500 F.

2d 1291

OVERSEAS AFRICAN CONSTRUCTION CORP., Employer,

and St. Paul
Mercury Insurance Co., Carrier, Appellants-Cross Appellees,
v.
Eugene McMULLEN, Deceased, by George McMullen,
Executor, and
John D. McLellan, Jr., Deputy Commissioner, United States
Employees Compensation Commission, Second Compensation
District, Appellees-Cross Appellants.
Nos. 948, 1064 and 1108, Dockets 74-1092, 74-1103 and 74-1538.

United States Court of Appeals, Second Circuit.

Argued May 17, 1974.
Decided July 5, 1974, Rehearing and Rehearing En Banc Denied
July 23, 1974.

Irwin B. Silverman, Brooklyn, N.Y., (Jacowitz & Silverman, P.C.,

Brooklyn, N.Y., of counsel), for appellants-cross appellees.
Angelo C. Gucciardo, New York City (Israel, Adler, Ronca & Gucciardo,
New York City, of counsel), for appellee-cross appellant McMullen.
Joshua T. Gillelan II, Atty., Dept. of Labor, Washington, D.C. (William J.
Kilberg, Sol. of Labor, James G. Johnston, Asst. Sol. of Labor, George M.
Lilly, Washington, D.C. of counsel), for appellee-cross appellant
McLellan.
Before MEDINA, HAYS and OAKES, Circuit Judges.
OAKES, Circuit Judge:

The principal appeal is by St. Paul Mercury Insurance Co. (St. Paul) on behalf
of itself and Overseas African Construction Corp. (Overseas African). St. Paul
questions the jurisdiction of the deputy commissioner, United States
Employees Compensation Commission, to make a $12,495.50 award, 1 handed

down June 22, 1972, on the behalf of claimant Eugene McMullen (claimant), a
former employee of Overseas African, who died some five months prior to the
awards being made. Jurisdiction was assumed and the award made by the
deputy commissioner under the Defense Base Act, as amended, 42 U.S.C. 1651
et seq. (the 'Act'),2 which applies the provisions of the Longshoremen's and
Harbor Workers' Compensation Act, 33 U.S.C. 901 et seq. (LHWCA), to
certain types of employees. The deputy commissioner and the estate of the
claimant have taken a cross appeal in connection with the district court's refusal
to assess attorney's fees against St. Paul.
2

St. Paul filed its action to set aside the award on July 21, 1972, pursuant to 33
U.S.C. 921. In a memorandum opinion and order dated November 21, 1973, on
cross motions for summary judgment, the district court dismissed St. Paul's
challenge to the award and affirmed the award in claimant's favor. The court
also imposed a statutory penalty on St. Paul under 33 U.S.C. 914(f).3 The court
also denied claimant's demand for payment by St. Paul of his legal fees spent in
prosecuting his claim, a claim apparently based solely on 33 U.S.C. 926, saying
that the basis for St. Paul's appeal was not so 'frivolous or malicious' as to
require such an assessment. The court did not comment on the possible impact
of an amendment to 33 U.S.C. 928-- which had become effective on November
26, 19724 -- on the question of assessing legal fees against St. Paul. On
November 30, 1973, claimant's counsel wrote a letter to the district court which
pointed out the possible relevance of the amended version of 928 to the
question of legal fees. The court, treating the letter as a motion to reargue,
adhered to its prior determination (which had reached the question of attorney's
fees under 926 but not 928) and assessed legal fees in the sum of $1,800 against
the claimant's estate under 928 as it existed prior to its amendment.

The claimant was hired in New York by Overseas African and was assigned to
a project at Chisimaio, Somalian Republic, Africa, during the period from May,
1968, to December, 1968, as project manager and chief accountant.5 The
project was under the general supervision of the United States Army Corps of
Engineers, which approved for acceptance the various parts of the construction
project as they were completed. The project was funded by AID, the Agency
for International Development, United States Department of State. The funds
came from 'Chisimaio Port and Municipal Facilities Loan No. 649-H-002
(Chisimaio loan).' While working on this project, claimant contracted a skin
disorder, diagnosed as neurodermatitis, which eventually forced his return to
the United States and which all parties concede to be a legitimate basis for the
compensation awarded by the deputy commissioner and approved by the
district court. Claimant's death on January 30, 1972, from unrelated causes,
came about five days after the hearing on his claim before the deputy

commissioner.6 There is no dispute whatsoever that claimant was temporarily

totally disabled and, if the Act conferred jurisdiction on the deputy
commissioner, was entitled to the award which was made together with the
penalty assessed by the district court.7
4

