Schmit v. ITT Federal Elec. Intern.
| Decision Date | 22 March 1993 |
| Docket Number | No. 92-1211,92-1211 |
| Parties | William K. SCHMIT, Plaintiff-Appellee, and Office of Workers' Compensation Programs, United States Department of Labor, Intervening-Appellee, v. ITT FEDERAL ELECTRIC INTERNATIONAL; Pacific Employers Insurance Company, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Seventh Circuit |
William K. Schmit, pro se.
Gregory P. Sujack (argued), David F. Buysse, Garofalo, Hanson, Schreiber & Vandlik, Chicago, IL, for defendants-appellants.
Eileen M. McCarthy, Dept. of Labor, Appellate Litigation, Donald S. Shire, Sol. Gen., Joshua T. Gillelan, II (argued), Marianne Demetral Smith, Office of the Sol., Louis W. Rogers, Office of Workers' Compensation Program, Washington, DC, for intervening-appellee.
Before FLAUM and EASTERBROOK, Circuit Judges, and WOOD, Jr., Senior Circuit Judge.
An employer seeking to avoid payment of a compensation award attacks the constitutionality of the Longshore and Harbor Workers' Compensation Act. For the following reasons we affirm the district court's order directing payment of the award.
Not often do our cases originate in Greenland, but it was there in 1981 that William Schmit suffered a work-related injury to his neck and arms. At the time, Schmit was employed as a power plant specialist by ITT Federal Electric International ("Federal Electric") at the United States Air Force Base in Thule. Schmit filed a claim for compensation under the Defense Base Act, 42 U.S.C. §§ 1651-1654. The Defense Base Act generally entitles employees at overseas military bases to benefits of the Longshore and Harbor Workers' Compensation Act, 33 U.S.C. §§ 901-950 ("Act").
Pursuant to the Act, an Administrative Law Judge ("ALJ") held a formal hearing in Chicago on October 19, 1989. At the hearing the parties were given an opportunity to present evidence. On May 14, 1990, the ALJ issued his decision and order finding Schmit entitled to compensation under 33 U.S.C. § 908(c)(1). Federal Electric appealed that decision to the Benefits Review Board ("Board"); the company also requested a stay of the payment of the compensation award during the pendency of the Board's review proceedings.
On June 8, 1990, the Board ruled Federal Electric failed to demonstrate irreparable injury would result from paying the award and therefore denied the stay. Despite this, Federal Electric refused to pay the award. Schmit then applied to the Office of Workers' Compensation Programs ("OWCP") district director for a supplementary order. Under 33 U.S.C. § 918(a), if an employer fails to pay a compensation award within thirty days, the employee may apply to the district director for a supplementary order declaring the award in default.
The district director conducted an investigation into Schmit's application and notified Federal Electric and its insurance company of the proceedings. There was no response to the notice and on April 1, 1991, the director entered a supplementary compensation order finding the compensation due Schmit to be in default. The order declared that Federal Electric owed Schmit a total of $134,079.53; this sum represented $87,836.96 compensation, $28,675.18 interest, and an additional $17,567.39. This additional amount was ordered pursuant to 33 U.S.C. § 914(f), which provides that when an employer fails to pay an award "within ten days after it becomes due," that employer is also liable for an additional amount equal to twenty percent of the compensation award.
Federal Electric refused to comply with the supplementary compensation order. On June 14, 1991, Schmit filed a certified copy of that order in district court. Pursuant to 33 U.S.C. § 918(a), the district court entered a judgment by default on October 10, 1991.
Federal Electric then filed a motion for rehearing, relief from judgment, and for a stay on October 21, 1991. Schmit opposed that motion, and the Director, OWCP, moved to intervene in support of the compensation orders. At a November 14, 1991, hearing, the court allowed the Director's intervention. At a second hearing, on December 19, 1991, the court vacated its "judgment by default" against Federal Electric but entered a new judgment against the company pursuant to 33 U.S.C. § 918(a).
Federal Electric again filed a motion for rehearing, relief from judgment, and for a stay. The company also moved to vacate the writ of execution that had been entered on the court's October 10, 1991, default judgment. At a third hearing on December 26, 1991, the court granted Federal Electric's motion to vacate the writ of execution but denied all other relief. The next day the court filed a memorandum opinion setting forth its reasoning and enforcing the district director's supplementary compensation order. Schmit v. Federal Elec. Int'l, 780 F.Supp. 1213 (N.D.Ill.1991).
