United States Department of Labor
Office of Administrative Law
Judges Law Library
THE JUDGE'S PERSPECTIVE
ON EVIDENCE OF FRAUD
AT THE FORMAL HEARING
DAVID W. DI NARDI
ADMINISTRATIVE LAW JUDGE
BOSTON DISTRICT
OFFICE OF ADMINISTRATIVE LAW JUDGES
U.S. DEPARTMENT OF LABOR
OVERVIEW AND INDEX
-
WHAT IS FRAUD
-
SECTION 31(A) OF THE ACT
-
EMPLOYEE FRAUD
-
WHAT CONSTITUTES FRAUD JUSTIFYING REOPENING A
PRIOR AWARD
-
REOPENING A SETTLEMENT
-
EXCLUSIVITY OF WORKER'S COMPENSATION
-
STATUTE VERSUS A TORT CLAIM
-
FIRST CATEGORY
-
SECOND CATEGORY
-
SECTION 26 OF THE ACT
-
COSTS NOT ALLOWED
-
COSTS NOT ALLOWED AGAINST THE SPECIAL
FUND
-
WHAT ARE COSTS
-
WHO IS A PARTY
-
COSTS ALLOWED
-
RECOVERY OF ERRONEOUS PAYMENTS
-
SECTION 31(b) OF THE ACT
-
CONCLUSIONS
-
A FEW BAD APPLES
-
FRAUD HOW BIG A PROBLEM
-
WHAT CAN BE DONE
WHAT IS FRAUD
ACCORDING TO
BLACK'S LAW DICTIONARY,
FRAUD IS A FALSE REPRESENTATION OF A MATTER OF FACT, WHETHER BY
WORDS OR BY CONDUCT, BY FALSE OR MISLEADING ALLEGATIONS, OR BY
CONCEALMENT OF THAT WHICH SHOULD HAVE BEEN DISCLOSED. AS
DISTINGUISHED FROM NEGLIGENCE, IT IS ALWAYS POSITIVE, INTENTIONAL.
FRAUD, A GENERIC TERM, EMBRACES ALL MULTIFARIOUS MEANS WHICH
HUMAN INGENUITY CAN DEVISE AND INCLUDES ALL SURPRISE, TRICK,
CUNNING, DISSEMBLING AND ANY UNFAIR WAY BY WHICH ANOTHER IS
CHEATED.
JOHNSON V. MCDONALD,
170 OK. 117, 39 P.2D 150.
ACCORDING TO
THE AMERICAN HERITAGE DICTIONARY
OF THE ENGLISH LANGUAGE,
"FRAUD" IS A DECEPTION
DELIBERATELY PRACTICED IN ORDER TO SECURE UNFAIR OR UNLAWFUL GAIN. A
PIECE OF TRICKERY; A SWINDLE; A CHEAT. ONE WHO ASSUMES A FALSE POSE; AN
IMPOSTER; A SHAM.
ON THE OTHER HAND, "MISREPRESENTATION"
INVOLVES GIVING AN INCORRECT OR MISLEADING REPRESENTATION OF SOME
IMPORTANT ELEMENT OR ITEM OR FACT RELATING TO THE CLAIM.
THOSE DEFINITIONS PROVIDE US WITH A CONCISE SUMMARY OF
THE PROBLEM OR ISSUE IN THE TOPIC ASSIGNED ME BY DEAN EBEL, NAMELY
THE JUDGE 'S PERSPECTIVE ON EVIDENCE OF FRAUD AT THE FORMAL
HEARING
.
1
AT THE OUTSET I WOULD NOTE THAT MY TALK WILL NOT DEAL
WITH THOSE SITUATIONS WHEREIN THE EMPLOYEE HAS SUSTAINED A
WORK-RELATED INJURY AND THE FORMAL HEARING BEFORE ME INVOLVES THE
ISSUE OF THE NATURE AND EXTENT OF THE EMPLOYEE'S DISABILITY.
OCCASIONALLY, I ENCOUNTER AN EMPLOYEE WHO, WHILE NOT NECESSARILY A
ALINGERER, NEVERTHELESS EXAGGERATES HIS SYMPTOMS AS HE AMBULATES
ABOUT THE COURTROOM AND NEEDLESSLY SHIFTS FROM SIDE-TO-SIDE IN THE
WITNESS CHAIR FOR MY BENEFIT. THAT DOES NOT CONSTITUTE EVIDENCE OF
FRAUD, WITHIN THE MEANING AND INTENT OF TODAY'S TOPIC, AND I DEAL WITH
THAT ISSUE IN MY DECISION AS SUCH EXAGGERATION AND
"SHOW-BOATING" BEAR ON THE WORKER'S CREDIBILITY AND
DEMEANOR.
IN MY YEARS AS AN ADMINISTRATIVE LAW JUDGE, INITIALLY
HERE IN NEW ORLEANS (WHEN OUR OFFICES WERE IN THE F. EDWARD HEBERT
BUILDING) AND NOW IN BOSTON, I HAVE SPECIFIC KNOWLEDGE OF ONLY ONE
FRAUDULENT CLAIM HAVING BEEN FILED BY A SHIPYARD WORKER ALTHOUGH I
SUSPECT THAT THERE HAVE BEEN OTHERS.
SEVERAL YEARS AGO, AS I WAS ABOUT READY TO CONVENE A
HEARING IN REGION I, THERE WERE SEATED IN THE COURTROOM THE EMPLOYEE,
HIS ATTORNEY, THE EMPLOYER'S ATTORNEY AND, IN THE BACK OF THE COURT-
ROOM, TWO WELL-DRESSED INDIVIDUALS WHO WERE NOT IDENTIFIED AS
PROSPECTIVE WITNESSES ON EITHER PARTY'S PRE-HEARING STATEMENT.
CLAIMANT'S ATTORNEY, REALIZING THAT HE HAD NOT CALLED THOSE
INDIVIDUALS AS HIS WITNESSES, ASKED EMPLOYER'S COUNSEL TO IDENTIFY HIS
WITNESSES. COUNSEL REPLIED THAT THEY WERE NOT WITNESSES BUT INSTEAD
WERE "OBSERVERS," COUNSEL THEN DROPPING THE BOMBSHELL THAT
ONE WAS FROM THE U.S. POSTAL SERVICE MAIL FRAUD UNIT AND THE OTHER WAS
FROM THE OFFICE OF THE INSPECTOR GENERAL (OIG). APPARENTLY THE
EMPLOYER HAD DEVELOPED EVIDENCE THAT THE ALLEGED SHIPYARD INJURY
WAS FRAUDULENT RIGHT FROM THE "GET-GO" AND THAT THE CLAIM
HAD BEEN FILED AND MAINTAINED FRAUDULENTLY AT THE LEVEL OF THE THEN
DEPUTY COMMISSIONER IN REGION I. THE EMPLOYER THEN ALERTED
APPROPRIATE AUTHORITIES AND THE TWO INDIVIDUALS WERE PRESENT IN THE
COURTROOM AS OBSERVERS TO HEAR THE EMPLOYEE'S TESTIMONY UNDER OATH.
IN FACT, THEY HAD MADE ARRANGEMENTS WITH THE COURT REPORTER TO
OBTAIN A COPY OF THE HEARING TRANSCRIPT, A DOCUMENT WHICH IS PART OF
THE PUBLIC RECORD IN ANY LONGSHORE CLAIM AND WHICH IS AVAILABLE TO
ANYONE UPON REQUEST AND PAYMENT OF THE APPROPRIATE CHARGE.
CLAIMANT'S ATTORNEY THEN REQUESTED A DELAY IN THE
START OF THE HEARING TO CONFER WITH HIS CLIENT. AFTER ABOUT TEN MINUTES
OR SO, BOTH RETURNED TO THE COURTROOM AND COUNSEL ADVISED THAT THE
EMPLOYEE DID NOT WISH TO GO FORWARD WITH HIS HEARING AND THAT HE
WANTED THE CLAIM TO BE REMANDED TO THE DEPUTY COMMISSIONER. THE
CLAIM WAS REMANDED AND WHILE THAT ENDED MY PARTICIPATION IN THE CASE,
THE MATTER WAS STILL VERY MUCH ALIVE AS THE EMPLOYEE HAD RECEIVED
SIGNIFICANT AMOUNTS AS COMPENSATION AND MEDICAL BENEFITS. THE
INVESTIGATIONS CONTINUED, THE EMPLOYEE WAS INDICTED FOR VIOLATION OF
SECTION 31(A)(1) OF THE LONGSHORE ACT. A PLEA ARRANGEMENT WAS WORKED
OUT AND THE SENTENCE INVOLVED PROBATION FOR SEVERAL YEARS IN A COURT
APPROVED WORK RELEASE PROGRAM, AS WELL AS FINANCIAL AND
PSYCHOLOGICAL COUNSELLING AND, MOST IMPORTANT, RESTITUTION OF THE
BENEFITS HE HAD FRAUDULENTLY RECEIVED.
SECTION 31(A) OF THE ACT
THE 1984 AMENDMENTS TO THE LONGSHORE ACT MADE
SIGNIFICANT CHANGES IN THE FIELD OF WORKERS' COMPENSATION LAW AND THE
CHANGE PERTINENT TO MY TALK TODAY IS REFLECTED IN SECTION 31. THIS
CHANGE IS MOST IMPORTANT BECAUSE SECTION 31 NOW MAKES IT A FELONY TO
ISREPRESENT ANY ASPECT OF A CLAIM AND HAS INCREASED THE PRISON TERM
TO FIVE YEARS AND THE FINE TO $10,000.00. NEEDLESS TO SAY, THOSE ARE
"BIG-LEAGUE" SANCTIONS AND BECAME EFFECTIVE ON SEPTEMBER 28,
1994.
FIRST, LET US LOOK AT THE SPECIFIC PROSCRIPTIONS OF THAT
SECTION.
SECTION 31(A) READS AS FOLLOWS:
-
(A)(1) ANY CLAIMANT OR
REPRESENTATIVE OF A CLAIMANT WHO KNOWINGLY AND WILLFULLY
MAKES A FALSE STATEMENT OR REPRESENTATIVE FOR THE PURPOSE OF
OBTAINING A BENEFIT OR PAYMENT UNDER THIS ACT SHALL BE GUILTY
OF A FELONY, AND ON CONVICTION THEREOF SHALL BE PUNISHED BY A
FINE NOT TO EXCEED $10,000, BY IMPRISONMENT NOT TO EXCEED FIVE
YEARS, OR BY BOTH.
-
(2) THB UNITED STATES ATTORNEY FOR THE
DISTRICT IN WHICH THE INJURY IS ALLEGED TO HAVE OCCURRED SHALL
MAKE EVERY REASONABLE EFFORT TO PROMPTLY INVESTIGATE EACH
COMPLAINT MADE UNDER THIS SUBSECTION.
33 U.S.C. §931(A).
ROBERT T. BRAHM, IN HIS
LONGSHORE NEWSLETTER,
TELLS US ABOUT AN INDIVIDUAL WHO IN THE 1960'S HAD FILED AT LEAST 24
COMPENSATION CLAIMS AS HE PERPETRATED A SERIES OF INJURY CLAIMS IN HIS
YEARLY MIGRATIONS FROM LAKE TAHOE TO PALM SPRINGS. APPARENTLY THE
CLAIMS WERE SETTLED AS NUISANCE CLAIMS BECAUSE THERE WAS NO FEAR OF
PROSECUTION AND BECAUSE IT "WAS CHEAPER TO PAY THAN TO FIGHT A
LOSING BATTLE."
HOWEVER, TIMES HAVE CHANGED AND, AS SUCH
ISREPRESENTATION NOW IS A FELONY, MR. BRAHM TELLS US ABOUT THE
POST-AMENDMENT STEVEDORE WHO WAS INJURED ON THE JOB AND WHO HAD NOT
RETURNED TO WORK SOME EIGHTEEN MONTHS LATER. SURVEILLANCE OF THE
INDIVIDUAL REVEALED THAT HE WAS WORKING AT NIGHTS FOR ANOTHER
EMPLOYER. BENEFITS WERE TERMINATED AND THE EMPLOYER REPORTED THE
ATTER TO THE OIG OF THE DEPARTMENT OF LABOR. THE OIG CONDUCTED AN
INVESTIGATION, CONFRONTED THE INDIVIDUAL WITH THE RESULTS AND THE
EMPLOYEE READILY ADMITTED THAT HE HAD MISLED HIS TREATING PHYSICIAN,
HIS ATTORNEY AND THE EMPLOYER. HE WAS SUBSEQUENTLY INDICTED FOR
VIOLATING SECTION 31(A)(1), WAS CONVICTED AND SENTENCED TO FIVE YEARS
IMPRISONMENT WITH ALL BUT SIX MONTHS SUSPENDED, FOLLOWED BY FIVE
YEARS PROBATION. MOST IMPORTANT, THE JUDGE MANDATED RESTITUTION IN
THE SUM OF $32,500 TO BE REPAID IN INSTALLMENTS ARRANGED BY THE U.S.
PAROLE OFFICE. WHAT IS NOTEWORTHY IS THAT THE FAILURE TO MAKE
RESTITUTION WILL RESULT IN CANCELLATION OF THE PROBATION AND
IMPRISONMENT TO SERVE THE BALANCE OF THE FIVE YEAR TERM. LONGSHORE
NEWSLETTER,
VOLUME 3, ISSUE 6 (AUGUST, 1985), PP. 62-63
WHAT HAPPENS WHEN FRAUDULENT ACTIONS TAKE PLACE IN
A WORKERS' COMPENSATION PROCEEDING? DOES FRAUD VITIATE THE ENTIRE
PROCEEDING? PART OF IT? CAN A SETTLEMENT AGREEMENT OBTAINED BY FRAUD
BE REOPENED? DOES SUCH FRAUD GIVE RISE TO A CAUSE OF ACTION FOR
INTENTIONAL AND WILLFUL CONDUCT BY EITHER PARTY? WHAT SANCTIONS ARE
AVAILABLE TO DEAL WITH SUCH CONDUCT? MY TALK TODAY HOPEFULLY WILL
ANSWER THOSE QUESTIONS AND PERHAPS SUGGEST SOME AVENUES OF APPROACH
DEPENDING UPON YOUR PERSPECTIVE.
EMPLOYEE FRAUD
THE LONGSHORE ACT CONTAINS NO PROVISION BARRING
RECOVERY DUE TO MISREPRESENTATIONS IN PRE-EMPLOYMENT CIRCUMSTANCES.
THE BOARD HAS CONSISTENTLY REFUSED TO READ A MISREPRESENTATION
DEFENSE INTO THE ACT AND HAS HELD THAT CASES THAT IMPOSE A DUTY ON
CLAIMANTS TO USE REASONABLE MEANS TO AVOID AN INJURY
WERE
APPLICABLE TO SITUATIONS INVOLVING ISSUES OF CAUSATION
AND NOT
TO SITUATIONS WHERE A MORE COMPLETE DISCLOSURE BY THE EMPLOYEE OF
PRE-EXISTING CONDITIONS COULD ARGUABLY HAVE RESULTED IN MORE
APPROPRIATE WORK FOR THE INJURED CLAIMANT. FOR EXAMPLE, ALTHOUGH
CLAIMANT FAILED TO DISCLOSE A PREVIOUS KNEE INJURY FOR WHICH HE HAD
RECEIVED COMPENSATION UNDER A STATE ACT, THE BOARD HELD THAT THIS NON-
DISCLOSURE DID NOT PRECLUDE SECTION 8(F) RELIEF SINCE ALL THAT IS
REQUIRED TO RENDER A PRE-EXISTING CONDITION "MANIFEST" IS THAT
IT BE OBJECTIVELY DETERMINABLE FROM MEDICAL RECORDS.
