Garvin v. Alumax of South Carolina, Inc.

HAYNSWORTH, Senior Circuit Judge:

Garvin was seriously injured while doing maintenance work on a ship loader located upon a pier. He was collecting compensation under the Longshoremen’s and Harbor Workers’ Compensation Act, 33 U.S.C.A. § 901 et seq., when he filed this action against the firms that allegedly designed and manufactured the machine and some of its component parts and against the contractor-owner of the machine who had contracted with Garvin’s immediate employer for its operation and maintenance. He alleged liability under the South Carolina Strict Liability statute, S.C.Code § 15-73-10 et seq., and in negligence. Alumax, the contractor and owner of the unloader, was not a seller of the machine and the claim against it was grounded solely upon common law negligence.

Alumax filed a motion to dismiss on the ground that it was the statutory employer of the plaintiff and immune from this common law tort action against it under South Carolina’s Workmen’s Compensation Act, § 42-1-540. The district court denied the motion, reasoning that since the LHWGA affirmatively extends immunity only to the subcontractor, which had procured compensation insurance, the two statutes were repugnant, the federal Act took precedence under the supremacy clause, and Alumax was not immune from suit.

While the case against all the other defendants is pending, the district court certified its decision for an immediate appeal under the provisions of 28 U.S.C.A. § 1292(b). This court granted leave to appeal.

Finding no repugnancy in the two statutes in the context of this state law tort claim, we reverse and hold that Alumax is entitled to the immunity conferred upon it by South Carolina law.

I.

Alumax is an importer of alumina ore, which it converts into aluminum. It is a joint lessee of a terminal near Charleston, South Carolina for the unloading of oceangoing vessels and is the owner of the alumina ore unloading machine installed on the pier.

The terminal is operated by Lemm Corporation-Operations, Garvin’s immediate employer, and it is responsible for the operation and maintenance of the unloading machine. Lemm procured workmen’s compensation insurance, as it was contractually required to do, but the premium costs were treated as costs of operation that Alumax paid.

While performing routine maintenance work on the unloading machine, Garvin came in contact with electrically energized members. He was severely shocked and suffered the loss of both arms.

II.

Preliminarily, we address the question of our subject matter jurisdiction, though we conclude that we have jurisdiction to adjudicate the merits of the question presented by the parties.

Garvin and his wife filed their original complaints in the United States District Court for the District of South Carolina. They alleged that federal jurisdiction was present because of diversity of citizenship and the presence of the requisite amount in controversy. That allegation, though correct as to all of the other defendants, turned out to be incorrect as to Alumax. Alumax, however, did not immediately raise the jurisdictional question. Instead, it moved for a dismissal on the ground that it was Garvin’s statutory employer and that neither Garvin nor his wife, claiming through him,¹ had any cause of action against it for his work-related injury.

In order to avoid dismissal of the complaint on the merits, Garvin filed a second amended complaint. In that complaint, he alleged federal question jurisdiction. Specifically, it was alleged that Garvin was receiving compensation under the LHWCA; that under that statute, as amended, Alumax, as the remote employer, had no immunity; that the federal and state statutes were repugnant; and that the provisions of the federal statute should prevail under the Supremacy Clause. Conceding that there was no right of action under state law, it was alleged that a determination that the federal statute had the meaning and the effect for which the plaintiff contended was “essential” to his cause of action.

As indicated earlier, the district judge was persuaded, holding that the two statutes, indeed, were repugnant and that the federal statute prevailed rendering inapplicable South Carolina’s protection of statutory employers.

It may well be that we are all agreed that the LHWCA does not purport to create any rights of action in consequence of any land based injury not caused by a vessel. At least by indirection, however, it is the contention of the plaintiff, and the holding of the district judge, that it does. The South Carolina statute, § 42-1-540, provides that acceptance of the compensation scheme “shall exclude all other rights and remedies of such employee” and those claiming through him. If that provision is rendered inapplicable by the LHWCA, as amended in 1984 specifically to permit injured employees of subcontractors to sue the general contractor unless the subcontractor had failed to procure compensation insurance and the general contractor had been compelled to do so, then the LHWCA has created a cause of action when none otherwise would exist. Its creation may be somewhat indirect when, under the South Carolina statutes, Garvin has neither right nor remedy, but plaintiff’s claim of a right to sue is clearly derived from the federal statute.

