REVISED United States Court of Appeals,
Fifth Circuit.
No. 96-60770
Summary Calendar.
DIRECTOR, OFFICE OF WORKERS' COMPENSATION PROGRAMS, UNITED STATES DEPARTMENT OF LABOR, Petitioner,
v.
INGALLS SHIPBUILDING, INC.,
and
Hollis Ladner, Respondents.
Oct. 21, 1997.
Petition for Review of an Order of the Benefits Review Board.
Before JOLLY, SMITH and STEWART, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
The Director of the Office of Workers' Compensation Programs
("OWCP"), United States Department of Labor ("Director"), petitions
for review of an order of the Benefits Review Board ("BRB")
granting Ingalls Shipbuilding, Inc. ("Ingalls"), special fund contribution for a worker's pre-existing disability. Concluding
that Ingalls failed to meet its evidentiary burden, we grant the
petition for review and reverse and remand.
I.
Hollis Ladner worked for Ingalls in various capacities
starting in 1986. As a sheet metal worker, he was injured in
January 1987 when a jackhammer fell on his toe. William Hopper,
1 Ladner's physician, treated him. After several months of being
unable to work, Ladner returned to the shipyard, only to discover
that Ingalls was discharging him because it required fewer sheet
metal workers, and Ladner lacked seniority.
At Ladner's request, Ingalls found him another position as a
joiner. In this position, Ladner injured his left knee in
September 1987 when he fell down a ladder while working on a ship
and injured his left knee. Again, he was treated by Hopper and his
assistant. After the fall from the ladder, Ladner complained to
Hopper about his prior toe injury, and Hopper prescribed therapy.
Thereafter, Ladner had to undergo back surgery to repair two
ruptured discs, apparently the result of his fall.
II.
For his inability to work, Ladner claimed workers'
compensation under the Longshore and Harbor Workers' Compensation
Act ("LHWCA"), 33 U.S.C. § 901 et seq. Ingalls unsuccessfully
contested the claim before an administrative law judge ("ALJ"), who
awarded Ingalls contribution from the LHWCA's special fund for part
of its compensation payments. See 33 U.S.C. §§ 908(f), 944.1
The Director appealed the ALJ's contribution finding to the
BRB, which failed to act within the statutory period. See Omnibus
1 At the proceedings, Hopper—among others—testified that Ladner was disabled and that part of his current permanent partial disability was the result of his prior toe injury. Hopper stated that the jackhammer injury had resulted in a 35% permanent disability to the toe. Hopper also concluded that Ladner would face a 30% "whole man" disability after his fall from the ladder. On this evidence, the ALJ found that Ladner was entitled to partial disability compensation.
2 Appropriations Act for Fiscal Year 1996, Pub.L. No. 104-134, 110
Stat. 1321. As a result, the ALJ's decision was summarily
affirmed. See id. The Director now petitions for review of that
affirmance pursuant to 33 U.S.C. § 921(c).2
III.
In petitions for review of a BRB order, we evaluate the ALJ's
factual findings under a substantial evidence standard. See, e.g.,
Ceres Marine Terminal v. Director, OWCP, 118 F.3d 387, 389 (5th
Cir.1997). Substantial evidence is that relevant evidence—more
than a scintilla but less than a preponderance—that would cause a
reasonable person to accept the fact finding. See, e.g., Polanco
v. City of Austin, 78 F.3d 968, 974 (5th Cir.1996). Because the
fact finder is entitled to deference, a reviewing body cannot
substitute its own view of the facts for that of the ALJ. See
Ceres, 118 F.3d at 389. Thus, our "only function is to correct
errors of law and to determine if the BRB ... deferred to the ALJ's
fact-finding...." Avondale Shipyards, Inc. v. Vinson, 623 F.2d
1117, 1119 n. 1 (5th Cir.1980); accord Ceres, 118 F.3d at 389.
Because the BRB failed to act in this case, we look directly to the
ALJ proceedings.
IV.
Generally, the employer is liable under the LHWCA for an
employee's entire disability upon injury, regardless of the effect
that prior injuries have on the level of the resulting disability.
2 Ladner has no interest in this case. Whichever party prevails, he will receive his disability payment.
3 See Strachan Shipping Co. v. Nash, 782 F.2d 513, 517 (5th Cir.1986)
(en banc). Essentially, this "aggravation rule" mimics the common
law: A tortfeasor takes his victim as he finds him. See, e.g.,
Vosburg v. Putney, 80 Wis. 523, 50 N.W. 403, 404 (1891).
Standing alone, the aggravation rule creates a perverse
incentive: It discourages employers from hiring workers who have
been previously injured. See, e.g., Ceres, 118 F.3d at 389. Risk
averse employers rationally fear the expected costs of hiring a
worker with a prior injury.3 Thus, all things otherwise equal,
employers will prefer an employee without a prior injury.
