these bad ports because they don't want all these tremendous costs and try to avoid them.

The ambulance chasers are a leech on our industry. We have some men, we have men working for us today that got three, four, and five third party suits against our company alone right now. We have got these guys coaching them how to act so their back injury is bad. There is no use beating around the bush. They are flocking into the areas where the longshore halls are. They are no friend to the industry or the longshoremen. I don't class these people as general legitimate attorneys. When a man is injured he needs an attorney but why are we making a racket out of this.

On the east coast the compensation insurance is often 24 to 30 percent of the payroll. It is going up all the time. We are facing constantly rising costs. One small stevedore company down our way had two awards within 60 days. One was over $300,000 against them where they wound up with it on third party and another $350,000. Now they are hunting for someone to insure them. Nobody wants it.

We are going to come to the point we can't get anybody to cover us. The only reason we went self-insured years ago was our costs were rising so high it was the only way we could hold it and stay in business.

We have men, I know one in particular I happened to look up, he has had 28 third party awards. We have got them against us now. This particular man is after us for three more.

Senator YARBOROUGH. You mean one man sued for 28 different injuries, 28 different lawsuits?

Mr. ESCHEN. Yes, and collected. He is now on us again.

Senator YARBOROUGH. The staff advises me that the Labor Department has no data on this, this cost of third party suits, other than cases that finally went to judgment that they have gotten from the files. If we get any data as to these suits like you are telling us about, one man filing 28 suits, they would have to be filed by the industry, and you bring your industry in and collect data on the number of suits and costs, et cetera, that you can file with the committee and give us the statistics. The Government takes statistics, as you know, and collects data on many, many facets of our industry, practically everything they can, but they say they have no way to get the amounts on these agreed settlements where the settlement is between the underwriters or stevedores and the man himself.

Mr. ESCHEN. Well

Senator YARBOROUGH. This would have to come from the industry. If we had data showing what this cost was overall in the industry. Mr. ESCHEN. We will take some specific items and forward them to

you.

Now, I inspected one particular man recently and it is three and a half pages of single space claims. A lot of these were settled without a direct award so we can't apprise you of how much he did get. We can show you the number of claims and we can show you the amounts in dollars where that is clearly stated.

Senator YARBOROUGH. Of course one lawsuit wouldn't, or one man filing multiple claims wouldn't average out in the entire industry

costs.

Mr. ESCHEN. No, we can go something on this. If you go further, when I say that I estimate the costs of these charges will go up to 10 or 15 percent of the payroll, I am going by what has happened on

the east coast where often in a single year they raise the compensation insurance over $3 a hundred. I am looking at the open end where these guys can conjure up something 15 years from now. How are you going to get any insurance company to cover you against those things? This may look obscure. These are my personal estimates but I know that the attorneys, the attorneys' fees will quadruple or more if the man doesn't have to pay it out of what his award is, then there is nothing to hold them back. As it is now they are stabbing the poor guy that gets the award for as high as 50 percent of the gross. We go at this, when we do have a case and a man is known to have had cases in the past, we make investigations and bring these up and show them. Our basic point is this, we don't want to take care of the guy that is making a racket out of it but we do want to take care of the man that is honestly injured and fairly. There is only so much money and when you drain it off to the wrong people or to the attorneys, why, the people that ultimately should receive it are the ones that suffer.

The industry is having a tough time and I know it is happening to the shipping industry and foreign trade and bucking all these new markets and new areas. I get shocked. I went aboard a ship recently. There were 16,000 cases of pears being imported into San Francisco from Japan.

Senator YARBOROUGH. Sixteen thousand cases of what?

Mr. ESCHEN. Canned pears coming into San Francisco from Japan. I was from the Santa Clara Valley and this kind of hits you. You see one item after another being imported when it used to be exported. You realize in the foreign trade situation our country is in trouble.

Senator YARBOROUGH. The longshore claims didn't cause those imports of pears from Japan, did they?

Mr. ESCHEN. No; but every time you add another cost onto your shipping industry-do you realize the port costs on the west coast here run 40 to 50 percent of the steamship company's income dollars, gross dollars revenue. A lot of these foreign lines, especially Europe, are working on 25, 30 cents a ton left. A lot are losing money. All we have to do is raise our cost a little bit more here and they won't run any

more.

