Petitioners Brief — Metropolitan Stevedore Co. v. Rambo

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No. 94-820

In the Supreme Court of the United States

OCTOBER TERM, 1994

METROPOLITAN STEVEDORE COMPANY, PETITIONER

JOHN RAMBO AND DIRECTOR, OFFICE OF

WORKERS’ COMPENSATION PROGRAMS,

UNITED STATES DEPARTMENT OF I-ABOR

ON WRIT OF CERTIORARI

TO THi UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

RIEF FOR THE DIRECTOR, OFFICE OF

WORKERS’ COMPENSATION PROGRAMS

DREW S. Days, ITT

Solicitor General

EDWIN S. KNEEDLER

Deputy Solicitor General

JEFFREY P. MINEAR

Assistant to the Solicitor

General

Department of Justice

Washington, D.C. 20530

(202) 514-2217

THOMAS S. WILLIAMSON, JR.

Solicitor of Labor

ALLEN H. FELDMAN

Associate Solicitor

NATHANIEL I. SPILLER

Counsel for Appellate Litigation

EDWARD D. SIEGER

Senior Appellate Attorney

Department of Labor

Washington, D.C. 20210

BEST AVAILABLE COPY

QUESTION PRESENTED

Whether the “change in conditions” that permits

modification of a disability award under Section 22

of the Longshore and Harbor Workers’ Compensation

Act, 33 U.S.C. 922, includes a change in an injured

employee’s wage-earning capacity that results from

factors other than a change in the employee’s physical

condition.

WI Da 5D IRENE NT Me

re nen onprnen:

TABLE OF CONTENTS

STEAL ee ee

I a winsibatoeniebiete

Statutory provisions involved _220.....0........eeeeeeeeeeceeceeeeeeeee

eo sedicebibaniubonneicins

Argument:

The “change in conditions” that will permit modifi-

cation of an award under Section 22 of the LHWCA

includes a change in an injured employee’s wage-

earning capacity that results from factors other

than a change in the employee’s physical condition..

A. The language and purposes of the LHWCA

require that the “conditions” permitting modifi-

cation include non-physical conditions that are

relevant to a claimant’s continuing entitlement

SEE aE ESA Ca Se nen

B. The Director’s construction is consistent with

earlier interpretations of Section 22 and is

I Ti i wcsadenecacsuneseateausiuceaneess

Ee diceeuiueaipnnsvnorasoaeioen

TABLE OF AUTHORITIES

Cases:

Alaska Packers Ass’n V. Pillsbury, 301 U.S. 174

CTEM IS EEO ee

Allen Vv. Metropolitan Stevedore, 8 Ben. Rev. Bd.

EE ee

American Mut. Ins. Co. v. Jones, 426 F.2d 12638

i si shseesiblbounaen

Atlantic Coast Shipping Co. Vv. Golubiewski, 9 F.

BS NE UY MS ROD acne esseccenncesecacncccecoaneencos

(III)

aI Oo nN NY eK

Cases—Continued: Page

Avondale Shipyards, Inc. Vv. Guidry, 967 F.2d 1039

IED NENT OO OE ee IS 15, 23

Banks Vv. Chicago Grain Trimmers Ass’n, 390 U.S.

I I hes ck a eee ie tae 10, 26

Bath Iron Works Corp. v. Director, OWCP, 113

Bi a I I ole day canon csvatecnaascctebeiebat Manaicccas 13

Bay Ridge Operating Co. v. Lowe, 14 F. Supp. 280

SA a CI Sic oak i ahdnisssr suena tance 24

Bethlehem Shipbuilding Corp. v. Cardillo, 23 F.

Supp. 400 (D. Mass. 1938), aff’d, 102 F.2d 299

(1st Cir.), cert. denied, 307 U.S. 645 (1939)... 24

Boudreaux Vv. American Workover, Inc., 680 F.2d

1034 (5th Cir. 1982), cert. denied, 459 U.S. 1170

RN RIO Pel vn ba PPA at EP TEES Sn en 25

Bowen V. Yuckert, 482 U.S. 187 (1987) .....000.......... 14

Brown V. Gardner, 115 S. Ct. 552 (1994) 2.0.0.0... 28

Burley Welding Works, Inc. v. Lawson, 141 F.2d

ef: RR ree ee 22

Chevron U.S.A. Inc. V. Natural Resources Defense

Council, Inc., 467 U.S. 8387 (1984) 22020... 25, 26, 28

Dingess V. Director, OWCP, 12 Black Lung Rep.

See BE CI he 12

Director, OWCP v. Detroit Harbor Terminals,

Inc., 850 F.2d 283 (6th Cir. 1988) .......0.000000002. 25

Director, OWCP v. Drummond Coal Co., 831 F.2d

I a eesactescnccuisieas 23

Director, OWCP v. Edward Minte Co., 803 F.2d

731 (D.C. Cir. 1986) ...... Bac AM EER Dnt NAN PE ee 23

Director, OWCP v. General Dynamics Corp., 980

Pie i cee Ge See kk ee 25

Director, OWCP v. General Dynamics Corp., 982

Pie vee tee Cee, Pickin eee 25

Director, OWCP v. O’Keefe, 545 F.2d 337 (3d Cir.

|, IO Ce at pace RMP E PEE ee Rice MT eee 25

Eastern S.S. Lines, Inc. v. Monahan, 110 F.2d 840

AI ETI. ID 5s acc bdinitenatonebip saseisiciacaeh atamadoacnaamlabeaie 13, 14

Edwards v. Director, OWCP, 999 F.2d ~374 (9th

Cir. 1993), cert. denied, 114 S. Ct. 1539 1994). 15

Estate of Coweri Vv. Nicklos Drilling Co., 112 S. Ct.

ND ite dnc sct ao cccennidedanmnnanivactbietin 9, 26

Cases—Continued: Page

Fleetwood v. Newport News Shipbuilding & Dry

Dock Co.:

16 Ben. Rev. Bd. Serv. (MB) 282 (1984),

aff’d, 776 F.2d 1225 (4th Cir. 1985) ............. 5, 27

776 F.2d 1225 (4th Cir. 1985) .....15, 16, 20, 21, 22, 29

Force v. Director, OWCP, 938 F.2d 981 (9th Cir.

|) ane ene ET amr SR Ty unre > Ay hanes 25

Franklin County Mining Co. v. Industrial Comm’n,

Re ae i 24

Gardner Vv. Director, OWCP, 640 F.2d 1385 (1st

| I talstesccesctncacntceitialeee 14

General Dynamics Corp. Vv. Director, OWCP, 673

ip § 2: 2: =| Ene we iin ne eee 22

Heckler v. Campbell, 461 U.S. 458 (1983) .....0........ 14

Hole v. Miami Shipyards Corp., 640 F.2d 769 (5th

ir | RRR ete ny ee Sees hes eure apres 15, 23

Independence Indem. Co. Vv. White, 27 S.W.2d 529

(Tex. Comm’n App. 1930) .............. hit leaaanai ae aaahs 24

Indianapolis Pump & Tire Co. Vv. Surface, 155 N.E.

Te Ct Fa FI hiescassecrcschnceneescnsesaesnseensrnctnders 24

Intercounty Constr. Corp. Vv. Walter, 422 U.S. 1

CE is ohne ve een naeiaidenie aaa meee 10, 26

John W. McGrath Corp. Vv. Hughes, 289 F.2d 403

COE Be DOES sicsseecthcxkc donee. 13

Jordan V. Decorative Co., 130 N.E. 634 (N.Y.

i «ica ie a ee eae 21

LaFaille v. Benefits Review Bd., 884 F.2d 54 (2d

ON sak cue secrete teen keer en ean eae: 15, 29

Louisiana Ins. Guar. Ass'n v. Abbott, 40 F.3d 122

CU Fee I siceisaxcccnicacanscmecacaneotmectieinns 13, 14

Lucero V. Climax Molybdenum Co., 732 P.2d 642

II UE seca tacctecdtcles teeseeceubisansei te nsamminismoniaasiinaaadsins 23

Martin v. OSHRC, 499 U.S. 144 (1991) —.....00000022.... 26

McCord v. Cephas, 532 F.2d 18377 (D.C. Cir.

I od hihi als annie teat: 7

McCormick S.S. Co. v. United States Employees’

Compensation Comm’n, 64 F.2d 84 (9th Cir.

6, 20, 21, 26

Cases—Continued: Page

McDougall v. E.P. Paup Co., 21 Ben. Rev. Bd.

