1 United States Court of Appeals,

Fifth Circuit.

No. 94-40716.

INGALLS SHIPBUILDING, INC., et al., Petitioners,

v.

DIRECTOR, OFFICE OF WORKERS' COMPENSATION PROGRAMS, UNITED STATES

DEPARTMENT OF LABOR, and Maggie Yates (Widow of Jefferson Yates),

Respondents.

Oct. 3, 1995.

Petition for Review of a Final Order of the Benefits Review Board.

Before WISDOM, GARWOOD and DAVIS, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Ingalls Shipbuilding (Ingall s) appeals the order of the

Benefits Review Board (BRB) awarding Magg ie Yates death benefits

under section 9 of the Longshore and Harbor Workers Compensation

Act (the "Act"), 33 U.S.C. § 909. We affirm.

I.

Jefferson Yates worked periodical ly as a shipfitter for

Ingalls in Pascagoula, Missis sippi, from 1953 until 1967, during

which time he w as exposed to asbestos. He worked in unrelated

non-maritime employment from 1967 to 1974, when he vo luntarily

retired at age 67. In March 1981, he was evaluated for

asbestos-related diseases and was later diagnosed as suffering from

asbestosis, chronic bronchitis, and possibl e malignancy of the

lungs . In April 1981, Mr. Yates filed a claim for disability

benefits under section 8 of the Act. 33 U.S.C. § 908. In May

1981, he filed a third -party lawsuit in a Mississippi federal2

district court, seeking damages from twenty-three manufacturers and

sellers of asbestos products to which he was exposed while employed

at Ingalls.

In June 1982, Ingalls admitted the compensability of Jefferson

Yates's c laim for disability benefits under the Act and tendered

benefits. In May 1983, Ingalls and Jefferson Yates executed a

settlement agreement pursuant to 33 U.S.C. § 908(i) under which

Ingalls agreed to pay Mr. Yates a lump sum payment of $15,000, give

him open medical benefits, and pay his attorney's fees. Ingalls

made payment consiste nt with a May 10, 1983 order of the deputy

commissioner. Between May 1981 and January 1984, Jefferson Yates

consummated settlement agreements with eight defendants in the

federal court suit (the pre-death settlements). Ingalls was not a

party to the pre-death settlements, and Jef ferson Yates did not

obtain its approv al before he made these settlements. Although

Maggie Yates was not named a party plaintiff in the federal court

suit, she signed releases in each of the pre-death settlements.

Al though some of the earlier settlements limited Maggie Yates's

release to loss of consortium, other se ttlements foreclosed her

from bringing any future tort claim for her husband's wrongful

death.

On January 28, 1986, Jefferson Yates d ied from prostate

cancer. The parties stipulated that his asbestosis contributed to

his death. In addition to his wife, Jefferson Yates was survived

by six non-dependent children. In April 1986, Maggie Yates filed

a claim for death bene fits under section 9 of the Act against1 None of the six children filed claims for death benefits

under the Act.

3 Ingalls and its carrier

. 1 Ingalls promptly controverted Mrs.

Yates's claim.

Maggie Yates and her six non-depend ent children continued

Jefferson Yates's federal court suit, which was converted from a

personal injury action to a wrongful death action. Thereafter,

Maggie Yates and her six children entered into settlements with

Raymark, et al. on June 9, 1987, for $2,821; with Wellington, et

al. on April 5, 1989, for $60,000; and with Johns-Manville, et al.

on March 3, 1989, for $43,000 (the post-death settlements). In

accordance with secti on 33(g)(1), Mrs. Yates obtained Ingalls's

written approval for the three post-death settlements.

Ingalls defended Ms. Yates' claim for death benefits under the

Act on two fronts. It argued that Mrs. Yates' pre-death settlement

with the asbestos defendants was without its approval and her claim

for post-death benefits was therefore barred by § 33(g)(1) of the

Act as interpreted by the Supreme Court in E state of Cowart v.

