Bailey v. Director, Office of Workers’ Compensation Programs, United States Department of Labor, No. 20-1075 (7th Cir. 2021)
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Bailey became partially disabled by pneumoconiosis, caused by the inhalation of coal dust. In 2002, he entered into an agreement with his employer to settle his state workers’ compensation claim; $27,677.50 was designated as Bailey’s take-home amount, representing payments of $135.67 per month, for 17 months beginning in July 2002. In November 2011, Bailey filed a claim under the Black Lung Benefits Act. The Office of Workers’ Compensation Programs (OWCP) granted Bailey’s claim in October 2013, but his benefits entitlement began the month he filed his claim and continued through May 2016—the month preceding the month that he died. At the time of his death, he had received benefits totaling $30,507.70 but was still owed benefits for the months from November 2011 through September 2013, $21,508.90. Bailey’s employer went bankrupt. He sought the remaining benefits from the federal Black Lung Disability Trust Fund. While the OWCP approved that claim, a District Director reevaluated the original award, finding that Bailey’s state workers’ compensation award represented monthly state benefits, some of which ran concurrently with his federal benefits eligibility period, so that the federal benefits must be offset by the state benefits received for that time—$135.67 per month over 55 months ($7,461.85). The OWCP subtracted this amount from the $21,508.90.
The Seventh Circuit affirmed. The offset is required by the Act; that Bailey received his state benefits years before he became eligible for federal benefits does not alter the conclusion.
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In the United States Court of Appeals For the Seventh Circuit ____________________ No. 20-1075 NANCY BAILEY, on behalf of CHARLES BAILEY, Petitioner, v. DIRECTOR, OFFICE OF WORKERS’ COMPENSATION PROGRAMS, UNITED STATES DEPARTMENT OF LABOR, Respondent. ____________________ Petition for Review of an Order of the Bene ts Review Board. Nos. 18-BLA-0504; 18-BLA-0505. ____________________ ARGUED DECEMBER 9, 2020 — DECIDED MARCH 11, 2021 ____________________ Before WOOD, BRENNAN, and ST. EVE, Circuit Judges. ST. EVE, Circuit Judge. Petitioner Nancy Bailey led this petition for review to contest the Department of Labor Bene t Review Board’s (the “Board”) decision a rming an o set to her husband’s federal-bene ts award. Charles Bailey, a former coal miner, quali ed for disability bene ts under the Black Lung Bene ts Act (the “Act”). The O ce of Workers’ Compensation Programs (“OWCP”) subsequently realized 2 No. 20-1075 that Charles Bailey had received a state workers’ compensation award nearly ten years earlier for the same disability and determined that the federal bene ts should be o set to account for the state award. Petitioner contested that decision, arguing both that the Act did not authorize an o set and that, if it did, the OWCP District Director erred in calculating the amount. An administrative law judge (“ALJ”) upheld the Director’s decision, and the Board a rmed. We agree that the Director correctly o set the federal bene ts and deny the petition for review. I. As a result of his years as a coal miner, Charles Bailey became partially disabled after contracting pneumoconiosis, a debilitating lung disease caused by inhalation of coal dust. In July 2002, he entered into an agreement with his employer to settle his state workers’ compensation claim for that disability. The parties agreed that he was rendered 15% disabled and settled on a $35,000 payout. Of that total, $27,677.50 was designated as Charles Bailey’s take-home amount, while the remaining $7,322.50 represented attorney’s fees and costs. The agreement indicated that the take-home amount represented payments of $135.67 per month for seventeen years, beginning in July 2002. In November 2011, Charles Bailey led a claim for federal bene ts under the Act. The OWCP did not grant Charles Bailey’s claim until October 2013, but his bene ts entitlement began the month he led his claim and continued through May 2016—the month preceding the month that he died. At the time of his death in June 2016, he was entitled to $52,088.60 for the 55 months from November 2011 through May 2016. He had received bene ts from October 2013 through May 2016, No. 20-1075 3 totaling $30,507.70. He was still owed a portion of his $52,088.60 in bene ts, however, for the months from November 2011 through September 2013, which amounted to $21,508.90. Charles Bailey’s employer—which was required to pay the federal bene ts awarded—went bankrupt before he received the remaining $21,508.90. He then sought