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DAVIS v. UNITED STATES LINES CO.

July 18, 1957

John C. DAVIS, Plaintiff,
v.
UNITED STATES LINES CO., Defendant & Third-Party Plaintiff, MURPHY-COOK& COMPANY, Third-Party Defendant



The opinion of the court was delivered by: DUSEN

The issue presented for decision in this case is, where a longshoreman prosecutes to settlement, in a net amount *fn1" which exceeds the total sum of moneys which plaintiff would have been entitled to recover under the compensation provisions of the Longshoremen's and Harbor Workers' Compensation Act, *fn2" an action for damages against a third party for injuries suffered in the course of his employment, after he has received voluntary payment of compensation benefits from his employer's compensation insurer, is he entitled to deduct from the full amount of the subrogation claim of the compensation insurer a proportionate amount of reasonable attorney's fees and costs incident to making such settlement recovery?

Plaintiff, employed as a longshoreman by Murphy-Cook & Company, a stevedoring company engaged in discharging cargo from a vessel owned and operated by the United States Lines Company, suffered injuries during the course of his employment as a result of being struck in the back by a tub being used to remove iron ore from the vessel.

 Compensation benefits of $ 220 *fn3" and medical payments of $ 792.40, *fn4" a total of $ 1012.40, were made promptly, regularly, and at the weekly rate prescribed by the Longshoremen's and Harbor Workers' Compensation Act, 33 U.S.C.A. § 901 et seq. (hereinafter called the 'Act'), to plaintiff by the Liberty Mutual Insurance Company (hereinafter called 'Liberty'), the insurance carrier of plaintiff's employer, without a compensation award. *fn5" Thereafter, plaintiff filed a notice of election to sue a third party, namely, the United States Lines Company, pursuant to § 33(a) of the Act, 33 U.S.C.A. § 933(a), and filed a complaint to recover damages for such injuries he sustained.

 A compromise settlement was effected between plaintiff and the third party for the sum of $ 7,500 and the employer's insurance carrier, Liberty, thereafter made demand upon the third party, the United States Lines Company, for payment out of the compromise settlement of the total sum of compensation benefits and medical expenditures made in the amount of $ 1012.40.

 Plaintiff challenged this payment to Liberty unless there was first deducted an allowance for counsel fees and costs incurred by plaintiff in obtaining the recovery against the third party. As a consequence of this dispute, the third party, the United States Lines Company, by order of court, obtained leave to deposit the said $ 1012.40 into court so that the court might determine whether or not the sum claimed by Liberty is subject to counsel fees and costs as claimed by plaintiff. *fn6"

 After deducting the counsel fees and costs referred to above and after deducting the $ 1012.40 compensation and medical expenses paid to plaintiff by Liberty, the net amount of the recovery to the plaintiff exceeded the total sum of moneys which the plaintiff would have been entitled to recover under the provisions of the Act.

 Plaintiff and Liberty both agree, though, that Liberty has a right to reimbursement for its compensation benefits and medical payments out of the recovery for the employee's injury. *fn7"

 Because the Act manifests a Congressional intent that the compensation insurer recover the full $ 1012.40 under the facts of this case, an order will be entered directing payment of this sum to Liberty. *fn8"

 The purpose of the Act was to assure, for the workers covered by it, the fixed payments specified, irrespective of any fault which may have caused the injury. See 33 U.S.C.A. § 904; South Chicago Coal & Dock Co. v. Bassett, 1940, 309 U.S. 251, 60 S. Ct. 544, 84 L. Ed. 732; Pennsylvania Railroad Co. v. O'Rourke, 1953, 344 U.S. 334, 337, 73 S. Ct. 302, 97 L. Ed. 367. Congress included in the Act a specific section ( § 33) headed 'Compensation for injuries where third persons are liable.' *fn9" which makes clear that Congress did not intend that the injured employee was entitled to both compensation, as computed in the Act, from his employer and damages from third parties. See The Etna, 3 Cir., 1943, 138 F.2d 37, 40; *fn10" Fontana v. Pennsylvania R. Co., D.C.S.D.N.Y.1952, 106 F.Supp. 461, 463, aff'd sub. nom. per curiam, Fontana v. Grace Line, Inc., 2 Cir., 1953, 205 F.2d 151, certiorari denied 1953, 346 U.S. 886, 74 S. Ct. 137, 98 L. Ed. 390. *fn11" As clearly stated in these cases, it has been consistently held that a reading of the Act as a whole, including § 33, requires the conclusion that any recovery, which is in excess of the payments provided for in the Act, by the employee as a result of an action instituted against a third party 'must first go to reimburse it (the subrogated insurance carrier of the employer) for amounts already paid out.' Czaplicki v. The Hoegh Silvercloud, 1956, 351 U.S. 525, 532, 76 S. Ct. 946, 950, 100 L. Ed. 1387. *fn12" This construction of the Act has been based by the court in part on the terms of subsection 33(e)(1)(A) (see footnote 9 above), providing that an employer may retain from any recovery by him against a third person 'the expenses incurred by him in respect to such proceedings or compromise (including a responsible attorney's fee as determined by the deputy commissioner).' *fn13"

 'Thus, (under subsection (e)), the Act treats the recovery (by the employer) as a fund charged first with the expense of the litigation and then with the amounts paid for compensation and medical expenses and the employee becomes entitled only to any excess finally remaining. There is no reason why a recovery obtained against the third party by the employee rather than the employer should be distributed differently. The expense of securing the recovery is, as in equity it should be, a first charge against the fund itself. As such it is immaterial whether the fund was created in a suit brought by the employer or one brought by the employee.'

 Cf. The Etna, supra, 138 F.2d at pages 40 and 41; Miranda v. City of Galveston, D.C.S.D.Tex.1954, 123 F.Supp. 889, 993.

 The various state statutes cited by plaintiff which have been recently amended to provide for the deduction of the expenses of suit or attorney's fee from the subrogation claim of the employer or his insurance carrier, have no bearing on the intent of Congress in enacting the provisions of this Federal Act and such amendments emphasize that plaintiff's remedy lies in the ...


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