2012 Was an Interesting Year: Part I

2012 Was an Interesting Year: Part I

With regard to jurisprudence, 2012 was an interesting year for those who follow developments under the Longshore Act. Several cases were decided (or are in the process of being decided) at the U.S. Supreme Court, several old questions received presumably final answers, and several perennial issues received new attention. There was even some good news for maritime employers in the state of Virginia.

In fact, it was so full of interesting events that it has to be covered in two parts.

Here’s Part One of a brief review of what, in my opinion, were some of the Longshore Act high points of 2012. This Part will be devoted to just those cases that came out of the federal Ninth Circuit Court of Appeals.

Pacific Operators Offshore, LLP v. Valladolid

On January 11, 2012, the U.S. Supreme Court issued its decision in an Outer Continental Shelf Lands Act (OCSLA) case involving an issue about which there was disagreement among several federal courts of appeal.

The OCSLA extends Longshore Act benefits, “with respect to disability or death of an employee resulting from any injury occurring as the result of operations, conducted on the outer Continental Shelf for the purpose of exploring for, developing, removing, or transporting by pipeline the natural resources, or involving rights to the natural resources, of the subsoil and seabed of the outer Continental Shelf ….” (43 U.S.C. Section 1333(b))

The OCSLA was passed in 1953, but it wasn’t until 2012 that the U.S. Supreme Court interpreted the “occurring as the result of operations” language in Section 1333(b) quoted above. In affirming the opinion of the Ninth Circuit Court of Appeals, the Supreme Court ruled that an injury does not have to actually occur on the outer Continental Shelf (OCS) of the United States to be covered by OCSLA. The injury can occur anywhere. The test for coverage under the “result of operations” phrase is that there must be a substantial nexus” between the injury and the employer’s extractive operations on the OCS. The Court noted that, “the test may not be the easiest to administer”, but that it (the Court) was “confident that ALJs and courts will be able to determine whether an injured employee has established a significant causal link between the injury … and the employer’s on-OCS extractive operations.”

The “substantial nexus” test will be clarified going forward as it is applied in different cases – beginning with Valladolid, which has been returned to the U.S. Department of Labor’s Benefits Review Board to apply the new test to the facts of the case.

NOTE: This result means that some employers now have an OCSLA exposure that they may be unaware of. Also, insurance coverage under the OCSLA is separate from insurance coverage under the Longshore Act. Your Longshore Act policy or endorsement does not insure you for any operations that may come under the expanded OCSLA coverage. Make sure that you have proper coverage. (Hint: check with AEU)

Dana Roberts v. Sea-Land Services, Inc.; Kemper Insurance Co.; and Director, Office of Workers’ Compensation Programs, U.S. Department of Labor.

Also on January 11, 2012, the Supreme Court heard oral arguments in the case of Roberts v. Sea-Land Services, Inc., et al. The decision in the case was issued on March 20, 2012.

“Cost of living” provisions were added to the Longshore Act in 1972 to adjust the maximum and minimum weekly benefit rates each October 1 by reference to the new fiscal year’s National Average Weekly Wage. In the Roberts case we have finally confirmed the correct interpretation of ambiguous language in Section 906(c) (33 U.S.C. 906(c)) of the Longshore Act, as another Ninth Circuit ruling was affirmed by the Supreme Court.

Under the Longshore Act, the weekly rate at which a disabled worker is paid a Permanent Total Disability (PTD) benefit is increased each October 1 based on the new NAWW. Also, the weekly rate is capped at 200% of the NAWW in effect during the period he is “newly awarded” benefits.

The issue in Roberts was the timing of what maximum weekly rate applies to compensation for PTD benefits – is it the maximum in effect as of the date of first entitlement to PTD benefits, or is it the (usually) higher later maximum as of the date of an ALJ’s compensation order? When are the benefits considered to have been “newly awarded”?

Petitioner Roberts argued that an injured worker is “newly awarded compensation” as that phrase is used in Section 906(c) at the time that a formal compensation order (award) is issued in his case.

The employer and the U.S. Department of Labor argued that “newly awarded compensation” means first entitled to disability benefits under the self-executing provisions of the Act.

Remember, the distinction is important because the date that benefits are “newly awarded” determines the applicable maximum weekly benefit rate. The maximum rate increases each October 1 – the later that PTD are “newly awarded” then the higher the weekly rate will be.

