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US Court of Appeals
FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

SAM D. MATULIC,
Petitioner,
                                                     No. 96-70874
v.
                                                     OWCP No.
DIRECTOR, OFFICE OF WORKERS
                                                     14-009322
COMPENSATION PROGRAMS; JONES
                                                     OPINION
STEVEDORING CO.,
Respondent.


Petition for Review of an Order of the
Benefits Review Board


Argued and Submitted
April 6, 1998--Seattle, Washington


Filed September 8, 1998

Before: Procter Hug, Jr., Chief Judge, Stephen Reinhardt,
Circuit Judge, and Edward C. Reed, Jr.,* District Judge.


Opinion by Judge Reinhardt; Dissent by Judge Reed

_________________________________________________________________

SUMMARY

The summary, which does not constitute a part of the opinion of the court,
is copyrighted C 1998 by West Group.
_________________________________________________________________


Labor and Employment/Workers' Compensation

The court of appeals vacated a decision of the Office of
Workers Compensation Programs (OWCP). The court held
that under the Longshore and Harbor Workers' Compensation
_________________________________________________________________
*The Honorable Edward C. Reed, Jr., Senior District Judge for the Dis-
trict of Nevada, sitting by designation.


                               10429


Act (LHWCA), the possibility of excessive compensation
does not per se support the use of the statute's "catchall" pro-
vision for calculating benefits based on the worker's annual
earning capacity.


Petitioner Sam Matulic suffered a work-related injury while
employed by Respondent Jones Stevedoring Co. After treat-
ment, he was unable to return to work for nearly three
months.


Matulic applied for permanent partial disability benefits
under the LHWCA. An administrative law judge (ALJ) con-
cluded that Matulic had suffered a five percent permanent
partial disability. Under LHWCA S 910(a), which applies
when the claimant's job at the time of the injury was his
employment during the previous (measuring) year, Matulic's
average weekly wages were $1018.94.


However, the ALJ determined that because Matulic had
worked only 82 percent of the total possible working days in
the measuring year, using S 910(a) would have overcompen-
sated him. Accordingly, the ALJ applied S 910(c), the stat-
ute's "catchall" provision that governs whenS 910(a) does
not apply, and requires a figure that reasonably represents the
annual earning capacity of the claimant. By that standard, the
ALJ calculated Matulic's average weekly wages as $834.05.
The ALJ's decision became the final decision of the OWCP.
Matulic petitioned for review.


[1] Section 910(a) could have been reasonably and fairly
applied in Matulic's case, even though his earning capacity
would have been based on an assumption that he would ordi-
narily have worked a number of days more than he worked
during the measuring year. Due to the fixed formula of
S 910(a), there will be a degree of inaccuracy in most benefits
cases, and there will be some overcompensation. [2] Section
910(a) applies except in unusual circumstances or if applying
it would be unreasonable or unfair. A worker's receipt of dis-


                               10430


ability benefits computed on the basis of 18 percent more
days than he actually worked in the measuring year is not a
sufficient basis to find the S 910(a) presumption rebutted.


[3] Application of S 910(a) to Matulic was not only
required but fell well within the realm of theoretical or actual
"overcompensation" that Congress contemplated. [4]
Matulic's earning capacity was generally higher than that
reflected by the number of days he worked during the year
preceding his injury. During that year, he moved from Los
Angeles to Seattle, and attendant circumstances were respon-
sible for a decrease in the number of hours he worked. During
the year after Matulic recovered and returned to work, his
hours returned to nearly the same level as his previous hours.
Only in the interim was there a decrease.


[5] The ALJ's decision to apply S 910(c) was contrary to
law. Section 910(c) may not be invoked when the only signif-
icant evidence that application of S 910(a) would be unfair or
unreasonable is that the claimant worked more than 75 per-
cent of the days in the year preceding the injury.


[6] The parties disagreed as to the method of calculating
Matulic's benefits and the amount to which he was entitled.
Matulic obtained a greater award than any offered by the
employer or recommended by the OWCP. Accordingly, he
was entitled to the attorneys' fees attributable to obtaining
that increase.


Judge Reed concurred in part and dissented in part, con-
cluding that it was neither reasonable nor fair to apply
S 910(a) to Matulic's claim.


_________________________________________________________________

COUNSEL

Mary Alice Theiler, Theiler, Douglas, Drachler & McKee,
Seattle, Washington, for the petitioner.


                               10431


Robert H. Madden, Madden & Crockett, Seattle, Washington,
for the respondent.