Nicklos Drilling Co., 505 U.S. 469, 112 S.Ct. 2589, 120 L.Ed.2d 379

(1992).

Ingalls also argued that once it took credit for all the net

proceeds of t he post-death settlements against its potential

liability to Maggie Yates for death benefits under the Act, it was

mathematically impossible that it would be re quired to pay death

benefits to Mrs. Yates.

In an April 1992 decision and order, the A dministrative Law4

Judge (ALJ) held that, at the time of the pre-death settlements,

Maggie Yates was not a person "entitled to compensation" under

s ection 33(g)(1) and was therefore exempt from that subsection's

written approval requirement. Thus, the ALJ concluded that Maggie

Yates's c laim for death benefits under the Act was not barred by

section 33(g)(1).

Based on the Mi ssissippi wrongful death statute and Maggie

Yates's own testimony, the ALJ determined that the post-death

settlements were apportioned between Maggie Yates and the six

children, so that Maggie Yates only received one-seventh of the net

amount. The ALJ concluded that Ingalls was only entitled to a

credit for one-seventh of the post-death settlement under the Act.

However, the ALJ held that, based on the terms of the post-death

settlement agreements, Ingalls was contractually entitled to

receive credit under section 33(f) for the entire net amount of the

post-death settlements to offset its statutory liability for death

benefits. Accordingly, the ALJ awarded Maggie Yates death benefits

under section 9 of the Act and held that Ingalls was entitled to a

credit under section 33(f) for the entire net amount of the

post-death settlements.

M aggie Yates appealed the ALJ's decision to the BRB, and

Ingalls cross-appealed. The Director of the Office of Workers'

Compensation Programs (Dire c tor) responded to the appeals and

supported Maggie Yates's interpretations of both section 33(g)(1)

and 33(f). In a June 1994 decision, the BRB affirmed the ALJ's

holding that Maggie Yates's claim for death benefits was not barred2 Ingalls moved to strike the brief of the Director and

disallow any further participation, asserting that the Director

lacked standing. In Ingalls Shipbuilding Div., Litton Systems,

Inc. v. White, 681 F.2d 275, 281-84 (5th Cir.1982), overruled on

other grounds, Newpark Shipbuilding & Repair, Inc. v. Roundtree,

723 F.2d 399, 406-07 (5th Cir.) (en banc), cert. denied, 469 U.S.

818, 105 S.Ct. 88, 83 L.Ed.2d 35 (1984), this Court held that the

Director has standing to participate as a respondent in the

appeal of a BRB decision. In so holding, the court in White

5 by section 33(g)(1) because she was not "a person entitled to

compensation" at the time of the pre-death settlements. The BRB

also affirmed the ALJ's order declining to give a credit as a

matter of law for settlement sums received by the Yates

non-depen dent children against death benefits Ingalls owed under

the Act. A majority of the BRB held that no contractual basis

existed for allowing the offset of the entire net amount received

in the post-death settlements and reversed the ALJ on this point.

One member of the three judge panel dissented, arguing that, under

t he terms of the post-death settlements, Maggie Yates waived her

right to apportionment.

Ingalls filed a timely petition for review with this Court.

The Director appeared as a respondent and filed a brief supporting

Maggie Yates's interpretations of sections 33(g)(1) and 33(f). We

consider below the issues presented in this appeal.

II.

A.

Ingalls argu es first that § 33(g)(1) of the Act bars Mrs.