HALLFORD V.
INGALLS SHIPBUILDING DIVISION, LITTON SYSTEMS INCORPORATED,
15
BRBS 112 (1982).
CHIEF ADMINISTRATIVE APPEALS JUDGE RAMSEY
"STRONGLY DISSENT(ED) FROM THE HOLDING THAT CLAIMANT HEREIN IS
ENTITLED TO BENEFITS. CLAIMANT'S MISREPRESENTATION OF HIS PHYSICAL
CONDITION ON HIS EMPLOYMENT APPLICATION PREVENTED EMPLOYER FROM
TAKING ANY STEPS TO ACCOMMODATE CLAIMANT, TO PLACE HIM ON JOB
RESTRICTIONS, OR TO EXERCISE ITS RIGHT TO DENY EMPLOYMENT TO
CLAIMANT." ACCORDING TO CHIEF JUDGE RAMSEY, "CLAIMANT, NOT
HAVING BEEN HONEST WITH EMPLOYER CONCERNING HIS MEDICAL HISTORY,
SHOULD NOT BE ALLOWED TO PROFIT FROM HIS OWN WRONGDOING.
SINCE THE EMPLOYER RELIED ON CLAIMANT'S MISREPRESENTATION TO ITS
DETRIMENT AND SINCE THERE IS A DIRECT RELATIONSHIP BETWEEN CLAIMANT'S
CONCEALED PRIOR KNEE INJURY AND HIS SUBSEQUENT WORK RELATED INJURY,
(JUDGE RAMSEY) WOULD DENY."
HALLFORD , SUPRA
AT 114-115).
AN EMPLOYER IS NOT RELIEVED OF COMPENSATION LIABILITY
FOR AN EMPLOYMENT-RELATED INJURY WHERE THE EMPLOYEE MISREPRESENTED
HIS MEDICAL HISTORY ON HIS EMPLOYMENT APPLICATION. SINCE THE ACT DOES
NOT ENCOMPASS A MISREPRESENTATION EXCEPTION TO LIABILITY, THE FOURTH
CIRCUIT REFUSED TO AMEND THE ACT UNDER THE GUISE OF "STATUTORY
INTERPRETATION" AND REJECTED THE MISREPRESENTATION DEFENSE.
NEWPORT NEWS SHIPBUILDING AND DRY DOCK COMPANY,
674 F.2D 248,
14 BRBS 641 (4TH CIR. 1982),
AFF'G
13 BRBS 873 (1981). THE LONGSHORE ACT
IS THE RESULT OF THE BALANCING OF THE INTERESTS OF EMPLOYEES AND
EMPLOYERS AND ANY MISREPRESENTATION DEFENSE SHOULD BE THE SUBJECT
FOR CONGRESSIONAL DEBATE.
WHAT CONSTITUTES FRAUD JUSTIFYING
REOPENING A PRIOR AWARD?
A WYOMING STATUTE PROVIDES THAT A CLAIM MAY BE
REOPENED FOR,
AMONG OTHER REASONS, FRAUD. THE WYOMING COURT CONCLUDED THAT
"THE FRAUD MUST OCCUR IN CONNECTION WITH THE AWARD." THAT
WAS NOT THE CASE IN A SITUATION WHERE THE EMPLOYER ALLEGED THAT THE
CLAIMANT HAD BEEN FRAUDULENT IN HIS ANSWERS TO QUESTIONS ON HIS PRE-
EMPLOYMENT APPLICATION FORM REGARDING PRIOR INJURIES AND AILMENTS.
EVEN IF FRAUD ON THE APPLICATION COULD BE GROUNDS FOR REOPENING, THE
COURT DETERMINED THAT THE CLAIMANT'S ANSWERS ON THE APPLICATION WERE
NOT FRAUDULENT, BUT SIMPLY RESULTED FROM THE APPLICATION'S
"IMPRECISE QUESTIONS."
FORNI V. PATHFINDER MINES,
834 P.2D
688, 693 (WYO. 1992).
ANOTHER INTERESTING CASE DID NOT INVOLVE ALLEGATIONS
OF FRAUD, BUT THE CLAIMANT PETITIONED THE COMMISSIONER TO REOPEN
PROCEEDINGS BASED ON AN ALLEGATION THAT THE EMPLOYER FAILED TO
DISCLOSE FOUR LETTERS BETWEEN THE EMPLOYER AND THE PLAINTIFF'S
PHYSICIAN. THE LETTERS, HOWEVER, DID NOT MEET THE TEST FOR THE
COMMISSIONER TO OPEN A CLAIM: "WHETHER THE NEW EVIDENCE [IS]
SUFFICIENT TO SHOW THAT AN INJUSTICE HAD BEEN DONE BY HIS AWARD AND
THAT A DIFFERENT RESULT WOULD PROBABLY BE REACHED ON A NEW HEARING.
TUTSKY V. YMCA OF GREENWICH
28 CONN. APP. 536, 612 A.2D 1222 (1992).
SEE ALSO MEADOW V. WINCHESTER REPEATING ARMS CO.,
134 CONN.
269 AT 275-76, 57 A.2D 138 (1948).
THE LOUISIANA REPORTS MENTION A DELIVERY TRUCK DRIVER
WHO SUSTAINED A BACK INJURY WHILE DELIVERING BEER IN THE FRENCH
QUARTER. CLAIMANT, CITING NEWLY-DISCOVERED EVIDENCE, MOVED FOR A NEW
TRIAL, ALLEGING THAT HE WAS PERMANENTLY AND TOTALLY DISABLED. THE
TRIAL COURT DENIED THE MOTION. THE LOUISIANA STATUTE PROVIDES THAT A
NEW TRIAL SHALL BE GRANTED WHEN THE PARTY HAS DISCOVERED,
SINCE
THE TRIAL
, EVIDENCE IMPORTANT TO THE CAUSE, WHICH HE COULD NOT,
WITH DUE DILIGENCE, HAVE DEVELOPED PRIOR TO THE TRIAL AND WHICH
EVIDENCE IS PROBATIVE AND IS NOT MERELY CUMULATIVE EVIDENCE.
FURTHERMORE, THIS "NEWLY DISCOVERED" EVIDENCE WOULD NOT
HAVE CHANGED THE RESULT SINCE IT WAS OUTWEIGHED BY THE CONCLUSION OF
FIVE ORTHOPEDIC SURGEONS WHO CONCLUDED THAT THE CLAIMANT WAS NOT
DISABLED.
VIDRINE V. MAGNOLIA LIQUOR CO.,
533 SO.2D 1329 (LA. CT.
APP. 1988).
I WOULD LIKE TO END THIS SECTION BY BRIEFLY MENTIONING THE WORKER WHO
WAS RECEIVING TEMPORARY TOTAL DISABILITY BENEFITS FOR A LOWER BACK
STRAIN. THE EMPLOYER'S SURVEILLANCE OF THE WORKER BY PRIVATE
INVESTIGATOR REVEALED THAT THE EMPLOYEE WAS VIGOROUSLY
PARTICIPATING IN A WEEKLY BOWLING LEAGUE WITHOUT ANY APPARENT
PHYSICAL PROBLEMS AND THE EMPLOYER MOVED TO REOPEN THE AWARD. THE
SUPREME COURT HELD THAT THE INDUSTRIAL COMMISSION LACKED JURIS -
DICTION TO MODIFY THE AWARD BECAUSE THE DISCOVERY OF UNDISCLOSED
BEHAVIOR WAS NOT EVIDENCE THAT THE CONDITION OF THE CLAIMANT HAD
CHANGED. MOREOVER, THAT DISCOVERY DID NOT ESTABLISH THAT THE
CLAIMANT
HAD OBTAINED THE AWARD FRAUDULENTLY
. I WOULD ADD
THAT
FOUR JUSTICES JOINED IN THE MAJORITY OPINION WHILE THREE JUSTICES FILED
A VIGOROUS DISSENT.
STATE EX REL. KEITH V. INDUSTRIAL COMM'N OF
OHIO,
62 OHIO APP.3D 139, 580 N.E.2D 433 (1991),
REH'G DENIED
, 62 OHIO
STATE 3D 1496, 583 N.E.2D 968 (1992).
IN THEIR DISSENT, THE JUSTICES STATED THAT "THE
INDUSTRIAL COMMISSION, AND THE EMPLOYER, ACTED ON PREVIOUSLY
UNKNOWN, DRAMATIC EVIDENCE, REVEALED IN THE NEWS MEDIA, AND DID SO
PROMPTLY. THE MODIFICATION OF THE PREVIOUS ORDER WAS AS FULLY JUSTIFIED
AS WAS THE REFUSAL TO AWARD FURTHER BENEFITS. THE EFFECT OF THIS MODIFI-
CATION (BY THE COMMISSION) WAS TO CONFORM THE AWARD OF BENEFITS TO
THE TRUTH OF (THE EMPLOYEE'S) PHYSICAL ABILITIES, AND WAS IN NO WAY A
VIOLATION OF THE LETTER OR INTENT OF THE CONTROLLING STATUTE."
MOREOVER, ACCORDING TO THE DISSENT, "IT WOULD BE
UNREASONABLE TO REWARD (EMPLOYEE'S) BEHAVIOR BY LIMITING" THE
COMMISSION'S JURISDICTION TO TERMINATE FUTURE BENEFITS AND THIS RULING
BY THE MAJORITY "CREATES A WINDFALL TO (THE EMPLOYEE) FOR A PERIOD
DURING WHICH HE SUCCESSFULLY AVOIDED DISCOVERY OF HIS DILIGENT
PRACTICE AND NOTABLE TRIUMPHS ON THE BOWLING LANES."
STATE EX
REL. KEITH, SUPRA.
OCCASIONALLY FRAUD OR MISREPRESENTATION OCCURS
IN EFFECTUATING A SETTLEMENT UNDER WORKERS' COMPENSATION STATUTES.
THERE ARE NUMEROUS EXAMPLES REPORTED IN THE LAW BOOKS AND I SHALL
JUST SELECT SEVERAL OF THOSE WHICH MAY BE OF INTEREST TO THOSE
PARTICIPATING UNDER EITHER THE LONGSHORE ACT OR WITHIN THE TERRITORY
OF THE FIFTH CIRCUIT COURT OF APPEALS.
CAN A SETTLEMENT AGREEMENT OBTAINED UNDER THE LONGSHORE ACT
BE REOPENED?
IN 1984 CONGRESS AMENDED SECTION 22 (THE PROVISION
PERMITTING MODIFICATION OF DECISIONS) AND PROVIDED THAT "(T)HIS
SECTION DOES NOT AUTHORIZE THE MODIFICATION OF SETTLEMENTS." THE
BOARD HELD THAT THIS AMENDMENT DID NOT CHANGE THE LAW, BUT MERELY
CODIFIED THE EXISTING PRACTICE. ACCORDINGLY, THE CLAIMANT COULD NOT
REOPEN HER SETTLEMENT AGREEMENT,
EVEN THOUGH IT HAD BEEN
ENTERED INTO PRIOR TO THE EFFECTIVE DATE OF THAT PARTICULAR 1984
AMENDMENT.
THE D.C. CIRCUIT COURT AFFIRMED.
BONILLA V.
DIRECTOR, OWCP,
859 F.2D 1484, 21 BRBS 185 (CRT) (D.C. CIR. 1988),
AMENDED BY
866 F.2D 451 (D.C. CIR. 1989).
THERE ARE A NUMBER OF STATES WHICH PROHIBIT REOPENING
A SETTLEMENT AGREEMENT EVEN THOUGH CLAIMANT ALLEGES MISREPRESEN-
TATION, A MISTAKE OF FACT OR A CHANGE OF CONDITION.
SEE, E.G., OLSEN
LOGGING CO. V. LAWSON,
856
P.2D 1155 (ALASKA 1993) (THE BOARD
DOES NOT HAVE THE AUTHORITY TO MODIFY SETTLEMENT AGREEMENTS BECAUSE
OF A MISTAKE OF FACT OF THE PARTIES);
SAFEWAY STORES, INC. V.
SENEY
, 124 OR. APP. 450, 863 P.2D 528 (1993) (A CLAIMANT MAY NOT ESCAPE HIS
BARGAIN BY RECHARACTERIZING HIS CLAIM AFTER THE FACT);
UNDERWOOD
V. ZURICH INS. CO.
, 854 S.W.2D 94 (TENN. 1993) (LUMP-SUM AWARDS ARE FINAL
AND MODIFICATION THEREOF FOR INCREASED DISABILITY DUE TO A CHANGE IN
PHYSICAL CONDITION IS PROPER ONLY IF THE AWARD IS PAYABLE PERIODICALLY
FOR MORE THAN SIX MONTHS).
THE COLORADO APPELLATE COURT HAS HELD THAT A
COMPROMISE SETTLEMENT AGREEMENT CONTAINING A WAIVER OF FUTURE
EDICAL BENEFITS IS BINDING UPON THE CLAIMANT
ABSENT FRAUD OR
UTUAL MISTAKE OF MATERIAL FACT. COMMISKEY V. VALLEY FORGE INS.
CO.
, 781 P.2D 188 (COLD. CT. APP. 1989).
AN INTERESTING CASE OCCURRED HERE IN LOUISIANA AND
INVOLVED A COMPROMISE SETTLEMENT PROPOSAL WHICH WAS SUBMITTED TO
THE OFFICE OF WORKERS' COMPENSATION (OWC) FOR APPROVAL BUT BEFORE THE
APPROVAL, THE EMPLOYEE PASSED AWAY. THE DEPENDENTS DID NOT NOTIFY
EITHER THE EMPLOYER OR THE OWC OF THE DEATH AND THE SETTLEMENT
PROPOSAL WAS APPROVED. AS YOU MIGHT EXPECT, THE EMPLOYER LEARNED OF
THE EMPLOYEE'S DEATH AND MOVED TO HAVE THE SETTLEMENT SET ASIDE. THE
OWC AGREED WITH THE EMPLOYER BECAUSE THE EMPLOYEE'S AND HIS
DEPENDENTS' RIGHTS TO COMPENSATION ENDED UPON THE EMPLOYEE'S DEATH
AND THE DEPENDENTS' FAILURE TO NOTIFY THE EMPLOYER OF THE DEATH WAS
A
MISREPRESENTATION BY OMISSION. RYDER V. INDUSTRIAL CONSTR.
CO.
, 616 SO.2D 857 (CT. APP.),
WRIT DENIED,
619 SO.2D 1068 (LA. 1993).
IN A RECENT TEXAS CASE, THE CLAIMS ADJUSTER ALLEGEDLY
ISREPRESENTED THE MAXIMUM LEVEL OF FUTURE MEDICAL PAYMENTS WHICH
COULD BE MADE UNDER THE WORKERS' COMPENSATION STATEMENT AND THE
EMPLOYEE AGREED TO A VOLUNTARY SETTLEMENT OF HIS CLAIM. HOWEVER,
AFTER HE LEARNED OF THE MISREPRESENTATIONS, HE MOVED TO REOPEN HIS
CLAIM AND TO SET ASIDE THE SETTLEMENT. THE COURT OF APPEALS HELD THAT
SUCH MISREPRESENTATIONS WERE SUFFICIENT TO ALLOW REOPENING OF THE
SETTLEMENT.