_________________________________________________________________

OPINION

REINHARDT, Circuit Judge:

Sam D. Matulic injured his left arm while employed by
Jones Stevedoring Company in Seattle, Washington. Object-
ing to the method used to calculate the amount of his perma-
nent partial disability benefits under the Longshore and
Harbor Workers' Compensation Act ("LHWCA"), 33 U.S.C.
S 901-50, he petitions for review of a decision of the Admin-
istrative Law Judge ("ALJ"). He also seeks review of the
ALJ's denial of a penalty award, interest, and attorney's fees.
We have jurisdiction under 33 U.S.C. S 921(c).


BACKGROUND

Matulic began working as a longshoreman in 1963 and was
based at the Port of Los Angeles until December 1988 when
he moved to Seattle and began working for Jones Stevedoring
Company. On September 13, 1989, he suffered a serious
injury to his left elbow while on-the-job. He received treat-
ment at the hospital and was unable to return to work until
December 8. Jones Stevedoring voluntarily paid Matulic tem-
porary total disability at the rate of $536.24 per week for the
period of his recovery.


Matulic applied for permanent partial disability. During the
preliminary negotiations in December 1990, the parties dis-
agreed over the extent of Matulic's disability. They agreed to
submit the matter to the Office of Workers Compensation
Programs ("OWCP"). On June 24, 1991, without conducting
an informal conference, the OWCP issued a written recom-
mendation as to the extent of Matulic's disability and the


                               10432


amount of his average weekly wage. Despite the continuing
requests of the parties, the informal conference was never
held and the OWCP did not issue a final Compensation Order.
In October 1993, the parties appeared before the ALJ.


On December 23, 1993, the ALJ issued an order with the
following findings of fact and conclusions of law: 1) Matulic
suffered a 5% permanent partial disability; 2) his average
weekly wage was $834.05, resulting in a weekly compensa-
tion rate of $556.03; 3) Matulic was not entitled toS 914(e)
penalties; 4) Matulic was not entitled to attorney's fees; 5)
Matulic was not entitled to interest; and 6) Matulic was enti-
tled to reimbursement of medically-related travel expenses.
Matulic appealed the ALJ's decision to the Benefits Review
Board. Because the Board failed to act within one year, the
decision is deemed automatically affirmed under Public Law
No. 104-134, 110 Stat. 1321-219 (1996). We now consider
Matulic's petition for review.


DISCUSSION

In cases in which the decision of the Administrative Law
Judge is deemed affirmed by operation of Public Law No.
104-134, we review the decision for errors of law and for fail-
ure to adhere to the substantial evidence standard. See Jones
Stevedoring Co. v. Director, OWCP, 133 F.3d 683, 687 (9th
Cir. 1997). In doing so, we recognize the "beneficent pur-
poses and humanitarian nature of the Act." Randall v. Com-
fort Control, Inc., 725 F.2d 791, 796 (D.C. Cir. 1984). "All
doubts are to be construed in favor of the employee in accor-
dance with the remedial purposes of the [LHWCA]." Odom
Constr. Co. v. United States Dept. of Labor, 622 F.2d 110,
115 (5th Cir. 1980). As a final preliminary point, we note that,
while Jones Stevedoring was not named as a party in
Matulic's Petition for Review, it is a proper party and has
standing to oppose Matulic's appeal. See 33 U.S.C. S 921(c);
see also, Ingalls Shipbuilding, Inc. v. Director, OWCP, 117
S.Ct. 796, 804 (1997).


                               10433


I. Calculation of Matulic's Average Weekly Wage

Matulic challenges the ALJ's method of calculating his
"average weekly wage" at the time of the injury. Under the
LHWCA, that average weekly wage is the key component
used to determine Matulic's earning capacity, and therefore
the amount of his benefits award. 33 U.S.C. S 910.1 Section
910 of the Act sets forth three formulas for determining
"average annual earnings," all using the 365 days preceding
the injury as the measuring year. 33 U.S.C. S 910(a)-(c).2 That
_________________________________________________________________
1 Under 33 U.S.C. SS 908(b), Matulic's temporary total disability award
is two-thirds of his average weekly wage multiplied by the total number
of weeks of the disability (approximately 12 weeks). Under 908(c)(1) and
908(c)(21), Matulic's permanent partial disability compensation is calcu-
lated by computing two-thirds of his average weekly wage, multiplying
that value by the number of weeks specified for the loss of an arm, and
multiplying that amount by the percentage of impairment to his arm (in

this case, 5%). See 33 U.S.C. S 908.
2 33 U.S.C. S 910(a), (b), (c) provide in pertinent part:


(a) If the injured employee shall have worked in the employment in which
he was working at the time of the injury, whether for the same or another
employer, during substantially the whole of the year immediately preced-
ing his injury, his average annual earnings shall consist of three hundred
times the average daily wage or salary for a six-day worker and two hun-
dred and sixty times the average daily wage or salary for a five-day
worker, which he shall have earned in such employment during the days
when so employed.