Yates' claim for death benefits because she entered into third

party settlements without Ingall s ' approval before Mr. Yates'

death. 2 This court's review of BRB decisions is limited torejected the line of cases relied on by Ingalls in this appeal,

namely, the Fourth Circuit's rule that the Director must show a

stake in the outcome of the controversy in order to respond to a

petition for review under 33 U.S.C. § 921(c). White, 681 F.2d at

281. In Director, Office of Workers' Compensation Programs v.

Newport News Shipbuilding and Dry Dock Co., --- U.S. ----, 115

S.Ct. 1278, 131 L.Ed.2d 160 (1995), the Supreme Court held that

the Director had no standing to petition the court of appeals

seeking reversal of a BRB decision. Id. at ----, 115 S.Ct. at

1288. The Court in Newport News Shipbuilding differentiated an

agency's entitlement to party-respondent status from its standing

to appeal and commented that the decision "intimates no view on

the party-respondent question." Id. at ---- n. 2, 115 S.Ct. at

1284 n. 2. Thus, White remains binding precedent in this Circuit

and forecloses Ingalls's argument that the Director has no

standing to respond in this case.

6 considering errors of law and ensuring that the BRB adhered to its

statutory standard of review, namely, wh ether the ALJ's factual

findings are supported by substantial evidence. T anner v. Ingalls

Shipbuilding, 2 F.3d 143, 144 (5th Cir.1993).

Section 33(g)(1) provides,

"If the person entitled to compensation (or the person's

representative) enters into a settlement with a third person

[other than an employer or person in his employ] for an amount

less than the compensation to which the person (or the

person's representative) would be entitled under this chapter,

the employer shall be liable for compensation as determined

under subsection (f) of this section only if written approval

of the settlement is obtained from the employer and the

employer's carrier, before the settlement is executed, and by

the person entitled to compe nsation (or by the person's

representative.)" 33 U.S.C. § 933(g)(1).

Section 33(f) governs third-party recovery by persons entitled to

compensation. If a person entitled to compensation enters into an

unapproved third-party settlement for an am ount less than he is

entitled to under the Act, all rights to compensation under the Act

are terminated pursuant to section 33(g)(1). On the other hand, if

the person entitled to compensation enters a third-party settlement7

for an amount greater than his statutory entitlement, then the

written approval requirement of section 33(g)(1) does not apply,

and the employer would be entitled to a 100% set-off under section

33(f).

Mrs. Yates concedes that the p re-death settlements were not

approved in writing by Ingalls but argues that whe n these

settlements were made, Mr. Yates was the only "person entitled to

compensation" and thus she was not a "person entitled to

compensation." She argues that because she had no right to

compensation she was not required to obtain Ingalls's written

approval for the pre-death settlements. On the other hand, Ingalls

argues that Maggie Yates, as a potential widow, qualifies as "a

person entitled to compensation" and that her failure to obtain

written appro val of the pre-death settlements in accordance with

section 33(g) bars her claim for death benefits. Both the ALJ and

the BRB agreed with Maggie Yates's interpretation of the phrase "a

person entitled to compensati on." The parties focus their

arguments on Estate of Cowart, 505 U.S. 469, 112 S.Ct. 2589, a

recent Supreme Court decision interpreting this phrase in section

33(g)(1).

In Cowart, the employee suffered a work-related hand injury,

and his employer paid temporary total disability benefits for ten

months but refused to pay permanent partial disability. During the

period when he was not receiving any benefits, Cowart settled a

third-party action withou t obtaining the written approval of his

employer. Cowart argued that he was not "a person entitled to8

compensation" under section 33(g)(1) at the time of the settlement

because his employer was not voluntarily paying benefits and a

formal award of benefits had not been issued. Because he was not

"a person entitled to compensation," Cowart contended that he was

not requi red to obtain his employer's approval of the settlement

pursuant to § 33(g)(1).

R ejecting Cowart's argument, the Supreme Court held t hat he

became "a person entitled to compensation" at the time of the

work-related injury and that it was immaterial whether the employee

was receiving benefits at the time of the third-party settlement.

I d. at 476-77, 112 S.Ct. at 2594-95. The Court stated, "Cowart

suffered an injury which by the terms of the LHWCA gave him a right

to compensation from his employer. H e became a person entitled to

compensation at the moment his right to recovery vested, not when

his employer admitted liability, an event yet to happen. " Id. at

477, 112 S.Ct. at 2595 (emphasis added).

