BLOOMER v. LIBERTY MUTUAL INS. CO.(1980)

 

No. 78-1418

Argued: December 4, 1979Decided: March 3, 1980

Held:

A stevedore’s lien for the amount of its compensation payment to an injured longshoreman under the Longshoremen’s and Harbor Workers’ Compensation Act against the longshoreman’s recovery in a negligence action against the shipowner may not be reduced by an amount representing the stevedore’s proportionate share of the longshoreman’s legal expenses in obtaining recovery from the shipowner. The language, structure, and history of the Act support this conclusion, rather than the application of the equitable “common fund” doctrine that when a third person benefits from litigation instituted by another, that person may be required to bear a portion of the expenses of suit. Pp. 77-88.

586 F.2d 908, affirmed.

MARSHALL, J., delivered the opinion of the Court, in which BURGER, C. J., and BRENNAN, STEWART, WHITE, POWELL, REHNQUIST, and STEVENS, JJ., joined. BLACKMUN, J., filed a dissenting opinion, post, p. 88.

Alan C. Rassner argued the cause and filed briefs for petitioner.

Douglas A. Boeckmann argued the cause and filed a brief for respondent. 

Footnote * ] Briefs of amici curiae were filed by Paul S. Edelman, Arthur Abarbanel, and Theodore I. Koskoff for the Association of Trial Lawyers of America; and by Dennis Lindsay and Robert Babcock for the Master Contracting Stevedore Association of the Pacific Coast, Inc.

MR. JUSTICE MARSHALL delivered the opinion of the Court.

Under the Longshoremen’s and Harbor Workers’ Compensation Act, 44 Stat. 1424, as amended, 33 U.S.C. 901 et seq., a longshoreman is entitled to receive compensation payments from his stevedore for disability or death resulting from an injury occurring on the navigable waters of the United States. [445 U.S. 74, 75]   If the longshoreman believes that his injuries warrant a recovery in excess of the compensation provided under the Act, he may also bring a negligence action against the owner of the vessel on which the injury occurred. The longshoreman’s recovery from the shipowner is subject to the stevedore’s lien in the amount of the compensation payment. The question for decision is whether the stevedore’s lien must be reduced by a proportionate share of the longshoreman’s expenses in obtaining recovery from the shipowner, or whether the stevedore is instead entitled to be reimbursed for the full amount of the compensation payment.

I

Petitioner William E. Bloomer, Jr., was injured during the course of his employment on board the vessel S. S. Pacific Breeze. He received $17,152.83 in compensation from respondent Liberty Mutual Insurance Co., the designated carrier of workers’ compensation for petitioner’s employer, Connecticut Terminal Co. Thereafter petitioner brought this diversity action against the owner of the vessel. He alleged that the shipowner had negligently created hazardous conditions on board the vessel, that the ship’s deck was slippery and dangerous, and that as a result he had fallen and incurred severe injuries.

During settlement negotiations, petitioner’s counsel gave respondent notice of the pending action and requested it to reduce its lien by a share of the costs of recovery. That share would be computed as an amount bearing the same ratio to the total cost of recovery as the compensation payments bear to the total recovery. Respondent refused petitioner’s request, asserted its right to full reimbursement, and successfully moved to intervene in the action. Soon thereafter petitioner settled with the shipowner for $60,000. He moved for summary [445 U.S. 74, 76]   judgment directing that respondent’s lien on the recovery be reduced by an amount representing its proportionate share of the expenses of the suit against the shipowner. Petitioner claimed that since the recovery from the shipowner would benefit respondent, equity required that respondent bear a portion of the expenses of obtaining that recovery.

The District Court denied petitioner’s motion, and the United States Court of Appeals for the Second Circuit affirmed. Bloomer v. Tong, 586 F.2d 908 (1978). The Court of Appeals concluded that a stevedore should not be required to pay a share of the longshoreman’s legal expenses in a suit [445 U.S. 74, 77]   brought against the shipowner. We granted certiorari to resolve this recurring question, on which the Courts of Appeals have been divided.   441 U.S. 942 (1979). We affirm.

