Karst Robbins Coal Co. v. Dir., Office of Workers’ Comp. Programs

• Decision Date: 07 August 2020
• Docket Number: No. 19-3836,19-3836
• Parties: KARST ROBBINS COAL COMPANY; Bituminous Casualty Corporation, Petitioners, v. DIRECTOR, OFFICE OF WORKERS’ COMPENSATION PROGRAMS, United States Department of Labor; Marlin D. Rice, Respondents.
• Court: U.S. Court of Appeals — Sixth Circuit

969 F.3d 316

KARST ROBBINS COAL COMPANY; Bituminous Casualty Corporation, Petitioners,

v.DIRECTOR, OFFICE OF WORKERS’ COMPENSATION PROGRAMS, United States Department of Labor; Marlin D. Rice, Respondents.

No. 19-3836

United States Court of Appeals, Sixth Circuit.

Argued: July 29, 2020

Decided and Filed: August 7, 2020

ARGUED: Mark E. Solomons, GREENBERG TRAURIG, LLP, Washington, D.C., for Petitioners. Cynthia Liao, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for Federal Respondent. Timothy C. MacDonnell, WASHINGTON AND LEE UNIVERSITY SCHOOL OF LAW, Lexington, Virginia, for Respondent Marlin Rice. ON BRIEF: Mark E. Solomons, Laura Metcoff Klaus, GREENBERG TRAURIG, LLP, Washington, D.C., for Petitioners. Gary K. Stearman, Michelle Gerdano, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for Federal Respondent. Timothy C. MacDonnell, WASHINGTON AND LEE UNIVERSITY SCHOOL OF LAW, Lexington, Virginia, for Respondent Marlin Rice.

Before: MOORE, CLAY, and McKEAGUE, Circuit Judges.

CLAY, Circuit Judge.

Bituminous Casualty Corp., as the insurer for Karst Robbins Coal Co. ("KRCC"), seeks review of a decision by the Department of Labor's Benefits Review Board finding Bituminous responsible for paying a claim under the Black Lung Benefits Act ("BLBA"), 30 U.S.C. §§ 901 – 45. Bituminous argues that the Department was collaterally estopped from finding that KRCC was the responsible operator under the Act, because an administrative law judge had previously found that another, related company was actually the claimant's employer. Bituminous also argues that it was entitled to rescind its insurance agreement based on alleged fraud by KRCC, and that delays in the Department's administrative proceedings violated its right to due process. For the reasons that follow, Bituminous is incorrect on each of these counts, and so we deny its petition for review.

BACKGROUND

A. Black Lung Claims

Marlin Rice is a former coal miner who filed a claim for benefits under the BLBA. Under that statute and its associated regulations, a miner is eligible for black lung benefits if (1) she has pneumoconiosis, which is known as black lung disease when caused by exposure to coal dust, (2) the pneumoconiosis arose out of her coal mine employment, (3) she is totally disabled, and (4) her pneumoconiosis contributes to that disability. 20 C.F.R. § 725.202(d)(2). On the second prong, if a miner worked in coal mines for ten years or more, there is a rebuttable presumption that her pneumoconiosis arose out of coal mine employment. Id. § 718.203(b).

Once a miner establishes her eligibility for benefits, the next question is who must pay. To answer this question, the Department of Labor ("DOL") looks to the miner's employers to see which of them employed the miner for at least one year and are capable of paying benefits under the BLBA. Id. § 725.494(c), (e). The miner's most recent employer that meets these requirements is deemed the "responsible operator" and is forced to foot the bill. Id. § 725.495(a)(1). And to ensure that potentially responsible operators can pay out benefits, the BLBA requires them to either qualify as a self-insurer or purchase insurance to cover any BLBA liability. 30 U.S.C. § 933(a) ; 20 C.F.R. § 725.494(e) ; see also id. pt. 726 (providing regulatory requirements for insurance coverage). If DOL cannot identify a responsible operator, the miner's benefits are instead paid by the Black Lung Disability Trust Fund. 26 U.S.C. § 9501(d)(1).

B. KRCC's Insurance Coverage

Karst Robbins Coal Co. ("KRCC") operated a coal mine where Rice worked from at least June 7, 1982 to August 9, 1983. But on paper, Rice never worked for KRCC. Instead he was employed by a separate corporate entity, Karst Robbins Machine Shop, Inc. ("KRMS"), which then charged KRCC for the cost of Rice's labor. KRMS's ownership and management overlapped with that of KRCC, it had no assets, and it operated out of the same offices as KRCC.

KRCC obtained workers’ compensation insurance, including BLBA coverage, from Bituminous Casualty Corp. But according to evidence submitted by Bituminous, KRCC only listed ten employees on its books. The other 150 or so were employed by KRMS, and thus covered by KRMS's separate insurance. According to both companies’ shared bookkeeper, new hires would choose whether they were willing to waive workers’ compensation coverage and take only disability insurance instead. If so, they would be hired as an employee of KRMS; otherwise they would work for KRCC. Bituminous describes this as a scam designed to dodge the otherwise higher premiums KRCC would have paid for BLBA and workers’ compensation coverage.

