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REVISED, APRIL 3, 2000
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 99-20278
_____________________
H B ZACHRY COMPANY; INSURANCE COMPANY OF THE STATE OF
PENNSYLVANIA
Plaintiffs - Appellants
v.
JOSE B QUINONES; DIRECTOR, OFFICE OF WORKERS'
COMPENSATION PROGRAMS, US DEPARTMENT OF LABOR
Defendants - Appellees
_________________________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
_________________________________________________________________
March 8, 2000
Before KING, Chief Judge, and DUHÉ and DeMOSS, Circuit Judges.
KING, Chief Judge:
Plaintiffs-Appellants appeal from the judgment of the
district court adopting and affirming a Decision and Order of the
Benefits Review Board and denying their petition for review. For
the following reasons, we reverse the district court's denial of
the petition and remand for further proceedings consistent with
this opinion.
I. FACTUAL AND PROCEDURAL BACKGROUND
Defendant-Appellee Jose Quinones was employed by Plaintiff-
Appellant H.B. Zachry Company ("Zachry") on and off from 1980

until 1994. In 1993, he accepted a one-year position with Zachry
as a construction foreman on the Kwajalein Army base in the
Marshall Islands. He began experiencing back troubles while in
the Marshall Islands and made several visits to doctors there.
Upon returning to the United States, Quinones sought further
medical treatment. Because of some debate regarding the cause of
his symptoms, Zachry and its insurance carrier, Plaintiff-
Appellant Insurance Company of the State of Pennsylvania
(together with Zachry, "Appellants"), refused to pay any more of
Quinones's medical bills. Quinones brought a claim for
compensation benefits under the Longshore and Harbor Workers'
Compensation Act ("LHWCA"), 33 U.S.C. § 901 et seq., as amended
and extended by the Defense Base Act ("DBA"), 42 U.S.C. § 1651 et
seq.
The Administrative Law Judge ("ALJ") awarded Quinones
ongoing temporary total disability benefits, basing his
calculation of Quinones's average weekly wages in part on the
value of meals and lodging that Zachry provided Quinones while he
was working in the Marshall Islands. Appellants appealed to the
Benefits Review Board ("BRB"), which affirmed the ALJ's decision.
See Quinones v. H. B. Zachry, Inc., 32 BRBS 6 (1998). Appellants
then petitioned the district court for review of the BRB's
decision, which petition the district court denied. Appellants
timely appeal to this court raising three issues. First, they
argue that the value of meals and lodging provided to Quinones
should not be included in his wages for the purpose of
2

calculating disability benefits. Second, they argue that the ALJ
failed to detail his reasons for rejecting certain evidence, and,
finally, they contest the rate at which the BRB calculated
attorney's fees for Quinones's counsel.
II. STANDARD OF REVIEW
Generally, disability compensation claims brought by persons
employed at United States military bases abroad are governed by
the DBA. The DBA provides that the LHWCA applies to such claims,
unless the DBA modifies the provisions of the LHWCA. See 42
U.S.C. § 1651(a) (1994). One such modification is the process
for seeking review of a decision of the BRB. Under the LHWCA, a
claimant petitions directly to this court for such review. See
33 U.S.C. § 921(c) (1994). Under the DBA, 42 U.S.C. § 1653(b)
(1994), review is sought first in the district court, and an
appeal of the district court's judgment can then be brought in
this court. See AFIA/CIGNA Worldwide v. Felkner, 930 F.2d 1111,
1114, 1116 (5th Cir. 1991).
Felkner did not address the deference this court pays to the
judgment of the district court in such a situation. Our review
of the case law in sister circuits has likewise yielded no
guidance on this question. In reviewing a district court's
decision on agency action in a different context, however, we
have explained that "since an appellate court reviews the
administrative decision on the identical basis as did the
district court, appellate court review need accord no particular
3