the remaining bene ts from the federal Black Lung Disability Trust Fund (the “Trust”). While the OWCP approved the claim for payment from the Trust, a District Director reevaluated the original federalbene ts award. The Director determined that Charles Bailey’s state workers’ compensation award represented monthly state bene ts, some of which ran concurrent with his federalbene ts eligibility period. As a result, the Director determined that the federal bene ts must be o set by the amount of state bene ts received for that time—$135.67 per month over 55 months ($7,461.85). The OWCP subtracted this amount from the $21,508.90 in remaining bene ts. Petitioner contested that decision. The ALJ sided with the Director, and the Board a rmed that decision. We examine the Board’s order for errors of law and for compliance with its scope of review, which is circumscribed by the Act and limited to ensuring that the ALJ’s decision is “rational, supported by substantial evidence, and in accordance with applicable law.” Consol. Coal Co. v. Dir., OWCP, 911 F.3d 824, 838 (7th Cir. 2018); see also 33 U.S.C. § 921(b)(3), (c); 20 C.F.R. § 802.301(a). While our review necessitates an examination of the record and ALJ order, “we do 4 No. 20-1075 not reassess the facts or substitute our judgment for that of the ALJ.” Id. Upon review, we deny the petition. 1 II. The Black Lung Bene ts Act, as its title suggests, is a federal statute providing bene ts for miners who are disabled by a form of pneumoconiosis—black lung disease. It works in tandem with state bene ts programs to ensure that between the two sources miners receive a minimum amount of bene ts. Under the Act’s implementing regulations, federal bene ts must be reduced by the amount of a state workers’ compensation award for pneumoconiosis disability if: (1) the state award is for the same months as the federal award, 20 C.F.R. § 725.535(b), or (2) the state award is a lump-sum substitute for periodic payments that would otherwise cover the same bene ts period as the federal award, § 725.535(c). Because Charles Bailey’s state workers’ compensation award was a single payment, § 725.535(c) is the most relevant provision. The question of whether his state bene ts constitute a lump-sum substitution for periodic payments within the meaning of § 725.535(c) turns on the interpretation of the workers’ compensation settlement agreement between Charles Bailey and his employer. The parties stipulate that the agreement is governed by Illinois contract law. 2 Two pages of 1 While we agree with the ALJ’s decision, we do not condone the callous assertion that Charles Bailey won the “actuarial gamble” because he received state bene ts calculated to cover seventeen years, even though he survived for just fteen years after receiving those bene ts. 2 Petitioner asserts that Illinois law governs. The Director did not disagree and noted that the agreement settled a claim under Illinois law between No. 20-1075 5 the Terms of Settlement Attachment to the contract are relevant for our purposes. Page one states that Charles Bailey shall receive a “lump sum payment of 35,000.” Dkt. 26 at 59. The next page contains a key paragraph with three subparts that provides as follows: The parties expressly state and the Industrial Commission having reviewed the medical evidence being otherwise fully advised in the premises nds that the said lump sum amount is not a substitute for periodic payments, but represents: (1) Payment of Attorney’s fees to Petitioner’s counsel in the sum of $7,000.00; (2) Reimbursement of court costs and expenses to Petitioner’s counsel in the sum of $322.50; (3) The balance of the settlement proceeds $27,677.50, after deducting Attorney’s fees, court costs and expenses, and medical expenses, represents a compromise agreement of the weekly or monthly benefit of Petitioner from the date the contract was entered into, July 17, 2002, over his life expectancy. The life expectancy of the Petitioner during this period is 17 years. (U.S. an Illinois employer and employee for an injury that occurred in Illinois. Consequently, we view the parties as stipulating to Illinois law. 6 No. 20-1075 Department of Labor, Bureau of Labor Statistics, Revised Work Life Tables) pro rata payments over the period contemplated by this agreement are based on a weekly payment rate of $31.31 and a monthly payment rate of $135.67 as and for Petitioner’s alleged incapacity to pursue his usual and customary line of employment. Said payments, however, shall be made in a lump sum. Id. at 60 (emphasis added). Petitioner seizes on a single phrase from the beginning of the paragraph: “the lump sum amount is not a substitute for periodic payments.” She argues that by the agreement’s express