' under the Act; rather, in order to prevail, employer must demonstrate that, as a voluntary retiree, claimant was aware of the relationship..."

Harris , en banc : Since medical treatment is not compensation, a CL entitled only to med. benefits at the time of the 3rd-P settlement can not be a PETC.

Mallot & Peterson v. Director, OWCP , 30 BRBS 87 (CRT), 98 F.3d 1170 ( 9th Cir. 1996) ( Ninth Circuit interpreted the word " representative ," in the Section 33(g) phase "person entitled to compensation (or the person's representative )," to mean a legal representative of the deceased , thus excluding legal counsel acting within an attorney/client relationship).

Brown & Root, Inc. v. Sain , 162 F.3d 813 ( 4 ^th Cir. 1998) Addresses when a person becomes "a person entitled to compensation."

IV. IS THE 3RD-PARTY SETTLEMENT FOR THE SAME DISABILITY (NOT INJURY) AS THE LHWCA CLAIM ?

See White v. Peterson Boatbuilding Co. , 29 BRBS 1 (1995) (medical malpractice). See also Goody v. Thomas Valley Steel Corp. , 28 BRBS 167 (1994); O'Berry v. Jacksonville Shipyards, Inc. ( O'Berry I ), 21 BRBS 355 (1988), on recon . O'Berry II , 22 BRBS 430 (1989); Chavez v. Todd Shipyards Corp. , 27 BRBS 80 (1993), aff'd on recon . en banc 28 BRBS 185 (1994). Similarly, is the settlement for the same cause of action? Casciani v. St. John's Shipyard , 35 BRBS 583 (ALJ) (2001) (Settlement was for "bad faith" claim; not for the covered occupational injury or death, but rather by the third-party's carrier pursuant to a cause of action arising out of its handling of the claim, not the underlying basis for the claim.).

See Kaye v. California Stevedore & Ballast , 28 BRBS 240, 253 (1994) (CL unsuccessfully argued in occupational disease case that there are several potentially liable ERs and it is impossible to know which is the responsible ER).

3. Numerical calculations: precise or not?

a) Board : 3rd-P settlements must be in precise factual amount. Harris I and II , en banc . Total amount of comp to which CL is entitled over lifetime is relevant figure. Linton v. Container Stevedoring Co. , 28 BRBS 282 (1994). Fact finder may use any reasonable method to calculate. Id .

b) Fifth Circuit : Villanueva v. CNA Ins. Companies , 868 F.2d 684 ( 5th Cir. 1989) ("if an employee settles with a third-party for more than the compensation benefits to which he is entitled, �33(f) extinguishes the ER's liability for any unpaid benefits...if the worker settles for less, �33(g) precludes further liability on the part of the ER unless the employee has obtained the ER's and carrier's prior approval").

c) Board : No, Cowart altered Villanueva and �33(f) doesn't wipe out ER's total liability in every case; compensation and medicals are suspended until net recovery is exhausted.

IX. EXCEPTIONS TO IMPLEMENTATION OF 33(g) BAR.