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make any supplemental statements that you wish to. I shall look to Mr. Scanlan to direct the presentation of your case.
STATEMENT OF FRANK A. SCANLAN, ESQ., PHILADELPHIA
MARINE TRADE ASSOCIATION, AMERICAN MERCHANT MARINE INSTITUTE; ACCOMPANIED BY RALPH E. CASEY, PRESIDENT, AMERICAN MERCHANT MARINE INSTITUTE, AND WILLIAM F. GIESEN, GENERAL MANAGER AND COUNSEL, MARITIME ASSOCIATION OF THE PORT OF NEW YORK, AND EXECUTIVE DIRECTOR, NATIONAL ASSOCIATION OF STEVEDORES
Mr. SCANLAN. Senator Morse, it is indeed a privilege for me to appear before you today on behalf of the associations which I represent.
For the record, I am a member of the firm of Kelly, Deasey & Scanlan, in Philadelphia, and I am making this statement for and on behalf of the following organizations: The American Merchant Marine Institute, the National Association of Stevedores, the Management Advisory Cargo Handling Safety Committee, the North Atlantic Ports Association, the Philadelphia Marine Trade Association, the Boston Shipping Association, the Hampton Roads Maritime Association, and other major port associations on the Atlantic and gulf coasts.
Senate bill S. 2485, which is being considered by this committee, would amend the Longshoremen's and Harbor Workers' Compensation Act in many respects by: (a) Increasing the benefits and other amendments which Mr. Vickery has testified to in detail; (b) imposing user charges on the industry to defray the costs of the safety program; and (c) imposing user charges on the industry to defray the administration expenses under the act.
I would like to reserve my comments, for the moment, regarding the above features of this bill, and address myself to the most serious problem presently existing under the Longshoremen's and Harbor Workers Compensation Act which deserves and, in my judgment, commands paramount consideration before any decision can be reached regarding any amendments to this act.
The most difficult problem with the greatest impact on the maritime industry-both legal and economic-relates to the so-called third-party cases. Under these cases, a longshoreman or other worker covered by this act, who is injured during the loading or discharging of a vessel, collects compensation benefits and medical expenses from his employer, who is usually the stevedoring contractor, and then sues the shipowner, who is called the third party, for damages. The ship owner then joins the stevedore to the action. If the longshoreman is successful, he recovers from the shipowner and the shipowner, in most cases under the present state of the law, recovers from the stevedore who winds up paying not only the compensation benefits but also whatever recovery the longshoreman makes against the shipowner.
In addition to these costs, the stevedore is liable for the payment of the shipowner's counsel' fees for defending the longshoreman's action.
The incongruous and highly unique situation applies only in the maritime industry under the Longshoremen's Act. There is nothing else comparable, to my knowledge, involving the maritime worker in the United States of America. It developed solely by judicial legislation in contravention of the will of Congress. It has imposed a staggering burden upon the maritime industry without any substantial benefits to the employees covered by this act. The bill under consideration, S. 2485, in its present form does nothing to correct this condition.
In order to place this problem into its proper perspective, we must go back and review very briefly how it came about. When Congress passed the Longshoremen's Act in 1927, it specifically provided in section 5 that the liability of the employer to pay compensation under the act would be an "exclusive liability” and “in place of all other liability of such employer to the employee * * *.” This is basic, fundamental law in any compensation act. It is the quid pro quo for the imposition of the absolute liability upon the employer to pay the compensation benefits regardless of whether the employer was at fault or not, or whether the accident was caused solely by the negligence of the injured employee. However, this clear declaration of Congress has been destroyed by the following Court decisions.
In 1946, the Supreme Court in Seas Shipping Co. v. Sieracki (328 U.S. 85, 66 S. Ct. 872, 90 L. Ed. 1099), in a five-to-three decision, ruled that longshoremen were entitled to the same rights as seamen to bring an action against the shipowner based on unseaworthiness because they allegedly were doing work traditionally done by the ship's crew. Unseaworthiness is a form of liability without fault. The rationale of this decision has been bitterly attacked. And I have noted in the footnote on page 4 of my statement some references to that decision.
Many authorities have cogently argued that it was historically and factually incorrect.
Other cases which followed Sieracki imposed liability between the shipowner and the stevedore based on the comparative degree of fault, using the concepts of active versus passive negligence under which the damages were usually divided between these two parties.
Senator MORSE. Counsel, has Seas Shipping Company v. Sieracki case been followed by the Supreme Court in subsequent cases? Have they cited it as binding precedent!
Mr. SCANLAN. Yes, they have, Senator Morse. They have followed it in subsequent cases, and as a matter of fact, as I will refer to later
Senator MORSE. That is all right.
