Powell v. Gray, 4671.

• Decision Date: 26 September 1940
• Docket Number: No. 4671.,4671.
• Citation: 114 F.2d 752
• Parties: POWELL et al. v. GRAY, Director of Bituminous Coal Division of Department of the Interior, et al. (BITUMINOUS COAL PRODUCERS BOARD FOR DISTRICT NO. 8, Intervenor).
• Court: U.S. Court of Appeals — Fourth Circuit

114 F.2d 752 (1940)

POWELL et al. v. GRAY, Director of Bituminous Coal Division of Department of the Interior, et al. (BITUMINOUS COAL PRODUCERS BOARD FOR DISTRICT NO. 8, Intervenor).

No. 4671.

Circuit Court of Appeals, Fourth Circuit.

September 26, 1940.

W. R. C. Cocke and Joseph F. Johnston, both of Norfolk, Va. (L. B. Plummer and Wm. H. Delaney, both of Norfolk, Va., on the brief), for petitioners.

Arnold Levy, Asst. Gen. Counsel, Bituminous Coal Division, Department of the Interior, of Washington, D. C. (Abe Fortas, Gen. Counsel, Harold Leventhal, and Robert W. Greenleaf, all of Washington, D. C., Attys., Bituminous Coal Division, Department of the Interior, and Robert L. Stern, Sp. Asst. to the Atty. Gen., on the brief), for respondents H. A. Gray and Harold L. Ickes.

Burr Tracy Ansell, of Washington, D. C., and William A. Grimes, of Baltimore, Md., for intervenor Bituminous Coal Producers Board for District No. 8.

Before PARKER, SOPER, and DOBIE, Circuit Judges.

PARKER, Circuit Judge.

This is a petition to review an order of the Director of the Bituminous Coal Division of the Department of the Interior. Petitioners are receivers of the Seaboard Air Line Railway Company and as such are the holders of coal leases on certain coal lands in Virginia and West Virginia from which they are having coal mined in three separate mines by independent contractors. The coal thus mined is used by petitioners in the operation of the interstate railway system of which they are receivers and before being used is transported in interstate commerce. The receivers, as producers of coal, filed application under Sec. 4-A of the Bituminous Coal Act, 15 U.S.C.A. § 834, asking that they be held exempt from the provisions of Sec. 4 of the Act by reason of the exemption contained in subsection (l), pt. 2, 15 U.S. C.A. § 833(l) thereof, to the effect that the provisions of Sec. 4 "shall not apply to coal consumed by the producer or to coal transported by the producer to himself for consumption by him." The order of the Director denied this application, and the receivers have filed with this court petition for review under Secs. 4-A and 6(b) of the Act, 15 U.S.C.A. §§ 834, 836(b). Bituminous Coal Producers Board for District No. 8, a district board of code members created under Sec. 4, Part I(a) of the Act, 15 U.S.C.A. § 832(a), has intervened in support of the order of the Director.

There is no question as to the facts of the case, which were fully found by the Director. Briefly stated, they are as follows: Petitioners consume about a million tons of coal annually in their railroad operations. In 1934 they devised a plan for acquiring a portion of this coal at prices less than the minimum prices in effect under the National Industrial Recovery Act, 48 Stat. 195, by acquiring coal leases and securing the services of independent contractors to mine for them coal covered by the leases. This plan was submitted to the NRA authorities and was approved by them as contravening no provision of the law. In 1934 and 1935, petitioners put the plan into effect by leasing the exclusive right to extract coal from mines on three coal tracts upon payment of tonnage royalties, with provision for payment of minimum royalties in any event. In one of the leases, but not in the others, they agreed to pay the property taxes on the coal properties. The leases were on an annual basis, with option on the part of petitioners to renew from year to year, and with the right to terminate them upon termination of contracts with the contractors, who were to mine the coal, for breach or default on the part of these contractors. The leases have been renewed from time to time, two of the renewals, however, being for short periods when it was thought that the price of coal might be affected by the outcome of cases pending in the Supreme Court or the enactment of legislation under consideration by Congress. One of the provisions of the leases was that the owners of the leased mines should lease the mining machinery in the mines to contractors to be designated by petitioners to conduct mining operations for them; and this agreement was duly carried out and the mining machinery leased in accordance with the agreement.

