Tri-State Steel Const. Co., Inc. v. Herman

• Decision Date: 13 January 1999
• Docket Number: 97-3348,TRI-STATE,Nos. 97-4118,s. 97-4118
• Citation: 164 F.3d 973
• Parties: 18 O.S.H. Cas. (BNA) 1602, 1998 O.S.H.D. (CCH) P 31,736 STEEL CONSTRUCTION CO., INC. (97-4118); National Engineering & Contracting Company (97-3348/4118), Petitioners, v. Alexis HERMAN, Secretary of Labor; Occupational Safety & Health Review Commission, Respondents.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 973

164 F.3d 973

18 O.S.H. Cas. (BNA) 1602, 1998 O.S.H.D. (CCH)

P 31,736

TRI-STATE STEEL CONSTRUCTION CO., INC. (97-4118); National Engineering & Contracting Company (97-3348/4118) Petitioners, v. Alexis HERMAN, Secretary of Labor; Occupational Safety &amp Health Review Commission, Respondents.

Nos. 97-4118, 97-3348.

United States Court of Appeals Sixth Circuit.

Argued Oct. 29, 1998.

Decided Jan. 13, 1999.

Kent W. Seifried (argued and briefed), POSTON, SEIFRIED & SCHLOEMER, Newport, Kentucky, for Petitioners.

Ellen L. Beard (argued and briefed), Allen H. Feldman (briefed), Nathaniel I. Spiller (briefed), U.S. DEPARTMENT OF LABOR, OFFICE OF THE SOLICITOR, Washington, D.C., for Respondent.

Before: GUY, CLAY, and GILMAN, Circuit Judges.

GUY, J., delivered the opinion of the court, in which CLAY, J., joined. GILMAN, J. (p. 981), delivered a separate opinion concurring in the result.

OPINION

RALPH B. GUY, JR., Circuit Judge.

Petitioners Tri-State Steel Construction Co., Inc. (Tri-State) and its parent corporation, National Engineering & Contracting Company (National), filed petitions for review of two decisions from the Occupational Safety & Health Review Commission (Commission) concerning the denial of their motions for attorney fees and costs incurred in administrative proceedings instituted by the Secretary of Labor (Secretary). The first petition, brought by both Tri-State and National, arose out of consolidated proceedings in which the Secretary issued several separate citations to Tri-State and National for alleged safety violations at a work site in Cincinnati, Ohio, where bridge reconstruction was being done under contract with the Ohio Department of Transportation (No. 97-3348). The second petition, brought by Tri-State only, also arose out of combined proceedings in which the Secretary issued separate citations to both Tri-State and National for alleged safety violations at a different work site in Goldtown, West Virginia (No. 97-4118).

Both appeals involve the question of whether Tri-State is eligible to seek an award of attorney fees and other expenses as a prevailing party in an adversary adjudication under the Equal Access to Justice Act (EAJA), 5 U.S.C. § 504. The Commission concluded in both cases that, although Tri-State's net worth taken alone would not exceed the limits for eligible parties under the EAJA, its net worth should be aggregated with that of National. There is no dispute that National's net worth exceeded the limits and, therefore, when aggregated, Tri-State was ineligible for an award of attorney fees and expenses under the EAJA. The first appeal also raises the question of whether Tri-State and National may seek sanctions under Rule 11 of the Federal Rules of Civil Procedure against the Secretary in the administrative proceedings before the Commission. Petitioners ask that we reverse the Commission's decisions and remand for further consideration of their entitlement to an award of attorney fees and expenses. For the reasons set forth below, we reverse in part and affirm in part.

I.

A. Procedural History

1. Case No. 97-3348

Inspections of the Cincinnati work site in May 1989, where both petitioners were subcontractors, resulted in the issuance of two citations, with a total of seven items, to Tri-State; and three citations, with a total of twelve items, to National. The Secretary brought separate complaints against Tri-State and National concerning the alleged safety violations, which were consolidated for purposes of trial. After a trial on the merits, the ALJ issued his decision and order, which was docketed on May 1, 1991, and became final after the expiration of 30 days.

On July 1, 1991, Tri-State and National filed a joint motion for attorney fees and expenses with respect to the items on which they prevailed. ¹ The ALJ denied the motion in an opinion docketed January 1, 1997, ² finding first that Tri-State's net worth should be aggregated with that of National under the "real-party-in-interest" test adopted by the Commission in Secretary v. Nitro Electric Co., 16 O.S.H. Cas. (BNA) 1596 (1994). The ALJ also denied both petitioners' requests for sanctions, concluding that sanctions provided for in Fed.R.Civ.P. 11 were not available in proceedings before the Commission because such sanctions were not incorporated into Commission Rule 32, 29 C.F.R. § 2200.32, and were barred by sovereign immunity. This decision became final on February 10, 1997, when the matter was not directed for review by the Commission. Tri-State and National filed their petition for review with this court on April 11, 1997.