The South Carolina statute speaks in terms of the exclusion of all other rights and remedies. If a covered employee of a complying employer is injured on the job, a right of compensation accrues, but no common law action for damages accrues as against his immediate or remote employer. When one views the state scheme in terms of the plaintiff’s search for a right to sue, the invocation of the federal statute takes on a decidedly “offensive” cast. The plaintiff has an immediate need for the federal provision because, without it, he may not proceed.

For convenience, however, the statutory deprivation of an injured employee of his right of action against his employer is frequently described as the employer’s immunity. If one speaks in terms of immunity, the effect of the federal statute might seem a bit more indirect. It might be argued that South Carolina has always preserved the right of action by an injured employee against a statutory employer and provided an appropriate remedy, but, at the same time, has clothed the statutory employer with immunity. In that posture, the plaintiff’s contention is given a more defensive coloration. If it is thus contended that an injured employee may state a perfectly good claim against his statutory employer for negligent infliction of physical injury and the statutory employer’s reliance upon the statute is labeled a claim of immunity, then the plaintiffs reference to the LHWCA may seem a federal response to an anticipated state law defense. This, however, is only a circuitous statement of the plaintiff’s claim that the LHWCA gives him a right to proceed which otherwise he would not have.

Federal question jurisdiction can be invoked only when the federal question appears on the face of the plaintiff’s complaint. Usually, the plaintiff’s right must be, in part at least, a federal right, and federal question jurisdiction may not be invoked by an allegation of an anticipated federal defense or a federal response to an anticipated state law defense. See Louisville & Nashville Railroad Co. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908). Mottley is at one end of the spectrum. The plaintiffs stated a perfectly good breach of contract claim governed entirely by state law. They went further, however, and alleged that the Railroad sought to justify or excuse its non-performance by reference to a recently enacted federal statute governing the issuance of passes to railroad passengers. They went still further and alleged that the federal statute was unconstitutional as applied if it were held to require that the Railroad refuse further performance of its contractual obligation.

There, the federal statute was clearly separable from the plaintiffs’ claim. The plaintiffs’ cause of action was sufficiently stated without reference to the federal statute. That reference was only in anticipation of the Railroad’s defense.²

The plaintiff concedes that he has no right of action under South Carolina law; he claims that he does have a right of action under the LHWCA and alleges that a construction and application of that statute in accordance with his contentions is essential to his cause of action. Whether one accepts the plaintiff at his word, however, and looks upon the federal statute as an essential ingredient of the plaintiff’s claimed cause of action, or whether one looks upon the federal statute, as construed by the plaintiff, as stripping away the state created absolute immunity of the defendant, leaving it open to the plaintiff’s attack, should make no difference. A determination whether a federal question is appropriately alleged in the plaintiff’s complaint should not depend upon subtle choices of emphasis. The situation should be viewed realistically. The defendant is in its citadel with all of the protection of the South Carolina statute. The plaintiff may successfully assault it only from a foundation of some federally derived right, for he has no right of action under state law. He alleges that federal right, and we should accept the allegation as appropriate to his claim.

At the time of Mottley, the prevailing view was that, for jurisdictional purposes, a cause of action could not be said to arise under the laws of the United States unless the right of action was a creature of the laws of the United States. See American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 36 S.Ct. 585, 60 L.Ed. 987 (1916). Federal jurisdiction does not exist, it was said, unless federal law “create[s] at least a part of the cause of action by its own force.” Smith v. Kansas City Title & Trust Co., 255 U.S. 180, 215, 41 S.Ct. 243, 250, 65 L.Ed. 577 (1921) (Mr. Justice Holmes, dissenting).

