United States Court of Appeals For The Third Circuit
United States Court of Appeals For The Third Circuit
United States Court of Appeals For The Third Circuit
2000)
Appeal from the United States District Court for the District of New
Jersey (D.C. No. 93-cv-03903) District Judge: Honorable Joseph H.
RodriguezDavid M. Linker (argued) Freedman & Lorry 400 Market Street
9th Floor Philadelphia, PA 19106 Attorney for Appellants
Shannen W. Coffin (argued) Mark F. Horning Steptoe & Johnson 1330
Connecticut Avenue, N.W. Washington, D.C. 20036 Attorneys for private
Appellees Southern Stevedoring and Lumbermen's Mutual
Allen H. Feldman Nathaniel I. Spiller Gary K. Stearman (argued) Andrew
D. Auerbach United States Department of Labor Office of the Solicitor
200 Constitution Avenue, N.W. Washington, D.C. 20210 Attorneys for
Appellee Secretary of Labor
Andrew D. Auerbach United States Department of Labor Office of the
The district court treated a motion brought under Rule 12(b)(6), Federal Rules
of Civil Procedure, as a one for summary judgment because the court looked
outside the pleadings in making its decision. We review a grant of summary
judgment by applying the same criteria used by the district court in the first
instance. Olson v. General Elec. Astrospace, 101 F.3d 947, 951 (3d Cir. 1996).
We will affirm the judgment if "there is no genuine issue as to any material fact
[and] the moving party is entitled to a judgment as a matter of law." Rule 56(c),
Federal Rules of Civil Procedure; see Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986).
5
Upon making the first payment, and upon suspension of payment for any cause,
the employer shall immediately notify the deputy commissioner, in accordance
with a form prescribed by the Secretary, that payment of compensation has
begun or has been suspended, as the case may be.
If the employer controverts the right to compensation he shall file with the
deputy commissioner on or before the fourteenth day after he has knowledge of
the alleged injury or death, a notice, in accordance with a form prescribed by
the Secretary, stating that the right to compensation is controverted, the name
of the claimant, the name of the employer, the date of the alleged injury or
death, and the grounds upon which the right to compensation is controverted.
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11
The Court has made clear, however, that a facial attack on a statute must also
satisfy the same requirements as an attack on a private individual's actions: (1)
the "constitutional deprivation [must be] caused by the exercise of some right
or privilege created by the State or by a rule of conduct imposed by the State or
by a person for whom the state is responsible, and [2] the party charged with
the deprivation must be a person who may fairly be said to be a state actor."
Sullivan, 526 U.S. at 50 (internal quotations and citations omitted).
I.
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The director again renewed his motion to dismiss, but in an opinion filed
September 30, 1997, relying on Baksalary v. Smith, 579 F. Supp. 218 (E.D. Pa.
1984), the district court denied the motion. The court ruled that the private
Appellees were "state actors" as a result of their purported "joint participation"
with federal officials in the suspension of benefits and that Kreschollek had a
protected property interest in the continuation of benefits.
16
All of these proceedings took place before March 1999, when the Court handed
down its decision in Sullivan, which held there is no state action when an
employer terminates voluntary payment of benefits, 526 U.S. at 51, and that an
employee has no property interests in unadjudicated benefits under a
Pennsylvania workers' compensation statute. 526 U.S. at 59-61. The district
court subsequently withdrew its decision and filed a new judgment on June 26,
1999 in which it held that withdrawal of benefits by the employer was not state
action and that Kreschollek did not have a property interest in the continued
receipt of benefits. Dist. Ct. Op. at 6. Kreschollek now appeals.
II.
