Potomac Electric Power Company v. John F. Wynn, Jr.

343 F.2d 295, 120 U.S. App. D.C. 13, 1965 U.S. App. LEXIS 6949

• Court: Court of Appeals for the D.C. Circuit
• Decided: January 8, 1965
• Docket: 18252_1
• Status: Published

Opinions

PER CURIAM.

On March 9, 1962, appellee Wynn was awarded compensation under the Longshoremen’s and Harbor Workers’ Compensation Act¹ for injuries suffered by electrical shock while working as a lifeguard at a pool operated by Government Services, Inc. On January 30, 1962, Wynn had filed an action against one Ansel Kelley an independent electrical contractor, alleging that Kelley was negligent in repairing and maintaining the pool. Almost three years after his injury and sixteen months after the compensation award, on July 17, 1963, Wynn filed an amended complaint naming appellant, Potomac Electric Power Company (PEPCO) as co-defendant with Kelley. The applicable three-year statute of limitations on the claim against PEPCO would have expired within two weeks.² PEPCO moved to dismiss the complaint on the ground that, since more than six months had pased from the compensation award, Wynn’s claim against PEPCO had been assigned to the compensating employer by the Act, 33 U.S.C. § 933(b) (Supp. Y, 1959-63). PEPCO argues that the statutory assignment removes Wynn’s standing to sue because he is no longer the real party in interest. The District Court denied the motion to dismiss and certified its order for interlocutory appeal.³

The Longshoremen’s and Harbor Workers’ Compensation Act must be construed liberally in favor of the injured employee.⁴ Narrow statutory construction should not deprive the injured employee of either his compensation or his claim in damages against third parties.

Prior to 1959, the Longshoremen’s and Harbor Workers’ Compensation Act required an injured employee to elect between accepting compensation from his employer and suing a third-party tort-feasor. The Act then provided that “ [acceptance of such compensation [from an employer] * * * shall operate as an assignment to the employer of all right of the person entitled to compensation to recover damages against such third person.” 33 U.S.C. § 933(b) (1958). Following this assignment, the employer was authorized to bring suit against or compromise with the third person, and the employee took all proceeds in excess of the employer’s expenses and compensatory payment to the employee. Thus the employee, after the assignment, had considerable interest in the employer's action against the third party. The statute was silent, however, regarding the remedies available to the employee if the employer-assignee failed to sue, or arbitrarily compromised with, the third party.

In Czaplicki v. The Hoegh Silvercloud, 351 U.S. 525, 76 S.Ct. 946, 100 L.Ed. 1387 (1956), which arose under that statute, the employee accepted compensation from the employer and the employer’s insurance carrier was then subrogated to the assigned action against the third parties. The carrier was also the insurer of one of the third parties, and thus had no incentive to pursue the employee’s claim against the third parties. The Court stated that “the statute presupposes that the assignee’s interest will not be in conflict with those of the employee * 351 U.S. at 531, 76 S.Ct. at 550. In that case, “given the conflict of interests and inaction by the assignee,” the Supreme Court held that the employee “can maintain the third-party action himself.” 351 U.S. at 532, 76 S.Ct. at 950. The opinion left open the question of the proper treatment of an employee’s action in a situation where his interest did not clearly conflict with the interest of the assignee.

In the present case, unlike Czaplicki, the record does not support the sole inference that the employer (or his sub-rogee) refused to sue the third party because its interests were identical with that party and opposed to the employee’s. Appellee suggested in oral argument that the employer failed to sue because he feared that if PEPCO were held liable to the employee, PEPCO could then successfully counterclaim against the employer as primary tortfeasor.⁵ But it is equally plausible from the record before us that the employer sincerely believed that PEPCO was not liable for the employee’s injury. In the absence of the 1959 amendments, Czaplicki would indicate that we should remand for a hearing on the employer’s reason for failing to sue PEPCO.⁶ In our view of the 1959 amendments, however, this further hearing is unnecessary.

In 1959 the Act was amended to enlarge the rights of the employee. The employee no longer is required to elect between his statutory and common-law remedies; he may both accept compensation from his employer and bring suit against the third-party tortfeasor. It is further provided that “unless [the compensated employee] shall commence an action against such third person within six months after such [compensation] award * * * all right” of the employee in such action is assigned to the employer. 33 U.S.C. § 933(b) (Supp. V, 1959-63). Like Czaplicki, the 1959 amendments recognized that the employer and employee do not always have the same interest in pursuing the third party. To meet this problem, the amendments provide a financial incentive for the employer-assignee to take vigorous action against the third party by allowing the employer to retain one fifth of the proceeds recovered from the third party in excess of his expenses and the amount required for his reimbursement of compensation paid to the employee. 33 U.S.C. § 933(e) (2) (Supp. V, 1959-63).⁷ This financial incentive encourages the employee to permit assignment of his action in order to enlist the superior resources of the employer in suing the third party. Thus, the Act as amended not only attempts to facilitate the employee’s recovery from third parties, but also gives financial incentive to the employer in an attempt to insure vigorous prosecution of claims after assignment of the employee’s rights.

