Brown v. Forest Oil Corp. ( 1994 )

UNITED STATES COURT OF APPEALS
for the Fifth Circuit
_____________________________________
No. 93-4340
_____________________________________
JAMES BROWN and JANN BROWN,
Plaintiffs-Appellants,
VERSUS
FOREST OIL CORP., ET AL.,
Defendants,
PRODUCTION OPERATORS, INC.,
Defendant-Appellee.
_____________________________________
No. 93-5292
_____________________________________
JAMES BROWN, ET AL.,
Plaintiffs,
JAMES BROWN,
Plaintiff-Appellant,
VERSUS
PRODUCTION OPERATORS, INC.,
Defendant-Appellee.
______________________________________________________
Appeals from the United States District Court
for the Western District of Louisiana
______________________________________________________
(August 10, 1994)
Before ALDISERT1, REYNALDO G. GARZA and DUHÉ, Circuit Judges.
DUHÉ, Circuit Judge:
1
Circuit Judge of the Third Circuit, sitting by designation.
James Brown, an employee of Production Operators, Inc.
("POI"), was injured while working on an offshore platform located
on the outer continental shelf off the coast of Louisiana. To
recover for their injuries, James Brown and his wife sued numerous
defendants, including Forest Oil Corp., an owner and operator of
the platform. POI intervened to recover medical and wage benefits
that it had paid to or on behalf of James Brown since his injury.
Upon learning POI had failed to secure compensation under the
Longshoreman and Harbor Worker's Compensation Act ("LHWCA"), the
Browns sued POI for damages under 33 U.S.C. § 905(a). [Hereinafter
"the LHWCA case"]. POI asserted a counterclaim against the Browns
arising out of James Brown's execution when employed of a contract
called the Insurance Waiver Agreement ("the Agreement"). The
Agreement, if Brown suffered a compensable injury, provided that
POI would pay Brown 100 percent of his salary and reasonable
medical benefits in lieu of the compensation benefits applicable in
the jurisdiction where he was injured. In exchange for these
promises, Brown waived any claims that he may have against POI
arising out of his injury.
Before trial, the Browns settled with all defendants except
POI for $600,000. Later, the Browns' LHWCA case against POI was
tried to a jury, which found both POI and Forest Oil responsible
for the Browns' injuries. The district court deducted from the
total damages found by the jury the full amount that the Browns had
collected from the settlement and the benefits that James Brown had
previously received from POI. After the application of these
2
credits, the district court entered a judgment against the Browns
for the balance they owed POI for the benefits it had previously
paid.2
While the federal suit was pending, James Brown filed suit
seeking money damages against POI in Texas state court, alleging
that POI had breached the Insurance Waiver Agreement by terminating
payment of benefits to Brown after he commenced the LHWCA action
against POI in federal court. [Hereinafter "breach of contract
case"]. Alternatively, Brown argued that POI fraudulently induced
him into signing the Agreement. The breach of contract case was
removed to federal court and transferred to the Western District of
Louisiana. POI's counterclaim in the LHWCA case was severed and
consolidated with the breach of contract case.
POI moved to dismiss, or alternatively, for summary judgment.
The district court granted POI's motion for summary judgment and
dismissed all Brown's claims in the breach of contract case with
prejudice.
2
Specifically, the jury awarded James Brown $584,000 in total
damages. The jury awarded Jan Brown $27,500 for loss of consortium
damages. The parties had stipulated to the amount of Brown's past
medical expenses, equaling $54,867.04. Accordingly, James and Jan
Brown's total damages were $666,367.04. The district court then
applied a credit of $600,000 for the settlement. On summary
judgment, the district court had determined that POI was entitled
to an employer's lien for benefits it had paid to Brown prior to
the tort suit. Therefore the district court applied a credit for
$120,640, the amount Brown had previously received from POI. After
application of both credits, no portion of the Browns' damages
remained due, and the district court entered a judgment against the
Browns in favor of POI in the amount of $54,272.96 to complete
reimbursement to POI.
3
The Browns appeal several aspects of the damage award in the
LHWCA case and the grant of summary judgment in favor of POI in the
breach of contract case. The appeals have been consolidated before
this Court. We vacate and remand in part and affirm in part.
