The U.S. Fifth Circuit Court of Appeals recently reaffirmed that a claimant must give the employer notice of a settlement or judgment of a third party lawsuit arising from the work-related injury, or risk losing entitlement to benefits. In Parfait v. Dir., OWCP, 16-60662 (5th Cir. Sep. 11, 2018), 2018 U.S. App. LEXIS 25736, the claimant maintained that the employer had notice of the settlement because the claimant invited the employer to attend a mediation. The claimant further maintained that the employer had notice of the judgment he obtained against a third party through the filing of the judgment in the public record.
The Fifth Circuit decided this case under Section 33(g) of the Act, and found that the claimant had not provided adequate notice as required by this section. As the Fifth Circuit explained, “Section 33(g) … requires the employee to obtain written approval of certain third-party settlements and to give notice of all third-party settlements and judgments, [and] is designed to ensure that the employer’s rights are protected in the settlement and to prevent the claimant from unilaterally bargaining away funds to which the employer or its carrier might be entitled …. [T]he notice requirement enables an employer to protect its right to set off the settlement amount against its future obligations and its right to reimbursement of its previous payments from the settlement proceeds. Further, it ensures against fraudulent double recovery by the employee.”
The Fifth Circuit upheld the application of Section 33(g) to bar the Claimant from benefits. The court relied upon the U.S. Supreme Court’s decision in Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469 (1992), which had emphasized the importance of the Section 33(g) scheme of notice and approval of settlement.
The Board recently confirmed that a claimant who has joined multiple potentially responsible employers in a claim may settle with a single employer. The claimant filed claims for back injuries occurring on May 21, 2010 and August 18, 2013, with the latter asserted as a cumulative injury claim. All the employers the claimant worked for between these dates were joined in the proceeding. At one point, the claimant settled with a single employer, Total Terminals International ("TTI"). The administrative law judge disapproved of the settlement, finding it “'deficient in that it does not include the signatures of all parties,' i.e., all the potentially liable employers." The Board vacated this order and confirmed that "[a]lthough several potentially liable employers have been joined in the proceeding, . . . any potentially liable employer may opt to settle separately with claimant." The Board determined that as "the proposed settlement agreement involves only claimant’s claim against TTI, and does not affect the rights or obligations of any other potentially liable employer, claimant and TTI are the only parties who must sign the application in this case." The Board added, however, that the employer ultimately responsible for the claimant's injury is not entitled to a credit for these settlements. See Alexander v. Director, OWCP, 297 F.3d 805 (9th Cir. 2002) and New Orleans Stevedores v. Ibos, 317 F.3d 480 (5th Cir. 2003).
Stovall v. Total Terminals International, LLC, BRB Nos. 14-0266 and 14-0266A (2/27/15)
An ALJ cannot vary the terms of an agreed settlement application submitted by the parties, the Benefits Review Board held. “Section 8(i) of the Act and its implementing regulations do not give an administrative law judge the authority to alter a complete Section 8(i) settlement submitted by the parties. Rather, the administrative law judge’s options are limited.” The Board explained that an ALJ has only four options when a settlement application is submitted: “1) issue a deficiency notice if the application is incomplete, 2) approve the settlement if it is adequate and not procured by duress, 3) disapprove the settlement if it is inadequate or was procured under duress; or 4) do nothing, in which case, if the parties are represented by counsel, the settlement will be deemed approved after 30 days.”
In this case, the parties submitted an 8(i) application which provided that a separate settlement application was also submitted to the state workers’ compensation agency. The application further stated that the parties agree that the amount agreed to in connection with the settlement would settle both the state and LHWCA claim. However, the judge conditioned approval of the LHWCA settlement on approval of the state claim. The Board determined that conditioning approval in this manner impermissibly altered the parties’ agreement. Also, in issuing his approval of the settlement, albeit with different terms, the ALJ ordered the carrier to pay the settlement, and indicated that this payment would discharge the carrier’s liability. However, the carrier was not mentioned in the settlement agreement. The Board found that this portion of the ALJ’s order again changed the parties’ agreement, noting that a settlement may only bind the parties to the agreement.
The Board also held that the ALJ improperly modified the agreed amount of the attorney’s fee. The Board determined that if the parties agree on a fee, the ALJ may not separately approve or disapprove of the fee portions of the agreement. Instead, if the ALJ finds that the fee is improper, the ALJ must disapprove the entire settlement. Notably, the Board added that the parties may agree that certain portions of a settlement agreement are severable, such as the fee or medical and compensation benefits.
Losacano v. Electric Boat Corp., BRB No. 13-0554 (7/28/14)
In a decision broadly supporting the parties’ determination of the adequacy of a settlement, the Benefits Review Board approved a settlement over the objections of the District Director.
The claimant and the employer reached an agreement to settle a partial disability claim, and submitted the settlement to the District Director. The District Director determined that the settlement was inadequate. The District Director found that the $140,000 proposed was well below the present value of the claimant’s benefits, calculated using an eight percent discount. Thereafter, the parties sought a hearing before an administrative law judge, added an insignificant $500 to the settlement amount, and the ALJ approved the settlement. The Director appealed this decision.
In urging affirmance of the ALJ’s order, the parties agreed that the settlement was adequate, particularly considering the risk of a decision from the Department adverse to the claimant’s interests. The Board approved the ALJ’s reliance on the determination by the claimant and her attorney that the claim presented meaningful disputed issues. The Board stated that the ALJ “found that claimant and her attorney are in the best position to assess her litigation risks, her life expectancy, and her future earnings, and that neither is ‘obliged to explain to the Department the detailed specifics of the assessment of why she thinks she might lose her case.’” The Board also emphasized the importance of the Act’s provision for automatic approval of settlements when the claimant is represented. “As claimant is represented by counsel who explained the pros and cons of her choices, and as the Act contains an automatic approval provision for settlements when claimants have legal representation, absent a specific disapproval of the settlement, it was reasonable for the administrative law judge to conclude that claimant is entitled to rely on the advice of her attorney.”
The Board also noted that approval of the particular settlement at issue did not hinge on an actuarial analysis of the settlement. The Board explained that the actuarial analysis is mandated by Section 702.243(g) of the Regulations, which only applies to cases being paid pursuant to a final compensation order in which no substantive issues are in dispute.
Richardson v. Huntington Ingalls, Inc., BRB No. 13-0476 (5/22/14).
© 2018 Ira J. Rosenzweig