deference to the district court's conclusion as to whether the
identical administrative record does or does not support the
administrative determination . . . ." Louisiana Envtl. Soc'y,
Inc. v. Dole, 707 F.2d 116, 119 (5th Cir. 1983). This reasoning
applies equally in the case at hand, and we therefore accord no
deference to the decision of the district court and proceed as
though reviewing the decision of the BRB in the first instance.
"Our review of Review Board decisions is limited to
considering errors of law and ensuring that the Review Board
adhered to its statutory standard of review, that is, whether the
ALJ's findings of fact are supported by substantial evidence and
are consistent with the law." Sisson v. Davis & Sons, Inc., 131
F.3d 555, 557 (5th Cir. 1998); see also Shell Offshore, Inc. v.
Director, OWCP, 122 F.3d 312, 315 (5th Cir. 1997); Boland Marine
& Mfg. Co. v. Rihner, 41 F.3d 997, 1002 (5th Cir. 1995). We
review the BRB's interpretation of the LHWCA de novo. See
Equitable Equip. Co. v. Director, OWCP, 191 F.3d 630, 631 (5th
Cir. 1999).
III. MEALS AND LODGING AS WAGES
The first question we must address is whether the value of
meals and lodging exempted from federal income taxation by
section 119 of the Internal Revenue Code ("§ 119 Meals and
4

Lodging")1 is included in "wages" under the LHWCA. The LHWCA
provides:
The term "wages" means the money rate at which the service
rendered by an employee is compensated by an employer under
the contract of hiring in force at the time of the injury,
including the reasonable value of any advantage which is
received from the employer and included for purposes of any
withholding of tax under subtitle C of title 26 (relating to
employment taxes). The term wages does not include fringe
benefits, including (but not limited to) employer payments
for or contributions to a retirement, pension, health and
welfare, life insurance, training, social security or other
employee or dependent benefit plan for the employee's or
dependent's benefit, or any other employee's dependent
entitlement.
33 U.S.C. § 902(13) (1994). Subtitle C of title 26, the Internal
Revenue Code, deals with employment taxes, three of which are
withheld from the pay of employees. See I.R.C. §§ 3101(a),
3101(b) & 3201(a) (1994) (old-age, survivors, and disability
insurance tax; hospital insurance tax; and railroad retirement
tax, respectively). Each of these taxes is calculated based on
wages, as defined in I.R.C. § 3121. See id. Since 1983, I.R.C.
§ 3121 has provided that "the term `wages' . . . shall not
include . . . the value of any meals or lodging furnished by
. . . the employer if at the time of such furnishing it is
1 Section 119(a) of the Internal Revenue Code provides:
There shall be excluded from gross income of an
employee the value of any meals or lodging furnished to him,
his spouse, or any of his dependents by or on behalf of his
employer for the convenience of the employer, but only if
(1) in the case of meals, the meals are furnished on the
business premises of the employer, or (2) in the case of
lodging, the employee is required to accept such lodging on
the business premises of his employer as a condition of his
employment.
I.R.C. § 119(a) (1994).
5

reasonable to believe that the employee will be able to exclude
such items from income under section 119 . . . ." I.R.C.
§ 3121(a)(19) (1994).2 The value of § 119 Meals and Lodging is
therefore not "included for purposes of any withholding of tax
under subtitle C of the Internal Revenue Code." All parties
agree that the room and board provided to Quinones in this case
qualified as § 119 Meals and Lodging.
The only question before
us then is the proper construction of § 902(13).
Relying on Guthrie v. Holmes & Narver, Inc., 30 BRBS 48
(1996), rev'd sub nom. Wausau Ins. Cos. v. Director, OWCP, 114
F.3d 120 (9th Cir. 1997), on recons. 136 F.3d 586 (9th Cir.
1998), the ALJ determined that, as a matter of law, the value of
§ 119 Meals and Lodging is included in the calculation of wages
under § 902(13). See Decision and Order Awarding Compensation
Benefits, dated Jan. 7, 1997, at 11 ("ALJ Decision"). The BRB
agreed, see Quinones, 32 BRBS at 10, and the district court
affirmed. See Memorandum and Order entered Feb. 26, 1999. We
now reverse.
In Guthrie, the claimant was provided with § 119 Meals and
Lodging under his employment contract. The BRB concluded that
because these services were provided "under the terms of
claimant's employment contract, and the value of these services
[was] readily ascertainable[,] . . . the room and board provided
by the employer [could not] be deemed a fringe benefit as the
2 Paragraph 19 was added to I.R.C. § 3121(a) by the Social
Security Amendments of 1983, Pub. L. 98-21 § 327(a)(1), 97 Stat.
65, 126-27 (1983).
6

