BRB No. 95-2177
MAE BARNES (Widow of )
EUGENE BARNES) )
)
Claimant-Petitioner )
)
v. )
)
GENERAL SHIP SERVICE ) DATE ISSUED: 11/13/1996
)
and )
)
LIBERTY MUTUAL INSURANCE )
COMPANY )
)
Employer/Carrier- )
Respondents ) DECISION and ORDER
Appeal of the Order Granting Employer's Motion for Summary Judgment of
Ellin M. O'Shea, Administrative Law Judge, United States Department of
Labor.
Anne Landwehr and Victoria Edises (Kazan, McClain, Edises, Simon &
Abrams), Oakland, California, for claimant.
Herman Ng (Hanna, Brophy, MacLean, McAleer & Jensen), San Francisco,
California, for employer/carrier.
Before: HALL, Chief Administrative Appeals Judge, SMITH and BROWN,
Administrative Appeals Judges.
PER CURIAM:
Claimant appeals the Order Granting Employer's Motion for Summary Judgment
(87-LHC-321) of Administrative Law Judge Ellin M. O'Shea 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).[1] We must affirm the findings of fact and conclusions of law of the administrative law judge if they 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).
Eugene Barnes (decedent) filed a claim for disability benefits under the Act
on May 10, 1984, after incurring lung cancer secondary to asbestos exposure during
his employment with employer. Prior to his death, decedent and his wife Mae Barnes
(claimant) filed a third-party civil action against various asbestos manufacturers
and suppliers. In 1984, decedent and claimant settled their action against 14
third-party defendants. Subsequently, decedent died of lung cancer on February 11,
1985, and claimant filed a claim for death benefits under the Act on March 6, 1985.
Claimant also filed a third-party wrongful death action against various asbestos
manufacturers and suppliers.
In a Decision and Order issued April 8, 1988, decedent was awarded permanent
total disability benefits and claimant was awarded death benefits. The
administrative law judge rejected employer's argument that claimant and decedent
were precluded from any recovery under the Act because they had entered into third-party settlements without obtaining the written consent of employer as required by
Section 33(g) of the Act, 33 U.S.C. §933(g). The administrative law judge
ruled, in accordance with existing case law, that the Section 33(g) bar did not
apply because the 1984 third-party settlements were executed prior to the time that
claimant and decedent received compensation under the Act. On appeal, the Board
affirmed the administrative law judge's decision. Barnes v. General Ship
Service, BRB Nos. 88-1453/A (March 30, 1990). Both claimant and employer
subsequently appealed to the United States Court of Appeals for the Ninth
Circuit.[2] On July 10, 1991, the Ninth Circuit
remanded the case for further fact-finding regarding apportionment of the 1984
third-party settlements pursuant to 33 U.S.C. §933(f). Barnes v. Director,
OWCP, No. 90-70227 (9th Cir. July 10, 1991).
During 1990 and 1991, claimant received offers to settle her third-party
wrongful death action from eight defendants: Johns-Manville (Manville Trust), W.R.
Grace, UNR, Uniroyal, Flintkote, Western MacArthur, Plant Insulation, and Kaiser.[3] On July 16, 1990, claimant's attorney sought
consent for a settlement offer received from Flintkote stating that claimant would
accept the settlement offer provided that the longshore carrier consented.
Subsequently, claimant signed releases in which she released and discharged each
of the eight defendants from her wrongful death claims and agreed to execute
requests for dismissal with prejudice of her civil action after payment of
settlement proceeds by the defendants to claimant's attorney as trustee for
claimant.[4] Most of the releases contain express
provisions that the terms of the release are contractual, and not a mere recital,
and constitute the entire agreement between the settling parties. The gross
amounts of the settlements range from $700 to $105,000, and total $151,340.
By letter dated July 16, 1991, claimant's counsel sought carrier's consent to
her settlements with Manville Trust, W.R. Grace, Uniroyal, Flintkote, Western
MacArthur, and Plant Insulation, stating that she would like to consummate these
settlements on behalf of claimant and distribute the monies, but would not do so
without the consent of the longshore carrier and that if consent was not received,
claimant would be forced to abandon her civil action. By letters dated July 18,
1991, claimant's counsel mailed the signed releases to counsel for defendants W.R.
