Does the Director Have a New Interpretation of Section 28(b)? Or Just a New Litigating Position?

A recent Court of Appeals filing from the Director of the Office of Workers’ Compensation Programs raises questions about whether the Director has a new interpretation of Section 28(b) of the Longshore and Harbor Workers’ Compensation Act (“LHWCA”) or whether the Director has taken inconsistent litigation positions.  You be the judge.

Attorneys fees can shift from a claimant to an employer or carrier pursuant to Section 28 of the LHWCA.  For purposes of this post, only Section 28(b) is relevant.  That statute states in pertinent part:

If the employer or carrier pays or tenders payment of compensation without an award pursuant to section 14(a) and (b) of this Act, and thereafter a controversy develops over the amount of additional compensation, if any, to which the employee may be entitled, the deputy commissioner or Board shall set the matter for an informal conference and following such conference the deputy commissioner or Board shall recommend in writing a disposition of the controversy.  If the employer or carrier refuse to accept such written recommendation, within fourteen days after its receipt by them, they shall pay or tender to the employee in writing the additional compensation, if any, to which they believe the employee is entitled.  If the employee refuses to accept such payment of tender of compensation, and thereafter utilizes the services of an attorney at law, and if the compensation thereafter awarded is greater than the amount paid or tendered by the employer or carrier, a reasonable attorney’s fees based solely on the difference between the amount awarded and the amount tendered or paid shall be awarded in addition to the amount of compensation. . . . In all other cases any claim for legal services shall not be assessed against the employer or carrier.

Agency deference is an important litigation concern.  Generally, when Congress has “explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation;” and “[s]uch legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute.”  Chevron, U.S.A., Inc. v. National Resources Defense Council, Inc., 467 U.S. 837, 843-44 (1984), quoted in Tualatin Valley Builders Supply, Inc. v. U.S., 522 F.3d 937, 941 (9th Cir. 2008).  Yet, Chevron deference is not always owed.  Pursuant to Skidmore v. Swift & Co., 323 U.S. 134, 139-140 (1944), the weight given to an agency’s interpretation of a statute depends on “the degree of the agency’s care, its consistency, formality, and relative expertness, and to the persuasiveness of the agency’s position.”  The weight applied to an agency interpretation can range from great respect to near indifference.  U.S. v. Mead Corp., 533 U.S. 218, 228 (2001).

While an agency is allowed to change its mind, “the consistency of an agency’s position is a factor in assessing the weight that position is due.”  Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 417 (1993).  The weight assigned to an agency’s interpretation depends on the facts of the case.  Id.  An agency’s conflicting interpretations are entitled to considerably less deference.  Id.  Deference to an “agency’s convenient litigation position would be entirely inappropriate.”  Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 213 (1988) (noting that Secretary’s litigation position was “[f]ar from being a reasoned and consistent view”).

To be sure, Section 28(b) has been the focus of much debate over the last decade because of a series of decisions out of the Fourth, Fifth and Sixth Circuits.  A circuit split developed with the Fourth, Fifth and Sixth Circuits on one side and the Ninth Circuit on the other.  To shift attorney’s fees under Section 928(b) in the so-called “strict” circuits, there must be (1) an informal conference; (2) a dispositive written recommendation from the deputy or Board; (3) the employer’s refusal to adopt the written recommendation; and, (4) claimant’s securing a lawyer to achieve a greater amount of compensation than what the employer was willing to pay after the recommendation.   Andrepont v. Murphy Exploration & Prod. Co., 566 F.3d 415, 418, 421 (5th Cir. 2009); Pittsburgh & Conneaut Dock Co. v. Dir., OWCP, 473 F.3d 253, 264-67 (6th Cir. 2007); Va. Int’l Terminals, Inc. v.  Edwards, 398 F.3d 313, 318 (4th Cir. 2005), cert. denied, 546 U.S. 960 (2005); Davis v. Eller & Co., 41 Ben. Rev. Bd. Serv. (MB) 58 (2007).

