BLOOMER v. LIBERTY MUTUAL INSURANCE CO.
No. 78-1418
Supreme Court of the United States
Argued December 4, 1979—Decided March 3, 1980
445 U.S. 74
Alan C. Rassner argued the cause and filed briefs for petitioner.
Douglas A. Boeckmann argued the cause and filed a brief for respondent.*
MR. JUSTICE MARSHALL delivered the opinion of the Court.
Under the Longshoremen‘s and Harbor Workers’ Compensation Act, 44 Stat. 1424, as amended,
I
Petitioner William E. Bloomer, Jr., was injured during the course of his employment on board the vessel S. S. Pacific Breeze. He received $17,152.83 in compensation from respondent Liberty Mutual Insurance Co., the designated carrier of workers’ compensation for petitioner‘s employer, Connecticut Terminal Co.1 Thereafter petitioner brought this diversity action against the owner of the vessel. He alleged that the shipowner had negligently created hazardous conditions on board the vessel, that the ship‘s deck was slippery and dangerous, and that as a result he had fallen and incurred severe injuries.
During settlement negotiations, petitioner‘s counsel gave respondent notice of the pending action and requested it to reduce its lien by a share of the costs of recovery. That share would be computed as an amount bearing the same ratio to the total cost of recovery as the compensation payments bear to the total recovery. Respondent refused petitioner‘s request, asserted its right to full reimbursement, and successfully moved to intervene in the action. Soon thereafter petitioner settled with the shipowner for $60,000. He moved for sum-
The District Court denied petitioner‘s motion,2 and the United States Court of Appeals for the Second Circuit affirmed. Bloomer v. Tung, 586 F. 2d 908 (1978). The Court of Appeals concluded that a stevedore should not be required to pay a share of the longshoreman‘s legal expenses in a suit
II
Petitioner‘s argument amounts to an appeal to the equitable principle that when a third person benefits from litigation instituted by another, that person may be required to bear a portion of the expenses of suit. He invokes cases establishing that in certain circumstances, courts should exercise their equitable powers to charge beneficiaries with a share of the expenses of obtaining a “common fund” through litigation. See Boeing Co. v. Van Gemert, 444 U. S. 472 (1980); Alyeska Pipeline Service Co. v. Wilderness Society, 421 U. S. 240, 257-259 (1975); id., at 275-280 (MARSHALL, J., dissenting); Mills v. Electric Auto-Lite Co., 396 U. S. 375 (1970); Sprague v. Ticonic National Bank, 307 U. S. 161 (1939). When measured against the language, structure, and history of the Longshoremen‘s and Harbor Workers’ Compensation Act, however, petitioner‘s argument must fail.
The Act provides a comprehensive scheme governing an injured longshoreman‘s rights against the stevedore and shipowner. The longshoreman is not required to make an election between the receipt of compensation and a damages action against a third person,
The Act does not expressly provide for the distribution of amounts recovered in a suit brought by the longshoreman. The unambiguous provision that the stevedore shall be reimbursed for all of his legal expenses if he obtains the recovery does, however, speak with considerable force against requiring him to bear a part of the longshoreman‘s costs when the longshoreman recovers on his own. There is no reason to believe that Congress intended a different distribution of the expenses of suit merely because the longshoreman has brought
III
As originally enacted in 1927, the Act required a longshoreman to choose between the receipt of a compensation award from his employer and a damages suit against the third party. Act of Mar. 4, 1927, § 33, 44 Stat. 1440. If the longshoreman elected to receive compensation, his right of action was automatically assigned to his employer. In 1938, however, Congress provided that in cases in which compensation was not made pursuant to an award by a deputy commissioner (appointed by the Secretary of Labor, see
Like the present version, the Act as amended in 1938 did not make provision for the distribution of amounts recovered from the third party in a suit brought by the longshoreman. The lower courts, however, interpreted the Act to require that the stevedore be reimbursed for his compensation payment out of the sum recovered from the third party. Congress was understood not to contemplate double recovery on the longshoreman‘s part, and the stevedore did not, therefore, lose the right to reimbursement for its compensation payment. See, e. g., The Etna, 138 F. 2d 37 (CA3 1943); Miranda v. Galveston, 123 F. Supp. 889 (SD Tex. 1954); Fontana v. Pennsylvania R. Co., 106 F. Supp. 461 (SDNY 1952) (Weinfeld, J.), aff‘d on opinion below sub nom. Fontana v. Grace Line, Inc., 205 F. 2d 151 (CA2), cert. denied, 346 U. S. 886 (1953).