DISCUSSION
I. Breach of Contract Case
A. Standard of Review
We review a summary judgment de novo. Abbott v. Equity Group,
Inc., 2 F.3d 613, 618 (5th Cir. 1993), cert. denied, 114 S. Ct.
1219 (1994). Summary judgment may be granted if there is "no
genuine issue as to any material fact and the moving party is
entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c).
A summary judgment may be affirmed on any proper legal basis, even
if not ruled on by the district court. See Harbor Ins. Co. v.
Urban Constr. Co., 990 F.2d 195, 199 (5th Cir. 1993).
B. Breach of Contract Claim
In this Court the parties proceed assuming that, under the
Insurance Waiver Agreement, Brown waived his right to compensation
under the LHWCA in lieu of the benefits promised under the
contract.3 Section 915(b) of the LHWCA provides, however, that
"[n]o agreement by an employee to waive his right to compensation
3
We question whether the Insurance Waiver Agreement applies to
Brown's injuries as it appears to waive benefits under Texas and
Louisiana workers' compensation laws. Because there is some
ambiguity in the contract, however, we will assume, as the parties
do, that the contract applies to compensation benefits under the
LHWCA. See Lumar Marine v. Insurance Co. of N. Am., 910 F.2d 1267,
1273 (5th Cir. 1990) (ambiguous contractual provisions are
construed against the drafter).
4
under this chapter shall be valid." Thus, as a matter of law,
Brown's breach of contract claim must fail because the contract is
void. See Lawson v. Standard Dredging Co., 134 F.2d 771 (5th Cir.
1943) (finding employment contract that waived benefits under the
LHWCA in favor of state worker's compensation benefits invalid).
Contrary to Brown's assertion, we find no policy
considerations that preclude this result. Brown makes much of
POI's failure to secure compensation. What Brown fails to
understand is that whether the contract is valid or applies to the
LHWCA is a separate inquiry from whether POI failed to secure
compensation. The LHWCA provides mechanisms to "punish" those
employers who fail to secure compensation. See 33 U.S.C. §§
905(a), 938(a). The requirements for securing compensation are set
forth in § 932 of the LHWCA, and § 932 does not require a contract
between the employee and employer. That POI failed to secure
compensation is irrelevant to the inquiry of whether the contract
is valid.
C. Fraud and Misrepresentation Claim
Alternatively, Brown argues that POI through certain
representations induced him into entering an agreement that was
void. To prevail on his fraud claim, Brown must prove POI's intent
to defraud him or gain an unfair advantage, and a resulting loss,
or damages. Autin v. Autin, 617 So. 2d 229 (La. Ct. App. 5th
Cir.), writ denied, 620 So. 2d 846 (1993). To recover for
negligent misrepresentation, Brown must establish the following
elements: 1) a legal duty on the part of POI to supply correct
5
information to Brown, 2) a breach of that duty, and 3) damages to
Brown as a result of his justifiable reliance upon the
misrepresentation. Busby v. Parish Nat'l Bank, 464 So. 2d 374, 377
(La. Ct. App. 1st Cir.), writ denied, 467 So. 2d 1132 (1985).
First, the undisputed facts show that at the time Brown signed
the Agreement, POI was not aware that Brown would be working in a
federal jurisdiction for workers' compensation purposes. Therefore
POI could not have known, at the time it entered into the
Agreement, that it would be invalid under the LHWCA. Brown has
adduced no summary judgment evidence that demonstrates otherwise.4
The only other misrepresentation suggested by the summary
judgment evidence is that POI fraudulently induced Brown into
signing the Insurance Waiver Agreement by representing that it was
a qualified self-insurer under the LHWCA. Brown contends that his
damages are the difference between the remedies afforded by the
Agreement and those of the LHWCA. Assuming that POI misrepresented
its self-insurer status,5 as previously discussed, POI's self-
4
In the district court, POI had argued that Brown's allegations
did not comply with the specificity requirement of Federal Civil
Procedure Rule 9(b). Brown argues that the district court should
have treated POI's motion as one for a more definite statement and
granted Brown leave to amend his complaint. Both parties, however,
submitted evidence beyond the pleadings. Brown can claim no
surprise in the district court's treating the motion as one for
summary judgment. See, e.g, Oreman Sales, Inc. v. Matsushita Elec.
Corp. of Am., 768 F. Supp. 1174, 1179 & n.3 (E.D. La. 1991).
