Atkinson v. Gates, McDonald & Co.

• Decision Date: 04 March 1988
• Docket Number: No. 87-4621,87-4621
• Citation: Atkinson v. Gates, McDonald & Co., 838 F.2d 808 (5th Cir. 1988)
• Parties: Billie J. ATKINSON, Plaintiff-Appellant, v. GATES, McDONALD & COMPANY, Defendant-Appellee. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 808

838 F.2d 808

90 A.L.R.Fed. 709

Billie J. ATKINSON, Plaintiff-Appellant, v. GATES, McDONALD & COMPANY, Defendant-Appellee.

No. 87-4621

Summary Calendar.

United States Court of Appeals Fifth Circuit.

March 4, 1988.

Rehearing and Rehearing En Banc Denied March 31, 1988.

Joe Clay Hamilton, David H. Linder, Meridian, Miss., for plaintiff-appellant.

Robert J. Kent, McCutchan, Schmidt & Druen, Columbus, Ohio, T. Kenneth Watts, Eppes, Watts & Shannon, Meridian, Miss., for defendant-appellee.

Appeal from the United States District Court for the Southern District of Mississippi.

Before GEE, GARWOOD, and JONES, Circuit Judges.

GARWOOD, Circuit Judge:

Plaintiff-Appellant Billie J. Atkinson (Atkinson) brought this diversity action seeking damages from defendant-appellee Gates, McDonald & Company (Gates, McDonald) for its alleged bad faith in terminating compensation benefits due Atkinson under the Longshoremen and Harbor Workers' Compensation Act (LHWCA), 33 U.S.C. Sec. 901 et seq., on account of an injury she sustained on May 20, 1980 in the course of her employment with the Navy Resale Services Support Office (NAVRESSO). The latter is a nonappropriated fund activity which is an instrumentality of the United States. Its liability for compensation for work-related injury of its employees is governed by the Nonappropriated Fund Instrumentalities Act, 5 U.S.C. Sec. 8171 et seq., which extends the coverage of the LHWCA to employees of nonappropriated fund instrumentalities. Id. at Secs. 8171(a) & (b). NAVRESSO was a self-insurer for compensation purposes and maintained a fund to pay compensation benefits to its employees. Gates, McDonald contracted with NAVRESSO to administer that fund, including processing, investigating, and settling workers' compensation claims of NAVRESSO employees, and paying compensation benefits to such employees on NAVRESSO's behalf from the NAVRESSO fund.

Gates, McDonald paid Atkinson LHWCA disability compensation benefits, and most but not all of her medical expenses, from the date of her injury through May 31, 1984, when it terminated all payments, allegedly without notification to Atkinson. After numerous but unsuccessful attempts to determine the reason for the discontinuance of benefits, Atkinson in March 1985 filed an employee's claim for compensation with the United States Department of Labor, as provided for under the LHWCA, and shortly thereafter Gates, McDonald was notified of the claim. Gates, McDonald at no time notified the Department of Labor of the suspension of compensation payments, nor did it ever file a controversion of Atkinson's entitlement to compensation, as required under the LHWCA. 33 U.S.C. Secs. 914(a), (c), & (d). Ultimately, in January 1986, the Department of Labor ordered that Atkinson's disability benefits be reinstated and instructed NAVRESSO to bring her benefits up to date and to pay Atkinson a ten percent penalty thereon together with her attorneys' fees, as provided in the LHWCA. 33 U.S.C. Secs. 914 (e) & 928. Gates, McDonald, with NAVRESSO funds, thereupon paid Atkinson all her back benefits, the ten percent penalty, and her attorneys' fees, and it reinstated and continued to timely pay her compensation benefits.

After her LHWCA compensation benefits were thus resumed, and Atkinson was paid the past due benefits, penalty, and attorneys' fees, she brought the present diversity action against Gates, McDonald. In her final amended complaint, Atkinson alleged that Gates, McDonald, "arbitrarily, callously, intentionally, capriciously, wrongfully, unreasonably, in bad faith, without any reasonably legitimate or reasonably arguable reason," did not make any disability or medical payments to Atkinson from March 31, 1984 to January 22, 1986, as well as failing prior to March 31, 1984 to pay certain medical expenses, "although the Plaintiff was clearly entitled to" all such payments. Atkinson also alleged that Gates, McDonald in so acting "willfully, intentionally, wrongfully and in bad faith used the fact of unequal wealth and bargaining position of the parties to effect economic gain for itself" and "intentionally caused the Plaintiff to suffer anxiety, worry, mental and emotional distress and other incidental damages." Atkinson sought one million dollars in compensatory damages and five million dollars in punitive damages. Following discovery, Gates, McDonald filed a motion to dismiss under Fed.R.Civ.P. 12(b)(6) and for summary judgment, which the district court granted, dismissing Atkinson's claims with prejudice.

