BRB No. 92-0971
JOHNNY R. BROUSSARD )
)
Claimant-Petitioner )
)
v. )
)
HOUMA LAND & OFFSHORE )
)
and )
)
AETNA CASUALTY AND SURETY ) DATE ISSUED: 02/28/1996
COMPANY )
)
Employer/Carrier- )
Respondents )
)
DIRECTOR, OFFICE OF WORKERS' )
COMPENSATION PROGRAMS, )
UNITED STATES DEPARTMENT OF )
LABOR )
)
Respondent ) DECISION and ORDER
Appeal of the Decision and Order - Denying Claimant's Motion for Summary
Judgment and Granting Employer/Carrier's Motion for Summary Judgment of
Lee J. Romero, Jr., Administrative Law Judge, United States Department
of Labor.
Joseph G. Albe, New Orleans, Louisiana, for claimant.
John M. Sartin, Jr. (Cornelius, Sartin & Murphy), New Orleans,
Louisiana, for employer/carrier.
Samuel J. Oshinsky (J. Davitt McAteer, Acting Solicitor of Labor; Carol
DeDeo, Associate Solicitor; Janet R. Dunlop, Counsel for Longshore),
Washington, D.C., for the Director, Office of Workers' Compensation
Programs, United States Department of Labor.
Before: HALL, Chief Administrative Appeals Judge, SMITH and DOLDER,
Administrative Appeals Judges.
PER CURIAM:
Claimant appeals the Decision and Order - Denying Claimant's Motion for
Summary Judgment and Granting Employer/Carrier's Motion for Summary Judgment (91-
LHC-2260) of Administrative Law Judge Lee J. Romero, Jr., 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. (the Act). We must affirm the
findings of fact and conclusions of law of the administrative law judge which are
rational, supported by substantial evidence, and in accordance with law.
O'Keeffe v. Smith, Hinchman & Grylls Associates, Inc., 380 U.S. 359 (1965);
33 U.S.C. §921(b)(3).
The basic facts in this case are undisputed. Claimant sustained an injury in
the course of his employment with Houma Land & Offshore on September 25, 1986, and
subsequently filed a claim for compensation with the Department of Labor on March
6, 1987. Upon notification, employer filed its Notice of Controversion on April
20, 1987.
On July 28, 1987, a Complaint for Damages was filed by claimant in the United
States District Court for the Eastern District of Louisiana naming CNG Producing
Company and Bruce Boat Rental, Incorporated, as defendants. In September 1990,
pursuant to Rule 68 of the Federal Rules of Civil Procedure, the defendants in this
third-party suit made an offer of judgment in the amount of $10,000 each, which was
accepted by claimant.
On September 13, 1990, a "Judgment Pursuant to Federal Rule of Civil Procedure
68" was rendered and signed by United States District Judge Robert F. Collins.
Written approval of the action taken by claimant in accepting the Rule 68 Offer of
Judgment and the money paid pursuant thereto was not made by employer/carrier, or
for that matter sought by claimant. The parties to this claim agreed that the
$20,000 received by claimant pursuant to the third-party suit is less than the
compensation to which claimant would be entitled under the Act. Employer has paid
no compensation or medical benefits to claimant since March 22, 1988.
The administrative law judge noted that the sole issue presented in this case
is whether claimant's action in accepting an offer of judgment under Federal Rule
of Civil Procedure (Rule) 68, for which consent was neither sought from nor given
by employer/carrier, constitutes a "settlement" barring claimant's rights under the
Act as provided by 33 U.S.C. §933(g)(1). The administrative law judge
initially determined that a judgment under Rule 68 results from "an agreement among
the parties involving mutual concession," and that the purpose of Section 33(g)(1),
to protect the interests of employer, would be avoided if a claimant were allowed
to settle third-party claims under Rule 68 without employer's approval. The
administrative law judge, thus, found that claimant's acceptance of the third-party
defendant's Offer of Judgment rendered pursuant to Rule 68 constituted a settlement
of his third-party claim within the scope of the written approval requirements of
Section 33(g)(1) of the Act. In light of this finding, the administrative law
judge concluded that since the third-party settlement entered into by claimant did
not conform to the explicit provisions of Section 33(g)(1), claimant is not
entitled to any compensation or medical benefits due and/or owing as of the date
of the approved offer of judgment and thereafter. Accordingly, the administrative
law judge denied claimant's Motion for Summary Judgment and granted
employer/carrier's Motion for Summary Judgment. On appeal, claimant asserts that
the administrative law judge erred by finding his claim barred by Section 33(g) of
the Act. Employer/carrier responds, urging affirmance of the administrative law
judge's Decision and Order.[1] Claimant has also
filed a reply brief reiterating his challenge to the administrative law judge's
finding under Section 33(g).
