The Benefits Review Board (BRB) recently reversed a grant of summary decision regarding whether a claimant’s current “left shoulder injury” claim is covered by the parties’ previous settlement for his “left pectoral muscle,” knee, and psychological injuries.
In Marcus Schulmeister v. Blackwater USA et al, BRB No. 23-0255 (September 25, 2024), the claimant sustained a left pectoralis muscle/shoulder injury in November 2008. The employer voluntarily paid temporary total disability (TTD) and medical benefits, and the claimant returned to work for the employer. Thereafter, the claimant sustained a left knee injury, and the employer again paid TTD and medical benefits. The claimant was released to work with no restrictions on August 22, 2013, but he did not return to work. In 2019, the claimant filed a claim for psychological injuries he allegedly sustained while working for the employer, and the parties reached a settlement agreement on October 12, 2020 in which “all of the symptoms, illnesses, or injuries which Claimant has brought to the attention of Employer/Carrier” were settled. The parties’ settlement application was approved on October 29, 2020.
Fifteen months later, the claimant filed a claim for compensation for alleged employment-related injuries to his left shoulder and left knee. In response, the employer filed a motion for summary decision, arguing Claimant’s claim is precluded by the 2020 8(i) settlement or, in the alternative, the claim was untimely filed.
The ALJ granted the motion for summary decision and determined that the left shoulder and left knee injuries were the same as the physical injuries identified in the 8(i) settlement. He found it undisputed that the 8(i) settlement specifically referred to the 2008 and 2012 physical injuries, in addition to the 2019 psychological injury claim, that both injuries were “in existence” at the time of the settlement, and the 8(i) settlement application contained language indicating that any claim for both injuries was included in the terms of Employer’s release. Link to ALJ decision: https://www.oalj.dol.gov/DECISIONS/ALJ/LDA/2022/Schulmeister_v_Blackwater_Security__2022LDA04223_(MAR_02_2023)_111420_CADEC_PD.PDF
On appeal, the BRB reversed the grant of summary decision and found that the ALJ did not act within the constraints imposed by the standard for granting summary decision. The BRB found the ALJ improperly relied on extrinsic evidence submitted by the employer to interpret the parties’ 8(i) settlement agreement, including Department of Labor claim forms, medical records, and the claimant’s 2022 deposition testimony regarding his understanding of the relationship between his pectoralis and shoulder injuries.
The BRB also found that the settlement agreement referenced only the “pectoralis muscle injury” and did not contain any language specifically encompassing a “left shoulder injury.” As a result, the BRB ruled that the employer did not meet its burden of showing “no genuine issue” that the parties settled Claimant’s shoulder injury claim, or that the pectoralis and shoulder injuries were the same. The BRB also ruled that the ALJ did not consider evidence in the light most favorable to the claimant as the non-moving party, which prevented the parties from developing medical evidence in the normal course of litigation that may have facilitated its resolution.
The Requirements of the 8(i) Settlement Application, Summary Decision, and Finality of Settlement
The Act mandates the 8(i) settlement application to be a self-sufficient document that can be evaluated without further reference to the administrative file. The Code of Federal Regulations requires the following information be included in, or attached to, a Section 8(i) settlement application:
- A full description of the terms of the settlement which clearly indicates the amounts to be paid for compensation, medical benefits, and attorney’s fees.
- The reason for the settlement, and the issues which are in dispute, if any.
- The claimant’s date of birth.
- Information on whether or not the claimant is working or is capable of working. This should include a description of the claimant’s educational background and work history, as well as other factors which could impact, either favorably or unfavorably, on future employability.
- A current medical report which fully describes any injury related impairment as well as any unrelated conditions. This report shall indicate whether maximum medical improvement has been reached and whether further disability or medical treatment is anticipated. If the claimant has already reached maximum medical improvement, a medical report prepared at the time the employee’s condition stabilized will satisfy the requirement for a current medical report.
- A statement explaining how the settlement amount is considered adequate.
- If the settlement application covers medical benefits an itemization of the amount paid for medical expenses by year for the three years prior to the date of the application. An estimate of the claimant’s need for future medical treatment as well as an estimate of the cost of such medical treatment shall also be submitted which indicates the inflation factor and/or the discount rate used, if any. The adjudicator may waive these requirements for good cause.
