Kreschollek v. Southern Stevedoring Co. ( 1996 )

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit
3-18-1996
Kreschollek v. So Stevedoring Co
Precedential or Non-Precedential:
Docket 95-5253
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UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
No. 95-5253
CARL KRESCHOLLEK,
Appellant
v.
SOUTHERN STEVEDORING COMPANY;
LUMBERMEN'S MUTUAL CASUALTY CO.;
ROBERT REICH, SECRETARY OF LABOR, and
R. DAVID LOTZ, REGIONAL DIRECTOR, REGION III,
OFFICE OF WORKERS' COMPENSATION PROGRAMS,
UNITED STATES DEPARTMENT OF LABOR
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 93-cv-03903)
Argued December 4, 1995
Before: SLOVITER, Chief Judge,
STAPLETON and SAROKIN, Circuit Judges
(Opinion Filed March 18, 1996)
David M. Linker (Argued)
Freedman & Lorry
Philadelphia, PA 19106
Attorney for Appellant Carl Kreschollek
David R. Kunz
Post & Schell
Philadelphia, PA 19103
Attorney for Appellees Southern Stevedoring Co.
and Lumbermen's Mutual Casualty Co.
1
Steven J. Mandel
Allen H. Feldman
Deborah Greenfield (Argued)
United States Department of Labor
Washington, D.C. 20210
Attorneys for Appellee Secretary of Labor
and Regional Director, Offc. of Workers' Compensation
Programs
OPINION OF THE COURT
SLOVITER, Chief Judge.
Carl Kreschollek appeals from the district court's
order dismissing for lack of subject matter jurisdiction his
complaint interposing a facial challenge to the constitutionality
of section 14 of the Longshore and Harbor Workers' Compensation
Act (Longshore Act or Act). The district court so ruled after
concluding that Kreschollek's claim could be raised in his
pending administrative proceeding and thereafter on review in
this court. Although we have previously held that the
administrative review scheme provided in the Longshore Act
supplants district court jurisdiction over claims for benefits,
Kreschollek's claim presents a new twist on the question because
his challenge to the Longshore Act is a constitutional one and he
claims that the review process established by the Act is
insufficient to address his injuries.
I.
2
Kreschollek suffered a work-related injury on or about
March 20, 1990 while employed as a longshoreman by Southern
Stevedoring Co. Southern did not controvert its liability for
benefits, and in late June of that same year it undertook
voluntary compensation for Kreschollek's disability pursuant to
33 U.S.C. § 914(b). It continued such payments until October 29,
1992. Thereafter, it filed a notice of controversion with the
District Director of the Office of Workers' Compensation
Programs, asserting that Kreschollek was now able to return to
work. Kreschollek contested the termination of compensation and,
after an informal conference produced no resolution, the District
Director, upon request by Kreschollek, transferred the case with
his recommendations to the Department of Labor for a formal
hearing before an Administrative Law Judge (ALJ). See 33 U.S.C.
§ 919(c), (d) (1994); 20 C.F.R. § 702.301 (1995). An ALJ held a
hearing on the case on December 15, 1993.
While the matter was pending before the ALJ,
Kreschollek filed this action in the United States District Court
for the District of New Jersey invoking jurisdiction under 28
U.S.C. § 1331 and alleging that the review procedure under the
Act is unconstitutional because it does not require a
predeprivation hearing before employers who voluntarily
compensated injured employees may terminate those benefits.
Kreschollek sought restoration of his benefits, a declaration
from the district court that section 14 of the Act, 33 U.S.C.
§914, is unconstitutional, an injunction against termination of
his benefits without a prior evidentiary hearing, and attorney's
3
fees and costs. Named as defendants were Southern Stevedoring
Co.; Robert Reich, Secretary of Labor; R. David Lotz, Regional
Director, Region III, Office of Workers' Compensation Programs;
and Lumberman Mutual Casualty Co. All defendants moved to
dismiss.