Union Steamship from New Zealand just quit recently. Waterman Steamship Co. turned their ships over to the Government because they couldn't operate in foreign trade economically. Weyerheuser gave their ships to the Government and operated where they can make money in the run to Vietnam because they couldn't run intercoastal and other mediums have taken over. We have a number of other steamship companies that are in dire straits, I am talking about the foreign steamship lines and a number of other of American lines that all you have to do is add a little bit more in the way of trouble and problems and they will quit.

We are trying to simplify this. In this world as soon as your costs are too great someone else takes over. Even this wide-eyed movement toward van is an effort partially, and I have had steamship company people state this to me, as a way of getting out of third-party suits. It is appreciable costs and now I am afraid it will be far greater unless some of these holes are plugged.

I don't think the third-party suits, here some guy may go in and cash in and get a fortune but for the average workingman I think we would be far better off with a properly liberalized compensation.

Because of over 100 years of experience in the stevedoring business and over 40 years of self-insurance, our company understands these problems extremely well. We realize that there must be reasonable increases in the Longshore and Harbor Workers Compensation Act, but at the same time we must not get so liberal that we kill the jobs through eliminating the foreign trade.

The proposed changes will raise direct labor costs by 10 or 15 percent, or the compensation insurance costs will be raised between 100 and 150 percent. In our industry about 85 percent of the cost is directly tied to physical labor.

We do the work for a majority of members of the European Conference running from San Francisco Bay area, Sacramento and Stockton to Europe. At the present time the stevedoring, terminal, and port charges take 40 to 50 percent of the gross income dollar of the steamship company obtained from freight revenues.

A 10 percent increase in cost would amount to $1.50 to $2 a short ton on steamship costs. This would more than eliminate any profit of the steamship company whatsoever. Most of them are losing money right

now.

There are over 300,000 tons per year of canned goods, dried fruit and nuts moving in the European trade alone. With the extreme competition of the European Common Market, North Africa, Australia, Taiwan, the American products are barely able to keep in the market. We have been informed by the canners and packinghouses that the freight rates must be reduced, not increased.

In the Los Angeles area over 3 million tons of bulk iron ore are moving through the Ports of Long Beach and Los Angeles. Just 2 or 3 cents increase in the cost per ton will be enough to divert these sales to Chile, Canada, Australia, or Africa. There also is over 1 million tons of surplus scrap iron on the Pacific coast which can only be sold to the Asiatics, if the present extremely cheap handling charges are maintained.

With the development of the van ships and intermodal transportation the huge amount of vanned cargo to and from the Far East can just as well move over Canadian railroads from Vancouver to Chicago as by American railroads from the west coast.

There are practically no third-party suits in Canada. Yet in the United States the third-party suits have caused the insurance costs on vans to run between $2 and $7 each time one is loaded or discharged from a ship. This places our ports at an extreme disadvantage.

The third-party suits are already seriously interfering with the movement of this cargo when it is realized that sometimes these awards are made in excess of $300,000 in a single case. Many other cargoes can be shown to be hanging in the balance. The basic problem is probably half of the insurance premiums are being eaten by attorneys. If the third-party actions can be eliminated, very sizable increases can be made in the compensation to the men, and the industry can still bear the burden of cost.

We can enumerate many other low-cost bulk cargoes, such as alfalfa, pellets, corn, barley, wood chips, and potash. Carbon coke is a special case with over a million and a half tons presently moving to Japan. However, there are still millions of tons sitting in stockpiles because

it is unsalable. This great increase in carbon coke arises from increased production of gas in the loss of the market for diesel fuel because of air pollution regulations.

The net result of this would be to increase our already very unfavorable balance of trade by many millions of dollars.

We appreciate your consideration of the fact that the steamship people are tired of the time and expense of third-party suits, and unless something is done we will lose a great deal of trade.

By eliminating third-party suits as much as possible we can enhance our foreign trade and at the same time increase the benefits to the longshoremen and no one will be the loser except the ambulancechasing lawers that are a leech on a long-suffering industry.

Thank you, gentlemen.

Senator YARBOROUGH. Thank you. Your prepared statement will be filed, is already filed in its entirety and will be printed in the record also so we will have the benefit of both your prepared statement and your oral statement, too.

Any questions, Senator Morse?