That view, however, was very substantially relaxed by the Supreme Court in the Smith case. That was a suit by a shareholder to prevent the directors of the corporation from investing corporate funds in bonds issued by a federally chartered land bank. The action was brought under a Missouri law which limited the bjank’s investment of funds to “valid” securities. The plaintiff alleged that the federal land bank's bonds were invalid because the authorizing act of Congress was unconstitutional. Despite the procedural remoteness of the federal question, the Supreme Court held that federal question jurisdiction existed “because the controversy concerns the constitutional validity of an act of Congress which is directly drawn into question.” Id. at 201, 41 S.Ct. at 245. Not surprisingly, Mr. Justice Holmes dissented. Under his strict view there could be no jurisdiction because Missouri alone had created the cause of action. State law provided the right and the remedy to confine the directors to lawful investments; federal law had no operative force of its own in the case, and the state’s adoption of it for the purpose of determining whether the bonds were valid or invalid did not make the cause of action one arising under federal law. Id. at 215, 41 S.Ct. at 250.

It is true that Smith’s cause of action was strictly the creature of state law, but the Supreme Court majority took the practical view and recognized that the only substantial legal question in the case was the validity of the bonds, and that was a federal question. At issue was the validity of an act of Congress, and pragmatic considerations strongly suggest that it was the kind of case that belonged in the federal courts.

The Smith case ushered in a new era. By 1964, Judge Friendly could say with some assurance that “[ejven though the claim is created by state law, a case may ‘arise under’ a law of the United States if the complaint discloses a need for determining the meaning or application of such a law.” T.B. Harms Co. v. Eliscu, 339 F.2d 823, 827 (2d Cir.1964). Except when the need is only collateral or peripheral or relevant only to a separable defensive claim, federal question jurisdiction should be found to exist if the complaint discloses that the result will turn in substantial part upon the resolution of the federal question. See Gully v. First National Bank, 299 U.S. 109, 118, 57 S.Ct. 96, 100, 81 L.Ed. 70 (1936).³

This court has adopted that approach. Christopher v. Cavallo, 662 F.2d 1082, 1083 (4th Cir.1981). Other cases seem consistently to take the practical, pragmatic approach of Eliscu and Christopher.⁴

The plaintiff’s complaint alleges a federal question. Resolution of that question in a manner favorable to him, he says, is essential to his cause of action. Indeed, in the present posture of the case, it is the only legal question presented. If that question is resolved unfavorably to him, he loses; if resolved favorably to him, there may be factual disputes leading to findings about negligence and contributory negligence, but, as between the plaintiff and Alumax, the record does not disclose any other substantial, lurking legal question.

Since the plaintiffs complaint presents a substantial federal question which it is necessary to determine, we conclude that federal question jurisdiction is present. That there is jurisdiction to adjudicate, however, does not suggest that the plaintiff must necessarily prevail on that question. A federal court does not lose jurisdiction to adjudicate because resolution of the federal question ultimately goes against the plaintiff. See Bell v. Hood, 327 U.S. 678, 682, 66 S.Ct. 773, 776, 90 L.Ed. 939 (1946). In determining our jurisdiction, it is enough to observe that the district judge adopted the plaintiff’s contentions, and this court cannot say that the contentions are insubstantial or frivolous.

III.

There is a long history of congressional deference to the workmen’s compensation acts of the states with respect to maritime employees other than masters and members of the crews of vessels. When, in 1917, the Supreme Court held in Southern Pacific Co. v. Jensen, 244 U.S. 205, 37 S.Ct. 524, 61 L.Ed. 1086, that New York’s workmen’s compensation act could not be constitutionally applied to the employer of a longshoreman injured while engaged on shipboard in the unloading of the ship, the Congress twice attempted to avoid the Jensen bar and to authorize the extension of state workmen’s compensation acts to maritime injuries of longshoremen and other harbor workers. Those efforts were held unavailing as in violation of the federal Constitution. Knickerbocker Ice Co. v. Stewart, 253 U.S. 149, 40 S.Ct. 438, 64 L.Ed. 834 (1920), Washington v. W.C. Dawson & Co., 264 U.S. 219, 44 S.Ct. 302, 68 L.Ed. 646 (1924). Finally, the Congress, responding to a Supreme Court suggestion, enacted the LHWCA providing federal compensation coverage for such maritime workers, but the Act was to apply only if the relevant state’s workmen’s compensation act might not be validly applied. Thus, the Congress sought to draw the line between federal and state authority at the outer limits of the reach of the state’s constitutional power to enforce and apply its workmen’s compensation act.

