TABLE OF
CONTENTS
Statement of
jurisdiction
Statement of the
issues
Statement of the
case
A. Nature of the case, course of
proceedings,
and disposition below
B. Statement of the facts
1. Statutory
framework
2. Facts of this
case
3. Decisions
below
Summary of argument
Argument
Claimant's constitutional
objections to Section 33(g) of the Longshore Act are without merit
A. Standard of review
B. The Court should not address claimant's
constitutional challenges to Section
33(g) because those issues are not raised by the facts of this case
C. Section 33(g) does
not unlawfully delegate legislative power to private entities
D. Section 33(g) does
not effect a deprivation of property without due process
1. The Court need not
decide if Mrs. Dilts has a constitutionally protected property interest in LHWCA
benefits
2. The "state action"
doctrine is not a bar to claimant's due process challenge to Section 33(g), although it would bar any such challenge to an employer's act of approving or
disapproving a third-party settlement
3. Section 33(g)'s
forfeiture provision satisfies due process because it
rationally balances the competing interests at stake in LHWCA-related
third-party litigation
Conclusion
Statement
of related cases
Certificate
of compliance
Certificate
of service
Statutory
addendum: 33 U.S.C. 933
TABLE OF AUTHORITIES
Cases:
American Mfrs. Mut.
Ins. Co. v. Sullivan,526 U.S. 40 (1999)
Bloomer v.
Liberty Mut. Ins. Co., 445 U.S. 74
(1980
Blum v.
Yaretsky, 457 U.S. 991 (1982)
Board of Regents of
State Colleges v. Roth, 408
U.S. 564 (1972)
Browder v.
Director, Dep't of Corr., 434 U.S.
257 (1978)
Carter v.
Carter Coal Co., 298 U.S. 238
(1936)
Clinton v.
Jones, 520 U.S. 681 (1997)
Confederated Tribes
of Siletz Indians v. United
States, 110 F.3d 688 (9th Cir. 1997), cert. denied, 522 U.S. 1027 (1997)
Crowell v.
Benson, 285 U.S. 22 (1932)
Currin v.
Wallace, 306 U.S. 1 (1939)
Dodd v. Hood
River County, 59 F.3d 852 (9th Cir.
1995), cert. denied, 525 U.S. 923
(1998)
Estate of Cowart
v. Nicklos Drilling Co., 505 U.S.
469 (1992)
Eunique v. Powell, 302 F.3d 971 (9th Cir. 2002)
Harris v.
Todd Pac. Shipyards Corp., 30 Ben.
Rev. Bd. Serv. (MB) 5 (1996)
Highland Farms
Dairy, Inc. v. Agnew, 300 U.S.
608 (1937)
Ingalls
Shipbuilding, Inc. v. Director, OWCP, 519 U.S. 248 (1997)
J.W. Hampton, Jr.,
& Co. v. United States, 276
U.S. 394 (1928)
Kentucky Div.,
Horsemen's Benevolent & Protective Ass'n v. Turfway
Park Racing Ass'n, 20 F.3d 1406 (6th Cir. 1994)
Kildare v.
Saenz, 325 F.3d 1078 (9th Cir.
2003)
Kreschollek v.
Southern Stevedoring Co., 223 F.3d
202 (3d Cir. 2000)
Larkin v.
Grendel's Den, Inc., 459 U.S. 116
(1982)
Lyng
v. Northwest Indian Cemetery Protective Ass'n, 485 U.S. 439 (1988)
Lyng
v. Payne, 476 U.S. 926 (1986)
National
Ass'n of Radiation Survivors v. Derwinski, 994 F.2d 583 (9th Cir.), cert. denied, 510 U.S. 1023
(1993)
New
Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96 (1978)
New
York Cent. R.R. v. White, 243 U.S. 188 (1917)
Northern
Pac. Ry. v.
Meese, 239 U.S. 614 (1916)
Panama
Ref. Co. v. Ryan, 293 U.S. 388 (1935)
Potomac
Elec. Power Co. v. Director, OWCP, 449 U.S. 268 (1980)
Price
ex rel. Price v. Western Res. Inc.,
232 F.3d 779 (10th Cir. 2000)
Retlaw
Broad. Co. v. NLRB, 53 F.3d 1002 (9th Cir. 1995)
Sequoia
Orange Co. v. Yuetter, 973 F.2d 752 (9th Cir. 1992), as amended, 985 F.2d 1419 (1993)
Silverman
v. Barry, 845 F.2d 1072 (D.C. Cir.), cert. denied, 488 U.S. 956
(1988)
Southern
Pac. Co. v. United States, 171 F. 360 (9th Cir. 1909)
Taylor
v. Director, OWCP, 201 F.3d 1234 (9th Cir. 2000)
Thomas
Cusack Co. v. City of Chicago, 242 U.S. 526 (1917)
Turner
Broad. Sys., Inc. v. FCC, 520 U.S. 180 (1997)
United
States v. Frame, 885 F.2d 1119 (3d Cir. 1989), cert. denied, 493 U.S.
1094 (1990)
United
States v. Lamont, 330 F.3d 1249 (9th Cir. 2003)
Usery
v. Turner Elkhorn Mining Co., 428 U.S. 1 (1976)
Washington
ex rel. Seattle Title Trust Co. v. Roberge, 278 U.S. 116 (1928)
Whitman
v. American Trucking Ass'ns, 531 U.S. 457 (2001)
Young
v. City of Simi Valley, 216 F.3d 807 (9th Cir. 2000), cert. denied, 531
U.S. 1104 (2001)
Constitution,
statutes and regulations:
U.S.
Const., art. I, § 1
Longshore
and Harbor Workers' Compensation Act, 33
U.S.C. 901 et seq.
Section 2(22), 33
U.S.C. 902(22)
Section 3, 33 U.S.C.
903
Section 7, 33 U.S.C. 907
Section 8, 33 U.S.C. 908
Section 9, 33 U.S.C.
