Newton-Sealey v. Armorgroup (Jersey) Services, Ltd.
| Decision Date | 29 May 2013 |
| Docket Number | BRB 12-0446 |
| Parties | DAVID G. NEWTON-SEALEY Claimant-Petitioner Cross-Respondent v. ARMORGROUP (JERSEY) SERVICES, LIMITED and FIDELITY AND CASUALTY COMPANY OF NEW YORK c/o CNA GLOBAL Employer/Carrier- Respondents Cross-Petitioners DIRECTOR, OFFICE OF WORKERS’ COMPENSATION PROGRAMS, UNITED STATES DEPARTMENT OF LABOR Respondent Cross-Respondent |
| Court | Longshore Complaints Court of Appeals |
Appeals of the Decision and Order of Patrick M. Rosenow Administrative Law Judge, United States Department of Labor.
Joel S. Mills and Gary B. Pitts (Pitts & Mills), Houston Texas, for claimant.
Michael W. Thomas and Vanessa N. Lichtenberger (Thomas, Quinn & Krieger, L.L.P.), San Francisco, California, for employer/carrier.
Sarah M. Hurley (M. Patricia Smith, Solicitor of Labor; Rae Ellen James, Associate Solicitor; Mark A. Reinhalter, Counsel for Longshore), Washington, D.C., for the Director, Office of Workers' Compensation Programs, United States Department of Labor.
Before: DOLDER, Chief Administrative Appeals Judge, SMITH and McGRANERY, Administrative Appeals Judges.
DECISION AND ORDER
Claimant appeals and employer cross-appeals the Decision and Order (2011-LDA-00387) of Administrative Law Judge Patrick M Rosenow rendered on a claim filed pursuant to the provisions of the Longshore and Harbor Workers’ Compensation Act, as amended, 33 U.S.C. §901 et seq., as extended by the Defense Base Act, 42 U.S.C. §1651 et seq. (the Act or the DBA). We must affirm the administrative law judge’s findings of fact and conclusions of law if they are supported by substantial evidence, are rational, and are in accordance with law. 33 U.S.C. §921(b)(3); O’Keeffe v. Smith, Hinchman & Grylls Associates, Inc., 380 U.S. 359 (1965).
The basic facts of this case are not in dispute, and the parties so stipulated. Claimant was hired to provide security for engineers working for Bechtel Corporation in Iraq. [1] He escorted them by vehicle to and from construction sites and was injured on March 23, 2004, as he employed defensive maneuvers and his vehicle was struck by a hostile’s car and rolled over. Claimant sustained serious injuries to his neck, shoulder, back, chest, and head, as well as a traumatic brain injury with brain stem and frontal lobe dysfunction. Carrier paid claimant temporary total disability and medical benefits under the Act, and the parties agreed that claimant remained temporarily totally disabled as of March 5, 2012, when the stipulations were signed.
On April 30, 2007, claimant, a resident of the United Kingdom (UK), filed negligence and breach of contract lawsuits in the UK against three defendants, all of which claimant considered his “employer:” [2] ArmorGroup Services (Jersey) Limited (AG Jersey), [3] ArmorGroup Services Limited (AG UK), and ArmorGroup International, PLC (AG PLC). [4] On February 14, 2008, the UK court issued an “Approved Judgment” which was not a “trial of action.” The court found “there is no real prospect” of claimant’s establishing an employment contract with AG UK or AG PLC, as his only employment contract was with AG Jersey. Jt. Ex. 17 at 6. However, the court found there was “a real prospect of the claimant succeeding” in establishing he was owed a duty of care. Id. at 9. That is, based on the evidence presented, the court found there was potentially a special relationship between claimant, AG UK, and AG PLC such that AG UK and AG PLC could have foreseen the dangers and had a special responsibility to him. Id. at 9-12. Therefore, the court dismissed the two moving defendants from claimant’s breach of contract claim but did not dismiss them from his duty of care claim.
Following the court’s decision, on December 16, 2009, claimant and the three defendants entered into a confidential settlement agreement. Jt. Ex. 18. [5] It is undisputed that the amount of the settlement was less than the amount to which claimant would be entitled under the Act and that, prior to the settlement, claimant did not inform, or obtain prior written approval from, the DBA carrier. Upon learning of the settlement, the DBA carrier paying claimant benefits asserted that AG UK and AG PLC were “third parties, ” invoked the Section 33(g), 33 U.S.C. §933(g), bar, and ceased benefits payments. Jt. Ex. 24; Stipulations.