The bright line that the Congress sought to draw between federal and state authority proved to be fuzzy. Injuries were suffered under circumstances in which no one could confidently predict in advance on which side of the constitutional boundary they fell. The practical problems led the Supreme Court to carve out a “twilight zone.” Within that zone, the Supreme Court held there was concurrent jurisdiction and the injured worker might safely proceed under either the LHWCA or the state’s workmen’s compensation act at his election. Davis v. Department of Labor, 317 U.S. 249, 63 S.Ct. 225, 87 L.Ed. 246 (1942).

In Calbeck v. Travelers Insurance Co., 370 U.S. 114, 82 S.Ct. 1196, 8 L.Ed.2d 368 (1962), the Supreme Court held that the LHWCA was applicable in the “maritime but local” zone, even though there was little doubt that the state’s workmen’s compensation act could be applied validly. Thus, under the decisions of the Supreme Court, there came to be recognized zones in which both the federal statute and the relevant state statute were applicable.

The Congress substantially extended the zone overlap when it adopted the 1972 amendments to the LHWCA. The immediate purpose of the Congress was to increase the level of compensation payments under the federal statute, but it was also concerned with the disparity between the levels of the enhanced compensation under the federal statute and the compensation available under the statutes of some of the maritime states. Longshoremen engaged in unloading or loading a vessel passed to and from ship and pier and it was thought to be inequitable to have marked differences in the level of available compensation depending upon whether the injury was suffered on shipboard or on the pier. Consequently it extended the coverage of the LHWCA to include injuries to longshoremen and other harbor workers suffered on piers adjoining navigable waters of the United States and other adjoining installations customarily used in loading, .unloading, repairing or building vessels. See 1972 U.S.Code, Cong. & Adm.News pg. 4698, et seq.

The shoreward extension of the LHWCA in 1972 was not intended to set up an exclusive federal regime. It was an extension of previously recognized zones of overlapping federal and state authority. That was the holding of the Supreme Court in Sun Ship Inc. v. Pennsylvania, 447 U.S. 715, 100 S.Ct. 2432, 65 L.Ed.2d 458 (1980). There the injured employees were clearly covered by the LHWCA, as amended in 1972, but Pennsylvania had increased the level of its workmen’s compensation benefits to the point that they exceeded those available under the LHWCA. The employees claimed benefits under the state statute, and the Supreme Court held they were entitled to the state benefits because of the concurrent applicability of the federal and state statutes.

At the time of his injury, Garvin was working on the pier. No vessel was alongside, and it is not alleged that the fault of any vessel had contributed in any way to the condition of the unloading machine or to Garvin’s injury. Since the pier was adjacent to navigable waters of the United States, he was within the coverage of the LHWCA as extended in 1972, but he was also clearly within the coverage of the South Carolina Workmen's Compensation Act because piers have always been recognized as extensions of land within the authority of the state and not within the authority of the LHWCA until its extension in 1972. As demonstrated by Sun Ship, he was free to proceed under the state statute if that route appeared advantageous to him. He chose, of course, to claim the higher benefits available under the federal statute, and the question is whether that choice limits the defenses available to a contractor in the position of Alumax when faced with a tort action founded entirely upon South Carolina law.

IV.

Against this background of congressional concern to preserve and protect application by the states of their own workmen’s compensation schemes and the purpose of the LHWCA’s 1972 landward extension to “supplement,” not to “supplant,” state compensation acts, Sun Ship, supra, ■ we approach the particular problem of this case.