FIDELITY & GUAR. INS. UNDERWRITERS, INC. V. SAENZ
, 865
S.W.2D 103 (TEX. CT. APP. 1993),
REHG OVERRULED,
1994 WL 12074 (1994).
ANOTHER NOTEWORTHY EXAMPLE IS THAT OF A WORKER WHO
INJURED HIS BACK IN JULY OF 1985. HE VISITED THE COMPANY DOCTOR WHO
REFERRED HIM TO AN ORTHOPEDIC SURGEON. TESTS BY THE SURGEON INDICATED
NO ABNORMALITY AND THE CONDITION WAS DIAGNOSED AS BACK STRAIN. HE
WAS GIVEN PAIN PILLS AND TOLD TO RETURN TO WORK. THE WORKER BELIEVING
THAT HE SUFFERED ONLY MUSCLE STRAIN, SIGNED A COMPROMISE AGREEMENT
WITH THE EMPLOYER'S CARRIER, WHICH AGREEMENT PROVIDED HIM WITH $3,500
AND ONE YEAR OF FUTURE MEDICAL EXPENSES. HOWEVER, HIS BACK PAIN
WORSENED AND, AFTER MORE THAN ONE YEAR HAD PASSED, THE WORKER
SOUGHT THE CARE OF A DIFFERENT PHYSICIAN. DIAGNOSTIC TESTS LED THE
DOCTOR TO CONCLUDE THAT HE SUFFERED A HERNIATED DISC. THE WORKER SUED
TO SET ASIDE THE AGREEMENT. THE JURY FOUND IN HIS FAVOR AND THE
EMPLOYER AND CARRIER APPEALED. THE COURT OF APPEALS AFFIRMED.
TEXAS EMPLOYERS' INS. ASS'N V. ALCANTARA,
764 S.W.2D 865 (TEX. CT.
APP. 1989).
IN
TEXAS EMPLOYERS' INS. ASS'N V. REMY,
752
S.W.2D 617 (TEX.
CT. APP. 1988), THE COURT OF APPEALS HELD THAT THE EMPLOYEE HAD BEEN THE
VICTIM OF "CONSTRUCTIVE FRAUD" WHEN HE SOUGHT THE ADVICE OF
A PHYSICIAN RECOMMENDED BY HIS EMPLOYER AND THE PHYSICIAN FAILED TO
DISCLOSE A BACK CONDITION WHICH LATER REQUIRED SURGERY.
SEE ALSO
RODRIQUEZ V. AMERICAN HOME ASSURANCE CO.,
735 S.W.2D 241 (TEX. 1987).
ALSO NOTEWORTHY IS THE CASE OF A WORKER WHOSE TREATING PHYSICIAN
ASSIGNED A 32% PERMANENT PARTIAL DISABILITY RATING TO THE ROTATOR CUFF
TEAR IN HIS SHOULDER. THE CLAIMANT, WHO WAS NOT REPRESENTED BY AN
EMPLOYER IN THE SETTLEMENT NEGOTIATIONS, ACCEPTED A SETTLEMENT OF HIS
CLAIM AWARDING HIM BENEFITS FOR A SCHEDULED INJURY. THEN, BECAUSE OF
THE INSURER'S FAILURE TO EXPLAIN TO HIM THE DIFFERENCE BETWEEN A
SCHEDULED INJURY AND AN INDUSTRIAL INJURY, THE CLAIMANT PETITIONED THE
COURT TO SET ASIDE THE AGREEMENT ON THE BASIS OF FRAUD. THE COURT,
FINDING THAT THE INFORMATION PROVIDED BY THE CLAIMANT SUFFICIENTLY
ADVISED HIM OF THE TERMS OF THE AGREEMENT AND OF HIS RIGHT TO OBTAIN
ADDITIONAL INFORMATION FROM AN ATTORNEY OR FROM THE INDUSTRIAL
COMMISSION, HELD THAT ALTHOUGH THE INSURER PERHAPS SHOULD HAVE
DISCUSSED WITH HIM THE DIFFERENCE BETWEEN SCHEDULED AND
NONSCHEDULED INJURIES, ITS FAILURE TO DO SO DID NOT AMOUNT TO FRAUD
BECAUSE THERE WAS NO EVIDENCE THAT THE CLAIMS EXAMINER INTENDED TO
DECEIVE THE CLAIMANT OR THAT SHE ACTED WITH RECKLESS DISREGARD OF THE
TRUTH IN HER COMMUNICATIONS WITH THE CLAIMANT.
MORTON V.
UNDERWRITERS ADJUSTING CO.
, 501 N.W.2D 72 (IOWA CT. APP. 1993).
EXCLUSIVITY OF WORKERS-
COMPENSATION
STATUTE VERSUS A TORT CLAIM
DOES THE WORKERS' COMPENSATION STATUTE PROVIDE
THE EMPLOYEE OR EMPLOYER WITH THE ONLY OR EXCLUSIVE REMEDY FOR A
WORK-RELATED INJURY? OR WILL THE COURTS PERMIT A CAUSE OF ACTION
FOR THE TORT RESULTING FROM THE WILLFUL AND INTENTIONAL ACTIONS OF
ONE OF THE PARTIES TO A WORKERS' COMPENSATION PROCEEDING?
CASES INVOLVING ALLEGATIONS OF DECEIT, FRAUD AND
ISREPRESENTATION CAN BEST BE SORTED OUT BY DISTINGUISHING THOSE IN
WHICH THE DECEIT PRECEDES AND HELPS PRODUCE THE INJURY, AS OPPOSED TO
THOSE IN WHICH THE DECEIT FOLLOWS THE INJURY AND PRODUCES A SECOND
INJURY OR LOSS. IN THE FIRST CATEGORY, A TORT ACTION HAS USUALLY BEEN
FOUND BARRED SINCE THE DECEIT MERGES INTO THE INJURY FOR WHICH A
COMPENSATION REMEDY IS PROVIDED. IN THE LATTER CATEGORY, THE ACTION
GIVES RISE TO A SECOND CAUSE OF ACTION FREE OF THE EXCLUSIVITY BAR.
FIRST CATEGORY
THE TENTH CIRCUIT, IN AFFIRMING THE DISTRICT COURT,
HELD THAT THE PLAINTIFFS, FORMER EMPLOYEES OF A NUCLEAR PLANT, WERE
BARRED FROM SUING THEIR FORMER EMPLOYER IN TORT BECAUSE OF THE
EXCLUSIVE REMEDY PROVISIONS OF THE COLORADO WORKER'S COMPENSATION
ACT. ACCORDING TO THE COURT, THE FACT THAT THE ACT DID NOT PROVIDE ANY
BENEFITS FOR SUCH CONDUCT WAS NOT CONTROLLING AND THE SUIT CANNOT BE
CONSIDERED AN INTENTIONAL TORT ACTION.
BUILDING AND CONSTR. DEPT.
V. ROCKWELL INTERN'L CORP.,
7 F.3D 1487 (10TH CIR. 1993).
ACCORD,
POLICE V. GEORGE AND ANNA PORTES CANCER PREVENTION CENTER OF
CHICAGO, INC.,
238 ILL. APP.3D 741, 606 N.E.2D 572 (1992),
APPEAL
ALLOWED,
149 ILL. 2D 661, 612 N.E.2D 524 (1993) (THE APPELLATE COURT
AFFIRMED A DETERMINATION THAT THE ACTION WAS BARRED BY THE EXCLUSIVE
REMEDY PROVISIONS OF THE WORKERS' COMPENSATION LAW AS THE INJURY
AROSE OUT OF AND IN THE COURSE OF THE EMPLOYMENT AND NO TORT ACTION
COULD BE MAINTAINED);
DAVIS V. LOCKHEED CORP.,
13 CAL. APP. 4TH 519,
17 CAL. RPTR.2D 233 (1993) (AN EMPLOYEE'S TORT CLAIM AGAINST HIS EMPLOYER
FOR FRAUD WAS BARRED BY THE EXCLUSIVITY OF THE WORKERS' COMPENSATION
STATUTE AS THE EMPLOYEE'S CANCER AND ITS AGGRAVATION WERE NOT THE
RESULT OF THE EMPLOYER'S FRAUDULENT CONCEALMENT OF THE INJURY OF
EXPOSING THE EMPLOYEE TO ASBESTOS).
THE OHIO DISTRICT COURT, APPLYING OHIO LAW, DISMISSED
THAT
PORTION OF THE PLAINTIFF'S COMPLAINT WHICH ALLEGED THAT THE
EMPLOYER HAD FRAUDULENTLY CONCEALED THE PLAINTIFF'S EXPOSURE TO
EXCESSIVE LEVELS OF RADIOACTIVE AND OTHER HAZARDOUS MATERIALS
BECAUSE THE CLAIMS FOR SUCH INJURIES WERE EXCLUSIVELY WITHIN THE
WORKERS' COMPENSATION ACT.
DAY V. NLO, INC.,
811 F.SUPP. 1271
(S.D. OHIO 1992).
ACCORD, SANTIAGO V. PENNSYLVANIA NATIONAL MUTUAL
CASUALTY INS. CO.
, 418 PA. SUPER. 178, 613 A.2D 1235 (1992) THE EMPLOYEE'S
TORT CLAIM IS BARRED AS PENNSYLVANIA DOES NOT PROVIDE AN INTENTIONAL
TORT EXCEPTION TO THE EXCLUSIVENESS DOCTRINE AND AS THE TORT CLAIM IS
COMPLETELY INTERTWINED" WITH HIS ORIGINAL COMPENSABLE
INJURY").
A NOTEWORTHY LOUISIANA CASE OCCURRED WHEN THE
PLAINTIFF FILED A TORT ACTION AGAINST HIS EMPLOYER AND THE COMPANY
DOCTOR, ALLEGING THAT HE HAD EXPERIENCED A PROGRESSIVE DETERIORATION
OF HIS LUNG CONDITION DUE TO THE CONDITIONS UNDER WHICH HE WORKED AND
THE EMPLOYER'S FAILURE TO WARN HIM OF THE RESULTS OF HIS YEARLY
PHYSICAL EXAMS, WHICH SHOWED A STEADY DECREASE IN HIS LUNG CAPACITY.
THE COURT HELD THAT THE EXCLUSIVITY DEFENSE BARRED A CAUSE OF ACTION
AGAINST THE EMPLOYER, STATING THAT PLAINTIFF'S RELIANCE ON
DORNAK
V. LAFAYETTE GENERAL HOSP.,
399 SO.2D 168 (LA. 1981), WAS MISPLACED. IN
DORNAK,
THE
SUPREME COURT OF LOUISIANA HAD UPHELD AN
EMPLOYEE'S RIGHT TO SUE HER EMPLOYER, WHICH HAD DISCOVERED IN A
PRE-EMPLOYMENT PHYSICAL THAT SHE WAS SUFFERING FROM TUBERCULOSIS BUT
HAD FAILED TO DISCLOSE THAT INFORMATION TO HER. THIS COURT
DISTINGUISHED DORNAK BY NOTING THAT THE SUPREME COURT HAD LIMITED ITS
HOLDING THERE TO CASES INVOLVING PRE-EMPLOYMENT PHYSICAL EXAMS. THE
COURT ALSO HELD THAT THE PLAINTIFF HAD NO CAUSE OF ACTION AGAINST THE
PLANT DOCTOR ON THE GROUND THAT, SINCE THE DOCTOR EXAMINED THE
PLAINTIFF ONLY FOR THE BENEFIT OF THE EMPLOYER, THERE WAS NO DOCTOR
PATIENT RELATIONSHIP BETWEEN THEM.
THOMAS V. KENTON
, 425 SO.2D
396 (LA. CT. APP. 1982).
A FOOTBALL PLAYER BROUGHT SUIT IN CONTRACT AGAINST HIS
TEAM FOR FAILING TO INFORM HIM OF THE TRUE NATURE OF HIS INJURIES AND
PHYSICAL CONDITION. THE DISTRICT COURT, APPLYING NEW YORK LAW, HELD
THAT SUCH ACTION WAS BARRED BY THE PUBLIC POLICY OF EXCLUSIVITY OF
WORKER'S COMPENSATION FOR WORK-RELATED INJURIES. ACCORDING TO THE
COURT, JUST AS AN ACTION FOR BODILY INJURY IS BARRED, SO TOO IS AN ACTION
FOR BODILY INJURY DUE TO NEGLIGENT MEDICAL TREATMENT.
RIVERS V.
NEW YORK JETS,
460 F.SUPP. 1233 (E.D. MO. 1978).
A PAINTER SUED HIS EMPLOYER FOR FAILING TO WARN HIM
ABOUT EXPOSURE TO ASBESTOS DURING WORK. ACCORDING TO THE COURT, EVEN
IF THE INJURIES WERE CAUSED BY THE EMPLOYER'S INTENTIONAL MISREPRE-
SENTATION OR FAILURE TO DISCLOSE, THE INJURIES WERE COMPENSABLE AND
THE TORT CLAIMS FOR DAMAGES WERE BARRED BY THE EXCLUSIVITY PROVISIONS
OF THE COMPENSATION ACT. MOREOVER, EVEN THOUGH THE PAINTER WAS
SEEKING COMPENSATION FOR FINANCIAL, AS OPPOSED TO PHYSICAL, INJURIES,
THE COURT FOUND THESE DAMAGE CLAIMS TO BE BASED ESSENTIALLY ON THE
POTENTIAL FOR CURRENT PHYSICAL INJURY DUE TO OCCUPATIONAL DISEASE.
JOHNSON V. HAMES CONTRACTING, INC.,
208 GA. APP. 664, 431 S.E.2D 455
(1993).
IN
GIBSON V. SOUTHERN GUARANTY INS. CO.
, 623 SO.2D
1065 (ALA. 1993), THE PLAINTIFF BROUGHT VARIOUS CLAIMS AGAINST THE
WORKERS' COMPENSATION CARRIER, INCLUDING CLAIMS FOR BAD FAITH, FRAUD,
CONSPIRACY, NEGLIGENCE AND OUTRAGEOUS CONDUCT. THE CLAIMS ALL
CENTERED ON THE MANNER IN WHICH THE DEFENDANTS HAD HANDLED THE
PLAINTIFF'S NEED FOR PSYCHOLOGICAL TESTING AND TREATMENT ARISING OUT
OF HIS WORKPLACE INJURY. THE COURT HELD THAT THE TORT CLAIMS WERE
BARRED BY THE EXCLUSIVITY PROVISIONS OF THE WORKERS' COMPENSATION
STATUTES.
