Peabody Coal Co. v. Ralston

• Decision Date: 25 September 1991
• Docket Number: No. 83A01-9103-CV-76,83A01-9103-CV-76
• Citation: 578 N.E.2d 751
• Parties: PEABODY COAL COMPANY, Appellant-Plaintiff, v. Patrick R. RALSTON, as Director of the Indiana Department of Natural Resources, Appellee-Defendant.
• Court: Indiana Appellate Court

Page 751

578 N.E.2d 751

PEABODY COAL COMPANY, Appellant-Plaintiff, v. Patrick R. RALSTON, as Director of the Indiana Department of Natural Resources, Appellee-Defendant.

No. 83A01-9103-CV-76.

Court of Appeals of Indiana First District.

Sept. 25, 1991.

David R. Joest, Peabody Coal Co., Henderson, Ky., for appellant-plaintiff.

Linley E. Pearson, Atty. Gen., Myra P. Spicker, Deputy Atty. Gen., Dept. of Natural Resources, Indianapolis, for appellee-defendant.

RATLIFF, Chief Judge.

STATEMENT OF THE CASE

Peabody Coal Company (Peabody) appeals a judgment for Patrick R. Ralston, as Director of the Indiana Department of Natural Resources (DNR) in an action for judicial review of an agency determination, which affirmed blasting violations by Peabody. We reverse and remand.

ISSUE ¹

We restate the issue on appeal as:

Did the trial court err in affirming DNR's decision finding two violations by Peabody of DNR's surface mining regulations, where DNR's order found that in administrative review of a DNR decision the burden of persuasion shifts from DNR to the party alleged to have violated the regulation, after DNR presents a prima facie case showing a violation?

FACTS ²

As part of its surface coal mining operation, Peabody uses explosives to blast the In 1988, Peabody requested review with DNR's director (Director) because it maintained that it had not committed the alleged violations. A hearing was held before a DNR administrative law judge (ALJ) in May of 1989, and following the hearing the ALJ submitted proposed findings and recommended to the Director that Peabody's notices of violations (NORs) be affirmed. Peabody objected, and a remand hearing was held in May of 1990 to allow Peabody to submit additional expert testimony. Following the remand hearing, the ALJ again recommended that the NORs be affirmed. The Director adopted the ALJ's proposed findings as his final order and affirmed the NORs in June of 1990.

overburden materials to excavate and uncover coal. A DNR regulation limits airblast from surface coal mining blasting. DNR measures airblast from various operations to monitor adherence to its regulations. DNR alleges that several of Peabody's blasts in 1988 exceeded the airblast limits mandated by DNR. Peabody disputes DNR's scientific findings, contending that DNR's equipment was ill-suited to the airblast tests and the findings indicating violations were thus flawed.

In July of 1990, Peabody filed a petition for judicial review of the agency's decision with the trial court. The trial court in February of 1991 entered its findings of fact and conclusions of law, affirming the agency's determination.

Other relevant facts will be stated in our discussion.

DISCUSSION AND DECISION

Peabody argues that the trial court in affirming DNR's decision, finding violations by Peabody in its mining operations, applied an improper standard regarding the shifting burdens involved in an agency determination. ³ We agree.

Judicial review of an administrative decision is limited to whether the agency possessed jurisdiction over the subject matter, and whether the agency's decision was made pursuant to proper procedures, was based upon substantial evidence, was not arbitrary or capricious, and was not in violation of any constitutional, statutory, or legal principle. State Board of Tax Commissioners v. Jewell Grain Co. (1990), Ind., 556 N.E.2d 920, 921. When reviewing an administrative decision, the burden of proof is on the party seeking to overturn the decision. Oriental Health Spa v. City of Fort Wayne (1988), Ind.App., 526 N.E.2d 1019, 1022. This burden requires the party arguing for reversal to disclose and argue those errors that would mandate reversal. Id.

Even under our deferential standard of review, we find that Peabody has shown that the DNR's decision, and the trial court's order affirming it, were contrary to legal principle, since the DNR and trial court improperly allocated the burden of persuasion as a shifting burden between DNR and Peabody, rather than as a burden that remained on DNR for the duration of the hearing, with the burden of production shifting to Peabody after DNR presented a prima facie case showing violations.

As Peabody points out in its reply brief, the allocation of the burdens of proof in administrative proceedings under IND.CODE Sec. 4-21.5-3-14(c) has not yet been delineated by our courts. Moreover, the section in the prior Administrative Adjudication Act (AAA), I.C. Sec. 4-22-1-1 et seq., does not contain an analogous provision from which controlling precedent can be gleaned. Thus, we need to define the parameters of the burden of production and burden of persuasion involved in administrative proceedings to which I.C. Sec. 4-21.5-3-14(c) applies.

We first turn to basic tenets of burdens of proof in discerning the appropriate burden standards. In a criminal proceeding, the State carries the ultimate burden of proof, or burden of persuasion. Denton v. State (1979), 182 Ind.App. 464, 471, 395 N.E.2d 812, 813, affirmed on rehearing, 398 N.E.2d 1288, 1289. The burden of going forward with the evidence, or burden of production, however, shifts to the defendant to revive a reasonable doubt in the jurors' minds after the State has presented a prima facie case showing the defendant's guilt. Id. Like defendants in a criminal proceeding, those charged with violations of DNR's regulations are often facing punitive sanctions such as fines. Similar to the rationale for affixing the ultimate burden of proof on the state in criminal matters, it would be a fundamentally unfair procedure to shift the burden of persuasion to one charged with a violation to prove his innocence. The burden of production may shift to the alleged violator when the agency pursuing sanctions for the violation has demonstrated a prima facie case of violation, but the ultimate burden of persuasion may never so shift.

The plain wording of I.C. Sec. 4-21.5-3-14(c) supports this interpretation. This section provides in full:

"(c) At each stage of the proceeding, the agency or other person requesting that an agency take action or asserting an affirmative defense specified by law has the burden of persuasion and the burden of going forward with the proof of the request or affirmative defense. Before the hearing on which the party intends to assert it, a party shall, to the extent possible, disclose any affirmative defense specified by law on which the party intends to rely. If a prehearing conference is held in the proceeding, a party notified of the conference shall disclose the party's affirmative defense in the conference." (emphasis added)

Peabody asserts, and we agree, that this provision's plain meaning shows that as a party to the administrative proceeding, the agency has the ultimate burden of proof. From our perusal of the record, Peabody cannot be said to have asserted an affirmative defense, and thus, be required to carry the burden on this basis. If the agency were not the party in essence prosecuting Peabody for a regulatory violation, the ultimate burden would be on the party petitioning the...