Chouest v. A & P Boat Rentals, Inc.

• Decision Date: 24 January 1973
• Docket Number: No. 71-1696.,71-1696.
• Citation: 472 F.2d 1026
• Parties: Cleveland CHOUEST, Plaintiff-Appellant, v. A & P BOAT RENTALS, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

472 F.2d 1026 (1973)

Cleveland CHOUEST, Plaintiff-Appellant, v. A & P BOAT RENTALS, INC., et al., Defendants-Appellees.

No. 71-1696.

United States Court of Appeals, Fifth Circuit.

January 24, 1973.

James A. Wysocki, New Orleans, La., for plaintiff-appellant.

Fred E. Salley, Robert B. Acomb, Jr., Maurice C. Hebert, Jr., New Orleans, La., for defendants-appellees.

Royston, Rayzor, Cook & Vickery, E. D. Vickery, Houston, Tex., amicus curiae.

Before WISDOM, COLEMAN and SIMPSON, Circuit Judges.

WISDOM, Circuit Judge:

This case presents an intricate problem in the allocation of the recovery in an action brought by an injured longshoreman against a shipowner under the Longshoremen's and Harbor Workers' Compensation Act (LHCA), 33 U.S.C. § 901 et seq. Because of the difficulty of the questions involved, we granted a rehearing to permit both sides to explore the issues in more depth. Having held the rehearing, we adhere to our original decision reversing the judgment of the district court. For the purpose of clarifying the relationship of this case to Strachan Shipping Co. v. Melvin, 5 Cir. 1964, 327 F.2d 83, and Haynes v. Rederi A/S Aladdin, 5 Cir. 1966, 362 F.2d 345, we withdraw our decision in this cause dated April 10, 1972 and issue the following opinion.

I.

Cleveland Chouest, a longshoreman, was injured while swinging from the crewboat CARDINAL to an offshore platform. A & P Boat Rentals, the defendant, owned the CARDINAL. Travelers Insurance Company, the compensation insurer of Chouest's employer, Buras Contractors, Inc., paid Chouest $4610.61 for medical expenses and compensation on Buras's behalf in fulfillment of Buras's responsibilities under the LHCA. Chouest then hired an attorney to sue A & P as a third party tortfeasor. Travelers intervened in Chouest's suit in an effort to recover the amount of the payments it had advanced Chouest before he brought the action against A. & P. A. & P, the ship-owner, in turn joined Buras, the stevedore, as a third party defendant, seeking to hold Buras liable as indemnitor for any judgment he might have against A & P. Because Travelers was the liability insurer for Buras as well as its compensation carrier, Travelers was obligated to provide a defense for Buras to the third party complaint of A & P. Travelers retained one lawyer to represent both of its positions in its lawsuit: (1) its intervention claim for a portion of the proceeds of Chouest's recovery as well as (2) its defense to any liability for Chouest's injuries should Buras be cast as the indemnitor of A & P.

As might be expected, Travelers found itself with conflicting interests in the litigation. The success of its intervention for recoupment of compensation payments depended upon a recovery by Chouest against A & P. Yet its potential liability as insurer of Buras required Travelers to assert certain defenses contrary to Chouest's theory of recovery. As a consequence, the cross-examination of Chouest tended to limit the quantity of recovery and to suggest that Chouest himself was negligent. In addition, Travelers' lawyer cross-examined Chouest in an effort to show that the difficulties Chouest had experienced with his knee were in part the result of a condition pre-existing the injury in litigation.¹ In the end, damages were limited compatibly with that theory of pre-existing injury.

The sole issue for review today is whether the district court properly denied the claim of Chouest's lawyer that his fee be deducted from Chouest's gross recovery before Travelers, as intervenor, recouped its compensation payments to Chouest.² Chouest's lawyer contends that Travelers benefitted from his attorneyship because he created the fund out of which Travelers was paid for its compensation advances to Chouest. Specifically, Chouest's lawyer stresses the adverse role played by Travelers' lawyer at the trial, and insists that it would be unfair not to charge Travelers for the services of Chouest's attorney when Travelers not only did nothing to assist in the recovery by Chouest, but also took steps detrimental to Chouest's cause.