(b) If the injured employee shall not have worked in such employment
during substantially the whole of such year, his average annual earnings,
if a six-day worker, shall consist of three hundred times the average daily
wage or salary, and, if a five-day worker, two hundred and sixty times the
average daily wage or salary, which an employee of the same class work-
ing substantially the whole of such immediately preceding year in the
same or in similar employment in the same or a neighboring place shall
have earned in such employment during the days when so employed.


(c) If either of the foregoing methods of arriving at the average annual
earnings of the injured employee cannot reasonably and fairly be applied,
such average annual earnings shall be such sum as, having regard to the
previous earnings of the injured employee in the employment in which he


                               10434


figure is then divided by fifty-two to arrive at the average
weekly wage. 33 U.S.C. S 910(d). At issue is whether
Matulic's average annual earnings, and thus his average
weekly wage, should have been calculated under S 910(a) or
S 910(c). Matulic contends that the ALJ erred by employing
the latter statutory provision rather than the former. He points
out that S 910(a) is the presumptively proper method for cal-
culating average weekly wage and must be employed unless
it would be unfair or unreasonable to do so. Matulic asserts
that in his case it would be neither unfair nor unreasonable to
use the presumptively proper method. Jones Stevedoring dis-
agrees, arguing that the ALJ was correct to employS 910(c)
because, in its view, Matulic would receive an unfairly high
rate of compensation were S 910(a) deemed applicable.


Section 910(a) applies in cases in which the injured claim-
ant "worked in the employment in which he was working at
the time of the injury . . . during substantially the whole of the
year immediately preceding his injury." 33 U.S.C.S 910(a).
Only if SS 910(a) and (b) cannot "reasonably and fairly be
applied" may the ALJ turn to S 910(c). 33 U.S.C. S 910(c).
Under the method prescribed in S 910(a), average weekly
wage is calculated by: 1) dividing the total earnings of the
claimant during the fifty-two weeks preceding the injury by
the number of days actually worked; 2) multiplying that fig-
ure by either 260 or 300, depending on whether the claimant
worked a five- or six-day week (in this case, five); and 3)
dividing that figure by fifty-two. See 33 U.S.C. SS 910(a) and
910(d). By comparison, S 910(c), which serves as a "catch-
all" provision if neither SS 910(a) nor 910(b) applies, allows
the ALJ to consider not only the claimant's previous earnings,
_________________________________________________________________

was working at the time of the injury, and of other employees of the same
or most similar class working in the same or most similar employment in
the same or neighboring locality, or other employment of such employee,
including the reasonable value of the services of the employee if engaged
in self-employment, shall reasonably represent the annual earning capacity
of the injured employee.


                               10435


but also earnings of employees in the same or similar class as
the claimant and other employment by which the claimant
may have generated income. See 33 U.S.C.S 910(c). Section
910(c) does not prescribe a fixed formula but requires the ALJ
to establish a figure that "shall reasonably represent the
annual earning capacity" of the claimant. 33 U.S.C. S 910(c).
Under S 910(a), Matulic's average weekly wage was
$1018.94; under S 910(c), it was determined by the ALJ to be
$834.05.


The ALJ's decision to apply S 910(c) was based on his con-
clusion that Matulic would be overcompensated if his average
weekly wage were calculated under S 910(a). The ALJ found
that Matulic earned a total of $43,370.81 in the fifty-two
weeks preceding his injury and that, during that year, he
worked only 213 of the 260 possible working days. Noting
that Matulic's annual earnings would be calculated at
$52,941.20 if S 910(a) were applied, the ALJ found that
S 910(a) would overestimate his annual earnings by treating
him as if he had worked throughout the entire year when he
had actually worked only 82% of the total possible working
days in the measuring year. Citing our decision in
Duncanson-Harrelson Co. v. Director, OWCP, 686 F.2d 1336
(9th Cir. 1982), vacated on other grounds, 462 U.S. 1101
(1983), the ALJ concluded that the prospect of excessive
compensation was a sufficient basis for finding thatS 910(a)
could not reasonably or fairly be applied.


[1] We adopt the factual findings of the ALJ but conclude,
as a matter of law, that S 910(a) could be reasonably and
fairly applied in Matulic's case, even though his earning
capacity would be based on an assumption that he would ordi-
narily work a number of days more than he worked during the
measuring year. We do so buttressed by the knowledge that
some "overcompensation" is built into the system institution-
ally. After giving due weight to the purposes and goals of the
Act, we conclude that the ALJ's failure to applyS 910(a) was
contrary to law.