Serv. (MB) 204 (1988), aff’d, 999 F.2d 1341

CE a TIED iia ciedeccnasecincicstadaascelinilhes ie ad 12

Mullins Coal Co. v. Director, OWCP, 484 U.S. 135

ff LE ee ee eee 26

New Orleans (Gulfwide) Stevedores v. Turner, 661

if ef) RC rs 13

Newport News Shipbuilding & Dry Dock Co. v.

Howard, 904 F.2d 206 (4th Cir. 1990)... 25

O’Keeffe v. Aerojet-General Shipyards, Inc., 404

Shia SI CIO AED nhcascccnindaeaeriacaatatarecasietiteietences 10

Owens V. Traynor, 274 F. Supp. 770 (D. Md.

1967), aff’d, 396 F.2d 783 (4th Cir.), cert.

Game, BOG TIT. De CEE ccccccceeceevercsecesvececcorsnens 14

Pauley Vv. BethEnergy Mines, Inc., 501 U.S. 680

ERED cinsicictensaiaantaaaeusdaetaben elaine ns 26

Peabody Coal Co. Vv. Gossett, 819 S.W.2d 33 (Ky.

WED . ~:scvscincinerssdnbiseandiaamenle lace an ee, 28

Pillsbury v. Alaska Packers Ass’n, 85 F.2d 758

(9th Cir. 1936), rev’d, 301 U.S. 174 (1937)........ 6, 21,

22, 26

Potomac Elec. Power Co. v. Director, OWCP, 449

if A Be so eee aged 26

Randall v. Comfort Control, Inc., 725 F.2d 791

ER, SUID TRIN sececectinccenan aaa 15, 29

Ray’s Case, 119 A. 191 (Me. 1922) ..........00000.... 21

Sea-Land Serv., Inc. Vv. Rock, 953 F.2d 56 (3d Cir.

|_| MNT UROL Reese PaO HAs SN Ramee 25

See v. Washington Metro. Area Transit Auth., 36

Pk Ce Co EE cecktacoceetneeetidceeentens io

Skelly Oil Co. v. Thomas, 295 P. 213 (Okla. 1931).. 24

South Vv. Indemnity Ins. Co. of N. Am., 146 S.E. 45

CG, GR FR, FI ececinadenetenneteeesaceeteutiiabinteres 24

Swift & Co. v. Neal, 18 N.E.2d 491 (Ind. App.

I cicciibéonesids-tccisirinedcisoiateistiguapoitims Malach ei Seance 24

Vasquez V. Continental Maritime, 23 Ben. Rev. Bd.

a | OG. eet ene Se 15

Verderane V. Jacksonville Shipyards, Inc., T72 F.2d

.,. Bes Ee RR i 23

Cases—Continued: Page

Welch v. Leavey, 397 F.2d 189 (5th Cir. 1968),

cert. denied, 393 U.S. 1049 (1969) —.00000 0. 14

Whitney Vv. Agsco Dakota, 453 N.W.2d 847 (S.D.

a ain 23

Statutes, regulations and rule:

Black Lung Benefits Act, 30 U.S.C. 901 et seq......... 11, 23

TER AN ee PO TET aC 11

sec teesdpeaaaiveabia 12

Longshore and Harbor Workers’ Compensation

Act, 38 U.S.C. 901 e€ seq. ..................... PA ee 3

§ 2(10), 33 U.S.C. 902(10) a... 2, 3, 13, 21, 28

eb me tk Fk |b! | ee 11

§ 8(c) (1)-(20), 33 U.S.C. 908 (c) (1)- (20) ...... 13

§ 8(c) (21), 33 U.S.C. 908 (c) (21) -2.00 0. 4,13

§ 8(c) (22), 33 U.S.C. 908 (c) (22) _200. 13

§ 8(c) (23), 33 U.S.C. 908 (c) (28)... 13

GS LS | |: esac e 4,19

§ 8(g), 33 U.S.C. 908(g) _....... Gee tear ore S., 18

§ 8(h), 88 U.S.C. 908 (hh) ......220000 bear 2

a I acs cececcnmsmenennsncavetnciens 16

RO 8 fk een 11

§ 9(b)-(d), 33 U.S.C. 909 (b)-(d) 2.0002. 11

be Bik |”, enna 11

BR Be a . | | 3

i NOD niicecicsecrerenncnceenescnereses 3

Os re ID ooo icieinenerncensneeensecncance 3

§ 21(a)-(c), 33 U.S.C. 921 (a)-(¢) -..0 et. 3

§ & fit 8k eee WM eet passim

bf Bik Tok | i) ee 3, 25, 26

FR Gk Fk ne 18

§ 44(c) (2) (B), 33 U.S.C. 944 (c) (2) (B) ......... 4

§ 44 (i) (2), 83 U.S.C. 944 (i) (2) .......- ee. 4

Vil

Statutes, regulations and rule—Continued: Page

Longshore and Harbor Worker’s Compensation

Act Amendments of 1984, Pub. L. No. 98-426,

98 Stat. 1639:

Og ee is BRUTE oaiiscccs vec ncceserctcouscnsnseiens 17

cst acai as al nlen ninedoncnl 27

Social Security Act, 42 U.S.C. 301 et seq.:

I ai pccrstitecncnccscscadanaseiiasics 24

Se re ets ED CE CID acenccneseetenenstagenicsceenneicnies 14

42 U.S.C. 423(d) (2) (A) (1988 & Supp. V

ee, oa ts suttustigiminndecinuncs 14

re BS |: Se eae ee Se 28

42 U.S.C. 1382c (a) (4) (B)-(D)......0000000000 ee... 28

Social Security Disability Benefits Reform Act of

1984, Pub. L. No. 98-460, 98 Stat. 1794 _............... 28

RT | = Seen nine ae 28

BER 8 ey 8g) eran 28

Ariz. Rev. Stat. Ann. § 23-1044.F (Supp. 1994) .... 12

Ga. Code Ann. § 34-9-104(a) (Michie 1992) _........... 12

Ky. Rev. Stat. Ann. § 342.125 (Michie/Bobbs-

PF, RAI EE CEERI ee 12

Va. Code Ann. (Michie 1991 & Supp. 1994):

I ir ee a elle aerccienin 12

TE oo veinencnesnsccscnencane ERIN OAR MOLT Te 12

20 C.F.R.:

a a ca csdedudbienkaegnbvabivmesens 3, 25

nhs acannioeinanios 3

cual badecnssnbnasanunbousunsisn 4

I I nicest nicccsounenonancotinneeess 17

a editnaiessabalbcionlonl 3

SS IRE Rone mee eee oe ne nC len One 3

EF ee 3

I aici aaa paras 3

ye ae 6

I, o ialareeppeneacaminiiens 18

A I css au suaknsnsasnenamniecniuneapnaneon 11

—

Be re Na csisicsniisk ces ncccsnopereeecnsenonatena

Miscellaneous: Page

Annotation, Workmen’s Compensation: Statutory

Phrase “Incapacity for Work” or the Like, As

Including Inability To Obtain Work Following

an Injury, 88 A.L.R. 115 (1924) ........................... 21

pb es SF}, eee 17

130 Cong. Rec. (1984) :

8 EEA oR OR 1 17, 27

ERE I eee ae RE 27

ROCESS eS 27

Employment Standards Admin., U.S. Dep’t of

Labor, Longshore and Harbor Workers’ Com-

pensation Act: Annual Report on Administra-

tion of the Act During Fiscal Year 1992 (1993).. 18

Employment Standards Admin., U.S. Dep’t of

Labor, OWCP Annual Report to Congress FY

I oie andesansaacinisdenswicees 18, 19

i ee Te TOD seiiscteensnshesatscdices secenesdcesenseeccs 11,12

H.R. Conf. Rep. No. 1027, 98th Cong., 2d Sess.

Sah PRE RT Mae ty OE ON SAE ORC Sea 27

H.R. Rep. No. 570, 98th Cong., Ist Sess. (1983) .... 17

A. Larson, The Law of Workmen’s Compeisation

(1994):

SRE EIR ae te nee ce es CTT OPT RC 12, 13

AREERINS eas einen ae ame 5 UCR st Pas oe OR 12, 15

Oversight Hearings on the Longshoremen’s and

Harbor Workers’ Compensation Act (Part 2):

Hearings Before the Subcomm. on Compensa-

tion, Health and Safety of the House Comm. on

Educ. and Labor, 95th Cong., 2d Sess. (1978)... 16

Seventeenth Annual Report of the United States

Employees’ Compensation Comm’n (1933)........ 27

The American Heritage Dictionary of the English

Be a, a a 10

Twenty-First Annual Report of the United States

Employees’ Compensation Comm’n (1937)........ 26-27

Iu the Supreme Court of the United States

OCTOBER TERM, 1994

No. 94-820

METROPOLITAN STEVEDORE COMPANY, PETITIONER

Vv.

