Kreschollek v. Southern Stevedoring Co.

• Decision Date: 14 June 2000
• Docket Number: No. 99-5599,INTERVENOR-PLAINTIFF,99-5599
• Parties: (3rd Cir. 2000) CARL KRESCHOLLEK, APPELLANT V. SOUTHERN STEVEDORING COMPANY; LUMBERMEN'S MUTUAL CASUALTY COMPANY; ROBERT REICH, INDIVIDUALLY, AND IN HIS CAPACITY AS SECRETARY OF LABOR AND INDUSTRY OF THE UNITED STATES OF AMERICA; DAVID LOTZ, INDIVIDUALLY, AND IN HIS CAPACITY AS DIRECTOR OF THE OFFICE OF WORKERS' COMPENSATION NATIONAL ASSOCIATION OF WATERFRONT EMPLOYERS AND THE SHIPBUILDERS COUNCIL OF AMERICA,IN D.C. Argued:
• Court: U.S. Court of Appeals — Third Circuit

Page 202

223 F.3d 202 (3rd Cir. 2000)

CARL KRESCHOLLEK, APPELLANT

V.

SOUTHERN STEVEDORING COMPANY; LUMBERMEN'S MUTUAL CASUALTY COMPANY; ROBERT REICH, INDIVIDUALLY, AND IN HIS CAPACITY AS SECRETARY OF LABOR AND INDUSTRY OF THE UNITED STATES OF AMERICA; DAVID LOTZ, INDIVIDUALLY, AND IN HIS CAPACITY AS DIRECTOR OF THE OFFICE OF WORKERS' COMPENSATION

NATIONAL ASSOCIATION OF WATERFRONT EMPLOYERS AND THE SHIPBUILDERS COUNCIL OF AMERICA, INTERVENOR-PLAINTIFF IN D.C.

No. 99-5599

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued: June 14, 2000

Filed July 28, 2000

As amended August 8, 2000.

Appeal from the United States District Court for the District of New Jersey (D.C. No. 93-cv-03903) District Judge: Honorable Joseph H. Rodriguez

David M. Linker (argued) Freedman & Lorry 400 Market Street 9th Floor Philadelphia, PA 19106 Attorney for Appellants

Shannen W. Coffin (argued) Mark F. Horning Steptoe & Johnson 1330 Connecticut Avenue, N.W. Washington, D.C. 20036 Attorneys for private Appellees Southern Stevedoring and Lumbermen's Mutual

Allen H. Feldman Nathaniel I. Spiller Gary K. Stearman (argued) Andrew D. Auerbach United States Department of Labor Office of the Solicitor 200 Constitution Avenue, N.W. Washington, D.C. 20210 Attorneys for Appellee Secretary of Labor

Andrew D. Auerbach United States Department of Labor Office of the Solicitor 200 Constitution Avenue, N.W. Washington, D.C. 20210 Attorney for Appellee Director Owcp

Before: Becker, Chief Judge, Aldisert, Circuit Judge and O'kelley, District Judge.^*

OPINION FOR THE COURT

Aldisert, Circuit Judge.

The issue on appeal is whether the Longshoreman and Harbor Workers' Compensation Act ("LHWCA"), 33 U.S.C. SS 901-950 (2000), is unconstitutional on its face because it allows employers and their insurance carriers to terminate payment of workers' compensation benefits without notice. Specifically, we must decide whether Appellant Carl Kreschollek's employer, Southern Stevedoring Co., and its insurance carrier, Lumbermen's Mutual Casualty Co., violated his right to due process when it terminated his workers' compensation payments without notice.

The Court decided a similar issue relating to state worker's compensation benefits in American Mfr. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 119 S.Ct. 977, 143 L.Ed.2d 130 (1999). The Court teaches in Sullivan, that (1) "an insurer's decision to withhold payment and seek utilization review of the reasonableness and necessity of particular medical treatment is not fairly attributable to the State," id. at 58, and (2) employees do not have a property interest in workers compensation benefits when they have not demonstrated that they are entitled to them and a state statute requires that they prove "that an employer is liable for a work-related injury, and . . . that the particular medical treatment at issue is reasonable and necessary." Id. at 61. We must therefore determine whether the teachings of Sullivan apply to LHWCA procedures and the case at bar. We hold that they do and will affirm the judgment of the district court dismissing Kreschollek's claim.

The district court had federal question jurisdiction pursuant to 28 U.S.C. S 1331. This court has appellate jurisdiction over the final decision of the district court pursuant to 28 U.S.C. S 1291. Kreschollek filed a timely notice of appeal under Rule 4(a), Federal Rules of Appellate Procedure.