Section 19(d), 33
U.S.C. 919(d)
Section 21(a), 33 U.S.C. 921(a)
Section 21(b)(3), 33
U.S.C. 921(b)(3)
Section 33, 33 U.S.C.
933
Section 33(a), 33
U.S.C. 933(a)
Section 33(b), 33
U.S.C. 933(b)
Section 33(f), 33
U.S.C. 933(f)
Section 33(g), 33
U.S.C. 933(g)
Section 33(g)(1), 33
U.S.C. 933(g)(1)
Section 33(g)(2), 33 U.S.C. 933(g)(2)
Act
of August 18, 1959, Pub. L. No. 86-171, 73 Stat. 391
Longshore
and Harbor Workman's Compensation Act, ch. 509, 44 Stat. 1424 (1927)
28
U.S.C. 2403(a)
20
C.F.R.:
Section 18.1(a)
Sections
702.331-702.351
Section 802.206(a)
Section 802.206(b)
Miscellaneous:
6
Arthur Larson & Lex K. Larson, Larson's Workers' Compensation Law §
115.01 (2003)
2
Chester J. Antieau & William J. Rich, Modern Constitutional Law §
26.00 (2d ed. 1997)
Fed.
R. Civ. P.:
Rule 44
Rule 60(a)
Rule 60(b)
IN THE UNITED STATES
COURT OF APPEALS
FOR THE NINTH
CIRCUIT
________________________
No. 03-71622
________________________
SHIRLEY A. DILTS
(Widow of Henry C.
Dilts),
Petitioner,
v.
TODD SHIPYARDS
CORPORATION, ET AL.,
Respondents
_________________________
On Petition for
Review of an Order
of the Benefits
Review Board
_________________________
BRIEF FOR THE
INTERVENOR UNITED STATES
AND RESPONDENT
DIRECTOR, OFFICE OF
WORKERS' COMPENSATION
PROGRAMS
_________________________
This brief is submitted
in response to this Court's notice, by letter dated September 15, 2003, to the
Attorney General, in accord with Fed. R. App. P. 44 and 28 U.S.C. 2403(a), that
the case raises a constitutional challenge to a provision of a federal statute,
the Longshore and Harbor Workers' Compensation Act, 33 U.S.C. 901 et
seq. (LHWCA or "the Act").
The brief is submitted jointly by the United States, which intervened for
the express purpose of defending
the statute, and the Director, Office of Workers' Compensation Programs (OWCP),
U.S. Department of Labor, who is a party-respondent to the case, see Ingalls
Shipbuilding, Inc. v. Director, OWCP, 519 U.S. 248, 269 (1997), but
who has not previously participated in it. The United States and the Director take
no position on any other issue raised in this case.
STATEMENT OF
JURISDICTION
This appeal
arises out of a claim for LHWCA benefits.
The administrative law judge (ALJ) had jurisdiction to issue a decision
on the claim (ER 213-227) pursuant to 33 U.S.C. 919(d). The Benefits Review Board (the Board)
had jurisdiction to review the ALJ's decision pursuant to 33 U.S.C.
921(b)(3). The appeal to the Board
(ER 239-241) was filed on March 11, 2002, within 30 days of the ALJ's February
19, 2002 decision, and thus was timely under 33 U.S.C. 921(a). The Board's March 12, 2003 decision
affirming the ALJ's denial of benefits (ER 282-288) is a final order disposing
of all parties' claims.
This Court has
jurisdiction to review the Board's decision pursuant to 33 U.S.C. 921(c). The April 7, 2003 petition for review
(ER 289-290) was filed with this Court within 60 days of the Board's decision
and is therefore timely under 33 U.S.C. 921(c).
STATEMENT OF THE
ISSUES
Section 33(g)
of the LHWCA, 33 U.S.C. 933(g), provides that, if a person entitled to
compensation enters into a third-party settlement for less than the compensation
to which she would be entitled under the Act, without the prior written approval
of her employer, her rights to compensation and medical benefits under the Act
are terminated. The questions
presented are:
1. Does Section 33(g)
unconstitutionally delegate legislative power by providing the employer with
unfettered discretion to deny a claimant's request for approval of a third-party
settlement?
A. Nature of the case, course of
proceedings, and disposition below
Henry Dilts
filed a claim for benefits under the LHWCA alleging that he suffered from a
work-related disability, lung cancer, arising out of his exposure to asbestos
during his employment with Todd Shipyards Corporation. ER 1. After his death, his widow, petitioner
Shirley Dilts, filed a claim for death benefits under the Act. ER 10, 13. Mrs. Dilts's claim was referred to a
Department of Labor administrative law judge (ALJ), who denied the claim on the
ground that she had, without Todd's prior written approval, entered into
third-party settlements for less than the amount of compensation to which she
was entitled under the Act, and therefore under Section 33(g) had forfeited any
right to LHWCA benefits. ER
213-226; SER 212.
On Mrs.
Dilts's appeal, the Benefits Review Board affirmed. ER 282-287. The Board upheld the ALJ's finding that
Mrs. Dilts had entered into such settlements without Todd's prior approval and
thus had relinquished any right to LHWCA compensation. The Board noted Mrs. Dilts's argument
that Section 33(g) of the Act violated the due process clause because the
provision gives employers the unfettered discretion to deny or ignore employees'
requests for approval to settle with third parties, but concluded that because
Mrs. Dilts had not sought Todd's approval before entering into the settlements,
the constitutional issue she raised is not presented by the facts of this
case. ER 286-287.
On April 17,
2003, Mrs. Dilts filed this timely petition for review of the Board's
decision. ER 289-290.
B. Statement of the facts
1. Statutory framework
The LHWCA requires covered
employers to provide workers' compensation benefits when a covered employee is
disabled or dies from a work-related injury. See 33 U.S.C. 903, 907, 908, 909. Section 33(a) of the LHWCA addresses the
rights of a "person entitled to . . . compensation" to sue a third party for
damages for such disability or death.