terms, the settlement award does not fall within the auspices of § 725.535(c). Petitioner also suggests that this phrase con icts with subsection (3), rendering the agreement ambiguous. That interpretation, however, takes the phrase out of context. The ALJ read the agreement as designating the take-home portion of the settlement as a lump sum that “translated into monthly bene ts,” and the Board agreed. We see no error in this interpretation. The lump-sum amount referenced in the initial sentence is the $35,000 total settlement award mentioned on the preceding page. The following three subsections represent a breakdown of this total amount. The third subsection, which lists the portion of the settlement that goes to Charles Bailey, states that this portion represents the “weekly or monthly bene t of the Petitioner” for the duration of seventeen years, though it is to be paid in the form of a “lump sum.” Dkt. 26 at 60. That language tracks the conditions for No. 20-1075 7 o set described in § 725.535(c). Although the Petitioner insists that the rst sentence of the paragraph creates ambiguity, that is true only if read in isolation from the remainder of the paragraph. Additionally, Petitioner’s interpretation of the agreement runs afoul of Illinois contract principles, under which we must give language its “plain and ordinary meaning” and avoid an interpretation that would render a contract provision null. Stampley v. Altom Transp., Inc., 958 F.3d 580, 586 (7th Cir. 2020). Petitioner’s view of one sentence would impermissibly write o an entire subsection clarifying that sentence. We reject that interpretation and hold that the Board and ALJ did not err in determining that the settlement agreement designates Charles Bailey’s $27,677.50 portion of the award as a lump-sum substitute for periodic bene ts. The fact that Charles Bailey received his state bene ts years before he became eligible for federal bene ts does not alter this conclusion. Section 725.535(c) does not require that the lump sum be paid during the bene ciary’s federal-bene ts eligibility—just that it be a substitute for periodic payments that would otherwise overlap with the federal bene ts. 3 Both the ALJ and the Board correctly observe that 3 Section 725.535(c) provides: “Where a State or Federal bene t is paid periodically but not monthly, or in a lump sum as a commutation of or a substitution for periodic bene ts, the reduction under this section is made at such time or times and in such amounts as the O ce determines will approximate as nearly as practicable the reduction required under paragraph (b) of this section.” There is no indication that an o set depends upon receipt of the state bene ts during the federal-bene ts eligibility period. Subsection (b) reinforces that interpretation; it requires that federal 8 No. 20-1075 Charles Bailey’s settlement agreement speci ed the range of time that the lump sum was intended to cover and that the time frame overlaps with his federal-bene ts eligibility. As a result, the Fourth Circuit’s opinion in Harman Mining Co. v. Director, OWCP, upon which Petitioner relies, is inapposite. 826 F.2d 1388 (4th Cir. 1987). In Harman, the lump-sum state award was both paid prior to the petitioner’s federal-bene ts eligibility and “covered bene ts for a period ending before claimant became entitled to federal bene ts….” Id. at 1389. Harman does not foreclose § 725.535(c)’s applicability here. III. As a separate argument against o set, Petitioner contends that it frustrates the purpose of the Act. We disagree. The Act’s goal is to “provide bene ts, in cooperation with the States, to coal miners who are totally disabled due to pneumoconiosis and to the surviving dependents of miners whose death was due to such disease….” 30 U.S.C. § 901(a) (emphasis added). In keeping with this goal, the Act mandates that federal bene ts “shall be reduced” “by the amount of any compensation received” under state worker’s compensation laws due to pneumoconiosis. 30 U.S.C. § 932(g). The o set in this case not only comports with the Act’s purpose—it is required by the Act. Petitioner asserts that the Department of Labor has interpreted the Act to guarantee minimum monthly bene ts and argues that if the federal-bene ts award is reduced, the bene ts be o set by state bene ts received “for such month”—not during the same month. § 725.535(b) (emphasis added). No. 20-1075 9 OWCP violates its interpretation of the Act. That argument is unavailing. Between the state and federal bene ts, Charles Bailey received an amount that exceeded his federal minimum bene ts. 4 Under the Act, Charles Bailey was entitled to $52,088.60 over the 55 months from November 2011 through May 2016 (his “federal minimum bene ts”). But he also