The claim of St. Paul is that the deputy commissioner and the court below were
without jurisdiction to enter an award and judgment respectively under the
Defense Base Act. The claim is evidentially based solely on a letter from AID
bearing a date of February 22, 1972, which is set forth in the margin.8 The
district court affirmed the deputy commissioner's finding that this letter did not
overcome the statutory 'presumption' of jurisdiction.9 St. Paul argues that the
construction contract was between the employer and the Republic of Somalia,
and that while it may have been approved and financed by the United States,
there is an exception as a matter of law to jurisdiction of employees'
compensation claims under the Defense Base Act as amended, 42 U.S.C.
1651(a) (5), in the case of projects financed from the Development Loan Fund.
Section 1651(a) does state that

the provisions of the Longshoremen's and Harbor Workers' Compensation Act .

. . shall apply in respect to the injury or death of any employee engaged in any
employment . . . (5) under a contract approved and financed by the United
States or any executive department . . . or agency thereof . . . where such
contract is to be performed outside the continental United States, under the
Mutual Security Act of 1954, as amended (other than title II of chapter II
thereof unless the Secretary of Labor, upon the recommendation of the head of
any department or other agency of the United States, determines a contract
financed under a successor provision of any successor Act should be covered by
this section) . . ..

St. Paul's argument is, then, that since title II of chapter II of the Mutual
Security Act of 1954 established a Development Loan Fund as an agency of the
United States and body corporate authorized to make loans to promote the
economic development of underdeveloped friendly countries, and since the
letter from AID says that the work performed by Overseas African was 'totally
financed on a development loan basis,' the work here was not work to which
the Defense Base Act and the LHWCA extended.10

Apparently this highly technical argument is a bit of an afterthought, for both

the employer and St. Paul thought that the Chisimaio project was a Defense
Base Act project and respectively sought and supplied insurance coverage in
relation to it. The contract of employment between Overseas African as
employer and Mr. McMullen, the employee, provided that the employer would

procure and pay the premiums for such compensation insurance as will accord
to Employee . . . the statutory benefits for death or injury to which the
Employee may be entitled under the applicable Federal law of the United States
including but not limited to the Defense Base Act and War Hazards
Compensation Act. Said workmen's compensation insurance shall also include
coverage of Employee for illness due to endemic diseases of Somalia . . ..

St. Paul's policy originally had provided in Section 2, Coverage A,

10

The company agrees to pay voluntarily on behalf of the insured, to the

employees defined in Section 1 of this endorsement, the compensation, medical
and other benefits specified in the Workmen's Compensation Law and
Occupational Disease Law of the state designated in Item 3 of the declarations
(New York) in the same manner as if such employees were covered under the
provisions of said law or laws.

11

By endorsement the policy was amended to read 'Policy includes employees

working in Chisimaio, Somalia (estimated at eleven)' and another endorsement
provided rather cryptically, 'It is understood and agreed that Public Law 208
benefits apply as respects the A.I.D. Projects only.'11 'Public Law 208' is the
Defense Base Act.

12

Certainly a prima facie showing of federal jurisdiction in this case is made out
by the contract of insurance itself, especially in light of the apparently
successful argument of St. Paul-- after claimant had originally proceeded in the
New York state courts to attempt to establish compensability under the relevant
state statutes-- that a federal forum was the appropriate one for resolution of the
dispute. A strong argument can be made that St. Paul should be estopped from
challenging federal jurisdiction over the dispute, or from raising the point that,
as a factual matter, the contractual relationships involved a specific exception to
jurisdiction over a dispute that is otherwise clearly a federal matter. Without
rendering our decision on this basis. We would nevertheless remark that St.
Paul's actions during the course of this dispute can and should be weighed in
connection with whether it has overcome the statutory presumption of
jurisdiction.