33 U.S.C. 933(a). Section
33(a) provides that a person entitled to compensation is not required to elect
between receiving compensation under the Act and pursuing a tort action against
a third party. 33 U.S.C.
933(a). Section 33(b) provides that
acceptance of compensation under an award assigns the employee's right to sue to
the employer but gives that right back to the employee if the employer does not
sue within 90 days. 33 U.S.C.
933(b). Section 33(f) provides
that, if the employee brings a third-party suit, the employer is generally
required to pay compensation to the extent that it exceeds the employee's net
third-party recovery. 33 U.S.C.
933(f).
Section
33(g), the provision at issue in this appeal, applies where the claimant settles
with a third party for less than the amount the LHWCA would require the employer
to provide. It states, in relevant
part,
(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.
(2) If no written approval of the
settlement is obtained and filed as required by paragraph (1), or if the
employee fails to notify the employer of any settlement obtained from or
judgment rendered against a third person, all rights to compensation and medical
benefits under this chapter shall be terminated, regardless of whether the
employer or the employer's insurer has made payments or acknowledged entitlement
to benefits under this chapter.
33 U.S.C. 933(g)(1), (2).
2. Facts of this
case
Henry Dilts
worked as a boilermaker for Todd Shipyards from 1965 to 1994, where he was
allegedly exposed to asbestos. ER
214, 283. He subsequently developed
lung cancer and in February 1999 filed a claim for LHWCA benefits, alleging that
his cancer and resulting disability were caused by his work-related exposure to
asbestos. ER 1, 283.
Mr. Dilts
died in July 1999, and his widow, Shirley Dilts, then filed a LHWCA claim for
death benefits. ER 10, 13, 214; 33
U.S.C. 909. She also joined actions
against a number of asbestos manufacturers in which she sought damages for her
husband's disability and death. ER
216, 219, 283. Between June 2000
and June 2001, Mrs. Dilts settled claims against a number of the third-party
defendants and received payments from them. ER 75-142, 284-285.
Mrs. Dilts's
LHWCA claim was referred to a hearing before a Department of Labor ALJ. During
the hearing on June 19, 2001, she testified that she had previously received and
cashed checks from several asbestos manufacturers in settlement of her
claims. See ER 215-216, 285. Todd
then moved for summary decision, arguing that Mrs. Dilts's claim was barred by
Sections 33(g)(1) and (2) because she had failed to obtain Todd's prior written
approval for the settlements, as Section 33(g) requires. ER 143-156.
After the
hearing but shortly before Todd filed its motion for summary decision, Mrs.
Dilts's counsel sent Todd a request for Todd's approval of the settlements,
accompanied by letters obtained from several asbestos manufacturers stating that
the settlements were "pending the employer's approval." ER 230-233. The letters, however, were dated
mid-July 2001, well after the settlements had been completed and Mrs. Dilts had
cashed the settlement checks. ER
223, 231-233. In addition, the
releases that Mrs. Dilts had signed at the time of the settlements' execution
did not state that the settlements were conditioned upon her employer's
approval. ER 223; see also ER
75-142.
3. Decisions below
a. The ALJ granted
Todd's motion for summary decision, ruling that Mrs. Dilts was a person entitled
to compensation within the meaning of Section 33(g) and that she had settled
claims with third-party defendants without Todd's prior written approval. ER 223-225; SER 212. The ALJ rejected claimant's argument,
based on the July 2001 letters from non-bankrupt third-party defendants, that
Section 33(g)'s forfeiture provision did not apply because the third-party
settlements were conditioned on Todd's approval. The ALJ found that Mrs. Dilts had cashed
checks and signed releases before then that "ma[d]e no mention" of such a
condition. ER 223. Thus, the ALJ concluded that "claimant
has made settlements with solvent third party defendants and pocketed the net
receipts, without notice to Todd" and without securing its approval.
Ibid.; SER 212.
The ALJ also
found that the amount of the third-party settlements was less than the amount to
which Mrs. Dilts would be entitled under the LHWCA. SER 212. He therefore concluded that Mrs. Dilts's
claim for LHWCA benefits was barred by Section 33(g). ER 225; SER 212.
b. The Board affirmed the ALJ's
decision. ER 282-287. The Board
rejected Mrs. Dilts's argument that Section 33(g) did not apply because Todd
waived the forfeiture provision by failing to respond to her August 2001 request
for approval. The Board
distinguished cases in which a waiver had been found because the LHWCA employer
had participated in the third-party suits and joined in the settlement, noting
that in this case, by contrast, Todd was unaware of the settlements until
claimant testified at the ALJ hearing.
ER 285. The Board also ruled
that the ALJ properly found that Mrs. Dilts settled her third-party suits before
she requested Todd's approval and that the settlements were not conditioned on
such approval. Ibid.
The Board
rejected as well claimant's argument that Section 33(g)'s forfeiture bar did not
apply because Todd was not prejudiced by the settlements. ER 285. The Board concluded that Section
33(g)(1), which is intended to prevent claimant from bargaining away funds to
which the employer may be entitled, contains no requirement that the employer
demonstrate prejudice, as by showing that it could have obtained a higher
recovery from the third party.
Ibid.
Finally, the
Board concluded that it need not address claimant's constitutional challenge to
Section 33(g). The Board noted that
Mrs. Dilts had not "sought [the] employer's written approval prior to entering
into the third-party settlements," but instead had first informed the employer
of the settlements after they were executed and claimant had received the
proceeds. ER 286-287. The Board concluded that Mrs. Dilts's
argument that Section 33(g) violates due process because it permits "employers
to deny or ignore requests for approval of third-party settlements" is
thus "not presented by the facts of this case." ER 286, 287 (emphasis supplied). Rather, the Board concluded, "the
claimant's entitlement to benefits under the Act is forfeited only because she
did not follow the requirements of . . . Section 33(g)." ER 287. The Board accordingly affirmed the ALJ's
decision denying benefits.