JOHN RAMBO AND DIRECTOR, OFFICE OF

WORKERS’ COMPENSATION PROGRAMS,

UNITED STATES DEPARTMENT OF LABOR

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE DIRECTOR, OFFICE OF

WORKERS’ COMPENSATION PROGRAMS

OPINIONS BELOW

The opinion of the court of appeals (Pet. App.

2a-5a) is reported at 28 F.3d 86. The decisions and

orders of the Benefits Review Board (Pet. App. 6a-

10a) and administrative law judges (Pet. App. 1la-

17a; 94-1045 Pet. App. 16a-20a') are unreported.

1 The Solicitor General filed a petition for a writ of cer-

tiorari on behalf of the Director, Office of Workers’ Compen-

sation Programs, seeking review of the same court of appeals’

decision at issue here. Director, Office of Workers’ Compensa-

tion Programs Vv. John Rambo and Metropolitan Stevedore

Co., No. 94-1045 (filed Dec. 12, 1994). The Court has not

acted on that petition.

(1)

JURISDICTION

The judgment of the court of appeals was entered

on June 24, 1994. The petition for rehearing filed by

Metropolitan Stevedore Company was denied on

August 10, 1994. Pet. App. la. The petition for

rehearing filed by the Director, Office of Workers’

Compensation Programs, was denied on September 14,

1994. 94-1045 Pet. App. 21la-22a. Metropolitan’s

petition for a writ of certiorari was filed on Novem-

ber 7, 1994, and was granted on January 13, 1995.

115 S. Ct. 787. The jurisdiction of this Court rests

upon 28 U.S.C. 1254(1).

STATUTORY PROVISIONS INVOLVED

Section 2(10) of the Longshore and Harbor Work-

ers’ Compensation Act (LHWCA), 33 U.S.C. 902(10),

provides in relevant part that “ ‘[d]isability’ means

incapacity because of injury to earn the wages which

the employee was receiving at the time of injury in

the same or any other employment.”

Section 22 of the LHWCA, 33 U.S.C. 922, provides

in relevant part:

Upon his own initiative, or upon the application

of any party in interest (including an employer

or carrier which has been granted relief under

section 908(f) of this title), on the ground of a

change in conditions or because of a mistake in

a determination of fact by the deputy commis-

sioner, the deputy commissioner may, at any time

prior to one year after the date of the last pay-

ment of compensation, * * * review a compensa-

tion case (including a case under which pay-

ments are made pursuant to section 944(i) of

this title) in accordance with the procedure pre-

scribed in respect of claims in section 919 of this

title, and in accordance with such section issue

a new compensation order which may terminate,

continue, reinstate, increase, or decrease such

compensation.

STATEMENT

1. In 1980, respondent John Rambo injured his

back and leg while working as a longshore “front-

man” for petitioner Metropolitan Stevedore Company.

See Pet. App. 3a, 7a, 12a. He filed a disability claim

with the Department of Labor under the Longshore

and Harbor Workers’ Compensation Act (LHWCA),

33 U.S.C. 901 et seg.2 The LHWCA defines “dis-

ability” as “incapacity because of injury to earn the

wages which the employee was receiving at the time

of injury in the same or any other employment.” 33

U.S.C. 902(10).

In 1983, an administrative law judge (ALJ) ac-

cepted a stipulation between Rambo and Metropolitan

that Rambo had sustained a 224%% permanent par-

tial disability that had produced a weeklv wage loss

of $120.24 per week, or 222% of his average weekly

wages of $534.88. 94-1045 Pet. App. 17a-18a. Under

2 Administration of the LHWCA is entrusted to the Secre-

tary of Labor, see 33 U.S.C. 939(a), and that task has been

assigned by regulation to the Office of Workers’ Compensation

Programs (OWCP), see 20 C.F.R. 701.202(a). The OWCP

investigates claims, and in uncontested cases a district director

(formerly a deputy commissioner, see 20 C.F.R. 702.105) in

OWCP may issue awards. 33 U.S.C. 919(c) and (e); 20

C.F.R. 702.315(a). In contested cases, parties may obtain

hearings before an administrative law judge (ALJ), who

then issues a decision awarding or denying benefits. 33 U.S.C.

919(d); 20 C.F.R. 702.316, 702.331 et seq. An ALJ decision

is reviewable by the Department’s Benefits Review Board,

and Board decisions are reviewable in the courts of appeals.

33 U.S.C. 921(a)-(c). Modification of compensation awards

is governed by 33 U.S.C. 922 and 20 C.F.R. 702.373.

Section 8(c)(21) of the LHWCA, Rambo therefore

received an award of $80.16 per week, which repre-

sented 6624% of “the difference between the average

weekly wages of [Rambo] and [Rambo’s] wage-

earning capacity thereafter in the same employment

or otherwise.” 33 U.S.C. 908(c) (21). See 94-1045

Pet. App. 17a-18a. Pursuant to Section 8(f) of the

LHWCA, 38 U.S.C. 908(f), the ALJ also limited

Metropolitan’s liability for permanent disability com-

pensation to 104 weeks, after which a Special Fund,

which the Director of the Office of Workers’ Compen-

sation Programs (OWCP) administers, became liable

for the $80.16 weekly payments. 94-1045 Pet. App.

19a-20a; see 33 U.S.C. 944(i) (2).°

2. After receiving the disability award, Rambo

attended crane school and obtained longshore work

as a crane operator. Pet. App. 3a, 14a. He worked

in that position for four to five years and performed

additional work as a heavy lift truck operator when

time was available. Jd. at 14a. Between 1985 and

3 Although the Special Fund assumed liability for Rambo’s

compensation after the first 104 weeks under the award,

Metropolitan retains a financial interest in the outcome of

this case. Under the LHWCA, an employer’s required con-

tribution to the Special Fund depends in part on the amount

of payments made by the Fund “during the preceding calendar

year which are attributable to the” employer. 33 U.S.C.

944(c) (2) (B). In recognition of their continuing financial

interest, employers “are given the authority to monitor their

claims in the special fund,” 20 C.F.R. 702.148(b), and are

among the “part[ies] in interest” who are permitted to seek

modification of an award. 33 U.S.C. 922; see 20 C.F.R.

702.148(b) (employer “can initiate [a] proceeding to modify

an award of compensation after the special fund has assumed

the liability to pay benefits”).

Ti aeeeeneieaaeeaeeaaenaeaemmamamaaal

1990, his average weekly earnings ranged from

$1,307.81 to $1,690.50, or more than three times his

pre-injury earnings. Jd. at 15a-16a; see also id. at

3a. His physical condition, however, remained essen-

tially unchanged. See id. at 3a, 15a. In 1989, Metro-

politan sought modification of the award pursuant to

Section 22 of the LHWCA, 33 U.S.C. 922, argu-

ing that Rambo’s increased earnings represented a

“change in conditions” such that he is no longer “dis-

ab[led]” under the Act. Pet. App. 8a, 14a.

In 1991, a second ALJ agreed with Metropolitan

and terminated Rambo’s disability payments. Pet.

App. lla-17a. Relying on Fleetwood v. Newport

News Shipbuilding & Dry Dock Co., 16 Ben. Rev. Bd.

Serv. (MB) 282 (1984), aff’d, 776 F.2d 1225 (4th

Cir. 1985), the ALJ reasoned that modification may

be based on a change in a claimant’s economic condi-

tion following an award. Pet. App. 18a-l4a. The

ALJ recognized that higher post-injury earnings are

not necessarily determinative of an employee’s wage-

earning capacity and that it therefore was necessary

“to consider wage-earning capacity in an open labor

market under normal employment conditions.” Jd. at

14a. After undertaking that inquiry, the ALJ found

that Rambo in fact no longer had a loss of wage-

earning capacity. Jd. at 14a-16a. In particular, the

ALJ noted that Rambo’s increased wages were not

attributable solely to the effects of inflation and sal-

ary increases; that Rambo was at no greater risk of

losing his present job or seeking employment than

anyone else; and that his present employment was not

the result of a “beneficent” employer. Ibid.‘

4The ALJ also rejected Rambo’s arguments that only the

ALJ who issued the 1983 award could modify it and that the

The Benefits Review Board affirmed. Pet. App.

6a-10a. Relying on Fleetwood, the Board rejected

Rambo’s argument that modification could not be

granted absent a showing of a change in the claim-

ant’s physical condition. Pet. App. 9a. The Board

also noted that Rambo “has raised no error committed

by the administrative law judge in weighing the evi-

dence and granting modification based on [Rambo’s]

increase in wage-earning capacity after the original

award of benefits.” Jd. at 10a.