Grace, Uniroyal, Flintkote, Western MacArthur, and Plant Insulation.[5] The cover letters enclosing the signed releases
state: 1) that the agreements are contingent upon the required consent under the
Longshore Act; 2) that if, at any time, plaintiff is required to rescind the
agreement because of her longshore claim, plaintiff will return the settlement
monies to the defendant; and 3) that the defendant has no right to rescind the
agreement which is final and binding as to the defendant as of the date initially
entered into. The record contains Alameda County Superior Court documents entering
the dismissal with prejudice of claimant's civil action against defendants Uniroyal
on September 5, 1991, W.R. Grace on September 13, 1991, and Flintkote on December
24, 1991. Claimant's counsel reiterated her request for consent by the longshore
carrier to the settlements on numerous occasions between September 25, 1991 and
February 21, 1995, noting in these letters that she had received no response to her
repeated requests for consent.
Finally, the record also contains letters written in March and April 1995 by
the attorneys for each of the third-party defendants, confirming their
understanding that the "tentative" settlements with claimant were contingent upon
approval of the longshore carrier, that settlement monies paid to claimant's
attorneys were to have been deposited in a trust account, and that if consent is
not obtained, the monies with interest would be returned to the defendants and
claimant would abandon her third-party action. Declarations of claimant and her
attorneys contained in the record similarly attest that settlement offers were
accepted contingent upon claimant's obtaining the carrier's consent, that
claimant's attorneys are holding settlement monies in trust for claimant, that
claimant herself has received no settlement monies, and that if the longshore
carrier refuses consent, the settlement monies, with interest, will be returned to
the defendants, and claimant's civil case would be dismissed.
In her Order Granting Employer's Motion for Summary Judgment, the
administrative law judge found that the Section 33(g) bar applies to the 1991 post-death third-party settlements, barring claimant from recovering any further
benefits under the Act.[6] In ruling that
claimant entered into fully executed settlements with third-party defendants W.R.
Grace, Uniroyal and Flintkote, the administrative law judge relied on uncontested
evidence that claimant personally signed settlement releases, that claimant's
attorney, as her agent, received and is holding settlement monies in trust for
claimant, and that dismissals with prejudice were entered with respect to the
aforementioned three settling defendants. The administrative law judge rejected
claimant's characterization of the settlements as executory, ruling that the cover
letters, which post-date claimant's signing of the releases and set forth the
carrier consent contingency, do not, by themselves, constitute an enforceable
contract, but, rather, constitute an attempted modification of the original
settlement contracts which fails for lack of consideration. The administrative law
judge further found that claimant's counsel had express authority to enter into the
agreement and to accept settlement monies on claimant's behalf, and, thus,
counsel's acceptance of the monies binds claimant under agency principles.
On appeal, claimant contends that, in order to preserve her entitlement to
benefits under the Act, claimant entered into executory, tentative third-party
settlements, conditioning final agreement on consent from the longshore carrier,
and that employer failed to satisfy its burden of showing the settlements were
fully executed. Specifically, claimant contends that the statutory language of
Section 33(g) contemplates that claimant may enter into an executory contract and
subsequently obtain employer's consent prior to full performance, or execution, of
the settlement, and that the settlement agreements must be deemed to be executory
until the condition has been fulfilled, in this case, obtaining the carrier's
consent. Claimant further avers that counsel's receipt of settlement proceeds does
not establish execution of the third-party settlement. Employer responds, urging
affirmance of the administrative law judge's Decision and Order.
Section 33(g) provides a bar to claimant's receipt of compensation where the
person entitled to compensation enters into a third-party settlement for an amount
less than his compensation entitlement without obtaining employer's prior written
consent.[7] Estate of Cowart v. Nicklos
Drilling Co., 505 U.S. 469, 26 BRBS 49 (CRT)(1992). We first address two
preliminary contentions made by claimant with respect to the issue of whether the
settlements were fully executed. Claimant avers initially that the burden of proof
to show fully executed third-party settlements falls on the employer; claimant
asserts that the reasoning of the United States Court of Appeals for the Ninth
Circuit in Force v. Director, OWCP, 938 F.2d 981, 25 BRBS 13 (CRT)(9th Cir.