SUMMARY OF ARGUMENT
Sections
33(g)(1) and (2) of the Longshore and Harbor Workers' Compensation Act (LHWCA),
33 U.S.C. 933(g)(1), (2), provide that a person entitled to compensation under
the Act forfeits her right to such compensation if, without obtaining the prior
written approval of her employer, she enters into a settlement with a third
party for less than the amount that would be payable under the Act. Claimant challenges this provision,
which has been integral to the Act since its enactment in 1927, on
constitutional grounds, but her arguments are without merit.
Claimant
argues that Section 33(g) unconstitutionally delegates legislative power to
private parties because it gives unfettered discretion to employers to approve
or disapprove third-party settlements reached by claimants, and that this denies
due process. The Court should not
address claimant's arguments, however.
As the Benefits Review Board concluded, Mrs. Dilts did not seek her
husband's employer's approval before entering into the third-party
settlements. Due to this failure,
the employer never faced the decision whether to approve the settlements. Thus, the questions whether the
Constitution requires standards to govern the employer's decision and whether an
employer's denial of approval of a settlement violates due process are not
presented by the facts of the case.
In any event,
claimant's arguments on the merits fail.
The delegation argument is fatally flawed because Section 33(g) does not
delegate legislative power, or any other governmental function, to a private
party. Congress has not delegated
the power to legislate, but has specified the rule of law that applies to
effectuate the statutory purpose of balancing the claimant's entitlement to
LHWCA benefits against the employer's right to a set-off from any third-party
settlement -- i.e., that an employee forfeits LHWCA compensation if she
enters into the third-party settlement, unless she obtains her employer's prior
written approval. Because Congress
could constitutionally require an
election of remedies, it follows that permitting the claimant to pursue both
remedies subject to the Section 33(g) conditions of notice and prior employer
approval equally passes constitutional muster.
Moreover, the
employer's decision whether to approve or disapprove the settlement -- like the
claimant's own decision to enter into such a settlement -- simply triggers
application of the statutorily-imposed rule and does not itself make law. Nor does the employer's decision
constitute governmental action in any other way that would invoke the
rarely-applied delegation principle.
Thus, Section 33(g) is similar to numerous statutory provisions that
contain a condition, based on private consent or waiver, to the application of a
rule, none of which has been found by the courts to be unlawful delegations of
legislative power.
Even assuming
claimant has a constitutionally protected property interest at stake in this
litigation, claimant's further argument that Sections 33(g)(1) and (2) deprive
her of property without due process of law is fundamentally misguided. Her contention that the
employer-approval "requirement" of Section 33(g) violates due process in the
context of multi-party asbestos litigation runs afoul of the proposition that
economic legislation that does not burden fundamental rights must be upheld
unless shown to be arbitrary or irrational. Section 33(g)'s employer-approval
requirement is a component of a rational policy addressing the competing
interests at stake in third-party litigation in the workers' compensation
context. It protects an employer
against the employee's accepting too little for her cause of action against a
third party, which would deprive the employer of a proper set-off against LHWCA
compensation and thus unfairly increase its compensation liability. Estate of Cowart v. Nicklos
Drilling Co., 505 U.S. 469, 482 (1992). Claimant's cursory argument that
multi-party asbestos litigation is "unique" utterly fails to discharge her
burden of showing that Section 33(g) is irrational; and, to the extent asbestos
litigation poses unique concerns, those should be addressed to Congress, not
this Court.
ARGUMENT
CLAIMANT'S CONSTITUTIONAL
OBJECTIONS TO SECTION 33(g) OF THE LONGSHORE ACT ARE WITHOUT MERIT
A. Standard of
review
The questions
whether Sections 33(g)(1) and (2) of the Longshore and Harbor Workers'
Compensation Act (LHWCA), 33 U.S.C. 933(g)(1) and (2), effect an
unconstitutional delegation of legislative power or violate due process are
issues of law reviewed de novo. Eunique v. Powell, 302 F.3d 971,
973 (9th Cir. 2002) ("'[t]he constitutionality of a statute is a question of law
which we review de novo'") (citation omitted).
B. The Court should not address
claimant's constitutional challenges to Section 33(g) because those issues are
not raised by the facts of this case
Mrs. Dilts argues that
Section 33(g) unconstitutionally delegates legislative power to private parties
because it gives unfettered discretion to employers to approve or disapprove
third-party settlements reached by claimants, and that it denies due
process. As the Benefits Review
Board concluded, however, Mrs. Dilts did not seek employer approval before
entering into her settlements with third-party defendants. Thus, her objections that Section 33(g)
does not provide standards for an employer's approval or disapproval and that an
employer can deny or ignore a request for approval are not germane to this
case. Accordingly, this Court
should not address these issues.
It is well established
that federal courts should decline to decide "any constitutional question in
advance of the necessity for its decision . . . or to formulate a rule of
constitutional law broader than is required by the precise facts to which it
is to be applied . . . or to decide any constitutional question except with
reference to the particular facts to which it is to be applied." Clinton v.
Jones, 520 U.S. 681, 690 n.11 (1997) (internal quotation marks and
citations omitted) (emphasis added).
Indeed, the Supreme Court has emphasized that this "doctrine of
avoidance" applies to "the entire Federal Judiciary." Id. at 690. This Court accordingly has also stressed
that a court "must start from a 'fundamental and longstanding principle of
judicial restraint [that] requires [us to] avoid reaching constitutional
questions in advance of the necessity of deciding them.'" United States v. Lamont,
330 F.3d 1249, 1251 (9th Cir. 2003) (quoting Lyng v. Northwest Indian
Cemetery Protective Ass'n, 485 U.S. 439, 445 (1988)); cf. Eunique,
302 F.3d at 973 ("'[a] court should invalidate [a] statutory provision only for
the most compelling constitutional reasons'") (citation omitted).
