limitations in the Longshoremen's and Harbor Workers' Compensation Act, 33 U.S.C. S 901 et seq., is to put our imprimatur on trivial, meaningless and confusing distinctions. Injustices should be remedied by additional legislation: our attempts to do so have served only to obfuscate this area of the law." (Emphasis added) Radovich V. Cunard SS Company, 364 F2d 147, 153 (1966). Other judges have pointed out that the incredible third party-indemnity snarl can now only be untangled by Congress, not by the courts. See for instance Circuit Judge William Mathes concurring specially in Pacific Inland Navigation Co. v. Course, 368 F2d 540, 542 (CA9, 1966) and Judge Kaufman's remarks in Scopaz v. SS Santa Luisa, 372 F2d 403 (CA2, 1967). We hope, however, that all members of your Subcommittee will read the words of Judge Friendly in Skibinski v. Waterman Steamship Corporation, 360 F2d 539 (1966) in which he coherently summarizes the flaws in the parallel compensation systems which have developed for injured maritime workers one legislative, the other judicialwhich intertwine in random, unpredictable fashion to presently make up the haphazard and wasteful method of paying for maritime workers' injuries by the maritime industry which employs these men: "It is time to scuttle a doctrine which requires judges to make distasteful hairsplitting distinctions unrelated to any intelligible concepts of right and wrong; granted that liability for unseaworthiness does not rest on fault, it ought to rest on something more than casuistry. Indeed, I suspect we would long since have revolted against a prin ple which capriciously imposes liability on a thoroughly well equipped ship if we did not know that in the usual case, where the plaintiff 'seaman' is shore-based, the story will have a happy ending for the ship since liability will rest on her only for a moment and then will be transferred to the stevedoring contractor. By very definition, improper use of ship's equipment triggers the contractor's warranty of workmanlike service, Ryan Stevedoring Co. v. Pan-Atlantic SS Corp., 350 U.S. 124, 76 S.Ct. 232. 100 L.Ed. 133 (1956), the ship regularly impleads the stevedore, and there the burden falls. To me this argues for a restrictive rather than an expansive notion of unseaworthiness in these situations: courts should not strain to use the ship. innocent in every realistic sense, merely as a conduit for imposing on the negligent employer a liability to his employees differing from the absolute but limited one which Congress made exclusive by S. 5 of the Longshoremen's and Harbor Workers' Compensation Act, 33 U.S.C. 8905. Of course, the statute did not impair an injured longshoreman's right against third parties who have wronged him, 33 U.S.C. S933. But proper respect for what Congress was 'driving at.' see Johnson v. United States. 163 F. 30, 32, 18 L.R.A., N.S., 1194 (1 Cir. 1908) (Holmes, J.), ought to lead judges away from a doctrine which so frustrates the legislative purpose by imposing a transitory liability on a third party that has turned over a thoroughly seaworthy vessel to a qualified stevedore. If the benefits under the Compensation Act are inadequate, the remedy lies in action by Congress, not in judicial legerdemain which helps one longshoreman but does nothing for another whose situation would appear similar to everyone except those lawyers and judges who have had to accustom themselves to the witty diversities of this branch of the law." (Emphasis added) 300 F2d at 544. THE PORTLAND THIRD PARTY SITUATIONS But you may very properly ask, is this really happening? Is the stevedore industry simply creating a straw bogey man when it comes before you in these hearings and tells you that its number one problem under the existing Longshoremen's Act are third party damage actions as presently authorized under Section 33 of the Act? As your staff will find when it checks into the matter, meaningful statistics for the courty as a whole as to the number of third party actions and resulting indemnity actions which have been brought and are being bronght are not readily available. Mr. Scanlan has previously in his testimony given you statistics as to the number of such cases filed and pending in the Philadelphia area; and Similar data can no doubt be gleaned by your staff from other United States courts in metropolitan centers. On a local basis and in order to provide your Subcommittee with some specific information, I have made an informal survey of the number of third party damage proceedings in connection with injuries sustained by longshoremen employed by firms performing stevedoring work in Oregon for the last three fiscals years, endng June 30 of 1965, 1966, and 1967. For the fiscal year 1965, these firms had 349 claims under the Act involving the payment of compensation benefits with more than $1,000 being paid in 98 of the claims. There were 70 third party proceedings. Accordingly, 20 per cent of all compensable claims resulted in third party actions but where compensation over $1,000 was paid, 79 per cent (or four out of five) resulting claims turned into third party cases. The statistics for fiscal year 1966 show that of 369 compensable claims, of which 112 were over $1,000, there were 58 third party cases, or 30.4 per cent of all compensable claims resulted in third party actions and 51 per cent of those over $1,000 resulted in litigation. The figures for fiscal year ending June 30, 1967 are incomplete (since in Oregon third party actions only have to be filed within two years from the date of injury). As of October 30, 1967, of 80 claims involving payments of compensation over $1,000, 33 of them (or approximately 41 per cent) had resulted in the institution of third party proceedings. The above data which I obtained does not reflect the number of third party actions and resulting indemnity suits involving the Portland's four major ship repair employers or any of its other waterfront employers subject to the Act (such as maritime construction firms). The significance of these figures is