Estate of Cowart v. Nicklos Drilling Company

• Decision Date: 22 June 1992
• Docket Number: No. 91-17,91-17
• Citation: 112 S.Ct. 2589,505 U.S. 469,120 L.Ed.2d 379
• Parties: ESTATE OF Floyd COWART, Petitioner v. NICKLOS DRILLING COMPANY et al
• Court: U.S. Supreme Court

505 U.S. 469

112 S.Ct. 2589

120 L.Ed.2d 379

ESTATE OF Floyd COWART, Petitioner

v NICKLOS DRILLING COMPANY et al.

No. 91-17.

Argued March 25, 1992.

Decided June 22, 1992.

Syllabus ^*

Floyd Cowart, whose estate is the petitioner, was injured while working on an oil drilling platform owned by Transco Exploration Company (Transco), in an area subject to the Longshore and Harbor Workers' Compensation Act (LHWCA or Act). The Department of Labor gave respondent Compass Insurance Co. (Compass), the insurer for Cowart's employer, respondent Nicklos Drilling Company (Nicklos), an informal notice that Cowart was due permanent disability payments, but none were ever made. In the meantime, Cowart settled a negligence action with Transco, which Nicklos funded under an indemnification agreement with Transco. However, Cowart did not secure from Nicklos or Compass a formal, prior, written approval of the settlement. Subsequently, Cowart filed a claim with the Department of Labor seeking disability payments from Nicklos. Nicklos denied liability on the ground that recovery was barred under § 33(g) of the Act, which provides that a "person entitled to compensation" must obtain prior written approval from the employer and its insurer of any settlement of a third-party claim, § 33(g)(1), and that the failure of the "employee" to secure the approval results in forfeiture of all rights under the Act, § 33(g)(2). The Administrative Law Judge awarded benefits, relying on past Benefits Review Board (BRB) decisions: one in which the BRB held that in an earlier version of § 33(g) the words "person entitled to compensation" did not refer to a person not yet receiving benefits; and another in which it held that, since this phrase was not altered in the 1984 amendments to the LHWCA that added § 33(g)(2), Congress was presumed to have adopted the BRB's interpretation. The Court of Appeals reversed, holding that § 33(g) unambiguously provides for forfeiture whenever an LHWCA claimant fails to meet the written-approval requirement.

Held: Section 33(g)'s forfeiture provision applies to a worker whose employer, at the time the worker settles with a third party, is neither paying compensation to the worker nor subject to an order to pay under the Act. The section's language is plain and cannot support the BRB's interpretation. The normal meaning of entitlement includes a right or benefit for which a person qualifies, regardless of whether the right or benefit has been acknowledged or adjudicated. Thus, Cowart became

"entitled to compensation" at the moment his right to recovery under the Act vested. If the language of § 33(g)(1) left any doubt, the ambiguity would be eliminated by the statute's structure, especially the addition of subsection (g)(2). This interpretation of § 33(g) is reinforced by the fact that the phrase "person entitled to compensation" is used elsewhere in the statute in contexts in which it cannot bear Cowart's meaning, and is not altered by the fact that subsection (g)(2) uses the term "employee" rather than that phrase. Contrary to Cowart's argument, this interpretation of § 33(g) gives full meaning to all of subsection (g)(2)'s notification and consent requirements. The question whether Nicklos' participation in the settlement brings this case outside § 33(g)(1)'s terms is not addressed, since it was not fairly included within the question on which certiorari was granted. The possible harsh effects of § 33(g) are recognized, but it is the duty of the courts to enforce the judgment of the legislature; it is Congress that has the authority to change the statute, not the courts. Pp. 475-484.

927 F.2d 828, (CA5 1991), affirmed.

KENNEDY, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and WHITE, SCALIA, SOUTER, and THOMAS, JJ., joined. BLACKMUN, J., filed a dissenting opinion, in which STEVENS and O'CONNOR, JJ., joined.

Lloyd N. Frischhertz, New Orleans, La., for petitioner.

Michael R. Dreeben, Washington, D.C., for the federal respondent.

H. Lee Lewis, Jr., Houston, Tex., for private respondents.

Justice KENNEDY delivered the opinion of the Court.