Both Maggie Yates and the Director argue that, under Cowart,

Maggie Yates was not "a person entitled to compensation" at the

time of the pre-death settlements because her right to recover

death benefits did not vest until her husband's death. S ee

Travelers Ins. Co. v. Marshall, 634 F.2d 843, 846 (5th Cir.1981)

(stating that "a cause of action for death benefits certainly does

not arise until death").

In response, Ingalls asserts that this panel should follow the

Ninth Ci rcuit's interpretation of "a person entitled to

compensation" in a cas e very similar to the instant case. In9

Cretan v. Bethlehem Steel Corp., 1 F.3d 843 (9th Cir.1993), cert.

denied, --- U.S. ----, 114 S.Ct. 2705, 129 L.Ed.2d 833 (1994), an

e mployee exposed to asbestos during his employment filed a claim

for disability benefits under the Act , and the employer disputed

liability. The employee also filed a product liability suit

against numerous asbestos manufacturers and entered into settlement

agreements with s everal of those manufacturers without obtaining

the written approval of his employer. Although his wife and

daughter were not named as parties in the third-party suit, both

settled their wrongful death claims against the manufacturers as

part of the settlement agreements. In addition, his wife settled

her loss of consortium claim in the same series of agreements.

After the employee died, an ALJ awarded disability benefits to his

wife and deat h benefits to his wife and daughter. The Ninth

Circuit held that the wife and daughter were "persons entitled to

compensation" and therefore could not recover death benefits under

the Act because they failed to obtain the written approval of the

employer for the pre-death settlements as required by section

33(g). Id. at 848.

The C retan court considered the Supreme Court's languag e in

Cowart that the employee "became a person entitled to compensation

at the moment his right to recovery vested," and concluded that it

was dicta that was not binding on the court. The precise issue

presented in Cowart was the definition of "a person entitled to

compensation." The Court's determination that the employee

qualified under this statutory test when his right to recovery10

vested is the core of the Supreme Court's holding. We therefore

disagree with the Cretan court's conclusion that this critical part

of the Supreme Court's opinion in Cowart is dicta.

Thus, applying Cowart 's definition we conclude that section

33(g)(1) does not bar Maggie Yates's death benefits claim because

she was not "a person entitled to compensation" at the time of the

pre-death settlements. At the time of the pre-death settlements,

Maggie Yates's claim for death benefits had not vested. Three

contingencies come to mind under which Maggie Yates's right to

death benefits under the Act would have never accrued. She could

have predeceased or divorced her husband, or Jefferson Yates could

have died from causes unrelated to his employment. Under any of

these scenarios, Maggie Yates's right to death benefits under the

Act would never have accrued. Because Mrs. Yates' right to death

benefits had not vested when the pre-death settlements were made,

her failure to obtain Ingalls's written approval of the pre-death

settlements is irrelevant.

B.

Ingalls argues next that the BRB erred in concluding that

Ingalls was not entitled to offset from death benefits due Ms.

Yates the entire amount of the post -death settlements. The ALJ

determined that Maggie Yates only received one-seventh of the net

amount of the three post-death settlements. He held, however,

that, as a matter of contract law, the settlement agreements Ms.

Yates executed permitted Ingalls to offset the entire net amount of

the post-death settlements. The BRB reversed and held that Ingalls11

was only entitled to set-off the net amount received by Maggie

Yates.

We first consider the propriety of the BRB's offset under §

33(f) of the Act, without regard to the provisions of the

settlement agreement. Section 33(f) provides:

"If the person entitled to compensation institutes proceedings

... the employer shall be required to pay as compensation

under this chapter a sum equal to the excess of t he amount

which the Secretary determines is payable on account of such

injury or death over the net amou nt recovered against such

third party. Such net amount shall be equal to the actual

amount recovered less the expenses reasonably incurred by such

person in respect to such proceedings (i ncluding reasonable

attorneys' fees). 33 U.S.C. § 933(f) (emphasis added).