The sole issue before the administrative law judge was whether any of the AG entities involved in the settlement was a “third party” within the meaning of the Act. The administrative law judge found that AG Jersey was claimant’s employer by virtue of the actual employment contract, AG UK was a borrowing employer by virtue of claimant’s having been recruited, hired and assigned by AG UK to perform duties required under its contract with Bechtel, and AG PLC was a distinct entity and, therefore, a third party by virtue of its “clear” inability to qualify under the borrowing employer test and the decision rendered by the UK court. Accordingly, the administrative law judge found that AG Jersey carried its burden of proof to establish the applicability of Section 33(g), and he dismissed claimant’s claim. Decision and Order at 15-16.
Claimant appeals, contending the administrative law judge erred in finding that AG PLC was a third party and thus in applying Section 33(g) to bar the claim. AG Jersey responds, urging affirmance. BRB No. 12-0446. AG Jersey cross-appeals the decision, contending the administrative law judge erred in finding AG UK to be a borrowing employer. Claimant has not responded to the cross-appeal. BRB No. 12-0446A. The Director, Office of Workers’ Compensation Programs (the Director), responds to both appeals via consolidated brief. She agrees that the administrative law judge properly found AG UK is a borrowing employer, albeit under a different test than the one used by the administrative law judge. She also asserts that the administrative law judge erred in applying the concept of issue preclusion and relying on the UK court decision to find that AG PLC was a third party, as the court did not litigate and decide the specific issue presented in this case. Thus, the Director urges the Board to remand the case for further findings as to AG PLC. AG Jersey replies, urging the Board to reject the Director’s arguments.
Pursuant to Section 33(a), 33 U.S.C. §933(a), a claimant may proceed in tort against a third party if he determines that the third party may be liable for damages for his work injuries. In order to protect an employer’s lien and offset rights against any third-party recovery, 33 U.S.C. §933(f), a claimant, under certain circumstances, must either give the employer notice of a settlement with a third party or a judgment in his favor, or he must obtain his employer’s and carrier’s prior written approval of the third-party settlement. 33 U.S.C. §933(g). [6] Pursuant to Section 33(g)(1), prior written approval of the settlement is necessary when the person entitled to compensation enters into a settlement with a third party for less than the amount to which the claimant is entitled under the Act. Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469, 482, 26 BRBS 49, 53(CRT) (1992); see Bundens v. J.E. Brenneman Co., 46 F.3d 292, 29 BRBS 52(CRT) (3 d Cir. 1995); Esposito v. Sea-Land Service, Inc., 36 BRBS 10 (2002); 20 C.F.R. §702.281. As Section 33(g) is an affirmative defense, the employer bears the burden of proving that the claimant entered into a fully-executed settlement with a third party without obtaining prior written approval from it and its carrier. [7] Flanagan v. McAllister Brothers, Inc., 33 BRBS 209 (1999). Failure to obtain prior written approval results in the forfeiture of disability and medical benefits under the Act. 33 U.S.C. §933(g)(2); Esposito, 36 BRBS 10; 20 C.F.R. §702.281(b).
Claimant acknowledges that: he is a “person entitled to compensation;” he entered into a settlement with the three defendants in 2009 for the same injuries for which he would be entitled to benefits under the Act; and he settled those claims for an amount less than the amount he would be entitled to under the Act without obtaining prior written approval from carrier. Thus, if any of the defendant AG entities is a “third party” under the Act, Section 33(g)(1) applies to bar claimant’s claim under the Act. Claimant argues that none of the AG companies is a “third party.”
A brief explanation of the AG corporate relationship is warranted before we address the issues. Founded in 1981, AG UK provided high-grade security to government and commercial clients. In 2003, AG UK was subject to a management buyout and became an indirectly wholly-owned subsidiary of AG PLC. AG UK contracted with Bechtel to provide its engineers security services in Iraq, obtained the necessary DBA workers’ compensation insurance, and contracted with AG Jersey, another indirectly wholly-owned subsidiary of AG PLC, to supply the security personnel to meet the Bechtel obligations. AG Jersey then contracted with AG UK to recruit and interview potential employees in its London office; the employees would sign contracts with AG Jersey, making it their official employer. AG PLC is the holding/parent company and sole shareholder of the AG subsidiaries; collectively, they are often referred to as “ArmorGroup.”
Section 33(g) is designed to prevent a claimant from unilaterally bargaining away funds to which his employer might be entitled. Petroleum Helicopters, Inc. v. Collier 784 F.2d 644, 18 BRBS 67(CRT) (5th Cir. 1986). It provides protection to the employer when a claimant settles a tort suit for damages with a third person for the same injury for which he is entitled to benefits under the Act. [8] 33 U.S.C. §933. The question in this case is whether any of the AG entities constitutes claimant’s “employer” or is instead a “third party” with which claiman...
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