Fun fact: The amount at stake in the Roberts case at the U.S. Supreme Court was only $830.99, since Mr. Roberts’ entitlement changed from permanent total disability (PTD) to permanent partial disability (PPD) after only 3 months of PTD (PPD benefits based on a Loss of Wage Earning Capacity are paid at two-thirds of the difference between the worker’s Average Weekly Wage and his residual wage earning capacity after the injury and are capped at the maximum on the date of injury. PPD benefits are not increased annually.) In the typical case, however, PTD benefits are paid for life, and the difference per week based on a higher maximum rate for each affected disabled worker multiplied in each case by life expectancy would add up significantly for maritime employers.

Keller Foundation/Case Foundation, et al. v. Joseph Tracy, et al.

Joseph Tracy, Jr. v. Director, Office of Workers’ Compensation Programs, U.S. Department of Labor

In September 2012 we see another Ninth Circuit case. Cases before the Court involving numerous parties included consideration of whether Section 903(a)’s situs provision’s reference to the “navigable waters of the United States” includes foreign territorial waters.

The Benefits Review Board has held that navigable waters of the United States include the “high seas” and also the territorial waters of other nations. Other federal circuits, including the Ninth, have also found Longshore coverage on the high seas, but no federal circuit had yet found the coverage to extend to other nation’s waters.

And this hasn’t changed. Based primarily on what it termed as the strong presumption against extraterritoriality in U.S. statutes, the Ninth Circuit refused to extend Longshore coverage to foreign territorial waters, or for that matter, to a foreign sovereign’s lands.

The BRB had reached the same conclusion on the facts of this case, but without disturbing its own precedent that, under certain circumstances, the Longshore Act could apply to the territorial waters of other countries. The BRB focused on the prolonged nature of the claimant’s overseas work assignments to distinguish the Tracy case from Weber v. S.C. Loveland Co. where the Board applied the Longshore Act to work performed in the port of Jamaica. So, presumably, in certain circumstances the BRB (outside of the Ninth Circuit) could still hold that the Longshore Act applies in foreign territorial waters.

But at least we now know that in the Ninth Circuit foreign territorial waters and their adjoining ports and shore based areas are not the “navigable waters of the United States” as the term is used in the Longshore Act.

Clearly this is not the last word on this issue. In fact, there is a petition for rehearing pending at the Ninth Circuit.

Price v. Stevedoring Services of America, Inc.

Guess which federal circuit court of appeals checked in again in September 2012 in the continuing inquiry into longstanding issues? This time, the issue in this Ninth Circuit case involved interest on past due compensation. The Longshore Act has no provision regarding interest, nor any standard for how to calculate the amount of interest due, but it’s long been settled that interest is mandatory on past due compensation from the date that an injured worker becomes entitled to compensation. In the latest installment of Price v. Stevedoring Services of America, Inc. the Ninth Circuit considered whether a claimant should receive interest on past due compensation at the rate defined in 28 U.S.C. Section 1961 (weekly average 1 year constant maturity Treasury Bill yield) or 26 U.S.C. Section 6621 (the rate that the IRS uses for overpayments and underpayments of taxes), and whether the interest should be calculated on a simple or compound basis.

The Ninth Circuit found that Section 1961 is permissible and appropriate in the maritime context (this is the rate that the U.S. Department of Labor already uses to calculate interest, and also the rate applied to federal district court judgments), and that interest on past due compensation should be compound and not simple interest. The Court states, “The growing recognition that compound interest can be necessary to compensate plaintiffs fully is justified by changing economic realities.” The Court noted the general movement of case law toward compound interest and its common use in the financial world.

So, in the Ninth Circuit we have compound interest on past due compensation, and I think it is likely that this will become the standard in the other circuits in time. The last time I checked, the Department of Labor was working on developing a compound interest calculator.

This latest Price decision is also noteworthy because in it the Ninth Circuit overruled its own precedents and has joined the other circuits that have ruled on the issue in holding that it will no longer grant Chevron level deference to the litigating position of the Director, Office of Workers’ Compensation Programs. The Director’s litigating positions may however still be entitled to Skidmore level deference, although in this case it did not qualify for any deference at all on the issue of simple versus compound interest. The difference between Chevron and Skidmore is essentially the difference between “deference” and simply acknowledging some additional persuasive authority.

It was truly a busy year for the Ninth Circuit with regard to the Longshore Act. 


John A. (Jack) Martone served for 27 years in the U.S. Department of Labor, Office of Workers’ Compensation Programs, as the Chief, Branch of Insurance, Financial Management, and Assessments and Acting Director, Division of Longshore and Harbor Workers’ Compensation. Jack joined The American Equity Underwriters, Inc. (AEU) in 2006, where he serves as Senior Vice President, AEU Advisory Services and is the moderator of AEU's Longshore Insider.
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