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Arel Price v. Stevedoring Services of America

September 4, 2012

AREL PRICE, PETITIONER,
v.
STEVEDORING SERVICES OF AMERICA, OWCP NO. INC.; EAGLE PACIFIC INSURANCE 07-0567 COMPANY; HOMEPORT INSURANCE CO.; DIRECTOR, OFFICE OF WORKERS COMPENSATION PROGRAMS, RESPONDENTS.



On Petition for Review of an Order of the Office of Workers' Compensation Programs

The opinion of the court was delivered by: Berzon, Circuit Judge:

FOR PUBLICATION

OPINION

Argued and Submitted September 22, 2011

Submission Vacated September 29, 2011

Resubmitted August 27, 2012

San Francisco, California

Before: Alex Kozinski, Chief Judge, Mary M. Schroeder,

Stephen Reinhardt, Diarmuid F. O'Scannlain, Sidney R. Thomas, Barry G. Silverman, William A. Fletcher,

Ronald M. Gould, Marsha S. Berzon, Carlos T. Bea, and

Mary H. Murguia, Circuit Judges.

Opinion by Judge Berzon;

Dissent by Judge O'Scannlain

10443

OPINION

We consider whether a claimant under the Longshore and Harbor Workers' Compensation Act ("LHWCA," "Longshore Act," or "Act"), 33 U.S.C. § 901 et seq., (1) is entitled to the maximum compensation rate from the fiscal year in which he becomes disabled or from the fiscal year in which he receives a formal compensation award; (2) receives interest on past due compensation at the rate defined in 28 U.S.C. § 1961 instead of the rate set forth in 26 U.S.C. § 6621;*fn1 and, (3) if interest is to be awarded at the § 1961 rate, whether it should be simple or compound. In the course of resolving these issues, we also consider the proper level of deference that should be accorded to the litigating position of the Director of the Office of Workers' Compensation Programs ("Director").

I. BACKGROUND

A. Statutory Scheme

The Longshore Act is a " 'comprehensive scheme' " to provide compensation for the disability or death of employees resulting from injuries occurring upon the navigable waters of the United States. Roberts v. Sea-Land Servs., Inc., 132 S. Ct. 1350, 1354 (2012) (quoting Metro. Stevedore Co. v. Rambo, 515 U.S. 291, 294 (1995)); see also 33 U.S.C. § 903(a). Although the Department of Labor is charged with administering the Act, Chesapeake & Ohio Ry. Co. v. Schwalb, 493 U.S. 40, 45 (1989); 33 U.S.C. §§ 902, 939, the statute provides for a "split-function regime," in which duties are divided between two "sub-agencies," Ingalls Shipbldg. v. Dir., OWCP, 519 U.S. 248, 268 (1997). "By statute and by regulation, the adjudicative and enforcement/litigation functions of the Department of Labor with respect to the LHWCA are divided between the ALJ[ ]s [Administrative Law Judges] and the Benefits Review Board on the one hand, and the Director on the other." Id. at 269 (internal citations omitted); see also Dir., OWCP v. Newport News Shipbldg. & Dry Dock Co., 514 U.S. 122, 125 (1995).

When seeking compensation under the Act, a worker must file a claim with a district director, a designee of the Director.

33 U.S.C. § 919(a); 20 C.F.R. §§ 701.301(a)(7), 702.105, 702.136. With respect to benefits, the LHWCA establishes a maximum limit on compensation for disability. 33 U.S.C. § 906(b)(1). Compensation is capped at twice the applicable national average weekly wage. Id. The Act requires that compensation "be paid periodically, promptly, and directly to the person entitled thereto, without an award, except where liability to pay compensation is controverted by the employer." Id. § 914(a).

An employer controverting the right to compensation must file a formal notice with the district director. Id. § 914(d). Employers who do not do so become liable for an additional ten percent of "any installment of compensation payable without an award [that] is not paid within fourteen days after it becomes due." Id. § 914(e). In addition to and separate from any penalty due under § 914, claimants are entitled under our case law to receive interest on past due payments, regardless of whether employers have controverted liability. See Matulic v. Dir., OWCP, 154 F.3d 1052, 1059 (9th Cir. 1998).

District directors are authorized by the Director to resolve disputes with respect to claims and generally do so through informal discussions. 20 C.F.R. §§ 702.311, 801.2. If parties are unable to reach a resolution through this informal process, a district director will transfer the case to an ALJ for formal adjudication. Id. § 702.316; see also 33 U.S.C. § 919(d). The ALJ will then issue a compensation order rejecting a claim or making an award. 33 U.S.C. § 919(e). Parties can appeal an ALJ's order to the Benefits Review Board ("Board" or "BRB"), id. § 921(b)(3), and "[a]ny person adversely affected or aggrieved by a final order of the Board may obtain a review of that order in the United States court of appeals," id. § 921(c).

B. Factual and Procedural History

Arel Price was injured in 1991 while employed as a long-shoreman by Stevedoring Services of America, Inc. After undergoing surgery for his injury, he returned to work and continued to work until 1998, when he stopped working upon his physician's advice.