In 1959, Congress amended the Act to delete the election-of-remedies requirement altogether. Act of Aug. 18, 1959, 73 Stat. 391. Existing law was felt to “wor[k] a hardship on an employee by in effect forcing him to take compensation under the act because of the risks involved in pursuing a lawsuit against a third party.” S. Rep. No. 428, 86th Cong., 1st Sess., 2 (1959). The result was that an injured employee “usually elects to take compensation for the simple reason that his expenses must be met immediately, not months or years after when he has won his lawsuit.” Ibid.; see H. R. Rep. No. 229, 86th Cong., 1st Sess. (1959).
Responding to this inequity, the 1959 amendment provided that even when compensation was paid pursuant to an award of the deputy commissioner, the longshoreman‘s right of action would not be assigned to the stevedore until six months from the date of the award. The legislative history demonstrates that Congress did not intend to alter the rule allowing the stevedore to recover the full amount of its lien from the long-
In 1972, Congress enacted more extensive Amendments to the Act, see Edmonds v. Compagnie Generale Transatlantique, 443 U. S. 256, 262 (1979), and it is these Amendments that according to petitioner, justify a change in the rule with respect to attorney‘s fees. Concerned that compensation benefits had been far too low, Congress altered the benefit structure of the Act so as to increase both maximum and minimum
Witnesses also brought to the attention of Congress the longstanding rule that an employer could recover the full amount of its compensation award from the longshoreman‘s recovery against the shipowner.10 Congress did not, however, enact any legislation concerning that rule.
Petitioner argues that the 1972 Amendments so altered the equities as to compel a holding that a stevedore must pay a proportionate share of the longshoreman‘s expenses in a third-party action brought against the shipowner. He observes that before the Amendments, the longshoreman and the stevedore had adverse interests in the third-party action: if the longshoreman were successful in that suit, the shipowner frequently would attempt to require the stevedore to make payment of amounts due the longshoreman. With the abolition of the shipowner‘s cause of action, the stevedore and the
In light of the Act and its legislative history, however, we are unable to accept petitioner‘s argument. It is of course true that the stevedore and longshoreman now have a common interest in the longshoreman‘s recovery against the shipowner, but it does not follow that the stevedore should be required to pay a share of the longshoreman‘s legal expenses. Congress has not modified
In addition, to the extent that the 1972 Amendments offer guidance, they strongly suggest that the rule for payment of attorney‘s fees was not intended to be altered. The legal expenses incurred by stevedores in connection with third-party actions were understood to be a major obstacle to the funding of increased compensation payments. Numerous witnesses testified that third-party actions frequently inured to the benefit of lawyers, depleting the stevedore‘s resources and congesting the courts without aiding the injured employee. It would be ironic indeed if statutory amendments designed to eliminate the stevedore‘s liability in connection with third-party actions were interpreted to give birth to an entirely new liability in the form of a charge for the longshoreman‘s legal expenses.11
Finally, we return to the original basis for the rule that a stevedore would not be required to pay a portion of the longshoremen‘s expenses in his suit against the shipowner. The compensation award was intended to be an immediate and readily available payment to the injured longshoreman. By receiving this payment, the longshoreman was not foreclosed from pursuing an action against the shipowner. At the same time, he was not entitled to double recovery, and the stevedore would be reimbursed in full for his compensation payment.13
The judgment of the Court of Appeals is
Affirmed.
MR. JUSTICE BLACKMUN, dissenting.