On January 24, 1992, Federal Electric filed a timely notice of appeal with this court pursuant to 28 U.S.C. § 1291.
The question of whether Schmit actually suffered a work-related injury and is entitled to workers' compensation is not before us. Instead, Federal Electric alleges the district court erred in its application of 33 U.S.C. § 918(a), maintains that the statute violates the company's due process rights, and complains that section 918(a) violates Article III of the Constitution.
If an injured employee has trouble collecting his workers' compensation award, his recourse is to seek the help of an OWCP district director. Pursuant to 33 U.S.C. § 918(a), the employer has thirty days to pay the award; if the employer refuses, the worker may "make application to the [district director] making the compensation order [f]or a supplementary order declaring the amount of the default." Before issuing the order, the director must conduct an investigation, give notice to the employer, and provide for a hearing. Id.
Once the supplementary order is issued, the worker may file a certified copy of the order with the clerk of the appropriate federal district court. After determining the order complies with the Act, but without holding an adversarial hearing, the court then enters judgment for the worker:
Such supplementary order of the [district director] shall be final, and the court shall upon the filing of the copy enter judgment for the amount declared in default by the supplementary order if such supplementary order is in accordance with law. Review of the judgment so entered may be had as in civil suits for damages at common law.
33 U.S.C. § 918(a). As noted above, the statute provides for review of the district court's decision by this court.
As recounted in the previous section, the district director and the district court followed the steps outlined in the statute. After issuing a default judgment for Plaintiff on October 10, 1991, the district court later vacated that judgment. The court reasoned that default judgment was not warranted since the Defendant had never been served a complaint nor given notice or a summons. In other words, the Defendant "did not fail an obligation of the federal rules" and therefore default judgment under Federal Rule of Civil Procedure 55 "was improper." Schmit v. Federal Elec. Int'l, 780 F.Supp. 1213, 1216 (N.D.Ill.1991).
The court then conducted a hearing with both sides represented and concluded Schmit was entitled to judgment pursuant to 33 U.S.C. § 918(a). The court did so after stating that its review of supplementary orders was limited to determining whether the order was entered "in accordance with the law." Id. In other words, the court examined the order to ensure it was issued according to 33 U.S.C. § 918(a). The court based its standard of review on Abbott v. Louisiana Insurance Guaranty Ass'n, 889 F.2d 626 (5th Cir.1989), cert. denied, 494 U.S. 1082, 110 S.Ct. 1813, 108 L.Ed.2d 944 (1990).
In Abbott, the Fifth Circuit said, "[T]he district court's scope of review in section 18(a) enforcement proceedings is limited to the lawfulness of the supplemental orders of default and does not include the procedural or substantive correctness of the underlying compensation orders." Id. at 630; c.f. Severin v. Exxon Corp., 910 F.2d 286, 290 (5th Cir.1990) (). Despite Abbott 's unambiguous language, Federal Electric argues the district court misconstrued the case and unnecessarily limited its scope of review. Federal Electric asserts the district court should have reached its arguments concerning the constitutionality of section 918(a).
We disagree with both contentions. First, the district court accurately interpreted Abbott. Second, we agree with the Fifth Circuit as to the district court's proper role in reviewing a supplementary order. The Longshore and Harbor Workers' Compensation Act is "a compromise between the competing interests of disabled laborers and their employers." Potomac Elec. Power Co. v. Director, Office of Workers' Compensation Programs, 449 U.S. 268, 282, 101 S.Ct. 509, 516, 66 L.Ed.2d 446 (1980). Injured employees give up the ability to recover their full damages in return for "a prompt and certain recovery" of some damages; employers lose common-law defenses but gain "definite and lower limits on potential liability than would have been applicable in common-law tort actions for damages." Id. at 281-82, 101 S.Ct. at 516.
To effectuate the employees' interest, Congress enacted 33 U.S.C. § 918(a). This section "was intended to provide a 'quick and inexpensive mechanism for the prompt enforcement of unpaid compensation awards, a theme central to the spirit, intent, and purposes of the LHWCA.' " Abbott, 889 F.2d at 629 (quoting Tidelands Marine Serv. v. Patterson, 719 F.2d 126, 129 (5th Cir.1983)); accord Providence Washington Ins. Co. v. Director, Office of Workers' Compensation Programs, 765...
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