                               10436


As we have previously recognized:

      When Congress amended section 910 of the Act in
      1948 to reflect the five-day work week, it undoubt-
      edly was aware that virtually no one in the country
      works every working day of every work week; there
      are many reasons including illness, vacations,
      strikes, unemployment, family emergencies, etc. We
      can infer that Congress knew that both subsections
      (a) and (b) would result in some overcompensation,
      but retained the 260-day factor for administrative
      convenience.


Duncanson-Harrelson, 686 F.2d at 1342. Due to the fixed for-
mula Congress adopted under S 910(a), in most benefits cases
there will be a degree of inaccuracy in the estimation of the
worker's earning capacity--ordinarily the error will favor the
worker and ordinarily there will be some overcompensation,
at least in theory, although in other respects the statutory for-
mula may benefit the employer.3 Flexibility and the resolution
of doubts in favor of the worker is the rule rather than rigid
mathematical certainty.


[2] The key to determining an injured worker's average
weekly wage is the requirement that S 910(a) shall apply
unless it would be unreasonable or unfair to do so. See 33
U.S.C. S 910(c). The statute sets a high threshold and requires
the application of S 910(a) or (b) except in unusual circum-
stances. Given the clear congressional intent to create an effi-
cient and beneficent, though not entirely accurate, method of
estimating a claimant's earning capacity, we conclude, as a
_________________________________________________________________
3 For example, application of the fixed formula benefits the employer in
cases in which the statutory maximum compensation rate serves to limit
the compensation for a high earnings wage earner. Title 33 U.S.C.
S 906(b)(1) sets a maximum compensation rate of $636.24 regardless of
the claimant's average weekly wage. In the instant case, Matulic's average
weekly wage, calculated under SS 910(a) and 910(d), yields a compensa-
tion rate of $678.73 but would be limited to $636.24 under S 906(b)(1).


                               10437


matter of law, that a worker's receipt in future years of dis-
ability benefits computed on the basis of 18% more days
(including vacation, holiday, and sick days) than he actually
worked in the measuring year is not sufficient basis to find the
S 910(a) presumption rebutted. Our conclusion is supported
by the humanitarian purposes of the LHWCA and by our
mandate to construe broadly its provisions so as to favor
claimants in the resolution of benefits cases. See Edwards v.
Director, OWCP, 999 F.2d 1374, 1375 (9th Cir. 1993) (noting
the "long-term remedial purpose of the LHWCA"); Randall
v. Comfort Control, Inc., 725 F.2d 791, 796 (D.C. Cir. 1984);
Odom Constr. Co. v. United States Dept. of Labor, 622 F.2d
110, 115 (5th Cir. 1980) (declaring obligation to resolve all
doubts in favor of employee). Thus, although there may be
some theoretical (or possibly even actual) "overcompen-
sation," the determination of Matulic's average weekly wage
under S 910(a) would not result in an excessive or unfair
result.


In Duncanson-Harrelson and other cases, courts have
upheld the application of S 910(c) in lieu ofS 910(a) primar-
ily when the claimant has worked only a portion of the year.
See Johnson v. Britton, 290 F.2d 355, 358 (D.C. Cir. 1961);
Marshall v. Andrew F. Mahony Co., 56 F.2d 74, 75 (9th Cir.
1932). In each of those cases, however, the percentage of days
worked in the measuring year was substantially lower than in
Matulic's case, and it was fair to conclude that the individual
did not work throughout the full year. See Duncanson-
Harrelson, 686 F.2d at 1343 (75%); Johnson, 290 F.2d at 357
(69%); Marshall, 56 F.2d at 75 (61%). In Duncanson-
Harrelson, we noted that the point at which the disparity
between the claimant's actual days worked and the 260-day
(or 300-day) standard becomes unreasonable or unfair is "a
question of line-drawing." Duncanson-Harrelson, 686 F.2d at
1343. Today, we draw the line where Duncanson-Harrelson
left it: we conclude that when a claimant works more than


                               10438


75% of the workdays of the measuring year the presumption
that S 910(a) applies is not rebutted.4


[3] Given that the statute contemplates that the number of
days worked in the measuring year will ordinarily be less than
260 or 300 (as the case may be), the application ofS 910(a)
to Matulic, a claimant who worked 82% of the workdays in
the year, is not only required but falls well within the realm
of theoretical or actual "overcompensation" that Congress
contemplated. We do not mean to suggest that a figure that is
75% or lower will necessarily result in the application of
S 910(c). There may be other circumstances which demon-
strate that a reduction in working days during the one-year
period preceding the worker's injury is atypical of the work-
er's actual earning capacity. Under such circumstances, appli-
cation of S 910(a) might still be required despite the lower
percentage of actual days worked in the measuring year. In
fact, although we do not rely on them here, some of those cir-
cumstances exist in Matulic's case.