To overcome this incentive to discriminate, Congress, in the
LHWCA, provided for a special fund.4 See 33 U.S.C. §§ 908(f), 944.
The LHWCA provides that any employer that meets the factors of §
908(f)(1) can obtain contribution from the special fund. To
qualify, the employer must prove that (1) the employee had a
pre-existing permanent partial disability (2) that was "manifest"
to the employer before the occurrence of the injury at issue, and
(3) the disability following the subsequent injury was "not due
solely" to the subsequent injury. See id. § 908(f)(1); Ceres, 118
F.3d at 389-90. Whether the third factor has been met is at issue
3 This worry is exacerbated when the risk of injury is as great as it is among longshoremen and harbor workers. 4 The special fund is financed by a taxing system on all employers in the industry. See 33 U.S.C. § 944. This device spreads the loss and internalizes the cost of the prior injury for the first employer. The first employer would otherwise escape paying for the worker's subsequent disability because the effects of the first injury remained latent during the worker's prior employment.
4 in this case.
The countervailing worry, as with any insurance system, is
that those entitled to benefit from the special fund will face a
moral hazard problem. Because they pay only a fraction of the
costs, employers will rationally "over-demand" benefits from the
special fund.5
In the LHWCA, Congress has attempted to control employers'
incentives to use small, insignificant prior injuries to pass off,
to the fund, costs that the employer should bear. Because this
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REVISED United States Court of Appeals,
Fifth Circuit.
No. 96-60770
Summary Calendar.
DIRECTOR, OFFICE OF WORKERS' COMPENSATION PROGRAMS, UNITED STATES DEPARTMENT OF LABOR, Petitioner,
v.
INGALLS SHIPBUILDING, INC.,
and
Hollis Ladner, Respondents.
Oct. 21, 1997.
Petition for Review of an Order of the Benefits Review Board.
Before JOLLY, SMITH and STEWART, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
The Director of the Office of Workers' Compensation Programs
("OWCP"), United States Department of Labor ("Director"), petitions
for review of an order of the Benefits Review Board ("BRB")
granting Ingalls Shipbuilding, Inc. ("Ingalls"), special fund contribution for a worker's pre-existing disability. Concluding
that Ingalls failed to meet its evidentiary burden, we grant the
petition for review and reverse and remand.
I.
Hollis Ladner worked for Ingalls in various capacities
starting in 1986. As a sheet metal worker, he was injured in
January 1987 when a jackhammer fell on his toe. William Hopper,
1 Ladner's physician, treated him. After several months of being
unable to work, Ladner returned to the shipyard, only to discover
that Ingalls was discharging him because it required fewer sheet
metal workers, and Ladner lacked seniority.
At Ladner's request, Ingalls found him another position as a
joiner. In this position, Ladner injured his left knee in
September 1987 when he fell down a ladder while working on a ship
and injured his left knee. Again, he was treated by Hopper and his
assistant. After the fall from the ladder, Ladner complained to
Hopper about his prior toe injury, and Hopper prescribed therapy.
Thereafter, Ladner had to undergo back surgery to repair two
ruptured discs, apparently the result of his fall.
II.
For his inability to work, Ladner claimed workers'
compensation under the Longshore and Harbor Workers' Compensation
Act ("LHWCA"), 33 U.S.C. § 901 et seq. Ingalls unsuccessfully
contested the claim before an administrative law judge ("ALJ"), who
awarded Ingalls contribution from the LHWCA's special fund for part
of its compensation payments. See 33 U.S.C. §§ 908(f), 944.1
The Director appealed the ALJ's contribution finding to the
BRB, which failed to act within the statutory period. See Omnibus
1 At the proceedings, Hopper—among others—testified that Ladner was disabled and that part of his current permanent partial disability was the result of his prior toe injury. Hopper stated that the jackhammer injury had resulted in a 35% permanent disability to the toe. Hopper also concluded that Ladner would face a 30% "whole man" disability after his fall from the ladder. On this evidence, the ALJ found that Ladner was entitled to partial disability compensation.
2 Appropriations Act for Fiscal Year 1996, Pub.L. No. 104-134, 110
Stat. 1321. As a result, the ALJ's decision was summarily
affirmed. See id. The Director now petitions for review of that
affirmance pursuant to 33 U.S.C. § 921(c).2
III.