3. The court of appeals reversed. Pet. App. 2a-5a.

The court construed its own precedents, “supported

by the clear weight of authority” (id. at 5a), to

“make clear that only a change in a claimant’s physi-

cal condition can justify an award modification.” Jd.

at 3a; see id. at 4a (citing Pillsbury v. Alaska Pack-

ers Ass’n, 85 F.2d 758, 760 (9th Cir. 1936), rev’d on

other grounds, 301 U.S. 174 (1937); and McCormick

S.S. Co. v. United States Employees’ Compensation

Comm’n, 64 F.2d 84 (9th Cir. 1933)). Thus, in the

court’s view, “fa] change in a claimant’s wages,

training, skills, or educational background is insuffi-

cient.” Pet. App. 3a-4a.°

1983 award, which was based on stipulated facts, could not

be modified because it was a “settlement.” Pet. App. 12a-13a;

see 33 U.S.C. 922 (settlements not subject to modification) ;

20 C.F.R. 702.373(a) (same). The Benefits Review Board

agreed that the 1983 award was not a settlement, Pet. App.

9a, and did not discuss Rambo’s arguments concerning the

particular ALJ’s authority to modify the award. The court

of appeals did not reach either of those questions, and they

are not at issue here.

5 The court of appeals did not address Rambo’s contention

(see Br. in Opp. i) that Metropolitan’s application for modifi-

SUMMARY OF ARGUMENT

A. Section 22 of the Longshore and Harbor Work-

ers’ Compensation Act (LHWCA) allows modifica-

tion of a disability award on account of a “change

in conditions.” 33 U.S.C. 922. Section 22’s plain

language demonstrates that the grounds for modifi-

cation are not limited to a change in only one condi-

tion, such as a claimant’s state of health, but also

include other conditions relevant to a claimant’s con-

tinuing entitlement to compensation. That construc-

tion is consistent with this Court’s decisions, which

have interpreted Section 22 broadly and have refused

to read unstated limitations into the words that Con-

gress chose.

The structure and purposes of the LHWCA also

demonstrate that Section 22 allows modification based

on changes in non-physical conditions bearing on en-

titlement to the award. The LHWCA provides death

benefit awards to a deceased employee’s survivors,

based on various considerations. Those awards, how-

ever, are routinely subject to modification based on

changes in the relevant conditions of entitlement,

cation should be denied because its attorney represented to

Rambo, who was represented by his own counsel, that the

award would be paid for life. Whether such representations

amounted to an express waiver of Metropolitan’s right to seek

modification, and whether modification of the award (now

paid by the Special Fund, which was not a party to any such

representations) should be denied on the ground that it would

not “render justice under the [A]ct,” see McCord v. Cephas,

532 F.2d 1377, 1380-1381 (D.C. Cir. 1976), are fact-bound

questions that this Court should not address in the first in-

stance. If this Court reverses the judgment in this case, the

court of appeals may consider those issues on remand.

such as the remarriage of a surviving spouse, an

end to dependency, or the receipt of concurrent ben-

efits under another statute. The same approach

should be followed in the case of a disability award

that is based on a reduction in the employee’s wage-

earning capacity. That approach, which allows mod-

ification of awards to reflect changes in the em-

ployee’s wage-earning capabilities, ensures that dis-

ability compensation will be fairly distributed based

on a current measure of actual entitlement.

The construction that we urge is also consistent

with the LHWCA’s reporting provisions, which allow

employers to require disabled employees to report

their earnings. The only apparent purpose of that

reporting requirement is to apprise employers of a

possible basis for seeking modification of an award

based on a change in the claimant’s wage-earning

capacity. More generally, the construction that we

urge advances the LHWCA’s goal of rehabilitating

disabled workers by creating a positive financial in-

centive for employers to participate in rehabilitation

programs. A contrary construction would not only

impede the smooth operation of the statutory scheme,

but could also be costly to the Special Fund, which the

Director administers.

B. Contrary to the court of appeals’ view, the

phrase “change in conditions” has not been uniformly

construed to mean only a change in a worker’s physi-

cal condition. Even if it had been so construed, how-

ever, the Director’s interpretation should prevail. Her

interpretation not only finds compelling support in

the statutory language, structure and purposes, but it

is also a reasonable accommodation of the LHWCA’s

policies that is entitled to judicial deference. The

Director’s construction is consistent with other inter-

pretive aids as well, such as the LHWCA’s legislative

history, and it promotes sound administration of the

Act. Under the Director’s interpretation, changes in

general economic conditions are not by themselves

changes in conditions for LHWCA eligibility, and a

mere change in a claimant’s wages does not automat-

ically establish a change in a claimant’s wage-earning

capacity.

ARGUMENT

THE “CHANGE IN CONDITIONS” THAT WILL PER-

MIT MODIFICATION OF AN AWARD UNDER SEC-

TION 22 OF THE LHV’CA INCLUDES A CHANGE

IN AN INJURED EMPLOYEE’S WAGE-EARNING

CAPACITY THAT RESULTS FROM FACTORS OTHER

THAN A CHANGE IN THE EMPLOYEE’S PHYSICAL

CONDITION

A. The Language And Purposes Of The LHWCA Require

That The “Conditions” Permitting Modification Include

Non-Physical Conditions That Are Relevant To A

Claimant’s Continuing Entitlement To Compensation

1. Section 22 of the LHWCA expressly allows

modification of compensation because of a “change

in conditions.” 383 U.S.C. 922. Under the “normal’’

or “natural reading” of the Act, Estate of Cowart v.

Nicklos Drilling Co., 112 S. Ct. 2589, 2595 (1992),

the phrase “change in conditions” includes all condi-

tions relevant to a claimant’s continuing entitlement

to compensation. Congress presumably used the

unadorned plural term “conditions” intentionally.

The plural usage indicates that modification is not

limited to a change “» only one condition, such as a

claimant’s physical : ate of health, but also includes

the full range of relevant circumstances. See, ¢.g.,

The American Heritage Dictionary of the English

Language 393 (8d ed. 1992) (“‘condition” may mean,

inter alia, a “state of health,” while “conditions”

means “‘[e]xisting circumstances’’).

2. This Court’s decisions construing Section 22’s

language show that “change in conditions” should not

be confined to a change in physical condition. This

Court has construed Section 22 broadly and has ac-

cordingly refused to give the statutory language a

“narrowly technical and impractical construction” or

to read unstated limitations into it. O’Keeffe v.

Aerojet-General Shipyards, Inc., 404 U.S. 254, 255

(1971) (per curiam). For example, the Court has

refused to construe that Section to create a limitations

period for acting on a timely filed claim. Intercounty

Constr. Corp. v. Walter, 422 U.S. 1 (1975). The

Court has likewise refused to limit the “mistake in a

determination of fact” ground for modification to mis-

takes that are demonstrated by new evidence rather

than by the agency adjudicator’s “further reflection

on the evidence initially submitted.” O’Keeffe, 404

U.S. at 256. It has also refused to limit that ground

for modification to “clerical errors and matters con-

cerning an employee’s disability, not to matters con-

cerning an employer’s liability.” Banks v. Chicago

Grain Trimmers Ass’n, 390 U.S. 459, 462 (1968).

The Court should similarly refuse to read unstated

limitations into the “change in conditions” ground

for modification. Indeed, it would be anomalous to

construe Section 22 simultaneously to allow the re-

opening of a final award for any reason to correct

perceived factual mistakes in matters that have al-

ready been litigated, but to deny corrective authority

when the litigated facts have changed and the condi-

tions that once justified payment of ongoing monetary

benefits can no longer sustain that award. Cf. Fed.

R. Civ. P. 60(b) (allowing a court to provide relief

from a judgment on a variety of grounds, including

mistake and changed circumstances ).

3. More generally, the structure and purposes of

the LHWCA’s benefits scheme demonstrate that the

changed conditions that may provide a basis for mod-

ification are not limited to changes in a claimant’s

physical condition. For example, it is well settled

that, in death benefit cases, eligibility depends on

whether a deceased employee’s survivor qualifies as

a dependent spouse, child, or other dependent rela-

tive. See 33 U.S.C. 909(b)-(d). Eligibility ends

when a spouse dies or remarries, a child’s age or

status as a student or disabled dependent changes, or

another relative is no longer dependent. 33 U.S.C.

902(14), 909(b) and (d). Section 22 unquestionably

requires modification of a survivor’s benefits award

whenever there is a change in the survivor’s eligibility

status—a change that (with the exception of disabled

dependent status) has no connection to the surviving:

claimant’s physical condition. See 43 Fed. Reg.

