Durand v. U.S. Department of Labor, 2011 U.S. App. LEXIS 22985 (9th Cir. 2011)

 Facts: The Federal Employee Compensation Act, or FECA, provides disability benefits to federal employees who are injured on the job. If a third party is responsible for the employee’s injury, the Secretary of Labor can require the employee to bring an action against that third party. If the employee wins that judgment, she must refund to the U.S. any FECA benefits she received. Plaintiff-appellant, who was injured while working for the Federal Aviation Administration, received over $400,000 in FECA benefits and settled a lawsuit with third-party, Era Aviation, for $2.3 million.

Procedure: The District Court of Alaska finds for the Dept. of Labor in ruling that the employee-beneficiary is only entitled to deduct costs from their gross recovery, and not from the amount they must refund to the U.S.

Issue: If a federal employee obtains a judgment against a third party for her on-the-job injury, can she deduct litigation costs from the FECA benefits she must refund to the U.S.?

Holding: No, an employee who obtains a judgment against a third party cannot deduct litigation costs from the refund of FECA benefits.

Rule/Reasoning: The relevant portions of the Act, codified under 5 U.S.C. § 8132, state that if a FECA beneficiary receives money as a result of settlement with the responsible third party, “the beneficiary, after deducting there-from the costs of suit and a reasonable attorney’s fee, shall refund to the United States the amount of compensation paid by the United States.” A literal reading of the statute shows that the beneficiary must deduct his litigation costs from the gross settlement amount, and not that which remains after allocating to loss of consortium, a minimum 20% the beneficiary retains under the statute, and the costs and attorney’s fees. Federal employees are not required to file a FECA claim and can, if they wish to keep the proceeds of the action for themselves, sue the third party tortfeasors on their own.

Order: Affirmed.

By: Judith Massis-Sanchez

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