Mrs. Dilts explicitly
focuses her constitutional challenges to Sections 33(g)(1) and (2) on the
statute's delegation of "legislative power" to the employer to approve or
disapprove a claimant's third-party settlement, without any governing
"standards." See Pet. Br. 2 (Act
"provides no standards for the exercise of [employers'/carriers'] discretion in
approving or disapproving settlements"), 3 (delegation of "unfettered
discretion" to employers/carriers and resulting absence of "judicial standards
to determine whether [they] have abused th[eir] discretion"), 9-10, 17. She also complains more generally that
an employer can deny or ignore a request for approval of such a settlement, and
that such action amounts to a denial of due process. Id. at 3. Her constitutional challenges thus
presume that a request for the employer's prior approval has been made and
denied or ignored, and that she has consequently been injured by the
employer's action.
Here, however, the ALJ
found -- as the record shows and Mrs. Dilts effectively concedes -- that she
never sought Todd's prior approval of any of the settlements she consummated
with asbestos manufacturers.
Without a request for Todd's prior approval and a denial thereof, the
issues whether the Constitution requires standards to govern such a
determination, and whether the request for approval can lawfully be denied or
ignored, simply are not presented, and Mrs. Dilts has no standing to pursue
them. Cf. Highland Farms Dairy,
Inc. v. Agnew, 300 U.S. 608, 616-617 (1937) (upholding statute
against argument that it fails to provide standards to be applied in granting
license for sale of milk, but also stating that plaintiffs challenging the law
should apply for a license and obtain review if the license is denied before
complaining of a danger that the license will be refused).
Mrs. Dilts's
constitutional claims are thus limited to the circumstance where a request for
the employer's prior approval has actually been made and denied. There was no such request or (a
fortiori) denial here, and consequently it would be inappropriate for the court
to entertain such arguments.
C. Section 33(g) does not
unlawfully delegate legislative power to private entities
Assuming Mrs.
Dilts's constitutional arguments are properly before the Court, her assertion of
an unlawful delegation of legislative power is plainly without merit. To begin with, the argument that there
has been a standardless delegation of legislative power in violation of
constitutional separation-of-powers principles ordinarily arises in the context
of a delegation to an executive agency, rather than to a private
entity. See Whitman
v. American Trucking Ass'ns, 531 U.S. 457, 472-476 (2001);
Panama Ref. Co. v. Ryan, 293 U.S. 388, 414-433 (1935).
In any event,
while Mrs. Dilts is correct that Section 33(g)(1) provides no standards to guide
an employer's approval or disapproval of a third-party settlement, and that such
a determination is solely within the employer's discretion, her "unlawful
delegation" argument fails because Section 33(g) effects no delegation of
a legislative power, or, for that matter, any governmental function.
The
delegation principle simply is not implicated where Congress allocates the
rights and responsibilities of private parties within the framework of a
workers' compensation scheme duly enacted under its maritime authority. Cf. Crowell v. Benson, 285
U.S. 22, 41-42 (1932) (upholding constitutionality of LHWCA generally). The distinction between an unlawful
delegation of legislative power and a lawful exercise of such power by limiting
the conditions under which entitlements are granted has long been recognized by
the Supreme Court. "Congress
manifestly is not permitted to abdicate or to transfer to others the essential
legislative functions with which it is thus vested" by the Constitution. Panama Ref., 293 U.S. at
421. However,
[t]he
Constitution has never been regarded as denying to the Congress the necessary
resources of flexibility and practicality, which will enable it to perform its
function in laying down policies and establishing standards, while leaving to
selected instrumentalities the making of subordinate rules within
prescribed limits and the determination of facts to which the policy as declared
by the Legislature is to apply.
Ibid. See also Southern Pac. Co.
v. United States, 171 F. 360, 361 (9th Cir. 1909) ("while a
Legislature may not delegate the power to legislate, it may delegate the power
to determine some fact on which the operation of its own act is made to
depend").
In Section 33(g),
Congress has not delegated the power to legislate, but has specified the
applicable rule of law -- i.e., that an employee forfeits LHWCA
compensation if she enters into a third-party settlement for the requisite
amount unless she obtains her employer's prior written approval. The employer's decision whether to
approve or disapprove the settlement -- like the claimant's own decision to
enter into such a settlement -- simply triggers application of the
statutorily-imposed rule, and does not itself make law.
Plainly, it
would have been constitutional for Congress to require a claimant to elect
between pursuing a common-law right to compensation from a third party and
seeking statutory benefits from the employer through the LHWCA administrative
process. See p. 34,
infra. It necessarily
follows that it is constitutional to allow the claimant to do both, subject to
certain conditions. First, any amount recovered from a third party must be set
off against the compensation for which the employer is determined to be
liable. 33 U.S.C. 933(f). Second, inasmuch as a settlement will
have a direct bearing on the amount the employer owes the claimant under Section
33(f), Congress requires the claimant to provide the employer prior notice of a
settlement and gives the employer the right to approve or disapprove the
settlement. See 33 U.S.C.
933(g)(1), (2).
These
conditions express Congress's entirely rational concern about claimants'
recoveries from settlements with third parties, because unduly low settlements
could deprive employers of a proper set-off and thereby unfairly increase the
amount of LHWCA compensation for which employers are liable. Congress therefore enacted Section
33(g)(1), which makes the employer liable for compensation under Section 33(f)
only if it has consented in advance to a claimant's third-party
settlement. 33 U.S.C. 933(g)(1);
see Estate of Cowart v. Nicklos Drilling Co., 505
U.S. 469, 482 (1992) (Section 33(g) protects employer against employee's
acceptance of too little in settlement of third-party action); Taylor
v. Director, OWCP, 201 F.3d 1234, 1237 (9th Cir. 2000)
(same). Thus, the employer-approval
requirement is simply a condition that implements Congress's intent to protect
the employer's right to an appropriate set-off.