[4] To begin with, the ALJ's factual finding that Matulic's
actual earnings during the year preceding his injury fairly rep-
resented his annual earning capacity is not supported by the
record. The record demonstrates that Matulic's wage earning
capacity was generally higher than that reflected by the num-
ber of days he worked during the year preceding his injury.
During that year, Matulic moved from Los Angeles to Seattle,
and several circumstances attendant to the move were respon-
sible for a decrease in the total number of hours he worked
during the transition period. Matulic testified, for example,
that he did not work on a number of days during that period
because he was moving into his new house and doing con-
_________________________________________________________________
4 Only the Seventh Circuit has drawn the line at the point at which
Matulic finds himself, see Strand v. Hansen Seaway Service, Ltd., 614
F.2d 572 (7th Cir. 1980) (upholding application ofS 910(c) when claimant
worked 84% of total workdays in the measuring year). We do not believe

such a rigid rule is consistent with the intent or purpose of the Act.

                               10439


struction on it, a fact the ALJ does not dispute. Moreover, the
ALJ noted but does not appear to have considered that, during
the year after Matulic recovered from the injury at issue and
returned to work in Seattle, his hours returned to nearly the
same level as his previous hours in Los Angeles. 5 Thus, only
during the interim year in which he moved from one location
to another and was injured, was there a decrease of any signif-
icance in his working hours.


Furthermore, contrary to the ALJ's finding, we note that
the nature of Matulic's employment in Seattle was not sea-
sonal or intermittent but stable and continuous. Jones Steve-
doring also argues that the Seattle port is smaller than the Los
Angeles harbor and offers fewer work opportunities. First,
there is no indication in the record that the Seattle port is
operational during only part of the year or that its work sched-
ules are sporadic. See Palacios v. Campbell Industries, 633
F.2d 840 (9th Cir. 1980) (noting that longshore work may be
considered intermittent if there is evidence that the port is
closed seasonally or for fixed periods of time). To reach the
conclusion urged by Jones Stevedoring, we would be required
to conclude that no longshoreman working out of Seattle is
employed continuously and none is entitled to have his aver-
age weekly wage computed under the presumptive formula of
the Act. The record does not support such a drastic holding.


[5] The ALJ's decision to apply S 910(c) to calculate
Matulic's average weekly wage was contrary to law. We hold
that S 910(c) may not be invoked in cases in which the only
significant evidence that the application of S 910(a) would be
unfair or unreasonable is that claimant worked more than 75%
of the days in the year preceding his injury. Accordingly, we
vacate the ALJ's determination of Matulic's average weekly
_________________________________________________________________
5 In 1987, Matulic worked approximately 2,001 hours; in 1988, he
worked 2,059 hours; in 1989 (the year of the accident), he worked 1,300
hours; and in 1990, he worked 1,800 hours.


                               10440


wage and remand with instructions to calculate the award
under S 910(a).


II. S 914(e) Penalties

Matulic unsuccessfully argued before the ALJ that Jones
Stevedoring never provided adequate notice of controversion
as is required by 33 U.S.C. S 914(d). Such a failure would
make the company liable for a ten percent penalty pursuant to
S 914(e), which imposes that sanction for failure to pay "any
installment of compensation payable without an award"
unless the proper notice is filed within fourteen days of the
triggering date. The penalty is added to all amounts unpaid
between the date the notice should have been filed and the
date notice was actually filed. Matulic challenges the ALJ's
denial of the S 914(e) penalty and requests that it be assessed
with respect to three items: 1) the retroactive adjustment of
the temporary total disability award; 2) the transportation
expenses incident to medical treatment; and 3) the permanent
partial disability award.


As we have previously held, the employer must provide
notice of controversion fourteen days after the employer has
"reason to believe a controversy will arise." National Steel &
Shipbuilding Co. v. United States Dep't of Labor, 606 F.2d
875, 879 (9th Cir. 1979). We do not require that an actual dis-
pute exist. Id. Here, the ALJ failed to identify a specific date
upon which the notice requirement was triggered, but noted
only a general time period of the month of December 1990.
That finding was insufficient and possibly erroneous. The
ALJ should have specified a date no earlier than December 8,
1989, when the employer unilaterally discontinued benefit
payments, see id., and no later than December 13, 1990, when
Matulic's attorney spoke with Jones Stevedoring's claims
manager and informed the manager of the dispute.