- Information on any collateral source available for the payment of medical expenses.
20 CFR § 702.242(b).
The Code of Federal Regulations providing for summary decision states a “party asserting that a fact cannot be…genuinely disputed must support the assertion by citing to particular parts of materials in the record.” 29 CFR § 18.72(c).
The Board’s decision in Schulmeister rejecting the ALJ’s examination of “extrinsic evidence” disregards the statutory and regulatory requirements that the information above be included or attached to the 8(i) settlement application and submitted in support of the motion for summary decision. Of note, the ALJ relied on judicial notice, Longshore forms, and medical records, documentation which was required to be included with the settlement application. Consequently, this information should be not considered “extrinsic,” as it was necessary information to comply with the self-sufficiency requirement of 20 CFR § 702.242(b) and the procedural requirement of 29 CFR § 18.72(c).
Additionally, the BRB relied on a Second Circuit class action parental rights case (remanding for modification of the settlement agreement based on the “parties stated and undisputed intent”) and an earlier Second Circuit decision from the Tax Court (considering the settlement agreement Form 870-AD and a proposed letter from the IRS appeals officer) for the scope of settlement agreements. In each case, the Second Circuit resorted to a review of evidence supplemented by the four corners of the instrument. Accordingly, the ALJ’s analysis of the settlement application and supporting materials establishing that the agreement was unambiguous and should have been affirmed by the BRB.
The BRB’s reasoning in Schulmeister casts into doubt the finality of the approval a Section 8(i) settlement application. The Act requires that the settlement application provide for the complete discharge of an employer’s liability through payment of compensation to a claimant. See Lawrence v. Toledo Lake Front Docks, 21 BRBS 282 (1988). The BRB did not discuss the language in the parties’ settlement application expressing their intention “to forever close out and settle all issues related to compensation under all Sections of the Defense Base Act, both accepted and not accepted, for any and all alleged conditions both physical and psychological.” Rather, the BRB focused on the claimant’s inability to develop medical evidence “that may have facilitated [the claim’s] resolution” despite the ALJ’s issuance of an order taking official (judicial) notice.
In response to the increasing number of second, third, and fourth claims filed by claimants, parties have recently included language in the section 8(i) settlement application to include either (1) settlement of all injuries or illness not claimed nor investigated and/or (2) language expressly noting the release of any and all liability.
Employers and carriers have argued that the release language is permissible and that its legal effect can be adjudicated for its preclusive effect if a claimant files a subsequent claim. The Fifth Circuit has stated that the “principal effect” of the 1984 Amendments was to give parties “far greater contractual autonomy” to settle their claims than before, although settlement “approval is now required (and, for claimants with legal representation, automatic) in the absence of an affirmative determination of inadequacy or duress.” Oceanic Butler v. Nordahl, 842 F.2d 773, 776 n.3 (5th Cir. 1988). The Fifth Circuit also recognized that contract principles apply to Section 8(i) settlement agreements in the absence of superseding provisions in the Act. Nordahl, 842 F.2d 773 (5th Cir. 1988) (recognizing that where the Act is silent on an employer’s right to withdraw from an 8(i) agreement, employer could have reserved right by means of a contractual provision). Employers and carriers should consider language which releases all claims in existence during a claimant’s employment, including those arising out of the alleged date of accident, in the settlement application. However, the Schulmeister decision may result in settlement applications that are overly broad, as well as requests for OALJ hearings on the record to confirm the settlement terms. The BRB’s decision could undermine the settlement process by provoking rejected settlement applications or invalidating release language.
It appears that until these issues are clarified by a federal circuit appeals court, employers and carriers are faced with uncertainty when negotiating and submitting settlements with claimants. One bad apple can spoil the whole barrel.
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Francis Waguespack, Esq.
Office: New Orleans, LA
fwaguespack@gallowaylawfirm.com | 504-648-6340
Heather Angelico, Esq.
Office: New Orleans, LA
hangelico@gallowaylawfirm.com | 504-648-6278
Kathleen Charvet, Esq.
Office: New Orleans, LA
kcharvet@gallowaylawfirm.com | 504-648-6278