36,786 (1978) (comments to regulations under Black

Lung Benefits Act).°

Similarly, payment of disability and death benefits

depends in part on whether a claimant is receiving

® The Black Lung Benefits Act, 30 U.S.C. 901 et seq., incor-

porates a number of LHWCA provisions, including Section

22’s provision for modification based on a change in conditions

or a mistake in a determination of fact. See 30 U.S.C. 932 (a)

(incorporation provision); 20 C.F.R. 725.310(a) (modifica-

tion provision).

concurrent benefits under another applicable law “for

the same injury, disability, or death.” 33 U.S.C.

903(e); see also 30 U.S.C. 932(g¢) (Black Lung Ben-

efits Act). Accordingly, if a state decision establish-

ing or modifying a claimant’s entitlement to benefits

under state law is rendered following an award of

LHWCA benefits, it may be considered a change in

conditions that supports modification of the LHWCA

compensation order. McDougall v. E.P. Paup Co.,

21 Ben. Rev. Bd. Serv. (MB) 204, 208 (1988), aff’d

on other grounds, 999 F.2d 13841 (9th Cir. 1993);

see also Dingess v. Director, OWCP, 12 Black Lung

Rep. (MB) 1-141 (1989); 43 Fed. Reg. 36,786

(1978) (Black Lung Benefits Act).’

The same principles should apply in ‘“‘non-schedule”

disability cases, such as this one, in which a loss of

Wwage-earning capacity is an essential condition for

entitlement to compensation and the employee’s wage-

earning capacity is determined on the basis of fac-

tors in addition to the employee’s physical condition.*®

7 As a general matter, state workers’ compensation stat-

utes, like the LHWCA, base entitlement on wage-earning

capacity, not just physical condition. See 1C A. Larson, The

Law of Workmen’s Compensation § 57.11 (1994). Although

state laws vary, at least some of them allow modification based

on non-physical factors, including a change in earning capac-

ity. See 3 A. Larson, supra, § 81.31(e); Ariz. Rev. Stat. Ann.

§ 23-1044.F (Supp. 1994) (modification based on non-physical

factors, including a change in earning capacity); Ga. Code

Ann. § 34-9-104(a) (Michie 1992) (same); Ky. Rev. Stat.

Ann. § 342.125 (Michie/Bobbs-Merrill Supp. 1994) (same) ;

Va. Code Ann. §§ 65.2-101, 65.2-708 (Michie 1991 & Supp.

1994) (same).

8 A “schedule” case is one in which compensation is deter-

mined by reference to a schedule or list describing parts or

Because the LHWCA defines “[d]isability” as “inca-

pacity because of injury to earn the wages which the

employee was receiving at the time of injury,” 33

U.S.C. 902(10), courts have long recognized that

“t]he degree of disability in any case cannot be meas-

ured by physical condition alone, but there must be

taken into consideration the injured man’s age, his

industrial history, his mentality, his education, and

the availability of that type of work which he can

do.” Kastern S.S. Lines, Inc. v. Monahan, 110 F.2d

840, 842 (1st Cir. 1940) ; accord, e.g., Lowisiana Ins.

Guar. Ass’n v. Abbott, 40 F.3d 122, 126 (5th Cir.

1994) (White, J.); See v. Washington Metro. Area

Transit Auth., 36 F.3d 375, 381 (4th Cir. 1994);

New Orleans (Gulfwide) Stevedores v. Turner, 661

F.2d 1031, 1037-1038 (5th Cir. 1981); American Mut.

Ins. Co. v. Jones, 426 F.2d 1263, 1265 (D.C. Cir.

1970); John W. McGrath Corp. v. Hughes, 289 F.2d

403, 405 (2d Cir. 1961).

functions of the body and prescribing a fixed number of weeks

of compensation for their loss (or loss of use). See 33 U.S.C.

908 (c) (1)-(20), (22); Bath Iron Works Corp. v. Director,

OWCP, 113 S. Ct. 692, 695 (1993); 1C A. Larson, supra,

§ 57.14(c). An employee with a scheduled injury is conclu-

sively presumed to be disabled, even if the injury does not

actually affect his wage-earning capacity. Bath Iron Works,

113 S. Ct. at 695 n.4. In a “non-schedule” case, which involves

an injury that is not specified in the “schedule” or in a provi-

sion governing certain retiree claims, an employee receives

compensation for two-thirds of the difference between his

pre-injury average weekly wages and his post-injury wage-

earning capacity. See 33 U.S.C. 908(c) (21) (‘‘non-schedule”’

provision); 33 U.S.C. 908(c) (23) (retiree provision); Bath

Iron Works, 1138 S. Ct. at 695-696.

Thus, an LHWCA claimant who retains some phys-

ical ability to work may nevertheless be found to be

totally disabled if there is no work available that the

claimant can perform, e.g., Louisiana Ins., 40 F.3d

at 126-127; Eastern, 110 F.2d at 841-842, while one

who has a physical impairment from an injury may

not be disabled at all if available employment results

in no loss of wage-earning capacity. Owens v.

Traynor, 274 F. Supp. 770, 773-776 (D. Md. 1967),

aff'd, 396 F.2d 783 (4th Cir.), cert. denied, 393 U.S.

962 (1968) ; see also Gardner v. Director, OWCP, 640

F.2d 1385, 1890 (1st Cir. 1981); Welch v. Leavey,

397 F.2d 189, 191 (5th Cir. 1968), cert. denied, 393

U.S. 1049 (1969). Compare Bowen v. Yuckert, 482

U.S. 137, 140-142, 146-147 (1987) (discussing par-

allel concepts under Social Security disability pro-

grams); Heckler v. Campbell, 461 U.S. 458, 459-462

(1983) (same); see 42 U.S.C. 423(d)(1)(A) and

(d)(2)(A) (1988 & Supp. V 1993) (definition of

“disability” under Social Security Act providing for

consideration of claimant’s “‘age, education, and work

experience” and the existence of suitable work in the

national economy).

The principles expressed in prior LHWCA cases,

which manifestly apply in initial non-schedule benefit

determinations, should also apply upon a request to

modify the initial award. For example, if a disabled

employee’s initial award is based on a finding that

he has retained some wage-earning capabilities, but

his retained skills become obsolete on account of par-

ticular technological advances, the change in his wage-

earning capacity may justify a modification of

his disability award. Conversely, if the disabled

employee has enhanced his wage-earning capacity

arise rue

through the acquisition of new skills—the situation

presented in this case—the change may also justify

a modification. As the Fourth Circuit explained, all

changes in an employee’s “wage-earning capabilities

should be relevant when considering a modification of

an award.” Fleetwood v. Newport News Shipbuild-

ing & Dry Dock Co., 776 F.2d 1225, 1229 (1985) ;

aceord Avondale Shipyards, Inc. v. Guidry, 967 F.2d

1039, 1042 n.6 (5th Cir. 1992); 3 A. Larson, The

Law of Workmen’s Compensation § 81.31(e) (1994).

See also Hole v. Miami Shipyards Corp., 640 F.2d

769, 772-773 (5th Cir. 1981); Vasquez v. Continental

Maritime, 23 Ben. Rev. Bd. Serv. (MB) 428 (1990);

ef. Edwards v. Director, OWCP, 999 F.2d 1374 (9th

Cir. 1993) (claimant disabled despite temporary

work), cert. denied, 114 S. Ct. 1539 (1994).°

The Fourth Circuit’s result ensures that employees

with similarly impaired wage-earning capacities are

treated alike: Compensation is awarded for a non-

schedule physical impairment—at an initial] hearing

®In some circumstances, a request for modification may be

time-barred, notwithstanding a change in wage-earning ca-

pacity. For example, a claimant whose compensation is termi-

nated because of an increase in wage-earning capacity may be

prevented from reinstating the payment of compensation if

the claimant suffers a subsequent loss in wage-earning capac-

ity more than one year after the termination. See 33 U.S.C.

922 (allowing modification within one year of the last pay-

ment of compensation “or at any time prior to one year after

the rejection of a claim”). That one-year limitation also

applies, however, to the initial adjudication of claims, Fleet-

wood, 776 F.2d at 1232, and may be extended by “de minimis”

awards in certain cases. See LaFaille v. Benefits Review BPd.,

884 F.2d 54, 62 (2d Cir. 1989); Randall v. Comfort Control,

Inc., 725 F.2d 791, 800 (D.C. Cir. 1984); Hole, 640 F.2d at

772.

or on modification—only insofar as that impairment

causes a continuing loss of wage-earning capacity.