Mr. SCANLAN. They actually have reversed themselves in the Sieracki case, because my point very briefly, as I will develop
Senator MORSE. I am sorry, I didn't mean to interrupt.
Mr. SCANLAN. That is quite all right, sir, but in Seas Shipping Company v. Sieracki, there is reference specifically in there that the Supreme Court recognized that the liability of the employer, the longshoreman to his employer was an exclusive liability, and then, as I will develop later on, that has been completely destroyed.
Senator MORSE. I will hear you through.
Mr. SCANLAN. But in 1953, in Pope & Talbot v. Hawn, (346 U.S. 406, 74 S. Ct. 202, 98 L. Ed. 143), the Supreme Court ruled that there could be no contribution among tort-feasors in maritime personal injury cases.
The Court referred this problem to Congress but to date nothing has been done about it. Then the stevedores were brought in for indempity-based on the breach of an implied or express contract to perform their work in a workmanlike manner.
In 1956, the Court decided the famous Ryan case (Ryan Stevedoring Co. v. Pan-Atlantic Steamship Corporation, 350 U.S. 124, 76 S. Ct. 232, 100 L. Ed. 133). Many people in the maritime industry hoped that this decision would bring to an end this unprecedented situation by limiting the longshoreman to the exclusive benefits provided by the act. But the Supreme Court in a 5-to-4 decision thought otherwise and sanctioned the indemnity action against the employer who provided the compensation benefits. This decision opened the floodgates and the deluge of third-party cases stated cascading in all their fury.
In 1958, in Weyerhaeuser v. Nacirema, (355 U.S. 563, 78 Š. Ct. 438, 2 L. Ed. 2d 491), the Court ruled that the stevedoring duty extended not only to handling of cargo but also to the use of equipment and the concept of "active versus passive negligence” was "inappropriate."
In 1959, Crumady v. Fisser (358 U.S. 423, 79 S. Ct. 445, 3 L. Ed. 2d 413) held that the stevedore was liable for indemnity if it brought the unseaworthy condition of the vessel “into play.” In 1960, Waterman Steamship Corp. v. Dugan & McNamara, Inc. (364 U.S. 421, 81 S. Ct. 200, 5 L. Ed. 2d 169) held that the stevedore could be liable to the ship for indemnity even though there was no contract between the ship and the stevedore.
In 1963, the most startling decision was reached by the Supreme Court in Reed v. Yaka (373 U.S. 410, 83 S. Ct. 1349, 10 L. Ed. 2d 448). There the Court held that a longshoreman could recover damages in addition to compensation benefits directly against his employer who was also the bare-boat charterer of the vessel. This decision was a complete usurpation of power by the Court in derogation of clear congressional statutory language. And in the same year Gutierrez v. Waterman (373 U.S. 206, 83 S. Ct. 1185, 10 L. Ed.2d 297), the Court ruled that a ship could be rendered unseaworthy by a bag of beans which had been discharged from the ship where the longshoreman was injured on the pier when he slipped on the beans which spilled on the pier from a torn bag.
Senator Morse. Is that a water-under-the-pier decision?
Mr. SCANLAN. This didn't go on the water under the pier, Senator Morse. That went on the basis that the cargo had been discharged from the ship, and it was part—since it was in the discharging operation, it was part of that process, and therefore, since it was part of the process, and the bag of beans was defective, that the ship was unsea worthy.
Senator MORSE. I am sorry, I have to declare a 10-minute recess for a vote.
(A brief recess was taken.) Senator MORSE. The hearing will reconvene. Mr. Scanlan, you may proceed. I am terribly sorry to interrupt you.
Mr. SCANLAN. It is quite all right, Senator Morse. We understand it, and we appreciate very much your taking the time to listen.
I was discussing the Reed case, Reed v. Yaka, and I had pointed out how in that case the Supreme Court completely nullified the law by holding that a longshoreman could recover directly against his
employer, who was a bare-boat charterer of the vessel, then in the Gutierrez case, I think I refer to that also.
We then go on to 1964, in the Oregon Stevedoring Co. case, where the Court decided that a stevedore who without negligence supplies defective equipment during the course of the stevedoring operation must indemnify the shipowner for breach of his implied warranty of workmanlike service.
The latest Supreme Court case on this subject is Jackson v. Lykes Bros. Steamship Co., Inc. ( U.S. 18 L. Ed. 2d 488, 87 S. Ct. ), decided May 8, 1967. In that case, a longshoreman employed by the defendant shipowner was fatally injured while working on one of the defendant's ships. His widow sued the defendant in a Louisiana State court, claiming that the death was caused by the defendant's negligence or by the ship's unseaworthiness. The trial court dismissed the action on the ground that it was precluded by section 5 of the Longshoremen's and Harbor Workers' Compensation Act which, as I mentioned above, provided that the compensation benefits payable under the act shall be exclusive and in place of all other liability of a longshoreman's employer. The judgment of dismissal was affirmed by a Louisiana court of appeal and the Louisiana Supreme Court denied certiorari.