As for the date upon which Jones Stevedoring provided
notice of controversion, on December 31, 1990, it sent


                               10441


Matulic a letter which the ALJ concluded "adequately satis-
fied the purpose behind the controversion requirements of the
Act." Accordingly, on remand, the ALJ shall determine the
date on which the notice requirement was triggered and assess
the appropriate penalty with respect to the period commenc-
ing with the triggering date and ending on December 31,
1990. See National Steel & Shipbuilding Co. v. Bonner, 600
F.2d 1288, 1293-95 (9th Cir. 1979) (assessing penalty com-
mencing on date obligation to give notice first arises).


III. Interest

Upon Matulic's motion for reconsideration of his original
decision, the ALJ found that it "would be inequitable to assess
interest against the Employer when the delay in payment of
benefits was occasioned by the refusal of Claimant to accept
the tender of appropriate benefits." This determination was in
error, and we reverse.


We have held that interest on a disability award is manda-
tory. See Sproull v. Director, OWCP, 86 F.3d 895, 900 (9th
Cir. 1996); Foundation Constructors, Inc. v. Director,
OWCP, 950 F.2d 621, 625 (9th Cir. 1991). In Sproull, we
accepted the Director's interpretation that "interest is a neces-
sary and inherent component of `compensation' because it
ensures that the delay in payment of compensation does not
diminish the amount of compensation to which the employee
is entitled." Sproull, 86 F.3d at 900. Furthermore, we have
extended this principle to "pre-judgment" interest, meaning
that interest accrues from the date a benefit came due, rather
than from the date of the ALJ's award. See Hunt v. Director,
OWCP, 999 F.2d 419, 421-22 (9th Cir. 1993). Jones Steve-
doring argues that Matulic is not entitled to interest because
he refused to accept its longstanding tender of benefits but it
has not cited a single case in which a court has refused to
award interest. Here, the employer retained the principal
amounts of the payments to which Matulic was entitled and

enjoyed the unrestricted use of those funds. Accordingly, it

                               10442


suffers no detriment from the requirement that it now pay
interest on them. We reverse the ALJ's denial of interest and
remand for a determination of when the payments became due
and a determination of the total interest accrued.


IV. Attorney's Fees

Jones Stevedoring argues that Matulic is not entitled to
attorney's fees and costs pursuant to 33 U.S.C.S 928(b)
because it agreed in advance to be bound by the June 24, 1991
recommendation of the OWCP as to the extent of Matulic's
disability. The employer contends that the only issue remain-
ing in dispute following the issuance of that recommendation
was whether Matulic was entitled to attorney's fees, and that
a claimant is not entitled to attorney's fees under such circum-
stances. See Todd Shipyards Corp. v. Director, OWCP, 950
F.2d 607, 610-11 (9th Cir. 1979). Were the facts as Jones
Stevedoring posits them, we might agree. The dispute, how-
ever, was broader.


[6] We have stated that "the purpose of section 928 is to
authorize attorney's fees against employers when the exis-
tence or extent of liability is controverted and the claimant
succeeds in establishing liability or obtaining increased
compensation." E.P. Paup Co. v. Director, OWCP, 999 F.2d
1341, 1354 (9th Cir. 1993) (citing National Steel & Shipbuild-
ing Co. v. United States Dep't of Labor, 606 F.2d 875, 882
(9th Cir. 1979)). Here, the record reflects that the parties dis-
agreed as to the method of calculating Matulic's disability
benefits or with respect to the amount of compensation to
which he was entitled, and that Matulic succeeded in obtain-
ing a greater award than any offered by the employer or rec-
ommended by the OWCP. Accordingly, he is entitled to the
attorney's fees attributable to the obtaining of that increase.


Contrary to the employer's assertions, this case is not con-
trolled by Todd Shipyards in which we concluded that a
claimant is not entitled to attorney's fees if after the informal


                               10443


conference there is no issue in dispute other than his entitle-
ment to such fees. Todd Shipyards, 950 F.2d at 611. In Todd
Shipyards, once the parties submitted the case to the OWCP
and received its recommendation, there was no longer any
dispute between them with respect to the amount of compen-
sation to be awarded to the claimant. By contrast, here, fol-
lowing the issuance of the OWCP recommendation on June
24, 1991, which for these purposes is the functional equiva-
lent of an informal conference, the parties continued to dis-
agree as to the procedure to be used in arriving at the average
weekly wage calculation and the amount of disability com-
pensation to which Matulic was entitled.6  If the attorney's fees
were the only issue in dispute from that time forward, Matulic
would not be entitled to an award of attorney's fees. But fol-
lowing the informal conference, the amount of claimant's dis-
ability compensation remained in dispute and indeed became
the central issue before the ALJ. Under these circumstances,

Matulic is entitled to the attorney's fees attributable to his
obtaining the greater disability award.