On the other side of the spectrum is the Ninth Circuit.  Proponents for a “looser” application of Section 28(b) want to apply the Ninth Circuit’s general rule—dating from 1979—that fees may be shifted whenever the extent of liability is controverted and the claimant successfully obtains increased compensation.  Nat’l Steel & Shipbuilding Co. v. U.S. Dept. of Labor, OWCP, 606 F.2d 875, 882 (9th Cir. 1979).  The Benefits Review Board is stuck in the middle.  In applies the “strict” approach unless Ninth Circuit law applies.  Davis v. Eller & Co., 41 Ben. Rev. Bd. Serv. (MB) 58 (2007).

But where does the Director stand?  Prior to the most recent filing, it appeared clear that the Director aligned himself with Fourth, Fifth and Sixth Circuit’s approach.  Consider the following paragraphs, which was taken from an Opposition the Director filed with the Supreme Court of the United States in Virginia International Terminals:

Contrary to petitioner’s principal contention (Pet. 10-15), the decision below does not clearly conflict with the decisions of the Ninth Circuit with respect to the question whether an informal conference and written recommendations are mandatory prerequisites to the award of attorney’s fees under Section 28(b).  In National Steel & Shipbuilding Co. v. United States Dep’t of Labor, 606 F.2d 875 (9th Cir. 1979), which is the primary basis for the claimed circuit conflict, the court affirmed an attorney’s fee award when the district director held an informal conference but did not issue a written recommendation following the conference.  Noting the congressional intent to limit attorney’s fee awards to cases in which parties dispute the existence or extent of liability, the court stated, “[w]e do not believe that the statute contemplates the making of a written recommendation by the deputy commissioner as a precondition to the imposition of liability for attorney’s fees.”  Id. at 882 (discussing H.R. Rep. No. 1441, 92d Cong., 2d Sess. 3 (1972)).  Further, the court reasoned that even if the “written recommendation” prerequisite was necessary, it was met, in that it was “evident” that the parties would have rejected any explicit recommendation because they had failed to reach an agreement at the informal conference, so that instead “[t]he recommendation following the informal conference * * * was for the matter to ‘be referred'” for a formal ALJ hearing “‘at the request of both parties.'”  Ibid. (citation omitted).  Under those circumstances, the court concluded that Section 28(b) provided the basis for an attorney’s fee award.

Unlike the parties in National Steel, petitioner and respondents did not participate in an informal conference, and thus the two cases do not squarely conflict.  There is no way to predict how the Ninth Circuit would have decided National Steel had there not been an informal conference.  If anything, the fact that the court relied on the conduct of the parties at the conference as evidence that a written recommendation would have been rejected suggests that the informal conference was critical to the disposition of that case.

Moreover, in Todd Shipyards Corp. v. Director, OWCP, 950 F.2d 607 (1991), a case expressly relied upon by the court of appeals below (Pet. App. 14), the Ninth Circuit subsequently distinguished National Steel and clarified the congressional intent behind Section 28 in a manner consistent with the Fourth Circuit’s decision here.  In that case, the only disputed issue following the informal conference was the claimant’s entitlement to an attorney’s fee for services rendered before the conference ended; the parties had reached an agreement at the informal conference on claimant’s entitlement to disability benefits.  950 F.2d at 608.  The court held that a fee award was not authorized in those circumstances, because Section 28(b) authorizes an attorney’s fee only when the record shows that, following an informal conference, the employer refused to accept the written recommendation of the claims examiner.  Id. at 610.  The court distinguished the case from National Steel, in which the parties continued to dispute “liability on the amount of compensation to be paid after the informal conference.” Id. at 611 (emphasis added).  The court explained:

While we believe that the intent of Congress is clear from a plain reading of the words used in [Section 28(b)], the legislative history explains unequivocally the very limited scope of attorneys’ fees awards under the statute.

“A new provision is added dealing with cases where payment of compensation is tendered and an unresolved controversy develops about the amount of additional compensation, despite the written recommendation of the deputy commissioner. The provision directs an award of a reasonable attorney’s fee . . . where the employer or carrier has refused to accept the recommendation. . . .”  In all cases other than those specified above, attorneys’ fees may not be assessed against the employer.