amount [was] readily calculable. These services satisfy the
definition of `wages' under [§ 902(13)]." Guthrie, 30 BRBS at 50
(footnote omitted). The employer in Guthrie appealed, and the
United States Court of Appeals for the Ninth Circuit reversed.
In a brief per curiam opinion, the Ninth Circuit held that the
LHWCA defers to the IRS definition of wages. See Wausau Ins.
Cos. v. Director, OWCP, 114 F.3d 120, 121-22 (9th Cir. 1997), on
recons. 136 F.3d 586 (9th Cir. 1998).
Defendant-Appellee Director, Office of Workers' Compensation
Programs, Department of Labor (the "Director"), joins Appellants
in arguing that the value of § 119 Meals and Lodging is not
included in wages under the LHWCA. The Director begins by
asserting that § 902(13) is clear on its face. In the
alternative, the Director argues that this court owes Chevron
deference to the Director's reasonable construction of the
statute.3 "Because the Department of Labor has been entrusted
with administering the workers' compensation scheme of the LHWCA,
3 Under Chevron U.S.A., Inc. v. Natural Resources Defense
Council, 467 U.S. 837 (1984), this court conducts a two step
process in reviewing an agency's construction of a statute it
administers.
[T]he court first must use "traditional tools of statutory
construction" to determine "whether Congress has directly
spoken to the precise question at issue." If so, the court
and the agency "must give effect to the unambiguously
expressed intent of Congress." However, "[i]f the statute
is silent or ambiguous" on the particular issue, the court
must determine "whether the agency's answer is based on a
permissible construction of the statute."
Doyle v. Shalala, 62 F.3d 740, 745 (5th Cir. 1995) (quoting
Chevron, 467 U.S. at 842-43 & n.9) (internal citations omitted
and alteration in original).
7

its construction of that scheme should be given considerable
weight." Texports Stevedores Co. v. Director, OWCP, 931 F.2d
331, 333 (5th Cir. 1991). The Director's views are entitled to
deference. See Boudreaux v. American Workover, Inc., 680 F.2d
1034, 1046 (5th Cir. Unit A 1982). Indeed, deference is owed to
the Director's views and not the views of the BRB. See id. at
1046 n.23; Potomac Elec. Power Co. v. Director, OWCP, 449 U.S.
268, 278 n.18 (1980)("It should also be noted that the Benefits
Review Board is not a policymaking agency; its interpretation of
the LHWCA thus is not entitled to any special deference from the
courts.").
Appellants and the Director advance three arguments in
support of their position. First, they argue that the phrase
"including the reasonable value of any advantage which is
received from the employer and included for purposes of any
withholding of tax" is one of expansion, explaining that the
section "provides that the term `wages,' in general, means the
monetary rate at which work is paid, but expands the term to also
include the reasonable value of non-monetary advantages received,
if subject to withholding tax." Director's Brief at 17. Second,
they argue that the BRB's construction of § 902(13) reads out
part of the statute. Because the BRB includes in wages an
advantage not subject to withholding (the value of § 119 Meals
and Lodging), the limiting phrase "and included for purposes of
any withholding tax" becomes superfluous. "As the Supreme Court
has recognized, `[t]he cardinal principle of statutory
8

construction is to save and not to destroy.'" Director's Brief at
17 (quoting United States v. Menasche, 348 U.S. 528, 538 (1955)).
Finally, Appellants and the Director argue that an
examination of changes made to § 902(13) evinces congressional
intent to exclude the value of § 119 Meals and Lodging from the
definition of wages. In Morrison-Knudsen Constr. Co. v.
Director, Office of Workers' Compensation Programs, the Supreme
Court held that the value of certain employer-paid fringe
benefits was not included in wages under § 902(13). See 461 U.S.
624 (1983). Congress codified this holding in 1984 by amending
§ 902(13) to read as it currently does.4 The Director argues
that the 1984 amendments created a provision that clearly
explains what is and is not included in wages under the LHWCA,
and the value of § 119 Meals and Lodging is not included.
Quinones, on the other hand, argues that "[t]he [post-1984]
definition of wages is the money rate at which the employee is
compensated under the contract of hire in force at the time of
injury, including the reasonable value of any advantage
received." Appellee's Brief at 19. He asserts that the mention
of taxable advantages in the provision is merely illustrative and
does not preclude including non-taxable advantages in wages.
4 Prior to the 1984 amendment, § 902(13) had provided that
wages included "the reasonable value of board, rent, housing,
lodging, or similar advantage received." Longshoremen's and
Harbor Workers' Compensation Act, Pub. L. No. 69-803, § 2(13), 44
Stat. 1424, 1425 (1927) (prior to 1984 amendment). The provision
did not require that these advantages be subject to tax.
9