The ALJ's final decision on Kreschollek's
administrative claim for benefits and the district court's ruling
on the motion to dismiss were handed down within days of each
other in March 1995. The ALJ denied Kreschollek's request for
additional benefits. That ruling, which Kreschollek appealed to
the Benefits Review Board, is not before us at this time.
The district court, in the decision that is on appeal
to us, granted the motion to dismiss for lack of subject matter
jurisdiction, holding that in light of the detailed
administrative and judicial review procedure provided by the Act,
Kreschollek's constitutional challenge must be raised in the
court of appeals after exhaustion of administrative remedies,
rather than in the district court through 28 U.S.C. § 1331.
II.
A.
The sole issue on appeal is whether the Longshore and
Harbor Workers' Compensation Act, 33 U.S.C. § 901 et seq.,
precludes district court review of Kreschollek's constitutional
challenge to the Act. Although Kreschollek concedes that his
claim for benefits must be adjudicated through the Act's
administrative review procedure, he argues that the district
court nonetheless has jurisdiction over his collateral
4
constitutional challenge to the adjudicatory process provided
under the Act.
This court previously addressed the more general
question of whether the Longshore Act supplants district court
jurisdiction over claims challenging the Secretary's
interpretation of the Act. Although that case arose in the
context of the Black Lung Benefits Act, the Black Lung Benefits
Act incorporates the scheme of administrative and judicial review
of benefits determinations set forth in the Longshore and Harbor
Workers' Compensation Act, see 30 U.S.C. § 932(a) (1994), and
decisions thereunder are of obvious applicability.
In Compensation Department of District Five, United
Mine Workers of America v. Marshall, 667 F.2d 336 (3d Cir. 1981),
the United Mine Workers of America brought an action in federal
district court to enjoin the Secretary of Labor from rereading X-
rays of claimants seeking benefits pursuant to the Black Lung
Benefits Act. The Union contended that the Black Lung Act
required the Secretary, ALJ and Benefits Review Board (Board) to
accept the x-ray reading made by the claimant's medical expert.
The district court dismissed the action for lack of subject
matter jurisdiction and this court affirmed, determining that
"the scheme of review established by Congress for determinations
of black lung disability benefits was intended to be exclusive."
Id. at 340.
Several considerations led to our determination. First,
we noted the general rule that if "there exists a special
statutory review procedure, it is ordinarily supposed that
5
Congress intended that procedure to be the exclusive means of
obtaining judicial review in those cases to which it applies."
Id. (quoting City of Rochester v. Bond, 603 F.2d 927, 931 (D.C.
Cir. 1979)). Moreover, we recognized the "strong presumption
against the availability of simultaneous review in both the
district court and the court of appeals." Id. (quoting Sun
Enterprises, Ltd. v. Train, 532 F.2d 280, 287 (2d Cir. 1976)).
We next considered whether "the statute's legislative
history, purpose, and design" suggested that the circumstances of
the particular case should overcome the presumption, id., and
concluded that they did not. In reaching this conclusion, we
considered the following: 1) the Benefits Review Board was
created to provide uniformity in application of the Act and to
prevent duplication of review; 2) the Act was amended in 1972 in
part to oust the district courts from jurisdiction over benefits
claims; 3) Congress's provision for review of Board
determinations in the court of appeals reflected its intention to
require exhaustion of administrative remedies prior to seeking
judicial review; and 4) permitting the Board and district court
to consider the same issue would create a danger of duplicative
and conflicting litigation. We acknowledged, however, that in
certain circumstances, such as if the remedies available through
the statutory scheme of review are inadequate, a district court
might have subject matter jurisdiction over a complaint involving
the Black Lung Benefits Act. Id. at 341-44.
The issue of preclusion of district court jurisdiction
for claims arising under the Black Lung Act arose again in
6
Connors v. Tremont Mining Co., 835 F.2d 1028 (3d Cir. 1987). In
Connors, a union Benefit Plan and Trust sought reimbursement from
coal mine operators for medical benefits it had paid to a large
number of black lung claimants. The Plan argued that the issue
was governed by the terms of the Plan, which was covered by the
Employee Retirement Income Security Act, and therefore it invoked
federal question jurisdiction. We rejected the Plan's attempt to
assert jurisdiction in the district court, holding once again
that in a case involving disability benefits pursuant to the
Black Lung Benefits Act, federal question jurisdiction is
supplanted by the procedure established by the statute. Id. at
1030-31.