The district court treated a motion brought under Rule 12(b)(6), Federal Rules of Civil Procedure, as a one for summary judgment because the court looked outside the pleadings in making its decision. We review a grant of summary judgment by applying the same criteria used by the district court in the first instance. Olson v. General Elec. Astrospace, 101 F.3d 947, 951 (3d Cir. 1996). We will affirm the judgment if "there is no genuine issue as to any material fact [and] the moving party is entitled to a judgment as a matter of law." Rule 56(c), Federal Rules of Civil Procedure; see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

Kreschollek contends on appeal that the LHWCA is unconstitutional on its face because it allows private companies to halt workers' compensation benefits at will, when there has been no formal compensation award. The statute provides:

(c) Notification of commencement or suspension of payment

Upon making the first payment, and upon suspension of payment for any cause, the employer shall immediately notify the deputy commissioner, in accordance with a form prescribed by the Secretary, that payment of compensation has begun or has been suspended, as the case may be.

(d) Right to compensation controverted

If the employer controverts the right to compensation he shall file with the deputy commissioner on or before the fourteenth day after he has knowledge of the alleged injury or death, a notice, in accordance with a form prescribed by the Secretary, stating that the right to compensation is controverted, the name of the claimant, the name of the employer, the date of the alleged injury or death, and the grounds upon which the right to compensation is controverted.

33 U.S.C. S 914(c), (d).

The Court has made clear, however, that a facial attack on a statute must also satisfy the same requirements as an attack on a private individual's actions: (1) the "constitutional deprivation [must be] caused by the exercise of some right or privilege created by the State or by a rule of conduct imposed by the State or by a person for whom the state is responsible, and [2] the party charged with the deprivation must be a person who may fairly be said to be a state actor." Sullivan, 526 U.S. at 50 (internal quotations and citations omitted).

I.

Appellant Carl Kreschollek suffered a work-related injury on March 20, 1990 while employed by Appellee Southern Stevedoring Company. As a result of his injury he was unable to work as a stevedore. His employer, Southern Stevedoring, and its insurer, Appellee Lumbermen's Mutual Casualty Company, voluntarily initiated disability payments. Southern and Lumbermen's filed a Form LS-206 (payment of compensation with award) informing the district director of the Office of Workers Compensation Programs ("OWCP") that they voluntarily began making payments to Kreschollek. See 33 U.S.C. S 914(a). On October 29, 1992, Appellees stopped making the compensation payments and, pursuant to 33 U.S.C. S 914(c), (d), filed notice of their decision with the district director. The director then sent Kreschollek a notice on November 2, 1992 that Appellees terminated his benefits because he was fit to return to work.

Kreschollek contested the termination of compensation payments and, on November 24, 1992, he requested that the district director hold an informal conference with the parties pursuant to 20 C.F.R. S 702.261 ("Where the claimant contests an action by the employer . . . terminating benefits . . . he should immediately notify the office of the district director . . . and set forth the facts pertinent to his complaint."). The director conducted the conference on December 16, 1992, but the parties were unable to resolve their differences. On January 7, 1993, Kreschollek filed a pre-hearing statement and a request for the director to transfer the case for a formal hearing before a Department of Labor Administrative Law Judge. The ALJ held a hearing in December 1993, in which he agreed with the employer and determined that the benefits termination was proper. Kreschollek unsuccessfully petitioned the Benefits Review Board for review of the ALJ's decision. We denied the petition for review. See Kreschollek v. Southern Stevedoring Co., 129 F.3d 1255 (3d Cir. 1997) (table cite).

On December 2, 1993, while his appeal was underway, Kreschollek filed a complaint in the district court alleging that Appellees violated his rights to due process and equal protection when they suspended payment of compensation benefits to him without first affording him notice or a hearing. He also facially attacked the LHWCA, contending that the provisions of the Act that permit private employers and their insurers to suspend the voluntary payment of compensation benefits violated his Fifth Amendment due process rights. The district court granted the director's motion to dismiss for lack of subject-matter jurisdiction to consider a constitutional challenge to LHWCA procedures, but on appeal we reversed the dismissal and held that the district court possessed the necessary jurisdiction. See Kreschollek v. Southern Stevedoring Co., 78 F.3d 868 (3d Cir. 1996).

The director again renewed his motion to dismiss, but in an opinion filed September 30, 1997, relying on Baksalary v. Smith, 579 F. Supp. 218 (E.D. Pa. 1984), the district court denied the motion. The court ruled that the private Appellees were "state actors" as a result of their purported "joint participation" with federal officials in the suspension of benefits and that Kreschollek had a protected property interest in the continuation of benefits.

All of these proceedings took place before March 1999, when the Court handed down its decision in Sullivan, which held there is no state action when an employer terminates voluntary payment of benefits, 526 U.S. at 51, and that an employee has no property interests in unadjudicated benefits under a Pennsylvania workers' compensation statute. 526 U.S. at 59-61. The district court subsequently withdrew its decision and filed a new judgment on June 26, 1999 in which it held that withdrawal of benefits by the employer was not state action and that Kreschollek did not have a property interest in the continued receipt of benefits. Dist. Ct. Op. at 6. Kreschollek now appeals.

II.

We believe that the Court's teachings in Sullivan control this case. In that case the plaintiffs filed suit under 42 U.S.C. S 1983 against various Pennsylvania officials, a self-insured public school district and a number of private workers' compensation insurers,...