Opinion ID: 181162
Heading Depth: 3
Heading Rank: 3

Heading: Applicable Interest Rate

Text: [3] As we have stated before, the LHWCA contains no express provision with respect to interest on past due payments. See Found. Constructors, 950 F.2d at 625. As the statute is silent on the issue of interest, the question before us is whether the Director’s proposed construction of the Act is unreasonable. See id. We will not “substitute our own construction ‘for a reasonable interpretation made by the administrator of an agency.’ ” Id. (quoting Chevron, 467 U.S. at 843). [4] The Director’s position,2 that simple interest on past due payments should be awarded at the rate defined in 28 U.S.C. § 1961(a), is not unreasonable. In the absence of any reference to interest in the Act, we measure the reasonableness of the Director’s position against the Act’s general purpose of compensating disabled employees. See id. (determining whether interest is appropriate on past due payments based on “the remedial intent of the Act”).3 [5] Awarding simple interest at the rate defined in 28 U.S.C. § 1961(a) is not an unreasonable method of compensating a claimant for past due compensation. Since the statute ties the interest rate to the one-year United States treasury bill 2 The Director’s position is clearly laid out in his brief to this panel. See Transbay Container Terminal v. U.S. Dep’t of Labor, 141 F.3d 907, 910 (9th Cir. 1998) (quoting Force, 938 F.2d at 983) (noting that the Director’s position may be presented as a litigating position). 3 We have previously held that interest on past due compensation may be appropriate to compensate a disabled worker. See Found. Constructors, 950 F.2d at 625. We later determined that interest on past due payments was mandatory. See Matulic v. Director, OWCP, 154 F.3d 1052, 1059 (9th Cir. 1998). We have never mandated a specific interest rate nor defined any standard beyond the Act’s general purpose of compensating disabled workers when evaluating interest awards. PRICE v. STEVEDORING SERVICES OF AMERICA 20123 rate, the interest rate applicable to past due payments adjusts with changes in the market. See 28 U.S.C. § 1961. In this way, the interest rate of § 1961(a) approximates the interest one could earn on an investment over a period of time, adjusted for changes in the market. Of course, Price suffered some loss due to the delay in his payment. However, applying a market-sensitive interest rate to past due compensation is an appropriate—and certainly not an unreasonable—way to compensate for this loss. In determining whether the 28 U.S.C. § 1961(a) rate reasonably fulfills the general compensatory objective of the Act, we also consider other provisions of the Act which compensate an employee for delay. It is salient to this inquiry to recognize that the Act specifically provides compensation for late payments. For payments due under the Act but not formalized in a compensation order, any payments not paid within 14 days of the time they are due are subject to a penalty of 10% of the unpaid amount. See 33 U.S.C. § 914(e). If payments are mandated by a compensation order, this penalty is 20%. Id. § 914(f). These penalties are separate from and in addition to interest awarded for past due payments by the ALJ at the 28 U.S.C. § 1961(a) rate. Price ignores the late payment penalty provisions of 33 U.S.C. § 914 in arguing that interest awarded under 28 U.S.C. § 1961(a) is unreasonable. He argues that the interest rate defined in 26 U.S.C. § 6621 better approximates the cost of borrowing money for a disabled employee. Price further contends that the Director’s position (using an interest rate approximating interest earned on saved money) is unreasonable because, in reality, most disabled employees will actually need to borrow. [6] As an initial matter, we have no evidence before us indicating whether most disabled employees must actually borrow funds while waiting for a determination of benefits. The only relevant inquiry is whether the Director’s position is 20124 PRICE v. STEVEDORING SERVICES OF AMERICA unreasonable with respect to all claimants. Nevertheless, even if Price is correct that most claimants borrow, we cannot say that the Director’s position is unreasonable. A disabled employee is compensated for past due payments at the interest rate defined in 28 U.S.C. § 1961 in addition to the penalty of either 10 or 20 percent defined in 33 U.S.C. § 914; this is simply not an unreasonable estimate of the employee’s actual loss, even if the employee borrowed funds.4 [7] In the alternative, Price argues that, if this panel upholds the Board’s use of the interest rate in 28 U.S.C. § 1961(a), the interest rate must be computed as compound, not simple interest. While Price correctly points out that, under 28 U.S.C. § 1961(b), federal courts use compound interest for post-judgment interest, that is of little significance here. First, 28 U.S.C. § 1961 does not mandate compound interest for pre-judgment interest—the type of interest at issue in this case. Furthermore, the Director is not bound to accept all the provisions of 28 U.S.C. § 1961(b) in determining that simple interest at the § 1961(a) rate is reasonable compensation for past due compensation in LHWCA cases. Our task is not to precisely determine Price’s individual loss. Nor are we persuaded by policy arguments as to why an interest rate other than that urged by the Director would be preferable. The only question before us is whether the Director’s position regarding simple interest at the 28 U.S.C. § 1961(a) rate is unreasonable, and we conclude that it is not. AFFIRMED. 4 Price also argues that, unless we apply the higher interest rate of 26 U.S.C. § 6621, employers will be able to profit from delaying payments to a disabled employee. In light of the Act’s specific penalties for delay defined in 33 U.S.C. § 914, this argument is without merit. PRICE v. STEVEDORING SERVICES OF AMERICA 20125