Reich v. Bath Iron Works Corp.

• Decision Date: 07 June 1994
• Docket Number: No. 94-1094,94-1094
• Parties: Robert B. REICH, Secretary of Labor, Plaintiff, Appellant, v. BATH IRON WORKS CORPORATION, Defendant, Appellee. First Circuit. Heard
• Court: U.S. Court of Appeals — First Circuit

Page 74

42 F.3d 74

1995 A.M.C. 2110

Robert B. REICH, Secretary of Labor, Plaintiff, Appellant, v. BATH IRON WORKS CORPORATION, Defendant, Appellee.

No. 94-1094.

United States Court of Appeals,First Circuit.

Heard June 7, 1994.

Decided Dec. 16, 1994.

Rehearing and Suggestion for Rehearing En Banc Denied Jan. 13, 1995.

Joshua T. Gillelan II, Sr. Atty., Office of the Sol., Dept. of Labor, with whom Thomas S. Williamson, Jr., Sol. of Labor, and Carol A. De Deo, Associate Sol., Washington, DC, were on brief, for appellant.

Robert H. Koehler, with whom Judith Bartnoff and Patton, Boggs & Blow, Washington, DC, were on brief, for appellee.

Before SELYA, CYR and BOUDIN, Circuit Judges.

BOUDIN, Circuit Judge.

Bath Iron Works, Inc. ("Bath") is a Maine corporation that has long engaged in shipbuilding and the repair of ships. It has employees who are covered by the Longshore and Harbor Workers' Compensation Act, 33 U.S.C. Secs. 901-50 (the "Longshore Act"). That statute enacts an extensive workers' compensation program that protects longshore and other specific classes of workers whose injuries occur upon navigable waters of the United States or adjoining facilities like piers and dry docks. Id. Sec. 903(a).

For the most part, scheduled payments for death or disability are made either by the employer or under insurance coverage; Bath, as it happens, is a self-insurer. But Congress has also included in the Longshore Act a so-called "special fund," 33 U.S.C. Sec. 944, administered by the Secretary of Labor ("the Secretary"). The fund is used for various purposes--most importantly, for "second injury" or "section 8(f)" payments made under 33 U.S.C. Sec. 908(f), a provision described below. See 33 U.S.C. Sec. 944(i). The special fund is primarily funded by annual assessments levied by the Secretary on employers subject to the Longshore Act. Id. Sec. 944(c). ¹

In this case the Secretary brought suit against Bath in the district court to recover supplemental assessments for the special fund claimed to be due by the Secretary. 838 F.Supp. 650. Because the dispute involves Bath's obligation to the special fund, the statutory formula used to determine such obligations--33 U.S.C. Sec. 944(c)(2)--needs to be explained. First, the statute requires the Secretary to estimate the fund's expected obligations for the forthcoming year, including expected section 8(f) payments. Id. Then, the Secretary estimates other fund income (e.g., fines) and levies the balance by assessing employers. Id. Specifically, the Secretary fixes and assesses each employer's share under a formula that takes the average of two fractions, both of which use the prior year's experience as a base. Id.

One fraction is the ratio of the individual employer's workers' compensation payments "under this chapter" [the Longshore Act] during the prior year to all such payments by all employers under the chapter during that year. 33 U.S.C. Sec. 944(c)(2)(A). The other fraction is the ratio of the section 8(f) payments attributable to the employer during the prior year to all such section 8(f) payments attributable to all employers for that year. Id. Sec. 944(c)(2)(B). In brief, the employer's obligation is based in part on its own prior payment experience and in part on the special fund's experience in making section 8(f) payments to that employer's employees.

For example, if Bath's compensation payments under the Longshore Act for 1988 represented three percent of all such employer payments for that year, and the special section 8(f) payments for Bath employees represented one percent of all such section 8(f) payments for that year, Bath's assessment would be two percent of the (otherwise unfunded) special fund obligations for 1989, as estimated by the Secretary. Under such a formula, every employer has an interest in seeing its own workers' compensation payments "under this chapter" represented by as small a figure as possible. The lower the figure, the more the burden of financing the special fund is shifted to other employers.