Claimant argues that his acceptance of the Offer of Judgment under Rule 68 is
not equivalent to a settlement contemplated by Section 33(g) of the Act. Claimant
maintains that the third-party document executed by claimant, CNG Producing Company
and Bruce Boat Rental represents a judgment and thus does not constitute a
settlement to which Section 33(g) applies. In support of his contention, claimant
cites Maguire v. Federal Crop Insurance Corp., 181 F.2d 320 (5th Cir. 1950),
for the proposition that the Offer of Judgment under Rule 68 cannot be a settlement
since the court issued an order rendering judgment according to the tender.
Claimant further avers that he should not now be penalized for following the
procedures of the district court by entering into the Offer of Judgment, since both
claimant and his attorney believed that the damage award on this federal third-
party claim would not exceed the Offer of Judgment amount. Consequently, claimant
argues that he was compelled to accept the Offer of Judgment, since had he refused,
Rule 68 would have required him to be responsible for all costs incurred by the
other parties after they made the offer. Claimant also asserts that he is
prejudiced by a sanction provision in Rule 68 which is now being used to defeat any
remedy he may have had for future workers' compensation benefits under the Act.
Moreover, claimant asserts that no damage or injury has been sustained by the
employer and/or carrier through claimant's acceptance of the Rule 68 Offer of
Judgment without its approval.
SECTION 33
Section 33 of the Act addresses situations where an employee sustains a
disability compensable under the Act, for which a third party may be liable in
damages. In such a case, the claimant need not elect whether to seek compensation
or pursue a third-party suit to recover damages. 33 U.S.C. §933(a). Section
33 permits an employee to file suit against a third party while also pursuing
compensation under the Act and contains provisions designed to prevent injured
employees from receiving double recoveries where they are entitled to both benefits
under the Act and civil damages from a successful suit. See 33 U.S.C.
§933(e), (f), (g); Petroleum Helicopters, Inc. v. Collier, 784 F.2d
644, 18 BRBS 67 (CRT) (5th Cir. 1986); United Brands v. Melson, 594 F.2d
1068, 10 BRBS 494 (5th Cir. 1979).
The purpose of Section 33(g) is to protect the employer against the employee's
entering into an inordinately low settlement, which would deprive the employer of
a proper offset under Section 33(f). Collier, 784 F.2d at 644, 18 BRBS at
67 (CRT); see also Estate of Cowart v. Nicklos Drilling Co., U.S.
, 112 S.Ct. 2589, 26 BRBS 49 (CRT) (1992). Section 33(f) acts as a safeguard
against double recovery by allowing employer to offset against its liability the
net amount of any recovery that the person entitled to compensation receives from
third parties for the same disability claimed under the Act.[2] Collier, 784 F.2d at 644, 18 BRBS at 67 (CRT); Melson,
594 F.2d at 1068, 10 BRBS at 494.
Under Section 33(g)(1) of the Act, an employer is not obligated to pay
compensation to an employee who, without the employer's and carrier's prior written
approval, settles a claim against a third person for an amount less than the
compensation to which the employee is entitled under the Act.[3] An employee is required to provide notification
under Section 33(g)(2) to his employer, but is not required to obtain prior written
approval, in two instances: (1) where the employee obtains a judgment,
rather than a settlement against a third party; or (2) where the employee
settles for an amount greater than or equal to employer's liability under the
Act.[4] Cowart, 112 S.Ct. at 2597, 26 BRBS
at 53 (CRT). Claimant seeks to have this case fall under subsection (g)(2) by
claiming that the Offer of Judgment is the equivalent of a judgment rather than a
settlement.
In Morauer & Hartzell, Inc. v. E. D. Woodworth, 439 F.2d 550 (D.C. Cir.
1970), the United States Court of Appeals for the District of Columbia Circuit held
that a judicial determination of liability and/or damages is necessary to avoid a
termination of benefits under Section 33(g). The court noted that the consent
judgment obtained in that case by the claimant against a third-party tortfeasor was
not the result of an independent judicial finding of the value of the claim after
a full presentation of the evidence. Rather, the consent judgment was, at most,
an informal exploratory attempt by the trial judge to determine the possibilities
for a private settlement. The court observed that the trial judge did not
force acceptance of his suggested figure by indicating that it was the highest
amount he would accept from the jury if the case had gone to trial. The plaintiff
was, therefore, free to reject the settlement opportunity and have the case heard.