II

Petitioner’s argument amounts to an appeal to the equitable principle that when a third person benefits from litigation instituted by another, that person may be required to bear a portion of the expenses of suit. He invokes cases establishing that in certain circumstances, courts should exercise their equitable powers to charge beneficiaries with a share of the expenses of obtaining a “common fund” through litigation. See Boeing Co. v. Van Gemert, 444 U.S. 472 (1980); Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 257 -259 (1975); id., at 275-280 (MARSHALL, J., dissenting); Mills v. Electric Auto-Lite Co., 396 U.S. 375 (1970); Sprague v. Ticonic National Bank, 307 U.S. 161 (1939). When measured against the language, structure, and history of the Longshoremen’s and Harbor Workers’ Compensation Act, however, petitioner’s argument must fail.

The Act provides a comprehensive scheme governing an injured longshoreman’s rights against the stevedore and ship-owner. The longshoreman is not required to make an election between the receipt of compensation and a damages action against a third person, 33 U.S.C. 933 (a). After receiving a compensation award from the stevedore, the longshoreman is given six months within which to bring suit against the third [445 U.S. 74, 78]   party. 33 U.S.C. 933 (b). If he fails to seek relief within that period, the acceptance of the compensation award operates as an assignment to the stevedore of the longshoreman’s rights against the third party. The Act makes explicit provision for the distribution of any amount obtained by the stevedore in a suit brought pursuant to that assignment. The stevedore is entitled to reimbursement of all compensation benefits paid the employee, and its costs, including attorney’s fees. Of the remainder, four-fifths is distributed to the longshoreman, and one-fifth “shall belong to the employer.” 33 U.S.C. 933 (e). 

The Act does not expressly provide for the distribution of amounts recovered in a suit brought by the longshoreman. The unambiguous provision that the stevedore shall be reimbursed for all of his legal expenses if he obtains the recovery does, however, speak with considerable force against requiring him to bear a part of the longshoreman’s costs when the longshoreman recovers on his own. There is no reason to believe that Congress intended a different distribution of the expenses of suit merely because the longshoreman has brought [445 U.S. 74, 79]   the action. Petitioner asserts, however, that in the absence of an explicit statutory resolution, the recovery against the shipowner represents a common fund for whose creation the stevedore may properly be charged. To evaluate this argument we turn to the history of the relevant provisions of the Act.

III

As originally enacted in 1927, the Act required a longshoreman to choose between the receipt of a compensation award from his employer and a damages suit against the third party. Act of Mar. 4, 1927, 33, 44 Stat. 1440. If the longshoreman elected to receive compensation, his right of action was automatically assigned to his employer. In 1938, however, Congress provided that in cases in which compensation was not made pursuant to an award by a deputy commissioner (appointed by the Secretary of Labor, see 33 U.S.C. 940), the longshoreman would not be required to choose between the compensation award and an action for damages. Under the 1938 amendments, no election was required unless compensation was paid pursuant to such an award. See Act of June 25, 1938, ch. 685, 12, 13, 52 Stat. 1168.

Like the present version, the Act as amended in 1938 did not make provision for the distribution of amounts recovered from the third party in a suit brought by the longshoreman. The lower courts, however, interpreted the Act to require that the stevedore be reimbursed for his compensation payment out of the sum recovered from the third party Congress was understood not to contemplate double recovery on the longshoreman’s part, and the stevedore did not, therefore, lose the right to reimbursement for its compensation payment. See, e. g., The Etna, 138 F.2d 37 (CA3 1943); Miranda v. Galveston, 123 F. Supp. 889 (SD Tex. 1954); Fontana v. Pennsylvania R. Co., 106 F. Supp. 461 (SDNY 1952) (Weinfeld, J.), aff’d on opinion below sub nom. Fontana v. Grace Line, Inc., 205 F.2d 151 (CA2), cert. denied, 346 U.S. 886 (1953). [445 U.S. 74, 80]  

Under the 1938 legislation the lower courts also decided that the stevedore should not be required to bear a proportionate share of the longshoreman’s legal expenses. To force the stevedore to do so, it was observed, would guarantee the longshoreman a total recovery in excess of the amount he received in his third-party action. Solely by virtue of the compensation scheme, then, the longshoreman would receive a greater sum than would be possible in an ordinary suit for damages. At the same time the stevedore would be prevented from recovering the full amount of its compensation payment. The courts concluded that these results would violate legislative purposes made manifest by the express provision that the employer may recover its legal expenses from the fund created by its own suit against the third party. See Davis v. United States Lines Co., 253 F.2d 262 (CA3 1958); Oleszczuk v. Calmar S. S. Corp., 163 F. Supp. 370 (Md. 1958); Fontana v. Pennsylvania R. Co., supra, at 463-464.

