

                UNITED STATES COURT OF APPEALS
                    FOR THE FIRST CIRCUIT
                                         

No. 94-1094

                       ROBERT B. REICH,
                     SECRETARY OF LABOR,

                    Plaintiff, Appellant,

                              v.

                 BATH IRON WORKS CORPORATION,

                     Defendant, Appellee.

                                         

         APPEAL FROM THE UNITED STATES DISTRICT COURT

                  FOR THE DISTRICT OF MAINE

           [Hon. Gene Carter, U.S. District Judge]                                                             

                                         

                            Before

                    Selya, Cyr and Boudin,

                       Circuit Judges.                                                 

                                         

Joshua T.  Gillelan II, Senior  Attorney, Office of the Solicitor,                                  
Department of Labor, with whom Thomas S. Williamson, Jr., Solicitor of                                                                
Labor,  and Carol A.  De Deo, Associate  Solicitor, were  on brief for                                    
appellant.
Robert H.  Koehler with whom Judith  Bartnoff and  Patton, Boggs &amp;                                                                              
Blow were on brief for appellee.            

                                         

                      December 16, 1994
                                         

     BOUDIN, Circuit  Judge.  Bath Iron  Works, Inc. ("Bath")                                       

is  a Maine corporation that has long engaged in shipbuilding

and the repair of ships.  It has employees who are covered by

the Longshore and Harbor  Workers Compensation Act, 33 U.S.C.

    901-50 (the  "Longshore Act").   That  statute enacts  an

extensive   workers'   compensation  program   that  protects

longshore  and  other  specific   classes  of  workers  whose

injuries occur upon navigable waters of the  United States or

adjoining facilities like piers and dry docks.  Id.   903(a).                                                               

     For  the  most part,  scheduled  payments  for death  or

disability are made either by the employer or under insurance

coverage;  Bath, as  it  happens,  is  a self-insurer.    But

Congress has also  included in the Longshore  Act a so-called

"special  fund,"  33  U.S.C.      944,  administered  by  the

Secretary of Labor ("the  Secretary").  The fund is  used for

various  purposes--most importantly,  for "second  injury" or

"section 8(f)"  payments made  under 33  U.S.C.    908(f),  a

provision  described below.   See  33 U.S.C.    944(i).   The                                             

special fund is primarily funded by annual assessments levied

by the Secretary  on employers subject to  the Longshore Act.

Id.   944(c).1                 

                                                    

     1The  statute refers  to  contributions by  self-insured
employers  or  carriers;  but  for  simplicity  we  refer  to                         
"employers" throughout the opinion.

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     In this case the Secretary brought  suit against Bath in

the  district court to  recover supplemental  assessments for

the special fund claimed to be due by the Secretary.  Because

the dispute  involves Bath's obligation to  the special fund,

the statutory  formula used to determine such obligations--33

U.S.C.     944(c)(2)--needs  to  be explained.    First,  the

statute  requires  the  Secretary   to  estimate  the  fund's

expected  obligations  for  the  forthcoming  year, including

expected  section 8(f)  payments.   Id.  Then,  the Secretary                                                   

estimates  other fund  income  (e.g., fines)  and levies  the                                                

balance  by  assessing employers.    Id.   Specifically,  the                                                    

Secretary fixes  and assesses  each employer's share  under a

formula that  takes the  average  of two  fractions, both  of

which use the prior year's experience as a base.  Id.                                                                 

     One fraction  is the ratio of  the individual employer's

workers'  compensation payments  "under  this  chapter"  [the

Longshore  Act] during the prior year to all such payments by

all  employers under the chapter during that year.  33 U.S.C.

   944(c)(2)(A).   The  other fraction  is  the ratio  of the

section 8(f) payments attributable to the employer during the

prior year to all such  section 8(f) payments attributable to

all employers for that year.   Id.   944(c)(2)(B).  In brief,                                              

the employer's obligation is  based in part on its  own prior

payment  experience  and  in   part  on  the  special  fund's

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experience in making section 8(f) payments to that employer's

employees.