The Court‘s approach in this case strikes me as somewhat crabbed. By tilting with the specter of “double recovery,” the Court adopts a construction of the Longshoremen‘s and Harbor Workers’ Compensation Act,
Under the Court‘s rule, the stevedore has everything to gain and nothing to lose. The longshoreman takes the risk and the worry of the litigation and, if he gains enough, the stevedore is home free. This result does not seem to me to square with the Court‘s recent recognition that the Act should be construed with the beneficent purpose of worker protection foremost in mind. Northeast Marine Terminal Co. v. Caputo, 432 U. S. 249, 268 (1977). Nor does it entirely square with the modern concept that the costs of industrial accidents are expenses to be borne by the industrial enterprise and not by the injured workman.1 It also fails to do equity where equity is due. Since I cannot agree that Congress has required us so to deviate from the principles of equity and the governing purposes of the Act, I respectfully dissent.
The Court recognizes, ante, at 79, that although Congress has provided a detailed scheme for the distribution of the amount recovered in a third-party action initiated by the stevedore, it has never fixed by statute the details of distribution when it is the longshoreman who brings suit. The Court, nonetheless, discovers and espouses a settled judicial rule for division of the recovery in an action by the longshoreman, and it transforms that rule into a statutory mandate by pronouncing that we should not presume to change what the Court thinks Congress, by inaction, apparently has left in force. Ante, at 85-86. I feel the Court has oversimplified the variegated history of the judicial “rule,” has overdrawn the clarity of congressional approval of it, and has failed to estimate the degree to which the rationale for exonerating the stevedore from bearing a portion of the attorney‘s fees was undermined by the 1972 Amendments to the Act.
The earliest cases mentioned by the Court, The Etna, 138
To be sure, Fontana, supra, and Davis v. United States Lines Co., 253 F. 2d 262 (CA3 1958), held, as the Court does today, that attorney‘s fees for a third-party action must be borne in their entirety by the longshoreman. These cases drew support for this conclusion from both the statutory division of recovery when the stevedore brings suit and the view that the “expense of securing the recovery is, as in equity it should be, a first charge against the fund itself.” Fontana v. Pennsylvania R. Co., 106 F. Supp., at 464. As a review of subsequent case law demonstrates, however, this reasoning never has achieved the broad acceptance that the Court‘s opinion implies. In the Fourth and the Fifth Circuits, and perhaps even in the Second Circuit, alternative approaches to the problem have been advocated and applied.
In Ballwanz v. Jarka Corp., 382 F. 2d 433 (1967), the Fourth Circuit adopted an entirely different rationale. The court recognized that Ryan Stevedoring Co. v. Pan-Atlantic S. S. Corp., 350 U. S. 124 (1956), which permitted shipowners to bring indemnity actions against stevedores, produced a “rotary situation” in which the stevedore was effectively aligned
In the Fifth Circuit, the proper distribution of recoveries in third-party actions initiated by longshoremen has been the subject of continuing debate. Strachan Shipping Co. v. Melvin, 327 F. 2d 83 (1964), applied Fontana‘s conclusion that attorney‘s fees are a “first charge” against the recovery in a case where the recovery was so small that nothing was left for the longshoreman. The decision provoked a vigorous dissent, which proposed a different reading of Fontana and Davis that would give the compensation lien priority over the fees. Id., at 87-89. This alternative appears to have been applied in Haynes v. Rederi A/S Aladdin, 362 F. 2d 345, 351 (1966), cert. denied, 385 U. S. 1020 (1967), albeit on the ground that the stevedore was represented in the action by its own counsel. Eventually, however, both readings of the Fontana-Davis “rule” were displaced in the Fifth Circuit by an approach that, in certain circumstances, required the longshoreman and the stevedore to “pay attorney‘s fees and litigation expenses in proportion to their recoveries.” Chouest v. A & P Boat Rentals, Inc., 472 F. 2d 1026, 1035-1036 (1973), cert. denied sub nom. Travelers Ins. Co. v. Chouest, 412 U. S. 949 (1973).