“Without such a modification procedure, workers who

had secured new skills and employment would be

receiving disability compensation when they were

not disabled and an [i]nequitable distribution of lim-

ited financial resources would result.” Fleetwood,

776 F.2d at 1229. See also id. at 1232; Oversight

Hearings on the Longshoremen’s and Harbor Work-

ers’ Compensation Act (Part 2): Hearings Before

the Subcomm. on Compensation, Health and Safety

of the House Comm. on Educ. and Labor, 95th Cong.,

2d Sess. 494 (1978) (statement of Donald Elisburg,

Assistant Secretary for Employment Standards, U.S.

Dep’t of Labor, that if a claimant arbitrarily refuses

rehabilitation services after a final award, the em-

ployer could seek modification on the ground of a

change in condition).

By contrast, the Ninth Circuit’s conclusion that

“only a change in a claimant’s physical condition can

justify an award modification” (Pet. App. 3a) ig-

nores the established framework for determining non-

schedule benefit payments under the LHWCA, which

calculates awards based on the claimant’s actual wage-

earning capabilities. Under the Ninth Circuit’s rule,

an employer would be obligated to pay for benefits

even when they are unnecessary to compensate in-

jured workers for any continuing loss of wage-earning

capacity.

4. Section 8(j) of the LHWCA, 33 U.S.C. 908(j).

also indicates that a non-physical change in wage-

earning capacity is a “change in conditions” that

permits modification. That Section allows employers

to require disabled employees “to report to the em-

ployer not less than semiannually any earnings from

employment or self-employment,” and it provides for

forfeiture of compensation by employees who fail

to report. That provision, which was part of the

Longshore and Harbor Workers’ Compensation Act

Amendments of 1984, Pub. L. No. 98-426, § 8(h),

98 Stat. 1646-1647, was enacted “in response to the

problem of a disabled employee receiving workers’

compensation benefits while he has actually returned

to gainful employment.” 129 Cong. Rec. 571 (1983)

(statement of Sen. Nickles); see also H.R. Rep. No.

570, 98th Cong., Ist Sess. 17-18 (1983) (reports ‘“‘in-

tended to be a device by which employers may main-

tain some control over claims in payment status’’).

It is unlikely that Congress would have imposed that

reporting requirement on all employees who earn

income if no possibility of modification existed in the

absence of a change in an employee’s physical condi-

tion. See 130 Cong. Rec. 8327 (1984) (statement of

Rep. Erlenborn) (“It is anticipated that employers

will utilize the procedures for modification of awards

set forth in section 22 for any subsequent adjustment

to benefits.’’) .”°

1” Similarly, the Director’s regulations provide that “[a]n

employer or insurance carrier may conduct any reasonable

investigation regarding cases placed into the special fund by

the emplover or insurance carrier. Such investigation may

include, but shall not be limited to, a semi-annual request for

earnings information[,] * * * periodic medical examinations,

vocational rehabilitation evaluations, and requests for any

additional information needed to effectively monitor such a

case.” 20 C.F.R. 702.148(c). The regulatory provision gov-

erning modification of awards establishes procedures to be

followed “[i]f the investigation, described in [20 C.F.R.]

702.148 (c), discloses a change in conditions and the employer

or insurance carrier intends to pursue modification of the

5. The interpretation of Section 22 that we urge

also advances the LHWCA’s goal of rehabilitating

disabled workers, see 33 U.S.C. 908(g) and 939(c),

by creating a positive incentive for employers to par-

ticipate in rehabilitation programs that provide dis-

abled employees with new vocational skills. The

LHWCA’s rehabilitation programs are an important

part of the overall statutory scheme. Under the inter-

pretation of the Act adopted by the Director and

applied by the Benefits Review Board, employers have

a strong incentive to promote vocational training for

disabled workers and thereby reduce their disability

benefits expenditures.”

The court of appeals’ decision in this case, by con-

trast, would reduce the employers’ financial motiva-

tion to participate in rehabilitation efforts. Under

the court of appeals’ rule, an employee who does not

receive rehabilitation until after the award issues

award of compensation.” 20 C.F.R. 702.373(d). The scope

of the permissible investigation, and the express recognition

that the investigation may reveal a “change in conditions”

warranting modification of an award, plainly reflect the

premise that the grounds for modification extend beyond

changes in the employee’s physical condition. The Director’s

interpretation is entitled to judicial deference. See pp. 25-30,

infra. %

11JTn fiscal year 1993, LHWCA programs successfully re-

habilitated 364 employees and provided assistance to 1,178

continuing participants. Employment Standards Admin.,\ U.S.

Dep’t of Labor, OWCP Annual Report to Congress FY 1993,

at 13, 24 (1994). A previous annual report noted that about

45% of rehabilitated employees were placed with their previ-

ous employers. Employment Standards Admin., U.S. Dep’t

of Labor, Longshore and Harbor Workers’ Compensation

Act: Annual Report on Administration of the Act During

Fiscal Year 1992, at 8-9 (1993).

issn

would be entitled to retain the full award without

regard to the effect of future rehabilitation on his

wage-earning capacity. Thus, the court of appeals’

rule would give employers a diminished incentive to

assist in rehabilitating injured workers, because re-

habilitation, unless completed prior to the award of

compensation, would not reduce the employers’

liability.

The court of appeals’ ruling could also impair the

smooth operation of the statutory scheme by creating

incentives for inappropriate delays. On the one“hand,

an employer would have an incentive to delay the

award proceedings until the injured employee’s re-

habilitation is complete and could be taken into ac-

count in determining the award. On the other hand,

the injured employee would have an incentive to

delay rehabilitation until after receipt of a compen-

sation award, when rehabilitation can no longer be

considered in adjusting the award. Those perverse

incentives—whether they result in postponement of

the compensation award or postponement of rehabili-

tation—are inimical to the Statutory objectives.

6. The court of appeals’ rule could also be costly

for the Special Fund, which the Director administers.

See OWCP Annual Report to Congress FY 1993, at

43 (Fund paid more than $90.86 million in 4,672

“second injury” or Section 8(f) cases and approxi-

mately $4.8 million in rehabilitation services in fiscal

year 1993). Neither the Fund, nor an employer,

should be required to pay for compensation based on

a disability that has diminished or ceased to exist, as

reflected in a permanent increase in wage-earning

capacity, even if the claimant’s physical condition has

not improved.

B. The Director’s Construction Is Consistent With Earlier

Interpretations Of Section 22 And Is Entitled To

Deference

1. In rejecting the Director’s construction of Sec-

tion 22, the Ninth Circuit stated that the phrase

“change in conditions” has been uniformly construed

“to refer exclusively to a change in [the] physical

condition of the employee receiving compensation.”

Pet. App. 5a (emphasis added by the Ninth Circuit,

quoting Fleetwood, 776 F.2d at 1235 (Warriner, J.,

dissenting) ). That statement is inaccurate. As the

Fourth Circuit recognized, no reported court case (ex-

cluding the subsequent decision in this case) “holds

that modification of a compensation award cannot be

granted when an employee experiences a permanent

increase in wage-earning capacity.” Fleetwood, 776

F.2d at 1229.

None of the cases cited by the Ninth Circuit as

establishing that principle so hold, although some in-

clude dicta to that effect. For example, the Ninth

Circuit relied on its prior ruling in McCormick S.S.

Co. v. United States Employees’ Compensation

Comm’n, 64 F.2d 84 (1933), which was the first

officially reported decision to construe Section 22. In

that case, an employee sought to obtain increased

compensation through modification because “depressed

economic conditions” had resulted in decreased steve-

doring work. 7d. at 85. The Ninth Circuit stated

that “we do not think [Section 22] applies to a change

in earnings due to economic conditions.” Jbid. That

statement falls far short of a holding that a “change

in conditions” excludes all increases in a claimant’s

wage-earning capacity unless they are accompanied

by a change in physical condition.

As the Fourth Circuit recognized, the McCormick

decision actually Supports the Director’s position.

McCormick recognized that “[e]Jompensation is

awarded only for loss of earning power,” 64 F.2d at

85, and it denied modification because the claimant’s

decrease in wages resulted from lack of work, not

from a decrease in his wage-earning capacity, id. at

86. See Fleetwood, 776 F.2d at 1231. That holding

is consistent with the Director’s view that an inability

to earn wages because of general economic conditions

is not an inability “because of injury.” See 33 U.S.C.

902(10) (defining “[d]isability”). At bottom, Mc-

Cormick simply held that general economic conditions

are not among the “conditions” that are taken into

account in determining eligibility for an award.”

The Ninth Circuit was also mistaken in relying on

its previous decision in Pillsbury v. Alaska Packers

Ass’n, 85 F.2d 758 (1936), rev’d on other grounds,

301 U.S. 174 (1937). The court of appeals observed

in that case that whether a claimant was an employee

at the time of injury was “obviously” not susceptible

to a “change in conditions.” 85 F.2d at 759-760.

The Director has no quarrel with that conclusion.