SECOND CATEGORY
A FORMER EMPLOYEE FILED AN ACTION IN STATE COURT TO
RECOVER DAMAGES FROM A FORMER EMPLOYER BECAUSE OF THE LATTER'S
ALLEGED FRAUDULENT CONSPIRACY WITH A PHYSICIAN TO DEPRIVE THE
EMPLOYEE OF HIS STATUTORY RIGHTS UNDER THE LONGSHORE ACT TO OBTAIN
COMPENSATION AND FURTHER MEDICAL BENEFITS FOR HIS WORK-RELATED
INJURY. THE EMPLOYER MOVED TO DISMISS THE CLAIM ON THE GROUNDS THAT
SECTION S OF THE LONGSHORE ACT PROVIDES CLAIMANT HIS ONLY REMEDY AND
THAT THE TORT CLAIM WAS A COLLATERAL ATTACK UPON THE FINDINGS OF THE
OWCP. THE NEW YORK SUPREME COURT REJECTED THE ARGUMENTS, HOLDING
THAT THE LONGSHORE ACT IS EXCLUSIVE
ONLY WHERE IT IN FACT PROVIDES
A REMEDY
AND THE TORT CHARGED AGAINST
THE EMPLOYER
OCCURRED IN APRIL OF 1952 WHEN THE EMPLOYER WRONGFULLY INTERFERED
WITH THE EMPLOYEE'S RIGHT TO BE COMPENSATED FOR HIS INJURY BY CAUSING
A FALSE REPORT OF HIS PHYSICAL CONDITION TO BE PREPARED AND SUBMITTED
TO THE DEPUTY COMMISSIONER WITH THE SOLE PURPOSE OF DEFEATING HIS
RIGHT TO COMPENSATION AND MEDICAL BENEFITS. MOREOVER, THE PROCEEDING
UNDER THE LONGSHORE ACT ONLY DEALT WITH THE MARCH, 1950 WORK-RELATED
ACCIDENTAL INJURY AND NOT WITH SUBSEQUENT EVENTS INVOLVING WILLFUL
AND INTENTIONAL ACTIONS BY THE EMPLOYER.
FLAMM V. BETHLEHEM
STEEL COMPANY,
185 N.Y.S.2D 136 (1959). THE APPELLATE DIVISION AFFIRMED
DENIAL OF THE MOTION TO DISMISS AT 202 N.Y.S.2D 222 (1960).
IN
HARRIS V. LYKES BROS. STEAMSHIP CO., INC.,
375
F.SUPP. 1155 (1974), THE STEVEDORE BROUGHT AN ADMIRALTY CAUSE OF ACTION
AGAINST THE VESSEL OWNER TO RECOVER DAMAGES FOR PERSONAL INJURIES
SUSTAINED UNLOADING BALED COTTON. THE STEVEDORE ALLEGED THAT THE
VESSEL OWNER HAD OBTAINED FROM HIM A RELEASE ABSOLVING THE VESSEL
OWNER FROM ANY LIABILITY BY MEANS OF FRAUD, COERCION OR MISTAKE. CHIEF
JUDGE J. J. FISHER HELD THAT THE EMPLOYEE HAD THE BURDEN OF PROOF WITH
RESPECT TO THE VALIDITY OF THE RELEASE, THAT THE EVIDENCE ESTABLISHED
THAT THERE WAS NO FRAUD OR OVERREACHING CONDUCT ON THE PART OF THE
EMPLOYER IN SECURING THE RELEASE AND THAT THE EIGHTYEAR LAPSE
BETWEEN THE INJURY AND THE FILING OF THE SUIT SUBJECTED THE SUIT TO THE
DEFENSE OF LACHES AS THE EMPLOYEE FAILED TO OVERCOME THE PRESUMPTION
OF PREJUDICE TO THE EMPLOYER FROM THE INEXCUSABLE DELAY. THE COURT DID
NOTE THAT THE BURDEN OF PROOF WAS ON THE SHIPOWNER TO PROVE THAT A
RELEASE GIVEN BY A SEAMAN WAS EXECUTED WITHOUT DECEPTION OR COERCION
AND WITH A -FULL UNDERSTANDING OF HIS RIGHTS AND THAT SUCH BURDEN IS
PLACED ON SHIPOWNERS FOR THE PROTECTION OF SEAMEN, WHO HAVE
TRADITIONALLY BEEN CHARACTERIZED AS WARDS OF THE COURT DUE TO THEIR
NOMADIC NATURE AND THE PERILS THEY ENCOUNTER WHILE AT SEA.
PLAINTIFF'S ACTION AGAINST THE EMPLOYER AND THE INSURER
FOR FRAUD WAS SEPARATE AND DISTINCT FROM HER EARLIER WORKER'S COMPEN-
SATION CLAIM FOR INJURIES SUSTAINED IN A FALL ON THE PREMISES OF THE
EMPLOYER. ACCORDINGLY, THE TEXAS COURT OF APPEALS HELD THAT THE CIVIL
ACTION WAS NOT BARRED BY THE EXCLUSIVE REMEDY PROVISIONS OF THE
COMPENSATION ACT.
MORRIS V. VARO, INC.,
814 S.W.2D 520 (TEX. CT. APP.
1991).
AN INTERESTING CASE OCCURRED,IN CALIFORNIA IN THE LATE
1950'S WHEN THE EMPLOYEE SUED HIS OWN EMPLOYER, A PETROLEUM COMPANY,
AND A THIRD PARTY, A DRILLING COMPANY, CHARGING A CONSPIRACY BETWEEN
THEM TO CONCEAL THE EXISTENCE OF THE EMPLOYEE'S COMMON-LAW ACTION
AGAINST THE DRILLING COMPANY. THE EMPLOYEE WAS INJURED, ACCORDING TO
THE COMPLAINT, WHILE WORKING IN AN OIL FIELD, DUE TO THE NEGLIGENCE OF
THE DRILLING COMPANY. TWO DAYS AFTER THE ACCIDENT, REPRESENTATIVES OF
THE EMPLOYER TOLD HIM THAT IT HAD BEEN HIS OWN EMPLOYER'S EMPLOYEES
THAT HAD CAUSED THE ACCIDENT. THE EMPLOYER HAD A HOLD-HARMLESS
AGREEMENT WITH THE DRILLING COMPANY TO REIMBURSE IT FOR ANY TORT
LIABILITY RESULTING FROM THE DRILLING OPERATIONS. THE COURT SHARPLY
DISTINGUISHED BETWEEN THE TWO INJURIES INVOLVED; FIRST, THE PERSONAL
AND PHYSICAL INJURY COMPENSATED BY THE ACT; AND SECOND, THE FRAUD
INJURY DESTROYING A VALUABLE RIGHT OF ACTION AGAINST THE THIRD PARTY
BY CAUSING IT TO LAPSE BECAUSE OF THE RUNNING OF THE STATUTE OF
LIMITATIONS. THIS INJURY ACTUALLY OCCURRED TWO DAYS AFTER THE FIRST,
JUST AS THE CONSPIRACY INJURY IN
FLAMM SUPRA
, HAD OCCURRED TWO
YEARS AFTER THE COMPENSABLE INJURY.
RAMEY V. GENERAL PETROLEUM
CORP.,
173 CAL. APP.2D 386, 343 P.2D 787 (1959).
A TORT CLAIM WAS PERMITTED IN A CASE WHERE THE
EMPLOYER TOOK CHEST X-RAYS OF THE EMPLOYEE AND THEN WITHHELD FOR
FIFTEEN YEARS THE FACT THAT THE EMPLOYEE HAD CONTRACTED
EMPLOYMENT-RELATED PNEUMOCONIOSIS. ACCORDINGLY, THE COURT REVERSED
A SUMMARY JUDGMENT IN FAVOR OF THE EMPLOYER BECAUSE THE FRAUDULENT
ACTS WERE NOT A HAZARD OF THE EMPLOYMENT. MOREOVER, THE DUAL
CAPACITY DOCTRINE REQUIRED REVERSAL BECAUSE THE EMPLOYER-SPONSORED
PHYSICAL EXAMINATIONS CONFERRED UPON THE EMPLOYER OBLIGATIONS
IMPOSED UPON THE EMPLOYER AS AN EMPLOYER.
DELAMOTTE V. UNITCAST
DIVISION OF MIDLAND ROSS CORP., 64 OHIO
APP.2D 159, 411 N.E.2D 814 (1978).
IN
MCGINN V. VALLOTI,
363 PA. SUPER 88, 525
A.2D 732 (1987),
APPEAL DENIED,
538 A.2D 500 (PA. 1988), A TORT ACTION
WAS PERMITTED BECAUSE THE EMPLOYEE IS LIKELY TO EXPECT AN UNSAFE
ENVIRONMENT IN THE WORKPLACE BUT HE OR SHE IS NOT LIKELY TO EXPECT
ACTUAL MISREPRESENTATIONS SUCH AS THAT ALLEGED BY THE EMPLOYEE. SUCH
ISREPRESENTATIONS BROUGHT THE HARM OUTSIDE THE CONFINES OF THE
WORKERS' COMPENSATION ACT;
FOSTER V. XEROX CORP.,
40 CAL. 3D 306,
219 CAL. RPTR. 485, 707 P.2D 858 (1985) (EMPLOYEE ALLEGED THAT THE EMPLOYEE
HAD CONTRACTED ARSENIC POISONING AND CONCEALED THAT INFORMATION
FROM HIM, AGGRAVATING HIS ILLNESS. THE COURT HELD THAT THE ALLEGATIONS
STATED A CAUSE OF ACTION);
MILLISON V. E.I. DU PONT DE NEMOUR8 &
CO.
, 101 N.J. 161, 501 A.2D 505 (1985) (THERE IS A DIFFERENCE BETWEEN, ON THE
ONE HAND, TOLERATING IN THE WORKPLACE CONDITIONS THAT WILL RESULT IN
A CERTAIN NUMBER OF INJURIES OR ILLNESSES AND, ON THE OTHER, ACTIVELY
ISLEADING EMPLOYEES WHO HAVE ALREADY FALLEN VICTIM TO THOSE RISKS
OF THE WORKPLACE. AN EMPLOYER'S FRAUDULENT CONCEALMENT OF.DISEASES
ALREADY DEVELOPED IS NOT ONE OF THE RISKS AN EMPLOYEE SHOULD HAVE TO
ASSUME AS SUCH INTENTIONALLY DECEITFUL ACTION GOES BEYOND THE
BARGAIN STRUCK BY THE COMPENSATION ACT).
WHEN AN INSURER ENGAGES IN OUTRAGEOUS CONDUCT, THE
INSURER "STEPS OUT OF THE SHOES" OF THE EMPLOYER AND IS NO
LONGER PROTECTED BY THE EXCLUSIVE REMEDY CLAUSE.
UNRUH V. TRUCK
INS. EXCH.,
7 CAL. APP.3D 616, 498 P.2D 1063 (1972).
IN 1974, THE FIRST CIRCUIT HELD THAT THE EXCLUSIVE REMEDY
AND PENALTY PROVISIONS OF THE ACT DID NOT BAR A STATE LAW ACTION
AGAINST AN INSURER FOR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS IN
TERMINATING COMPENSATION PAYMENTS.
MARTIN V. TRAVELERS INS. CO.,
497 F.2D 329 (1ST CIR. 1974). THIS CASE IS A GOOD EXAMPLE OF THE TYPE OF
CONDUCT REQUIRED BY THE APPELLATE COURTS TO PERMIT A WAIVER OF THE
EXCLUSIVE REMEDY CLAUSE OF SECTION 5 OF THE ACT. IN
MARTIN,
THE
EMPLOYEE, AN INJURED STEVEDORE, HAD RECEIVED THREE CHECKS FROM THE
INSURER TOTALLING $5700 IN SETTLEMENT OF HIS WORKERS' COMPENSATION
CLAIM. HOWEVER, TWO WEEKS AFTER THE EMPLOYEE DEPOSITED THE CHECKS
AND BEGAN MAKING WITHDRAWALS ON THEM, THE INSURER STOPPED PAYMENT
ON THE CHECKS AND FILED AN APPEAL OF THE AGENCY'S DECISION. THE
COMPLAINT ALLEGED THAT THE INSURER'S ACTIONS VIOLATED THE TERMS OF THE
LONGSHORE ACT AND HAD SUBJECTED HIM TO FINANCIAL EMBARRASSMENT
SINCE HE HAD WRITTEN CHECKS THAT HAD BECOME WORTHLESS, ESPECIALLY
SINCE THE INSURER KNEW THAT HE HAD A "GRIEVOUS AND
LIFE-THREATENING DISEASE" WHICH COULD BE AGGRAVATED BY THE
INSURER'S ACTIONS INTO ANOTHER "DISABLING ATTACK AND SEVERE
PHYSICAL IMPAIRMENT."
MARTIN, SUPRA
AT 331.
HOWEVER, IN
SAMPLE V. JOHNS0N,
771 F.2D 1335 (9TH
CIR. 1985),
CERT. DENIED,
106 S.CT. 1206 (1986), THE NINTH CIRCUIT HELD
THAT THE LONGSHORE ACT BARS AN ACTION FOR BAD FAITH TERMINATION OF
BENEFITS, THE COURT DISTINGUISHING
MARTIN, SUPRA,
AS A CASE
INVOLVING "CONSPICUOUSLY CONTEMPTIBLE" CONDUCT. ANOTHER
DISTINGUISHING FACTOR IS THAT THE LONGSHORE WORKER SOUGHT TO BRING AN
ACTION FOR BAD FAITH UNDER FEDERAL MARITIME LAW.
OTHER PERTINENT CASES PERMITTING A TORT CLAIM ARE
MCCAIN V. NORTHWESTERN NAT'L INS. CO.
, 484 SO.2D 1001, 1002 (MISS.
1986);
SOUTHERN FARM BUREAU CASUALTY INS. CO.
, 469 SO.2D 5S, 58-59
(MISS. 1984);
MASSEY V. AMOCO STEEL CO.,
652 S.W.2D 932, 933-34 (TEX.
1983) (REVERSING DISMISSAL OF CLAIMS FOR BAD FAITH AND INTENTIONAL
INFLICTION OF EMOTIONAL DISTRESS TO ALLOW PLAINTIFF TO AMEND THE
COMPLAINT, SINCE TEXAS ALLOWS A COMMON LAW ACTION FOR AN INTENTIONAL
TORT THAT IS INDEPENDENT OF THE ORIGINAL INJURY);
BEAUCHAMP V. DOW
CHEM. CO.
, 398 N.W.2D 882, 893 (MICH. 1986) (THE EXCLUSIVITY PROVISION
DOES NOT APPLY IF THE EMPLOYER KNEW THAT THE INJURY WAS SUBSTANTIALLY
CERTAIN TO OCCUR AND INTENDED THE ACT WHICH CAUSED THE INJURY).
SEE
ALSO JONES V. VIP DEV. CO.
, 472 N.W.2D 1046, 1055 (OHIO 1984);
MANDOLIDIS V. ELAINE INDUS.,
246 S.E.2 907, 914 (W.VA. 1978).
MOREOVER, INJURED WORKERS HAVE PREVAILED WHEN THEIR
INJURIES
WERE AGGRAVATED BY THE EMPLOYER'S FRAUDULENT FAILURE TO DISCLOSE
KNOWN SAFETY RISKS.