On June 26, 1984 the decision of the Supreme Court in Washington Metropolitan Transit Authority v. Johnson, 467 U.S. 925, 104 S.Ct. 2827, 81 L.Ed.2d 768 (1984), was announced. There it appears that the WMTA, prompted by practical and financial considerations, had procured workmen’s compensation insurance for the employees of all of its many subcontractors. Faced with tort actions by some of those employees in the District of Columbia, WMTA claimed immunity under the LHWCA, and the Supreme Court held that a general contractor in the position of WMTA, and Alumax, was entitled to that tort claim immunity. As so interpreted, the LHWCA and South Carolina's Workmen’s Compensation Act were completely congruent.

There was swift congressional reaction. By P.L. 98-426, signed on September 28, 1984, 33 U.S.C.A. § 905 was amended by adding a sentence

“For purposes of this subsection, a contractor shall be deemed the employer of a subcontractor’s employee only if the subcontractor fails to secure the payment of compensation required by § 904

The Congress was of the view that LHWCA immunity should extend to a contractor only if he secured the payment of compensation for the employees of subcontractors by force of the statutory requirement of § 904. It was stipulated that the amendment should apply to pending cases. Hence, it is now perfectly clear that the LHWCA extends no immunity to Alumax. There is nothing in that amendment or its legislative history, however, to indicate a congressional intention to restrict the application of state created immunity of contractors in situations in which the state statute traditionally had been applied.

It was necessary, of course, for the Congress in the LHWCA to deal in some fashion with employer immunity. That statute has exclusive application in the District of Columbia and to most injuries suffered on the navigable waters of the United States. In those areas, the Congress was free to determine for itself under what circumstances a general contractor would be immune from tort actions by employees of a subcontractor, but nothing done in the Congress suggests that it intended to modify immunities provided general contractors by state workmen’s compensation laws, when those laws are applicable.

Except with respect to claims against vessels addressed in 33 U.S.C.A. § 905(b), the LHWCA does not address the substantive rights of claimants against third parties. There are housekeeping provisions in 33 U.S.C.A. § 933. The right to maintain a third party action will not be waived by the acceptance of benefits, and there are provisions for the management of any such third party action as between the injured person and his employer and for the distribution of any proceeds derived in the third party action between the injured employee and his employer or subrogated insurance carrier. The federal statute seeks to protect and preserve whatever rights an injured claimant may have against third parties and to provide the terms upon which an employer or its insurance carrier may be a participant in, and beneficiary of, the prosecution of such claims. The federal statute lays down some procedural rules, but it does not create any cause of action against a third party, except with respect to claims against vessels, or to define circumstances affecting the right of the insured claimant to prevail in any action that may be brought against a third party.

As initially enacted, when the application of the LHWCA stopped at the water’s edge, the third party claim would usually be one in admiralty. When application of the federal statute was moved inland to supplement state workmen’s compensation statutes without displacing them, a third party claim under state law by a recipient of benefits under the LHWCA was not converted into a maritime claim. Its scope, including available defenses, is governed by state law. Thus in Holland v. Sea-Land Service, 655 F.2d 556 (4th Cir.1981), cert. denied 455 U.S. 919, 102 S.Ct. 1274, 71 L.Ed.2d 459 (1982), we held that the defendant, in an action brought by a recipient of benefits under the LHWCA for damages on account of injury for which he was receiving compensation, could defend on the basis of the state’s contributory negligence rule.

A similar result was reached in Millspaugh v. Port of Portland, 65 Or.App. 389, 671 P.2d 743 (1983), in which it was held that Oregon’s rule of municipal immunity is applicable to such a claim.

The Supreme Court itself left no doubt about the matter in Victory Carriers, Inc. v. Law, 404 U.S. 202, 92 S.Ct. 418, 30 L.Ed.2d 383 (1971). The third party action, when founded on state law, is a creature of state law and is to be governed entirely by it. Indeed, in Ferri v. Ackerman, 444 U.S. 193, 100 S.Ct. 402, 62 L.Ed.2d 355 (1979), the Supreme Court stated with respect to such a third party claim by an LHWCA compensation recipient:

When state law creates a cause of action, the state is free to define the defenses to the claim, including the defense of immunity, unless the state rule is in conflict with federal law.

