Smiley v. Director, Office of Workers Compensation Programs

• Decision Date: 15 May 1992
• Docket Number: No. 91-70335,91-70335
• Citation: 973 F.2d 1463
• Parties: Shirley A. SMILEY, Petitioner, v. DIRECTOR, OFFICE OF WORKERS COMPENSATION PROGRAMS; Navy Resale and Services Support Office, Respondents.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1463

973 F.2d 1463

Shirley A. SMILEY, Petitioner, v. DIRECTOR, OFFICE OF WORKERS COMPENSATION PROGRAMS; Navy

Resale and Services Support Office, Respondents.

No. 91-70335.

United States Court of Appeals, Ninth Circuit.

Submitted May 15, 1992. ^*

Decided Aug. 31, 1992.

Shirley A. Smiley, pro se.

Thomas R. Ungleich, Navy Exchange Service, Staten Island, N.Y., for respondent.

Petition to Review a Decision of the Benefits Review Board.

Before: FERGUSON, REINHARDT, and KOZINSKI, Circuit Judges.

FERGUSON, Circuit Judge:

This case arises from denial of a claim for benefits under the Longshore and Harbor Workers' Compensation Act, 33 U.S.C. §§ 901-950 (1988) ("the Longshore Act"). An administrative law judge (ALJ) denied Shirley A. Smiley's claim for permanent total disability benefits as compensation for a back injury and psychological injury suffered while employed by the Navy. The United States Department of Labor Benefits Review Board affirmed the ALJ's decision. We reverse.

BACKGROUND

In 1983 Shirley A. Smiley ("Smiley") worked as a security and loss prevention manager for a Navy Exchange at the LeMoore Naval Air Station in California. She claims that her disabling back problems developed after a fall at work on October 31, 1983. Earlier in 1983, she investigated her supervisor for various fiscal irregularities. Smiley claims that her psychological problems are the result of harassment in retaliation for these whistle-blowing activities.

Smiley transferred to another Naval Exchange at Mare Island in 1984 but had trouble performing her new job. She took a disability leave due to physical and psychological problems. In June 1985, while on leave, she was terminated for poor job performance.

In June 1985 Smiley filed a claim for disability, claiming that job stress made it impossible to return to her work as a security manager. She applied for and received temporary benefits on the stress claim from June 1985 until October 1985 and again from June 1986 through June 1988, when the Navy ceased paying, claiming Smiley was not totally disabled from her back injury and that her stress resulted from a legitimate personnel action which was therefore not compensable.

By 1986, Smiley had retained an attorney, Sanford Killip ("Killip"), to represent her. At some point, Gates, McDonald & Co. ("Gates, McDonald") also became a client of Killip's. Gates, McDonald was the The ALJ conducted a hearing on June 23, 1988 and issued its opinion on November 23, 1988. Killip represented Smiley at the hearing. The ALJ found that petitioner's orthopedic problems were not permanently disabling. He found that her testimony regarding her psychological complaints was not credible, and that her stress resulted from a non-compensable legitimate personnel action. He denied her claim of permanent physical and psychological injury.

                compensation insurance carrier for the Navy and a named defendant in the proceeding before the ALJ.   In fact, the record contains a letter in which Killip acknowledges that Gates, McDonald is a defendant.   A Navy attorney handled the hearing before the ALJ and the negotiations involved in Smiley's case
                

Killip died in 1989 after filing a notice of appeal with the United States Department of Labor Benefits Review Board ("BRB"). The BRB delayed action to give Smiley time to retain new counsel, which she was unable to secure. The BRB affirmed the ALJ's decision on March 27, 1991.

In addition to appealing the BRB's decision denying her benefits, Smiley claims her attorney was incompetent and had a conflict of interest because he also represented the Navy's compensation insurance carrier, Gates, McDonald. The Navy contends that (1) the issue of her attorney's representation was not raised below and should not be heard on appeal, (2) there was no actual conflict, and (3) Killip provided competent representation. Because we reverse on the conflict issue, we do not reach the merits of Smiley's contested disability claim.

DISCUSSION

Disability for work injuries suffered by Naval Exchange employees is governed by the Longshore Act. 5 U.S.C.A. § 8171 (West 1980). The Longshore Act provides that when a claim for compensation cannot be amicably resolved, a Department of Labor commissioner shall order a hearing before a qualified ALJ. 33 U.S.C. § 919(c)-(d). Orders of the ALJ are appealed to the BRB. 33 U.S.C. § 921(b)(3). The BRB must accept the ALJ's fact findings if they are supported by substantial evidence. Bumble Bee Seafoods v. Director, Office of Workers' Compensation Programs, 629 F.2d 1327, 1329 (9th Cir.1980). The court of appeals for the circuit in which the injury occurred reviews the decision of the BRB. 33 U.S.C. § 921(c). We review the BRB's decision for errors of law and adherence to the substantial evidence standard. Hairston v. Todd Shipyards Corp., 849 F.2d 1194, 1195 (9th Cir.1988).

