Director, Office of Workers Compensation Programs, U.S. Dept. of Labor v. Barnes and Tucker Co.

• Decision Date: 16 July 1992
• Docket Number: 91-3859,Nos. 91-3851,s. 91-3851
• Parties: DIRECTOR, OFFICE OF WORKERS' COMPENSATION PROGRAMS, UNITED STATES DEPARTMENT OF LABOR, Petitioner, v. BARNES AND TUCKER COMPANY, Joseph J. Molnar, Albert J. Novotny, William H. Daisley, Bethenergy Mines Inc., and Donald Smith, Respondents.
• Court: U.S. Court of Appeals — Third Circuit

Page 1524

969 F.2d 1524

DIRECTOR, OFFICE OF WORKERS' COMPENSATION PROGRAMS, UNITED STATES DEPARTMENT OF LABOR, Petitioner, v. BARNES AND TUCKER COMPANY, Joseph J. Molnar, Albert J Novotny, William H. Daisley, Bethenergy Mines Inc., and Donald Smith, Respondents.

Nos. 91-3851, 91-3859.

United States Court of Appeals Third Circuit.

Argued June 19, 1992.

Decided July 16, 1992.

Marshall J. Breger, Sol. of Labor, Donald S. Shire Associate Sol., Michael J. Denney, Counsel for Appellate Litigation, and C. William Mangum (argued), Atty., U.S. Dept. of Labor, Office of the Sol., Washington, D.C., for petitioner.

John J. Bagnato (argued), Spence, Custer, Saylor, Wolfe & Rose, Johnstown, Pa., for respondents Barnes & Tucker Co. and Bethenergy Mines Inc.

Blair V. Pawlowski, Pawlowski, Creany, Tulowitzki, Bilonick & Walter, Ebensburg, Pa., for respondents Joseph J. Molnar and Donald Smith.

Before: GREENBERG and NYGAARD, Circuit Judges, and POLLAK, District Judge. ^*

OPINION OF THE COURT

NYGAARD, Circuit Judge.

We are presented with a conflict between the Director of the Office of Worker's Compensation Programs (Director) and the Benefits Review Board, Department of Labor (Board), over the proper interpretation of 20 C.F.R. § 725.535 (1991). ¹ The regulation was promulgated by the Secretary of Labor pursuant to the Federal Mine Safety and Health Act, 30 U.S.C. §§ 801 to 962. (West 1986 & 1992 Supp.) Section 725.535(d) provides in part that legal fees awarded as part of state pneumoconiosis benefits are to be excluded when determining the extent to which federal Black Lung benefits are offset by state benefits. We conclude that the Director's interpretation of the method of offset under § 725.535 is neither unreasonable nor inconsistent with the regulation. We will therefore grant the petition for review and reverse the Board decisions consolidated for this appeal.

I.

The facts and procedural history of these cases are not disputed. Joseph J. Molnar, Albert J. Novotny, William H. Daisley and Donald Smith (claimants) were coal miners employed in the Commonwealth of Pennsylvania. ² Barnes & Tucker is the designated responsible operator, 30 U.S.C. § 802(d), liable for benefit payments to Molnar, Novotny, Daisley. Bethenergy is the designated responsible operator liable for benefit payments to Smith.

Each claimant was awarded federal black lung benefits in addition to state Black Lung benefits from Pennsylvania. The state referee awarded each claimant a sum certain attributable to legal fees, pursuant to the Pennsylvania Workmen's Compensation Act, 77 P.S.Ann. § 998 (West 1992). In each award, the state referee did not specify the manner in which the claimant would pay his legal fee, that is, the award did not specify whether the fees were to be paid as a percentage of the claimant's weekly state benefits or paid as a lump sum at the beginning or end of the state benefits.

Under the Federal Mine Safety and Health Act, federal Black Lung benefits awarded to a claimant are offset by any federal or state Workmen's Compensation benefits received because of death or disability due to pneumoconiosis. 30 U.S.C. § 932(g). The offset provision was enacted to avoid the duplication of Workman's Compensation benefits by Black Lung benefits. See Coal Mine (BLBA) Procedure Manual, Chapter 2-1403, p 7 (February 1980). In addition, Department of Labor regulations provide that legal expenses incurred in a claimant's state Black Lung claim must be excluded from the calculation of offset. 20 C.F.R. § 725.535(d). Where the state award or a state statute requires a particular method for paying legal fees, or where the claimant and his attorney have agreed to a particular method of payment, the Director will use that method for calculating the exclusion of legal fees from offset. Coal Mine (BLBA) Procedure Manual, Chapter 2-1403, p 11(c). Where no method of payment is provided by statute or agreement, ³ the Director presumes that a claimant will use as much of his initial benefit payments as is necessary to pay his attorney's fee. Id. Thus, federal benefits will not be offset until the claimant's state attorney's fees are paid. This method is known as the "up-front" method. ⁴

Here, the Deputy Commissioner of Labor utilized the up-front method to determine the offset. Barnes & Tucker objected to the offset determinations as to Molnar, Novotny, and Daisley, and appealed from the Deputy Commissioner's award of federal benefits to the Office of Administrative Law Judges. Bethenergy Mines likewise objected to the Deputy Commissioner's offset determination in Smith's case, and also appealed the award of federal benefits to the Office of Administrative Law Judges. The ALJ rejected the Deputy Commissioner's method of determining offset and modified the federal award according to the formula announced by the Benefits Review Board in Scuilli v. Bethlehem Mines Corp., 8 BLR 1-206 (1985). The Director appealed the decisions to the Benefits Review Board. The Benefits Review Board affirmed. The Director petitioned this Court for review of both final orders of the Benefits Review Board and the cases were consolidated for appeal.