SEE, E.G., JOHNS KANVILLB PROD. CORP. V. CONTRA
COSTA SUPERIOR CT.,
612 P..2D 948, 956 (CAL. 1980) (THE EMPLOYER WAS HELD
LIABLE FOR FRAUDULENTLY CONCEALING HAZARDOUS CONDITIONS FROM THE
EMPLOYEE AND THE EMPLOYEE'S DOCTOR);
MILLISON V. E.I. DUPONT DE
NEMOURS & CO.,
501 A.2D 505, 516-17 (N.J. 1985) (THE EMPLOYER WAS
RESPONSIBLE FOR FRAUDULENTLY CONCEALING KNOWLEDGE OF ALREADY
CONTRACTED DISEASES);
MARTIN V. LANCASTER BATTERY CO.,
606 A.2D
444, 447-48 (PA. 1992) (THE EMPLOYER'S FRAUDULENT MISREPRESENTATION
RESULTING IN A DELAY WHICH AGGRAVATED A WORK RELATED INJURY DID NOT
FALL WITHIN THE EXCLUSIVITY PROVISION).
THUS, THE TREND IN THESE DECISIONS SEEMED TO BE LARGELY
OTIVATED BY CONCERNS THAT WANTON DISREGARD OF WORKPLACE SAFETY
SHOULD NOT BE PROTECTED BY THE MANTLE OF IMMUNITY BESTOWED BY
WORKERS' COMPENSATION STATUTES AND THE DOCTRINE OF EXCLUSIVITY. THE
DISTINCTION SEEMS TO BE THE OUTRAGEOUS AND INTENTIONAL NATURE OF THE
INSURER'S CONDUCT AND THE MORE OUTRAGEOUS AN INSURER'S CONDUCT AND
THE MORE HARM THAT RESULTS, THE MORE LIKELY THAT THE SUBSEQUENT
INJURY WILL BE SEPARATE AND DISTINCT FROM THE ORIGINAL INJURY. THE 1984
AMENDMENTS TO THE LONGSHORE ACT INCLUDED THE ADDITION OF PROVISIONS
FOR BAD FAITH CONDUCT BY EMPLOYERS IN REPORTING INJURIES. SECTION 30(e)
(PROVIDES FOR A FINE UP TO $10,000.00).
SOME COMMENTATORS ARGUE AGAINST THE CREATION OF AN
INDEPENDENT TORT ACTION FOR EMOTIONAL DISTRESS BECAUSE SECTION 14(A)
OF THE ACT GIVES THE EMPLOYER THE OPTION OF PAYING BENEFITS TO THE
EMPLOYEE OR CONTROVERTING ENTITLEMENT TO BENEFITS. CONGRESS, IN
BALANCING THE INTERESTS OF THE EMPLOYEE AND EMPLOYER, MITIGATED THE
BURDEN ON THE EMPLOYEE BY PROVIDING FOR THE AWARD OF PENALTIES,
INTEREST ON THE AMOUNTS UNPAID AND ATTORNEYS' FEES AND LITIGATION
EXPENSES ASSESSED AGAINST THE EMPLOYER.
SECTION 26 OF THE ACT
A QUESTION I WILL NOW POSE IS WHETHER OR NOT
SECTION 26 OF THE LONGSHORE ACT PROVIDES A REMEDY TO THE AGGRIEVED
EMPLOYER.
SECTION 26 PROVIDES:
-
IF THE COURT HAVING JURISDICTION OF PROCEEDINGS IN
RESPECT OF ANY CLAIM OR COMPENSATION ORDER DETERMINES THAT THE
PROCEEDINGS IN RESPECT OF SUCH CLAIM OR ORDER HAVE BEEN
INSTITUTED OR CONTINUED WITHOUT REASONABLE GROUND, THE COSTS OF
SUCH PROCEEDINGS SHALL BE ASSESSED AGAINST THE PARTY WHO HAS SO
INSTITUTED OR CONTINUED SUCH PROCEEDINGS.
33 U.S.C. § 926.
COSTS NOT ALLOWED
THAT SEEMS TO BE RATHER SPECIFIC LANGUAGE AND
SEEMS TO PROVIDE A SANCTION AGAINST A PARTY IN THE SO-CALLED VEXATIOUS
OR FRIVOLOUS CLAIMS. HOWEVER, THERE ARE SOME INTERESTING DECISIONS
INTERPRETING THAT PROVISION AND I WOULD LIKE TO BEGIN THE JOURNEY WITH
THE DECISION OF THE NINTH CIRCUIT IN
METROPOLITAN STETEDORE CO.
V.
BRICRNER; DIRECTOR, OWCP, 11 F.
3D 887, 27 BRBS 132 (CRT) (9TH
CIR. 1993), WHEREIN THE COURT HELD THAT NEITHER THE DEPUTY COMMISSIONER
(NOW DISTRICT DIRECTOR), NOR THE ADMINISTRATIVE LAW JUDGE NOR THE BRB
HAS THE AUTHORITY TO IMPOSE COSTS UNDER SECTION 26 SINCE THE PLAIN
LANGUAGE OF THE SECTION REFERS TO "THE COURT HAVING
JURISDICTION." IT IS NOTEWORTHY THAT THE NINTH CIRCUIT AGREED WITH
THE BRB THAT SECTION 26, WHICH ALLOWS A SANCTION FOR UNREASONABLE
CLAIMS AGAINST EITHER PARTY,
IMPLIEDLY PRECLUDES
A SANCTION
FOR BAD FAITH CLAIMS AND THAT FEDERAL RULE OF CIVIL PROCEDURE 11
SHOULD NOT BE INCORPORATED INTO ADMINISTRATIVE PROCEEDINGS UNDER THE
LONGSHORE ACT.
THE NINTH CIRCUIT, REFERRING TO THE LEGISLATIVE HISTORY
OF THE ACT, NOTED THAT THE ORIGINAL DRAFT OF SECTION 26 WOULD HAVE
AUTHORIZED THE DEPUTY COMMISSIONER OR THE COURT TO IMPOSE COSTS BUT
WHEN THE SECTION WAS FINALLY ENACTED THE REFERENCE TO THE DEPUTY
COMMISSIONER HAD BEEN REMOVED. THEREFORE, IT WAS OBVIOUS THAT ONLY
A FEDERAL COURT COULD EXERCISE AUTHORITY UNDER SECTION 26.
BRICKNER, SUPRA,
11 F.3D AT 890, 27 BRBS AT 137 (CRT).
I NOTE THAT THE DIRECTOR, OWCP, ARGUED FOR THE POSITION
IN
BRICKNER
THAT THE NINTH CIRCUIT ADOPTED. THUS, IF ADOPTED BY
OTHER CIRCUITS, SECTION 26 MAY TURN OUT TO BE A "PAPER TIGER" AS
IT IS A TEDIOUS AND COSTLY PROCEDURE TO SEEK SUCH COSTS IN FEDERAL
DISTRICT COURT.
A SECTION 26 ISSUE SHOULD BE RAISED BEFORE THE
ADMINISTRATIVE LAW JUDGE TO PERFECT THE ISSUE FOR APPEAL BEFORE THE
BOARD.
PINELL V. PATTERSON SERVICE,
22 BRBS 61, 66 (1989). IN
INTERPRETING THIS SECTION, THE JUDGE MUST DETERMINE,
FROM A
PRE-HEARING PERSPECTIVE,
WHETHER THE CLAIMANT HAD SOME
REASONABLE BASIS FOR INITIATING OR PURSUING THE CLAIM. THE TEST IS
AN
OBJECTIVE ONE
AND REQUIRES CONSIDERATION OF WHETHER THE EVIDENCE
COULD JUSTIFY THE RELIEF REQUESTED.
SEE, E.G., BOLDEN V. U.S.
STEVENDORES CORPORATION,
18 BRBS 172, 174 (1986). ,
AN INTERESTING BOARD DECISION IS CONTAINED IN
FREIWILLIG V. TRIPLE A SOUTH,
23 BRBS 371, 374-375 (1990). IN THAT CASE,
THE EMPLOYER SOUGHT SANCTIONS UNDER SECTION 26 BECAUSE POST-INJURY
THE EMPLOYEE EARNED SIGNIFICANTLY HIGHER WAGES THAN HIS AVERAGE
WEEKLY WAGE AND BECAUSE HE FAILED TO REPORT THOSE WAGES TO THE
DISTRICT DIRECTOR. THE ALJ CONCLUDED THAT THE PROCEEDINGS WERE
INITIATED AND CONTINUED BY THE EMPLOYEE WITHOUT REASONABLE GROUNDS
AND THAT THE EMPLOYEE WAS DIRECTED TO REIMBURSE THE EMPLOYER IN THE
AMOUNT OF $26,S97.24 FOR ITS COSTS AND ATTORNEY'S FEES RELATED TO
DEFENDING THE CLAIM. THE ALJ STATED THAT "THIS IS A CONTRIVED CLAIM
FROM A PREHEARING PERSPECTIVE," THAT THE EMPLOYEE "KNEW OR
SHOULD HAVE KNOWN, AS OF THE DATE OF HIS DEPOSITION, IF NOT EARLIER,
(THAT THE CLAIM) WAS DOOMED TO FAILURE." THE ALJ FURTHER
CONCLUDED "THAT CLAIMANT HAD ENGAGED IN MANIPULATIVE AND
DECEPTIVE CONDUCT THROUGHOUT THE PROCEEDINGS, THAT CLAIMANT HAD
BEEN ENGAGED IN POST-INJURY SELF-EMPLOYMENT, OPERATING A TRUCKING
BUSINESS, WHICH HE ATTEMPTED TO DISGUISE AS AN OPERATION BELONGING TO
HIS WIFE, THAT CLAIMANT'S POST-INJURY SELF-EMPLOYMENT YIELDED WAGES IN
EXCESS OF HIS AVERAGE WEEKLY WAGE AT THE TIME OF HIS INJURY AND THAT
CLAIMANT CONCEALED HIS SELF-EMPLOYMENT WAGES IN VIOLATION OF SECTION
8(J) OF THE ACT."
CLAIMANT APPEALED FROM THE DECISION DENYING BENEFITS
AND THE BOARD VACATED THE SECTION 26 SANCTIONS BECAUSE "(T)HE MERE
FACT THAT A CLAIMANT IS EARNING HIGHER WAGES POST-INJURY IS INSUFFICIENT
TO DEMONSTRATE THAT HE HAS NO LOSS OF WAGE-EARNING CAPACITY" AS
HE MAY STILL BE ENTITLED TO BENEFITS FOR PARTIAL DISABILITY, PURSUANT TO
SECTION 8(C)(21). THUS, ACCORDING TO THE BOARD, HIGHER POSTINJURY WAGES
ARE "INSUFFICIENT TO ESTABLISH THAT CLAIMANT'S CLAIM WAS 'DOOMED
TO FAILURE'," ESPECIALLY SINCE IT WAS "CONCEIVABLE THAT AN
ADMINISTRATIVE LAW JUDGE COULD HAVE CREDITED THE MEDICAL EVIDENCE
THAT CLAIMANT HAD A CONTINUING IMPAIRMENT TO HIS BACK AS A RESULT OF
HIS WORK INJURY AND (COULD HAVE) FOUND THAT HIS POSTINJURY WAGES WERE
NOT REPRESENTATIVE OF HIS WAGE-EARNING CAPACITY." MOREOVER,
ACCORDING TO THE BOARD, "THIS CASE IS NOT ONE WHERE CLAIMANT HAD
NO INJURY OR MEDICAL EVIDENCE TO SUPPORT A CLAIM. AN HONEST
PRESENTATION OF THE FACTS AND EVIDENCE PROVIDES REASONABLE GROUNDS
FOR PURSUING A CLAIM. THE ADMINISTRATIVE LAW JUDGE'S APPLICATION OF
SECTION 26 HERE IS FOUNDED NOT ON CLAIMANT'S LACK OF BASIS FOR A CLAIM
FOR BENEFITS BUT ON HIS WILLFUL MISREPRESENTATIONS-REGARDING
POST-INJURY EARNINGS. WE DO NOT QUESTION HER FINDING THAT CLAIMANT DID
WILLFULLY SEEK TO CONCEAL HIS POST-INJURY EARNINGS. THE SANCTIONS FOR
THIS CONDUCT, HOWEVER' ARE IN SECTION 8(J), WHICH PROVIDES FOR THE
SUSPENSION OF BENEFITS, AND IN SECTION 31 . . . WHICH PROVIDES THAT A
CLAIMANT MAY BE FOUND GUILTY OF A FELONY FOR KNOWINGLY AND
WILLFULLY MAKING A FALSE STATEMENT FOR THE PURPOSE OF OBTAINING A
BENEFITS UNDER THE ACT."
FREILLING, SUPRA
AT 373-375.
IN
WILLIAMS V. JOHN JONES D/B/A NICOLE ENTERPRISES,
11 F.3D 247, 27 BRBS 142 (CRT) (1ST CIR.,,1993), THE CLAIMANT HAD SOUGHT
ENFORCEMENT OF A COMPENSATION ORDER IN U.S. DISTRICT COURT, PURSUANT
TO 21(D) OF THE ACT. THE COURT GRANTED ENFORCEMENT
THEREOF BUT
THE COURT OF APPEALS FOR THE FIRST CIRCUIT VACATED THE ENFORCEMENT
ORDER DUE TO A LACK OF COMPLIANCE WITH THE SERVICE OF PROCESS
REQUIREMENTS IMPOSED BY FED.R.CIV.P. 4 AND 81(A)(6). THE EMPLOYER HAD
DEFENDED ITS ACTIONS IN REFUSING TO PAY THE COMPENSATION ORDER "ON
THE GROUNDS THAT 'NEWLY-DISCOVERED' EVIDENCE REVEALED THAT WILLIAMS
SECURED THE AWARD THROUGH PERJURY AND FRAUD." THE FIRST CIRCUIT
INITIALLY POINTED OUT THAT A COURT OF EQUITY WILL NOT ENFORCE A
JUDGMENT OBTAINED BY FRAUD.
SEE RESTATEMENT (SECOND) OF
JUDGEMENT,
§70, CMT. A (1982). FRAUD AND "UNCLEAN HANDS"
HISTORICALLY HAVE BEEN REGARDED AS VALID EQUITABLE DEFENSES TO
INJUNCTIVE RELIEF, SUCH AS THAT SOUGHT IN A SECTION 21(D) PROCEEDING.
HOWEVER' THE FIRST CIRCUIT POINTED OUT THAT THE NEWLY-DISCOVERED
EVIDENCE SHOULD BE CONSIDERED BY THE ALJ' PURSUANT TO SECTION 22' AS THE
ALJ HAS BROAD DISCRETION TO CORRECT MISTAKES OF FACT AND AS THE
OVER-ARCHING CRITERION FOR REOPENING A COMPENSATION AWARD UNDER THE
ACT IS WHETHER REEXAMINATION WOULD SERVE THE "INTERESTS OF
JUSTICE."
O'KEEFE V. AEROJET-GENERAL SHIPYARDS, INC.,
404 U.S.
254 (1971).
ACCORDING TO THE FIRST CIRCUIT, "PERJURED TESTIMONY
RESULTING IN AN ERRONEOUS FINDING OF FACT CONCERNING THE NATURE OR
EXTENT OF AN EMPLOYEE'S DISABILITY WOULD SEEM TO COME SQUARELY WITHIN
THE REALM -OF A 'MISTAKE OF FACT'," THE COURT CONCLUDING THAT THE
AFFIRMATIVE DEFENSES RAISED BY THE EMPLOYER COULD BEST BE RESOLVED BY
THE DEPARTMENT OF LABOR AND N (T)O ALLOW THE SECTION 922 AND THE
SECTION 921(D) PROCEEDINGS TO GO FORWARD SIMULTANEOUSLY WOULD OPEN
UP THE POSSIBILITY OF INCONSISTENT RULINGS ON THE FRAUD CLAIM, WHICH
ULTIMATELY WOULD HAVE TO BE RESOLVED BY THE COURT OF APPEALS IN
EITHER EVENT."