In petitions for review of a BRB order, we evaluate the ALJ's
factual findings under a substantial evidence standard. See, e.g.,
Ceres Marine Terminal v. Director, OWCP, 118 F.3d 387, 389 (5th
Cir.1997). Substantial evidence is that relevant evidence—more
than a scintilla but less than a preponderance—that would cause a
reasonable person to accept the fact finding. See, e.g., Polanco
v. City of Austin, 78 F.3d 968, 974 (5th Cir.1996). Because the
fact finder is entitled to deference, a reviewing body cannot
substitute its own view of the facts for that of the ALJ. See
Ceres, 118 F.3d at 389. Thus, our "only function is to correct
errors of law and to determine if the BRB ... deferred to the ALJ's
fact-finding...." Avondale Shipyards, Inc. v. Vinson, 623 F.2d
1117, 1119 n. 1 (5th Cir.1980); accord Ceres, 118 F.3d at 389.
Because the BRB failed to act in this case, we look directly to the
ALJ proceedings.
IV.
Generally, the employer is liable under the LHWCA for an
employee's entire disability upon injury, regardless of the effect
that prior injuries have on the level of the resulting disability.
2 Ladner has no interest in this case. Whichever party prevails, he will receive his disability payment.
3 See Strachan Shipping Co. v. Nash, 782 F.2d 513, 517 (5th Cir.1986)
(en banc). Essentially, this "aggravation rule" mimics the common
law: A tortfeasor takes his victim as he finds him. See, e.g.,
Vosburg v. Putney, 80 Wis. 523, 50 N.W. 403, 404 (1891).
Standing alone, the aggravation rule creates a perverse
incentive: It discourages employers from hiring workers who have
been previously injured. See, e.g., Ceres, 118 F.3d at 389. Risk
averse employers rationally fear the expected costs of hiring a
worker with a prior injury.3 Thus, all things otherwise equal,
employers will prefer an employee without a prior injury.
To overcome this incentive to discriminate, Congress, in the
LHWCA, provided for a special fund.4 See 33 U.S.C. §§ 908(f), 944.
The LHWCA provides that any employer that meets the factors of §
908(f)(1) can obtain contribution from the special fund. To
qualify, the employer must prove that (1) the employee had a
pre-existing permanent partial disability (2) that was "manifest"
to the employer before the occurrence of the injury at issue, and
(3) the disability following the subsequent injury was "not due
solely" to the subsequent injury. See id. § 908(f)(1); Ceres, 118
F.3d at 389-90. Whether the third factor has been met is at issue
3 This worry is exacerbated when the risk of injury is as great as it is among longshoremen and harbor workers. 4 The special fund is financed by a taxing system on all employers in the industry. See 33 U.S.C. § 944. This device spreads the loss and internalizes the cost of the prior injury for the first employer. The first employer would otherwise escape paying for the worker's subsequent disability because the effects of the first injury remained latent during the worker's prior employment.
4 in this case.
The countervailing worry, as with any insurance system, is
that those entitled to benefit from the special fund will face a
moral hazard problem. Because they pay only a fraction of the
costs, employers will rationally "over-demand" benefits from the
special fund.5
In the LHWCA, Congress has attempted to control employers'
incentives to use small, insignificant prior injuries to pass off,
to the fund, costs that the employer should bear. Because this
risk is especially large in permanent, partial disability cases,
the LHWCA adds an additional component to the third statutory
factor: The employer also must show that the disability following
the subsequent injury was "materially and substantially greater
than that which would have resulted from the subsequent injury
alone." 33 U.S.C. § 908(f)(1). The Director claims that the ALJ
applied the two parts of this third statutory factor incorrectly.
A.
The Director contends that the ALJ failed to find that the
permanent partial disability resulting from Ladner's fall from the
ladder was "not due solely" to his fall. The ALJ found that
Ladner's permanent partial disability after his fall was increased
because of his prior toe injury. The Director, however, maintains
that in order to meet the "not due solely" requirement, the ALJ had
5 Cf. Ball Mem'l Hosp. v. Mutual Hosp. Ins., Inc., 784 F.2d 1325, 1332 (7th Cir.1986) ("Insurance creates "moral hazard.' Once a person has insurance, he wants the best care regardless of cost—for someone else bears the cost.").
5 to find the converse as well: that without the prior toe injury,
the subsequent permanent partial disability would not have been as
great as it was.
The Director confuses the standards necessary to show "not due
solely" to the subsequent injury in partial and total permanent
disability cases. In a total disability case, the employee could
be "more injured" as a result of the subsequent injury without
necessarily entitling his employer to relief from the special fund.
For example, the worker could be thirty-five percent permanently
disabled from his prior injury but still one hundred percent
permanently disabled from his subsequent injury. Thus, in order to
meet the "not due solely" requirement, the employer would have to
prove that without the prior injury, the worker would not now be
totally permanently disabled. See Two "R" Drilling Co. v.
Director, OWCP, 894 F.2d 748, 750 (5th Cir.1990) (per curiam).