     For example,  if Bath's compensation  payments under the

Longshore Act for 1988 represented three percent of all  such

employer payments for that year, and the special section 8(f)

payments for  Bath employees  represented one percent  of all

such section  8(f) payments for that  year, Bath's assessment

would be two percent of the (otherwise unfunded) special fund

obligations for 1989, as  estimated by the Secretary.   Under

such  a formula, every employer has an interest in seeing its

own  workers'  compensation  payments  "under  this  chapter"

represented by as small a figure as possible.   The lower the

figure,  the more the burden of financing the special fund is

shifted to other employers.

     The present  case arose because Bath  calculated its own

assessment  by excluding from  the formula  calculation under

section  944(c)(2)(A)  most  payments  it  made  to   injured

employees  who were covered both by the Longshore Act and the

Maine Workers Compensation Act.  Me. Rev. Stat. Ann. tit. 39,

   1 et seq.  The Maine statute generally provides comparable                       

payments,  and both  regimes encourage  the employer  to make

payment  without having  the  employee file  a formal  claim.

Where  both statutes  covered  the same  injury  in the  same

amount,  Bath said that it was making payment under the Maine

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statute and filed a boilerplate denial of liability under the

Longshore Act.  See 33 U.S.C.   914(d).                               

     An employer's  payment of workers'  compensation under a

state statute discharges  the employer's liability  pro tanto                                                                         

under  the Longshore  Act.   This was  well settled  by court

decision long ago and eventually Congress enacted a provision

to  this effect.   33 U.S.C.    903(e).   Thus,  in such dual

liability cases, Bath's payments--purportedly under the Maine

statute--erased  its liability under  the federal  statute as

well.  This erasure of federal  obligations led the Secretary

to recalculate Bath's formula  assessment on the premise that

such dual liability  payments should be treated  as ones made

"under" the Longshore  Act.  Bath  disagreed.  The  Secretary

brought suit.

     In the  district court,  the magistrate judge  entered a

recommended decision in favor of Bath, and the district court

approved  the recommendation  and  dismissed the  Secretary's

complaint.  The  gist of  the district  court's decision  was

that the language of the formula--specifically, its reference

to  an employer's  payments  made  "under this  chapter"--was

clear and unambiguous.  "The subsection [944(c)(2)(A)]," said

the  district  court,  "speaks  in  terms  of  payments,  not

liability";  and it  deemed  the dual  liability payments  in

dispute  to be ones made  under Maine law,  not the Longshore

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Act.    The  court  also relied  secondarily  on  legislative

history and policy.

     On this  appeal, the  Secretary takes the  position that

his  own  reading  of  the  formula  language  is  at   least

permissible,  is a  reasonable one,  and is  entitled to  the

deference ordinarily  due to  the agency or  department under

the  Chevron doctrine.  Chevron v. NRDC, 467 U.S. 837 (1984).                                                   

We  generally agree  with  the Secretary  that the  statutory

language permits  his reading, which is entitled to a measure

of  deference.   We  also  think  that  the  history  of  the

provision supports the  Secretary's reading.   Finally, there

is no clue anywhere that the distinction proposed by Bath was

ever considered, let alone adopted, by Congress.

     Starting with  statutory  language, the  parties  devote

many pages to the question whether the disputed payments are,

in a  literal sense  or by various  characteristics, payments

"under" the Longshore  Act.  We  do not  think that the  bare

words "under  this chapter" are precise enough to resolve our

case.   As a matter  of dictionary meaning,  the phrase could

(as  Bath claims) refer to  the statute invoked  by the payor

when making the payment--here, the Maine statute--or it could

(as the Secretary  claims) cover any  payment that erases  or

discharges  a  liability  that  otherwise  exists  under  the

federal  statute,  regardless of  what  the  payor says  when

handing over the money.

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     The  surrounding  circumstances   seem  to  us   equally

uninformative.  It  makes no difference to any  known purpose

of Congress, or any  suggested policy underlying the statute,

that  Bath  did,  as  it claims,  file  repeated  boilerplate

notices of  contravention denying liability under the federal

statute.   Conversely,  it  does not  matter whether,  as the

Secretary claims, Bath reported  the accidents in question to

federal authorities,  as other provisions required  it to do.