However, the U.S. Supreme Court reversed and remanded the case. The Court held that the action was not precluded by section 5 and reaffirmed Reed v. Yaka that a person employed by a shipowner as a longshoreman could sue the shipowner directly for injuries sustained as a result of the ship's unseaworthiness.
The dissenting opinion in this case in one sentence summarizes what the Supreme Court has been doing to change the original intent of Congress, which was to make compensation benefits the exclusive remedy against the employer, the same as in other compensation acts. That it was said that “it is our duty to apply the law not to repeal it.” This opinion also pointed out that: “Congress, in setting up a Federal system of workmen's compensation for longshoremen, imposing liability without fault upon employers, provided that this should be the exclusive remedy against the employer himself. I cannot agree that the law Congress passed is either "incongruous”, “absurd", or "unjust”. If it is, then so are the workmen's compensation laws of 49 States, all of which contain the same basic provision." And I respectfully submit that these cases clearly demonstrate that what the Supreme Court has actually done is to repeal the law, insofar as the intent of Congress was concerned, that the liability of the employer was to be exclusive.
As a matter of fact, the Court even recognized this in the Sieracki case, when the question came up as to the right of the longshoreman to bring an action against the shipowner for unseaworthiness, because in the Sieracki decision, the Court said: "We may take it, therefore, that Congress intended the remedy of compensation to be exclusive as against the employer."
Now this was repudiated in the Ryan case, and it was certainly repudiated in Reed v. Yaka, and most recently, in the Lykes Bros.
Now I would like to touch on the economic impact of the third party cases on the maritime industry. In 1915, before the Sieracki decision, the editors of American Maritime Cases devoted 14 pages to digesting
maritime personal injury cases. In 1950, this was increased to 23 pages; in 1955, tô 44 pages; and in 1964, to 54 pages. It has been estimated that no more than 10 to 15 percent of all suits filed go to trial. We have no way of knowing, therefore, how many cases were settled without suit or how many cases were settled after suit and without a reported decision. But this gives you some idea of the influx of the maritime third party cases since Sieracki.
In Philadelphia, I am told that about 90 percent of all longshorecompensable accidents wind up in third party claims. This is a staggering figure which I cannot imagine was contemplated by the Supreme Court when it decided the Ryan and Yaka cases. These maritime cases have caused such a tremendous congestion of the dockets in the U.S. District Court for the Eastern District of Pennsylvania that last year that court was forced to institute emergency procedures in an attempt to correct this situation. In a statement to the maritime bar, the court pointed out that:
The increase of Longshoreman cases from 254 in 1961 to 1128 in 1966 is an increase of 344 percent. In contrast, motor vehicle cases have increased less than 27 percent, and F.E.L.A. cases have not increased either percentagewise or numerically.
In 1961 Longshoreman cases constituted only eight percent of the total actions pending. Today, that is, as of June 30, 1966—
When the statement was made they constituted more than 23 percent of the total tort actions pending at the end of June 30, 1966. With the rundown which I have from the Administrative Office from June 30, 1966, to December 31, 1966, the trend is still continuing in growth. With any type of reasonable projection, this increase from eight percent to almost 23 percent, if that trend is continued for another five years, Longshoreman cases could constitute 23 of the total tort actions pending in this Court ...
And as the Court said: We cite this data because we believe that the trend may ultimately raise the issue in Congress and for others as to the wisdom of a Federal Court devoting so much of its resources to one field.
The U.S. Department of Labor through its Bureau of Labor Standards has done an outstanding job under Public Law 85–742 in establishing safety programs and making other worthwhile recommendations for the purpose of reducing longshore accidents. A 5-year report published by the Bureau of Labor Standards covering the period from 1960 to 1964 is very illuminating in connection with the problem we are discussing today. This report shows that in 1960, 10,701 longshore injuries were reported to the Bureau and that the compensation costs exclusive of medical expenses amounted to $8,885,537. In 1964, 7,794 longshore injuries were reported to the Bureau-a decrease of 2,907 accidents--but the compensation costs exclusive of medical expenses amounted to $13,384,429 or an increase of $4,498,892. The Government publication states that:
Had the reported injuries remained at the 1960 level during the four-year period, 1961–1964, the additional cost of compensation alone (exclusive of medical cost) for this period could have been over $9 million had all the claims for such injuries been closed within the four-year period.
Senator MORSE. Do you think, Mr. Counsel, that comparable statistics in connection with recovery for automobile accidents might show a substantial increase in the amounts of settlement in each case?
Mr. SCANLAN. On automobile cases, Senator Morse?