2. Case No. 97-4118

National was the general contractor at the site in Goldtown, West Virginia, and Tri-State was one of its subcontractors. As a result of inspections at the site from July to December 1992, the Secretary issued four sets of citations which were contested by petitioners and docketed as cases before the Commission. These cases, two against Tri-State and two against National, were subsequently withdrawn by the Secretary in their entirety. The withdrawals were docketed December 13, 1993.

On February 11, 1994, petitioners filed a joint fee petition in which Tri-State sought an award under the EAJA and both Tri-State and National sought discovery sanctions under Commission Rule 52(e), 29 C.F.R. § 2200.52(e). The ALJ denied Tri-State's request under the EAJA, but awarded discovery sanctions. The Commission decided to review the matter and remanded only Tri-State's cases for determination of whether it was an eligible party under the EAJA. On remand, the ALJ concluded, as had the ALJ in the earlier cases, that Tri-State was not an eligible party under the EAJA because its net worth should be aggregated with that of National. The Commission decided to review this decision and affirmed on August 6, 1997. ³ Tri-State filed a petition for review of this decision on October 3, 1997.

B. Tri-State and the EAJA

It is apparent that the facts concerning the issue of aggregation, which are set forth in the various ALJ and Commission decisions, are not disputed and we briefly summarize them here. Tri-State is and was a wholly-owned subsidiary of National Engineering during the relevant time periods. Although National has a net worth in excess of $7 million, Tri-State, standing alone, has always had a net worth of less than $7 million and fewer than 500 employees. The two companies have the same board of directors, but have separate chief executive officers. Tri-State also has separate department heads for accounting, purchasing, estimating and operations, but shares a safety director with National.

Tri-State was principally engaged in structural steel erection, placing reinforcement bars and related activities, and hired only ironworkers as tradesmen. National was engaged in earth moving, excavating, concrete form construction, concrete placement, and mechanical contracting. National did not use ironworkers as tradesmen, but employed operating engineers, carpenters, plumbers, laborers, and pipefitters. About half of Tri-State's projects during the relevant period were with National. National did not use Tri-State exclusively, but awarded work to Tri-State when it made the lowest and best bid.

Tri-State and National shared the same office space, but each paid their own overhead costs. Tri-State had its own clerical staff and office equipment, its own separate bank accounts and accounting systems, processed its own invoices, purchased its own equipment independent of National, leased ninety percent of its equipment from outside sources, and paid rent to National when it made use of its equipment. National purchased some services on behalf of Tri-State, such as insurance, accounting services, payroll services, and employee benefit plans, for which Tri-State is charged its pro-rata share.

In the cases involving the Cincinnati site, which are on appeal as Case No. 97-3348, the ALJ noted that the companies shared the same safety program and the same safety loss director; that they shared several top-level supervisors on the project; and that they were "essentially considered one and the same at the site[.]" Although the OSHA inspections were triggered by conditions relating to Tri-State's employees, it was National that unsuccessfully sought a stay of the expanded inspections that led to citations against both Tri-State and National. Tri-State and National were represented by the same counsel, who had also represented National in prior proceedings before the Commission. The ALJ noted that the affidavits did not mention whether Tri-State paid its own legal fees in the pending cases. The ALJ concluded that the interrelationship between the companies and the availability of National's litigation resources to Tri-State were "special circumstances" requiring aggregation and making an award of fees under the EAJA unjust. The ALJ also concluded that Tri-State was not a "separate entity" from National for purposes of the EAJA.

In the cases involving the citations issued for the Goldtown site, which are on appeal as Case No. 97-4118, the ALJ noted that Tri-State paid its pro-rata share for services purchased by National, but emphasized that there was no showing that the costs incurred for those services were equivalent to what it would have paid on the open market. There was evidence presented in these cases that when Tri-State and National were involved in the same OSHA litigation, the invoices for legal services were sent to National and then Tri-State reimbursed National for its share. There was also more detailed evidence offered concerning the financial relationship between the companies, including that the shared board of directors and officers received only one paycheck which was from National. The financial records did not show how often Tri-State was charged for the shared services, although some items were charged on an annual basis, and reflected long-term...