17
We believe that the Court's teachings in Sullivan control this case. In that case
the plaintiffs filed suit under 42 U.S.C. S 1983 against various Pennsylvania
officials, a self-insured public school district and a number of private workers'
compensation insurers, alleging that the withholding of benefits without notice
and an opportunity to be heard deprived them of property in violation of due
process. Pennsylvania law permits insurers to delay paying a medical bill under
the workers' compensation act until a review has been made of the claim to
ensure that it is medically necessary. The insurer is required to file a form with
the state Workers' Compensation Bureau requesting a utilization review of the
procedure. The Bureau makes no attempt to address the legitimacy of the
request, but rather simply ensures the form was filled out correctly before
forwarding the request to a randomly selected utilization review organization.
18
The Court held that the respondent satisfied the first requirement of showing a
violation of due process because "it may fairly be said that private insurers act
with the knowledge of and pursuant to the state statute . . .." Sullivan, 526 U.S.
at 50 (internal quotations omitted). The Court explained, however, that the
respondents failed to establish the second requirement inasmuch as "the party
charged with the deprivation [was not] a person who may fairly be said to be a
state actor." Id. (internal quotations and citations omitted). Because the decision
to refuse payment was made by the insurer alone without state approval or
standards, there was no state action. The Court identified "the specific conduct
The State's decision to allow insurers to withhold payments pending review can
just as easily be seen as state inaction, or more accurately, a legislative decision
not to intervene in a dispute between an insurer and an employee over whether a
particular treatment is reasonable and necessary.
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If the employer controverts the right to compensation he shall file with the
deputy commissioner on or before the fourteenth day after he has knowledge of
the alleged injury or death, a notice, in accordance with a form prescribed by
the Secretary, stating that the right to compensation is controverted, the name
of the claimant, the name of the employer, the date of the alleged injury or
death, and the grounds upon which the right to compensation is controverted.
23
33 U.S.C. S 914(d).
24
then may appeal to a worker's compensation judge for a de novo review. See
Sullivan, 526 U.S. at 46-47.
25
Under provisions of the LHWCA, upon receipt of notice that an employer has
disputed its liability under the Act or that it has suspended payment, the district
director must attempt to resolve the parties' disagreement.2 The district director
typically holds an informal conference and embodies any agreement reached
through the conference in an enforceable written memorandum. 20 C.F.R. S
702.315(a). If the parties do not reach agreement at the informal conference or
if no conference is held, then the district director will transfer the case to the
Office of the Chief Administrative Law Judge for a formal evidentiary hearing.
33 U.S.C. S 919(c)-(d); 20 C.F.R.S 702.301, .316. After conducting a hearing,
the ALJ makes findings of fact and conclusions of law and issues an
enforceable compensation order, which is filed with the district director. 33
U.S.C. S 919(c); 20 C.F.R. S 702.348-.349. The government becomes active
only after "concededly private parties" choose to terminate payment of workers
compensation benefits. See Sullivan, 526 U.S. at 52.
26
Thus, the similarities are clear and apparent when we examine the essential
Pennsylvania and LHWCA procedures prior to submission to a state worker's
compensation judge or a federal ALJ.
B.
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In the view we take it is not necessary to reach other issues presented by the
parties. The judgment of the district court will be affirmed.
Notes:
*
Honorable William C. O'Kelley, United States District Judge for the Northern
District of Georgia, sitting by designation.
The Department of Labor substituted the designation "district director" for the
statutory term "deputy commissioner" in 1990. Wherever the statute refers to
Deputy Commissioner, these regulations have substituted the term District
Director. The substitution is purely an administrative one, and in no way effects
the authority of or the powers granted and responsibilities imposed by the
statute on that position. 20 C.F.R. S 702.105. We use the designation "district
director."
The Act provides: The deputy commissioner (1) may upon his own initiative at
any time in a case in which payments are being made without an award, and (2)
shall in any case where right to compensation is controverted, or where
payments of compensation have been stopped or suspended, upon receipt of
notice from any person entitled to compensation, or from the employer, that the
right to compensation is controverted, or that payments of compensation have
been stopped or suspended, make such investigations, cause such medical
examinations to be made, or hold such hearings, and take such further action as
he considers will properly protect the rights of all parties. 33 U.S.C. S 914(h).