Jones Stevedoring notes that in Todd Shipyards we stated
that payment of attorney's fees under S 928(b) is authorized
"only if the employer refuses to pay the amount of compensa-
tion recommended by the claims examiner following an infor-
mal conference." Id. at 610. The employer argues that it did
not refuse to accept the OWCP's recommendation of June 24,
1991, and accordingly attorney's fees are not authorized.
Jones Stevedoring has misinterpreted the rule we adopted in
_________________________________________________________________
6 We note that, for a brief period after June 24, Matulic was prepared to
compromise as to the average weekly wage computation if Jones Steve-
doring made other concessions, including the payment of attorney's fees,
medical transportation costs, and benefits for an extended period of time.
Although Matulic expressed a willingness to reach a compromise agree-
ment on these terms, he maintained that legally he was entitled to the cal-
culation of his award under S 910(a). Once the employer rejected

Matulic's package offer, Matulic immediately made it clear that he would
continue to contest the use of S 910(c) to compute his average weekly
wage.


                               10444


Todd Shipyards. As we reported above, the facts in Todd
Shipyards were unusual in that as a result of the informal con-
ference the parties reached complete agreement on all issues
except for attorney's fees. The holding in that case is simply
that S 928(b) is inapplicable when, following the informal
conference, there is no longer any dispute regarding the
employee's right to disability compensation or other benefits
or reimbursement. Most important, Todd Shipyards reiterated
our earlier explanation of the intent underlying the enactment
of S 928(b).


      The purpose of Section 928(b) is to authorize the
      assessment of legal fees against employers in cases
      where the existence or extent of liability is contro-
      verted and the employee-claimant succeeds in estab-
      lishing liability or obtaining increased compensation
      in formal proceedings in which he or she is repre-
      sented by counsel.


Id. (quoting National Steel, 606 F.2d at 882) (emphasis in
original).


Under the rule we announced in National Steel and later
followed in E.P. Paup Co., the claimant is entitled to attor-
ney's fees where the extent of liability is controverted and the
claimant successfully obtains increased compensation,
"whether or not the employer had actually rejected an admin-
istrative recommendation." National Steel, 606 F.2d at 882.
While in National Steel no administrative recommendation
had been made, we relied on Universal Terminal & Stevedor-
ing Co. v. Parker, 587 F.2d 608, 612 (3rd Cir. 1978), in
reaching our conclusion, and specifically noted that the Third
Circuit upheld an award of attorney's fees despite the fact that
the employee rejected the recommendation of the OWCP and
the employer had accepted it. National Steel, 606 F.2d at 882.
Accordingly, we conclude that because Matulic prevailed on
issues that remained in dispute following the informal confer-
ence and obtained a greater award on appeal, he is entitled to


                               10445


attorney's fees even though Jones Stevedoring did not reject
the OWCP recommendation.7


CONCLUSION

The ALJ's application of S 910(c) was contrary to law.
Accordingly, we VACATE the determination of Matulic's
average weekly wage, and REMAND for a proper computa-
tion of that figure under S 910(a), and of the amount of the
disability compensation to which Matulic is entitled. With
regard to the S 914(e) penalties, we REVERSE the ALJ's
denial of penalties and REMAND for a determination of the
amount of the penalty award. Because we conclude that inter-
est is mandatory, we REVERSE the ALJ's denial of interest
and REMAND for a determination of the interest accrued
from the date payments became due. As to the attorney's fees,
we REVERSE the denial of fees and REMAND for a proper
computation of fees consistent with this opinion. It is so


ORDERED.

_________________________________________________________________

REED, District Judge, concurring in part and dissenting in
part:


I respectfully dissent from parts I and IV of the majority
opinion, and concur in the remainder.


Although it is a close question, I believe for three reasons
that it is neither reasonable nor fair to calculate Mr. Matulic's
_________________________________________________________________
7 Because, as we have noted, interest attaches automatically to principal
in the type of case before us, the attorney's fees attributable to pursuing
the interest issue are also recoverable. So, too are the fees attributable to
establishing the ancillary penalty amounts to be paid. Matulic is not, how-
ever, entitled to attorney's fees with respect to the medical transportation
expenses because the employer did not dispute his entitlement to those
costs.