These arguments are examples of fussing about inessentials.

     What matters, given that  the statute's language is open

to more than  one reading, is the history and  purpose of the

provision.    Congress adopted  an  earlier  version of  this

formula in 1972 when the assessment device was first  adopted

to  support the special fund.  Under the 1972 amendments, the

assessment  was based  on  the proportion  of the  employer's

prior  year "payments made on  risks covered by  this Act" to

"the total of such payments made by all" employers.  86 Stat.

1251, 1256.  This is a variation, of course, on the  language

now  comprising  the first  half  of  the statutory  formula.

Compare 33 U.S.C.   944(c)(2)(A).                   

     In  recent years, the main  use of the  special fund has

been to encourage employers to hire workers who have suffered

a  previous  partial  permanent  disability.     For  various

reasons,  employers feared that such a  worker who suffered a

new disability  might impose extra liability  on the employer               

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where the first  injury contributed  to the  severity of  the

second; a  good example is  the loss  of an eye  by a  worker

already blind  in one eye.   See  Lawson v. Suwannee  Fruit &amp;                                                                         

Steamship Co., 336  U.S. 198 (1949);  2 A. Larson,  Workmen's                                                                         

Compensation Law   59.31(a) (1994).   The section 8(f) regime                            

was designed to lessen this discouragement.

     For some  years, section 8(f) has  accomplished this end

by making the special  fund, and not the employer,  liable in

certain    circumstances   for    so-called   "second-injury"

compensation payments, beginning after 104 weeks of  employer

payments.  33 U.S.C.   908(f).   In 1972, when Congress first

adopted the employer assessment device to support the special

fund,  it also  greatly  enlarged  the  scope of  the  fund's

liability  by  inter  alia  extending  the  fund's  liability                                      

retroactively  to  provide  some  coverage  for  some  second

injuries  that  had  occurred  prior  to  the  new  statutory

amendments.

     What Congress  discovered between 1972 and  1984 is that

employers were "dumping"  as many  cases as  possible in  the

section 8(f) basket.   This meant that the employer  not only

avoided compensation liability to  the worker after 104 weeks

(as intended) but also (unexpectedly)  lowered the employer's

future formula payments  to the special fund  below the level

that  would otherwise  have applied.   The  lowering occurred

because the  original 1972  formula only counted  payments by

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the employer as  increasing the employer's fraction;  section

8(f)  payments made by the fund, on account of the employer's

double-injury  employees,  did  not increase  the  employer's

assessment.

     Under the new section  944(c)(2) formula adopted in 1984

and in force  today, the payments by  the fund on account  of

these  double-injury  employees  is  now  attributed  to  the

employer  to  the  extent  that such  payments  increase  the

employer's assessment  under the second half  of the formula.

This  second  half represents  only 50  percent of  the final

assessment;  thus the employer  gets some help  when the fund

takes over compensation and, presumably, the employer retains

some incentive to hire the partly disabled.  But the employer

does see its future assessments rise somewhat as the employer

transfers responsibility to the special fund.

     As Congress saw it, "[t]his [new] formula will, at once,

dissuade  the dumping of cases  into the fund,  and will more

equitably  apportion  the responsibility  of  paying for  the

fund."

130  Cong. Rec.  25,904  (1984) (statement  of Mr.  Miller).2

Further, because  the employer  now has a  continuing (albeit

indirect) interest in  holding down  unjustified payments  to

                                                    

     2The  statutory solution ultimately  devised by Congress
was adopted late in  the day by the Conference  Committee and
explained  only in floor statements.  Compare H. Rep. No. 98-                                                         
570,  98th Cong., 1st Sess. 20-21 (1983), with Conf. Rep. No.                                                          
98-1027, 98th Cong., 2d Sess. 31 (1984).

                             -9-                                         -9-

employees even after 104 weeks, the legislators expected that

unjustified  disability claims would  be better  policed than

they  had  been  by the  fund  administrators.    Id.   Other                                                                 

explanations for  the change are consistent.   130 Cong. Rec.