We agree with the Director and Appellants that adopting
Quinones's view of § 902(13), that all advantages received from
the employer are included in wages, would read the phrase "and
included for purposes of any withholding of tax under subtitle C
of title 26" out of the statute. Moreover, Quinones implicitly
construes the first occurrence of the term "including" as meaning
"including but not limited to." That construction is undermined
by the fact that the second occurrence of the term "including" in
§ 902(13) is followed by the parenthetical "(but not limited
to)." Both occurrences of the term "including" were added to
§ 902(13) in the 1984 amendments to the LHWCA, and it is
illogical to assume that Congress intended both to be construed
as "including but not limited to" but only chose to modify the
second occurrence of the term with a parenthetical.
Section 902(13) is clear on its face. It provides that
"wages" equals monetary compensation plus taxable advantages. We
join the Ninth Circuit in holding that § 902(13), on its face,
excludes from the definition of "wages" the value of § 119 Meals
and Lodging.
IV. FAILURE TO COMPLY WITH 5 U.S.C. § 557(C)(3)
Appellants next argue that the ALJ failed to comply with
§ 557(c)(3) of the Administrative Procedures Act (the "APA")
which provides, in pertinent part, that "[a]ll [agency]
decisions, including initial, recommended, and tentative
decisions, are a part of the record and shall include a statement
10

of . . . findings and conclusions, and the reasons or basis
therefor, on all the material issues of fact, law, or discretion
presented on the record . . . ." 5 U.S.C. § 557(c)(3)(A) (1994).
They assert that the ALJ failed to explain why he rejected the
testimony of Quinones's supervisor, Joe Ramirez, why he rejected
evidence that there was no language barrier in this case, and why
he rejected the testimony of Dr. Goldstein. Appellants turn to
cases from two other circuits, See v. Washington Metro. Transit
Auth., 36 F.3d 375, 384 (4th Cir. 1994), and Cotter v. Harris,
642 F.2d 700, 705-07 (3d Cir. 1981), for the proposition that an
ALJ must explain why evidence contradicting his conclusion was
rejected. This circuit has expressly declined to adopt the
Cotter rule. In Falco v. Shalala, a case dealing with subjective
complaints of pain, we stated:
[Appellant] urges that we adopt the Third Circuit's
rule that an ALJ must articulate specifically the evidence
that supported his decision and discuss the evidence that
was rejected. Although we find that this rigid approach is
unnecessary, we have nonetheless set our own strictures
that, we feel, effectively reach the same result. . . .
[F]or example, . . . when the evidence clearly favors the
claimant, the ALJ must articulate reasons for rejecting the
claimant's subjective complaints of pain.
27 F.3d 160, 163 (5th Cir. 1994) (footnotes omitted).
"Under the [APA], agency action is reviewed solely to
determine whether it is arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law." Hernandez
v. Reno, 91 F.3d 776, 779 (5th Cir. 1996) (citing 5 U.S.C.
§ 706). Under this standard, an agency "is not required to make
express findings on collateral contentions considered by itonly
11

to make findings upon the material issues of fact, law, or
discretion presented to it by the administrative proceedings."
Trailways, Inc. v. ICC, 676 F.2d 1019, 1022 (5th Cir. Unit A
1981). An agency "is required to give reasons for its actions if
the protestants raise a material disputed issue or if the
existence of a material issue is apparent from the proceedings."
Central Freight Lines, Inc. v. United States, 669 F.2d 1063, 1074
(5th Cir. Unit A 1982). In the summary judgment area, we have
stated that "[a] fact is material if it might affect the outcome
of the suit under the governing substantive law." United States
v. Arron, 954 F.2d 249, 251 (5th Cir. 1992).
A. Joe Ramirez's Deposition and the Alleged Language Barrier
First, Appellants complain that the ALJ adopted Quinones's
testimony that he reported an injury to his supervisor, Joe
Ramirez, and failed to explain why he rejected Ramirez's
assertion that Quinones had never reported an injury to him.
Second, Appellants complain that the ALJ adopted Quinones's
assertions regarding a purported language barrier without
explaining why he rejected contradictory evidence. Several
hospital reports completed overseas state that Quinones did not
know how or when he had injured himself. Quinones explains that
because of a language barrier, hospital staff did not understand
his explanation or he did not understand their questions.
Appellants argue that other evidence shows that Quinones speaks
and understands English well enough to have communicated when and
12

