USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 94-1094
ROBERT B. REICH,
SECRETARY OF LABOR,
Plaintiff, Appellant,
v.
BATH IRON WORKS CORPORATION,
Defendant, Appellee.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Gene Carter, U.S. District Judge]
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Before
Selya, Cyr and Boudin,
Circuit Judges.
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Joshua T. Gillelan II, Senior Attorney, Office of the Solicitor,
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Department of Labor, with whom Thomas S. Williamson, Jr., Solicitor of
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Labor, and Carol A. De Deo, Associate Solicitor, were on brief for
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appellant.
Robert H. Koehler with whom Judith Bartnoff and Patton, Boggs &
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Blow were on brief for appellee.
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December 16, 1994
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BOUDIN, Circuit Judge. Bath Iron Works, Inc. ("Bath")
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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.
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. 903(a).
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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. 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. 908(f), a
provision described below. See 33 U.S.C. 944(i). The
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special fund is primarily funded by annual assessments levied
by the Secretary on employers subject to the Longshore Act.
Id. 944(c).1
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1The statute refers to contributions by self-insured
employers or carriers; but for simplicity we refer to
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"employers" throughout the opinion.
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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. Because
the dispute involves Bath's obligation to the special fund,
the statutory formula used to determine such obligations--33
U.S.C. 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
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estimates other fund income (e.g., fines) and levies the
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balance by assessing employers. Id. Specifically, the
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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.
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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.
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. 944(c)(2)(B). In brief,
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the employer's obligation is based in part on its own prior
payment experience and in part on the special fund's
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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,
1 et seq. The Maine statute generally provides comparable
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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
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statute and filed a boilerplate denial of liability under the
Longshore Act. See 33 U.S.C. 914(d).
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An employer's payment of workers' compensation under a
state statute discharges the employer's liability pro tanto
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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. 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
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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 (1984).
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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.
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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. 944(c)(2)(A).
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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
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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 &
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Steamship Co., 336 U.S. 198 (1949); 2 A. Larson, Workmen's
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Compensation Law 59.31(a) (1994). The section 8(f) regime
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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. 908(f). In 1972, when Congress first
adopted the employer assessment device to support the special
fund, it also greatly enlarged the scope of the fund's
liability by inter alia extending the fund's liability
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retroactively to provide some coverage for some second
injuries that had occurred prior to the new statutory
amendments.
What Congress discovered between 1972 and 1984 is that
employers were "dumping" as many cases as possible in the
section 8(f) basket. This meant that the employer not only
avoided compensation liability to the worker after 104 weeks
(as intended) but also (unexpectedly) lowered the employer's
future formula payments to the special fund below the level
that would otherwise have applied. The lowering occurred
because the original 1972 formula only counted payments by
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the employer as increasing the employer's fraction; section
8(f) payments made by the fund, on account of the employer's
double-injury employees, did not increase the employer's
assessment.
Under the new section 944(c)(2) formula adopted in 1984
and in force today, the payments by the fund on account of
these double-injury employees is now attributed to the
employer to the extent that such payments increase the
employer's assessment under the second half of the formula.
This second half represents only 50 percent of the final
assessment; thus the employer gets some help when the fund
takes over compensation and, presumably, the employer retains
some incentive to hire the partly disabled. But the employer
does see its future assessments rise somewhat as the employer
transfers responsibility to the special fund.
As Congress saw it, "[t]his [new] formula will, at once,
dissuade the dumping of cases into the fund, and will more
equitably apportion the responsibility of paying for the
fund."
130 Cong. Rec. 25,904 (1984) (statement of Mr. Miller).2
Further, because the employer now has a continuing (albeit
indirect) interest in holding down unjustified payments to
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2The statutory solution ultimately devised by Congress
was adopted late in the day by the Conference Committee and
explained only in floor statements. Compare H. Rep. No. 98-
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570, 98th Cong., 1st Sess. 20-21 (1983), with Conf. Rep. No.
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98-1027, 98th Cong., 2d Sess. 31 (1984).
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employees even after 104 weeks, the legislators expected that
unjustified disability claims would be better policed than
they had been by the fund administrators. Id. Other
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explanations for the change are consistent. 130 Cong. Rec.
26,297 (1984) (statement of Senator Nickles).
In sum, prior to 1984 Congress intended the special fund
to be paid for by employers primarily in proportion to their
experience in paying compensation claims required to be paid
by the federal statute ("payments made on risks covered by
[the] Act"). No reason is suggested to us why Congress might
have wished in 1984 to lower an employer's share because, by
happenstance, the employer was located in a state with
generous compensation laws of its own and the employer chose
to pin a state label on its payment while discharging an
obligation that existed under both federal and state law. By
the same token, no legislative evidence indicates that
Congress intended to make such a change in 1984.
Bath infers such an intent because Congress in 1984
altered the 1972 phrase "payments made on risks covered by
[the] Act" to refer instead to payments "under this chapter."
As best we can tell, Congress happened by chance to alter the
wording of the original 1972 sentence when--in a last-minute
compromise (see note 2, supra)--it adopted the 1972 provision
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as the first part of the new two-part formula. To the extent
that the 1972 language is slightly more helpful to the
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Secretary, it strengthens the Secretary's present position
slightly, rather than detracts from it, precisely because
there is no indication that Congress meant to change the
substance of that part of the formula.
There is only one discrepancy that gives us any pause.
In 1991, the Secretary's Benefits Review Board rendered a
decision in a case entitled Stewart v. Bath Iron Works Corp.,
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25 B.R.B.S. 151 (1991). There, it appears that a second-
injury employee of Bath withdrew a claim for compensation
under the Longshore Act when Maine's benefits proved more
generous. Although the Stewart opinion is difficult to
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decipher without more information, the Board apparently took
the view that section 8(f) relief from the special fund was
not available to Bath because the payments that Bath was
making to the employee were required of Bath by the Maine
statute but not by federal law.
Bath argued to the district court, and repeats here, its
claim that "it would be anomalous to base [Bath's] special
fund assessments on state law payments, when special fund
relief is not available to [Bath] from its obligations under
the Maine [compensation law]." The technical responses
offered in the government's reply brief may explain why the
district court saw some merit in Bath's reliance on Stewart.
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The government's failure either to answer Bath's central
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argument, or to concede the discrepancy, is not what we would
expect from government counsel.
Bath's argument is relevant in the sense that a
construction that produces anomalous results is, by that fact
alone, a more doubtful reading of a statute. Public
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Employees Retirement Sys. of Ohio v. Betts, 492 U.S. 158,
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177-78 (1989). Still, nothing in Stewart is literally
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inconsistent with the government's reading of the assessment
formula; Stewart turns on a reading of other provisions of
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the Longshore Act that are not centrally involved in this
case. At worst, Stewart--assuming it was correctly decided--
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produces an apparent possible inequity of a kind that is not
unknown in complex statutory arrangements. Puerto Rico
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Telephone Co. v. FCC, 553 F.2d 694, 700 (1st Cir. 1977).
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We have far too little information to assess fully the
dense and elliptical opinion in Stewart. The case may have
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been wrongly decided; or the anomaly may be a rarity that
carries no great weight in interpreting the formula
provisions before us; or it may not be an inequity at all
(the Board in Stewart refers to the possibility that Bath
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could seek relief from Maine's counterpart to the special
fund provision). Bath gives us no information on any of
these matters, so there is no reason to feel distress on its
behalf in having to leave this dangling loose end.
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The judgment of the district court is vacated and the
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case remanded for further proceedings consistent with this
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opinion.
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