In this regard, Section
33(g) is similar to other statutory provisions that the courts have found to be
legitimate conditions intended to effectuate a congressional policy, rather than
unlawful delegations of legislative power to a private entity. For instance, in Currin
v. Wallace, 306 U.S. 1, 6 (1939), a statute authorized the
Secretary of Agriculture to designate tobacco auction markets, but only if
tobacco growers, by referendum, favored such markets. The Supreme Court held that the
referendum was not a delegation of legislative authority, but "merely . . . a
restriction upon [Congress's] own regulation [of tobacco markets] by withholding
its operation as to a given market 'unless two-thirds of the growers voting
favor it.'" Id. at 15. In this circumstance, the Court
reasoned, "it is Congress that exercis[ed] its legislative authority in making
the regulation and in prescribing the conditions of its application," and "[t]he
required favorable vote upon the referendum is one of th[o]se conditions." Ibid.
Similarly,
the court of appeals in Kentucky Division, Horsemen's Benevolent &
Protective Ass'n v. Turfway Park Racing Ass'n, 20 F.3d
1406, 1416 (6th Cir. 1994), approved a federal statute giving racehorse owners
veto power over a racetrack's plan to permit interstate off-track betting. Echoing Currin's analysis, the
Court held that the statute was not an unconstitutional delegation of
legislative power to private parties, but "merely a condition established by
Congress upon the application of Congress' general prohibition of interstate
off-track betting."
Ibid. See Sequoia
Orange Co. v. Yuetter, 973 F.2d 752, 759 (9th Cir. 1992) (Agriculture
Secretary's determination to implement amendment to orange marketing order with
approval of 75% of growers was not unconstitutional delegation of power), as
amended, 985 F.2d 1419 (1993); United States v.
Frame, 885 F.2d 1119, 1128 (3d Cir. 1989) (industry referendum was
"valid condition upon the application of the Beef Promotion Act and not an
unlawful delegation of power"), cert. denied, 493 U.S. 1094 (1990); cf.
Confederated Tribes of Siletz Indians v. United States, 110 F.3d
688, 695 (9th Cir.) (by requiring that state governor approve placing Indian
reservation land in trust for gambling purposes, "Congress is exercising its
legislative authority by providing what conditions must be met before a
statutory provision goes into effect"; such "[c]ontingent legislation is
constitutionally acceptable in many forms" and "is not an invalid delegation of
legislative authority"), cert. denied, 522 U.S. 1027 (1997).
Moreover,
courts have long recognized that there is no unconstitutional delegation when a
statute imposes a prohibition on the activities of a private person but waives
the prohibition if other persons who would be affected by the activities give
their consent. For example, in
Thomas Cusack Co. v. City of Chicago, 242 U.S. 526
(1917), the Supreme Court rejected an unlawful delegation challenge and upheld
an ordinance that prohibited billboards in residential areas unless a majority
of the property owners in a given block consented to the erection of such
signage. The Court emphasized that
the ordinance in question generally prohibited the erection of the billboards,
"but permit[ted] the prohibition to be modified with the consent of the persons
who are to be most affected by such modification." Id. at 531. This, the Court concluded, was not a
"delegation of legislative power, but is . . . a familiar provision affecting
the enforcement of laws and ordinances."
Ibid.
Section
33(g)(1) operates in a similar fashion here: if a claimant settles with a third party
(for an amount less than her potential LHWCA compensation), LHWCA compensation
is not available, unless the employer "waives" that protection by
consenting to the settlement. See
also New Motor Vehicle Bd. v. Orrin W. Fox Co., 439
U.S. 96, 109 (1978) ("[a]n otherwise valid regulation is not rendered invalid
simply because those whom the regulation is designed to safeguard may elect to
forgo its protection"); Silverman v. Barry, 845 F.2d 1072,
1086-1087 (D.C. Cir.) (upholding law that prohibited conversions of rental
property to condominiums unless tenants consent), cert. denied, 488 U.S. 956
(1988).
Thus, it is
clear that, when an employer decides whether to approve a third-party
settlement, it is not "making law."
Nor does the fact that the employer's decision may affect the employee's
entitlement to LHWCA benefits render the decision governmental in
character. Instead, the employer is
protecting its own interests in the underlying LHWCA proceedings, as Congress
authorized by enacting Section 33(g).
See Cowart, 505 U.S. at 482 ("the employer is a real party in
interest with respect to any settlement that might reduce but not extinguish the
employer's liability").
It is also
significant that, in availing itself of the right to approve or disapprove a
third-party settlement, the employer is not performing any function that the
government would otherwise perform.
Although the government administers and enforces the LHWCA, it has no
role in approving or disapproving third-party settlements. The government's sole function
respecting a third-party settlement is simply to provide the form for the
employer's approval and to accept it for filing. 33 U.S.C. 933(g)(1).
The
employer-approval provision in Section 33(g) thus bears no resemblance to the
core government functions that were unlawfully delegated to private entities in
other cases. See, e.g.,
Carter v. Carter Coal Co., 298 U.S. 238, 310-312 (1936) (the power
to fix maximum hours of labor and wages in coal industry); Washington ex
rel. Seattle Title Trust Co. v. Roberge, 278
U.S. 116, 120-123 (1928) (the power to prohibit a use of private property that
is otherwise lawful); Young v. City of Simi Valley, 216 F.3d 807,
817-818, 820 (9th Cir. 2000) (same, in First Amendment context), cert. denied,
531 U.S. 1104 (2001). See also
Larkin v. Grendel's Den, Inc., 459 U.S. 116, 122 (1982) (First
Amendment case involving law giving church the power to veto liquor license
application of nearby establishment).