See also Fleetwood, 776 F.2d at 1232 n.6. The

2 State courts have long recognized a distinction between

a compensable inability to obtain work that results from

limited job opportunities available to persons who are physi-

cally disabled and a noncompensable inability that results

from general economic conditions. See, e.g., Jordan Vv. Decora-

tive Co., 130 N.E. 634, 6385 (N.Y. 1921) (Cardozo, J.) ; Ravy’s

Case, 119 A. 191, 192 (Me. 1922) ; Annotation, Workmen’s

Compensation: Statutory Phrase “Incapacity for Work” or

the Like, As Including Inability To Obtain Work Following

an Injury, 33 A.L.R. 115 (1924).

Pillsbury decision went on to state, however, that

“change in conditions’ refers to a change in the

physical condition of the employee.” Jd. at 760. That

observation was mere dictum that did not purport to

decide whether an increase in wage-earning capacity

could be a change in conditions.”

The Ninth Circuit’s reliance on Burley Welding

Works, Inc. v. Lawson, 141 F.2d 964 (5th Cir. 1944),

was also misplaced. That decision held that a wage

increase is not a change in conditions if it does not

fairly and reasonably reflect the employee’s wage-

earning capacity. Id. at 966. Burley’s holding is cor-

rect and is consistent with the Director’s view. See

ibid. (quoting deputy commissioner’s decision) ; Fleet-

wood, 776 F.2d at 1231. Burley’s summary of prior

law, however, was not accurate. It stated that “the

term ‘change in conditions’ * * * means a change in

the employee’s physical condition, and not other con-

ditions.” 141 F.2d at 966 (emphasis added). The

only cases that Burley cited for that proposition were

McCormick and Pillsbury, which—as we have ex-

plained—contain no such holding. See Fleetwood,

776 F.2d at 1231-1282. The Ninth Circuit’s reliance

on General Dynamics Corp. v. Director, OWCP, 673

F.2d 23 (1st Cir. 1982), suffers from the same flaw.

General Dynamics repeated the Burley dicta, 673

F.2d at 25 & n.6, but did not consider whether a

13 Moreover, Pillsbury has no precedential value, because

this Court reversed the Ninth Circuit’s decision on the ground

that “the circuit court of appeals was without jurisdiction to

entertain the attempted appeal.” Alaska Packers Ass’n V.

Pillsbury, 301 U.S. 174, 177 (1987).

“change in conditions” could include a change in

wage-earning capacity.™

Other cases, not cited in the Ninth Circuit’s opin-

ion, contain similar Statements.” Those cases, like the

cases the Ninth Circuit cited, simply reflect a repeti-

tion of dicta rather than careful analysis. Their ac-

tual holdings are by and large consistent with the

position the Director advocates here. For example, in

Atlantic Coast Shipping Co. v. Golubiewski, 9 F. Supp.

315 (D. Md. 1934), a district court held that im-

prisonment is not a “change in conditions” under

Section 22, but stated in dictum that the phrase

“would seem obviously to refer to a change in the

physical condition of the employ[ee] caused by the

accident.” Id. at 317. The court reasonably concluded

that an inability to work caused by imprisonment is

not a condition that bears on the Statutory definition

of “disability” under the LHWCA. 7d. at 317-318;

See also Allen vy. Metropolitan Stevedore, 8 Ben. Rev.

—__—_——

* It is questionable whether the Fifth Circuit itself would

construe Burley to require a change in physical condition.

That court has recently expressed approval of Fleetwood. See

Avondale Shipyards, 967 F.2d at 1042 n.6; ef. Hole, 640 F.2d

at 772-7738.

1 See, e.., Director, OWCP vy. Drummond Coal Co., 831

F.2d 240, 244 n9 (11th Cir. 1987) (Black Lung Benefits

Act); Director, OWCP Vv. Edward Minte Co., 803 F.2d 731,

735 (D.C. Cir. 1986); Verderane v. Jacksonville Shipyards,

pre-Fleetwood LHWCA decisions as “holding” that “change

in conditions” means a change in physical condition); Lucero

V. Climax Molybdenum Co., 782 P.2d 642, 647 (Colo. 1987)

(same).

Bd. Serv. (MB) 366, 368 (1978).*° The court’s

dictum regarding the employee’s physical condition,

however, was entirely unnecessary to its decision.”

18 As the district court in Golubiewski pointed out, the

LHWCA contains no statutory exclusion from eligibility for

benefits on the part of a person who is imprisoned. Compare

42 U.S.C. 402(x) (limiting the payment of Social Security

disability insurance benefits to persons imprisoned on the

basis of a felony conviction).

17 Other cases contain similar dictum. See Bay Ridge Op-

erating Co. Vv. Lowe, 14 F. Supp. 280, 281 (S.D.N.Y. 1936)

(commitment to a mental institution); Bethlehem Shipbuild-

ing Corp. V. Cardillo, 23 F. Supp. 400, 403 (D. Mass. 1938)

(imprisonment), aff’d, 102 F.2d 299 (1st Cir.), cert. denied,

307 U.S. 645 (1939). The district courts in Bay Ridge, 14

F. Supp. at 281, and Golubiewski, 9 F. Supp. at 317, relied

in part on state workers’ compensation cases in concluding

that “change in conditions” refers to a change in an injured

employee’s physical condition. See also Bethlehem Shipbuild-

ing, 23 F. Supp. at 403 (relying on McCormick, Bay Ridge,

and Golubiewski). The state cases they cite, however, con-

strued statutes materially different from Section 22 of the

LHWCA and are therefore not persuasive authority. See

Independence Indem. Co. Vv. White, 27 S.W.2d 529, 531 (Tex.

Comm’n App. 1930) (state laws allowing review and modifica-

tion of awards are designed to allow an increase, decrease,

or termination of awards because of a change in physical

condition); Skelly Oil Co. v. Thomas, 295 P. 213, 214 (Okla.

1931) (construing the term “change of condition”): South

v. Indemnity Ins. Co. of N. Am., 146 S.E. 45, 46 (Ga. Ct. App.

1928) (same); Indiananolis Pump & Tire Co. v. Surface, 155

N.E. 835 (Ind. App. 1927) (same); Franklin County Mining

Co. V. Industrial Comm’n, 153 N.E. 608, 610 (Tll. 1926) (state

law allowing modification if “disability of the employee has

subsequently recurred, increased, diminished or ended’’). Cf.

Swift & Co. v. Neal, 18 N.E.2d 491, 493 (Ind. App. 1939)

(a 1934 state statute allowing modification “on account of a

change in conditions” does not “necessarily mean that there

2. Even if the Ninth Circuit were correct that

courts had “uniformly” construed Section 22 to re-

quire a change in an employee’s physical condition,

the Director has permissibly reached a different in-

terpretation. The Director acts on behalf of the Sec-

retary of Labor, who is charged with administering

the LHWCA, see 33 U.S.C. 939(a) ; 20 C.F.R. 701.202

(a), and the Director’s construction of the phrase

“change in conditions” is therefore entitled to defer-

ence under the principles announced in Chevron

U.S.A. Ine. v. Natural Resources Defense Council,

Inc., 467 U.S. 837, 842-843 (1984). See, e.9., Direc-

tor, OWCP v. General Dynamics Corp., 982 F.2d 7 90,

793-795 (2d Cir. 1992); Force y. Director, OWCP,

938 F.2d 981, 983 (9th Cir. 1991); Newport News

Shipbuilding & Dry Dock Co. vy. Howard, 904 F.2d

206, 208-209 (4th Cir. 1990) ; Boudreaux vy. Ameri-

can Workover, Inc., 680 F.2d 1034, 1046 & n.23 (5th

Cir. 1982) (en banc), cert. denied, 459 U.S. 1170

(1983) .78

must be a change in the physical condition of the injured

employee’).

18 Not all courts of appeals have deferred to the Director’s

construction of the LHWCA. See, e.g., Sea-Land Serv., Inc.

V. Rock, 953 F.2d 56, 59 (3d Cir. 1992); Director, OWCP vy.

Detroit Harbor Terminals, Inc., 850 F.2d 283, 287-288 (6th

Cir. 1988); ef. Director, OWCP v. General Dynamics Corp.,

980 F.2d 74, 78 (1st Cir. 1992) (reserving question). Courts

refusing to defer have relied on the erroneous premise that

“neither the Director nor the [Benefits Review] Board is the

officer or agency charged with the administration of the

[LHWCA].” Director, OWCP vy. O’Keefe, 545 F.2d 337, 343

(3d Cir. 1976). They overlook that the Director acts pursuant

to a delegation of authority from the Secretary, 20 C.F.R.

