Opinion ID: 195068
Heading Depth: 1
Heading Rank: 2

Heading: Equitable Defenses and the State-law Counterclaim.

Text: 21 Jones asserted two affirmative defenses and a state-law counterclaim based on allegations that Williams committed perjury before the ALJ in March 1980, and that, as a direct consequence, the ALJ found, incorrectly, that no laborious work had been performed by Williams after October 1978. At the October 23, 1992 hearing before the magistrate judge, Jones proffered three affidavits from individuals who had accompanied Williams on numerous clamming and lobstering expeditions between October 1978 and March 1981. These affidavits attest that Williams engaged in the very types of heavy labor and lifting explicitly disclaimed in his testimony before the ALJ in 1980. Jones contends that the identity of the affiants could not have been discovered earlier in the exercise of reasonable diligence, since Jones only learned of their existence through a chance conversation in August or September of 1992. 22 With respect to the affirmative defenses, Jones requested alternative forms of equitable relief: (1) denial of the enforcement order on the ground that a party who obtains a compensation award through fraud is not entitled to its enforcement by injunction, or (2) a temporary stay of the section 921(d) enforcement action pending administrative relief from the DOL. With respect to the state-law counterclaim, see Me.Rev.Stat.Ann. tit. 14, Sec. 870 (1992) (damages action for perjury), Jones requested compensatory and punitive damages. 23 The district court held that it had no jurisdiction--hence no discretion under LHWCA section 921(d)--to refuse to enforce the compensation order, except on the two grounds enumerated in the LHWCA, neither of which was contested by Jones; namely, that Jones was not in default or that the compensation order was not made and served in accordance with law. 12 On related grounds, the district court refused to exercise pendent jurisdiction over Jones's state-law counterclaim. See United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966). The recommended decision did not address the request for a temporary stay of the section 921(d) enforcement proceedings. 24 On appeal, Jones contends that the district court viewed its equitable powers under section 921(d) too narrowly. See Restatement (Second) of Judgments Sec. 70, cmt. a (1982) (a court of equity will not enforce a judgment obtained by fraud). Although the district court may have painted with too broad a brush, see, e.g., infra notes 14 and 18, we think its core conclusions were nonetheless sound. 25
26 An enforcement order under LHWCA section 921(d) may take the form of a writ of injunction, a traditional equitable remedy which may expose the enjoined party to the district court's coercive contempt powers. Accordingly, fraud and unclean hands historically have been regarded as valid equitable defenses to injunctive relief, Loglan Inst., Inc. v. Logical Language Group, Inc., 962 F.2d 1038, 1042 (Fed.Cir.1992), and absent a controlling statute a federal court is presumed to possess the broad discretion and equitable power to configure its remedy to suit the needs of the case. Even in the context of congressionally created injunctive remedies, the Supreme Court has said that [u]nless a statute in so many words, or by a necessary and inescapable inference, restricts the court's jurisdiction in equity, the full scope of that jurisdiction is to be recognized and applied. Porter v. Warner Holding Co., 328 U.S. 395, 398, 66 S.Ct. 1086, 1089, 90 L.Ed. 1332 (1946) (emphasis added). See Weinberger v. Romero-Barcelo, 456 U.S. 305, 313, 102 S.Ct. 1798, 1803, 72 L.Ed.2d 91 (1982) ([W]e do not lightly assume that Congress has intended to depart from established [equity] principles.). 13 27 Under this rubric, the first question we confront is whether the LHWCA deprives the district court of its traditional discretionary powers to withhold equitable relief for the enforcement of a compensation award obtained through an employee's fraud. 14 Since section 921(d) contains no explicit delimitation of the district court's equitable powers, 15 we must look to the LHWCA's remedial framework as a whole. 28 The LHWCA affords Jones an adequate remedy for redressing any fraud alleged in the affirmative defense. Eschewing conventional res judicata principles, section 922 allows an employer to request the ALJ to reconsider the case where there has been a change of conditions or mistake of fact warranting modification or suspension in compensation payments. See 33 U.S.C. Sec. 922; see also 20 C.F.R. Sec. 702.373; Hudson v. Southwestern Barge Fleet Servs., Inc., 16 Ben.Rev.Bd.Serv. 367, 369 (1984) (holding that Sec. 922 was intended by Congress to displace traditional notions of res judicata) (citing Banks v. Chicago Grain Trimmers Ass'n, 390 U.S. 459, 88 S.Ct. 1140, 20 L.Ed.2d 30 (1968)). 16 [F]acts relating to the nature and extent of a claimant's disability typically are the subject of modification proceedings. Williams v. Geosource, Inc., 13 Ben.Rev.Bd.Serv. 643, 645 (1981). The factfinder [ALJ] has broad discretion to correct mistakes of fact, whether they be demonstrated by new evidence, cumulative evidence, or further reflection upon the evidence initially submitted. Id. (emphasis added). The overarching criterion for reopening a compensation award under the LHWCA is whether reexamination would serve the interests of justice. O'Keeffe v. Aerojet-General Shipyards, Inc., 404 U.S. 254, 255-56, 92 S.Ct. 405, 406-07, 30 L.Ed.2d 424 (1971). Perjured testimony resulting in an erroneous finding of fact concerning the nature or extent of an employee's disability would seem to come squarely within the realm of a mistake of fact. 29 On October 14, 1992, days before the recommended decision issued in this case, Jones filed a petition for modification pursuant to LHWCA section 922. 