that by their mere volume alone, your Subcommittee can gain a picture of what is really happening, at least in Portland. Moreover, I am told by our member firms that the third party situation is far worse in the larger metropolitan ports, such as San Francisco and Los Angeles, a fact which you can again no doubt verify through your own staff work. THE THIRD PARTY GAME In order that you may appreciate what we believe to be the inherent economic waste, let me briefly lay before you a case history of a typical third party action. This is what we call the "the third party game" and what Judge John R. Brown of the Fifth Circuit Court of Appeals has called the "sometime weird Ryan-Yaka world . . . a three-cornered Kilkenny Fair in which all lash out against the other . . ." Strachan Shipping Co. v. Melvin, 327 F2d 83, 90 (1964) (dissent). An accident occurs aboard a ship where a longshoreman has obviously sustained some injuries which will require medical attention and time off from work. Hardly before the dust settles, attorneys or investigators for the union are on the scene taking photographs, conducting interviews, advising fellow longshoremen "not to talk," etc. They are usually followed by attorneys for the shipower, who attempt to make an identical investigation, but are mainly confined to interviewing vessel personnel. Also to the scene come attorneys for the stevedore employer, who also attempt to cover the now somewhat worn-out same set of tracks. There follows a time hiatus, during which the stevedore, in accordance with the Act provides medical care and pays compensation benefits-the time during which the stevedore employer is, in effect financing the forthcoming damage lawsuit against himself. After the man's medical condition has stabilized and he has returned to work, a third party action is then filed against the vessel. Depositions and other discovery proceedings are then engaged in by the attorneys for the injured employee and for the vessel, with the stevedore not being a party present. Human nature being what it is, the attorney for the vessel is necessarily interested in these discovery proceedings in perfecting his indemnity case against the stevedore employer, for after all under the indemnity doctrine, his client can recover over not only for what has to be paid the injured employee but also the costs of defense including the vessel's attorney's fees. The vessel then tenders defense of the third party action to the stevedore. If the stevedore accepts, under the threat of the indemnity doctrine I referred to earlier, he then steps into the shoes of the vessel and must defend and stand the full consequences and damages of the lawsuit as though he had been sued directly in the first instance. If he rejects the tender, the matter then proceeds to trial or settlement between the longshoreman and the vessel. After this is disposed of, the vessel then comes back against the stevedore seeking full indemnity, together with his defense costs, which always seem to include substantial attorney's fees. Who Really Wins a Third Party Action? Aside from the obvious fact that all of this litigation makes for wonderful law business, are third party and resulting indemnity actions involving shipboard injuries desirable or undesirable? Should we keep them, limit them, or do away with them? As in everything else, it all depends upon your point of view and your economic interest, according to whether you are lawyer, injured longshoreman, stevedore, or other waterfront employer, the shipping industry and ultimately we the people who must buy and pay for products to which there has been added transportation costs, including stevedoring charges. As for we lawyers, there can be no doubt that all three sets of us profit by this "three-cornered Kilkenny Fair in which all lash out against the other." The attorneys for the plaintiff obtain their reward by their contingent fees taken out of the judgment or settlement. The attorneys for the vessel serve their client well by passing along any liability to the stevedore and charge accordingly, their charges in any event ultimately being for the account of the stevedore. The attorneys for the stevedore, who must in reality try to do the best they can under the circumstances for their client, naturally charge for their efforts. As for the injured longshoreman, I cannot in all honesty tell you whether or not he really benefits. It all depends. It is necessary to analyze each case individually and determine whether or not after he pays his attorney a contingent fee and his litigation costs, he ends up with more or less benefits (i.e. money and medical care) than he would have obtained under the Longshoremen's Act. Numerous examples have been and will be given to you of instances where longshoremen have not made out as well as they would have under the Act (though they do get their money in an immediate lump sum, an intangible benefit hard to evaluate). Many other examples can undoubtedly be given to you where there can be no question but that the injured longshoreman gets considerable more as a result of a third party proceeding than he would have under the Act. But we are all here to prepare statutory rules which will be of benefit to the most possible injured employees, not to enable a spectacular recovery in some individual instances. I must say to you in all candor that there must be a real nagging doubt in the minds of all responsible union officials as to whether or not their men would not be better off under a compensation system which offers a higher level of benefits for all rather than one which enables a few to do handsomely at the expense of holding down compensation benefits for the many. When it comes to evaluating the worth of third party actions on the stevedoring industry and on the shipping industry, however, there can be no doubt whatsoever that they are the real losers, because of one factor alone, if for none other, the heavy litigation expenses and attorneys' fees which they must pay. The proof of the pudding as to the