Prescott v. U.S.

• Decision Date: 25 April 1984
• Docket Number: 83-1949,Nos. 83-1948,s. 83-1948
• Citation: 731 F.2d 1388
• Parties: Keith L. PRESCOTT, Plaintiff-Respondent, v. UNITED STATES of America, Defendant-Petitioner. Keith L. PRESCOTT, Plaintiff-Respondent-Appellee, v. UNITED STATES of America, et al., Defendants, and Reynolds Electrical and Engineering Company, Inc., a Nevada Corporation, Defendant-Petitioner-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1388

731 F.2d 1388

Keith L. PRESCOTT, Plaintiff-Respondent, v. UNITED STATES of America, Defendant-Petitioner.

Keith L. PRESCOTT, Plaintiff-Respondent-Appellee, v. UNITED STATES of America, et al., Defendants, and Reynolds Electrical and Engineering Company, Inc., a Nevada

Corporation, Defendant-Petitioner-Appellant.

Nos. 83-1948, 83-1949.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 15, 1984.

Decided April 25, 1984.

Stewart L. Udall, Phoenix, Ariz., Larry C. Johns, Alan R. Johns, Johns & Johns, Las Vegas, Nev., for plaintiff-respondent-appellee.

J. Paul McGrath, Asst. Atty. Gen., Jeffrey Axelrad, Director, Torts Branch, Donald E. Jose, Asst. Director, Torts Branch, Washington, D.C., John Thorndal, Thorndal, Backus & Maupin, Las Vegas, Nev., for defendant-petitioner-appellant.

Appeal from the United States District Court for the District of Nevada.

Before DUNIWAY, FARRIS, and PREGERSON, Circuit Judges.

FARRIS, Circuit Judge:

The question certified for this interlocutory appeal is whether an agreement between the Atomic Energy Commission and the Nevada Industrial Commission is a valid device for providing workers' compensation coverage for radiation-related injuries and diseases for the employees of Reynolds Electrical and Engineering Company. The district court held that the agreement was not a valid device because it failed to meet the requirements of the Nevada Industrial Insurance Act and the Nevada Occupational Diseases Act. We affirm.

FACTS

The United States, through the Atomic Energy Commission and other agencies, has tested nuclear weapons and nuclear devices at the Nevada Test Site since the early 1950's. Reynolds Electrical and Engineering Company is a contractor at the Nevada Test Site. From 1961 to 1968, Reynolds employed Prescott as an operating engineer. Prescott alleges that he was exposed to radiation when he was regularly sent into highly contaminated test areas immediately after nuclear detonations to retrieve test instruments. In 1969, he was diagnosed as having multiple myeloma, a cancer of the bone marrow. Prescott brought tort actions against Reynolds and the United States, alleging that he contracted the disease as a result of exposure to radiation while employed at the Nevada Test Site.

Reynolds and the Atomic Energy Commission had agreed that Reynolds would provide insurance coverage for its employees under the Nevada Industrial Insurance Act and the Nevada Occupational Diseases Act and would pass the insurance costs on to the United States. Although employers typically purchase such insurance by paying premiums to the state insurance fund, Reynolds has not paid any premiums to purchase insurance for employees who suffer radiation-related harm. Instead, in 1956, the Atomic Energy Commission and the Nevada Industrial Commission entered into an agreement which was intended to provide coverage for radiation-related diseases and injuries for employees of Reynolds and other contractors and subcontractors at the Nevada Test Site. The agreement provided that when an employee filed a claim, the Nevada Industrial Commission would determine if the claim was compensable under Nevada workers' compensation laws. If compensable, the Nevada Industrial Commission would make payments to the employee for injuries, disabilities or death resulting from work-related radiation exposure. The Atomic Energy Commission promised to reimburse the Nevada Industrial Commission for payments made to employees. This agreement has been extended and modified nine times since 1956, but the substance of the agreement remains unchanged. The Department of Energy has since assumed the responsibilities of the Atomic Energy Commission.

In 1979, Prescott filed a claim with the Department of Energy. When no action was taken on the claim, Prescott sued Reynolds and the United States in tort. Reynolds and the United States moved to dismiss Prescott's suit, arguing that the Nevada Industrial Insurance Act and the Nevada Occupational Diseases Act provided his exclusive remedy. The district court held that the agreement between the Atomic Energy Commission and the Nevada Industrial Commission failed to satisfy the defendants' obligations to provide coverage under the acts. Prescott v. United States, 523 F.Supp. 918 (D.Nev.1981). The district court held that the agreement was void because the Nevada Industrial Commission lacked authority to enter into the agreement and because the agreement impermissibly modified the terms of defendants' liabilities created by the Nevada Occupational Diseases Act. The court concluded that since no workers' compensation insurance had been purchased, Prescott could sue Reynolds and the United States in tort. On motion for reconsideration, the district court held that no premiums had been paid to purchase coverage for radiation-related diseases. Prescott v. United States, No. 80-143 (D.Nev. Mar. 28, 1983). The court again concluded that since Reynolds had not purchased insurance, Prescott could sue the defendants in tort. Pursuant to 28 U.S.C. Sec. 1292(b), the district court certified for interlocutory appeal the question of the validity of the agreement between the Atomic Energy Commission and the Nevada Industrial Commission.