Senator MORSE. No; I just gave my attention to Mr. Eschen's oral testimony. I haven't had a chance to go over his printed testimony, but I shall and I think you summarized it anyway. I think the result of his testimony, Mr. Chairman, is to put us to work.

You examined it in part in regard to the settlement of cases by way of compromises that don't go to judgment. Any information that can be supplied us as to what is settled outside of going to final judgment would be helpful. Counsel tells me we have nothing in the files on that. It might be helpful to us if you could give us data telling us how many of these third-party suits are settled by the way of adjustment and compromise before going to judgment. That is all I have.

Mr. MITTELMAN. I just have one observation. Mr. Eschen, you are the third witness in a row who has commented on a notorious situation of all the attorneys involved in these lawsuits. I know California has bar associations and they do have canons of ethics. I was wondering if any action has been taken at all by any local bar association concerning these practices. I know in New York in the 1930's there was a similar scandal concerning the regular workmen's compensation cases which resulted in a special commission being created which came out with some very stiff recommendations which were enacted into law in the workmen's compensation. Well, the situation as far as attorney goes in workmen compensation cases is very closely regulated. I realize this is not-seaworthiness cases do not follow regular court proceedings but it seems to me a situation as notorious as this would be made subject of inquiry before now.

Mr. ESCHEN. It has suddenly got worse. It got far worse on the east coast and then some of their boys came out here and helped organize it and it is worse in southern California. Even by Federal Government records they are constantly raising compensation costs in southern California. Now it is moving up to northern California and getting further organized. It came from the east coast. It is just really getting bad here and what we are worried about is, I work sometimes with stevedores, stevedore companies from the east coast, and I tell them of certain of our problems and I listen to what they

are suffering and it is horrible. Now it is coming out here. Some of this is just straight-out rackets. Some of the same guys that are operating back there in New York are now coming out here. It isn't the legitimate regular man. Part of this is just because we have set up an opportunity for them to operate.

What I would like to see is the law close down so that only in cases of gear failure, real gear failure or something of that sort where there is a legitimate third-party suit that it should be that the man should have the right to go into this area. Now they go into the thirdparty suits, they have got nothing to lose. And now you want to give them or pay their attorneys, too, over and above what they get so that will develop more of them. Then you want to give them unlimited time to do it. You are creating the opportunity for these guys to work and if the laws are written where the attorneys can work on it, they will

be there.

Senator YARBOROUGH. In the case you gave where one man had 28 claims, were they for a few weeks apiece or did he have permanent disability?

Mr. ESCHEN. I remember one man got $28,000 on his leg and he is now after us on the same leg. He has been paid off on that a number of times. I am in operations, working with the ships, working with the men, and I don't get into the insurance angle and I don't have it clear as some of the others but I do see these things and I can see the results and I can also see where time and again we are asked by foreign lines, for example, steamship companies to give bids on cargoes of grain, on cargoes of coke, and then we put our costs in and we are too expensive, they go buy them some place else. This is a competitive world and it is getting very small and any time you handicap your own industry in some way someone else moves in and takes over. We are rapidly losing our-a lot of our market for farm goods because they are growing pineapple in Taiwan, they are growing it in Central America, they are growing all kinds of fruits in north Africa or almonds and nuts and so on, north Africa can take care of them. They are heavy in this cheaper wines. Every place you turn there are others developing. It is just like up in the Northwest. You face tremendous competition from Russian logs as far as the trade goes. There is competition every place and we have to be competitive. Senator MORSE. Mr. Chairman, I have one further jocular comment and one serious one. I don't want Mr. Lindsay to walk out on my jocular one. Mr. Lindsay, Mr. Chairman, Mr. Mittelman, Mr. Harris, I belong to America's most closely woven closed shop, and you hear a lot about the need for some disciplining within the union closed shop. Mr. Mittelman has raised them whether we are going to have to do some internal disciplining in our closed shop. But in all seriousness I think the problem you raised calls upon this committee in its own research to look into it as far as the alleged abuses of third-party suits are concerned from the standpoint that the practices of the lawyers may be concerned.

Eventually we will have in this record a brief from the Department of Justice as to its position on third-party suits under the law. I think Mr. Harris has one from the Department of Labor that will be inserted in the record probably before we recess these hearings. But the serious matter I wanted to raise questions about-and I didn't when I spoke before is the commentary made early in your testimony about the conditions of these American boats. I would have to say this came as