Consequently, the court concluded that since the consent judgment was not a
judicial determination but rather a "compromise" within the meaning of Section
33(g), claimant's subsequent claim for additional compensation was barred. This
rationale echoes the United States Supreme Court's decision in Banks v. Chicago
Grain Trimmers Association, 390 U.S. 459, reh'g denied, 391 U.S. 929
(1968), wherein the Court specifically held that since an Order for Remittitur is
a judicial determination of recoverable damages, and is not an agreement between
the parties involving mutual concessions, it cannot be a settlement for purposes
of Section 33(g). In Banks the Supreme Court held that the danger of an
employee's accepting too little for his cause of action against a third party is
not present when damages are determined, not by negotiations between an employee
and third party, but rather by the independent evaluation of a trial judge.
Banks, 390 U.S. at 467. Therefore, a key factor in determining the
applicability of Section 33(g)(1) is the relevant involvement of the parties and
the district court judge in the resolution of the third-party claim.
RULE 68: OFFER OF JUDGMENT
Rule 68 of the Federal Rules of Civil Procedure permits a defendant, until ten
days before trial, to offer to allow a judgment to be taken against it. Fed. R.
Civ. P. 68. If the plaintiff rejects this offer, and a subsequent judgment in
favor of the plaintiff is not more favorable than the rejected offer, the plaintiff
must pay the costs incurred after the offer was made.[5] Id. The application of Rule 68 is mandatory, both in terms
of the judge's entering a Rule 68 Offer of Judgment if the plaintiff accepts the
offer, and in awarding costs incurred after the offer was made and refused, and a
lower judgment ensued. Mallory v. Eyrich, 922 F.2d 1273 (6th Cir. 1991);
Hopper v. Euclid Manor Nursing Home, Inc., 867 F.2d 291 (6th Cir. 1989);
Simon v. Intercontinental Trans. (ICT) B.V., 882 F.2d 1435 (9th Cir. 1989);
Johnston v. Penrod Drilling Co., 803 F.2d 867 (5th Cir. 1986). Unlike
imposed judgments and ordinary consent judgments, Rule 68 leaves no discretion with
the district court to do anything but enter judgment once an offer has been
accepted. Id. In this regard, judgments entered under Rule 68 are self-
executing. Id. Once the parties agree on the terms of the judgment, the
court has no discretion to withhold its entry or to otherwise frustrate the
agreement. Id.
To decide whether there has been a valid offer and acceptance for purposes of
Rule 68, courts apply the principles of contract law. Radecki v. Amoco Oil
Co., 858 F.2d 397 (8th Cir. 1988); Johnson v. University College of
University of Alabama in Birmingham, 706 F.2d 1205 (11th Cir.), cert.
denied, 464 U.S. 994 (1983); Adams v. Wolff, 110 F.R.D. 291 (D. Nev.
1986); Bently v. Bolger, 110 F.R.D. 108 (C.D. Ill. 1986). Thus, there must
be an objective manifestation of mutual assent for offer and acceptance to create
a binding Rule 68 Offer of Judgment. Radecki, 858 F.2d at 400. This occurs
between the parties, completely independent of any tribunal officer, and therefore,
reflects the nature of a settlement agreement rather than a judgment. Id.
In Delta Airlines, Inc. v. August, 450 U.S. 346 (1981), the United
States Supreme Court delineated the function of Rule 68 as follows:
The purpose of Rule 68 is to encourage the settlement of
litigation. In all litigation, the adverse consequences of potential
defeat provide both parties with an incentive to settle in advance of
trial. Rule 68 provides an additional inducement to settle in
those cases in which there is a strong probability that the plaintiff
will obtain a judgment but the amount of recovery is uncertain. Because
prevailing plaintiffs presumably will obtain costs under Rule 54(d),
Rule 68 imposes a special burden on the plaintiff to whom a formal
settlement offer is made. If a plaintiff rejects a Rule 68
settlement offer, he will lose some of the benefits of victory if
his recovery is less than the offer.
August, 450 U.S. at 352, [emphasis added]. In Marek v. Chesny,
473 U.S. 1 (1986), the Supreme Court similarly referred to Rule 68 as a "pretrial
offer of settlement." Marek, 473 U.S. at 4. Consequently, the language of
the August and Marek decisions strongly indicates that Rule 68 is
intended to be a settlement device rather than a decision rendered by a court after
judicial determination of contested damages and liability following the
presentation of evidence.[6] See also
Herrington v. County of Sonoma, 12 F.3d 901 (9th Cir. 1993)(referring to Rule
68 Offer of Judgment as an offer of settlement.).
In the instant case, the third-party defendants offered and claimant accepted
a "Rule 68 settlement offer," in accordance with the basic tenets of contract law.