received state bene ts meant to cover those months. Taking the Director’s breakdown of the workers’ compensation award as correct— which we will discuss below—Charles Bailey’s state bene ts awarded him $135.67 a month. The Director reduced the federal bene ts by this amount: $52,088.60 – ($135.67 x 55) = $44,626.75. Because the Director subtracted only what Charles Bailey received in state bene ts and no more, he received the required minimum bene t amount. That he reached that amount through both state and federal funding is of no consequence. IV. Despite Petitioner’s argument to the contrary, the ALJ and Board also did not err in holding that the Director properly calculated the o set amount. Like the applicability of the o set, the amount of the o set is dependent on a contractual interpretation. The Director based her calculation on subsection (3) of page two of the settlement agreement. That provision provides that Charles Bailey’s $27,677.50 take-home amount 4 Charles Bailey was eligible for federal bene ts for 55 months for a total of $52,088.60 and was paid $44,626.75 after the state-bene ts o set. Collectively, he received $72,304.25 ($27,677.50 in state bene ts plus $44,626.75 in federal bene ts), which exceeds the $52,088.60 federal minimum bene ts OWCP awarded. 10 No. 20-1075 is based on a monthly payment of $135.67 over seventeen years. Petitioner relies on a di erent provision from the previous page, which states that the “amount of $35,000.00 represents approximately 15% [man as a whole] or 75.16 weeks of compensation at the [permanent partial disability] rate of $465.67 per week based on the last date of exposure.” 5 From this, she raises two primary arguments. First, Petitioner proposes that the o set should be calculated at the rate of $465.67 per week rather than $135.67 per month, with a start date of either July 28, 1998 (the date her husband was last exposed to coal-mine dust) or July 17, 2002 (the contract date). Under either of those start dates, the state bene ts would be exhausted long before Charles Bailey was eligible for federal bene ts, and there would be no o set. While the Board observed that this provision and the pagetwo provision advanced by the Director were “seemingly in tension,” it concluded that the ALJ reasonably relied on the more detailed page-two provision. We agree. Under the Petitioner’s reading of the agreement, the pagetwo provision—despite being the only provision to speci cally list a breakdown of Charles Bailey’s take-home portion—would be nulli ed. By contrast, the Director’s interpretation reconciles both provisions. On that view, the page-one provision addresses the method of calculation for the total 5 Man as a whole (or “percentage of the person as a whole”) is a metric for disability compensation that is recognized under Illinois law. It is employed primarily when a person’s injuries “partially incapacitate him from pursuing the duties of his usual and customary line of employment but do not result in an impairment of earning capacity….” 820 ILCS 305/8(d)(2); see also Gallianetti v. Indus. Comm’n of Ill., 734 N.E.2d 482, 488 (Ill. App. Ct. July 28, 2000). No. 20-1075 11 settlement, while the page-two provision explains the periodic distributions represented by Charles Bailey’s take-home portion. The ALJ and Board’s acceptance of the Director’s interpretation was not contrary to applicable law. Alternatively, Petitioner argues that the Director should have discounted the state-bene ts o set by 15% rather than subtracting the entire amount. For support, she cites Lucas v. Director, OWCP, 14 Black Lung Rep. 1-112, 1990 WL 284124, at 1 (Ben. Rev. Bd. Aug. 30, 1990) (en banc). There, a miner received a state disability award after a determination that he was 87% disabled. Because pneumoconiosis accounted for only 30% of his disability, his federal bene ts under the Act were o set by only 30% of the total state bene ts that overlapped. Id. at 1–2. Lucas does not map onto this case. Charles Bailey did not receive a general disability award of which a portion was derived from a pneumoconiosis disability. The entirety of the $35,000 was based on his pneumoconiosis disability, which rendered him 15% disabled. There is no reason to discount the state-bene ts o set here, and the ALJ and Board did not err by declining to do so. V. Federal regulations require that Charles Bailey’s federal bene ts be o set by the overlapping amount of his state workers’ compensation award. The Director recognized that and correctly calculated the o set amount. Given that the Board’s decision approving that o set was legally correct and did not exceed its scope of review, we deny the petition for review.
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