Barscz v. Director, Owcp and Elec. Boat Corp.

• Decision Date: 18 May 2007
• Docket Number: Docket No. 05-6420-AG.
• Parties: Anna BARSCZ (Widow of Charles Barscz), Petitioner, v. DIRECTOR, OFFICE OF WORKERS' COMPENSATION PROGRAMS AND ELECTRIC BOAT CORPORATION, Respondents.
• Court: U.S. Court of Appeals — Second Circuit

486 F.3d 744

Anna BARSCZ (Widow of Charles Barscz), Petitioner, v. DIRECTOR, OFFICE OF WORKERS' COMPENSATION PROGRAMS AND ELECTRIC BOAT CORPORATION, Respondents.

Docket No. 05-6420-AG.

United States Court of Appeals, Second Circuit.

Argued: February 21, 2007.

Decided: May 18, 2007.

Carolyn P. Kelly, O'Brien, Shafner, Stuart, Kelly & Morris, P.C., Groton, CT, for Petitioner.

Peter D. Quay, Murphy and Beane, New London, CT for Respondent Electric Boat Corporation.

Matthew W. Boyle, (Howard M. Radzely, Solicitor of Labor, Allen H. Feldman, Associate Solicitor, Mark A. Reinhalter, Counsel for Longshore on the brief), United States Department of Labor, Washington, D.C. for Respondent Director, Office of Workers' Compensation Programs.

Before KEARSE, JOSÉ CABRANES, and KATZMANN, Circuit Judges.

KATZMANN, Circuit Judge.

This case calls on us in principal part to determine whether the entire amount of a state law settlement covering both disability and death benefits may be credited against an award of death benefits under the Longshore and Harbor Workers' Compensation Act ("Longshoreman's Act" or "Act"), 33 U.S.C. § 901 et seq. For the reasons that follow, we hold that it may not and that only the portion of the settlement funds directed toward state law death benefit claims may be credited. Accordingly we remand to the Benefits Review Board ("Board") for fact-finding regarding the allocation of petitioner's prior state settlement between death benefits and disability benefits. Further, we hold that on remand the burden of proof on the allocation of the state settlement between death and disability benefits lies with the party asserting the credit.

I.

Charles Barscz ("Mr. Barscz") worked at Electric Boat Corporation (a division of General Dynamics Corporation) ("Electric Boat") in New London, Connecticut from 1950 through 1978. During his employment he was regularly exposed to asbestos and in November 1978 he was diagnosed with asbestosis. Mr. Barscz sought compensation for his injuries sustained while working for Electric Boat under both the Longshoreman's Act and under Connecticut workers' compensation laws.

On June 21, 1984, Mr. Barscz and his wife Anna Barscz ("Mrs. Barscz") entered into a settlement agreement ("Settlement") with Electric Boat and three insurance companies resolving all "past, present and future" state law claims relating to injuries suffered by Mr. Barscz during his employment with Electric Boat. The Settlement covered a variety of injuries to Mr. Barscz including: illness associated with exposure to asbestos; shoulder, back and neck injuries; and hearing loss. It also covered possible claims that Mrs. Barscz had or may have had "by virtue of any exposure which [Mr. Barscz] had to harmful irritants including but not limited to asbestos ...."

The insurers agreed to pay "to the claimant" $35,000, of which $5,000 covered the Barsczs' "attorney's fees." Pursuant to the terms of the Settlement, such payment would be accepted

as a full and final settlement for all compensation for said injury, and for all results upon the claimant past, present and future, and for all claims past, present and future medical, surgical, hospital and incidental expenses and all compensation which may be due to anyone in case of the death of the claimant, to the end that the payment of such sum shall constitute a complete satisfaction of all claims due or to become due at any time in favor of anybody on account of the claimed injury, or on account of any condition in any way resulting out of the said injury, or on account of the death of the claimant.

The Settlement was approved by the Compensation Commissioner for the Second Compensation District on June 27, 1984.

Mr. Barscz also sought compensation for his asbestosis under the Longshoreman's Act. In a decision dated December 3, 1984, administrative law judge Chester Shatz ("ALJ Shatz") determined that Mr. Barscz was permanently disabled as of November 24, 1978 and awarded him compensation for permanent total disability from that date forward. ALJ Shatz also determined that Mr. Barscz had suffered from a partial disability since at least 1974, which was when a chest x-ray first revealed to Electric Boat that Mr. Barscz had lung abnormalities including emphysema and pulmonary fibrosis. ALJ Shatz concluded that Electric Boat continued to employ Mr. Barscz despite that partial disability.

