Elliot Coal Min. Co., Inc. v. Director, Office of Workers' Compensation Programs

• Citation: 17 F.3d 616
• Decision Date: 09 February 1994
• Docket Number: No. 92-3385,92-3385
• Parties: ELLIOT COAL MINING COMPANY, INC., Petitioner, v. DIRECTOR, OFFICE OF WORKERS' COMPENSATION PROGRAMS, United States Department of Labor, Benefits Review Board, United States Department of Labor, Metro Kovalchick, Respondents.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 616

17 F.3d 616

ELLIOT COAL MINING COMPANY, INC., Petitioner, v. DIRECTOR, OFFICE OF WORKERS' COMPENSATION PROGRAMS, United

States Department of Labor, Benefits Review Board,

United States Department of Labor, Metro

Kovalchick, Respondents.

No. 92-3385.

United States Court of Appeals, Third Circuit.

Argued Feb. 25, 1993.

Decided Feb. 9, 1994.

Stephen Yakopec, Jr., Elise Glenn, Mark R. Hornak, (Argued), Buchanan Ingersoll Professional Corporation, Pittsburgh, PA, Attorneys for Petitioner.

Marshall J. Breger, Solicitor of Labor, Donald S. Shire, Associate Solicitor for Black Lung Benefits, Michael J. Denney, (Argued), Counsel for Appellate Litigation Karen N. Blank, United States Department of Labor, Office of the Solicitor, Washington, DC, Attorneys for Respondent Director, Office of Workers' Compensation Programs.

Present: HUTCHINSON and NYGAARD, Circuit Judges, and POLLAK, District Judge ^*.

OPINION OF THE COURT

HUTCHINSON, Circuit Judge.

Elliot Coal Mining Company ("Elliot") petitions for review of an order of the United States Department of Labor Benefits Review Board ("Board"). The ultimate question in this case is whether Elliot or the Black Lung Disability Trust Fund (the "Trust Fund"), financed by an excise tax on coal, must pay black lung benefits due Metro Kovalchick ("Kovalchick" or "claimant") and sixteen other miners who once worked in Elliot's mines. ¹ The threshold issue is whether that question is one of law or fact. The Board, contrary to an administrative law judge's ("ALJ's") finding, held Elliot liable for payment of black lung benefits to any of its employees after December 31, 1969, ² who suffer disability or death as a result of pneumoconiosis because it was a "responsible operator" within the meaning of the Black Lung Benefits Act, ("the Act"), 30 U.S.C.A. Secs. 901-945 (West 1986 & Supp.1993). Yebernetsky v. Elliot Coal Mining Co., BRB No. 84-2560 BLA 8-9 (June 30, 1988) ("Yebernetsky II "). It then remanded this case to the Department of Labor's Office of Administrative Law Judges for a determination of whether Kovalchick was entitled to black lung benefits under the standards of the Act relating to disability and causation. On remand, the parties stipulated Kovalchick did meet the standards of the Act and was entitled to benefits. The ALJ therefore directed Elliot to pay benefits to Kovalchick in accordance with the Act. The Board affirmed, and this petition for review followed. In it, Elliot questions the Board's holding that it was a "responsible operator."

Respondent, the Director of the Office of Workers' Compensation Programs ("Director"), contends that Elliot was a responsible operator on three independent bases: (1) the Act imposes liability on all owners or lessees of coal lands without regard to their control or supervision of the mines; (2) Elliot qualifies as an operator who is responsible for black lung benefits due its former employees because, after June 30, 1973, ³ it retained a substantial right to control the mining operations of others who mined coal on its lands through provisions in their mining leases and subleases giving Elliot the right to monitor production, receive royalties based on minimum periodic tonnages, and to reenter coal lands for breach of those leases or subleases; and (3) Elliot employed "miners" after June 30, 1973.

We reject the Director's first argument as contrary to the text of the statute. ⁴ Our decision in that respect is supported by the text, punctuation and grammatical structure of Sec. 802(d), the Secretary of Labor's ("Secretary") own regulations, and the legislative history of the Act in general and that of Sec. 802(d) in particular.