701.202(a), who has express authority to “administer” the

As we have explained, the Director’s interpretation

is the most natural construction of the language of

Section 22 and is consistent with the structure and

purposes of the Act. The Director’s interpretation

should therefore prevail. See Chevron, 467 U.S. at

842-848. There is nothing in other interpretive

sources, such as the legislative history, to support a

contrary construction. Instead, the legislative history

of the LHWCA and its amendments during the 1930s

confirms that Congress drafted Section 22 to give

agency adjudicators broad authority to reconsider and

modify awards. See Intercounty Constr., 422 U.S.

at 8-12 (discussing legislative history); Banks, 390

U.S. at 463-465 (same).”

LHWCA and “make such rules and regulations * * * as may

be necessary in the administration” of the Act. 33 U.S.C.

939(a). Compare Pauley v. BethEnergy Mines, Inc., 501 U.S.

680, 696-697 (1991); Martin v. OSHRC, 499 U.S. 144 (1991);

Mullins Coal Co. v. Director, OWCP, 484 U.S. 135, 159 (1987).

As an adjudicatory tribunal without administrative authority,

the Benefits Review Board receives no special deference. See

Estate of Cowart, 112 S. Ct. at 2595; Potomac Elec. Power Co.

v. Director, OWCP, 449 U.S. 268, 278 n.18 (1980).

19 Congress amended Section 22 in 1934 and 1938. See

Intercounty Constr., 422 U.S. at 8-12. During that same gen-

eral time period, the Ninth Circuit decided McCormick, supra,

and Pillsbury, supra, which contained dicta suggesting that

a “change in conditions” was limited to the employee’s physi-

cal condition. See pp. 20-22, supra. There is no reason to

believe that Congress intended to ratify those dicta. The

amendments Congress enacted did not address the issue, and

there is scant evidence that Congress was aware of the state-

ments in those decisions. The United States Employees’ Com-

pensation Commission (USECC), which administered the

LHWCA until 1946, mentioned those and numerous other

cases in its annual reports to Congress. Twenty-First Annual

The legislative history of Congress’s 1984 amend-

ments to the LHWCA similarly provides no basis for

rejecting the Director’s construction. To the contrary,

the legislative history indicates that Congress ex-

pected Section 22 to be used to adjust the compensa-

tion of disabled employees who had returned to gain-

ful employment. See 130 Cong. Rec. 8827 (1984)

(statement of Rep. Erlenborn). In that regard, Con-

gress amended Section 22 to give employers (such as

petitioner in this case) authority to seek modifica-

tion of awards that are paid primarily by the Special

Fund that the Director administers. See Longshore

and Harbor Workers’ Compensation Act Amendments

of 1984, Pub. L. No. 98-426, § 16, 98 Stat. 1650; H.R.

Conf. Rep. No. 1027, 98th Cong., 2d Sess. 82 (1984).

Furthermore, although the legislative history ac-

companying the 1984 amendments shows that Con-

gress intended to overrule some Board decisions, see

H.R. Conf. Rep. No. 1027, supra, at 30; 130 Cong.

Rec. 25,902-25,9038 (1984) (statement of Rep. Mil-

ler) ; id. at 26,300 (statement of Sen. Hatch), it con-

tains no expression of dissatisfaction with the

Board’s decision in Fleetwood v. Newport News Ship-

building & Dry Dock Co., 16 Ben. Rev. Bd. Serv.

(MB) 282 (1984), aff'd, 776 F.2d 1295 (4th Cir.

1985), which approved an award modification based

on changes in non-physical conditions. In light of

that history, there is no plausible basis to believe that

Congress ratified pre-Fleetwood dicta Suggesting that

Report of the USECC 56 (1937) (describing Pillsbury) ;

Seventeenth Annual Report of the USECC 15 (1933) (de-

scribing McCormick). But the USECC’s brief summaries

provide no basis to think that Congress approved of the dicta

in those decisions. -

a “change in conditions” is limited to a change in the

employee’s physical condition. See generally Brown

v. Gardner, 115 S. Ct. 552, 556-557 (1994) .”

3. The Director’s construction is also sound inso-

far as it reflects a reasonable accommodation of the

policies “committed to the agency’s care.” Chevron,

467 U.S. at 845. The Director’s construction will not

overburden the agency and courts with modification

requests because, as discussed above, a change in

wage-earning capacity necessary to support modifica-

tion must be a change in an employee’s capacity to

earn wages because of injury. See 33 U.S.C. 902(10)

(“ ‘{d]Jisability’ means incapacity because of injury

to earn the wages which the employee was receiv-

ing at the time of injury” (emphasis added) ).

Thus, changes in general economic conditions, as in

McCormick, are not by themselves changes in the

conditions causing (or eliminating) disability and

therefore should not be a basis for modification.”

20 In the same year in which it enacted the LHWCA amend-

ments discussed in the text, Congress enacted the Social Secu-

rity Disability Benefits Reform Act of 1984, Pub. L. No. 98-

460, 98 Stat. 1794, which expressly provides for termination

of disability benefits in circumstances other than those in

which the individual’s medical condition has improved. See

§2(a) and (c), 98 Stat. 1794-1797, codified at 42 U.S.C.

423 (f) (2)-(4) and 1382c(a) (4) (B)-(D). It therefore is un-

likely that Congress would have intended to foreclose that

result under the LHWCA when it amended that Act in 1984.

21 The fact that state laws authorize modification for non-

physical conditions, see note 7, supra, further demonstrates

that courts and agencies can successfully administer broad

modification provisions. Cf. Peabody Coal Co. v. Gosseti, 819

S.W.2d 338, 35-36 (Ky. 1991) (discussing amended state

statute).

Similarly, “a mere change in a claimant’s wages,”

Pet. App. 8a, is insufficient to establish a “change

in conditions” under Section 22. Section 8(h) of the

LHWCA clearly states that the actual, post-injury

wages of an employee who has sustained a partially

disabling, non-schedule disability will establish the

employee’s wage-earning capacity only if the wages

“fairly and reasonably represent” his wage-earning

capacity. 33 U.S.C. 908(h). If they do not, an agency

adjudicator

may, in the interest of justice, fix such wage-

earning capacity as shall be reasonable, having

due regard to the nature of his injury, the degree

of physical impairment, his usual employment,

and any other factors or circumstances in the

case which may affect his capacity to earn wages

in his disabled condition, including the effect of

disability as it may naturally extend into the

future.

33 U.S.C. 908(h). Accordingly, in determining wage-

earning capacity, the adjudicator considers such fac-

tors as “the beneficences of a sympathetic employer,

the claimant’s earning power on the open market,

* * * [and] circumstances [that] indicate a probable

work injury related wage loss in the future.” Ran-

dall v. Comfort Control, Inc., 725 F.2d 791, 797 (D.C.

Cir. 1984). An increase in wages resulting from in-

flation is insufficient to establish an increase in wage-

earning capacity. See, e.g., LaFaille v. Benefits Re-

view Bd., 884 F.2d 54, 61 (2d Cir. 1989).

As the Fourth Circuit recognized in Fleetwood, 776

F.2d at 1232, and the ALJ recognized in this case,

relevant factors affecting the claimant’s future earn-

ings must be considered at both the initial hearing

and the modification hearing. The ALJ in this case

observed that the worker’s increased wages were not

attributable solely to the effects of inflation and salary

increases; that the worker was at no greater risk of

losing his present job or in seeking new employment

than anyone else; and that his present employment

was not the result of a “beneficent” employer. Pet.

App. 16a. The Board additionally noted that the

worker had completed vocational training (id. at 8a)

and that he “has raised no error committed by the

administrative law judge in weighing the evidence

and granting modification based on [his] increase in

wage-earning capacity after the original award of

benefits.” Jd. at 10a.

Thus, nothing in the Director’s position, or in the

decisions of the ALJ or the Benefits Review Board,

suggests that modification under Section 22 follows

automatically from a finding that the claimant’s ac-

tual wages have increased; rather, a change in wage-

earning capacity must be demonstrated to support

modification. The court of appeals erred in conclud-

ing otherwise and in rejecting the Director’s reason-

able interpretation of the LHWCA.

CONCLUSION

The judgment of the court of appeals should be

reversed.

Respectfully submitted.

DREw S. DAys, III

Solicitor General

EDWIN S. KNEEDLER

Deputy Solicitor General

JEFFREY P. MINEAR

Assistant to the Solicitor

General

THOMAS S. WILLIAMSON, JR.

Solicitor of Labor

ALLEN H. FELDMAN

Associate Solicitor

NATHANIEL I. SPILLER

Counsel for Appellate Litigation

EDWARD D. SIEGER

Senior Appellate Attorney

Department of Labor

FEBRUARY 1995

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