Director, Office of Workers' Compensation Programs, U.S. Dept. of Labor v. Ingalls Shipbuilding, Inc.

• Decision Date: 21 October 1997
• Docket Number: No. 96-60770,96-60770
• Parties: DIRECTOR, OFFICE OF WORKERS' COMPENSATION PROGRAMS, UNITED STATES DEPARTMENT OF LABOR, Petitioner, v. INGALLS SHIPBUILDING, INC., and Hollis Ladner, Respondents. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 303

125 F.3d 303

1998 A.M.C. 527

DIRECTOR, OFFICE OF WORKERS' COMPENSATION PROGRAMS, UNITED STATES DEPARTMENT OF LABOR, Petitioner, v. INGALLS SHIPBUILDING, INC. and Hollis Ladner, Respondents.

No. 96-60770

Summary Calendar.

United States Court of Appeals Fifth Circuit.

Oct. 21, 1997.

Mark Ambrose Reinhalter, Office of the Solicitor of Labor, Carol DeDeo, Assoc. Solicitor, U.S. Department of Labor, Dir., Office of Workers Comp. Programs, Washington, DC, Thomas O. Shepherd, Jr., Clerk, Benefits Review Board, Washington, DC, for Petitioner.

Richard P. Salloum, Paul B. Howell, Franke, Rainey & Salloum, Gulfport, MS, for Ingalls Shipbuilding, Inc., Respondent.

Timothy Dale Crawley, Hopkins, Dodson, Crawley, Bagwell, Upshaw & Persons, Gulfport, MS, for Hollis Ladner, Respondent.

Petition for Review of an Order of the Benefits Review Board.

Before JOLLY, SMITH and STEWART, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

The Director of the Office of Workers' Compensation Programs ("OWCP"), United States Department of Labor ("Director"), petitions for review of an order of the Benefits Review Board ("BRB") granting Ingalls Shipbuilding, Inc. ("Ingalls"), special fund contribution for a worker's pre-existing disability. Concluding that Ingalls failed to meet its evidentiary burden, we grant the petition for review and reverse and remand.

I.

Hollis Ladner worked for Ingalls in various capacities starting in 1986. As a sheet metal worker, he was injured in January 1987 when a jackhammer fell on his toe. William Hopper, Ladner's physician, treated him. After several months of being unable to work, Ladner returned to the shipyard, only to discover that Ingalls was discharging him because it required fewer sheet metal workers, and Ladner lacked seniority.

At Ladner's request, Ingalls found him another position as a joiner. In this position, Ladner injured his left knee in September 1987 when he fell down a ladder while working on a ship and injured his left knee. Again, he was treated by Hopper and his assistant. After the fall from the ladder, Ladner complained to Hopper about his prior toe injury, and Hopper prescribed therapy. Thereafter, Ladner had to undergo back surgery to repair two ruptured discs, apparently the result of his fall.

II.

For his inability to work, Ladner claimed workers' compensation under the Longshore and Harbor Workers' Compensation Act ("LHWCA"), 33 U.S.C. § 901 et seq. Ingalls unsuccessfully contested the claim before an administrative law judge ("ALJ"), who awarded Ingalls contribution from the LHWCA's special fund for part of its compensation payments. See 33 U.S.C. §§ 908(f), 944. ¹

The Director appealed the ALJ's contribution finding to the BRB, which failed to act within the statutory period. See Omnibus Appropriations Act for Fiscal Year 1996, Pub.L. No. 104-134, 110 Stat. 1321. As a result, the ALJ's decision was summarily affirmed. See id. The Director now petitions for review of that affirmance pursuant to 33 U.S.C. § 921(c). ²

III.

In petitions for review of a BRB order, we evaluate the ALJ's factual findings under a substantial evidence standard. See, e.g., Ceres Marine Terminal v. Director, OWCP, 118 F.3d 387, 389 (5th Cir.1997). Substantial evidence is that relevant evidence--more than a scintilla but less than a preponderance--that would cause a reasonable person to accept the fact finding. See, e.g., Polanco v. City of Austin, 78 F.3d 968, 974 (5th Cir.1996). Because the fact finder is entitled to deference, a reviewing body cannot substitute its own view of the facts for that of the ALJ. See Ceres, 118 F.3d at 389. Thus, our "only function is to correct errors of law and to determine if the BRB ... deferred to the ALJ's fact-finding...." Avondale Shipyards, Inc. v. Vinson, 623 F.2d 1117, 1119 n. 1 (5th Cir.1980); accord Ceres, 118 F.3d at 389. Because the BRB failed to act in this case, we look directly to the ALJ proceedings.

IV.