13

So doing, we agree with the deputy commissioner and with the court below that
the AID letter of February 22, 1972, is insufficient to overcome the statutory
presumption of jurisdiction. The rule, of course, is that so long as any
reasonable inference from the facts supports jurisdiction under the statutory
presumption that jurisdiction may be found. Cardillo v. Liberty Mutual

Insurance Co., 330 U.S. 469, 474, 67 S.Ct. 801, 91 L.Ed. 1028 (1947);
Michigan Mutual Liability Co. v. Arrien, 344 F.2d 640, 645-646 (2d Cir.), cert.
denied, 382 U.S. 835, 86 S.Ct. 80, 15 L.Ed.2d 78 (1965). But see Employers
Mutual Liability Inssurance Co. v. Arrien, 244 F.Supp. 110, 113
(N.D.N.Y.1965) (distinction between presumption of coverage and
presumption of jurisdiction). The AID letter does not indicate the relationship
between the parenthetical exclusion in 1(a)(5) of the Defense Base Act, 42
U.S.C. 1651(a)(5), and the assertion that Overseas African's contract 'was
totally financed on a development loan basis.' St. Paul did nothing to prove that
relationship before the deputy commissioner, before the court below, or before
us. For all that appears before us there are other foreign assistance act loans,
and there are other forms of development loans than those made from the
Development Loan Fund.
14

Thus it becomes unnecessary for us to pass upon the deputy commissioner's

assertion that this contract was covered by 42 U.S.C. 1651(a)(4),12 or to pass
upon the claim of the claimant's estate that, because the employer appeared and
conceded jurisdiction and under 33 U.S.C. 935 the jurisdiction of the employer
'shall be jurisdiction of the carrier,' the concession of the employer is ipso facto
the concession of the carrier.

15

We pass then to the question of attorneys' fees. To recapitulate, the deputy

commissioner approved a fee of $2,500 for the services of the claimant's
attorney and directed that this be paid out of the total award. The district court
fixed the value of the claimant's estate's attorneys' services at $1,800 in addition
thereto, and directed that this also be paid by the executor out of any funds
received by him. These awards were clearly authorized by 33 U.S.C. 928 as it
existed prior to its amendment. On cross appeal here the deputy commissioner
and the claimant's estate raise two arguments concerning who should pay these
fees. The first argument is that the district court erred in not finding that all
counsel fees in that court should be chargeable to St. Paul by virtue of 33
U.S.C. 926, which allows for the imposition of all costs upon a party that
institutes or continues proceedings relative to workmen's compensation 'without
reasonable ground . . ..' The second argument is that at least those legal
expenses incurred by claimant's estate after November 26, 1972, are
recoverable against St. Paul irrespective of whether 'reasonable grounds' existed
for St. Paul's resistance to the claim under the provisions of 928 as amended.13

16

Considering first the argument under 926, as it relates to legal fees in the
district court, we believe the following factors to be determinative in claimant's
favor. On the appeal from the deputy commissioner's order to the district court,
St. Paul raised several issues concerning the award in its pleadings-- the usual

stock defenses in such cases-- but pressed only the jurisdictional issue. The
district court found the jurisdictional issue to be the 'only serious issue' before it
but, after stating that both St. Paul and Overseas African 'both regarded the
Chisimaio project as within the Defense Base Act . . .,' held that the
jurisdictional argument was neither 'frivolous nor malicious.' With that we may
agree, but compensation acts generally and the LHWCA specifically
contemplate the voluntary payment of compensation to the claimant upon
receipt of notice of disability or injury. Here, legal proceedings were held
before the New York State Workmen's Compensation Board where, for all
practical purposes, they were adjourned because of St. Paul's refusal to 'waive'
its 'admiralty or interstate commerce rights and remedies,' before the United
States Employees Compensation Commission. For its own reasons, St. Paul
resisted the jurisdiction of the deputy commissioner, the district court and now
this court, even though there has never been any serious claim that the claimant
(or his estate) was not entitled to relief at all times. The only claim consistently
advanced by the carrier has been that relief has not been sought in the proper
forum. On the facts, and in light of the policy for expeditious payment of
claims, we feel the jurisdictional claim to be so insubstantial as to require the
carrier to bear the expense of the legal fees in the district court, and the
judgment of the district court in this respect is reversed.
17