how he injured himself, and the ALJ rejected that evidence
without explanation. Neither Ramirez's statements nor the
language barrier testimony is material to this dispute.
In this case, the ALJ explained that Quinones had to
establish a prima facie case of compensability by showing an
injury existed that could have been caused by working conditions
or an accident at work. The burden then shifted to Appellants to
introduce substantial evidence to rebut the presumption of
compensability. Were Appellants to meet their burden, the ALJ
would have had to resolve the issue of causation based upon all
the evidence. ALJ's Order at 6-7. Appellants do not challenge
this legal framework.
The ALJ concluded that Quinones established his prima facie
case, and the burden shifted to Appellants to rebut with
substantial evidence. First, the ALJ determined that Quinones
had an injury under the definition provided in the LHWCA. The
ALJ noted that it was not clear what caused the injury but that
one existed nonetheless. The ALJ then concluded that working
conditions existed that could have caused the injury:
While a specific instance of injury has not been clearly
established since, on multiple occasions, Claimant has
stated he did not know how he got injured, it is clear that
Claimant was engaged in labor which involved the lifting and
moving of heavy materials such as rebar, bricks, and
concrete panels. This fact alone will satisfy the prima
facie condition of having working conditions that could have
caused the accident.
Id. at 8. Once the ALJ determined that Quinones met his burden
of establishing a prima facie case by showing that working
conditions existed that could have caused the injury, the
13

contradictory testimony regarding whether a specific injury was
ever reported to Quinones's supervisor and Quinones's failure to
report a specific injury in medical records became immaterial.
Under the law of this circuit, therefore, the ALJ need not
address these contradictions specifically.
B. Dr. Goldstein's Findings
Appellants further assert that the ALJ failed to give his
reasons for rejecting the findings of a Dr. Goldstein.
Appellants argued in their brief before us, as they had in their
post-hearing brief before the ALJ, that Dr. Goldstein's findings
contradicted those of Dr. Meadows, Quinones's current physician.
Our thorough review of the record reveals no testimony or
deposition of Dr. Goldstein.
When discussing Dr. Goldstein's findings, Appellants cite to
their own exhibit 40 at page 4. Exhibit 40 on Appellants'
Exhibit List is described as "DOL certified administrative file."
Employer and Carrier's Exhibit List at 3. Marginalia next to
that entry indicates that the exhibit was withdrawn, and there is
no tab for exhibit 40. Moreover, no Respondents' Exhibit 40 was
offered or received in evidence at the hearing. See Hearing
Record at 21-23. Finally, as previously stated, in our
independent review of the entire record we found no report from
or testimony or deposition of Dr. Goldstein. The ALJ has no
obligation to consider, let alone explain his rejection of,
evidence not in the record before him.
14

V. AWARD OF ATTORNEY'S FEES BY THE BRB
Finally, Appellants dispute the hourly rate at which
attorney's fees were awarded by the BRB. An award of attorney's
fees by the BRB is reversed only if it is arbitrary, capricious,
an abuse of discretion, or not in accordance with law. See
Conoco, Inc. v. Director, OWCP, 194 F. 3d 684, 688 (5th Cir.
1999). Appellants' only support for their argument is a
photocopy of an 1996 order from this court granting attorney's
fees at a rate lower than the rate at which the BRB granted fees
in this case. Even were we to consider evidence outside of the
record, Appellants have failed to establish that the BRB abused
its discretion.
VI. CONCLUSION
For the foregoing reasons we REVERSE the judgment of the
district court denying Appellants' petition for review and REMAND
for further proceedings consistent with this opinion.
15