Despite assertions to the contrary, claimant clearly had the option to reject the
defendant's offer and have his case heard on its merits. However, claimant,
presumably after a consideration of the relevant factors of his third-party claim,
elected to accept the defendant's offer because that course of action appeared to
be in his best interests. At that time, there was no guarantee that claimant would
be able to obtain a favorable judgment awarding a greater sum of money had he
sought to fully pursue his third-party suit. Claimant had to weigh the
aforementioned information against the possibility that a subsequent judicial award
of damages might not be greater than the settlement offer, thus, subjecting
claimant to possible Rule 68 sanctions. Claimant, therefore, was not compelled to
accept the offer.
Despite having signed a "Judgment Pursuant to Federal Rule of Civil Procedure
68," Judge Collins had no part in deciding the liability of the parties, or in
determining whether the amount offered and accepted was appropriate. See
Banks, 390 U.S. at 467. Consequently, there was no independent judicial
evaluation of claimant's third-party claim. Judge Collins merely approved the
stipulated settlement reached by the parties. Thus, the very nature of the Rule
68 Offer of Judgment in this case openly lends itself to being categorized as a
settlement agreement. We, therefore, hold that the Rule 68 Offer of Judgment is
tantamount to a formal settlement agreement and, thus, is a "compromise" for
purposes of Section 33(g)(1).[7]
We also hold that claimant's remaining contentions are meritless. First,
claimant is not being penalized for following the procedures of the court by
entering into the Offer of Judgment. While Rule 68 does place an additional burden
on claimant in that it provides possible sanctions against a plaintiff who rejects
an offer of judgment and is subsequently awarded damages for less than the rejected
offer, this additional burden is meant to serve as an "additional inducement" for
claimant to settle rather than litigate his claim. August, 452 U.S. at 352.
In this regard, the possibility of Rule 68 sanctions is not the equivalent of a
penalty. Claimant's denial of additional compensation benefits under the Act is
not immediately due to his execution of the Offer of Judgment. Claimant could have
entered into such an agreement and remained eligible for additional compensation
under the Act, by obtaining employer/carrier's approval of the agreement. The
denial of additional compensation benefits in this case is a direct result of
claimant's failure to comply with the Section 33(g)(1) prior written approval
requirements.
Additionally, contrary to claimant's contention, employer has sustained an
injury through the claimant's acceptance of the Rule 68 Offer of Judgment. As
previously noted, the purpose of Section 33(g) is to protect the employer against
the employee's entering into an inordinately low settlement, which would deprive
the employer of a proper offset under
Section 33(f). Collier, 784 F.2d at 644, 18 BRBS at 67 (CRT); Melson,
594 F.2d at 1068, 10 BRBS at 494. Consequently, the third-party settlement
in this case has a direct effect on employer's liability for additional
compensation benefits, and thus, most certainly has an impact upon employer.
Lastly, claimant's reliance on Maguire, 181 F.2d at 320, is misplaced.
In Maguire, the court held that an offer of compromise is not an offer of
judgment. The basis for the court's decision rests largely on the fact that the
offer of compromise in Maguire failed to conform to the formal requirements
of Rule 68. The court specifically recognized this distinction "so that appellee,
before another trial, [might] avail itself of the benefit of this rule [68] by
formal compliance with the provisions thereof," if it saw fit to do so.
Maguire, 181 F.2d at 322. Moreover, the language of August, 450 U.S.
at 352, indicates that Rule 68 could be interpreted to include a formal settlement
offer, so long as that offer conforms with that rule's requirements. See
generally S.G.C. v. Penn-Charlotte Associates, 116 F.R.D. 286 (W.D. N. C.
1987). Therefore, the holding in Maguire cannot stand, as claimant
suggests, for the proposition that an offer of judgment is not a compromise between
the parties.
Inasmuch as claimant failed to obtain employer's written approval before the
Rule 68 settlement agreement was executed, we hold that the administrative law
judge properly found that the claim is barred by the provisions of Section
33(g)(1). Cowart, 112 S.Ct. at 2589, 26 BRBS at 49 (CRT). We, therefore,
affirm the administrative law judge's determination that claimant is not entitled
to any further benefits due and/or owing as of the date of the approved Offer of
Judgment and thereafter. Consequently, the administrative law judge's denial of
claimant's Motion for Summary Judgment and granting of employer/carrier's Motion
for Summary Judgment is affirmed as it accords with law.
Accordingly, the administrative law judge's Decision and Order - Denying
Claimant's Motion for Summary Judgment and Granting Employer/Carrier's Motion for
Summary Judgment is affirmed.