To these contentions Travelers has three responses. First, Travelers argues that its attorney did in fact assist Chouest. Second, Travelers points to an oral pre-trial stipulation which arguably guaranteed it reimbursement for the full amount of its advances to Chouest.³ Travelers explains that this stipulation led it to believe it was free to devote all its efforts to defending the third party complaint against Buras — indeed, that it was free to fire away at Chouest's case against A & P without threat to its right to full reimbursement. The district court explicitly held that Chouest had entered into the stipulation in error. Moreover, there is no reason why Chouest's attorney should have agreed to permit Travelers to recoup its compensation payments in full regardless of the behavior of Travelers's lawyer at trial. Chouest would have nothing to gain, and everything to lose, from such a stipulation. In these circumstances, the proper interpretation of the ambiguous stipulation was that attached to it by the district court: the parties merely agreed that the amount of the medical and compensation payments to Chouest was not in dispute, as a means of avoiding the tedious business of putting on witnesses as to evidence of the uncontroverted amounts.

Even if the stipulation be of no effect in warding off Chouest's lawyer's claim for reimbursement, Travelers argues as a matter of law that it should recoup the full amount of its compensation payments, regardless of the position it took at trial. The district court apparently considered that our decision in Haynes v. Rederi A/S Aladdin, 5 Cir. 1966, 362 F.2d 345, prevented reimbursement of a longshoreman's lawyer whenever the employer-intervenor employs its own counsel to protect its position at trial — regardless whether protecting the employer's position has a positive or negative impact on the longshoreman's chances for recovery against the shipowner. The district court awarded Travelers full reimbursement for compensation advances to Chouest and allowed Chouest's lawyer no reimbursement for creation of the recovery against A & P. As we shall explain, the district court read Haynes too broadly.

II.

Section 933 of the LHCA explicitly provides for actions by employers of injured longshoreman against third parties who may be liable in damages.⁴ Section 933(e) sets forth the distribution of the proceeds of any recovery by the employer in a third party action. The employer retains a) his litigation expenses including a reasonable attorney's fee; b) medical expenses and compensation payments made to the employee as well as the present value of these payable in the future; and c) an incentive bonus of 20% of any amount remaining after deduction of litigation expenses, compensation payments, and medical payments. The statute at the same time preserves the longshoreman's right to sue third parties responsible for his injuries, in the hopes of obtaining a recovery higher than the amount of the compensation payments to which he is entitled by the LHCA. Seas Shipping Co. v. Sieracki, 1946, 329 U.S. 85, 101, 66 S.Ct. 872, 90 L.Ed. 1099; Corrado v. Pennsylvania R. Co., 2 Cir.1948, 171 F.2d 73, 75. Unfortunately, there is no legislation establishing a distribution of the longshoreman's recovery in actions which he initiates, as § 933(c) establishes distribution of the employer's recovery against third parties. This casts upon the federal courts the burden of distributing the amount of the longshoreman's recovery.

Twice before today, this Court has considered the proper allocation between a longshoreman and employer-intervenor (compensation carrier) of the proceeds of a longshoreman's recovery against a negligent shipowner, in a situation where the proceeds of the recovery were insufficient to provide both full reimbursement for the employer's compensation payments and the attorney's fee of the longshoreman's lawyer. In Strachan Shipping Co. v. Melvin, 5 Cir.1964, 327 F.2d 83, the longshoreman's gross recovery in his third party action ($30,000) exceeded the compensation and medical payments by his employer ($27,836.92). The question presented was whether Melvin's attorney would be permitted to collect his 40% contingent fee out of the $30,000 gross recovery before the employer was reimbursed for his advances to the longshoreman. We affirmed the district court's decision to allow Melvin's attorney a $12,000 fee, plus $588.88 in expenses, before the employer was reimbursed for his advances to Melvin. In our decision in Melvin we stressed "the age-old equitable principle that one who accomplishes the creation of a fund for the benefit of another is entitled to reimbursement therefrom for the reasonable costs thereby incurred."⁵ Melvin, supra, 327 F.2d at 85, quoting Voris v. Gulf-Tide Stevedores, 5 Cir. 1954, 211 F.2d 549, 551.

Our later decision in Haynes v. Rederi A/S Aladdin, 5 Cir. 1966, 362 F.2d 345, is consistent with Melvin's principle of equitable reallocation, even though it placed limits on the Melvin decision. In Haynes, we again had before us an employee's third party action which resulted in a recovery greater than the compensation owed but less than sufficient to pay both the employee's attorney fees and the employer's compensation advances to the employee. There we held that the lower court was correct in refusing to allow the employee's attorney to deduct his fee before the compensation insurer was reimbursed out of the gross recovery. In Haynes, unlike Melvin, the employer's compensation insurer engaged its own attorney who "actively asserted" the compensation insurer's rights as intervenor. The compensation insurer stood along side, and waged war in aid of the injured longshoreman. The compensation insurer's "own counsel were responsible, at least in part, for the reimbursement allowed it." 362 F.2d at 351. Distinguishing Melv...