On Petition for Review of Orders of the Benefits Review Board, United States Department of Labor
Before: Greenberg And Nygaard, Circuit Judges, and Pollak, District Judge*fn*
We are presented with a conflict between the Director of the Office of Worker's Compensation Programs (Director) and the Benefits Review Board, Department of Labor (Board), over the proper interpretation of 20 C.F.R. § 725.535 (1991).*fn1 The regulation was promulgated by the Secretary of Labor pursuant to the Federal Mine Safety and Health Act, 30 U.S.C. § 801 to 962.
(West 1986 & 1992 Supp.) Section 725.535(d) provides in part that legal fees awarded as part of state pneumoconiosis benefits are to be excluded when determining the extent to which federal Black Lung benefits are offset by state benefits. We conclude that the Director's interpretation of the method of offset under § 725.535 is neither unreasonable nor inconsistent with the regulation. We will therefore grant the petition for review and reverse the Board decisions consolidated for this appeal.
The facts and procedural history of these cases are not disputed. Joseph J. Molnar, Albert J. Novotny, William H. Daisley and Donald Smith (claimants) were coal miners employed in the Commonwealth of Pennsylvania.*fn2 Barnes & Tucker is the designated responsible operator, 30 U.S.C. § 802(d), liable for benefit payments to Molnar, Novotny, Daisley. Bethenergy is the designated responsible operator liable for benefit payments to Smith.
Each claimant was awarded federal black lung benefits in addition to state Black Lung benefits from Pennsylvania. The state referee awarded each claimant a sum certain attributable to legal fees, pursuant to the Pennsylvania Workmen's Compensation Act, 77 P.S.Ann. § 998 (West 1992). In each award, the state referee did not specify the manner in which the claimant would pay his legal fee, that is, the award did not specify whether the fees were to be paid as a percentage of the claimant's weekly state benefits or paid as a lump sum at the beginning or end of the state benefits.
Under the Federal Mine Safety and Health Act, federal Black Lung benefits awarded to a claimant are offset by any federal or state Workmen's Compensation benefits received because of death or disability due to pneumoconiosis. 30 U.S.C. § 932(g). The offset provision was enacted to avoid the duplication of Workman's Compensation benefits by Black Lung benefits. See Coal Mine (BLBA) Procedure Manual, Chapter 2-1403, P 7 (February 1980). In addition, Department of Labor regulations provide that legal expenses incurred in a claimant's state Black Lung claim must be excluded from the calculation of offset. 20 C.F.R. § 725.535(d). Where the state award or a state statute requires a particular method for paying legal fees, or where the claimant and his attorney have agreed to a particular method of payment, the Director will use that method for calculating the exclusion of legal fees from offset. Coal Mine (BLBA) Procedure Manual, Chapter 2-1403, P 11(c). Where no method of payment is provided by statute or agreement,*fn3 the Director presumes that a claimant will use as much of his initial benefit payments as is necessary to pay his attorney's fee. Id. Thus, federal benefits will not be offset until the claimant's state attorney's fees are paid. This method is known as the "up-front" method.*fn4
Here, the Deputy Commissioner of Labor utilized the up-front method to determine the offset. Barnes & Tucker objected to the offset determinations as to Molnar, Novotny, and Daisley, and appealed from the Deputy Commissioner's award of federal benefits to the Office of Administrative Law Judges. Bethenergy Mines likewise objected to the Deputy Commissioner's offset determination in Smith's case, and also appealed the award of federal benefits to the Office of Administrative Law Judges. The ALJ rejected the Deputy Commissioner's method of determining offset and modified the federal award according to the formula announced by the Benefits Review Board in Scuilli v. Bethlehem Mines Corp., 8BLR 1-206 (1985). The Director appealed the decisions to the Benefits Review Board. The Benefits Review Board affirmed. The Director petitioned this Court for review of both final orders of the Benefits Review Board and the cases were consolidated for appeal.
Our review of the Benefits Review Board's final order is based on § 422(a) of the Black Lung Benefits Act, 30 U.S.C. § 932(a), which incorporates § 21(c) of the Longshore and Harbor Workers' Compensation Act, 33 U.S.C. § 921(c) (West 1986 & 1992 Supp.). We review the decisions of the Board for error of law and to assure ourselves that it has adhered to the statutory scope of review. Hillibush v. United States Department of Labor, Benefits Review Board, 853 F.2d 197, 202 (3d Cir. 1988); Kertesz v. Crescent Hills Coal Co., 788 F.2d 158, 162 (3d Cir. 1986). Thus, our review of the Board's legal determinations is plenary. Carozza v. United States Steel Corp., 727 F.2d 74, 77 (3d Cir. 1984).
We must, however, defer to an agency's consistent interpretation of its own regulation unless it is "plainly erroneous or inconsistent with the regulation." Director, O.W.C.P. v. Mangifest, 826 F.2d 1318, 1323 (3d Cir. 1987), quoting Bowles v. Seminole Rock and Sand Co., 325 U.S. 410, 414, 65 S. Ct. 1215, 1217, 89 L. Ed. 1700 (1945). We owe such deference to the Director, not to the Board, for the Director makes policy under the Black Lung Act. Id. However, we will not defer to an "interpretation" in an adversary proceeding that strains "the plain and natural meaning of words in a standard," Bethlehem Steel Corp. v. O.S.H.A, 573 ...