Legal fees in this court, which we set at $2,000.00, we find to be governed by

the provisions of 33 U.S.C. 928(a) & (c) as amended. Under 928(a), a claimant,
whose claim is resisted by a carrier, who successfully prosecutes that claim has
an absolute right to recover his legal expenses incurred in that prosecution. The
only serious dispute involving 928(a) is whether, as a statutory matter,
Congress intended that section to apply to cases pending in any forum on
November 26, 1972 (the effective date of the amendments), and, if so, whether
there be any constitutional impediment to such an application. These questions
need not detain us long. In Virginia Hotel Co. v. Mills, BRB No. 133-73 (Ben
Rev. Bd. Apr. 2, 1974), the Benefits Review Board of the Department of Labor,
which, under 33 U.S.C. 921(b)(3), replaces the district court for purposes of
appealing a compensation order, held that the absence of any legislative history
to the contrary indicated congressional intent that the amendments-- here
involving procedural and remedial aspects of workmen's compensation
disputes-- should be applied to pending proceedings. There being no savings
clause in the amendments, we fully concur with the Mills decision on this
point. As was said by the Supreme Court in Sampeyreac v. United States, 32
U.S. (7 Pet.) 222, 238, 8 L.Ed. 665 (1833), 'Almost every law, providing a new
remedy, affects and operates upon causes of action existing at the time the law
is passed.' See Ahmed's Case, 278 Mass. 180, 179 N.E. 684 (1932). Cf. Bradley
v. Richmond School Board, 416 U.S. 696, 94 S.Ct. 2006, 40 L.Ed.2d 476

(1974). See generally 3 A. Larson, The Law of Workmen's Compensation

83.12, 83.17 (1973). As for any constitutional objections to such retrospective
application of 928(a) as is involved here, objections not raised directly by St.
Paul in its briefs, we agree with the Mills decision to the effect that the date the
right of action accrued has no constitutional significance. As of November 26,
1972, St. Paul was on notice that 928(a) as amended might be applied to its case
respecting legal fees should St. Paul fail to prevail on its appeal in both the
district court and on further appeals it might choose to take.14
18

For the reasons stated herein, the judgment of the district court to the extent that
it affirmed the award of the deputy commissioner is affirmed; so much of the
district court's judgment as denied claimant's entitlement to legal fees in that
court is reversed and the cause remanded to the district court for entry of an
order directing St. Paul to make good those expenses. Legal fees assessed in
this court are to be paid in accordance with this opinion.

The award was for $11,250.00 on the basis of $70.00 per week from January 1,
1969, to January 30, 1972, plus $1,245.50 for documented medical expenses
incurred during this period. A fee of $2,500.00 for claimant's attorneys was
fixed by the deputy commissioner to be paid out of the compensation awarded

This Act was adopted to extend coverage to employees working on defense

bases including originally particularly those acquired from Great Britain on a
lend-lease basis. See Republic Aviation Corp. v. Lowe, 164 F.2d 18 (2d Cir.
1947) (Chase, J.), cert. denied, 333 U.S. 845, 68 S.Ct. 663, 92 L.Ed. 1128
(1948). As such it was a 'remedial act' to be 'interpreted to accomplish so far as
is possible the purposes for which it was intended.' Id. at 20

Under 14(f) of the LHWCA, if payment of an award is not timely made (within
10 days) and no stay is sought or granted, a 20 per cent penalty 'shall be
imposed' by the district court. 33 U.S.C. 914(f). Thus, the total amount of the
award before this court is $14,994.60

Longshoremen's and Harbor Workers' Compensation Act Amendments of 1972,

Pub.L. No. 92-576, 13, 86 Stat. 1251, 1259, 1265

Overseas African was a wholly owned subsidiary of Reynolds Construction

Co., which was the original overseas contractor for this project and to which
the insurance policy originally underwritten by St. Paul ran as insured. The
contract between the Somalian Republic and Reynolds was assigned by the
latter to Overseas African and, by endorsement to the St. Paul-Reynolds

insurance policy, it was agreed that the name of the insured was amended to
include the interests of Overseas African
6