WILLIAMS, SUPRA.
THE FACTS OF THE
WILLIAMS
CASE ARE MOST
INTERESTING AND REFLECT THAT THE EMPLOYEE WAS INJURED IN 1978 "AS
A RESULT OF A FALL FROM THE BOOM OF A FISHING VESSEL OWNED BY HIS
EMPLOYER," THAT THE ALJ AWARDED COMPENSATION BENEFITS
COMMENCING ON THE DAY OF THE INJURY, THAT THE EMPLOYER PREVAILED
AFTER TWO SUCCESSFUL APPEALS TO THE BRB' 15 BRBS-453 (1983), 19 BRBS 66 (1986),
AND ULTIMATELY THE BRB AFFIRMED A COMPENSATION AWARD IN FAVOR OF THE
EMPLOYEE. 21 BRBS 164 (1988). THE FIRST CIRCUIT DENIED EMPLOYER'S PETITION
FOR JUDICIAL REVIEW IN 1990 AND, NOTWITHSTANDING THE FINALITY OF THE
COMPENSATION AWARD, CLAIMANT "ALLEGES THAT HE HAS RECEIVED ONLY
$450 IN BENEFIT PAYMENTS FROM JONES TO DATE," AND THAT PAYMENT
APPARENTLY WAS MADE BY THE EMPLOYER
AFTER
CLAIMANT HAD FILED
A SECTION 21(D) ENFORCEMENT PROVISION AND
SHORTLY BEFORE
THE
EMPLOYER FILED A PETITION FOR MODIFICATION, PURSUANT TO SECTION 22. WHY
ONLY $450 IN BENEFITS TO CLAIMANT? THE FIRST CIRCUIT COURT RECOGNIZED, IN
FOOTNOTE 10, 27 BRBS AT 153 (CRT), "UNDER THE LHWCA, EMPLOYERS MAY
RECOUP OVERPAYMENTS ONLY AS
CREDITS
AGAINST COMPENSATION
PAYMENTS DUE THE EMPLOYEE IN THE FUTURE. (CITATIONS OMITTED). THUS, IF
A COMPENSATION ORDER IS VACATED IN ITS ENTIRETY, PAYMENTS PREVIOUSLY
ADE ARE ESSENTIALLY UNRECOVERABLE."
IN
TOSCANO V. SUN SHIP INCORPORATED,
24 BRBS 207,
211 (1991), THE BOARD HELD THAT ATTORNEY'S FEES MAY NOT BE CONSIDERED
COSTS WITHIN THE MEANING OF SECTION 26 AND, THUS, CANNOT BE ASSESSED
AGAINST ANY PARTY TO THE PROCEEDING. THE BOARD'S DECISION IS BASED UPON
THE SO-CALLED "AMERICAN RULE," I.E., ABSENT STATUTORY LANGUAGE
OR AN ENFORCEABLE CONTRACT, OR ONE OF THE WELL-RECOGNIZED EXCEPTIONS
SUCH AS PROCEEDINGS INVOLVING BAD FAITH OR ABUSIVE LITIGATION,
LITIGANTS PAY THEIR OWN ATTORNEYS' FEES AND SUCH FEES ARE NOT
RECOVERABLE AS COSTS.
ALYESKA PIPE LINE SERVICE CO. V. WILDERNESS,
412 U.S. 240 (1975). MOREOVER, AN ATTORNEY'S FEE CANNOT BE ASSESSED
AGAINST THE SPECIAL FUND, EITHER PURSUANT TO SECTION 26,
TOSCANO,
SUPRA
AT 212, OR PURSUANT TO SECTION 28,
MEDRANO V. BETHLEHEM
STEEL CORP.,
18 BRBS 229 (1986).
IN
FULLER V. MATSON TERMINALS,
24 BRBS 252, 256
(1991), THE BOARD HELD THAT THE EMPLOYER, AS A MATTER OF LAW, WAS NOT
ENTITLED TO A REIMBURSEMENT OF ITS COSTS, PURSUANT TO SECTION 26, SINCE
THE LEGAL THEORY ADVANCED BY CLAIMANT CONCERNING WHETHER A
SETTLEMENT WAS REACHED, PURSUANT TO SECTION 8(I), WAS NOT
UNREASONABLE. THE RECORD REFLECTED THAT, AT THE TIME OF THE EMPLOYEE'S
DEATH, THE SETTLEMENT AGREEMENT HAD NOT BEEN SIGNED BY THE EMPLOYEE
OR EMPLOYER AND HAD NOT BEEN SUBMITTED TO THE DEPUTY COMMISSIONER
FOR APPROVAL. THUS, THERE WAS NO ENFORCEABLE SETTLEMENT AGREEMENT.
IN AN EARLY CASE UNDER THE LONGSHORE ACT AS EXTENDED
BY THE DEFENSE BASE ACT, THE DECEASED EMPLOYEE'S ESTATE RAISED THE
ISSUE OF MALICIOUS PROSECUTION BY THE EMPLOYER AND, PURSUANT TO
SECTION 26, SOUGHT TO HAVE THE EMPLOYER HELD LIABLE FOR THE COST OF
LEGAL FEES INCURRED TO DEFEND THE AWARD TO THE EMPLOYEE'S ESTATE. THE
COURT DENIED THE REQUEST HOLDING AS FOLLOWS:
-
LEGAL FEES STAND ON A DIFFERENT FOOTING. ALTHOUGH WE
BELIEVE THE ACTION LACKING IN MERIT, WE CANNOT SAY THAT
PLAINTIFFS' POSITION WAS FRIVOLOUS OR MALICIOUS. UNDER ALL THE
CIRCUMSTANCES, EACH PARTY SHOULD BEAR HIS OWN LEGAL FEES IN
THIS COURT.
OVERSEAS AFRICAN CONSTRUCTION CORP, V. MCMULLEN,
367 F.SUPP
202, 207 (S.D.N.Y. 1973).
THE EMPLOYER AND CARRIER (RESPONDENTS) APPEALED AND
THE SECOND CIRCUIT COURT, IN REVIEWING THE QUESTION OF ASSESSMENT OF
THE ATTORNEY'S FEES UNDER SECTION 26, HELD THAT THE LOWER COURT HAD
ERRED IN FAILING TO FIND THAT THE RESPONDENTS SHOULD PAY THOSE FEES
BECAUSE THE RESPONDENTS' JURISDICTIONAL CLAIM WAS "SO INSUBSTAN-
TIAL" AS TO REQUIRE THE RESPONDENTS TO BEAR THE EXPENSE OF THE
LEGAL FEES IN THE DISTRICT COURT. HOWEVER, AS SECTION 28 HAD BEEN ADDED
TO THE LONGSHORE ACT BY THE 1972 AMENDMENTS AND AS THE ATTORNEY FEE
WAS NOW PAYABLE BY THE RESPONDENTS, THE SECOND CIRCUIT HELD THAT THE
ATTORNEY FEE AWARDED BY THE DISTRICT COURT SHOULD BE PAID BY
RESPONDENTS, PURSUANT TO SECTIONS 28(A) AND (C).
OVERSEAS AFRICAN
CONSTRUCTION CORP. V. MCMULLEN, 500 F.2D
1291, 1297 (2D CIR. 1974).
AFTER
MCMULLEN ,
THE NEXT REPORTED CLAIM
DEALING WITH SECTION 26 WAS THE BOARD'S DECISION IN
BOLDEN V. U.S.
STEVEDORES CORP.,
18 BRBS 172 (1985), WHEREIN THE CLAIM WAS REMANDED
TO THE ALJ FOR CONSIDERATION OF THE ISSUE AS THE ALJ HAD REFUSED TO
CONSIDER THE ISSUE AS THE EMPLOYER HAD NOT IDENTIFIED THAT ISSUE ON ITS
FORM LS18, THE PRE-HEARING STATEMENT.
WHERE THERE WAS NO EVIDENCE INDICATING CLAIMANT
CONTINUED THE CLAIM WITHOUT A GOOD FAITH, REASONABLE BASIS, AND WHERE
THE APPEAL TO THE BOARD WAS NOT COMPLETELY GROUNDLESS IN LIGHT OF THE
NOVEL ISSUE RAISED, THE BOARD HAS AFFIRMED THE DENIAL OF SECTION 26
COSTS.
OLSEN V. GENERAL ENGINEERING AND MACHINE WORKS,
25
BRBS 169, 173 (1991),
PINNELL V. PATTERSON SERVICES,
22 BRBS 261 (1989).
COSTS NOT ALLOWED AGAINST THE SPECIAL FUND
IN
RIHNER V. BOLAND MARINE AND
ANUFACTURING COMPANY,
24 BRBS 84 (1990), THE BOARD REVERSED AND
VACATED AN AWARD OF COSTS AGAINST THE SPECIAL FUND BECAUSE THE
EMPLOYER'S ACTIONS IN TERMINATING VOLUNTARY PAYMENTS TO CLAIMANT
NECESSITATED A FORMAL HEARING, AND ITS CONTROVERSION OF TWO ISSUES
REQUIRED CLAIMANT'S PARTICIPATION IN THE HEARING. MOREOVER, THE
DIRECTOR CANNOT BE SAID TO HAVE CONTINUED THE PROCEEDINGS WITHOUT
REASONABLE GROUND SOLELY ON THE BASIS OF HIS RULINGS ON THE
APPLICABILITY OF SECTION 8(F) IN THAT CASE. THUS, THE EMPLOYER WAS HELD
LIABLE FOR THE ATTORNEY'S FEE, UNDER SECTION 28(B), FOR THE WORK
PERFORMED BEFORE THE ADMINISTRATIVE LAW JUDGE. I NOTE THAT THE DEPUTY
COMMISSIONER (NOW THE DISTRICT DIRECTOR) HAD TWICE RECOMMENDED TO
THE ASSOCIATE DIRECTOR AT THE NATIONAL OFFICE OF THE OWCP THAT SECTION
8(F) RELIEF BE GRANTED BUT THE RECOMMENDATIONS WERE REJECTED BECAUSE
"(I)T COULD BE CONCLUDED THAT THE (DECEASED'S) DEMISE AS RESULT OF
A FATAL HEART ATTACK] WAS A NATURAL PROGRESSION OF HIS UNDERLYING
[CARDIOVASCULAR] CONDITION."
RIHNER, SUPRA
AT 85.
IN
DIRECTOR, OWCP V. ROBERTSON
, 625 F.2D 873, 12
BRBS 550 (9TH CIR. 1980), THE NINTH CIRCUIT HELD THAT THE ACT DID NOT
PROVIDE FOR PAYMENT OF ATTORNEY'S FEES FROM THE SPECIAL FUND. THE
ELEVENTH CIRCUIT ADOPTED THIS REASONING IN
DIRECTOR, OWCP V.
ALABAMA DRY DOCK & SHIPBUILDING CO.,
672 F.2D 415, 14 BRBS 669 (llTH CIR.
1982), AS DID THE FIFTH CIRCUIT IN
HOLIDAY V. TODD SHIPYARDS CORP
.,
654 F.2D 415, 13 BRBS 741 (5TH CIR. 1981).
PURSUANT TO SECTION 26, THE ATTORNEY FEE AWARD CANNOT
BE ASSESSED AGAINST THE SPECIAL FUND. MOREOVER, THE EMPLOYER'S
PARTICIPATION IN THE CASE WAS NECESSARY AS THE EMPLOYER IS AN
INDISPENSABLE PARTY TO THE PROCEEDING WHEREAS THE DIRECTOR'S
PARTICIPATION IN THE HEARING WAS NOT MANDATED AND THERE WAS NO
SHOWING THAT THE DIRECTOR OTHERWISE INSTITUTED OR CONTINUED THE
PROCEEDINGS IN THE CASE WITHOUT REASONABLE GROUND.
MEDRANO V.
BETHLEHEM STEEL CORP., 23 BRBS 223, 226
(1990). THE PURPOSE OF THIS
SECTION IS TO DISCOURAGE UNNECESSARY LITIGATION.
MEDRANO,
SUPRA
AT 226.
SEE ALSO BINGHAM V. GENERAL DYNAMICS CORP
.,
20 BRBS 198 (1988).
WHAT ARE COSTS?
AN ATTORNEY'S FEE MAY NOT BE CONSIDERED COSTS
UNDER SECTION 26 AND, THUS, CANNOT BE ASSESSED AGAINST ANY PARTY,
PURSUANT TO THAT SECTION. MOREOVER, SINCE THE ACT CONTAINS SPECIFIC
PROVISIONS FOR AWARDING ATTORNEY FEES AND SINCE THE ACT DOES NOT
INCLUDE A PROVISION FOR HOLDING THE SPECIAL FUND LIABLE FOR SUCH FEES,
THE FUND CANNOT BE ASSESSED THE EMPLOYER'S ATTORNEY FEE PURSUANT TO
SECTION 26, THE OALJ'S RULES OF PRACTICE AND PROCEDURE, THE FEDERAL
RULES OF CIVIL PROCEDURE AND THE EQUAL ACCESS TO JUSTICE ACT.
BORDELON V. REPUBLIC BULK STEVEDORE, 27 BRBS
280, 283-285 (1994).
IT IS WELL-SETTLED THAT ATTORNEY'S FEES MAY NOT BE
CONSIDERED COSTS WITHIN THE MEANING OF SECTION 26, AND THUS CANNOT BE
ASSESSED AGAINST ANY PARTY PURSUANT TO THAT SECTION.
STEED V.
CONTAINER STEVEDORING COMPANY,
25 BRBS 210, 221 (1991);
MACKEY
V. MARINE TERMINALS CORP.,
21 BRBS 129, 131 (1988)(SECTION 26 MAKES NO
ENTION OF ATTORNEY FEES AND THEY WERE "NOT RECOVERABLE AS COSTS
IN THE ABSENCE OF A STATUTORY PROVISION OR ENFORCEABLE CONTRACT").
WHO IS A PARTY?
THE BOARD HAS HELD THAT CLAIMANT'S COUNSEL WAS
NOT A "PARTY" FOR PURPOSES OF SECTION 26, AS HE WAS NOT
NECESSARY FOR A FORMAL HEARING, NOR WAS HE AN ENTITY WHO SOUGHT
RELIEF OR AGAINST WHOM RELIEF WAS SOUGHT. THUS, WHERE CLAIMANT
WITHDREW HIS CLAIM, THE BOARD REVERSED THE JUDGE'S ASSESSMENT OF
EMPLOYER'S ATTORNEY'S FEE AND COSTS AGAINST CLAIMANT'S COUNSEL.
SECTION 26 PROVIDES THAT "THE COSTS OF SUCH PROCEEDINGS SHALL BE
ASSESSED AGAINST THE PARTY WHO HAS INSTITUTED OR CONTINUED SUCH
PROCEEDINGS "WITHOUT REASONABLE GROUND THEREFOR.
FLETCHER
V. SLATTERY ASSOCIATES
, 22 BRBS 70, 71 (1989).
