I.T.O. Corp. of Baltimore v. Sellman, 90-1531

• Decision Date: 02 March 1992
• Docket Number: No. 90-1531,90-1531
• Citation: 954 F.2d 239
• Parties: I.T.O. CORPORATION OF BALTIMORE, Petitioner, v. William SELLMAN; Director, Office of Workers' Compensation Programs, United States Department of Labor, Respondents.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 239

954 F.2d 239

1993 A.M.C. 2405

I.T.O. CORPORATION OF BALTIMORE, Petitioner, v. William SELLMAN; Director, Office of Workers' Compensation Programs, United States Department of Labor, Respondents.

No. 90-1531.

United States Court of Appeals Fourth Circuit.

Argued April 10, 1991.

Decided Jan. 22, 1992.

As Amended March 2, 1992.

Stan Musial Haynes and Rudolph Lee Rose, Semmes, Bowen & Semmes, Baltimore, Md., argued, for petitioner.

Joshua T. Gillelan, II, Office of the Sol., U.S. Dept. of Labor, Washington, D.C., argued (Robert P. Davis, Sol. of Labor, Carol A. De Deo, Associate Sol., and Janet R. Dunlop, Counsel for Longshore, Office of the Sol., U.S. Dept. of Labor, on brief), for respondent Director.

Paul David Bekman, argued (Laurence A. Marder, on brief), Israelson, Salsbury, Clements & Bekman, Baltimore, Md., for respondent Sellman.

Before RUSSELL, Circuit Judge, CHAPMAN, Senior Circuit Judge, and WILLIAMS, United States District Judge for the Eastern District of Virginia, sitting by designation.

OPINION

DONALD RUSSELL, Circuit Judge:

This case arises out of a claim filed under the Longshore and Harbor Workers' Compensation Act, 33 U.S.C. §§ 901-950 (1986). Employer, I.T.O. Corporation of Baltimore ("I.T.O."), appeals from a decision of the Benefits Review Board ("Board") affirming an administrative law judge's (ALJ) decision denying I.T.O.'s request to terminate compensation and medical benefit payments or, alternatively, to offset its liability against settlement proceeds received by the claimant, William Sellman, through a third-party settlement agreement. We agree with the Board that I.T.O. may not terminate benefit payments, but reverse its determination that I.T.O. is not entitled to an offset.

There is no dispute in this case concerning William Sellman's disability status. Sellman suffered a fall on July 10, 1979, while working on a ship known as the Algenib for I.T.O.'s predecessor, resulting in a fractured skull and paralysis. I.T.O. voluntarily paid compensation and medical benefits for total disability from July 11, 1979, until July 21, 1984. I.T.O. refused to make further payments after this date because Sellman refused to transfer to I.T.O. funds he received from a settlement of his third-party suit against the owners of the Algenib.

I.T.O., Sellman, and his wife ¹ and children filed suit against the Algenib defendants in 1982 which culminated in two settlement agreements executed in June 1984. One agreement ("I.T.O. agreement") called for the payment of $250,000 to I.T.O. The agreement provided that it would have "no force and effect" until "the companion Settlement Agreement of the Sellmans is approved by the Circuit Court for Baltimore County...." The I.T.O. agreement was signed by Mrs. Sellman, William's attorney, and the attorneys for I.T.O. and the Algenib defendants.

The second agreement ("Sellman agreement") required the Algenib defendants to pay $250,000 to the Sellmans in satisfaction of any claims against them. The Sellmans had filed nine causes of action against the Algenib, including one cause of action for loss of consortium. The Sellman agreement was signed by Mrs. Sellman, the Sellmans' attorney, Roger Smith, and the attorney for the Algenib defendants, Geoffrey Tobias. Like the I.T.O. agreement, the Sellman agreement was contingent upon approval by the Baltimore Circuit Court. Both agreements referenced I.T.O.'s alleged compensation lien. At the time the settlements were reached, I.T.O. had a lien of over one-half million dollars, which was growing at a rate of over $100,000 a year.