In the Second Circuit, Fontana‘s approach has not been uniformly followed. Landon v. Lief Hoegh & Co., 521 F. 2d 756, 761 (1975), cert. denied sub nom. A/S Arcadia v. Gulf Ins. Co., 423 U. S. 1053 (1976), treated the compensation lien as an “express trust for the benefit of the employer” with the
I mention these variations and counterpoints to the Fontana-Davis theme not to challenge the Court‘s assertion that, prior to the 1959 and 1972 amendments to the Act, stevedores generally were exonerated from bearing a portion of attorney‘s fees incurred in longshoreman-initiated actions, but rather to suggest that the Court errs when it implies that the case law presented a settled judicial construction of the Act for Congress to approve. Indeed, the situation was even more complicated than this brief exposition illustrates, since the various rationales employed by the courts led them into disarray over the handling of attorney‘s fees in cases where the third-party recovery was insufficient to satisfy both the fees and the stevedore‘s compensation lien in their entirety. See Valentino v. Rickners Rhederei, G. m. B. H., SS Etha, 417 F. Supp. 176, 177-179 (EDNY 1976), aff‘d on other grounds, 552 F. 2d 466 (CA2 1977). The legislative history relied upon by the Court, ante, at 80-81, 84, fails to show that Congress delved into the intricacies of this judicial debate, or indeed that it did more than barely scratch the surface in consideration of fee allocations in actions brought by longshoremen. The most that can be gleaned from this history is that Congress intended not to interfere with judicial developments in this sphere.
As a result, I think that the Court informs congressional inaction with the wrong meaning, and that it draws an analogy to the statutory allocation of stevedore-initiated recoveries where none, in fact, exists. Had Congress intended rote ap-
Adaptation of the statutory framework, of course, might be desirable if it achieved an equitable result. But it does not. Indeed, the analogy to the division of a recovery under § 933 (e) itself is flawed. When the stevedore brings the lawsuit, its own recovery comes first after expenses and costs of litigation have been paid; the longshoreman, as nonparticipating beneficiary, receives only a portion of the remainder. In contrast, under the Court‘s ruling, the longshoreman who brings suit must wait in line until the nonparticipating stevedore‘s interests have been satisfied in full. Under the statute, then, the party who takes the risk of loss receives priority of treatment. Under the Court‘s ruling, he does not. The apparent symmetry of a strict analogy to the statutory formula thus produces, for the longshoreman, an asymmetrical result. Considerations of equity surely do not require that approach.
As I weigh the equities, the most persuasive reason heretofore for exonerating the stevedore from bearing a proportion-
In addition to eliminating the only sound reason for refusing an allocation on equitable grounds, the 1972 Amendments also show clearly that congressional concern was primarily for the workman and not for the stevedore-employer or for the shipowner. The chief purpose of the Amendments was to benefit the longshoreman. Congress’ desire to reduce excessive litigation and thus to conserve stevedore resources, of which the Court makes so much, was incidental and secondary to this purpose. When, for example, Congress eliminated the litigation merry-go-round produced by the indemnity and unseaworthiness actions created in Ryan Stevedoring Co. v.
The Court also makes much of the putative “windfall” a longshoreman would receive if petitioner prevailed. Ante, at 87. The longshoreman would receive no windfall. Any costs or fees he must pay reduce his net recovery below the amount of his adjudicated injuries. This deficit would be alleviated, but never exceeded, if the stevedore were charged with a proportionate share of the attorney‘s fees. The longshoreman, of course, would be better off than if he had to depend either on the statutory compensation or on the negligence suit alone. But Congress long ago eliminated the necessity of electing a remedy, and an increase in total recovery accomplished by resort to both methods of redress is fully consistent with the statutory scheme. So long as the longshoreman‘s total compensation remains less than his actual damages, there is no true “double recovery.”