After informal negotiations preceding adjudication by an ALJ, Stevedoring provided Price with weekly workers' compensation payments of $676.89 from his date of injury until January 1992. The maximum weekly compensation rate at the time of Price's injury was $699.96 per week. Price also received a lump sum payment for the period from January to November 1992.

The parties disagreed, however, as to whether the amount Stevedoring paid Price in benefits was correct, or whether the proper rate was higher. As a result, the case was referred to an ALJ, who issued a formal compensation award in 2000. Upon eventual appeal, we remanded the case for reconsideration of the national average weekly wage used to calculate Price's disability payments. Stevedoring Servs. of Am., Inc. v. Price, Nos. 02-71207 & 02-71578, 2004 WL 1064126, at *2-3 (9th Cir. May 11, 2004).

On remand, the ALJ revised the applicable national average weekly wage and awarded Price compensation at the 1991 fiscal year maximum, declining to apply the maximum compensation rate from fiscal year 2000, when Price received his formal compensation order. In addition, the ALJ awarded Price interest on past due payments at the rate set forth in 28 U.S.C. § 1961; the ALJ rejected Price's argument that interest should be awarded at the higher rate set forth in 26 U.S.C. § 6621(a). The ALJ also refused to award Price compound interest at the § 1961 rate, requiring only simple interest instead.*fn2

Price appealed each of these holdings to the BRB, which affirmed the ALJ's order in its entirety.

Price then petitioned this court for review of the Board's decision, challenging the maximum rate of compensation, the rate of interest on his past due compensation, and the award of simple rather than compound interest. Price named the Director, who had not been involved in the adjudicatory proceedings before the Board, as one of the respondents. See generally Ingalls, 519 U.S. at 269 (holding that the Director may be named as a respondent in litigation before the courts of appeals). The Director filed a brief urging us to affirm the BRB's decision. A three-judge panel affirmed the Board's order as to all three issues, see Price v. Stevedoring Servs. of Am., 627 F.3d 1145 (9th Cir. 2010), and Price petitioned for en banc review of the panel's decision. We granted the petition, in large part to address the degree of deference due the Director's litigating positions. See id. at 1150-51 (O'Scannlain, J., concurring).

II. DISCUSSION

A. Standard of Review

1. Chevron deference

[1] Two administrative entities have weighed in on the issues here: the Board, through its order, and the Director, through his litigating position before this court. Because the Board is not a policymaking entity, we accord no special deference to its interpretation of the Longshore Act. See Matson Terminals, Inc. v. Berg, 279 F.3d 694, 696 (9th Cir. 2002) (citing Potomac Elec. Power Co. v. Dir., OWCP, 449 U.S. 268, 279 n.18 (1980)); see also Martin v. Occupational Safety and Health Review Comm'n, 499 U.S. 144, 154-55 (1991). The Director, by contrast, is a policymaking entity under the Act; he has the "power to resolve legal ambiguities in the statute." Newport News, 514 U.S. at 134. But having that author- ity does not mean that any reasonable statutory construction by the Director is entitled to what has become known as Chevron deference. See generally Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984). Although we have previously extended Chevron deference to the Director's litigating positions interpreting the Act, see, e.g., Gilliland v. E.J. Bartells Co., Inc., 270 F.3d 1259, 1262 (9th Cir. 2001); Mallott & Peterson v. Dir., OWCP, 98 F.3d 1170, 1172 (9th Cir. 1996), we now overrule our precedent to that effect.

"[O]ur rule mandating deference to the Director's reasonable litigating positions cannot be reconciled with Supreme Court precedent." Price, 627 F.3d at 1150 (O'Scannlain, J., concurring). In United States v. Mead Corp., the Supreme Court held that Chevron deference applies only when: (1) "it appears that Congress delegated authority to the agency generally to make rules carrying the force of law" and (2) "the agency interpretation claiming deference was promulgated in the exercise of that authority." 533 U.S. 218, 226-27 (2001). Whether an agency's reasonable statutory interpretation satisfies Mead's second requirement depends on the form and context of that interpretation. See Marmolejo-Campos v. Holder, 558 F.3d 903, 909 (9th Cir. 2009) (en banc). Mead compels us to reconsider the deference we have previously accorded the Director's statutory interpretations advanced during litigation. See Roberts, 132 S. Ct. at 1363 n.12 (declining to resolve whether the Director's litigating position is entitled to Chevron deference).

Mead held that tariff classification rulings by the U.S. Customs Service do not merit Chevron deference. 533 U.S. at 221. The relevant statute in that case provided that the Customs Service "shall, under rules and regulations prescribed by the Secretary [of the Treasury,] . . . fix the final classification and rate of duty applicable to . . . merchandise." 19 U.S.C. § 1500(b). In addition, the Secretary had promulgated regulations authorizing the Customs Service to issue "ruling letters" setting tariff classifications for imports. See 19 C.F.R. § 177.8 (2000). In denying Chevron deference to the Service's ruling letters, Mead first explained, "It is fair to assume generally that Congress contemplates administrative action with the effect of law when it provides for a relatively formal administrative procedure tending to foster the fairness and deliberation that should underlie a pronouncement of such force." 533 U.S. at 230. Mead then observed that the Customs Service generally issued ruling letters without any notice-and-comment procedure. Id. at 230-31.