1991), underlying its ruling that the employer bears the burden of proof regarding
apportionment of third-party settlements pursuant to Section 33(f), 33 U.S.C.
§933(f), applies equally to the burden of proof issue under Section 33(g).
Claimant's position that the employer bears the burden of proving that the claimant
executed a settlement agreement without employer's written approval is correct, as
it is in the nature of an affirmative defense. In Mallott & Peterson v.
Director, OWCP [Stadtmiller], F.3d , No. 94-70927 (9th Cir. Oct. 24,
1996), aff'g Stadtmiller v. Mallot & Peterson, 28 BRBS 304 (1994), the
United States Court of Appeals for the Ninth Circuit placed the burden on employer
of proving that an attorney was in fact acting as the claimant's agent for purposes
of entering into a third-party settlement. Moreover, as claimant correctly notes,
the burden is on employer to establish apportionment of any third-party settlement
for purposes of its credit under Section 33(f). Force, 938 F.2d at 985, 25
BRBS at 19 (CRT); see also I.T.O Corp. of Baltimore v. Sellman, 954 F.2d
239, 25 BRBS 101 (CRT) (4th Cir.), modified on reh'g, 967 F.2d 971, 26 BRBS
7 (CRT) (1992), cert. denied, 113 S.Ct. 1579 (1993). Thus, in this case,
employer bears the burden of proving that claimant entered into fully executed
settlements without its prior written approval in order to bar claimant's receipt
of further benefits.
Claimant additionally asserts that Section 33(g) contemplates that an
agreement between a claimant and a third-party defendant will be reached before
such agreement is submitted for the approval of the employer. Citing statutory
language that written approval must be obtained "before the settlement is
executed," claimant avers that the statute provides the claimant with a window of
opportunity to obtain the carrier's consent after a settlement has been entered
into and before the settlement is executed.[8]
We agree that the language cited by claimant indicates a clear statutory
recognition of the distinction between an executory and an executed, or completed,
settlement. We note that, in practical terms, until there is an agreement between
the claimant and the third party, there is nothing for the employer to approve.
See generally Chavez v. Director, OWCP, 961 F.2d 1409, 25 BRBS 134 (CRT)(9th
Cir. 1992). Furthermore, it is clear that the third-party settlements can be
conditioned on some action by employer. See Formoso v. Tracor Marine,
Inc., 29 BRBS 105 (1995) (third-party settlement conditioned on employer's
release of its lien). Moreover, we reject the construction of Section 33(g) urged
by employer, according to which an agreement signed by the claimant necessarily
would be considered an executed settlement as a matter of law. Inquiry must be
made, on the facts of the individual case, into whether the settlement was
executed, prior to its submission to the employer for its approval; the statutory
bar applies if written approval is not obtained before the settlement is executed.
Our agreement with claimant on her two preliminary points, however, does not
compel a decision in her favor. Rather, on the facts presented by the instant
case, we hold that employer satisfied its burden of proof that claimant failed to
obtain employer's written approval before executing third-party settlements. The
administrative law judge in the case at bar properly relied upon uncontested
evidence that claimant personally signed the settlement releases, that settlement
proceeds were paid to claimant's attorney as trustee for claimant, and that
claimant's civil actions were dismissed with prejudice against defendants W.R.
Grace, Uniroyal and Flintkote to find that the settlement agreements between
claimant and W.R. Grace, Uniroyal and Flintkote were fully executed as a matter of
law.
In this regard, we note that previous cases in which there was held to be no
third-party settlement for purposes of Section 33(g) may be distinguished from the
present case on several bases. In Mallott & Peterson v. Director, OWCP
[Stadtmiller], F.3d , No. 94-70927 (9th Cir. Oct. 24, 1996),
aff'g Stadtmiller v. Mallott & Peterson, 28 BRBS 304 (1994), the United
States Court of Appeals for the Ninth Circuit upheld the Board's affirmance of the
administrative law judge's finding that because the claimant was not bound by the
unauthorized efforts of her counsel to settle her case, the Section 33(g) bar did
not apply. In Stadtmiller, it was uncontested that the claimant's attorney
lacked actual or apparent authority under California law governing agency to enter
into the third-party agreement. In upholding the administrative law judge's ruling
that the claimant did not ratify the unauthorized settlement, the Board and the
court affirmed the administrative law judge's finding that the claimant's refusal
to sign a release, her repudiation of the agreement and her refusal to accept
settlement proceeds were actions inconsistent with ratification.[9] Additionally, the Board noted that there was
documentary evidence that the court order dismissing the lawsuit was vacated.