COSTS ALLOWED UNDER SECTION 26
WHILE THE PRECEDING RECITES NUMEROUS EXAMPLES
WHEREIN SECTION 26 COSTS HAVE BEEN DENIED FOR VARIOUS REASONS, THERE
ARE ISOLATED CASES WHERE COSTS HAVE BEEN ALLOWED.AND THEY ARE AS
FOLLOWS:
SECTION 26 COSTS TO THE EMPLOYER'S ATTORNEY WERE
ALLOWED IN A PROCEEDING WHERE THE ADMINISTRATIVE LAW JUDGE HELD THE
CLAIMANT WAS NOT ENTITLED TO MODIFICATION BASED ON RELATING BACK HIS
EARNINGS IN HIS PRESENT JOB TO THE WAGE LEVEL AT THE TIME OF HIS INJURY
SINCE CLAIMANT'S INITIAL AWARD OF BENEFITS WAS BASED NOT ON THIS JOB OR
ON AN ACTUAL LOSS OF WAGE-EARNING CAPACITY,
BUT ON THE LIKELIHOOD
OF A FUTURE DECREASE IN EARNINGS BECAUSE OF HIS BACK INJURY . . . .
THE ADMINISTRATIVE LAW JUDGE ALSO HELD THAT THE OPINION OF CLAIMANT'S
PHYSICIAN PROVIDED NO SUPPORT FOR HIS ASSERTION THAT THERE HAD BEEN A
CHANGE IN HIS PHYSICAL CONDITION. THE RECORD REFLECTED THAT THE
CLAIMANT HAD FAILED TO REPORT HIS INCOME FOR 27.5 MONTHS NOT ONLY TO
THE IRS BUT ALSO TO THE EMPLOYER ON THE FORM LS-200. THE BOARD AFFIRMED
THE DECISION AND THE AWARD OF SECTION 26 COSTS OF $818.00 BECAUSE THE
ADMINISTRATIVE LAW JUDGE RATIONALLY CONCLUDED THAT
FROM A
PRE-HEARING PERSPECTIVE
CLAIMANT COULD NOT SUCCEED IN HIS
ODIFICATION PROCEEDING. ZEPEDA V.
NATIONAL STEEL AND SHIPBUILDING
COMPANY,
24 BRBS 163 (1991).
AN INTERESTING CASE IS
THE TRAVELERS INSURANCE
COMPANY V. THOMPSON,
20 BRBS 77 (CRT) (W.D. WASH. 1987), WHEREIN THE
EMPLOYEE SOUGHT AND OBTAINED AN AWARD OF BENEFITS UNDER THE ACT. HE
THEN SOUGHT AND OBTAINED COMMUTATION OF THAT AWARD. HOWEVER, THE
BENEFITS REVIEW BOARD VACATED THE COMMUTATION ORDER AND THE INSURER
SUED TO RECOVER THE LUMP SUM PAID TO THE EMPLOYEE. THE DISTRICT COURT
HELD THAT THE DEFENDANT HAD NO LEGITIMATE BASIS FOR REFUSING TO
RETURN THE LUMP SUM PAYMENT TO THE INSURER, THAT THE INSTANT
LITIGATION SHOULD NOT HAVE BEEN NECESSARY AND, ONCE BROUGHT, ITS
CONTINUATION WAS WITHOUT REASONABLE GROUND. ACCORDINGLY, THE
INSURER WAS ENTITLED TO RECOVER ITS REASONABLE ATTORNEY'S FEES,
PURSUANT TO SECTION 26, AND THE COURT APPROVED THE AMOUNT OF $5,565.83
AS "ADEQUATELY DOCUMENTED AND REASONABLE IN AMOUNT." ID. AT
78 (CRT).
RECOVERY OF ERRONEOUS
PAYMENTS
OTHER THAN UTILIZING THE FELONY PROVISIONS OF SECTION
31(A)(1) AND WAITING FOR THE WEEKLY INSTALLMENTS MANDATED BY AN
OBLIGATION ON THE PART OF THE EMPLOYEE TO MAKE RESTITUTION, WHAT ELSE
CAN THE EMPLOYER DO TO RECOVER COMPENSATION AND MEDICAL BENEFITS
ERRONEOUSLY PAID TO AN EMPLOYEE AS A RESULT OF FRAUD OR MISREPRE-
SENTATION? WHAT ABOUT THE POSSIBILITY OF A CLAIM UNDER THE LONGSHORE
ACT FOR THOSE ERRONEOUS PAYMENTS? LOGICALLY, THERE SHOULD BE SOME
REMEDY TO PREVENT SUCH UNJUST ENRICHMENT.
HOWEVER, THE COURTS AND THE BRB HAVE CONSISTENTLY
ANSWERED THIS QUESTION IN THE NEGATIVE.
SEE, E.G., CERES GULF V.
DIRECTOR, OWCP (COOPER),
957 F.2D ll99, 25 BRBS 12S (CRT) (9TH CIR. l992);
STEVEDORING SERVICES OF AMERICA V. EGGERT,
953 F.2D SS2, 2S BRBS
92 (9TH CIR. 1992),
CERT. DENIED,
112 S.CT. 3056 (1992);
VITOLA V. NAVY
RESALE AND SUPPORT OFFICE,
26 BRBS 88, 96-97 (1992). THOSE DECISIONS
UNIFORMLY HOLD THAT THE LONGSHORE ACT DOES NOT PROVIDE AN EMPLOYER
WITH A RIGHT TO RECOVER ADVANCE PAYMENTS ERRONEOUSLY PAID, SUCH AS
THROUGH FRAUD, WHEN NO ADDITIONAL COMPENSATION IS DUE THE EMPLOYEE.
IN
STEVEDORING SERVICES OF AMERICA V. EGGERT,
THE EMPLOYER SUED THE EMPLOYEE IN U.S. DISTRICT COURT TO RECOVER
THE AMOUNT OF $96,6S1.22, REPRESENTING SEVEN YEARS OF OVERPAYMENTS TO
THE EMPLOYEE, AS WELL AS FOR ITS ATTORNEY'S FEE AND COSTS, PURSUANT TO
SECTION 26. BOTH SIDES MOVED FOR SUMMARY JUDGMENT, CLAIMANT POSITING
THAT THE DOCTRINE OF "PRIMARY JURISDICTION" DIVESTED THE COURT
OF ANY JURISDICTION AND THAT THE ACT DOES NOT CONTEMPLATE THE ENTRY
OF ORDERS REQUIRING AN INJURED WORKER TO REIMBURSE HIS EMPLOYER FOR
ANY OVERPAYMENT OF BENEFITS WHEN NO ADDITIONAL BENEFITS ARE OWED.
THE COURT GRANTED EMPLOYER'S MOTION FOR SUMMARY JUDGMENT AS THE
DECISION OF THE ALJ WAS NOT APPEALED AND HAD BECOME A FINAL ORDER BY
OPERATION OF LAW. THE COURT REJECTED THE EMPLOYEE'S INTERPRETATION OF
SECTION 14(J) BECAUSE THE PAYMENTS MADE TO HIM WERE NOT "ADVANCE
PAYMENTS" AS THEY WERE MADE PURSUANT TO THE ALJ'S DECISION AND
ORDER AND, MOST IMPORTANT, BECAUSE "THERE IS NOTHING IN THE ACT TO
INDICATE THAT THIS (SUBSECTION) WAS INTENDED TO BE THE EMPLOYER'S
EXCLUSIVE
REMEDY FOR AN OVERPAYMENT OF BENEFITS. BUT FINALLY,
AND MOST FUNDAMENTALLY, (THE EMPLOYEE'S) CONSTRUCTION OF THE STATUTE
WOULD BE UNCONSCIONABLY UNFAIR TO EMPLOYERS" AND "WOULD
EMASCULATE STEVEDORE'S APPEAL RIGHTS, AND PROVIDE (THE EMPLOYEE) AN
UNCONSCIONABLE WINDFALL" OF APPROXIMATELY $100,000, THE COURT
CONCLUDING, "THIS WOULD NOT HAVE BEEN THE INTENT OF THE DRAFTERS
OF § 914(J)."
STEVEDORING SERVICES OF AMERICA, SUPRA
, 23
BRBS 25, 28-29 (CRT) (WASH. WESTERN DISTRICT AT SEATTLE 1989)
(NON-PUBLISHED). (AS NOTED ABOVE, THE NINTH CIRCUIT REVERSED THIS
DECISION FOR WANT OF SUBJECT MATTER JURISDICTION.)
SECTION 14(J) OF THE ACT PROVIDES THAT AN EMPLOYER WHO HAS
MADE ADVANCE PAYMENTS OF COMPENSATION "SHALL BE ENTITLED TO BE
REIMBURSED OUT OF ANY UNPAID INSTALLMENTS OR INSTALLMENTS OF
COMPENSATION DUE."
(EMPHASIS ADDED)
SECTION 31(B) OF THE ACT
I WOULD ALSO LIKE TO BRING TO YOUR ATTENTION AN
IMPORTANT PROVISION ADDED TO THE LONGSHORE ACT BY THE 1984
AMENDMENTS AT SECTION 31 AS FOLLOWS:
-
(B)(1) NO REPRESENTATION FEE OF A
CLAIMANT'S REPRESENTATIVE SHALL BE APPROVED BY THE DEPUTY
COMMISSIONER (NOW THE DISTRICT DIRECTOR), AN ADMINISTRATIVE LAW
JUDGE, THE BOARD, OR A COURT PURSUANT TO SECTION 28 OF THIS ACT, IF
THE CLAIMANT'S REPRESENTATIVE IS ON THE LIST OF INDIVIDUALS WHO
ARE DISQUALIFIED FROM REPRESENTING CLAIMANTS UNDER THIS ACT
MAINTAINED BY THE SECRETARY PURSUANT TO PARAGRAPH (2) OF THIS
SUBSECTION.
-
(2) (A) THE SECRETARY SHALL ANNUALLY PREPARE A LIST OF THOSE
INDIVIDUALS IN EACH COMPENSATION DISTRICT WHO HAVE REPRESENTED
CLAIMANTS FOR A FEE IN CASES UNDER THIS ACT AND WHO ARE NOT
AUTHORIZED TO REPRESENT CLAIMANTS. THE NAMES OF INDIVIDUALS
CONTAINED ON THE LIST REQUIRED UNDER THIS SUBPARAGRAPH SHALL BE
MADE AVAILABLE TO EMPLOYEES AND EMPLOYERS IN EACH
COMPENSATION DISTRICT THROUGH POSTING AND IN SUCH OTHER FORMS
AS THE SECRETARY MAY PRESCRIBE.
-
(B) INDIVIDUALS SHALL BE INCLUDED ON THE LIST
OF THOSE NOT AUTHORIZED TO REPRESENT CLAIMANTS UNDER THIS ACT IF
THE SECRETARY DETERMINES UNDER THIS SECTION, IN ACCORDANCE WITH
THE PROCEDURE PROVIDED IN SUBSECTION (J) OF SECTION 7 OF THIS ACT,
THAT SUCH INDIVIDUAL-
-
(I) HAS BEEN CONVICTED (WITHOUT REGARD TO PENDING
APPEAL) OF ANY CRIME IN CONNECTION WITH THE
REPRESENTATION OF A CLAIMANT UNDER THIS ACT OR ANY
WORKERS' COMPENSATION STATUTE;
-
(II) HAS ENGAGED IN FRAUD IN CONNECTION WITH THE
PRESENTATION OF A CLAIM UNDER THIS OR ANY WORKERS'
COMPENSATION STATUTE, INCLUDING, BUT NOT LIMITED TO,
KNOWINGLY MAKING FALSE REPRESENTATIONS, CONCEALING OR
ATTEMPTING TO CONCEAL MATERIAL FACTS WITH RESPECT TO A
CLAIM, OR SOLICITING OR OTHERWISE PROCURING FALSE TESTIMONY;
-
(III) HAS BEEN PROHIBITED FROM REPRESENTING CLAIMANTS BEFORE
ANY OTHER WORKERS' COMPENSATION AGENCY FOR REASONS OF
PROFESSIONAL MISCONDUCT WHICH ARE SIMILAR IN NATURE TO
THOSE WHICH WOULD BE GROUNDS FOR DISQUALIFICATION UNDER
THIS PARAGRAPH; OR
-
(IV) HAS ACCEPTED FEES FOR REPRESENTING CLAIMANTS UNDER THIS
ACT WHICH WERE NOT APPROVED, OR WHICH WERE IN EXCESS OF THE
AMOUNT APPROVED PURSUANT TO SECTION 28.
-
(C) NOTWITHSTANDING SUBPARAGRAPH (B), NO
INDIVIDUAL WHO IS ON THE LIST REQUIRED TO BE MAINTAINED BY THE
SECRETARY PURSUANT TO THIS SECTION SHALL BE PROHIBITED FROM
PRESENTING HIS OR HER OWN CLAIM OR FROM REPRESENTING WITHOUT
FEE, A CLAIMANT WHO IS A SPOUSE, MOTHER, FATHER, SISTER, BROTHER, OR
CHILD OF SUCH INDIVIDUAL.
-
(D) A DETERMINATION UNDER SUBPARAGRAPH (A)
SHALL REMAIN IN EFFECT FOR A PERIOD OF NOT LESS THAN THREE YEARS
AND UNTIL THE SECRETARY FINDS AND GIVES NOTICE TO THE PUBLIC THAT
THERE IS REASONABLE ASSURANCE THAT THE BASIS FOR THE
DETERMINATION WILL NOT REOCCUR.
-
(3) NO EMPLOYEE SHALL BE LIABLE TO PAY A REPRESENTATION FEE TO
ANY REPRESENTATIVE WHOSE FEE HAS BEEN DISALLOWED BY REASON OF
THE OPERATION OF THIS PARAGRAPH.
-
(4) THE SECRETARY SHALL ISSUE RULES AND REGULATIONS AS ARE
NECESSARY TO CARRY OUT THIS SECTION.
THUS, ACCORDING TO SECTION 31(B), THE SECRETARY OF LABOR
IS AUTHORIZED TO PREPARE AND MAINTAIN A
LIST
OF PERSONS WHO
HAVE PREVIOUSLY REPRESENTED CLAIMANTS FOR A FEE IN CASES UNDER THE ACT
AND WHO ARE NOT AUTHORIZED TO REPRESENT CLAIMANTS. SUCH PERSONS MAY
NOT RECEIVE A REPRESENTATION FEE.
DISQUALIFIED REPRESENTATIVES
INCLUDE PERSONS
WHO HAVE BEEN CONVICTED OF ANY CRIME IN CONNECTION WITH THE
REPRESENTATION OF A CLAIMANT
UNDER THE ACT OR ANY WORKERS'
COMPENSATION STATUTE,
WHO HAVE ENGAGED IN FRAUD IN CONNECTION
WITH THE REPRESENTATION OF A WORKERS' COMPENSATION CLAIM, WHO HAVE
BEEN PROHIBITED FROM REPRESENTING CLAIMANTS BEFORE ANY OTHER
WORKERS' COMPENSATION AGENCY FOR REASONS OF PROFESSIONAL
ISCONDUCT SIMILAR TO THOSE ENUMERATED HERE OR WHO HAVE ACCEPTED
FEES FOR REPRESENTING CLAIMANTS UNDER THE ACT WHICH WERE NOT
APPROVED OR WERE IN EXCESS OF THE AMOUNT APPROVED UNDER SECTION 28.