II.

Our review of the Benefits Review Board's final order is based on § 422(a) of the Black Lung Benefits Act, 30 U.S.C. § 932(a), which incorporates § 21(c) of the Longshore and Harbor Workers' Compensation Act, 33 U.S.C. § 921(c) (West 1986 & 1992 Supp.). We review the decisions of the Board for error of law and to assure ourselves that it has adhered to the statutory scope of review. Hillibush v. United States Department of Labor, Benefits Review Board, 853 F.2d 197, 202 (3d Cir.1988); Kertesz v. Crescent Hills Coal Co., 788 F.2d 158, 162 (3d Cir.1986). Thus, our review of the Board's legal determinations is plenary. Carozza v. United States Steel Corp., 727 F.2d 74, 77 (3d Cir.1984).

We must, however, defer to an agency's consistent interpretation of its own regulation unless it is "plainly erroneous or inconsistent with the regulation." Director, O.W.C.P. v. Mangifest, 826 F.2d 1318, 1323 (3d Cir.1987), quoting Bowles v. Seminole Rock and Sand Co., 325 U.S. 410, 414, 65 S.Ct. 1215, 1217, 89 L.Ed. 1700 (1945). We owe such deference to the Director, not to the Board, for the Director makes policy under the Black Lung Act. Id. However, we will not defer to an "interpretation" in an adversary proceeding that strains "the plain and natural meaning of words in a standard," Bethlehem Steel Corp. v. O.S.H.A., 573 F.2d 157, 161 (3d Cir.1978), nor will we give deference to an interpretation of a regulation that implies language that does not exist in the regulation. Id.

We are thus faced with a two-fold inquiry. First, we must determine whether the Board's decisions, in Molnar and Smith, which rejected the Director's interpretation of § 725.535(d), were erroneous as a matter of law. Second, we must determine whether the Director's interpretation of 20 C.F.R. § 725.535(d) is plainly erroneous or inconsistent with that regulation.

III.

It is undisputed that neither the Black Lung Benefits Act nor the Department of Labor's regulations expressly set forth a method for determining how attorney's fees are to be apportioned over a state benefit award where there is neither a state statute apportioning such fees nor an agreement between a claimant and his lawyer. So the choice of method to use is a pure policy decision--one that is left to the Director, and not the Board, because the Director is the body within the Department of Labor authorized to make Black Lung policy. Bethlehem Mines Corp. v. Director, O.W.C.P., 766 F.2d 128, 130 (3d Cir.1985) (requiring deference to Director, not to the Board, in construction of regulations). We conclude that the Board erred by supplanting the Director's interpretation of § 725.535(d) with its own.

Our conclusion is initially based, not on the merits of the conflicting interpretations of § 725.535(d) proffered by the Director and the Board, but on the structure of "split-enforcement" agency decisionmaking mandated by Congress under the Black Lung Benefits Act. See generally, Johnson, The Split-Enforcement Model: Some Conclusions from the OSHA and MSHA Experiences, 39 Admin.L.Rev. 315, 317-23 (1987). In Bethlehem Mines Corp. v. Director, O.W.C.P., supra, we said that Congress delegated its rule-making powers under the Act to the Secretary of Labor, who in turn redelegated powers under the Act to the Director. 766 F.2d at 130. The Board, however, is an adjudicatory tribunal, and has no authority to either make rules or formulate policy, and the interpretation it gives to the Act is "not entitled to any special deference from the courts." Potomac Electric Power Co. v. Director, O.W.C.P., 449 U.S. 268, 278 n. 18, 101 S.Ct. 509, 514 n. 18, 66 L.Ed.2d 446. So we generally defer to the Director's interpretation of the regulations unless it is "plainly erroneous or inconsistent with the regulation." Udall v. Tallman, 380 U.S. 1, 16-17, 85 S.Ct. 792, 801-802, 13 L.Ed.2d 616 (1965); But see Bonessa v. United States Steel, 884 F.2d 726, 732 (3d Cir.1989) (where Director takes no position in an adjudication, we will credit the Board's interpretation of a regulation "to the extent that it is relying on an appropriate analysis provided by the Director.").

In its Scuilli decision, the Board had established a method for determining how legal fees are to be excluded from the calculation of offset under 20 C.F.R. § 725.535(d). Under this method, a legal fee is spread evenly over the life of a benefit award, on a monthly basis, subtracting the prorated amount from the monthly benefit, to result in a net state monthly benefit payment. The net state monthly benefit amount is then used to determine offset. The Board reasoned that its decision in Scuilli was dispositive of the three appeals in Molnar because:

in cases where State lump-sum attorney's fees are awarded without any mandate as to the required...