The South Carolina rule of immunity of a contractor in the position of Alumax is different from that under the LHWCA, but not in conflict with it, for Congress has not purported to prescribe the immunity rules to be applied by states in actions brought upon state law claims. The federal immunity rule is to be applied when the third party claim is a federal claim; when the third party claim is a state law claim, the immunity rules of that state are to be applied. The federal and state statutes are readily harmonized, and each may function in its own sphere without interference with the other.

We are admonished not to seek out conflicts between federal and state laws “where none clearly exists” or to strike down state laws under the Supremacy Clause when application of the state law will result in no frustration of federal law. Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 98 S.Ct. 2207, 57 L.Ed.2d 91 (1978); Colorado Anti-Discrimination Commission v. Continental Air Lines, Inc., 372 U.S. 714, 83 S.Ct. 1022, 10 L.Ed.2d 84 (1963); Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 83 S.Ct. 1210, 10 L.Ed.2d 248 (1963); Gary Aircraft Corp. v. General Dynamics Corp., 681 F.2d 365 (5th Cir.1982).

Congress has diligently attempted to preserve state law governance of state law third party claims by recipients of LHWCA compensation. Since there is no conflict between differing rules of immunity and application of South Carolina’s rule will not frustrate the effectiveness of any federal law, Alumax, the contractor, is immune from this state tort claim.

V.

The judgment of the district court is reversed and the case remanded with instruction to enter judgment for Alumax. The case may then proceed against the other defendants.

REVERSED AND REMANDED.

1 . The wife’s claim is derivative, and her pleadings and contentions track those of her husband. What we say of his claim applies also to hers.

2 . The aftermath of Mottley is interesting. The case proceeded through the courts of Kentucky in which the Mottleys prevailed, but the Supreme Court then took the case to consider the federal questions it had refused to consider two years earlier. It then held that the federal statute required the Railroad to decline to renew its free passes and that the statute was constitutional as applied despite the fact that it deprived the Mottleys of part of the consideration for which, many years before, they had released their tort claims for damages for physical injury. See Louisville & Nashville Railroad Co. v. Mottley, 219 U.S. 467, 31 S.Ct. 265, 55 L.Ed. 297 (1911).

3 . The Supreme Court’s decision in Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983), does not militate against our conclusion. There, the state of California sought a state declaratory judgment of the validity of its regulations, but alleged that the defendant claimed that enforcement and application of the regulations was precluded by federal preemption. The defendant undertook to remove the case to a United States district court. There, the preemption claim was clearly and exclusively defensive. Here, the plaintiff asserts federal preemption and alleges that his right of action is dependent upon it. The Supreme Court in Franchise Tax Board said there is federal jurisdiction to "hear ..those cases in which a well-pleaded complaint establishes ... that the plaintiffs right to relief necessarily depends on resolution of a substantial question of federal law.” Id. at 27-28, 103 S.Ct. at 2855-56. This is such a case.

See also Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983), where the plaintiff's claim was that the state laws regulating it were preempted. There, federal jurisdiction was upheld. Id. at 96 n. 14, 103 S.Ct. at 2899 n. 14.

4 . See, e.g., Mountain Fuel Supply Co. v. Johnson, 586 F.2d 1375, 1381 (10th Cir.1978); Sweeney v. Abramovitz, 449 F.Supp. 213, 214 (D.Conn. 1978). See also Stone & Webster Engineering Corp. v. Ilsley, 690 F.2d 323, 328 (2d Cir.1982) (action for a declaratory judgment turns on construction of federal energy law); Chengfan Hsu v. Philippine Air Lines, Inc., 98 F.Supp. 805, 806 (N.D.Cal.1951) (state law negligence action "hinges” on construction of federal immigration law).