The provision requiring approval by the circuit court was requested by the ship owners, because Mr. Sellman was under guardianship protection and the Baltimore County Circuit Court was the court which had approved Mrs. Sellman as Mr. Sellman's legal guardian. Pursuant to this requirement of the settlement agreements, Mr. Smith drafted a Petition to Compromise Claim for submission to the Baltimore County Circuit Court. The petition was drafted after the settlement agreements were executed and contained provisions which differed significantly from the provisions of the settlement agreements. Whereas the settlement agreements were silent as to whether I.T.O. had the right to suspend compensation payments, or to receive an offset against the proceeds of the Sellman settlement, the petition stated that I.T.O. had agreed to continue compensation and medical payments without interruption and that none of the proceeds of the Sellman agreement were subject to offset because they were intended solely to compensate Mrs. Sellman for loss of consortium. The petition submitted to the Baltimore County Circuit Court resulted in approval of the Sellman agreement.

In finding that I.T.O. was required to continue making both compensation and medical payments, the ALJ found that the petition was incorporated into the settlement agreements, and relied on this document and testamentary evidence to find that the parties in fact intended that I.T.O. continue making payments without interruption. The ALJ further found that the circumstances of this case obviated Mr. Sellman's responsibility under 33 U.S.C. § 933(g) to file a government form known as Form LS-33 reflecting I.T.O.'s written approval of its third-party settlement agreement. Finally, the ALJ determined that the proceeds of the Sellman agreement were for loss of consortium and thus not subject to offset.

The Board unanimously upheld the ALJ's determination that I.T.O. was not entitled to terminate benefit payments. The Board reasoned that the requirement of section 33(g) that a claimant obtain employer's written approval of any settlement claimant reached with a third party was inapplicable where, as in this case, employer was both a party to the third-party suit and helped negotiate the settlement reached between claimant and the third-party. The Board noted that, in any event, I.T.O. would have no right to terminate medical benefit payments because the statute only permitted termination of medical benefits where claimant failed to either obtain employer's written approval of the settlement or notify employer of the settlement, and there was no question that I.T.O. received notice of the Sellman agreement.

A majority of the Board also affirmed the ALJ's finding that I.T.O. was not entitled to offset the proceeds of the Sellman agreement against its liability under the Act. The majority found that since the settlement agreements were ambiguous as to whether I.T.O. had waived its statutory right to an offset, the ALJ properly relied on extrinsic evidence to determine the intentions of the parties and that substantial evidence supported his findings regarding the intentions of the parties.

One Board member dissented from the majority's determination regarding the offset issue. The dissenting Board member felt that I.T.O. had the right to either collect the entire $500,000 paid by the Algenib defendants immediately or to receive a credit against its future liability by suspending payments until its full offset was realized. The dissent also took the position that the petition to compromise claim was a separate document from the settlement agreements whose only purpose was to request the circuit court to approve the Sellman agreement, and that the circuit court's order did not approve the petition, but the Sellman agreement. Finally, the dissent argued that the ALJ's findings regarding the intention of the parties were not supported by substantial evidence because the ALJ had misconstrued relevant testimony.

Under 33 U.S.C. § 933(a), an employee entitled to compensation under the Act need not elect to pursue his worker's compensation claim to the exclusion of a negligence action against a third party. If, however, recovery is obtained from the third party, the employer is entitled to offset its liability under the Act against such recovery pursuant to 33 U.S.C. § 933(f). Section 33(g), 33 U.S.C. § 933(g), deals with situations where the claimant settles his third-party action. That section provides, in pertinent part:

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) 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.

33 U.S.C. § 933(g)(1).

Subsection 2 of section 33(g) states the consequences for failing to obtain the employer's written approval:

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)(2).

In this appeal, I.T.O. argues that the Board erred by ignoring the plain language of the statute and pertinent case law in denying I.T.O. the right to terminate benefits. I.T.O. argues that since Mr. Sellman did not obtain I.T.O.'s written approval of the Sellman agreement and indisputably failed to file the required LS-33 form in a timely manner, the statute requires that benefit payments terminate. I.T.O. further contends that the Board erred by finding that its...