The present case arose because Bath calculated its own assessment by excluding from the formula calculation under section 944(c)(2)(A) most payments it made to injured employees who were covered both by the Longshore Act and the Maine Workers Compensation Act. Me.Rev.Stat.Ann. tit. 39, Sec. 1 et seq. The Maine statute generally provides comparable payments, and both regimes encourage the employer to make payment without having the employee file a formal claim. Where both statutes covered the same injury in the same amount, Bath said that it was making payment under the Maine statute and filed a boilerplate denial of liability under the Longshore Act. See 33 U.S.C. Sec. 914(d).

An employer's payment of workers' compensation under a state statute discharges the employer's liability pro tanto under the Longshore Act. This was well settled by court decision long ago and eventually Congress enacted a provision to this effect. 33 U.S.C. Sec. 903(e). Thus, in such dual liability cases, Bath's payments--purportedly under the Maine statute--erased its liability under the federal statute as well. This erasure of federal obligations led the Secretary to recalculate Bath's formula assessment on the premise that such dual liability payments should be treated as ones made "under" the Longshore Act. Bath disagreed. The Secretary brought suit.

In the district court, the magistrate judge entered a recommended decision in favor of Bath, and the district court approved the recommendation and dismissed the Secretary's complaint. The gist of the district court's decision was that the language of the formula--specifically, its reference to an employer's payments made "under this chapter"--was clear and unambiguous. "The subsection [944(c)(2)(A) ]," said the district court, "speaks in terms of payments, not liability"; and it deemed the dual liability payments in dispute to be ones made under Maine law, not the Longshore Act. The court also relied secondarily on legislative history and policy.

On this appeal, the Secretary takes the position that his own reading of the formula language is at least permissible, is a reasonable one, and is entitled to the deference ordinarily due to the agency or department under the Chevron doctrine. Chevron v. NRDC, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). We generally agree with the Secretary that the statutory language permits his reading, which is entitled to a measure of deference. We also think that the history of the provision supports the Secretary's reading. Finally, there is no clue anywhere that the distinction proposed by Bath was ever considered, let alone adopted, by Congress.

Starting with statutory language, the parties devote many pages to the question whether the disputed payments are, in a literal sense or by various characteristics, payments "under" the Longshore Act. We do not think that the bare words "under this chapter" are precise enough to resolve our case. As a matter of dictionary meaning, the phrase could (as Bath claims) refer to the statute invoked by the payor when making the payment--here, the Maine statute--or it could (as the Secretary claims) cover any payment that erases or discharges a liability that otherwise exists under the federal statute, regardless of what the payor says when handing over the money.

The surrounding circumstances seem to us equally uninformative. It makes no difference to any known purpose of Congress, or any suggested policy underlying the statute, that Bath did, as it claims, file repeated boilerplate notices of contravention denying liability under the federal statute. Conversely, it does not matter whether, as the Secretary claims, Bath reported the accidents in question to federal authorities, as other provisions required it to do. These arguments are examples of fussing about inessentials.

What matters, given that the statute's language is open to more than one reading, is the history and purpose of the provision. Congress adopted an earlier version of this formula in 1972 when the assessment device was first adopted to support the special fund. Under the 1972 amendments, the assessment was based on the proportion of the employer's prior year "payments made on risks covered by this Act" to "the total of such payments made by all" employers. 86 Stat. 1251, 1256. This is a variation, of course, on the language now comprising the first half of the statutory formula. Compare 33 U.S.C. Sec. 944(c)(2)(A).

In recent years, the main use of the special fund has been to encourage employers to hire workers who have suffered a previous partial permanent disability. For various reasons, employers feared that such a worker who suffered a new disability might impose extra liability on the employer where the first injury contributed to the severity of the second; a good example is the loss of an eye by a worker already blind in one eye. See Lawson v. Suwannee Fruit & Steamship Co., 336 U.S. 198, 69 S.Ct. 503, 93 L.Ed. 611 (1949); 2 A. Larson, Workmen's Compensation Law Sec. 59.31(a) (1994). The section 8(f) regime was designed to lessen this discouragement.

For some years, section 8(f) has accomplished this end by making the special fund, and not the employer, liable in certain circumstances for so-called "second-injury" compensation payments, beginning after 104 weeks of employer payments. 33 U.S.C. Sec. 908(f). In 1972, when Congress first adopted the employer assessment device to support the special fund, it also...