Noting that the absence of any formal procedure did not categorically preclude extension of Chevron deference, the Court proceeded to examine whether there were "any other circumstances reasonably suggesting that Congress ever thought of classification rulings as deserving the deference claimed for them here." Id. at 231; see also Barnhart v. Walton, 535 U.S. 212, 221-22 (2002). Those circumstances, it concluded, were not present. See Mead, 533 U.S. at 232-34. Of particular importance, the Court explained, was that the agency's regulations and practice made it clear that "a letter's binding character as a ruling stops short of third parties." Id. at 233. Specifically, the regulations provided that a ruling letter was to "be applied only with respect to transactions involving articles identical to the sample submitted with the ruling request or to articles whose description is identical to the description set forth in the ruling letter." 19 C.F.R. § 177.9(b)(2) (2000). Even then, a letter was "subject to modification or revocation . . . without notice to any person, except the person to whom the letter was addressed," id. § 177.9(c), and could usually be modified without notice and comment, id. § 177.10(c). The regulations, moreover, warned that "no other person should rely on the ruling letter or assume that the principles of that ruling will be applied in connection with any transaction other than the one described in the letter." Id. § 177.9(c). Because the Court found no indication that the agency had "ever set out with a lawmaking pretense," Mead, 533 U.S at 233, it concluded that the tariff rulings should be treated like interpretations contained in enforcement guidelines, agency manuals, and policy statements-that is, as "beyond the Chevron pale," id. at 234.

The Director's construction of the Longshore Act advanced through his litigating position falls even further "beyond the Chevron pale," id., and evinces even less of a "lawmaking pretense," id. at 233, than did the ruling letters in Mead. The Director does not adopt his litigating positions through any "relatively formal administrative procedure," id. at 230, but through internal decisionmaking not open to public comment or determination. Cf. Didrickson v. U.S. Dep't of Interior, 982 F.2d 1332, 1339 (9th Cir. 1992) ("[L]instigation decisions are generally committed to agency discretion by law, and are not subject to judicial review under the APA."). Nor are there any other indicia that Congress intended the Director's litigating positions to "carry[ ] the force of law," Mead, 533 U.S. at 227. Quite the contrary. In adjudications under the Longshore Act, it is the BRB's decision, rather than the Director's litigating position, that binds the parties in any given case and provides guidance to other claimants and employers. See 33 U.S.C. § 921(b)(3) ("The Board shall be authorized to hear and determine appeals raising a substantial question of law or fact . . . .").

In practice as well as theory, it is the BRB's published decisions-and not the Director's litigating positions-that are precedential and determine the rights of future parties. See, e.g., B.C. v. Stevedoring Servs. of Am., 41 BRBS 107, 112 (2007) ("[W]e decline to overturn our longstanding precedent that, under normal circumstances, pre-judgment interest awards under the Act should be calculated on a simple basis."). Any claimants or employers who ignore a Board precedent and rely instead on the Director's contrary litigating position-assuming there is one-do so at their own peril. Furthermore, the Director's arguments during agency adjudication inform but do not constrain the BRB's decisions in any way. In Grant v. Portland Stevedoring Co., for example, the BRB decided to adopt the 28 U.S.C. § 1961 rate for calculating interest on past due disability payments, despite the Director's position before the Board that it should rely on the 26 U.S.C. § 6621 rate. 16 BRBS 267, 270-71 (1984).

In addition, the Director's maintenance of some litigating positions that are consistent with the Board's precedential orders and others that are at odds with those orders is inconsistent with the "fairness and deliberation that should underlie a pronouncement of [law]." Mead, 533 U.S. at 230; cf. Marmelejo-Campos, 558 F.3d at 920. Returning to the previous example, the Director continued to advocate before the BRB for the § 6621 rate even after the Board's decision in Grant. See Stone v. Newport News Shipbldg. & Dry Dock Co.,

20 BRBS 1, at *5 (1987); Littrell v. Oregon Shipbuilding. Co., 17 BRBS 84, at *2 (1985). At some point, however, the Director changed his stance to accord with the BRB's position. The agency's Longshore Procedure Manual now cites Grant for the proposition that interest on past due payments is to be paid at the ยง 1961 rate. See Div. of Longshore and Harbor Workers' Compensation, Dep't of Labor, Longshore (DLHWC) Procedure Manual ch. 8-201, available at http:// www.dol.gov/owcp/dlhwc/lspm/pmtoc.htm (hereinafter Long-shore Manual). Nonetheless, the Director has not promulgated notice-and-comment regulations that undergird his current position, although he ...


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