Id., 28 BRBS at 306, 313.
In Chavez v. Director, OWCP, 961 F.2d 1409, 25 BRBS 134 (CRT)(9th Cir.
1992), the Ninth Circuit held that substantial evidence supported the
administrative law judge's and Board's determination that no third-party settlement
existed; in support of its ruling, the court cited the absence of any evidence of
an actual settlement agreement executed by the parties, the fact that the claimant
had not received any settlement monies, the claimant's counsel's testimony that he
had not agreed to any settlements on the claimant's behalf and had returned any
monies received to the third-party defendants, and testimony by counsel for the
third-party defendants that no settlement agreement had been reached and that they
were not aware of any releases signed by the claimant. Id., 961 F.2d at
1413, 25 BRBS at 139 (CRT). In rejecting the employer's argument that the
administrative law judge's admission of extrinsic evidence to demonstrate that no
settlement had been executed violated the parol evidence rule, the court held that
although a contract is evidence that an agreement exists, extrinsic evidence may
be introduced to prove the nonexistence of an agreement; parol evidence need not
be excluded until it is known that a contract has been made. Id., 961 F.2d
at 1414, 25 BRBS at 140-141 (CRT).
Lastly, in Formoso v. Tracor Marine, Inc., 29 BRBS 105 (1995), the
Board affirmed the administrative law judge's determination that because no
settlement of the claimant's third-party suit was executed, there was no settlement
for Section 33(g) purposes. The Board affirmed the administrative law judge's
findings: 1) that the proposed settlement was contingent upon the employer's
release of its lien; 2) that, as the lien was not released, the contingency did not
occur; 3) that the claimant received no settlement monies; and 4) that the claimant
had signed no releases. Id. at 108.
The instant case is distinguishable from these cases in several material
aspects. First, unlike the Chavez, Formoso and Stadtmiller cases in
which the claimants did not sign settlement releases, claimant herein personally
signed the releases. Additionally, claimant's counsel in the instant case is
holding the settlement proceeds in trust for claimant as distinguished from
Chavez in which the claimant's attorney returned settlement monies to the
third-party defendant and Formoso in which the third-party defendant did not
pay any settlement funds. As distinguished from Stadtmiller, where it was
undisputed that the claimant's attorney lacked authority to settle the civil action
and, thus, counsel's actions with respect to the "settlement" could not be imputed
to the claimant, the releases signed by claimant in the case at bar expressly
conferred on claimant's counsel the authority to settle the action and receive
monies on behalf of claimant.
While claimant characterizes the settlements as "executory," or contingent on
obtaining employer's approval, the particular facts of this case do not support
such a characterization. The settlement releases themselves contain no provision
requiring that employer's approval be obtained;[10] in accordance with the written terms of the releases, settlement
proceeds were paid to claimant's attorney as trustee and the civil actions were
dismissed with prejudice against three of the third-party defendants.[11] As there is no condition on the faces of the
releases which has not been satisfied, the agreements signed by claimant have been
fully executed.
Contrary to claimant's contention, the cover letters setting forth the
employer consent contingency, which post-dated claimant's signing of the releases,
cannot be considered to create a condition precedent. Claimant avers that the
employer approval condition outlined in the cover letters as well as other
documents which post-date the releases allows claimant to return the settlement
proceeds to the defendants and rescind the settlements should she be unable to
obtain employer's approval of the settlements. Rescission of an agreement,
however, must return both parties to the settlement to the status quo ante,
and, here, the court's dismissal with prejudice of the third-party actions
forecloses a restoration of the parties' original positions.[12] Claimant
relies on the fact that the settlement proceeds paid to claimant have been held in
trust and the fact claimant agreed to return the proceeds to the defendants in the
absence of employer's approval of the settlements; these facts, however, are of no
consequence where the dismissal of the lawsuits precludes the return of claimant's
rights to the status quo ante.[13] We
therefore affirm the administrative law judge's determination that claimant's
settlement agreements with W.R. Grace, Uniroyal and Flintkote were fully executed
without employer's prior written approval, and that, therefore, the provisions of
Section 33(g)(1) bar claimant from recovery of further benefits under the Act.