C. Procedural History

Rice filed his first claim for BLBA benefits in October 1983. During proceedings on that claim, DOL identified KRCC and KRMS, among others, as potentially responsible operators. While perhaps strange given their shared ownership and management, KRCC and KRMS retained separate counsel and argued conflicting positions: KRCC said that Rice was actually employed by KRMS, while KRMS said that it never operated a coal mine or ran a coal mining business, and so could not be considered an employer under the applicable regulations. The administrative law judge ("ALJ") settled on KRMS as the responsible operator, leaving KRCC and Bituminous off the hook.¹

Despite this finding, the ALJ denied Rice's claim, holding that Rice failed to establish that he had pneumoconiosis. Accordingly, Rice was ineligible for BLBA benefits. Rice then appealed to the Benefits Review Board.

During those appellate proceedings, KRCC and Bituminous (along with other employers of Rice) filed a motion to be dismissed from the case, given that the ALJ found that KRMS was the responsible operator. The Director of the Office of Workers’ Compensation Programs, who represented DOL's interests in the proceedings, did not file a response. Accordingly, the Board granted the motion and dismissed KRCC and Bituminous. The Board then went on to affirm the denial of Rice's claim on the merits. The Director never filed a cross-appeal or otherwise challenged the responsible operator determination.²

Fast-forward more than a decade. In 2002, Rice filed another claim for benefits. During proceedings on that claim, DOL again sent a notice to KRCC and Bituminous saying that KRCC might be the responsible operator.³ Bituminous claims it "denied coverage based on the fraudulent arrangements" between KRCC and KRMS, and so requested that DOL dismiss it from the case. (Pet'rs’ Br. at 6.) After various administrative proceedings, DOL refused to dismiss Bituminous, but again denied Rice's claim. While this time Rice established that he suffered from pneumoconiosis, DOL's district director found that Rice failed to show that the pneumoconiosis was caused by his coal mine employment. This was in line with DOL's earlier finding that Rice had only worked for a little more than eight years in coal mines; as discussed above, at least ten years of coal mine employment is required for a presumption that any pneumoconiosis was caused by that work. 20 C.F.R. § 718.203(b).

In 2006, Rice filed another claim for BLBA benefits, and KRCC and Bituminous were again identified as potentially responsible for payment.⁴ Bituminous moved to be dismissed from the case, arguing that Rice was employed by KRMS, that its liability was precluded by res judicata, and that DOL had failed to investigate other potential carriers. Bituminous also moved to rescind its insurance policy with KRCC on the grounds that its employee leasing scheme with KRMS constituted fraud. The ALJ rejected all of these arguments, finding that under the governing regulations, KRCC was the responsible operator and that Bituminous was required to cover the claim. See 20 C.F.R. § 725.493(a)(1) (defining employment "as broadly as possible" to "include any relationship under which an operator retains the right to direct, control, or supervise the work performed by a miner, or any other relationship under which an operator derives a benefit from the work performed by a miner"); see also id. ("It is the specific intention of this paragraph to disregard any financial arrangement or business entity devised by the actual owners or operators of a coal mine or coal mine-related enterprise to avoid the payment of benefits to miners who, based upon the economic reality of their relationship to this enterprise, are, in fact, employees of the enterprise.").

Nevertheless, the ALJ denied Rice's claim. According to the ALJ, Rice's claim was a "subsequent claim" under the applicable regulations, meaning Rice had to demonstrate that "one of the applicable conditions of entitlement [to benefits] has changed since the date upon which the order denying the prior claim became final." 20 C.F.R. § 725.309(c) (citations omitted). Because the denial of Rice's 2002 claim was based solely on his failure to show that his pneumoconiosis was caused by coal mine employment, and because this "is not something that can change over time," Rice could not show his eligibility under the BLBA. (App. at 92.)

Rice appealed this denial to the Benefits Review Board, and Bituminous cross-appealed the responsible operator designation. But the Board remanded the case to the ALJ, finding in part that Rice's filing was not a "subsequent claim" but rather a request for modification based on its proximity in time to another 2005 filing by Rice. (Id. at 76.) Following this remand, during a years-longer procedural morass, another ALJ revealed that Rice's attorney had specifically told a DOL claims examiner years earlier, in ex parte phone calls, not to adjudicate that earlier filing as a modification request. This meant that the 2006 filing had correctly been construed as a subsequent claim. While the claims examiner recorded this information in "note[s] to file," these notes were misfiled and so were not included in the record before the earlier ALJ or the Board. (Id. at 9–10 (alteration in...