                               10446


compensation according to 33 U.S.C. S 910(a). First, when
"computation [under S 910(a) or (b)] results in excessive
compensation of the claimant in light of the injured worker's
actual employment record," S 910(c) should be employed.
Duncanson-Harrelson Co. v. Director, OWCP , 686 F.2d
1336, 1342 (9th Cir. 1982), vacated, 462 U.S. 1011, aff'd in
relevant part on remand, 713 F.2d 462, 463 (9th Cir. 1983).
Mr. Matulic worked 82% of the time in the year preceding his
injury, but will be compensated for his injury as if he had
worked 100% of the time. Unlike the majority, I believe "this
disparity is large enough to justify application of subsec-
tion (c) in order to avoid excessive overcompensation."
Duncanson-Harrelson, 686 F.2d at 1343. Second, by holding
that S 910(a) presumptively applies when an injured long-
shoreman works more than 75% of the time in the year pre-
ceding an injury, the majority has consciously created an
inter-Circuit conflict. Strand v. Hansen Seaway Service, 614
F.2d 572, 574 (7th Cir. 1980) (S 910(c) proper where peti-

tioner worked 84% of preceding year). Although Duncanson-
Harrelson does endorse the sort of bright line rule the major-
ity announces, Duncanson-Harrelson itself avoids deciding
the issue and nothing in our case law requires us to adopt 75%
as the minimum percentage. Duncanson-Harrelson, 686 F.2d
at 1343. Third, under old but still valid Ninth Circuit authority
S 910(a)'s 260-day work year does not accurately reflect Peti-
tioner's earning capacity in the year preceding his injury,
because he was not ready and willing to work a full year dur-
ing that period. Marshall v. Andrew F. Mahony Co., 56 F.2d
74, 78 (9th Cir. 1932) ("[E]arning capacity means fitness and
readiness and willingness to work . . .." (quoting court
below)); see Palacios v. Campbell Industries, 633 F.2d 840,
843 (9th Cir. 1980) (compensation awards should be based on
earning capacity). In my view, Mr. Matulic's explanation for
his shortened work year in 1989, that he was moving and
working on his house, weighs against granting him a windfall

at Jones Stevedoring's expense. I am reluctant to resolve this
close question in Mr. Matulic's favor where his reduced earn-
ings are not the result of illness, layoff, or other factors


                               10447


beyond his control. See Walker v. Washington Metropolitan
Area Transit Authority, 793 F.2d 319, 322 (D.C. Cir. 1986)
(listing such "involuntary" circumstances where use of
S 910(c) has been upheld).


As for attorney's fees, the plain language of 33 U.S.C.
S 928(b), as well as the statute's legislative history, led this
Court to announce the following test: "the employer will not
be responsible for the payment of attorneys' fees, unless the
employer rejects the written recommendation of the claims
examiner following the informal hearing . . .." Todd Ship-
yards v. Director, OWCP, 950 F.2d 607, 611 (9th Cir. 1991).
Since Mr. Matulic does not dispute that the claims examiner's
June 24, 1991 letter proposing a settlement is the legal equiv-
alent of an informal conference, I see no principled distinction
between the present case and Todd Shipyards. 20 C.F.R.
S 702.311 (disputes may be handled informally by confer-
ence, telephone, or written correspondence). As in Todd
Shipyards, a dispute arose over permanent disability benefits
and OWCP proposed a settlement, which the employer imme-
diately accepted without condition but the employee did not.


The majority correctly observes that the scope of Mr.
Matulic's disagreement with the claims examiner's recom-
mendation was greater than that of the worker in Todd
Shipyards, but this is a distinction without a difference, as a
review of the fee-shifting statute reveals. Section 928(b) per-
mits an award of attorney's fees only when the employer
"refuse[s] to accept" the OWCP's recommendation; neither
the worker's rejection of the recommendation nor the nature
of any remaining disputes are relevant. 33 U.S.C.S 928(b). If
the employer so "refuse[s] to accept [the OWCP's] written
recommendation," then it must immediately pay or tender the
amount "to which [it] believe[s] the employee is entitled." Id.
"[I]f the compensation thereafter awarded is greater than the
amount paid or tendered by the employer," only then the
employer is liable for an attorney's fee "based solely upon the
difference between the amount awarded and the amount ten-


                               10448


dered or paid." Id. In short, as this Court concluded in Todd
Shipyards, "[s]ection 928(b) authorizes a payment of attor-
ney's fees only if the employer refuses to pay the amount of
compensation recommended by the claims examiner follow-
ing an informal conference." Todd Shipyards , 950 F.2d at
610. Since Jones Stevedoring accepted the OWCP's written
recommendation, the threshold condition to an award of attor-
ney's fees has not been met, and Petitioner's disagreement
with the claims examiner's recommendation is immaterial.
Accordingly, although Mr. Matulic's final award is greater
than that proposed by the claims examiner, "[s]ection 928(b)
is inapplicable because [Jones Stevedoring] did not refuse to
pay" him compensation. Todd Shipyards, 950 F.2d 610. Con-
sequently, I would affirm the denial of attorney's fees.


                               10449




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