Ingalls first argues that, as a matter of law, it is entitled

to a credit under section 33(f) for the net amount of all the

post-death settlements. Ingalls argues that the appropriate

set-off is the "amo unt recovered against the third party."

Respondents counter that the proper offset is the net amount

recovered by "such person" entitled to compensation. Several

courts have addressed this precise issue. In F orce v. Director, an

employee's widow and her two children settled their potential

wrongful death action with third- parties. 938 F.2d 981 (9th

Cir.1991). In the widow's later claim for death benefits under the

Act, the employer argued that it was entitled to a credit for the

net amount the widow and her two children obtained in the

settlement agreements. Like the Yates children, the Force children

filed no claims for death benefits under the Act. Rejecting the

employer's argument, the Ninth Circuit stated,

"The offset provision [of section 33(f) ] applies to the third

party recovery obtained by "the p erson entitled to3 The settlement at issue in Force was executed before the

employee died. Because the court in Force also held that a

potential widow was a "person entitled to compensation" under

section 33(f), it applied section 33(f) to the pre-death

settlement. Although Ingalls argues that we should adopt Force

's definition of "a person entitled to compensation" for section

33(g), it does not argue that it is entitled to a set-off under

section 33(f) for the pre-death settlements.

12 compensation" under the Act. A n employer is entitled t o offset its liability to a particular claimant only the third

party damages recei ved by the claimant for the covered

occupational injury or death

... The Force child ren did not

file claims for LHWCA benefits and are not entitled to them;

section 933(f) simply does not apply to the children or their

third party recovery." Id. at 985 (emphasis added). 3

The Fourth Circuit has also adopted this interp retation of

section 33(f) in determining apportionment among parties. S ee

I.T.O. Corp. of Baltimore v. Sellman, 967 F.2d 971 (4th Cir.),

cert. denied,

--- U.S. ----, 113 S.Ct. 1579, 123 L.Ed.2d 147 (1993)

("Employer's offset right s [under section 33(g) ] are limited to

the portion intended for the claimant since the claimant is the

"person entitled to compensation.' "). S ee also Brown v. Forest

Oil C orp., 29 F.3d 966, 972 (5th Cir.1994) (in the context of an

employ er's lien, "[e]mployer's offset rights are limited to the

portion of the recovery intended for the employee").

Based on the plain language of § 33(f) and the above

authoriti es, we conclude that Ingalls's argument that it is

entitled as a matter of law to a credit for the net amount received

by Mrs. Yates and her six children from the post-death settlements

must be rejected. Ingalls is only entitled to a credit under

section 33(f) for the net amount received by Mrs. Yates.

Relying on St. John Stevedoring Co. v. Wilfred, 818 F.2d 39713

(5th Cir.1987), Ingalls argues next that the provisions of the

post-death settlement agreements provide them with an independent

basis to obtain credit for the net amount of the settlements

received by Maggie Yates and her six children. The respondents

counter t hat the terms of the settlement agreement are ambiguous

and cannot be reasonably interpreted as a consent by Maggie Yates

to grant Ingalls a credit for the net amount of all third party

recoveries. In addition, the respondents assert that the BRB

properly held that Ingalls had no right to enforce the terms of the

settlement agreements.

Because we are persuaded that the respondents' first argument

is meritorious, we do not reach their remaining contentions. For

the reasons explained below, we conclude that the language in these

contracts does not clearly and unambiguously require Mrs. Yates to

give Ingalls a credit for any sums that exceed the net amount she

received from the settlements.