5
Brown stated in an affidavit that POI told him that it was a
qualified self-insurer when he signed the Agreement. Notably,
Brown does not testify that POI told him that it was a qualified
self-insurer under the LHWCA. As stated above, POI did not know
that the LHWCA would apply to Brown, and POI was qualified under
state workers' compensation laws.
6
insurer status is irrelevant to the contract's validity. Brown has
failed to show how such a misrepresentation caused him any damages.
Because we find that Brown has failed to establish a genuine
issue of material fact as to his fraud and misrepresentation claim,
we need not address the prescription argument urged by POI.
II. The LHWCA Case
A. Credit for Settlement
The Browns argue that the district court erred in setting off
the entire $600,000 they received in settlement against the total
damages awarded to them at trial.6 They argue that Louisiana law,
made applicable by the Outer Continental Shelf Lands Act (OCSLA),
43 U.S.C. §§ 1331-1356, is the applicable law. Accordingly, the
Browns contend that the district court should have employed the
proportionate fault method in offsetting the third-party
settlement. See Diggs v. Hood, 772 F.2d 190, 195-96 (5th Cir.
1985) (explaining that under Louisiana law, nonsettling tortfeasor
is responsible for only his share of the judgment based on his
percentage of fault). POI responds that under the OCSLA, Louisiana
law only applies if there is no inconsistent federal law, and
because the LHWCA embodies a one recovery policy, the dollar-for-
dollar or pro tanto approach to credit was appropriate.
6
POI challenges the Browns' standing to raise this claim. POI's
argument that the Browns were not injured because they obtained the
single recovery they are entitled to begs the question raised by
this claim. Nor is the claim moot as POI argues. The issue raised
in this case does not concern contribution among tortfeasors, and
that POI and Forest Oil have resolved the issue of contribution
between them is irrelevant.
7
A brief review of the statutory framework governing this
action is necessary to understand the issue confronting this Court.
Because Brown was injured on a platform on the outer
continental shelf, the OCSLA applies to this lawsuit. 43 U.S.C. §
1333(a). Pursuant to § 1333(b) of the OCSLA, compensation is
payable under the provisions of the LHWCA for employees injured as
a result of operations conducted on the outer continental shelf for
the purpose of exploring for or removing natural resources from the
seabed. Because POI was engaged in this type of operation, the
LHWCA is the applicable compensation scheme in this case.
Under the LHWCA, an injured worker is ordinarily barred from
bringing a civil action against his or her employer. See 33 U.S.C.
§ 905(a). When an employer fails to secure compensation in
accordance with § 932 of the LHWCA,7 however, § 905(a) provides
that an employee or his legal representatives "may elect to claim
compensation under the chapter, or to maintain an action at law or
in admiralty for damages on account of such injury or death."
Because POI failed to secure compensation, the Browns elected to
bring a civil action under § 905(a).
7
Section 932 provides that every employee shall secure the
payment of compensation:
(1) By insuring and keeping insured the payment of
such compensation with any stock company or mutual
company or association, or with any other person or fund,
while such person or fund is authorized (A) under the
laws of the United States or any State, to insure
workmen's compensation, and (B) by the Secretary, to
insure payment of compensation under this chapter; or
(2) By furnishing satisfactory proof to the
Secretary of his financial ability to pay such
compensation and receiving an authorization from the
Secretary to pay such compensation directly.
8
The Browns brought their civil cause of action under the
OCSLA. Section 1333(a)(2)(A) of the OCSLA states that:
To the extent that they are applicable and not
inconsistent with this Subchapter or with
other Federal laws and regulations . . . the
civil and criminal laws of each adjacent State
. . . are hereby declared to be the law of the
United States for that portion of the subsoil
and seabed of the outer Continental Shelf, and
artificial islands and fixed structures
erected thereon . . . .
Thus, Louisiana civil law is adopted as surrogate federal law in
this lawsuit via the OCSLA.
Thus, the issue posited by this case is not whether the LHWCA
supplants Louisiana law under the OCSLA; we have already determined
that it does. The Browns are able to bring this civil action only
because the LHWCA permits them to under the circumstances. The
issue presented today is whether the LHWCA mandates the application
of the pro tanto rule when an employee elects to bring a civil
action under § 905(a). The resolution of that issue is a matter of
statutory construction.