The reasoning of Compensation Department and Connors is
consistent with the approach taken by the Supreme Court in its
recent decision in Thunder Basin Coal Co. v. Reich, 114 S. Ct.
771 (1994), raising a similar issue in the context of the Federal
Mine Safety and Health Amendments Act of 1977 (Mine Act). Thunder
Basin, a mine operator, sued in district court challenging the
Mine Safety and Health Administration's instruction that it post
the names of the two representatives its employees had chosen
pursuant to the Mine Act to participate in mine inspections,
obtain certain health and safety information and promote health
and safety enforcement. The mine operator's objection was that
the designated representatives were not its employees, but were
employed by the union. Although there was a statutory procedure
for administrative review of a citation for violation of such an
order, the mine operator challenged the Administration's
7
interpretation of the Mine Act as permitting such designations by
seeking a pre-enforcement injunction from the district court. It
argued that designation of union representatives who were not its
employees violated the principles of collective-bargaining
representation under the National Labor Relations Act and
infringed its right to exclude union organizers from its
property. It also argued that the Administrator's action
violated its Fifth Amendment due process rights by compelling it
to choose between violating the Act and enduring the irreparable
harm that it would allegedly suffer because of organizing
advantages the union would gain as a result of the designation.
A unanimous Supreme Court held that the district court
lacked jurisdiction over the pre-enforcement challenge. The
Court stated that determination of whether a statute is intended
to preclude initial judicial review is made from "the statute's
language, structure, and purpose, its legislative history, and
whether the claims can be afforded meaningful review." Thunder
Basin, 114 S. Ct. at 776 (citations omitted).
Although the Mine Act is silent on the question of pre-
enforcement claims, the Court looked at the detailed structure of
the Act, which requires a mine operator to challenge a citation
issued within 30 days; provides for review by an administrative
law judge (ALJ), and possibly thereafter by the Federal Mine
Safety and Health Review Commission (Commission), which must
expedite review if necessary; and gives a mine operator the
opportunity to challenge an adverse Commission decision in the
appropriate court of appeals. There is express provision for
8
district court jurisdiction in only two instances: one empowering
the Secretary to seek to enjoin habitual violations of health and
safety standards and the other to coerce payment of civil
penalties.
The Court concluded that the comprehensive review
process provided within the Act signified an intent by Congress
that most challenges would be heard within that process.
Moreover, there was an emphasis in the legislative history on the
need to improve penalties and enforcement measures and streamline
the review process. This totality of factors led the Supreme
Court to find that Congress intended to preclude district court
jurisdiction over ordinary challenges under the Mine Act. Id. at
777-79.
The Secretary argues that the reasoning of Thunder
Basin and the Court's treatment of the Mine Act lead ineluctably
to the conclusion that the district court lacked jurisdiction
over Kreschollek's claim under the Longshore Act. We agree that
Thunder Basin bolsters our earlier conclusion in Compensation
Department that Congress intended that district court
jurisdiction over most claims pertaining to benefits be
precluded. Certainly, the review scheme provided in the
Longshore Act is comparable in its comprehensiveness to that of
the Mine Act. Under section 14(h) of the Longshore Act, the
district director must initiate an investigation upon receiving
notice from the employer that "payments of compensation have been
stopped." 33 U.S.C. § 914(h) (1994). Where the parties' dispute
is not resolved by means of an informal conference, see 33 U.S.C.
9
§ 914(h) (1994); 20 C.F.R. § 702.301 (1995), then an ALJ must
conduct a full evidentiary hearing, 33 U.S.C. § 919(c), (d)
(1994); 20 C.F.R. §§ 702.316, 702.331-.351 (1995). Either party
may request review by the Benefits Review Board and thereafter by
the appropriate court of appeals. 33 U.S.C. § 921(b), (c)
(1994).