Generally, the employer is liable under the LHWCA for an employee's entire disability upon injury, regardless of the effect that prior injuries have on the level of the resulting disability. See Strachan Shipping Co. v. Nash, 782 F.2d 513, 517 (5th Cir.1986) (en banc). Essentially, this "aggravation rule" mimics the common law: A tortfeasor takes his victim as he finds him. See, e.g., Vosburg v. Putney, 80 Wis. 523, 50 N.W. 403, 404 (1891).

Standing alone, the aggravation rule creates a perverse incentive: It discourages employers from hiring workers who have been previously injured. See, e.g., Ceres, 118 F.3d at 389. Risk averse employers rationally fear the expected costs of hiring a worker with a prior injury. ³ Thus, all things otherwise equal, employers will prefer an employee without a prior injury.

To overcome this incentive to discriminate, Congress, in the LHWCA, provided for a special fund. ⁴ See 33 U.S.C. §§ 908(f), 944. The LHWCA provides that any employer that meets the factors of § 908(f)(1) can obtain contribution from the special fund. To qualify, the employer must prove that (1) the employee had a pre-existing permanent partial disability (2) that was "manifest" to the employer before the occurrence of the injury at issue, and (3) the disability following the subsequent injury was "not due solely" to the subsequent injury. See id. § 908(f)(1); Ceres, 118 F.3d at 389-90. Whether the third factor has been met is at issue in this case.

The countervailing worry, as with any insurance system, is that those entitled to benefit from the special fund will face a moral hazard problem. Because they pay only a fraction of the costs, employers will rationally "over-demand" benefits from the special fund. ⁵

In the LHWCA, Congress has attempted to control employers' incentives to use small, insignificant prior injuries to pass off, to the fund, costs that the employer should bear. Because this risk is especially large in permanent, partial disability cases, the LHWCA adds an additional component to the third statutory factor: The employer also must show that the disability following the subsequent injury was "materially and substantially greater than that which would have resulted from the subsequent injury alone." 33 U.S.C. § 908(f)(1). The Director claims that the ALJ applied the two parts of this third statutory factor incorrectly.

A.

The Director contends that the ALJ failed to find that the permanent partial disability resulting from Ladner's fall from the ladder was "not due solely" to his fall. The ALJ found that Ladner's permanent partial disability after his fall was increased because of his prior toe injury. The Director, however, maintains that in order to meet the "not due solely" requirement, the ALJ had to find the converse as well: that without the prior toe injury, the subsequent permanent partial disability would not have been as great as it was.

The Director confuses the standards necessary to show "not due solely" to the subsequent injury in partial and total permanent disability cases. In a total disability case, the employee could be "more injured" as a result of the subsequent injury without necessarily entitling his employer to relief from the special fund. For example, the worker could be thirty-five percent permanently disabled from his prior injury but still one hundred percent permanently disabled from his subsequent injury. Thus, in order to meet the "not due solely" requirement, the employer would have to prove that without the prior injury, the worker would not now be totally permanently disabled. See Two "R" Drilling Co. v. Director, OWCP, 894 F.2d 748, 750 (5th Cir.1990) (per curiam).

In the case of permanent partial disability, however, all the employer must show to meet the "not due solely" requirement is that an increased permanent partial disability results when the injuries from the prior and subsequent injuries are combined. Whenever the disability is increased from the combination of the two injuries, the resulting permanent partial disability is necessarily "not due solely" to the subsequent injury. ⁶

The ALJ found that the permanent partial disability resulting from Ladner's fall was increased because of his previously-injured toe. Therefore, assuming for the moment the sufficiency of that finding, ⁷ the ALJ correctly determined that this part of the third statutory factor was met.

B.

The Director claims that the ALJ was required to state explicitly that Ladner's permanent partial disability was "materially and substantially greater" than it would have been had the toe injury never occurred. Both sides concede that the ALJ never made an explicit "materially and substantially greater" finding. Recently, however, we noted that "[a]lthough it would be helpful if attorneys asked questions designed to elicit the 'magic words' that authorize special fund relief, we decline to adopt a rule that would require a rote recitation of the applicable legal standard." Ceres, 118 F.3d at 391.

Instead, when the "magic words" are absent from the record, "the fact finder's inquiry must of necessity be resolved by inferences based on such factors as the perceived severity of the pre-existing disabilities and the current employment injury, as well as the strength of the relationship between them." Id. Thus, assuming for the moment the sufficiency of the evidence, it was not error, in and of itself, that the ALJ failed to state explicitly that the permanent partial disability was "materially and substantially greater" as a result of the prior toe injury.

V.

The Director maintains that even if the ALJ applied the correct legal standards in determining the two parts of the third statutory factor, the evidence cannot support a finding in favor of the employer on either part. We agree with regard to the second part. First, we address the sufficiency of the "not due solely" finding. Then, we discuss the "materially and substantially greater" determination.

A.

The evidence is sufficient to find...