In 1959, Congress amended the Act to delete the election-of-remedies requirement altogether. Act of Aug. 18, 1959, 73 Stat. 391. Existing law was felt to “wor[k] a hardship on an employee by in effect forcing him to take compensation under the act because of the risks involved in pursuing a lawsuit against a third party.” S. Rep. No. 428, 86th Cong., 1st Sess., 2 (1959). The result was that an injured employee “usually elects to take compensation for the simple reason that his expenses must be met immediately, not months or years after when he has won his lawsuit.” Ibid.; see H. R. Rep. No. 229, 86th Cong., 1st Sess. (1959).

Responding to this inequity, the 1959 amendment provided that even when compensation was paid pursuant to an award of the deputy commissioner, the longshoreman’s right of action would not be assigned to the stevedore until six months from the date of the award. The legislative history demonstrates that Congress did not intend to alter the rule allowing the stevedore to recover the full amount of its lien from the longshoreman’s [445 U.S. 74, 81]   third-party recovery. An employee “would not be entitled to double compensation,” for “an employer must be reimbursed for any compensation paid to the employee out of the net proceeds of the recovery.” S. Rep. No. 428, supra, at 2. During the hearings on the 1959 amendments, the rule that an employer would not be required to bear a proportionate share of the longshoreman’s cost of recovery was specifically drawn to Congress’ attention, and one witness suggested that it should be abandoned. Instead, Congress elected not to disturb the existing rule. Recognizing that no change had [445 U.S. 74, 82]   been contemplated, the courts continued to hold that a stevedore would not be required to bear a proportionate share of the longshoreman’s legal expenses. See Haynes v. Rederi A/S Aladdin, 362 F.2d 345 (CA5 1966); Ashcraft & Gerel v. Liberty Mutual Ins. Co., 120 U.S. App. D.C. 51, 343 F.2d 333 (1965); Petition of Sheffield Tankers Corp., 222 F. Supp. 441 (ND Cal. 1963).

In 1972, Congress enacted more extensive Amendments to the Act, see Edmonds v. Compagnie Generale Transatlantique, 443 U.S. 256, 262 (1979), and it is these Amendments that according to petitioner, justify a change in the rule with respect to attorney’s fees. Concerned that compensation benefits had been far too low, Congress altered the benefit structure of the Act so as to increase both maximum and minimum [445 U.S. 74, 83]   benefits substantially. These increases were linked to two provisions designed to reduce litigation and to ensure that stevedores would have sufficient funds to pay the additional compensation. First, Congress abolished the unseaworthiness remedy for longshoremen, recognized in Seas Shipping Co. v. Sieracki, 328 U.S. 85 (1946), and limited the longshoreman’s action against the shipowner to one based on negligence. Second, Congress eliminated the third-party action by the shipowner against the stevedore, recognized in Ryan Stevedoring Co. v. Pan-Atlantic S. S. Corp., 350 U.S. 124 (1956). In that case the Court held that a shipowner could obtain damages from the stevedore when it showed that the stevedore had breached its warranty to the shipowner of workmanlike service. As the House Report notes, the consequence was that “a stevedore-employer is indirectly liable for damages to an injured longshoreman who utilizes the technique of suing the vessel,” with the result “that much of the financial resources which could better be utilized to pay improved compensation benefits were now being spent to defray litigation costs.” H. R. Rep. No. 92-1441, p. 5 (1972); see S. Rep. No. 92-1125, p. 9 (1972). Indeed, there was considerable testimony during the hearings that third-party actions had resulted in congested courts and that the primary beneficiaries had been lawyers, not injured longshoremen. The Senate [445 U.S. 74, 84]   Report stated that “[t]he social costs of these law suits, the delays, crowding of court calendars and the need to pay for lawyers’ services have seldom resulted in a real increase in actual benefits for injured workers.” Id., at 4. The elimination of the shipowner’s cause of action against the stevedore was intended to reduce litigation, immunize stevedores and their insurers from liability in third-party actions, and assure conservation of stevedore resources for compensation awards to longshoremen.

