ISSUE In Admiralty Court if state workers compensation benefits have been paid to an injured party what law does the Federal Judge follow when deciding whether or not the workers compensation carrier has a subrogation lien? FACTS Two New Jersey employees were on a casino boat on the Mississippi River when it was struck by a barge. Each employee was injured and collected workers compensation benefits under New Jersey state workers comp law. The injured employees also hired an attorney who brought suit against the owner of the barge. The suit was filed in federal court under admiralty law and the cases were resolved. The attorney who represented the employees in their third party case argued that the workers compensation carrier had no right of recovery because they never filed their own case and offered to resolve the liens for a minimal amount. After some research, specifically finding a 9 th Circuit case that was on point, we turned a minimal offer into a six figure recovery. LAW The admiralty court must apply New Jersey law to determine the workers compensation carrier’s right to recover its lien since neither maritime policy nor the supremacy clause dictate otherwise. See Pason v. Westfal-Larson Co., et al., 504 F.2d 1226 (9 th Cir. 1974) (citing Grant Smith-Porter Ship Co. v. Rohde, 257 U.S. 469 (1922) (where the Court held that a state compensation act could be applied)). In Pason, although California’s Workmen Compensation law was unfavorable to the lien holder, the Ninth Circuit applied that state’s statutory worker’s compensation scheme to determine the rights of the lien holder. In Pason, the Court held where harbor worker, who was injured while doing repair work aboard a completed vessel lying in navigable waters, was awarded benefits under California workmen's compensation law and the employer's compensation carrier claimed a lien against any recovery the employee might obtain from third-party ship owner in admiralty action based on negligence and un-seaworthiness, right of the insurer to recover its lien was to be determined under California law, since neither federal maritime policy nor the supremacy clause dictated otherwise. Id at 1230. This conflict of law resolution is also in line with Missouri law when the injury occurs in a jurisdiction different from where the workers compensation payment is made. See Langston v Hayden, 886 SW2d 82 (1994, Mo App) (where the court, in applying Kansas law to determine a lien holder’s rights, held when workers' compensation benefits are claimed in one state for accident which occurred in another, law generally states that question of whether and to what extent employer or its insurer is entitled to subrogation or reimbursement is to be determined according to provisions of workers' compensation law under which compensation for employee's injury was paid if law of foreign state does not violate Missouri's public policy). Consequently, the employees will not be able to elect a state remedy under New Jersey worker’s compensation law and then argue that the
carrier’s right to reimbursement is to be determined by a different set of laws. Under New Jersey law, the employee is guaranteed recovery for his common-law damages against contributing third-party tort-feasors or for his compensation award, whichever is greater, but he may not duplicate those recoveries. Schweizer v. Elox Division of Colt Industries, 359 A.2d 857 (NJ 1976). In Wager v. Burlington Elevators, Inc., 282 A.2d 437 ( NJ 1971), the court in interpreting a provision of the workmen’s compensation statute that states ‘if employee effects settlement with third person prior to service of notice upon third person of compensation obligation of employer or his carrier, employer or his carrier is barred from instituting any action’, held the provision merely prevents employer from bringing subrogation-type action against negligent third party, when employee has done so, and does not bar employer from recovering on lien for compensation paid for failure to file timely notice of lien before settlement. As in this case, where a carrier sends notice of its compensation lien by certified mail to all interested third-parties before tort-feasors paid amount of settlement to employee, such lien should be honored by all parties, even though notice of lien was not filed before settlement. Id. Additionally, under New Jersey’s law, the worker’s compensation statutory scheme does not exempt any portion of recovery from lien, but rather attaches lien to any sum recovered. See DeLane ex rel. DeLane v. City of Newark, 778 A.2d 511 (NJ 2001) (where the court held lien attached to entire amount of wrongful death award paid to surviving spouse, given that wrongful death action was single claim, not collection of separate causes of action, and statute did not exempt portion of recovery from lien, but rather attached lien to any sum recovered); See also Johns-Manville Products Corp. v. Dronebarger, 511 A.2d 1304 (NJ 1986) (where court held employer which had paid worker's compensation benefits to covered employee was entitled to lien against any recovery in malpractice action brought by employee against attorney for alleged failure to prosecute third-party product liability action against manufacturer of scooter upon which employee sustained his injuries). Under New Jersey workers' compensation law, when injured employee has received compensation benefits and later recovers greater sum from third person liable for those injuries, employee must reimburse employer or its compensation carrier to extent of benefits paid. Stabile v. New Jersey Mfrs. Ins. Co., 623 A.2d 252 (NJ 1993). The maximum amount of attorney fees that can be deducted from such reimbursement is 1/3 of the amount paid in workers’ compensation and total costs may not exceed $200.00. See N.J.S.A. 34:15-40 (b)(e); See also Dante v. William T. Gotelli, Inc., 111 A.2d 267 (NJ 1955) (Where injured workman settled third-party tort action for $60,000 and paid his attorneys $10,000, or one-sixth of amount of recovery, and employer, which had paid compensation to workman, was held entitled to reimbursement in the amount of $17,304.50 for its compensation liability, employer could be assessed up to one-third of the $17,304.50, in accordance with this section for employer's proportionate share of workman's attorney's fees, and assessment was not required to be limited to one-sixth merely because workman paid his attorney only one-sixth of amount of recovery).
Consequently, it is the law that my client was entitled to the full amount of compensation paid to each employee less 1/3 that amount for attorney fees and expenses of suit not to exceed $200.00.