Accordingly, the Order Granting Employer's Motion for Summary Judgment is
affirmed.
SO ORDERED.
BETTY JEAN HALL, Chief
Administrative Appeals Judge
ROY P. SMITH
Administrative Appeals Judge
JAMES F. BROWN
Administrative Appeals Judge
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Footnotes.
1)By Order dated July 11, 1996, the Board granted claimant's
request to maintain this case on the Board's docket until November 14, 1996,
pursuant to Public Law No. 104-134.
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2)We note that employer's appeal to the United States Court of
Appeals for the Ninth Circuit of its designation as the responsible employer,
General Ship Service v. Director, OWCP, 938 F.2d 960, 25 BRBS 22 (CRT)(9th
Cir. 1991), is not at issue in the present appeal.
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3)Claimant's attorney sought and obtained consent on April 2,
1990, from the longshore carrier to a settlement reached with an additional
defendant Center for Claims Resolution (CCR); the CCR settlement, thus, is not at
issue in the instant appeal.
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4)Claimant signed the Plant Insulation release on July 8, 1991,
the W.R. Grace, Uniroyal and Flintkote releases on July 9, 1991, the Western
MacArthur release on July 15, 1991, the Manville Trust release on July 17, 1991,
the Kaiser release on November 14, 1991, and the UNR release on March 10, 1994.
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5)Identical cover letters, enclosing signed releases, were sent
to counsel for defendants Kaiser on November 15, 1991, Manville Trust on June 17,
1994, and UNR on March 31, 1995.
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6)We note that employer does not contest the administrative law
judge's finding, with respect to the 1984 pre-death third-party settlements, that
inasmuch as the determination in the original Decision and Order that the Section
33(g) bar did not apply to those settlements was not appealed, the original
decision is final as to the 1984 settlements. Moreover, the administrative law
judge found that any benefits to which claimant was entitled prior to the 1991
settlements is not affected by her ruling.
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7)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 district director within thirty days after the settlement
is entered into.
33 U.S.C. §933(g)(1)(1988).
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8)Section 33(g)(1), in relevant part, provides that:
if the person entitled to compensation ... enters into a settlement
with a third person ... for an amount less than the compensation to
which the person ... would be entitled under this chapter, the employer
shall be liable for compensation ... only if written approval of the
settlement is obtained from the employer and the employer's carrier,
before the settlement is executed, ....
33 U.S.C. §933(g)(1)(1988) (emphasis supplied).
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9)The court also affirmed the Board's holding that the term
"representative" in Section 33 does not mean the attorney of the claimant.
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10)We note that this case would not be before the Board in this
posture had the settlement release stated, on its face, that it was conditioned on
employer's approval of the settlement and that the agreement would be void if
employer's approval was not obtained within a specified period of time.
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11)Claimant relies upon Mills v. Marine Repair Service,
22 BRBS 335 (1989), in which dismissal of a third-party suit was held not to bar
a claim under Section 33(g), to argue that claimant's authorization to her counsel
to dismiss the civil action upon counsel's receipt of monies does not trigger the
Section 33(g) bar. In Mills, however, the employer asserted the Section
33(g) bar solely on the claimant's abandonment of a third-party suit; the Board's
holding was based on the fact that there was no third-party settlement.
Mills is thus distinguished from the instant case in which claimant
dismissed her third-party suits as part of a settlement agreement.
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12)We note that, unlike the Stadtmiller case in which
there was documentary evidence that the court order dismissing the third-party
lawsuit was vacated, there is no evidence in the case at bar of any attempt to have
the dismissals vacated nor does claimant assert any right to reinstatement of the
three suits that were dismissed.
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13)In light of our holding that claimant's counsel's receipt of
funds and the dismissal of the three lawsuits effectuated completion of the
settlements, we need not address all of the administrative law judge's findings
with respect to the parol evidence rule and the existence of consideration for
claimant's attempt to modify the original settlement agreement.
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NOTE: This is a PUBLISHED LHCA Document.
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