17 In these circumstances, and against this legislative framework, we think there are at least two sound reasons for not inferring a congressional intention to dedicate two forums to the task of assessing alleged mistakes of fact relating to an employee's testimony before the ALJ. First, where newly discovered evidence of fraud implicates the evidentiary basis for an employee's compensation claim, the LHWCA discloses a decided preference for utilizing the DOL's in-house expertise in resolving the dispute. See, e.g., Crowell v. Benson, 285 U.S. 22, 46, 52 S.Ct. 285, 290, 76 L.Ed. 598 (1932) (the LHWCA provides a prompt, continuous, expert and inexpensive method for dealing with a class of questions of fact which are peculiarly suited to examination and determination by an administrative agency specially assigned to that task) (emphasis added); cf. Youghiogheny & Ohio Coal Co. v. Vahalik, 970 F.2d 161, 162 (6th Cir.1992) (the benefits of agency expertise become irrelevant under the LHWCA only after claim determination is complete). 18 30 Under either section 921(d) or 922, the factfinder would be required to decide: (1) whether Jones could have discovered the putative fraud earlier, in the exercise of due diligence; (2) whether the affidavits proffered by Jones, together with the record evidence in the case before the DOL, credibly suggest that Williams misrepresented his physical capacities and activities during the relevant period; and (3) whether the putative perjury was sufficiently material to undermine the ALJ's finding of temporary total disability. See General Dynamics Corp. v. Director, Office of Workers' Compensation Programs, 673 F.2d 23, 25 (1st Cir.1982) (in reopening case, ALJ must balance the need to render justice against the need for finality in decisionmaking, and justice is not necessarily served where the employer could have presented his side of the case at the first hearing....); see also McCord v. Cephas, 4 Ben.Rev.Bd.Serv. 224, 225 (1976) (employer not entitled to modification if it exhibits a bad faith effort to relitigate issues ad nauseam). We think the DOL is better positioned to address such issues in these circumstances. 31 Second, section 922 modification rulings are appealable to the BRB and to the court of appeals. See 33 U.S.C. Sec. 921(b), (c); O'Loughlin v. Parker, 163 F.2d 1011, 1013 (4th Cir.1947) (ALJ's decision to reopen under section 922 is reviewed for abuse of discretion). Similarly, an employer would be allowed an appeal from a district court decision which discounted the employer's equitable defenses and directed enforcement of a compensation award. To allow the section 922 and the section 921(d) proceedings to go forward simultaneously would open up the possibility of inconsistent rulings on the fraud claim, which ultimately would have to be resolved by the court of appeals in either event. 32 As we can discern no good purpose for such a needless duplication of administrative and judicial effort, we conclude that LHWCA section 921(d), viewed in broad context, gives rise to the inescapable inference, see Porter, 328 U.S. at 398, 66 S.Ct. at 1089, that Congress did not intend the type of fraud defense here presented by Jones to be adjudicated by the district court but by the DOL. 33
34 The remaining question is somewhat narrower: may the district court in a section 921(d) proceeding temporarily enjoin enforcement of a compensation order pending administrative resolution of an employer's petition for modification under section 922? 19 Jones contends that he will be harmed irreparably absent a stay of the section 921(d) enforcement proceeding, because the compensation payments he is compelled to make prior to any section 922 modification order would not be recoverable. See supra note 10. 35 Only two LHWCA provisions explicitly allow stays of effective compensation orders. See 33 U.S.C. Secs. 921(b) (stay pending appeal to BRB), 921(c) (stay pending appeal from BRB to court of appeals), thus underscoring the strong LHWCA policy favoring prompt compensation payments even though the employee's entitlement to disability benefits remains in genuine dispute. Stays pending administrative and judicial review are available only on a showing of irreparable injury. See Henry, 704 F.2d at 865. It is not enough that the employer demonstrate that interim payments would be unrecoverable absent a stay, nor that the employer is experiencing financial difficulty in making payments. Edwards v. Director, Office of Workers' Compensation, 932 F.2d 1325, 1329 (9th Cir.1991). Irreparable injury will be found only in extraordinary circumstances. Id. 36 Unlike the minimal time delays required to effect proper service of process, see supra pt. I, a stay of section 921(d) enforcement proceedings while an employer pursues a modification ruling from the DOL (and, perhaps, pending appellate review) threatens a lengthy delay in the previously ordered compensation payments to the employee. Therefore, under the inescapable inference standard established in Porter, 328 U.S. at 398, 66 S.Ct. at 1089, we must conclude that the LHWCA divests the district court of the equitable power to defer its entry of a section 921(d) enforcement order pending the outcome of a section 922 modification proceeding unless the employer first establishes irreparable injury. As we have noted, Jones's answer did not allege facts sufficient to establish irreparable injury, nor does the record suggest a basis for such a showing. Thus, the magistrate judge did not err in failing to act on the request for a temporary stay. 37