D. Section 33(g) does not effect a
deprivation of property without due process
1. The Court need not decide if
Mrs. Dilts has a constitutionally protected property interest in LHWCA
benefits
Because there
has not yet been a determination of the employer's liability, it is arguable
that Mrs. Dilts has no protected property interest in LHWCA benefits. See American Mfrs. Mut. Ins. Co.
v. Sullivan, 526 U.S. 40, 59-61 (1999) (employee has no property interest
in being paid for disputed medical treatment because state law required an
employee to establish that the medical treatment was reasonable and necessary);
Lyng v. Payne, 476 U.S. 926, 942 (1986) ("[w]e have
never held that applicants for benefits, as distinct from those already
receiving them, have a legitimate claim of entitlement protected by the Due
Process Clause of the Fifth or Fourteenth Amendment").
However, in
Cowart, 505 U.S. at 471, 475, the Supreme Court held that Section 33(g)
of the LHWCA applies to a worker whose
employer, at the time the worker settles with a third party, is neither
paying LHWCA compensation to him nor subject to an order to pay. The Court explained that a "person
entitled to compensation," as used in Section 33(g)(1), "need not be receiving
compensation or have had an adjudication in his favor. Both in legal and general usage, the
normal meaning of entitlement includes a right or benefit for which a
person qualifies, and it does not
depend upon whether the right has been acknowledged or adjudicated." Id. at 477 (citing Board of
Regents of State Colleges v. Roth, 408 U.S. 564, 577 (1972)). See also Kildare v. Saenz,
325 F.3d 1078, 1085 (9th Cir. 2003) (applicants for social security disability
benefits have property interest in receiving benefits); National Ass'n of
Radiation Survivors v. Derwinski, 994 F.2d 583, 588 n.7
(9th Cir.) (both applicants for, and recipients of, benefits have
"constitutionally protected property interest in those benefits"), cert. denied,
510 U.S. 1023 (1993).
The Court
need not decide whether Mrs. Dilts has a protected property interest in her
claim for benefits, as distinct from the payments themselves. See Sullivan, 526 U.S. at 61 n.13
(declining to address question).
Assuming the existence of such a constitutionally protected property
interest, Section 33(g) clearly passes constitutional muster, as we show in Part
D.3, infra.
2. The "state action" doctrine is
not a bar to claimant's due process challenge to Section 33(g), although it
would bar any such challenge to an employer's act of approving or disapproving a
third-party settlement
Respondents
argue (Resp. Br. 35-42) that there is no due process violation in this case
because the prerequisite of state action is missing. If Mrs. Dilts were challenging an
employer's action in disapproving a settlement, respondents would be correct
under the Supreme Court's decision in Sullivan. There the Court held that state action
was lacking where private insurers, as permitted by a state workers'
compensation statute, suspended claimants' medical benefits payments pending
utilization review of the medical treatments. 526 U.S. at 52-58. Like the insurers' actions in
Sullivan, an employer's or insurer's decision under the LHWCA to approve
or disapprove a claimant's third-party settlement is a "private choice,"
id. at 54, "made by concededly private parties, and [it] 'turns on . . .
judgments made by private parties' without 'standards . . . established by the
State.'" Id. at 52 (quoting
Blum v. Yaretsky, 457 U.S. 991, 1008 (1982)). See also ibid. ("[a]ction taken by private entities
with the mere approval or acquiescence of the State is not state action").
In this case,
however, Mrs. Dilts is not challenging any particular action by the employer or
any other private party. Indeed,
because she failed to seek prior approval of her settlements by the employer,
there is no such action to challenge.
Rather, she has raised a narrow facial challenge to Sections 33(g)(1) and
(2) on the ground that they offend due process. See, e.g., Pet. Br. 3 (Issue
3). Cf. Sullivan, 526 U.S.
at 51 (court must "identify[] 'the specific conduct of which the plaintiff
complains'"). Thus, here the
federal law itself supplies the requisite governmental action. Cf. 2 Chester J. Antieau & William
J. Rich, Modern Constitutional Law, § 26.00, at 21 (2d ed. 1997) ("[w]hen
the legislature enacts statutes, enforcement of those statutes by the judiciary
will generally constitute state action").
As we demonstrate next, however, Mrs. Dilts's due process challenge to
Section 33(g) is patently without merit.
3. Section 33(g)'s forfeiture
provision satisfies due process because it rationally balances the competing
interests at stake in LHWCA-related third-party litigation
Mrs. Dilts's
due process argument, like her argument regarding an unconstitutional
delegation, is not clearly articulated, and is instead characterized by
conclusory statements and a lack of relevant authority. She does not expressly argue that she
has been denied procedural due process, such as notice and a meaningful
opportunity to be heard. Nor could
she make such an argument with respect to the denial of her claim on the basis
of Section 33(g). She was accorded LHWCA procedures for
resolution of her claim (see 33 U.S.C. 919(d); 20 C.F.R. 702.331-702.351) and
thus had the opportunity for a formal hearing on the factual questions relevant
to Section 33(g) forfeiture -- whether she entered into settlement agreements
without obtaining the prior approval of her employer, and whether those
agreements were for less than her potential compensation entitlement under the
Act.
The gravamen
of her due process claim, however, appears to be that Section 33(g) violates the
substantive component of that Clause, at least in the context of multi-party
asbestos litigation. Pet. Br.
11. It is well established that
"legislative Acts adjusting the burdens and benefits of economic life come to
the Court with a presumption of constitutionality, and that the burden is on one
complaining of a due process violation to establish that the legislature has
acted in an arbitrary and irrational way."
Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15
(1976). See also Dodd v.
Hood River County, 59 F.3d 852, 864 (9th Cir. 1995) ("[a] substantive due
process claim requires proof that the interference with property rights was
irrational and arbitrary"), cert. denied, 525 U.S. 923 (1998). Thus, Mrs. Dilts is faced with the heavy
burden of showing that Section 33(g) is irrational, a burden that she plainly
fails to meet.
a. The LHWCA, like other workers'
compensation laws, is "a compromise between the competing interests of disabled
laborers and their employers."