The Longshore Act, like the Mine Act construed in
Thunder Basin, confers jurisdiction in the district court only in
limited circumstances not applicable here. One such circumstance
covers the situation when an employer fails to comply with a
final compensation order making an award, and authorizes the
beneficiary of the award or the district director making the
order to apply to the district court for enforcement. 33 U.S.C.
§ 921(d) (1994). Another such provision allows the Secretary to
bring an action in district court to restrain violations of the
Act's safety rules and regulations. 33 U.S.C. § 941(e) (1994).
As in Thunder Basin, the comprehensive nature of the
administrative review scheme and its limited provision for
district court jurisdiction make "fairly discernible" a
Congressional intent to preclude district court jurisdiction over
most claims under the Act. 114 S. Ct. at 776 (quoting Block v.
Community Nutrition Inst., 467 U.S. 340, 351 (1984)).
The legislative history of the Longshore Act also
supports this reading. Before the Act was amended in 1972, it
provided for deputy commissioners to resolve disputed claims by
conducting evidentiary hearings and issuing initial decisions,
which were reviewable in district court and ultimately in the
10
courts of appeals. See Compensation Dept., 667 F.2d at 341;
Kalaris v. Donovan, 697 F.2d 376, 381-82 (D.C. Cir.), cert.
denied, 462 U.S. 1119 (1983). Although effort at informal
resolution of disputed claims continued to rest with deputy
commissioners (renamed as district directors, see 20 C.F.R.
§701.301(a)(7) (1995)), the 1972 amendments transferred to ALJs
the formal adjudication of claims. The ALJ's decision was made
reviewable by the Board to determine from the record developed
before the ALJ if the decision was in accordance with law and
supported by substantial evidence. Kalaris, 697 F.2d at 382. The
Board now performs the identical function that the district
courts performed before the 1972 amendments, eliminating the role
of the district courts in the claims process. See Compensation
Dept., 667 F.2d at 342. Thus, the changes effected by the 1972
amendments further support reading the Act to preclude district
court jurisdiction over ordinary challenges.
B.
This conclusion does not end our inquiry. We must
proceed to consider, as the Court did in Thunder Basin, whether
the claim asserted is of the type Congress intended to be
reviewed within the Act's statutory structure. See Thunder
Basin, 114 S. Ct. at 779. In that connection, the Court noted
its own precedent upholding district court jurisdiction over
"wholly collateral" claims, "particularly where a finding of
preclusion could foreclose all meaningful judicial review." Id.
at 779.
11
The Court's own discussion in Thunder Basin of its
earlier cases permitting district court jurisdiction over
collateral claims serves as a useful textbook exegesis of the
situations in which district court jurisdiction is not deemed
precluded, and it is useful to quote it in full. The Court
stated:
This Court previously has upheld district
court jurisdiction over claims considered
"wholly 'collateral'" to a statute's review
provisions and outside the agency's
expertise, Heckler v. Ringer, 466 U.S. 602,
618, 104 S. Ct. 2013, 2023, 80 L. Ed. 2d 622
(1984), discussing Mathews v. Eldridge, 424
U.S. 319, 96 S. Ct. 893, 47 L. Ed. 2d 18
(1976), particularly where a finding of
preclusion could foreclose all meaningful
judicial review. See Traynor v. Turnage, 485
U.S. 535, 544-545, 108 S. Ct. 1372, 1380, 99
L. Ed. 2d 618 (1988) (statutory prohibition
of all judicial review of Veterans
Administration benefits determinations did
not preclude [district court] jurisdiction
over an otherwise unreviewable collateral
statutory claim); Bowen v. Michigan Academy
of Family Physicians, 476 U.S. 667, 678-680,
106 S. Ct. 2133, 2140-2141, 90 L. Ed. 2d 623
(1986); Johnson v. Robison, 415 U.S. 361,
373-374, 94 S. Ct. 1160, 1168-1169, 39 L. Ed.
2d 389 (1974); Oestereich v. Selective
Service Bd., 393 U.S. 233, 237-238, 89 S. Ct.