Atkinson brings this appeal, and we affirm, being essentially in agreement with the district court's well-reasoned opinion. Atkinson v. Gates, McDonald & Co., 665 F.Supp. 516 (S.D.Miss.1987).

As the district court correctly noted, Atkinson "is asserting what are in essence state law claims for bad faith intentional infliction of emotional distress" in terminating and refusing to pay compensation benefits and medical expenses which Atkinson was entitled to under the LHWCA. Id. at 519-20. The district court held, and we agree, "that the exclusivity provisions of both the Nonappropriated Fund Instrumentalities Act ¹ and the LHWCA, ² coupled with the penalty provision of section 914(e) of the LHWCA, ³ operate to bar Atkinson's claims." Id. at 519 (footnotes supplied). In essence, then, Atkinson's state law claims are preempted by the Unappropriated Fund Instrumentalities Act and the LHWCA, which provide the exclusive remedy for the nonpayment of compensation benefits due thereunder.

Other sections of the LHWCA, in addition to sections 5 and 14(e), reinforce this conclusion. Section 14(a) provides that compensation "shall be paid ... promptly ... without an award, except where liability to pay compensation is controverted by the employer." (Emphasis added.) Section 14(b) requires compensation to be paid on the fourteenth day after the employer has notice of the injury, and thereafter semimonthly. Section 14(c) requires the employer to give notice to the deputy commissioner when making the first payment of compensation "and upon suspension of payment for any cause," while section 14(g) requires notice to the deputy commissioner within sixteen days after the final payment of compensation is made and provides for a one hundred dollar civil penalty against the employer if such notice is not timely given. Section 14(d) requires the employer, if it "controverts the right to compensation," to file with the deputy commissioner, within fourteen days after knowledge of the alleged injury, a notice of controversion. As noted, section 14(e) calls for a ten percent penalty when pre-award benefits are not timely paid, unless notice of controversion has been filed (see note 3, supra ). Subsection (f) provides for a twenty percent penalty on any compensation payable under the terms of an award that is not paid within ten days after it becomes due, unless the award has been appealed and a stay order entered. 33 U.S.C. Sec. 914. Further, section 28 of the LHWCA provides for an award of attorneys' fees and certain expenses to the successful claimant where entitlement to compensation has been disputed. 33 U.S.C. Sec. 928. ⁴

Thus, the scheme of the LHWCA is that the employer is absolutely required to pay compensation promptly on notice of injury and in the absence of a timely written controversion. Failure to do so incurs the ten percent penalty of section 14(e), unless the employer shows that "owing to conditions over which he had no control such installment could not be paid" timely. Similarly, however, the Act gives the employer the absolute, unfettered right to timely controvert the entitlement to compensation, in which event no compensation is owing, under the express terms of section 14(a), and no penalty is owing, under the express terms of section 14(e), unless and until an award is made by the deputy commissioner. In that event, compensation is due within ten days of the award, and failure to timely pay the award, unless it is stayed pursuant to an appeal, results in the twenty percent penalty of section 14(f). We have held that this penalty "does not admit to an exception for late payment for equitable reasons." Lauzon v. Strachan Shipping Co., 782 F.2d 1217, 1222 (5th Cir.1985). Moreover, where a plaintiff secures payment of compensation by an award, attorneys' fees and certain expenses may also be adjudged in his favor. 33 U.S.C. Sec. 928.

In 1984, Congress enacted further amendments to the LHWCA, including a new provision making it a criminal offense for an employer, its agent, or an employee of an insurance carrier, to knowingly and willfully make a false statement or misrepresentation for the purpose of reducing, denying, or terminating compensation benefits. 33 U.S.C. Sec. 931(c). The legislation which became the 1984 amendments to the LHWCA was the product of several years of congressional consideration. During this period of time, organized labor took the position that employers all too often arbitrarily refused to pay compensation resulting in "cases of members virtually having been forced to accept settlements far below their proper entitlements" under the LHWCA, as "the injured worker in need of immediate care and income protection is in a far more vulnerable position than his employer or longshore insurance carrier." See generally, Longshoremen's and Harbor Workers' Compensation Act Amendments of 1981: Hearings on S. 1182 Before the Subcommittee on Labor of the Senate Committee on Labor and Human Resources, 97th Cong., 1st Sess. 433, 516-23, 545 (1981). Congress, however, did not enact any legislation to modify the employer's absolute, unfettered right under the LHWCA to controvert compensation claims, nor did it change the penalty structure of section 14 of the LWHCA; rather, it confined its actions in respect to these concerns to enacting the new above-referenced section 31(c) and increasing the penalties provided in section 38 (...