POI relies on Hernandez v. M/V Rajaan, 841 F.2d 582 (5th
Cir.), modified, 848 F.2d 498 (5th Cir.), cert. denied, 488 U.S.
981 (1988), and cert. denied, 488 U.S. 1030 (1989), and Edmonds v.
Compagnie Generale Transatlantique, 443 U.S. 256 (1979), to support
its position that the LHWCA, although allowing an employee to file
a civil action, alters the state law rule applicable to the issue
of a nonsettling defendant's liability. In Hernandez, an injured
longshoreman brought an action against a vessel under the general
9
principles of maritime law pursuant to § 905(b) of the LHWCA.8 The
vessel impleaded several third-party defendants. The plaintiff
settled with the third-party defendants before trial. In
determining the liability of the nonsettling defendant, we adopted
the maritime pro tanto approach. We further reasoned that under
the LHWCA, the plaintiff was entitled to one recovery for the
injuries he suffered. We explained that because the damage award
represented 100 percent of the loss suffered, it must be reduced by
the amount the plaintiff received in settlement from the third-
party defendants.
Although this panel has no authority to overrule a prior
panel's decision, we question the continuing viability of the
Hernandez decision in light of the recent Supreme Court case,
McDermott, Inc. v. AmClyde, 114 S. Ct. 1461 (1994). In McDermott,
the Supreme Court rejected the application of the dollar-for-dollar
credit method in maritime cases in favor of the proportionate share
method.
We further question the broad language in Hernandez concerning
the LHWCA's policy of one recovery. Although admittedly the LHWCA
8
Section 905(b) provides:
In the event of injury to a person covered under
this chapter caused by the negligence of a vessel, then
such person, or anyone otherwise entitled to recover
damages thereof, may bring an action against such vessel
as a third party in accordance with the provisions of
section 933 of this title, and the employer shall not be
liable to the vessel for such damages directly or
indirectly and any agreements or warranties to the
contrary shall be void.
10
has a general policy to avoid double recoveries,9 we have also
noted that limitations on employee recovery are not favored absent
statutory authority. See Strachan Shipping Co. v. Nash, 782 F.2d
513, 519 (5th Cir. 1986) (en banc); United Brands Co. v. Melson,
594 F.2d 1068, 1075 (5th Cir. 1979) (employer should not be
credited for benefits that the employee has received under a state
compensation system absent statutory authority, even though it
results in double recovery), overruled by 33 U.S.C. § 903(e); see
also Todd Shipyards Corp. v. Director, Office of Workers'
Compensation Programs, U.S. Dep't of Labor, 848 F.2d 125, 129 (9th
Cir. 1988) (employer receives no credit for employee's Veterans
benefits absent statutory authority). Nothing in § 905(b) suggests
that a pro tanto rule be applied. Thus, although Hernandez is
analogous, it is not controlling, and we decline to follow its
reasoning.
We likewise reject POI's reliance on Edmonds. As the Supreme
Court noted in McDermott, Edmonds did not address a nonsettling
defendant's liability; it merely reaffirmed the well-established
principle of joint and several liability. McDermott, 114 S. Ct. at
1471. In Edmonds, a longshoreman brought suit against a vessel
under 33 U.S.C. § 905(b). The longshoreman had received LHWCA
benefits from his employer. The question before the Court was
9
That policy has been codified in the statutory credit provision,
§ 903(e), and the subrogation provisions of § 933. Section 903(e)
allows a credit to the employer for any amount that the employee
has actually received under state worker's compensation laws or the
Jones Act. Section 933 involves the reimbursement rights of the
employer when an employee seeks recovery from a third party.
Neither of these sections apply to the present case.
11
whether the vessel should pay its proportionate share of the
damages or be fully responsible to the longshoreman even if the
employer's negligence contributed to the injuries. The Court held
that the vessel should be liable to the longshoreman for the full
amount of damages. The Court explained that applying a
proportionate share rule would place the burden of recovering
damages on the injured employee and could potentially result in the
employee's recovery of an amount less than actual injury. The
Court's concern in Edmonds was not double recovery, but the
inequities faced by the employee as a result of the statutory
scheme. The same concerns do not exist here, however, as the
Browns voluntarily assumed the risk of a "good" or "bad"
settlement.