414, 416-417, 21 L. Ed. 2d 402 (1968); Leedom
v. Kyne, 358 U.S. 184, 190, 79 S. Ct. 180,
184, 3 L. Ed. 2d 210 (1958) (upholding
injunction [over otherwise unreviewable
bargaining unit determination] of agency
action where petitioners had "no other means
within their control . . . to protect and
enforce that right").
Thunder Basin, 114 S. Ct. at 779.
The cases referred to by the Court in the above
discussion provide the legal authority for Kreschollek's argument
12
that there is district court jurisdiction over his claim. In
Mathews v. Eldridge, 424 U.S. 319 (1976), the Court held that the
provision of the Social Security Act that required exhaustion of
administrative remedies before the denial of benefits could be
challenged in district court was not intended to bar federal
jurisdiction over a due process challenge to the lack of a
pretermination hearing. The Court explained that that issue was
"entirely collateral" to the denial of benefits, and the claimant
had made a colorable showing that he could not obtain full relief
at a postdeprivation hearing. Id. at 330.
In McNary v. Haitian Refugee Center, Inc., 498 U.S. 479
(1991), also referred to in Thunder Basin, the Court held that an
alien could challenge in district court the constitutionality of
Immigration and Naturalization Service (INS) procedures used to
process claims of alien farmworkers for "special agricultural
worker" status under the Immigration Reform and Control Act, even
though the Immigration and Naturalization Act expressly barred
judicial review of individual determinations except in
deportation and exclusion proceedings. The McNary Court held
that the preclusion of review applied only to denials of
individual applications, and not to a constitutional claim
alleging a broad "pattern and practice" that was collateral to
petitioners' substantive claim for special status. 498 U.S. at
491-94.
The Court in Thunder Basin distinguished this long line
of earlier cases from Thunder Basin's situation. First, it
explained that Thunder Basin's challenge to the designation of
13
nonemployees as the miners' representatives required
interpretation of the parties' rights and duties under the Mine
Act and its regulations, thus implicating subjects within the
Commission's expertise. Second, although constitutional
challenges were generally considered beyond the jurisdiction of
administrative agencies, under the Mine Act the reviewing body
was not the agency itself but an independent commission created
to review agency decisions, and in any event Thunder Basin would
have an opportunity to present its claims to the appropriate
court of appeals. Thunder Basin, 114 S. Ct. at 779-80.
Of course, Kreschollek's claim, and the statute and
circumstances involved, bear some similarity to those in Thunder
Basin. Like the Commission at issue in Thunder Basin, the
Benefits Review Board is competent to hear claimants' legal
contentions, see 33 U.S.C. § 921(b)(3) (1994) ("The Board shall
be authorized to hear and determine appeals raising a substantial
question of law or fact taken by any party in interest . . . with
respect to claims" under the Longshore Act). Like the
complainant mine operator in Thunder Basin, Kreschollek may seek
review in the court of appeals, see 33 U.S.C. § 921(c) (1994)
("Any person adversely affected or aggrieved by a final order of
the Board may obtain a review of that order in the United States
court of appeals . . . ."). And the Longshore Act does contain
an express preclusion provision: "Proceedings for suspending,
setting aside, or enforcing a compensation order, whether
rejecting a claim or making an award, shall not be instituted
otherwise than as provided in this section and section 918 of
14
this title." § 921(e). The Act is silent, however, as to
whether constitutional challenges to the Act must be brought
within the administrative claim process.
Although there have been instances in which
administrative agencies have been deemed capable of dealing with
constitutional issues in the first instance, see, e.g., Thunder
Basin, 114 S. Ct. at 780, "[a]djudication of the
constitutionality of congressional enactments has generally been
thought beyond the jurisdiction of administrative agencies,"
Johnson v. Robison, 415 U.S. 361, 368 (1974) (quoting Oestereich
v. Selective Service Bd., 393 U.S. 233, 242 (1968) (Harlan, J.,
concurring in result). This point was also made in Califano v.