Potomac Elec. Power Co. v. Director, OWCP, 449 U.S. 268,
282 (1980). Employees lose rights
they would have had to sue their employers, and employers lose defenses they
could have asserted when sued for a workplace injury. Id. at 282 & n.24. In return, employees receive a prompt
and certain recovery, and employers receive limits on their liability. Ibid. There is no serious dispute that the
basic compromise of rights embodied in workers' compensation laws, including the
LHWCA, satisfies due process requirements.
See, e.g., Crowell, 285 U.S. at 41-42 (LHWCA); New York
Cent. R.R. v. White, 243 U.S. 188, 196-205 (1917) (state law).
As part of this
workers' compensation compromise, Section 33 of the LHWCA adjusts the rights of
employers and employees when a third party may be liable for a workplace
injury. Section 33(a) gives
employees a right to receive LHWCA compensation and sue a third party without
electing between these remedies. 33
U.S.C. 933(a). Section 33(f) gives
employees who recover from a third party a right to receive LHWCA compensation
to the extent that compensation owed exceeds the third-party recovery. 33 U.S.C. 933(f). Because of the liability imposed by
Section 33(f), "the employer is a real party in interest with respect to any
settlement that might reduce but not extinguish the employer's liability." Cowart, 505 U.S. at 482. The written approval requirement in
Section 33(g) "'protects the employer against his employee's accepting too
little for his cause of action against a third party.'" Ibid. (citation omitted). Accord Taylor, 203 F.3d at
1237.
There is nothing
irrational or arbitrary about this adjustment of employee and employer rights
concerning LHWCA compensation.
Congress could have required employees to elect between receiving
compensation or suing a third party and given the employee no LHWCA recovery if
the employee chose to sue a third party.
See 6 Arthur Larson & Lex K. Larson, Larson's Workers'
Compensation Law § 115.01 (2003) (discussing historical practice of states
with its harsh results on employees); cf. Northern Pac. Ry. v.
Meese, 239 U.S. 614 (1916) (no equal protection violation when state
workers' compensation law bars employee actions against third party); Price
ex rel. Price v. Western Res. Inc., 232 F.3d 779, 789 (10th Cir.
2000) (no due process violation when tort action against subcontractor is barred
by availability of workers' compensation remedy against contractor). Instead, Congress has been more generous
to employees, by giving them a right to sue third parties and recover LHWCA
compensation under Section 33(f) when their third-party recoveries are less than
the LHWCA provides in compensation.
It is not arbitrary for Congress to temper this generosity by a provision
such as Section 33(g), which protects an employer from an employee's settling
for too little.
Section 33(g)
thus represents a reasonable balancing of the interests at stake in
LHWCA-related third-party litigation, and it is a far cry from arbitrary or
irrational legislation that offends the Due Process Clause.
b. Mrs. Dilts has wholly failed to
overcome the "presumption of constitutionality" that attaches to the
provision. Turner Elkhorn,
428 U.S. at 15. She offers neither
cogent legal argument nor any factual basis for questioning the rationality of
the LHWCA's employer-approval requirement, either in today's workplace and
economy or at the time it was originally enacted. Indeed, she does not dispute that
Sections 33(g)(1) and (2) make sense in the usual workers' compensation
case. Pet. Br. 8 (provisions "may
make some sense in the context of an industrial injury so that an employer who
is paying benefits to a worker does not have its subrogation rights prejudiced
by a sweetheart settlement between the worker and a liable third party"). Moreover, her argument that Section
33(g) is unconstitutional in the context of complex, multi-party asbestos
litigation is essentially unexplained, consisting of one sentence in her
brief. Pet. Br. 11.
To be sure,
Section 33(g) was originally enacted in 1927, before the advent of today's mass
tort litigation against multiple defendants, such as that involving the asbestos
industry. Moreover, where a person
entitled to LHWCA compensation seeks recovery from, and settles with, multiple
third parties, the person has the additional burden of obtaining the employer's
and insurer's approval of multiple settlements if she wishes to remain eligible
for LHWCA compensation as well. But Mrs. Dilts offers nothing to suggest
that that "burden" is either inherently unfair or beyond Congress's
contemplation in the statute. Indeed, it has always been possible for
a person to sustain an injury on the job that is caused by multiple factors, for
which multiple parties could be liable.
In any event,
Mrs. Dilts's cursory discussion of asbestos litigation is woefully deficient for
establishing that such cases present problems that undermine the
constitutionality of Section 33(g).
Rather, claimant's problems in this case appear to stem from her failure
(or that of her counsel in the asbestos litigation) to consider Section 33(g)
before settling with some asbestos defendants. See ER 286 (Board notes that there is no
evidence that claimant sought employer's approval prior to entering into
third-party settlements); ER 223 (ALJ rejects claimant's attempt to undo
settlements by submitting post-settlement letters from three of the third-party
defendants, stating that the settlements were contingent on employer
approval). Moreover, as the Board
recognized, there may be ways for claimants to dispose of asbestos cases besides
settling them and thereby avoid a forfeiture of LHWCA rights under Section
33(g). See, e.g., ER 285 4
n.3 (payments from a trust fund set up because of bankruptcy of asbestos
manufacturer are not subject to Section 33(g)).
Finally,
whether asbestos litigation presents "unique" circumstances (Pet. Br. 11) that
warrant a different approach under the LHWCA to third-party litigation is not a
question of constitutional dimension, but is instead a policy question that should be
directed to Congress, rather than to this Court. See Turner Broad. Sys., Inc. v.
FCC, 520 U.S. 180, 195 (1997) (Congress is "far better equipped than the
judiciary" to gather and evaluate data relevant to legislative judgments); see
also Cowart, 505 U.S. at 483-484 (harsh effects of LHWCA Section 33(g)
are for Congress to address).