If anything, Edmonds supports the Browns' position. In
Edmonds, the Supreme Court declined to alter the pre-existing
maritime rule without an indication in the statute or legislative
history of congressional intent to do so.
Turning to § 905(a), itself, the purpose of that section is to
induce employers to accept and participate in the LHWCA
compensation scheme by eliminating the non-participating employer's
immunity from tort actions under the LHWCA. See Weeks v. Alonzo
Cothron, Inc., 493 F.2d 538 (5th Cir. 1974) (citing Gould v. Bird
& Sons, Inc., 485 P.2d 458 (Wash. Ct. App.), review denied, 79
Wash. 2d 1009 (1971)). In essence, § 905(a) restores the
employee's pre-LHWCA right against the non-participating employer.
Cf. Parker v. South Louisiana Contractors, Inc., 537 F.2d 113 (5th
12
Cir. 1976) (holding that § 905(b) does not create a broader cause
of action in admiralty; rather, it preserves a longshoreman's right
under prior law), cert. denied, 430 U.S. 906 (1977).
Although there is no helpful legislative history, the language
of the statute demonstrates Congress' ability to expressly modify
the usual state law rules when it desires to do so. Section 905(a)
prohibits an employer from pleading contributory negligence,
negligence of a fellow servant or assumption of the risk as
defenses, although ordinarily available in most state tort actions.
The statute indicates no other change of state tort actions. Cf.
Edmonds, 443 U.S. at 266-67 ("[R]eticence while contemplating an
important and controversial change in existing law is unlikely.").
Although we are mindful that in this case the Browns may
receive a windfall, we will not alter the cause of action that
Congress has returned to the employee under § 905(a) without a
clearer mandate. Accordingly, we vacate the judgment insofar as it
decreed that the $600,000 settlement be deducted from the Browns'
total damages and remand for a determination of POI's share of the
jury award.
B. Employer's Lien
Prior to commencement of the Browns' civil action, POI paid
$120,640.00 to James Brown in compensation and medical benefits.
On summary judgment, the district court concluded that POI could
recover this amount out of the settlement paid by third-party
defendants. The Browns argue that POI made the payments pursuant
to the Insurance Waiver Agreement, not the LHWCA; therefore, POI
13
cannot rely on the reimbursement policy of the LHWCA. The
Agreement has no provision for an employer's lien. We review the
district court's grant of summary judgment de novo. See Abbott, 2
F.3d at 618.
We believe that in the interest of fairness and justice, the
payments made by POI under the void Insurance Waiver Agreement
should as a matter of law be considered payments in compliance with
the LHWCA. See Lawson, 134 F.2d at 772 (payments made under an
invalid contract are considered advance payments of compensation
under the LHWCA). It is undisputed that POI attempted to comply
with the LHWCA by filing the necessary forms with the Department of
Labor once it began payment, and that the Department of Labor
considered POI's payments in compliance with the LHWCA. The courts
have long recognized the employer's subrogation right to be
reimbursed from the worker's net recovery from a third party for
the full amount of compensation benefits already paid. Peters v.
North River Ins. Co., 764 F.2d 306, 312 (5th Cir. 1985). This
right extends to those employers who voluntarily pay compensation
without an award. See Allen v. Texaco, Inc., 510 F.2d 977, 980
(5th Cir. 1975).
To disallow POI the right of reimbursement would be in
contravention of the LHWCA's policy of encouraging voluntary
compliance with the LHWCA. That POI failed to secure compensation
does not affect POI's rights; no provision in the LHWCA penalizes
the employer for failing to secure compensation by making it
14
forfeit the amounts it paid prior to the commencement of the civil
suit. We conclude that POI is entitled to an employer's lien.
C. Application of Lien to Jann Brown's Damages
The Browns argue that if we determine that POI is entitled to
an employer's lien, then the district court erred in applying that
lien against the damages recovered by Jan Brown. We agree.
Employer's offset rights are limited to the portion of recovery
intended for the employee. See 33 U.S.C. § 933(f); Allen, 510 F.2d
at 980. On remand, the district court should apply the employer's
lien only to the damages recovered by James Brown.
CONCLUSION
For the foregoing reasons, we VACATE the judgment in part as
discussed above and REMAND to determine the appropriate credits to
be deducted from the Browns' total damage award. The grant of
summary judgment in both cases is AFFIRMED.
15