On August 21, 1969, claimant settled a claim under a separate policy, #GR
1018, with AFIA-St. Paul Mercury Insurance Co., Overseas African and/or
Reynolds, for $1,800.00. This policy involved compensation under the rubric of
'Non-occupational Sickness Weekly Indemnity Benefits' and was found by the
deputy commissioner to have no bearing on claimant's rights under the Defense
Base Act

With $2,500.00 fixed as attorneys' fees by the deputy commissioner and

$1,800.00 by the district court, as the case comes to us $4,300.00 is chargeable
against the overall recovery of $14,994.60 exclusive of any fees which might be
awarded in this appeal

The pertinent portion of the letter is as follows:

The following information is supplied in response to your inquiry to Mr. Barry
Wallace concerning Overseas African Construction Corporation's work on the
Chisimaio Port project. The work performed by Overseas African was totally
financed on a development loan basis. The applicable loan is designated as
Chisimaio Port and Municipal Facilities Loan No. 649-H-002.

In any proceeding for the enforcement of a claim for compensation under the
LHWCA 'it shall be presumed, in the absence of substantial evidence to the
contrary-- (a) that the claim comes within the provisions of this chapter.' 33
U.S.C. 920

10

The original statute establishing the Development Loan Fund as a corporate

agency was repealed by the Foreign Assistance Act of 1961, Pub.L. No. 87195, pt. III, ch. 3, 642(a)(2), 75 Stat. 460. That act established a new
'Development Loan Fund' to be used by the President to make loans pursuant to
the authority contained in the Act and the new fund provisions are set forth in
22 U.S.C. 2161-2169 inclusive. Technically speaking, there is no longer any
title II, chapter II, exception of the Mutual Security Act of 1954 as amended, 42
U.S.C. 1651(a)(5), but the Development Loan Fund referred to in 22 U.S.C.
2161-2169 must be read as continuing the exception to 42 U.S.C. 1651(a)(5),
since 642(b) of the Foreign Assistance Act of 1961, 75 Stat. 460, provided that
References in law to the Acts, or provisions of such Acts, repealed by
subsection (a) of this section shall hereafter be deemed to be references to this
Act or appropriate provisions of this Act . . .,
and since old title II, chapter II, was replaced by the similar provisions of pt. I,

ch. 2, title I of the 1961 Act (comprising 201-205), 75 Stat. 426-427, now as
amended, 22 U.S.C. 2161 et seq.
11

We say 'cryptically,' because it is now claimed by the insurer that the case falls
within an exception to the Public Law 208 benefits because it was an AID
'development loan' project

12

Since the contract appears to have been executed solely by the Republic of
Somalia and not by the United States as a party, it would not appear to fall
within the provisions of 42 U.S.C. 1651(a)(4). However, it is on a federal form
and apparently a federal 'contracting officer' approved the assignment from
Reynolds Construction Co. to Overseas African

13

Section 928(a), as amended, reads as follows:

If the employer or carrier declines to pay any compensation on or before the
thirtieth day after receiving written notice of a claim for compensation having
been filed from the deputy commissioner, on the ground that there is no
liability for compensation within the provisions of this chapter, and the person
seeking benefits shall thereafter have utilized the services of an attorney at law
in the successful prosecution of his claim, there shall be awarded, in addition to
the award of compensation, in a compensation order, a reasonable attorney's fee
against the employer or carrier in an amount approved by the deputy
commissioner, Board, or court, as the case may be, which shall be paid directly
by the employer or carrier to the attorney for the claimant in a lump sum after
the compensation order becomes final.

14

Thus, if our judgment on the 926 issue with respect to legal fees in the district
court should be found erroneous by the Supreme Court, claimant's estate would
still be entitled to recovery of any legal expenses incurred in the district court
after November 26, 1972, should our view of 928(a) be sustained. We reach the
928(a) question because we feel that the claim for legal fees made in this court
should be decided under 928(a), even though our views with respect to legal
fees under 926 in the district court would be equally applicable to fees in this
court. The rationale for this position is that we see the 1972 Amendments to the
LHWCA as superseding 926 in that they provide for the first time what is
clearly a congressional preference that attorneys' fees not diminish the recovery
of a claimant regardless of how close a case might be which is litigated but
finally lost by a carrier. This appeal, because it was perfected after the effective
date of the 1972 Amendments, should therefore be decided on the law most
clearly applicable at that time