1. Appellate Review of Smiley's Claims against her Attorney.

The Navy argues that we should not review Smiley's claims against her attorney because she raised them for the first time on appeal. We disagree.

Early in 1988 Killip notified the ALJ of a possible motion to withdraw as plaintiff's attorney. By letter dated February 1, 1988, the ALJ informed him that motions must be put in writing. On February 16, 1988, Killip, the Navy attorney and the ALJ participated in a telephone conference to discuss a continuance. The resulting Order of Continuance issued by the ALJ on February 29, 1988, notes that "[d]uring the call, the attorneys also discussed a potential conflict of interest between Claimant and Gates, McDonald, another client of Mr. Killip's. However, they both agreed that there is no real conflict because the Navy is now handling all negotiations as well as the hearing in this matter." (Emphasis added.)

It appears that Mr. Killip never made a formal motion to withdraw. However, the ALJ, on the record, clearly approved or at least acquiesced in the cozy arrangement agreed to by Killip and the Navy. Killip would represent Smiley at the hearing while keeping Gates, McDonald as his client.

There is no indication in the record that Smiley knew of the conflict while her case was before the ALJ. Killip filed the appeal with the BRB. Thus, Smiley could not have raised the conflict issue during the time her attorney represented her.

Killip died in April of 1989. Smiley wrote to the BRB on July 20, 1989. She asked for more time to retain counsel and described her complaints against Killip. Her letter stated "My attorney had in his possession evidence proving case, but failed to produce it. This might have been because he was ill or possibly because he was retained by the insurance company representing the carrier for the Navy Resale System one month before my first hearing was set." On October 20, 1989, Smiley again wrote the BRB, informing them that she had received her file, which had been in Mr. Killip's possession. She told the BRB that she had found a telephone message from the Navy attorney to Killip in the file, offering to settle the case for $150,000, an offer she claims Killip never told her about.

On May 16, 1990, the BRB issued an order denying a motion to dismiss made by the Navy. The BRB also stated that it would consider the statements in claimant's July letter.

This court can review issues raised for the first time on appeal in certain situations, including review for "clear error" or where review will prevent "manifest injustice." Animal Protection Institute of America v. Hodel, 860 F.2d 920, 925 (9th Cir.1988). But we need not rely on these exceptions to reach Smiley's claim. The conflict issue is an issue of law. The Navy has never disputed that Killip represented Gates, McDonald at the same time he represented petitioner. The ALJ's acceptance of the representation despite the conflict is part of the record. Smiley alerted the Board to her concerns about her attorney in the July 20, 1989 letter and in its subsequent order the Board agreed to consider them. Although Smiley had raised the conflict issue in the context of her attorney's alleged ineffectiveness, the BRB had an obligation to address it, especially because Smiley was representing herself at that point. See Haines v. Kerner, 404 U.S. 519, 520, 92 S.Ct. 594, 595, 30 L.Ed.2d 652 (1972) (obligation to construe pro se pleadings liberally). However, in its decision, the BRB did not address the conflict issue at all and instructed Smiley to seek modification of the ALJ's decision to introduce evidence she claimed her attorney had withheld.

The BRB reviews errors of law by the ALJ. 33 U.S.C. § 921(b)(3). We have no problem in reaching an issue of law of which both the ALJ and the BRB were aware, and which the BRB specifically promised to consider. The Navy was fully aware of the conflict and so cannot claim surprise or lack of notice. We therefore reject the Navy's claim that we may not consider the issue of Killip's representation because it is raised for the first time on appeal.

2. The Conflict of Interest Claim.

The Navy argues that there was no conflict because Killip's representation of Smiley was unrelated to the matters in which he represented Gates, McDonald. The ALJ apparently agreed that there was no conflict because the Navy, rather than Killip, was handling the negotiations and the hearing in Smiley's case.

This conclusion is unsupportable. It appears that Gates, McDonald, as the insurance carrier for the Navy, would pay the claim if Smiley was successful. Gates, McDonald was a named defendant in the matter before the ALJ. There was a serious, direct financial conflict between Mr. Killip's two clients. The ALJ's failure to determine whether Killip should have been disqualified requires reversal.

33 U.S.C. § 919(d) and 20 C.F.R. § 702.332 (1988) provide that hearings held under the Longshore Act shall be conducted pursuant to the Administrative Procedure Act, 5 U.S.C.A. § 554 (West Supp.1992). Mrs. Smiley had a...