If the employer fails to sue after the statutory assignment, and the employee is then required to produce evidence regarding the employer’s motives in order to sue on his own behalf, a substantial burden would be cast on the employee seeking to recover from the third-party tortfeasor. This burden would -be inconsistent with the underlying purpose of the 1959 amendments — to facilitate the employee’s recovery against the third party. By itself, the employer’s failure to bring suit is burden enough for the employee who is thus relegated to his ordinarily lesser resources.

Moreover, even if the employerassignee had “proper motives” or did not abuse a “fiduciary duty to the employee” in failing to sue the third party, no statutory purpose would be served in precluding the employee from suing. If, for example, the employer decides in good faith that the third party was not liable for the employee’s injuries, there is no reason under the statute that the employee should not be permitted to take his chances that the employer's judgment is wrong. The statute is not designed to protect third parties from suit.⁸

A further important purpose of the statutory assignment is to “safeguard” the employer’s right of recoupment “where a claimant [compensated employee] does not pursue a good third-party action * * ⁹ This purpose does not require us to penalize the employee if the employer-assignee declines to sue the third party. In effect, the employer’s declination amounts to a waiver of the protection offered by the statutory assignment. Moreover, the employer’s interest in recoupment, if the employee ultimately succeeds in recovering from the third party, would presumably be protected by a lien on the proceeds.¹⁰

We think that the Act’s purposes to benefit the employee, as interpreted by Czaplicki, and supplemented by the 1959 amendments, support the view that the employee may bring suit against a third'party whenever it is evident that the employer-assignee, for whatever reason, does not intend to bring suit.

Affirmed.

1 . 33 U.S.C. § 901 (1958), as amended, id. §§ 906 et seq. (Supp. V, 1959-63).

2 . D.C.Code § 12-201 (1961), id. § 12-301 (Supp. Ill, 1964).

3 . 28 U.S.C. § 1292(b) (1958).

4 . Voris v. Eikel, 346 U.S. 328, 333, 74 S.Ct. 88, 98 L.Ed. 5 (1953) ; Vinson v. Einbinder, 113 U.S.App.D.C. 246, 307 F.2d 387 (1962), cert. denied, Aetna Cas. & Sur. Co. v. Vinson, 372 U.S. 934, 83 S. Ct. 880, 9 L.Ed.2d 765 (1963).

5 . See Ryan Stevedoring Co. v. Pan-Atlantic S.S. Corp., 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed. 133 (1956).

6 . See Johnson v. Sword Line, Inc., remanded to the District Court, 240 F.2d 954 (3d Cir. 1957), rehearing, 153 F. Supp. 691 (E.D.Pa.1957), reversed, 257 F.2d 541 (3d Cir. 1958).

7 . The Senate Report states: “[B]y giving the employer a reasonable (one fifth) share in the net recovery and [sic] incentive is provided not to compromise a suit only for the amount of compensation but to protect the interests of the employee as much as possible.” S.Rep.No. 428, 86th Cong., 1st Sess. 2 (1959), U.S. Code Congressional and Administrative News, p. 2135.

8 . 33 U.S.C. § 933(d) (Supp. V, 1959-63) provides: “Such employer on account of such assignment may either institute proceedings for the recovery of such damages or may compromise with such third person either without or after instituting such proceeding.” The statute does not in terms authorize the employer to let the employee’s claim expire. Our decision does not, however, rest on this statutory omission. Reliance on this omission to support our holding might be taken to imply that the employee would have no remedy if, for example, the employer-assignee arbitrarily compromised the claim. We do not intend to foreclose any possible remedy for the employee in such circumstances. See, e. g., Di Somma v. N. V. Koninklyke Nederlandsche Stoom-boot, 188 F.Supp. 292 (S.D.N.Y.1960).

9 . H.R.Rep.No. 229, 86th Cong., 1st Sess. 2 (1959).

10 . International Terminal Operating Co. v. Waterman S.S. Co., 272 F.2d 15 (2d Cir. 1959), cert. denied, 362 U.S. 919, 80 S.Ct. 671, 4 L.Ed.2d 739 (1960) ; Liberty Mutual Ins. Co. v. United States, 290 F.2d 257, 258 (2d Cir. 1961).