Sanders, 430 U.S. 99, 109 (1977), where the Court noted that
"[c]onstitutional questions obviously are unsuited to resolution
in administrative hearing procedures . . . ." This principle
could most aptly be applied if judicial review would not
otherwise be available, see, e.g., Bowen v. Michigan Academy of
Family Physicians, 476 U.S. 667, 678-680 (1986), but it is
equally pertinent in this case because the result, albeit not
necessarily the absence of any judicial review at all, might well
be the absence of any effective judicial review.
Kreschollek argues with some persuasiveness that in
this respect his case shares more important similarities with the
Mathews v. Eldridge line of cases than with Thunder Basin. As in
Mathews, Kreschollek's claim that he has a constitutional right
to a pretermination hearing is entirely collateral to his claim
of entitlement to benefits. Moreover, unlike the situation
15
presented in Thunder Basin, where the mine operator sought to
circumvent the administrative procedure and enjoin enforcement
proceedings, Kreschollek's attempt to seek a declaration of his
right to a pretermination hearing is in no way inimical to the
purpose of the Act and its amendments, which is to create an
effective process of providing adequate benefits to injured
employees, see Schmit v. ITT Fed. Elec. Int'l, 986 F.2d 1103,
1106 (7th Cir. 1993); see also H.R. Rep. No. 1441, 92d Cong., 2d
Sess. 3, reprinted in 1972 U.S.C.C.A.N. 4698, 4698-99, 4711.
The critical distinction, however, is that in this case
the administrative process is insufficient to provide Kreschollek
the full relief to which he may be entitled. In Mathews, the
Court noted that "[a] claim to a predeprivation hearing as a
matter of constitutional right rests on the proposition that full
relief cannot be obtained at a postdeprivation hearing." 424
U.S. at 331. In Thunder Basin, the Court rejected the operator's
argument that due process required district court review because
it found that "neither compliance with, nor continued violation
of, the statute will subject [Thunder Basin] to a serious
prehearing deprivation." Thunder Basin, 114 S. Ct. at 781.
Kreschollek, on the other hand, is more clearly at risk of
irreparable harm due to the lack of a pretermination hearing.
Kreschollek's benefits were terminated on October 29, 1992, and
he contends he has been unable to return to work due to his
disability. App. at 56. Thus he was deprived of all earned
income for almost two-and-a-half years from the time that his
16
benefits were terminated until the ALJ issued a decision in March
of 1995.
The inadequacy of the administrative review scheme to
address the harm at issue - here, the lack of a pretermination
hearing - is precisely the sort of situation which we envisioned
in Compensation Department would permit a district court to
exercise jurisdiction over a claim involving the Act. See
Compensation Dept., 667 F.2d at 343. Notably, unlike the Mine
Act involved in Thunder Basin, the Longshore and Harbor Workers'
Compensation Act does not provide for expedited review of
benefits determinations. As in Mathews, Kreschollek "has raised
at least a colorable claim that because of his physical condition
17
and dependency upon the disability benefits, an erroneous
termination would damage him in a way not recompensable through
retroactive payments." Mathews, 424 U.S. at 331. It follows
that Kreschollek has alleged a sufficiently serious irreparable
injury to lead us to conclude that the administrative review
process is insufficient to afford him full relief.
Although Kreschollek has presented the same
constitutional questions in the administrative proceeding, the
danger of conflicting and duplicative litigation over which the
Supreme Court expressed concern in Whitney National Bank v. Bank
of New Orleans & Trust Co., 379 U.S. 411, 422 (1965), and which
factored into our decision in Compensation Department is
minimized in this case. By addressing only the constitutional
claims, the district court decision will have no bearing upon the
merits of Kreschollek's claim of entitlement to continuing
disability benefits. Thus, the procedural problems presented by
a pending district court claim should not present an
insurmountable barrier to the exercise of district court
jurisdiction. We are confident that the district court and the
parties can fashion a workable solution should the issue arise.
Kreschollek's counsel conceded at oral argument that at some
point he may have to make a decision as to his forum.
18
III.
For the reasons set forth above, we will reverse the
order of dismissal and remand to the district court for
proceedings consistent with this opinion.
19