To use the Court‘s own adjective, ante, at 85, it is “ironic” that from this litigation petitioner will receive, by today‘s ruling, only $2,779.57 more than the attorney‘s fees of $19,932.40. The Court thus acts to ensure that third-party actions will remain, as they were before the 1972 Amendments, a litigation playground for others instead of a method by which the injured longshoreman realistically may hope to
Notes
| Recovery | $60,000.00 |
| less expenses | (202.80) |
| balance for distribution | 59,797.20 |
| less attorney‘s fee of one-third | (19,932.40) |
| balance | 39,864.80 |
| less lien of respondent | (17,152.83) |
| net to petitioner | 22,711.97 |
Petitioner sought to have the fund distributed in the following manner:
| Recovery | $60,000.00 | |
| less expenses | (202.80) | |
| balance for distribution | 59,797.20 | |
| less attorney‘s fee of one-third | (19,932.40) | |
| balance | 39,864.80 | |
| lien of respondent | 17,152.83 | |
| less proportionate share of fees and expenses (.3355866 X $17,152.83) | (5,756.26) | |
| 11,396.57 | (11,396.57) | |
| net to petitioner | 28,468.23 |
“Any amount recovered by such employer on account of such assignment, whether or not as the result of a compromise, shall be distributed as follows:
“(1) The employer shall retain an amount equal to—
“(A) the expenses incurred by him in respect to such proceedings or compromise (including a reasonable attorney‘s fee as determined by the deputy commissioner or Board);
“(B) the cost of all benefits actually furnished by him to the employee under section 907 of this title;
“(C) all amounts paid as compensation;
“(D) the present value of all amounts thereafter payable as compensation, . . . and the present value of the cost of all benefits thereafter to be furnished under section 907 of this title . . . ; and
“(2) The employer shall pay any excess to the person entitled to compensation or to the representative, less one-fifth of such excess which shall belong to the employer.”
“Mr. BUTLER. . . . I understand that the bill merely amends section 33 of the Longshoremen‘s and Harbor Workers’ Act, so as to permit an employee to bring a third-party liability suit without forfeiting his right to compensation under the act. It is my further understanding that the courts have consistently held that the present section 33 of the act gives the employer a lien on the employee‘s third party recovery for the compensation and benefits paid by the employer.
“Is it the Senator‘s understanding, then, that the passage of this measure would in no way affect the present construction of the act with respect to the employer‘s lien on the employee‘s third-party recovery for compensation and benefits paid by the employer?
“Mr. BARTLETT. The distinguished Senator from Maryland is correct. In further explanation on this point, I ask unanimous consent to have
printed at this point in the RECORD a brief statement from the Committee on Labor and Public Welfare . . . :“‘There is no necessity for a provision giving the employer a lien on the employee‘s third-party recovery for the compensation and benefits paid by the employer, inasmuch as the courts have construed the present section 33 as providing such lien. In addition, as a result of judicial construction of the existing section, the employee is entitled to deduct his expenses incurred in third-party proceedings,‘” 105 Cong. Rec. 12674 (1959) (emphasis added).
The express statement that the employee should deduct his expenses from the recovery is, of course, a plain indication that those expenses would not be borne by the stevedore. Cf. n. 13, infra.
The House version of the amendment would have provided: “[T]he carrier liable for the payment of . . . compensation shall have a lien on the proceeds of any recovery from [a] third person, whether by judgment, settlement, or otherwise, after the deduction of the reasonable and necessary expenditures, including attorney‘s fees, incurred in effecting such recovery, to the extent of the total amount of compensation awarded under, or provided, or estimated, by this Act . . . .” H. R. Rep. No. 229, 86th Cong., 1st Sess., 6 (1959). The House passed this version of the amendment, 105 Cong. Rec. 5561-5562 (1959), but later concurred in the Senate version on the evident assumption that the Senate version also adopted existing judicial practice. See id., at 15343.
The Act explicitly allows attorney‘s fees in cases in which an employer declines to pay compensation,
Petitioner suggests that the distribution we approve will result in a $5,756.26 windfall to the respondent, since it is in effect permitted to recover its lien without contributing to the costs of the recovery. But as explained in the text, our review of the Act and its legislative history persuades us that Congress intended the stevedore to recover the full amount of its lien, regardless of who brings the action.
A number of States have required proportional sharing of legal expenses by statute. See, e. g.,