Witnesses also brought to the attention of Congress the longstanding rule that an employer could recover the full amount of its compensation award from the longshoreman’s recovery against the shipowner. 10 Congress did not, however, enact any legislation concerning that rule.

Petitioner argues that the 1972 Amendments so altered the equities as to compel a holding that a stevedore must pay a proportionate share of the longshoreman’s expenses in a third-party action brought against the shipowner. He observes that before the Amendments, the longshoreman and the stevedore had adverse interests in the third-party action: if the longshoreman were successful in that suit, the shipowner frequently would attempt to require the stevedore to make payment of amounts due the longshoreman. With the abolition of the shipowner’s cause of action, the stevedore and the [445 U.S. 74, 85]   longshoreman had a common interest in the longshoreman’s recovery against the shipowner. Petitioner concludes that the common-fund doctrine should be available to permit the employee to recover from the stevedore a proportionate share of the expenses of suit.

In light of the Act and its legislative history, however, we are unable to accept petitioner’s argument. It is of course true that the stevedore and longshoreman now have a common interest in the longshoreman’s recovery against the shipowner, but it does not follow that the stevedore should be required to pay a share of the longshoreman’s legal expenses. Congress has not modified 33 U.S.C. 933 (e), providing that the stevedore is not required to pay its legal expenses in cases in which it has recovered against the shipowner pursuant to an assignment from the longshoreman. Moreover, in 1972 Congress was informed of, but did not alter, the uniform rule that the longshoreman’s legal fees would be paid by the longshoreman alone. In these circumstances we are reluctant to take steps to change that rule on our own. See Edmonds v. Compagnie Generale Transatlantique, 443 U.S., at 273 .

In addition, to the extent that the 1972 Amendments offer guidance, they strongly suggest that the rule for payment of attorney’s fees was not intended to be altered. The legal expenses incurred by stevedores in connection with third-party actions were understood to be a major obstacle to the funding of increased compensation payments. Numerous witnesses testified that third-party actions frequently inured to the benefit of lawyers, depleting the stevedore’s resources and congesting the courts without aiding the injured employee. It would be ironic indeed if statutory amendments designed to eliminate the stevedore’s liability in connection with third-party actions were interpreted to give birth to an entirely new liability in the form of a charge for the longshoreman’s legal expenses. 11   [445 U.S. 74, 86]   We are unwilling to attribute to Congress an intention to allow creation of a new liability irreconcilable with its general desire to reduce litigation and to ensure conservation of the legal expenses of stevedores and their insurers. 12 

Finally, we return to the original basis for the rule that a stevedore would not be required to pay a portion of the longshoremen’s expenses in his suit against the shipowner. The compensation award was intended to be an immediate and readily available payment to the injured longshoreman. By receiving this payment, the longshoreman was not foreclosed from pursuing an action against the shipowner. At the same time, he was not entitled to double recovery, and the stevedore would be reimbursed in full for his compensation payment. 13   [445 U.S. 74, 87]   The result we reach enables the longshoreman to recover an amount no less than that which he would receive through an ordinary negligence action, 14 and also immunizes the stevedore from liability in connection with the third-party action. If we were to accept petitioner’s view, an injured longshoreman would ultimately receive a sum equal to the full amount of his recovery against the shipowner and, in addition, a supplement consisting of the stevedore’s contribution to the longshoreman’s legal expenses. This supplement would represent a windfall in excess of the amount the longshoreman received as compensation for the injuries he has suffered. The stevedore would not obtain reimbursement for the full amount of its compensation payment, but would instead have that amount reduced by a possibly substantial legal fee. This result would be contrary to the allocation of attorney’s fees expressly provided by Congress for suits brought by the stevedore pursuant to an assignment from the longshoreman. In these circumstances we do not believe that the Act and its legislative history [445 U.S. 74, 88]   can fairly be read to support the distribution proposed by petitioner.