Id. at 610 (quoting H.R. Rep. No. 1441, supra, at 3).  Not only does this explanation call into question the continued viability of National Steel‘s holding regarding the dispensability of the written-recommendation requirement, but the Ninth Circuit’s analysis is completely consistent with the reasoning of the Fourth Circuit below.

As can be seen, the Director questioned the continued viability of National Steel when addressing Section 28(b) to the Supreme Court.  It appears that the Director supports the use of the four prerequisites recognized by the Fourth, Fifth and Sixth Circuits.  In fact, in a subsequent Brief to the United States Fifth Circuit Court of Appeals, which was submitted in Carey v. Ormet Primary Aluminum Corp., 627 F.3d 979 (5th Cir. 2010), the Director championed the use of the four prerequisites:

To shift attorney fee liability to an employer under section 28(b), a claimant must satisfy the following requirements: a) the district director must hold an informal conference; b) the district director must issue a written recommendation resolving the controversy; c) the employer must refuse to accept the recommendation; and d) the claimant must utilize the services of an attorney to obtain a greater award than that which the employer was willing to pay after the written recommendation.

Despite these statements to the Supreme Court (in 2004) and the Fifth Circuit (in 2010), the Director recently took a different tact with the United States Ninth Circuit Court of Appeals (in 2012):

It is firmly established in this Circuit that fee-shifting under Section 28(b) is not limited to situations where the employer rejects a district director’s written recommendation after an informal conference.  Indeed, fee-shifting does not depend on the existence of a written recommendation.  As the “seminal Ninth Circuit decision regarding Section [28(b)] held:

“We do not believe that the statute contemplates the making of a written recommendation by the [district director] as a precondition to the imposition of liability for attorney’s fees.  The congressional intent was to limit liability to cases in which the parties disputed the existence or extent of liability, whether or not the employer had actually rejected an administrative recommendation.”

. . .

Contrary to [Employer’s] suggestion, this Court’s later decisions have not retreated from [National Steel‘s] clear holding.  In Todd Shipyards…a panel held that a claimant was not entitled to attorney’s fees under Section 928(b).  But it did so not because of a lack of a recommendation from the district director, but because the only issue that remained in the case after the informal conference was entitlement to attorney’s fees for work performed prior to formal litigation.  The [Todd Shipyards] panel plainly reiterated the holding of [National Steel] that the purpose of Setion 28(b) is to authorize assessment of legal fees where liability is contested and an attorney secures higher compensation in formal proceedings.  950 F.2d at 610.  And it distinguished [National Steel] only because:

“In this matter, there was no controversy concerning liability on the amount of compensation to be paid after the informal conference.  These issues were resolved by Todd’s concession and the parties’ stipulation.  Section 928(b) does not authorize the payment of attorneys’ fees if the only unresolved issue is whether attorneys’ fees awarded should be for services performed prior to the successful termination of the informal conference.  That is the only issue that was unresolved after the informal conference in this matter.”

. . .

Any doubt about [National Steel‘s] continuing viability is eliminated by Matulic v. Director, OWCP, 154 F.3d 1052, 1061 (9th Cir. 1998)…

So what do you think?  Has the Director’s position changed?  The continued viability of National Steel was questionable in 2004; yet in 2012 the Director has no doubt about the continuing viability of National Steel because of the Matulic decision.  Yet, Matulic was issued in 1998, six years before the Director questioned the viability of National Steel in a brief to the Supreme Court.  Or maybe the Director’s position has not changed, and he was just analyzing Ninth Circuit law.  Perhaps that is why he used the phrase “in this Circuit.”  If that is the case, however, the Director is not entitled to deference because he is not interpreting a statute or regulation, he is instead interpreting case law.

As mentioned earlier, agency deference is a powerful tool.  But, courts will not defer to a “convenient litigating position,” especially one that lacks consistency with an agency’s prior position.   It will be interesting to see how much deference is offered to the Director’s interpretation of Section 28(b) going forward.