Three separate settlements were reached in this case and three

separate releases were executed. The settlement with Raymark

Industries et al. was signed on June 9, 1987. Mrs. Yates and her

six children are named in the body of the release and referred to

collectiv ely as "Releasors." The critical paragraph provides in

part that if any claim for worker's compensation benefits ... [1]

"shall hereaf ter be filed and be successful, and the amounts

ordered to be paid are found to be a lien against the consideration

paid herein, then any employer or its insurance carrier paying or

ordered to pay such compensation benefits to a ny Releasor shall14

first be given credit for the consideration paid to Releasors under

this agreement, less reasonable costs of collection, and [2] shall

make no payment of any compensation benefits to any Releasor until

the consideration paid to Releasors under this a greement is

exhausted." The initial clause quoted above reflects an intent to

give the employer a credit to the extent any compensation payments

to the Releasors constitute "a lien against the consideration paid

herein." Obviously the only portion of the third party settlement

which c ould be subject to a lien are for sums paid to a person

"entitled to compensation." No compensation lien can be imposed on

settlement sums paid by a third party to an employee not entitled

to compensation. See 33 U.S.C. § 917. Thus, the language in the

rel ease which purports to give the employer a set-off against

settlement sums subject to a compensation lien reflects an intent

to limit the set-off to the portion of the settlement paid to a

party entitled to compensation.

This supports the director and Mrs. Yates' argument that the

language of the instrument do es not reflect an intent to grant a

set-off for the total amount of the settlement. The second clause

in the above quoted provision ("and s hall make no payment of any

compensation benefits to any Releasor until the consideration paid

to Releasors under this agreement is exhausted") could, if read in

isolation, reflect an intent to grant the employer a credit for the

total consideration paid to all Releasors under the settlement

agreement. But the second clause does not clearly indicate an

intent to grant a credit for sums not covered by a compensation4 In the Raymark settlement, the third party tort defendants

obtained an individual "acknowledgement" from Maggie Yates giving

Litton systems "credit for the amount of money paid to me by the

above named defendant." It stated further that "Litton Systems

will owe me no workmen's compensation benefits or medical

benefits under the Longshore & Harbor Workers' Compensation Act

until the amount received by me from the above mentioned

defendant has been exhausted based on the weekly benefits due me

from Litton Systems, Inc...." This instrument, prepared for Mrs.

Yates' signature, makes no reference to Mrs. Yates' children;

and Mrs. Yates' children signed no separate acknowledgement

similar to the one signed by Mrs. Yates. (emphasis added) See

page 17 of RX 21.

5 Neither the Wellington nor the Manville settlement papers

include a separate document similar to the "Acknowledgement"

signed by Mrs. Yates in the Raymark settlement and discussed in

note 4.

15 lien. The second clause can reasonably be read to grant a credit

to the employer against sums paid to all "Releasors" for all

s ettlement sums subject to a compensation lien. 4 The settlement

instrument does not evidence an intent to grant Ingalls a set-off

in derogation of § 33(f) of the Act with sufficient clarity to

permit enforcement.

Language almost identical to that quoted above in the Raymark

release is included in the other two instruments. In the

Wellington settlement, the release provides that if any claim for

w orkmen's compensation shall be filed and be successful

... " and

the amounts ordered to be paid are found to be a lien against the

consideration paid herein, then any employer or its insurance

carrier paying or ordered to pay such compensation benefits to

either of the undersigned shall first be given credit for the

consideration pai d to the undersigned under this agreement...."

The Manville settlement contains an almost identical provision. 56 Although Mrs. Yates was not entitled to compensation at the

time of the pre-death settlements, her right to compensation

under the Act accrued upon Mr. Yates' death. See 33 U.S.C. §

909.

16 For the reasons stated above, we conclude that the language

in these three instruments do not reflect with sufficient clarity

an intent to grant Ingalls a credit against any larger portion of

the settlement sum than would be subject to a compensation lien.

A compensation lien would only be imposed on the settlement sums

received by Mrs. Yates since she was the only settling party who

was entitled to compensation. 6

For the reasons stated above, we affirm the order of the BRB.

AFFIRMED.