ANALYSIS

In determining the liability of Reynolds and the United States, the district court interpreted Nevada law. We recently granted rehearing en banc to decide whether a "clearly wrong" or a de novo standard applies when reviewing a district court's determination of the law of the state in which it sits. See In re McLinn, F/V Fjord, 721 F.2d 666 (9th Cir. rehearing en banc granted Dec. 6, 1983). Under either standard, we affirm.

PLEDGE OF ASSETS

The Nevada Industrial Insurance Act requires that employers pay to the state insurance fund premiums in the form of advance deposits. ¹ It is undisputed that Reynolds did not contribute to the fund to cover the payment of benefits to employees for work-related radiation injuries and diseases. Reynolds and the United States argue instead that the agreement between the Atomic Energy Commission and the Nevada Industrial Commission satisfied Reynolds' obligation under the Nevada Industrial Insurance Act. Nev.Rev.Stat. Sec. 616.395(3) permits the state industrial insurance system to accept as a substitute for premiums a "bond or pledge of assets." ² The district court held that the agreement between the Atomic Energy Commission and the Nevada Industrial Commission is not a pledge of assets within the meaning of Nev.Rev.Stat. Sec. 616.395(3).

The Nevada Industrial Insurance Act does not define "pledge of assets." Nevada courts have not defined the term. The sparse legislative history provides no guidance. We must therefore look to other sources to determine whether the agreement qualifies as a "pledge of assets."

The Restatement defines a "pledge" as "a security interest in a chattel or in an intangible represented by an indispensable instrument, the interest being created by a bailment for the purpose of securing the payment of a debt or the performance of some other duty." RESTATEMENT OF SECURITY Sec. 1 (1941). The essential elements of a common-law pledge are: 1) the existence of a debt or obligation and 2) the transfer of property to the pledgee, to be held as security and, if necessary, to be used to assure performance of the obligation. See, e.g., Madsen v. Prudential Federal Savings & Loan Ass'n., 558 P.2d 1337, 1339 (Utah 1977). The pledgee takes possession of the pledged property and has a right to retain the property until the debt is satisfied. See Ahlswede v. Schoneveld, 87 Nev. 449, 488 P.2d 908, 910 (1971); Campbell v. Peter, 108 Utah 565, 162 P.2d 754, 755 (1945).

Reynolds and the government argue that the term "pledge" can signify a promise. However, we reject their argument that the Nevada Legislature intended that a promise to reimburse would satisfy the "pledge of assets" requirement of Nev.Rev.Stat. Sec. 616.395(3). That argument conflicts with the well established case law which provides that a pledge requires a transfer of property and possession by the pledgee. See e.g., Lincoln National Bank v. Herber, 604 F.2d 1038, 1040 (7th Cir.1979); Madsen v. Prudential Federal Savings & Loan Ass'n, supra. Additionally, the primary definition of "pledge" is a "bailment or delivery of goods or property by way of security for a debt or engagement, or as security for the performance of an act." BLACK'S LAW DICTIONARY 1038 (5th Ed.1979). Under this definition, a transfer is required; a promise to reimburse is insufficient. The defendants have not presented any evidence to show that this primary definition of "pledge" was not the intended one. See Maine v. Thiboutot, 448 U.S. 1, 4, 8, 100 S.Ct. 2502, 2504, 2506, 65 L.Ed.2d 555 (1980). Finally, the Nevada Industrial Insurance Act itself refers to the "amount and sufficiency of security " that an employer must provide. Nev.Rev.Stat. Sec. 616.395(3) (emphasis supplied). This reference to "security" indicates that an employer is required to provide something more than a mere promise.

The government's promise to reimburse is at best a conditional promise. Article 4.c. of the agreement provides that "all reimbursements to the NIC by the AEC under this Article shall be subject to the availability of appropriations therefor." Thus, the Atomic Energy Commission expressly promised to reimburse the Nevada Industrial Commission only to the extent that money had been appropriated for that purpose.

Moreover, the procedures outlined in the agreement render such reimbursement contingent on several occurrences. The agreement provides that the Atomic Energy Commission will reimburse the Nevada Industrial Commission only if the Atomic Energy Commission agrees that a claimant's award was justified. If it disagrees, the Atomic Energy Commission and the Nevada Industrial Commission may submit the dispute to arbitration. If the arbitrator rules...