Because ALJ Shatz determined that Mr. Barscz had a partial disability when he contracted asbestosis, Electric Boat was able to obtain the benefit of section 8(f) of the Longshoreman's Act. Section 8(f) provides that an employer need only compensate an employee for two years when an employee with an "existing permanent partial disability" sustains a work-related injury that results in a permanent, total disability. 33 U.S.C. § 908(f); see also Sealand Terminals, Inc. v. Gasparic, 7 F.3d 321, 323 (2d Cir.1993) (per curiam). After the employer has compensated the employee for two years, the obligation to compensate the employee shifts to a special fund ("Special Fund") that is administered by the Secretary of Labor ("Secretary"). 33 U.S.C. § 908(f); see also id. § 944 (establishing the Special Fund); Sealand Terminals, 7 F.3d at 323.¹ Thus, ALJ Shatz ordered Electric Boat to compensate Mr. Barscz for 104 weeks; after 104 weeks any "continuing benefits" would be paid by the Special Fund. The order did not mention the Settlement, which had already been approved, but it did provide that "[t]he Employer shall receive a credit for all amounts of compensation previously paid to the Claimant as a result of his pulmonary injury." Despite this statement, Electric Boat paid the entire 104 weeks of compensation without taking a credit for the Settlement. After that time the Special Fund made disability payments to Mr. Barscz until his death in September 1992. The Special Fund did not take any credit for the Settlement.

Following Mr. Barscz's death, Mrs. Barscz sought death benefits under the Longshoreman's Act. In an order dated June 9, 2004 ("June 9 Order"), administrative law judge Colleen A. Geraghty ("ALJ Geraghty") concluded that because Mr. Barscz's "work-related lung disease hastened [his] death," Mrs. Barscz was entitled to death benefits. Further, ALJ Geraghty determined that because the elements of 8(f) had been satisfied and Electric Boat had covered the first 104 weeks of Mr. Barscz's disability claim, the Special Fund was responsible for paying Mrs. Barscz's death benefits.

Electric Boat moved for reconsideration of the June 9 Order, and for the first time, raised the existence of the Settlement. It argued that under section 3(e) of the Act ("Section 3(e)") $30,000 should be credited against the Special Fund's liability to Mrs. Barscz for death benefits. Section 3(e) provides that "[n]otwithstanding any other provision of law, any amounts paid to an employee for the same injury, disability, or death for which benefits are claimed under this chapter pursuant to any other workers' compensation law or [the Jones Act] shall be credited against any liability imposed by this chapter." 33 U.S.C. § 903(e).

ALJ Geraghty granted the motion and modified her original order to reflect a credit for the entire amount of the Settlement. She acknowledged that disability and death benefits are separate claims under the Act but noted that Mrs. Barscz had signed the Settlement, which specifically mentioned death benefits and concluded that "[u]nder these circumstances, it is appropriate to permit a credit against the death and survivor benefits due under the Act for the amounts received in settlement of the State claim for death or survivor benefits." Turning to the question of what portion of the Settlement to credit against the death benefits, ALJ Geraghty concluded that under prior Board decisions, because the Settlement resolved multiple claims and the record did not establish how the settlement funds were to be apportioned the "employers and the Special Fund are entitled to offset the entire amount paid to the parties under the State settlement." While conceding that this was a "harsh" result, she noted that claimants were in the best position "to ensure that the settlement agreement specifically apportions the amounts paid in settlement among the various claims."

The Director of the Office of Workers' Compensation Programs ("Director") appealed the ALJ's decision to the Board.² Because any death benefits would be paid by the Special Fund, the Director was an interested party in both Mrs. Barscz's original claim for death benefits and in Electric Boat's motion for reconsideration, but had not appeared in either proceeding. On appeal, the Director argued that the burden of proving the apportionment of the Settlement should have been placed on Electric Boat, not Mrs. Barscz, and that placing the burden on Mrs. Barscz was inconsistent with the Supreme Court's holding in Director, OWCP v. Greenwich Collieries, 512 U.S. 267, 114 S.Ct. 2251, 129 L.Ed.2d 221 (1994), that under the Administrative Procedure Act ("APA") a proponent of a rule or order bears the burden of proof.

In a decision and order dated September 29, 2005, a two-member majority of the Board affirmed ALJ Geraghty's decision. The Board focused its analysis on the language of Section 3(e), which the Board read to provide that an amount paid to an employee for a state claim "offsets any liability the employer has under the [Longshoreman's] Act that is related to that same injury, disability or death." (emphasis in original). Based on that language, which it viewed as "quite expansive," the Board held that "in the absence of specific evidence of the apportionment of a state settlement ... [the] employer is entitled to a credit for the amount of the state benefits paid." The Board's decision did not address the question of the burden of proof.

One member of the Board dissented. The dissent emphasized that Section 3(e)...