Newton-Sealey v. ArmorGroup Services Limited
| Decision Date | 06 May 2015 |
| Docket Number | BRB 14-0279,14-0279A |
| Parties | DAVID G. NEWTON-SEALEY Claimant-Petitioner Cross-Respondent v. ARMORGROUP SERVICES (JERSEY), LIMITED and FIDELITY AND CASUALTY COMPANY OF NEW YORK c/o CNA GLOBAL Employer/Carrier-Respondents Cross-Petitioners |
| Court | Longshore Complaints Court of Appeals |
Appeals of the Decision and Order on Remand of Patrick M. Rosenow Administrative Law Judge, United States Department of Labor.
Gary B. Pitts and Joel S. Mills (Pitts & Mills), Houston Texas, for claimant.
Michael W. Thomas and Edwin B. Barnes (Thomas, Quinn & Krieger, LLP), San Francisco, California, for employer/carrier.
Before: HALL, Chief Administrative Appeals Judge, McGRANERY and BOGGS, Administrative Appeals Judges.
DECISION AND ORDER
Claimant appeals, and employer (AG Jersey) cross-appeals, the Decision and Order on Remand (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).
This is the second time this case has come before the Board. The underlying facts of this case are not in dispute, and the parties so stipulated; nevertheless, a review of the facts is warranted. Claimant was hired to provide security for engineers working for Bechtel Corporation in Iraq.[1] He escorted them to and from construction sites and was injured as he employed defensive maneuvers on March 23, 2004; his vehicle rolled over after it was struck by a hostile’s car. 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. AG Jersey and its DBA carrier (CNA) paid claimant temporary total disability and medical benefits under the DBA, [2]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 British citizen, filed negligence and breach of contract lawsuits in the United Kingdom (UK) against three defendants:[3] ArmorGroup Services (Jersey) Limited (AG Jersey), ArmorGroup Services Limited (AG UK), and ArmorGroup International, PLC (AG PLC).[4] On February 14, 2008, a British court issued an “Approved Judgment, ” finding “there is no real prospect” of claimant’s establishing the existence of an employment contract with AG UK or AG PLC, as his only contract was with AG Jersey. The court thus dismissed AG UK and AG PLC from the breach of contract claim. However, the court found there was a “special relationship” among claimant, AG UK and AG PLC, such that AG UK and AG PLC could have foreseen the dangers and therefore had a “special responsibility” to claimant. Therefore, the court did not dismiss them from the duty of care claim. JX 17 at 6, 9-12; Newton-Sealey v. ArmorGroup Services, Ltd. et al., [2008] EWHC 233 (QB) (accessed at www.bailii.org).
Following the UK court’s decision, on December 16, 2009, claimant and the three defendants entered into a confidential settlement agreement. JX 18 (cover and signature pages only).[5] It is undisputed that the amount of the tort settlement was less than the amount claimant would have received under the Act and that claimant did not obtain prior written approval from CNA, which was not a party to the settlement. Upon learning of the settlement, CNA asserted that AG UK and AG PLC were not claimant’s employers and, thus, were “third parties.” It invoked the Section 33(g), 33 U.S.C. §933(g), bar, and ceased payments to claimant. JX 24; Stipulations.
The 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 or whether they could all be considered claimant’s “employers.”[6] In his initial decision, the administrative law judge found: AG Jersey was claimant’s employer by virtue of the actual employment contract between them; AG UK was a borrowing employer by virtue of claimant’s having been recruited, hired, and assigned duties by AG UK; and, AG PLC was a distinct entity and, therefore, a third party to the settlement by virtue of the decision rendered by the UK court. Accordingly, the administrative law judge found that claimant settled a third-party claim without prior written approval of CNA. Therefore, he found claimant’s DBA claim barred by Section 33(g). Decision and Order at 15-16.
Claimant appealed, and AG Jersey cross-appealed, the administrative law judge’s decision. The Board vacated that decision as to AG UK because the administrative law judge did not address which borrowed employee test is best suited to the facts of this case, and he did not explain his findings in terms of the test factors. The Board vacated the administrative law judge’s decision as to AG PLC because he did not apply any borrowed employee test, but instead found it was not claimant’s employer by relying on the UK court’s determination that there was no contract between claimant and AG PLC. The Board determined that neither res judicata nor collateral estoppel can be applied to the relationship between claimant and AG PLC. Therefore, the Board remanded the case for the administrative law judge to address all of the borrowed employee tests and to determine which is most appropriate for the facts of this case. If the administrative law judge found that AG UK and/or AG PLC were not employers under the chosen test, then he must address whether the three companies acted as a single entity such that the corporate structure should be disregarded and all three should be considered claimant’s employer, making none a “third party” for purposes of the Act. Newton-Sealey v. ArmorGroup (Jersey) Services, Ltd., 47 BRBS 21 (2013).
On remand, after considering all the borrowed employee tests, the administrative law judge found that neither AG UK nor AG PLC was claimant’s borrowing employer. Decision and Order on Rem. at 23. Therefore, he addressed whether the three companies could be considered as a single entity such that all were claimant’s employer and none was a third party. In applying “the law cited by the Board, ” the administrative law judge found that “AG UK and AG Jersey were at the very least engaged in a joint venture to provide security for Bechtel.” Id. at 24; see Heavin v. Mobil Oil Exploration & Producing Southeast, Inc., 913 F.2d 178 (5th Cir. 1990). However, with regard to AG PLC, the administrative law judge found that it was a separate company that did not act as a single entity with the others. Consequently, he found that claimant settled in tort with a third party, and he applied Section 33(g) to bar the claim for benefits. Decision and Order on Rem. at 25. Claimant appeals, and AG Jersey responds. Claimant filed a reply brief. BRB No. 14-0279. AG Jersey cross-appeals, and claimant has not responded.[7] BRB No. 14-0279A.
Claimant contends the administrative law judge erred in finding that neither AG UK nor AG PLC was his borrowing employer. He also contends the administrative law judge erred in finding that the three companies did not act as a single entity under Claudio v. United States, 907 F.Supp. 581 (E.D.N.Y. 1995). Claimant alleges the relationship among these three companies is one that warrants treating them as a single entity. In its cross-appeal, AG Jersey contends the administrative law judge erred in finding that AG UK and AG Jersey were in a joint venture. It also contends the administrative law judge erred in not placing the burden of proof of showing a single entity on claimant, as he is the party seeking to disturb the legal corporate status of the companies.
Pursuant to Section 33(a) of the Act, 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 related to his work-related injuries. In order to protect an employer’s right to offset any third-party recovery against its liability for compensation under the Act, 33 U.S.C. §933(f), a claimant, under differing circumstances, must either give his 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).[8] 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 for which the employer is liable under the Act. 33 U.S.C. §933(g)(1); 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) (3d 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.[9] Flanagan v. McAllister Brothers, Inc., 33 BRBS 209 (1999). Failure to obtain prior written approval, when required to do so, 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 exact injuries...
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