We agree with the Director that a mining company that reserves an effective power to substantially control the coal mining operations of others on lands it once mined continues to be a coal mine operator responsible for black lung benefits due its former employees and that evidence showing this power to control has been exercised is not required. Moreover, where the lessor and the lessee are closely affiliated companies, we believe that existence of a power to control the lessee should be presumed. We believe, however, that in other cases, when the former operator is not related to or affiliated with the person to whom the right to mine coal has been given, the question whether an owner or lessor of coal lands has reserved a substantial power to control continuing operations involves inferences on which an ALJ's findings are conclusive if supported by substantial evidence. We think this holding is supported by the statements of the Secretary ⁵ concerning the 1977 amendments to the Act in which she said that the question of who is a responsible operator is to be determined on a case-by-case basis. Conversely, we do not believe that the statute or the regulations indicate that a lessor's bare reservation of a legal right of re-entry, combined with a requirement of minimum royalty payments, a right to an accounting for the tonnage produced from the leased land, and a right to monitor compliance with state and federal regulations demonstrate continuing operation as a matter of law.

Accordingly, whether Elliot had the power to exercise substantial control was a question of fact to be resolved by an ALJ. The record before us shows no interlocking corporate relationships between Elliot and any of the corporations or other persons from whom or to whom it had leased any of the coal lands it worked prior to June 30, 1973. There is evidence that the lease provisions concerning re-entry, minimum royalties and verification of tonnage were provisions that Elliot had to require of its lessees in order to avoid termination, at its own lessors' hands, of its rights to mine coal or allow others to do so. There is also evidence that all of the leases and subleases from Elliot to the operators who continued to mine coal after June 30, 1973, were made to facilitate Elliot's liquidation after it had suffered severe losses in its own mining operations on the coal lands in question. Thus, we believe the ALJ's finding that Elliot was not an operator after June 30, 1973, is supported by substantial evidence.

Finally, there is substantial evidence to support the ALJ's finding that the two employees Elliot retained after June 30, 1973, were not miners within the meaning of the Act. Therefore, we will grant Elliot's petition for review and remand the case to the Board with instructions to vacate its order reversing the ALJ's finding that Elliot was not, after June 30, 1973, an operator who is responsible for benefits due its former miners and thereafter for further proceedings consistent with this opinion.

I. Statement of Facts

Elliot employed Kovalchick as a miner from 1965 until he retired for failing health on July 15, 1971. Before June 30, 1973, Elliot operated a number of surface and underground coal mines on coal lands it either owned or leased from others. ⁶ By June 22, 1973, Elliot had ceased active mining and was beginning to divest itself of its mining equipment. By that time, Elliot had accumulated losses of about four million dollars from its mining operations. Because of these losses, Elliot had been winding down its mining operations. In June 1973, Elliot's lessors asked why the lands Elliot leased from them were no longer being mined as required by the lease terms. Elliot's lessors included the Kittaning Coal Company, the Philipsburg Coal & Land Company, General Refractories, Phyllis Daughenbauch, Barney Finberg, James G. Clune, and Mid-State Bank & Trust Company (Middle Pennsylvania Coal Corporation). There is no evidence that any of these lessors were affiliated with Elliot, shared controlling stockholders or otherwise had common or related corporate ownership.

Elliot entered into sublease arrangements with independent contractors to avoid a continuing breach of its mining leases and a consequent loss of its right to the coal in place on the leased lands. The sublessees included Helena Coal Co. ("Helena"), W.C. Bowman ("Bowman"), Power Contracting Co. ("Power"), J. Arthur Minds ("Minds"), and Jerry Demchak ("Demchak"). There is no evidence that any of Elliot's lessees or sublessees were then affiliated with Elliot shared controlling stockholders or otherwise had common or related corporate ownership. ⁷

According to Elliot, it had little choice in setting the terms of these subleases because operations under them had to be in compliance with the terms of the prime leases on which the subleases depended. Revenues generated from the subleases were, in the main, passed on to Elliot's lessors. A letter dated November 14, 1973, from John Murphy, then Elliot's president and general manager, addressed to L.T. Phillips, agent for the Kittaning Coal Co. and the Philipsburg Coal & Land Co., two of Elliot's lessors, stated:

Elliot Coal Mining Co. recently suspended its operations because it was impossible to make a profit at the existing coal prices for the quality coal we were able to produce.

* * * * * *

We have under consideration a proposal, to be implemented within a few days, to employ contractors to mine the coal & to procede [sic] with the construction of a cleaning plant to improve coal quality.

We propose to employ sufficient contractors to raise the production rate to at least 300,000 tons per year over the next 12 months. We propose simultaneously to begin a coal drilling program to identify coal locations and quality so that we may construct a coal cleaning plant in approximately nine months from now....

We recognize that the land owners would like to see more revenue income from these lands. Our company also would like to obtain substantial revenue so as to recoup our investment.

This program will be put into effect immediately and I trust we both will receive substantial economic benefit from it.

Appendix ("App.") at 413-14. Robert Long ("Long"), former President of Elliot,...