26,297 (1984) (statement of Senator Nickles). 

     In sum, prior to 1984 Congress intended the special fund

to  be paid for by employers primarily in proportion to their

experience in paying compensation  claims required to be paid

by the  federal statute ("payments  made on risks  covered by

[the] Act").  No reason is suggested to us why Congress might

have  wished in 1984 to lower an employer's share because, by

happenstance,  the  employer  was  located in  a  state  with

generous compensation laws of its own and the employer  chose

to  pin a  state label  on its  payment while  discharging an

obligation that existed under both federal and state law.  By

the  same  token,  no  legislative  evidence  indicates  that

Congress intended to make such a change in 1984.

     Bath  infers such  an  intent because  Congress in  1984

altered the 1972  phrase "payments made  on risks covered  by

[the] Act" to refer instead to payments "under this chapter."

As best we can tell, Congress happened by chance to alter the

wording of the original  1972 sentence when--in a last-minute

compromise (see note 2, supra)--it adopted the 1972 provision                                         

as the first part of the new two-part formula.  To the extent

that the  1972  language  is slightly  more  helpful  to  the

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Secretary,  it strengthens  the Secretary's  present position

slightly, rather  than  detracts from  it, precisely  because

there  is no  indication that  Congress meant  to change  the

substance of that part of the formula.

     There is only  one discrepancy that gives  us any pause.

In  1991, the  Secretary's Benefits  Review Board  rendered a

decision in a case entitled Stewart v. Bath Iron Works Corp.,                                                                        

25 B.R.B.S. 151  (1991).   There, it appears  that a  second-

injury  employee of  Bath withdrew  a claim  for compensation

under  the Longshore  Act when  Maine's benefits  proved more

generous.    Although the  Stewart  opinion  is difficult  to                                              

decipher without  more information, the Board apparently took

the view that section  8(f) relief from the special  fund was

not  available to  Bath because  the payments  that Bath  was

making to the  employee were  required of Bath  by the  Maine

statute but not by federal law.

     Bath argued to the district court, and repeats here, its

claim that  "it would be  anomalous to base  [Bath's] special

fund  assessments on  state law  payments, when  special fund

relief  is not available to [Bath] from its obligations under

the  Maine  [compensation  law]."   The  technical  responses

offered in  the government's reply brief may  explain why the

district court saw some merit  in Bath's reliance on Stewart.                                                                        

The  government's failure  either  to answer  Bath's  central

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argument, or to concede the discrepancy, is not what we would

expect from government counsel.

     Bath's  argument  is  relevant   in  the  sense  that  a

construction that produces anomalous results is, by that fact

alone,  a  more  doubtful  reading  of  a  statute.    Public                                                                         

Employees Retirement  Sys. of Ohio  v. Betts,  492 U.S.  158,                                                        

177-78  (1989).    Still,  nothing in  Stewart  is  literally                                                          

inconsistent with the government's reading  of the assessment

formula; Stewart  turns on a  reading of other  provisions of                            

the Longshore Act  that are  not centrally  involved in  this

case.  At worst, Stewart--assuming it was correctly decided--                                    

produces  an apparent possible inequity of a kind that is not

unknown  in  complex  statutory arrangements.    Puerto  Rico                                                                         

Telephone Co. v. FCC, 553 F.2d 694, 700 (1st Cir. 1977).                                

     We  have far too little information  to assess fully the

dense and elliptical opinion  in Stewart.  The case  may have                                                    

been wrongly decided;  or the  anomaly may be  a rarity  that

carries   no  great   weight  in  interpreting   the  formula

provisions before us;  or it  may not be  an inequity at  all

(the Board  in Stewart  refers to the  possibility that  Bath                                  

could  seek relief  from Maine's  counterpart to  the special

fund  provision).   Bath gives  us no  information on  any of

these matters, so there is no reason to feel  distress on its

behalf in having to leave this dangling loose end.

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     The judgment of  the district court  is vacated and  the                                                                

case  remanded for further  proceedings consistent  with this                          

opinion.

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