effect of third party proceedings is in the spiraling insurance rates or costs which stevedore firms must pay and which in due course must be passed along to their customers. If any member of the Subcommittee has any doubts concerning the cost consequences to the industry of third party and indemnity actions, he has but to have the staff look into these insurance rates. In summary, we say to this Subcommittee that the almost incredible volume of third party litigation imposes an unnecessary cost burden on the industry which simply cannot be justified on grounds of demonstrable benefit to the injured employee. THE AVAILABLE REMEDY More importantly, we say to the Subcommittee that there is at hand a ready remedy to curtail this litigation, and at the same time to better meet the guiding purpose of the Longshoremen's Act, namely, to adequately compensate the injured employee. The real root of the stevedores' predicament is that under court decisions interpreting the Longshoremen's Act the stevedore and the vessel upon which he performs his work are considered separate legal entities. The result is that an injured employee of a stevedore firm, although generally not allowed to sue directly his own employer (except in the Yaka situation), is nonetheless permitted to sue the vessel, because the latter is viewed as a "third person." We believe that this is a misconception and misapplication of concepts, insofar as the Longshoremen's Act and the stevedoring industry are concerned. The very nature of a longshoreman's job is to perform work aboard a vessel. This is where he is employed to work. It is in the performance of this work that he may sustain injury. It is for this injury that he is and should be entitled to medical care and compensation benefits without regard to any doctrines of fault or negligence. In any compensation act involving shoreside workers performing work aboard a vessel, it is the work relationship which should be insulated from suit as part and parcel of the providing of compensation and medical benefits. For the purposes of the Longshoremen's Act, it is legal fiction to treat the vessel owner or operator as a third person. Accordingly, there has been prepared and presented to this Subcommittee by Mr. Scanlan some proposed amendments to the Longshoremen's Act in order to preclude the bringing of third party actions under Section 33 against a vessel on which a longshoreman may be injured, though otherwise preserving third party rights against all other strangers to the employment relationship. We claim no particular legislative expertise in the drafting of these amendments. Your staff we would hope can do better. The legislative purpose should be clear. There has to be an end to this third party game. Section 5 of the Act must be restored to its original intent before its judicial emasculation. We find it anomalous that the United States Supreme Court, while on the one hand approving the expansion of third party proceedings under the Longshoremen's Act in the private sector of our economy, has in the public sector curtailed the right to bring third party actions under the Federal Employees' Compensation Act. Thus, the Court in United States v. Demko, 385 U.S. 116 (1966) approved of lower federal court decisions precluding third party actions against the United States for injuries received in the course of their work under the Jones Act, Tort Claims Act, the Suits in Admiralty Act, and the Public Vessels Act, on the ground that the right to recover compensation was the exclusive remedy of the employee. So, a maritime worker employed by the government and covered by the Federal Employees' Compensation Act, has not been permitted to sue and recover against the United States vessel on which he was injured (Aho v. United States, 347 F2d 885 CA9, 1967), even though a private industry maritime worker covered by the Longshoremen's Act may bring such a third party action against his own employer under the Yaka decision. In the Demko case, supra, while ruling that compensation was the sole remedy rather than a damage action, Justice Black wrote the following memorable words with respect to the purpose of compensation statutes: "Historically, workmen's compensation statutes were the offspring of a desire to give injured workers a quicker and more certain recovery than can be obtained from tort suits based on negligence and subject to common-law defenses to such suits. Thus compensation laws are practically always thought of as substitutes for, not supplements to, common-law tort actions. A series of comparatively recent cases in this Court has recognized this historic truth and ruled accordingly. Johansen v. United States, 343 U.S. 427 *** and Patterson v. United States, 359 US 495 ***, for instance, are typical of the recognition by this Court that the right of recovery granted groups of workers covered by such compensation laws is exclusive. Such rulings of this Court have established as a general rule the exclusivity of remedy under such compensation laws." (Emphasis added) 385 US 260. Finally, if any of the members of this Subcommittee are harboring any reservations concerning the effect that third party actions are having upon the proper functioning of the Longshoremen's Act, we would ask that you or the members of your staff privately interview the hard-working Deputy Commissioners located out in the field. While we appreciate that the "official" Department of Labor line may, for various reasons, be otherwise, we ask you to ascertain by your own private investigation from field representatives of the Bureau of Employees' Compensation whether or not the purposes of the Act would not be far better served insofar as injured employees are concerned by restricting third party actions in the respect we have proposed and by correspondingly liberalizing benefits. We can assure you that their answer to you, as it has been to us, will be that employees and employers subject to the Act will gain and that the only real losers will be the members of my profession. 88-651-68- -16 |