In the case of permanent partial disability, however, all the
employer must show to meet the "not due solely" requirement is that
an increased permanent partial disability results when the injuries
from the prior and subsequent injuries are combined. Whenever the
disability is increased from the combination of the two injuries,
the resulting permanent partial disability is necessarily "not due
solely" to the subsequent injury.6
The ALJ found that the permanent partial disability resulting
from Ladner's fall was increased because of his previously-injured
6 This happenstance may explain why Congress added the "materially and substantially greater" requirement in permanent partial disability cases. See infra part V.B.
6 toe. Therefore, assuming for the moment the sufficiency of that
finding,7 the ALJ correctly determined that this part of the third
statutory factor was met.
B.
The Director claims that the ALJ was required to state
explicitly that Ladner's permanent partial disability was
"materially and substantially greater" than it would have been had
the toe injury never occurred. Both sides concede that the ALJ
never made an explicit "materially and substantially greater"
finding. Recently, however, we noted that "[a]lthough it would be
helpful if attorneys asked questions designed to elicit the "magic
words' that authorize special fund relief, we decline to adopt a
rule that would require a rote recitation of the applicable legal
standard." Ceres, 118 F.3d at 391.
Instead, when the "magic words" are absent from the record,
"the fact finder's inquiry must of necessity be resolved by
inferences based on such factors as the perceived severity of the
pre-existing disabilities and the current employment injury, as
well as the strength of the relationship between them." Id. Thus,
assuming for the moment the sufficiency of the evidence, it was not
error, in and of itself, that the ALJ failed to state explicitly
that the permanent partial disability was "materially and
substantially greater" as a result of the prior toe injury.
7 We address the Director's sufficiency of the evidence claims in part V, infra.
7 The Director maintains that even if the ALJ applied the
correct legal standards in determining the two parts of the third
statutory factor, the evidence cannot support a finding in favor of
the employer on either part. We agree with regard to the second
part. First, we address the sufficiency of the "not due solely"
finding. Then, we discuss the "materially and substantially
greater" determination.
The evidence is sufficient to find that Ladner's current
permanent partial disability is "not due solely" to the fall from
the ladder. At the proceedings, Hopper testified to this
conclusion. Although there was conflicting evidence, the ALJ was
entitled to weight Hopper's testimony more and others' less. The
record indicates that the ALJ accepted Hopper's conclusion that
Ladner's permanent partial disability was increased because of the
prior toe injury. This finding was a reasonable inference.
The same cannot be said about the second part. Any ALJ
finding that Ladner's permanent partial disability was "materially
and substantially greater than that which would have resulted from
the subsequent injury alone," 33 U.S.C. § 908(f)(1), is not
supported by the evidence. Satisfying the "materially and
substantially greater" prong of the statutory test requires "an
employer [to] present evidence of the type and extent of the
disability that the claimant would suffer if not previously
disabled when injured" subsequently. Director, OWCP v. Newport
8 News Shipbuilding & Dry Dock Co., 8 F.3d 175, 185 (4th Cir.1993),
aff'd, 514 U.S. 122, 115 S.Ct. 1278, 131 L.Ed.2d 160 (1995).
Thus, the employer must offer some proof of the extent of the
permanent partial disability had the pre-existing injury never
existed.8 See Newport News, 8 F.3d at 185-86 & n. 9. Ingalls can
offer only testimony that the permanent partial disability was
increased because of the prior toe injury.
There is no evidence suggesting that the resulting permanent
partial disability was "materially and substantially greater," nor
is there any quantification of the resulting permanent partial
disability in the absence of the prior injury.9 Although Hopper's
testimony is enough for a rational person to infer that the
resulting permanent partial disability was increased because of the
prior toe injury, no reasonable fact finder could infer that the
permanent partial disability was "materially and substantially
greater than that which would have resulted from the subsequent
injury alone." 33 U.S.C. § 908(f)(1).
8 In Newport News, the evidence the employer presented was similar to that in the present case. Concluding that the employer had not met the statutory burden, the court noted: "Newport News showed that the Claimant suffered from a pre-existing permanent partial disability in the cervical spine area that created a five percent whole body impairment. After the work-related injury at issue, the Claimant suffered an ultimate permanent partial disability that produced a whole body impairment of eighteen percent.... This conclusion stops short of identifying whether the ultimate permanent partial disability is materially and substantially greater than a disability cause by the work-related injury only." Newport News, 8 F.3d at 186 n. 9. 9 Because we find the standard has not been met in this case, we need not express any view about what evidence would support a "materially and substantially greater" inference.
9 Therefore, because Ingalls has failed to offer sufficient
evidence needed to obtain special fund relief under § 908(f)(1), we
GRANT the petition for review and REVERSE and REMAND to the BRB for
proceedings consistent with this opinion.