SO ORDERED.
BETTY JEAN HALL, Chief
Administrative Appeals Judge
ROY P. SMITH
Administrative Appeals Judge
NANCY S. DOLDER
Administrative Appeals Judge
To Top of Document
Footnotes.
1)The Director, Office of Workers' Compensation Programs (the
Director), filed a response brief requesting that the Board hold the instant case
in abeyance pending resolution by the United States Supreme Court of Estate of
Cowart v. Nicklos Drilling Co., 60 U.S.L.W. 3418 (U.S. Dec. 9, 1991)(No. 91-
17), granting review of 927 F.2d 828 (5th Cir. 1991)(en banc). We
note that the United States Supreme Court's decision in Estate of Cowart v.
Nicklos Drilling Co., U.S. , 112 S.Ct. 2589, 26 BRBS 49 (CRT) (1992), was
issued on June 22, 1992, thereby making the Director's request moot.
Back to Text
2)Section 33(f) provides
If the person entitled to compensation institutes proceedings . . .
the employer shall be required to pay as compensation under this chapter
a sum equal to the excess of the amount which the Secretary determines
is payable on account of such injury or death over the net amount
recovered against such third person. . . .
33 U.S.C. §933(f)(1988).
Back to Text
3)Section 33(g)(1), as amended in 1984, states:
(1) If the person entitled to compensation (or the person's
representative) enters into a settlement with a third person referred to
in subsection (a) of this section for an amount less than the
compensation to which the person (or the person's representative) would
be entitled under this chapter, the employer shall be liable for
compensation as determined under subsection (f) of this section only if
written approval of the settlement is obtained from the employer and the
employer's carrier, before the settlement is executed, and by the person
entitled to compensation (or the person's representative). The approval
shall be made on a form provided by the Secretary and shall be filed in
the office of the deputy commissioner within thirty days after the
settlement is entered into.
33 U.S.C. §933(g)(1)(1988).
Back to Text
4)In the instant case, the parties have stipulated that the
amount received by claimant pursuant to the third-party settlement is less than the
compensation to which claimant would be entitled under the Act, and thus, claimant
is required to obtain employer's written approval of the third-party settlement,
unless claimant's acceptance of the third-party Offer of Judgment is determined to
be a judgment.
Back to Text
5)Fed. R. Civ. P. 68, states in pertinent part:
At any time more than ten days before the trial begins, a party
defending against a claim may serve upon the adverse party an offer to
allow judgment to be taken against him for the money or property or to
the effect specified in his offer, with costs then accrued. [If the
offer is rejected and] . . . [i]f the judgment finally obtained by the
offeree is not more favorable than the offer, the offeree must pay the
costs incurred after the making of the offer.
Back to Text
6)Additional support for this determination is found through an
examination of proposed Congressional amendments to Rule 68. In response to a
growing belief that Rule 68 had failed to achieve its goal of encouraging
settlements, an advisory committee proposed amendments in 1983 and 1984. 7 Moore's
Federal Practice 68.07. Among the proposed changes, the Advisory Committee
recommended that Rule 68 be "recaptioned to refer to `settlement' to indicate
[that] it is that process rather than entry of a judgment that is being fostered."
Advisory Committee Note on Rules of Civil Procedure, Report of Proposed Amendments,
102 F.R.D. 432 (1984). The Advisory Committee, however, tabled these proposals in
1986, largely due to suggestions that the proposed amendments as a whole involved
substantive changes which violated the Rules Enabling Act, 28 U.S.C. §2072,
which provides that the Federal Rules "shall not abridge, enlarge or modify any
substantive right." 7 Moore's Federal Practice 68.07[5].
Back to Text
7)Claimant further avers that at the time the tender of judgment
was accepted, claimant did not believe or state that he was accepting an offer of
settlement. Claimant, however, has shown nothing to support this belief and a
plethora of cases in existence prior to the execution of the Offer of Judgment in
this case referred to an offer of judgment as a settlement agreement.
See, e.g., August 450 U.S. at 346; Marek, 473 U.S. at 1;
Radecki, 858 F.2d at 397; Johnson, 706 F.2d at 1205. Clearly, there
was mutual assent between claimant and the third-party defendants in this case and
thus, a meeting of the minds as to the terms of the Offer of Judgment.
Accordingly, contract law establishes the existence of a contract for the purpose
of settling the third-party claim. Claimant's assertion, therefore, does nothing
to change the fact that the Rule 68 Offer of Judgment meets the definition of a
settlement.
Back to Text
NOTE: This is a PUBLISHED LHCA Document.
To Top of Document
|
