The opinion of the court was delivered by: LASKER
The plaintiff, Srecko Barulec, a longshoreman, was injured on January 6, 1975, while assisting in the discharge of the M/S Mette Skou, owned by the defendant, Ove Skou R.A. Barulec received workmen's compensation from his employer until March 14th, when the employer determined that Barulec had fully recovered from his injuries. On March 25, 1975, Barulec filed a claim for additional compensation under the Longshoremen's and Harbor Workers' Compensation Act (OWHCA), 33 U.S.C. §§ 901-950, with the Office of Workmen's Compensation Programs (OWCP). Pursuant to the regulations implementing the LWHCA, a claims examiner convened an informal conference. See 20 C.F.R. §§ 702.311-.314 (1976). At the conference, Barulec and his employer reached an agreement settling Barulec's claim, and the agreement was memorialized in a "Memorandum of Informal Conference" prepared and signed by the claims examiner.
A year later, on February 22, 1978, Barulec commenced this action against the shipowner, alleging that his injuries were caused by the shipowner's negligence, and seeking damages.
The shipowner moves to amend its answer to assert as a defense that any claim that Barulec may have had against it has been assigned to his employer pursuant to section 33(b) of the LHWCA, 33 U.S.C. § 933(b), because Barulec filed suit more than six months after accepting compensation "under an award in a compensation order filed by the deputy commissioner."
Id. Since leave to amend pleadings "shall be freely given when justice so requires," Fed.R.Civ.P. 15(a), and shipowner's counsel filed this motion eleven days after receiving the records of Barulec's compensation proceedings which provide the basis for the new defense sought to be asserted, the motion for leave to amend the answer is granted.
In the event leave is granted, the shipowner moves for summary judgment dismissing the complaint on the merits of the newly asserted defense. Barulec counters that even if the shipowner is permitted to interpose a defense of assignment, the assignment may not be effective in this case under the rule of Czaplicki v. The Hoegh Silvercloud, 351 U.S. 525, 76 S. Ct. 946, 100 L. Ed. 1387 (1956).
Under the LHWCA as originally enacted in 1927,
an injured employee who accepted workmen's compensation from his employer lost his right to sue third parties, which was assigned by operation of law to his employer. In 1938 the Act was amended to provide that the employee's right to sue is assigned to his employer only when the employee accepts compensation "under an award in a compensation order filed by the deputy commissioner or (Benefits Review) Board." Act of June 25, 1938, ch. 685, § 12, 52 Stat. 1164.
"As a result of the amendment there must now be some official action by the Deputy Commissioner establishing an award of compensation in order to make such acceptance an assignment of the employee's cause of action against a third party."
Grasso v. Lorentzen, 149 F.2d 127, 128-29 (2d Cir.), Cert. denied, 326 U.S. 743, 66 S. Ct. 57, 90 L. Ed. 444 (1945). The shipowner contends that the intercession of the Office of Workmen's Compensation Programs, and the preparation of a "Memorandum of Informal Conference" embodying the terms of the settlement reached following that intercession, constitute sufficient "official action by the Deputy Commissioner" to amount to an award in a compensation order and consequently to establish an assignment of Barulec's claims, barring him from maintaining this action in his own name.
Because the regulations implementing the LHWCA stress informal resolution of compensation disputes, See 20 C.F.R. § 702.301, and the practical effect of an award does not always depend on the issuance of a formal compensation order, See id. § 702.315(a), the OWCP often does not in fact issue such orders, See Intercounty Construction Corp. v. Walter, 422 U.S. 1, 4-5 & 4 n.4, 95 S. Ct. 2016, 44 L. Ed. 2d 643 (1975), even though the LHWCA contemplates, 33 U.S.C. § 919(c), and the regulations effective at the time Barulec's claim was processed require, 20 C.F.R. §§ 702.315(a), .348 (1976),
that every claim submitted to the OWCP culminate in a formal order rejecting the claim or making an award on it. However, the absence of a formal order does not bar an assignment of an employee's claim under section 33(b). It has long been the law that informal official action, "equivalent to an order," suffices to trigger an assignment. Toomey v. Waterman S.S. Corp., 123 F.2d 718, 721 (2d Cir. 1941); Accord, Liberty Mutual Insurance Co. v. Ameta & Co., 564 F.2d 1097, 1102-03 (4th Cir. 1977); Grasso v. Lorentzen, 149 F.2d 127, 129 (2d Cir.), Cert. denied, 326 U.S. 743, 66 S. Ct. 57, 90 L. Ed. 444 (1945); Rodriguez v. Compass Shipping Co., 456 F. Supp. 1014, 1020 (S.D.N.Y.1978); Hernandez v. Costa Armatori, S.P.A., "Pia Costa," 467 F. Supp. 1064 at 1065-1066 (E.D.N.Y.1979).
The question, then, is whether the actions of the OWCP relating to Barulec's claim were "equivalent to an order" establishing an award of compensation. Barulec argues that they were not, because the deputy commissioner himself took no part in, and in no way ratified, those actions. Several early cases, which held that only action by the deputy commissioner himself can amount to a compensation order (formal or informal), support his argument. E.g., Grasso v. Lorentzen, 56 F. Supp. 51, 54 (S.D.N.Y.1944), Aff'd, 149 F.2d 127 (2d Cir.), Cert. denied, 326 U.S. 743, 66 S. Ct. 57, 90 L. Ed. 444 (1945); Sessa v. Weeks Stevedoring Co., 56 F. Supp. 50, 51 (S.D.N.Y.1943); See Lumber Mutual Casualty Insurance Co. v. Locke, 60 F.2d 35, 37 (2d Cir. 1932). For instance, in Sessa v. Weeks Stevedoring Co., supra, on facts nearly identical to those of the present case, the court held that an employee's right to sue third parties was not assigned under section 33(b) where a conference was held before a claims examiner and the disposition of the employee's claims at the conference recorded in a "Memorandum of Conference" prepared by the claims examiner. The court stated that "the determination or award, even though informal in character, (was) made by a claims examiner and there seems to be no authority in the statute for the award made by claims examiners." 56 F. Supp. at 51.
However, Sessa and the other cases relied on by Barulec were premised on outdated administrative practice. Modern practice, as indicated below, authorizes considerably greater delegation of authority than was permissible at the time those cases were decided. See Rodriguez v. Compass Shipping Co., 456 F. Supp. 1014, 1019 (S.D.N.Y.1978); 1 K. Davis, Administrative Law Treatise § 3:17 (2d ed. 1978). The OWCP has formally adopted procedures for processing compensation claims that provide for the delegation of many of the deputy commissioner's statutory functions to others in the agency. The regulations in effect when Barulec's claim was processed provide:
"Informal conferences shall be called by the deputy commissioner or his designee assigned or reassigned the case and held before that same person, unless such person is absent or unavailable. When so assigned the designee shall perform the duties set forth below assigned to the deputy commissioner."
20 C.F.R. § 702.312 (1976). Among the duties "set forth below" is that of preparing compensation orders when claims are settled at the conference.
"Following an informal conference at which agreement is reached on all issues, the deputy commissioner shall embody the agreement in a formal compensation order. . . ."
Id. § 702.315. Whatever may have been the regulatory scheme when Sessa was decided, the regulations applicable to this case clearly authorize the claims examiner to make an award of compensation based ...