Contemporaneously with the acquirement of the coal leases, petitioners entered into contracts with independent contractors for the mining of the coal subject to the terms of the leases. Under these contracts, a flat sum per ton was to be paid for the mining of the coal, with provision for adjustment to conform to changes in cost of operation due to fluctuation of wages, taxes and certain other costs, and with option on the part of the petitioners to pay on the basis of actual cost plus 10 cents per ton. The contracts provided that the relationship of the contractors to petitioners should be that of independent contractors. Specifically, the contractors agreed to perform at their own expense all the work of mining and loading, including the furnishing of material and supplies and the necessary organization for the work of mining; to assume all obligations of petitioners to lessors, except those relating to royalties, minimum royalties and land taxes, and to indemnify petitioners against any of the liabilities assumed in the leases, with the same exceptions; to pay all taxes on improvements on the land and on all the property except the land; at their own expense to take out and maintain employers liability, casualty and other insurance for the protection of petitioners and themselves; to pay all cost and expense incident to the mining operations and save petitioners harmless from accidents incident thereto; and to assume liability for and save petitioners harmless from loss incident to injury to person or damage to property arising out of mining operations, taxes other than land taxes, fines imposed for violation of law by contractors or their workmen, liens for work or supplies, and attorneys' fees arising in connection with any of these matters. These contracts are terminable by petitioners if they are able to purchase coal on the open market at a price less than the amount paid the contractors plus the amount paid the lessors, and if the contractors fail to reduce their charge to an extent that will either meet or undercut the market prices. In the case of one of the contracts a similar provision requires the contractor to absorb any increased cost of transportation, in so far as this would result in a cost to petitioners above the market price.

Under these leases and contracts, petitioners have received between 40 and 50 per cent of the coal required for their operations. The contractors receive monthly and weekly instructions from petitioners as to their requirements and as to destination points of coal shipments. The coal is required to meet certain specifications and is inspected at the mines by petitioners' inspectors. The contractors are paid for mining only with respect to coal meeting the specifications, and only such coal is shipped to petitioners. The coal from the West Virginia mines is ordinarily shipped to and consumed in the states of Virginia, North Carolina and South Carolina; that from the Virginia mine, in the states of North Carolina, South Carolina, Georgia and Florida.

In no case does the contractor have or claim any title or interest whatever in the coal in the mines, either before or after severance, and no sale or other transfer of title to any of the coal from the contractors to petitioners takes place at any time. Petitioners are entirely independent of the lessors and the contractors; and these, in turn, are entirely independent of the petitioners and of each other. There is nothing in the evidence to support any other conclusion than that the mines in question are "captive" mines, leased by petitioners and operated through the instrumentality of independent contractors.

The Director denied the exemption prayed by petitioners on the ground that they were not producers engaged in the business of mining coal within the meaning of the Act. This conclusion he based on the fact that the actual work of mining was done by the employees of the contractors and not the employees of petitioners, that the risks imposed by the coal leases or incident to the mining operations were assumed by the contractors and that petitioners had made no investment in coal bearing lands. He found at length the primary facts which we have summarized, and after giving his reasons as above indicated, stated his conclusion as follows:

"In view of these many important factors I am of the opinion that applicants are not a producer of coal within the contemplation and design of the Act. The work of coal mining is performed, paid for, and controlled by the contractors. They are paid a fixed sum per ton for coal of the specified quality which is accepted at the mine by applicants' inspectors. The transaction has the aspects of an ordinary commercial sale and, indeed, it appears that applicants stand in a position not materially different from that of any large consumer who dominates a small source of supply or who has contracted for the total product of a given manufacturing enterprise or tract of land. In every real sense, with respect to the supply of coal obtained from these contractors, applicants have not become a `producer' but have rather left their `consumer' position and mobility unchanged."

If as a matter of fact petitioners are nothing more than mere purchasers of coal, as thus found by the Director, they are not subject to the Act at all; for it is producers of coal, and not consumers, who are subject to its provisions. If they are subject to the Act, it is because of their operation of the mines through the instrumentality of the independent contractors; and it would, indeed, be an anomalous situation, if because of this operation petitioners should be held to be producers for the purpose of bringing them within the provisions of the...