33 U.S.C. §931(B)(2)(B)(I)-(IV).
THERE ARE
EXCEPTIONS
, HOWEVER, UNDER WHICH A
DISQUALIFIED REPRESENTATIVE MAY NEVERTHELESS SERVE AS A
REPRESENTATIVE IN A
LIMITED CAPACITY
. A DISQUALIFIED INDIVIDUAL
IS NOT PROHIBITED FROM REPRESENTING HIMSELF OR FROM REPRESENTING
WITHOUT A FEE A CLAIMANT WHO IS A SPOUSE, MOTHER, FATHER, SISTER,
BROTHER, OR CHILD OF SUCH INDIVIDUAL.
A
DETERMINATION
THAT AN INDIVIDUAL IS A
DISQUALIFIED REPRESENTATIVE
REMAINS IN EFFECT FOR AT
LEAST
THREE YEARS. 33 U.S.C. §931(B)(2)(D). UNDER SECTION 31(B)(3), NO EMPLOYEE
IS LIABLE TO PAY A REPRESENTATIVE FEE TO ANY REPRESENTATIVE WHOSE FEE
HAS BEEN DISALLOWED UNDER THIS SECTION.
SECTION 31(C) OF THE ACT READS AS FOLLOWS:
-
(C) A PERSON INCLUDING, BUT NOT LIMITED TO, AN EMPLOYER,
HIS DULY AUTHORIZED AGENT, OR AN EMPLOYEE OF AN INSURANCE
CARRIER WHO KNOWINGLY AND WILLFULLY MAKES A FALSE STATEMENT
OR REPRESENTATION FOR THE PURPOSE OF REDUCING, DENYING, OR
TERMINATING BENEFITS TO AN INJURED EMPLOYEE, OR HIS DEPENDENTS
PURSUANT TO SECTION 9 IF THE INJURY RESULTS IN DEATH, SHALL BE
PUNISHED BY A FINE NOT TO EXCEED $10,000, BY IMPRISONMENT NOT TO
EXCEED FIVE YEARS, OR BY BOTH.
SECTION 31(C), AN IMPORTANT SANCTION UNDER THE ACT,
PROVIDES THAT A PERSON, INCLUDING BUT NOT LIMITED TO, AN
EMPLOYER,
HIS
AUTHORIZED AGENT,
OR AN
EMPLOYER
OF AN INSURANCE CARRIER
WHO
KNOWINGLY AND WILLFULLY
MAKES A
FALSE STATEMENT
OR REPRESENTATION
FOR THE
PURPOSE OF REDUCING, DENYING OR TERMINATING BENEFITS
IS
SUBJECT TO A FINE NOT TO EXCEED $10,000, FIVE YEARS IMPRISONMENT OR
BOTH.
CONCLUSIONS
A FEW BAD APPLES
SOME COMMENTATORS POSIT THAT SOME DOCTORS AND
LAWYERS CAN AND DO MANIPULATE WORKERS' COMPENSATION PROCEEDINGS TO
THEIR ADVANTAGE. IT IS OBVIOUS THAT DOCTORS, KEY PERSONAGES IN MOST
DISABILITY PROGRAMS, HAVE A PROFOUND INFLUENCE ON THE COST OF BOTH
EDICAL TREATMENT AND WORKERS' BENEFITS. AS A RESULT, SOME DOCTORS
ARE PAINTED AS PROFESSIONALS WHO TEND TO OVERTREAT, OVERCHARGE AND
OFFER OPINIONS WHICH ARE INFLUENCED MORE BY THE SOURCE OF THE
PAYMENT THAN BY THE ACTUAL CONDITION OF THE PATIENT. SOME
EMPLOYERS AND INSURERS NOW VIEW MEDICAL COSTS AS THE PRIMARY CAUSE
OF WORKERS' COMPENSATION PROBLEMS AND, THEREFORE, ARE PUTTING
CONSIDERABLE ENERGY INTO HEALTH CARE COST CONTAINMENT STRATEGIES.
WHILE I AM RELUCTANT TO MENTION THIS TOPIC, I SHALL NOW
GIVE EQUAL TIME TO THOSE FEW LAWYERS WHO EITHER MAY ENCOURAGE THE
FILING OF FRAUDULENT CLAIMS OR WHO MAY CONDONE SUCH ACTIONS ONCE
FILED. SOME ATTORNEYS ARE BELIEVED TO INSTIGATE THE FILING OF
FRAUDULENT, WEAK OR UNNECESSARY CLAIMS AND TO ORGANIZE
INAPPROPRIATE SCREENINGS TO LOCATE AND IDENTIFY WORKERS WHO ARE THEN
ENCOURAGED TO FILE NUISANCE CLAIMS. THE SELF INTEREST OF THESE FEW
ATTORNEYS, WHOSE FEES RISE WITH INCREASES IN BENEFITS, TENDS TO TARNISH
THE IMAGE OF THE OVERWHELMING W ORITY OF THE ATTORNEYS. THE LEGAL
PROFESSION SHOULD POLICE ITSELF IN THIS AREA TO PREVENT CHANGES IN THE
ATTORNEY FEE PROVISIONS OF DISABILITY STATUTES, CHANGES WHICH WILL BE
DETRIMENTAL TO ALL ATTORNEYS PRACTICING IN THIS FIELD.
WHAT ARE STATES DOING TO DEAL WITH WORKERS' COMPENSATION COSTS?
IN 1992 ALONE, CONNECTICUT, MINNESOTA AND OKLAHOMA
ESTABLISHED
FRAUD UNITS AND ALABAMA, MISSOURI AND RHODE ISLAND HAVE STIFFENED
THEIR FRAUD PENALTY PROVISIONS. STATES HAVE ALSO ATTACKED THE PROBLEM
OF USING WORKERS' COMPENSATION COSTS BY REDUCING BENEFIT LEVELS, BY
REDUCING MEDICAL COST INFLATION THROUGH A VARIETY OF COST
CONTAINMENT STRATEGIES (I.E., MEDICAL FEE SCHEDULES, AUTHORIZING
ANAGED CARE OPTIONS, RESTRICTING THE RIGHT TO CHANGE PHYSICIANS) OR
BY EMPHASIZING EFFORTS AT REHABILITATION AND RETURNTO-WORK
PROGRAMS. I WOULD ALSO ADD MY OWN VIEW THAT SAFETY IN THE WORKPLACE
IS THE MOST DIRECT, EFFECTIVE METHOD OF CONTROLLING WORKERS'
COMPENSATION CASELOADS AND COSTS FOR EMPLOYERS, FOR THE STATES AND
FOR ALL CONCERNED AT THE FEDERAL LEVEL.
FRAUD--HOW BIG A PROBLEM?
SOME COMMENTATORS HAVE STATED THAT THERE IS AN
INCREASE IN THE
FILING OF COMPENSATION CLAIMS IN DIRECT PROPORTION TO THE INCREASE
IN BENEFIT LEVELS. THESE SAME COMMENTATORS SUGGEST THAT BENEFITS
ADEQUACY SHOULD BE TEMPERED TO REMOVE OR, AT LEASE, MINIMIZE THIS
TREND. TO THE EXTENT THAT THIS INCREASE IN FILING CLAIMS REFLECTS
AN INCREASE IN THE FILING OF UNNECESSARY OR FRAUDULENT CLAIMS,
EMPLOYERS SHOULD BE ENCOURAGED TO REDUCE COSTS BY CONTROVERTING
SUSPECTED CLAIMS MORE DILIGENTLY THROUGH AGGRESSIVE LITIGATION
ONCE THESE CLAIMS ARE FILED. FRAUD, IN THIS CONTEXT,~MEANS THE FILING
OF CLAIMS WHICH INVOLVE OUTRIGHT LIES. I REFER TO "FRAUD" AS
INVOLVING SCHEMES WHEREBY UNINJURED WORKERS COLLECT WORKERS'
COMPENSATION BENEFITS BY CONCOCTING EVIDENCE OR BY FABRICATING
EDICAL EVIDENCE. I REFER TO THOSE WORKERS WHO CLAIM THEY HAVE
DISABILITIES THAT IN FACT DO NOT EXIST OR WHO ALLEGE THAT THEIR
DISABILITIES WERE CAUSED AT WORK WHEN, IN FACT, THE INJURIES OCCURRED
AT HOME. THE THREAD THROUGHOUT THESE FRAUDULENT CLAIMS IS
ANUFACTURING DISABILITY WHERE NONE EXISTS OR THE INAPPROPRIATE
LINKING OF DISABILITY TO OCCUPATIONAL ETIOLOGY.
MY RESEARCH HAS LED TO THE TENTATIVE CONCLUSION THAT
WHILE ALLEGATIONS OF FRAUD ARE LONG ON ANECDOTAL STORIES,
ALLEGATIONS OF WIDESPREAD FRAUD ARE NOT DOCUMENTED BY CASE
PRECEDENTS NOT ONLY AT THE OALJ BUT AT THE STATE LEVEL. THERE COULD BE
SEVERAL ANSWERS FOR THAT DEARTH OF DATA. INITIALLY, IT COULD BE THAT
THESE CLAIMS ARE WEEDED OUT BY THE CLAIMS EXAMINER AT THE INITIAL
LEVEL WHERE A CLAIM IS FIRST PROCESSED. OR IT COULD BE THAT SUSPICIOUS
CLAIMS ARE NOT AGGRESSIVELY DEFENDED BY THE EMPLOYER, EITHER BECAUSE
OF THE EXPENSES INVOLVED IN EMPLOYING SEVERAL PRIVATE INVESTIGATORS
FOR ONE WEEK TO CONDUCT SURVEILLANCE OF THE WORKER OR BECAUSE THE
EMPLOYER IS CONTENT WITH PAYING 104 WEEKS OF PERMANENT DISABILITY
BENEFITS WITH THE SPECIAL FUND BECOMING, IN EFFECT, THE EMPLOYER OF LAST
RESORT.
FRAUDULENT CLAIMS, WHATEVER THEIR NUMBER AND
FREQUENCY, ARE GIVING THE WORKERS' COMPENSATION SYSTEM A BAD NAME
AND ARGUMENTS THAT FRAUD IS RUINING THE SYSTEM SEEM TO HAVE A
PARTICULAR ATTRACTION WITHIN THE FRAMEWORK OF WORKERS'
COMPENSATION POLITICAL DEBATES, JUST AS WE DAILY READ IN DEBATES
REGARDING SOCIAL WELFARE PROGRAMS. ATTACKS ON BENEFIT LEVELS OR
ELIGIBILITY CRITERIA FOR SOCIAL PROGRAMS ARE EASIER TO COUNTENANCE IF
THE PEOPLE WHO ARE EXCLUDED FROM THE PROGRAMS ARE PERCEIVED TO BE
ALINGERERS AND CHEATS.
WHAT CAN BE DONE
MY TALK TODAY MAY LEAD SOME TO INFER THAT THE
LONGSHORE ACT MAY NOT FULLY BE ABLE TO DEAL WITH FRAUDULENT CONDUCT
BY ANY PARTY TO THE PROCEEDING.
EMPLOYERS ARE ENCOURAGED TO CONTROL WORKERS'
COMPENSATION COSTS BY CHALLENGING AND CONTROVERTING ANY AND ALL
CLAIMS THAT ARE NOT WORK-RELATED, OR ARE FRIVOLOUS OR FRAUDULENT.
JUST LETTING THROUGH THE SYSTEM ONE SUCH CLAIM WILL RESULT IN AN
INCREASE IN INSURANCE PREMIUMS THAT WILL COST EACH EMPLOYER
THOUSANDS OF DOLLARS. BUT THIS BILL IS REALLY PAID BY THE TAXPAYERS AS
THE EMPLOYERS PASS ON THESE COSTS TO THEIR CUSTOMERS.
"IT MUST BE REMEMBERED ONCE AGAIN THAT THIS
(WORKERS' COMPENSATION STATUTE) IS A NON-FAULT SYSTEM AS TO BOTH
EMPLOYER AND EMPLOYEE. UNJUST RESULTS, BY CONVENTIONAL STANDARDS,
ARE COMMONPLACE." 2A ARTHUR LARSON,
WORKMEN'S COMPENSATION
LAW,
SECTION 68.15(E), AT 13-108. TO THOSE WORDS OF WISDOM I WOULD ADD
Y OWN POSTSCRIPT: SOME "UNJUST" RESULTS CAN BE RESOLVED BY
AN ADMINISTRATIVE LAW JUDGE. HOWEVER, SOME "UNJUST" RESULTS
CAN BEST BE RESOLVED IN THE LEGISLATIVE ARENA, WHETHER ON THE STATE
LEVEL OR IN CONGRESS, AFTER HEARINGS AND DUE DELIBERATION, AS WAS DONE
IN 1972 AND 1984. ON A TWELVE YEAR CYCLED PERHAPS THE TIME IS RIPE.
I WOULD LIKE TO END WITH THE WORDS OF THE NINTH CIRCUIT
IN THE
BRICKNER
CASE:
-
WHAT WE DO KNOW IS THAT IF CLAIMANTS CONTINUE
PROCEEDINGS IN THE COURTS WITHOUT REASONABLE GROUND, CONGRESS
HAS SEEN FIT TO PROVIDE FOR THE IMPOSITION OF COSTS AS A SANCTION.
IT HAS DONE NO MORE. IF THE DIRECTOR, THE BOARD OR OTHERS FEEL THE
NEED FOR A FURTHER COST OR ATTORNEY FEE PROVISION, THEY MUST SEEK
IT IN CONGRESS.
METROPOLITAN STEVEDORE COMPANY V. BRICKNER; DIRECTOR, OWCP,
11 F.3D 887, 27 BRBS AT 138 (CRT)(9TH CIR. 1993).
CURRICULUM VITAE
DAVID W. DI NARDI
ADMINISTRATIVE LAW JUDGE
U.S. DEPARTMENT OF LABOR
J.W. MCCOMACK POCH RM 507
BOSTON, MA 02109
(617) 223-9355
PROFESSIONAL EXPERIENCE
:
1982 TO PRESENT
-
ADMINISTRATIVE LAW JUDGE
U.S. DEPARTMENT OF LABOR
Boston, MA 02109
1978 to 1982
-
ADMINISTRATIVE LAW JUDGE
F. Edward Hebert Building
New Orleans, Louisiana
1965 TO 1978
-
SENIOR STAFF ATTORNEY
FEDERAL TRADE COMMISSION
Boston Regional Office
Boston, MA 02222
ADMISSIONS:
assachusetts Bar (1962); U.S. Court of Military Appeals (1963); U.S. District Court of
assachusetts (1965); U.S. Supreme Court (1966) .
EDUCATION:
Georgetown University Law Center
Washington, DC 20001
LL.M. Degree (1965)
Boston College Law School
Newton CENTRE, MA 02159
J.D. Degree (1962)
ember: Boston College Industrial and
Commercial Law
Review (B.C. Law Review), Moot Court
Competition
Boston College
Chestnut Hill, MA
B.A. Degree (1959)
MILITARY:
U.S. Army Military Intelligence
Fort Meade, Maryland, 1962-1964
MEMBERSHIP:
A.B.A., Conference of Administrative Law Judges,
Federal Administrative Law Judges Conference, Boston Bar Association
[ENDNOTES]
1
At the outset, I issue the usual
disclaimer that the comments made in this paper, as well as my answers to your questions, are
my own and do not necessarily reflect those of anyone else at the Office of Administrative Law
Judges or at the Department of Labor.