The Longshore and Harbor Workers' Compensation Act (LHWCA), 44 Stat. 1424, as amended, 33 U.S.C. § 901 et seq., creates a comprehensive federal scheme to compen-

sate workers injured or killed while employed upon the navigable waters of the United States. The Act allows injured workers, without forgoing compensation under the Act, to pursue claims against third parties for their injuries. But § 33(g) of the LHWCA, 33 U.S.C. § 933(g), provides that under certain circumstances if a third-party claim is settled without the written approval of the worker's employer, all future benefits including medical benefits are forfeited. The question we must decide today is whether the forfeiture provision applies to a worker whose employer, at the time the worker settles with a third party, is neither paying compensation to the worker nor is yet subject to an order to pay under the Act.

I

The injured worker in this case was Floyd Cowart, and his estate is now the petitioner. Cowart suffered an injury to his hand on July 20, 1983, while working on an oil drilling platform owned by Transco Exploration Company (Transco). The platform was located on the Outer Continental Shelf, an area subject to the Act. 43 U.S.C. § 1333(b). Cowart was an employee of the Nicklos Drilling Company (Nicklos), who along with its insurer Compass Insurance Co. (Compass) are respondents before us. Nicklos and Compass paid Cowart temporary disability payments for 10 months following his injury. At that point Cowart's treating physician released him to return to work, though he found Cowart had a 40% permanent partial disability. App. 75. The Department of Labor notified Compass that Cowart was owed permanent disability payments in the total amount of $35,592.77, plus penalties and interest. This was an informal notice which did not constitute an award. No payments were made.

Cowart, meanwhile, had filed an action against Transco alleging that Transco's negligence caused his injury. On July 1, 1985, Cowart settled the action for $45,000, of which he received $29,350.60 after attorney's fees and expenses. Nicklos funded the entire settlement under an indemnifica-

tion agreement with Transco, and it had prior notice of the settlement amount. But Cowart made a mistake: he did not secure from Nicklos a formal, prior, written approval of the Transco settlement.

After settling, Cowart filed an administrative claim with the Department of Labor seeking disability payments from Nicklos. Nicklos denied liability on the grounds that under the terms of § 33(g)(2) of the LHWCA, Cowart had forfeited his benefits by failing to secure approval from Nicklos and Compass of his settlement with Transco, in the manner required by § 33(g)(1).

Section 33(g) provides in pertinent part:

"(g) Compromise obtained by person entitled to compensation

"(1) If the person entitled to compensation (or the person's representative) enters into a settlement with a third person referred to in subsection (a) of this section for an amount less than the compensation to which the person (or the person's representative) would be entitled under this chapter, the employer shall be liable for compensation as determined under subsection (f) of this section only if written approval of the settlement is obtained from the employer and the employer's carrier, before the settlement is executed, and by the person entitled to compensation (or the person's representative). The approval shall be made on a form provided by the Secretary and shall be filed in the office of the deputy commissioner within thirty days after the settlement is entered into.

"(2) If no written approval of the settlement is obtained and filed as required by paragraph (1), or if the employee fails to notify the employer of any settlement obtained from or judgment rendered against a third person, all rights to compensation and medical benefits under this chapter shall be terminated, regardless of whether the employer or the employer's insurer has

made payments or acknowledged entitlement to benefits under this chapter." 33 U.S.C. § 933(g).

The Administrative Law Judge rejected Nicklos' argument on the basis of prior interpretations of § 33(g) by the Benefits Review Board (Board or BRB). In the first of those decisions, O'Leary v. Southeast Stevedoring Co., 7 BRBS 144 (1977), aff'd mem., 622 F.2d 595 (CA9 1980), the Board held that in an earlier version of § 33(g) the words "person entitled to compensation" referred only to injured employees whose employers were making compensation payments, whether voluntary or pursuant to an award. The O'Leary decision held that a person not yet receiving benefits was not a "person entitled to compensation," even though the person had a valid claim for benefits.

The statute was amended to its present form, the form we have quoted, in 1984. In that year Congress redesignated then subsection (g) to what is now (g)(1) and modified its language somewhat, but did not change the phrase "person entitled to compensation." Congress also added the current subsection (g)(2), as well as other provisions. Following the 1984 amendments the Board decided Dorsey v. Cooper Stevedoring Co., 18 BRBS 25 (1986), app. dism'd 826 F.2d 1011 (CA11 1987). The Board reaffirmed its interpretation in O'Leary of the phrase "person entitled to compensation," saying that because the 1984 amendments had not changed the specific language, Congress was presumed to have adopted the Board's previous interpretation. It noted that nothing in the 1984 legislative history disclosed an intent to overrule the Board's interpretations. The Board decided that the forfeiture provisions of subsection (g)(2), including the final phrase providing that forfeiture occurs "regardless of whether the employer . . . has made payments or acknowledged entitlement to benefits," was a ...