Signature Mining Services, LLC v. Secretary of Labor

Plain-English summary

Signature Mining Services prevailed against an overbroad MSHA imminent-danger order and sought $80,004.37 in fees and expenses under the Equal Access to Justice Act. Its mine-owner contracting partner had promised to reimburse defense costs and had paid all costs from the underlying contest plus part of the fee-application costs. Judge Thomas P. McCarthy held that Signature had not “incurred” the reimbursed fees because the contractual protection removed the financial deterrent that EAJA is designed to address, and another payment would be a windfall. He also denied the remaining $40,214.78 in post-bankruptcy fee-application costs because no fees were available for pursuing an unsuccessful EAJA claim. As an alternative ground, the Judge found that Signature's redaction of the contract terms revealing the reimbursement obligation created special circumstances that made an award unjust. The Secretary received summary judgment, Signature's fee request was denied, and each party was ordered to bear its own costs.

Decision snapshot

• Governing authority: 5 U.S.C. § 504; 29 C.F.R. §§ 2704.100 through 2704.107
• Outcome: Signature's request for $80,004.37 in fees and expenses was denied on summary judgment.
• Key point: A prevailing contractor does not incur reimbursed fees for EAJA purposes when a solvent third party's binding payment obligation eliminated litigation-cost deterrence.

Full text (FMSHRC public release)

FEDERAL MINE SAFETY AND HEALTH REVIEW COMMISSION

OFFICE OF
ADMINISTRATIVE LAW JUDGES

1331 PENNSYLVANIA
AVE., N.W., SUITE 520N

WASHINGTON, DC
20004-1710

TELEPHONE:
202-434-9958 / FAX: 202-434-9949

SIGNATURE MINING SERVICES, LLC,
Petitioner

v.

SECRETARY OF LABOR

MINE SAFETY AND HEALTH     

ADMINISTRATION (MSHA),

Respondent

EQUAL ACCESS TO JUSTICE PROCEEDING

Docket No. EAJ 2012-0002

Mine: Coalburg No. 1

AMENDED DECISION
AND ORDER

Appearances:               David Hardy, Esq., & Christopher Pence, Esq.,
Hardy Pence, PLLC, Charleston, West Virginia for Petitioner

Karen Barefield, Esq., Office of the Solicitor, U.S.
Department of Labor, Arlington, Virginia for Respondent          

Before:           
           Judge McCarthy

The Decision and Order issued December 5, 2014, is
hereby amended pursuant to Commission Rule 69(c), 29 C.F.R. § 2700.69(c) (2014), to correct clerical errors and
read as set forth below.

I.      
Statement of the Case

This case is before me upon an
Application for Award of Fees and Expenses under the Equal Access to Justice
Act (EAJA). 5 U.S.C. § 504 (2014). Signature Mining Services, LLC, filed its Application
against the Secretary of Labor’s Mine Safety and Health Administration based
upon a negotiated settlement that the parties reached in the underlying contest
proceeding. Currently pending in this case are Cross Motions for Summary Judgment
filed on March 11, 2014, and a Motion to Supplement the Record filed on May 28,
2014. The undersigned finds no genuine issues of material fact that preclude
summary disposition of this matter. For the reasons set forth herein, the
Secretary’s Motion for Summary Judgment is granted, and Signature’s Motion for
Summary Judgment is denied.

II.        Factual and Procedural Background

A.        The Underlying
Contest Proceeding

On August 25, 2011, adverse roof and rib
conditions developed at the Coalburg No. 1 Mine at the 003 MMU-2 East Panel, a
retreat mining section. Order No. 8139507; Signature App. at 1-2. Initially, these
conditions affected several entries on the right side of the section along and
inby the last open crosscut. Order No. 8139507. After MSHA inspectors observed
pillars taking weight on the 2 East Panel, MSHA issued imminent danger Order
No. 8139507 pursuant to Section 107(a) of the Act. Order No. 8139507; Sec’y
Answer at 3. This order covered the #6 and #8 entries along and inby the last
open crosscut. Order No. 8139507.                     

Signature and the Secretary both allege that the conditions
began to spread from the mouth of the 2 East Panel to the Mains. Signature App.
at 3; Sec’y Answer at 3. In response, Signature began withdrawing miners and
equipment from, and dangering off, the affected area. Signature also set Heintzman
jacks along the roadway at break 15 along the Mains, outby the area affected by
the adverse roof conditions. Richmond Dep. 30:9-31:10; Canterbury Dep.
11:21-12:13; Mackowiak Dep. 60:11-14, 65:2-5, 66:14-15; 75:11-19.

On August 27, 2011, at 1:30 a.m., the Coalburg No. 1 foreman
reported that the pillars at the mouth of the 2 East Panel were taking weight. Richmond
Dep. 18:21-19:8. Randel Richmond, Signature’s president, was informed that the
ground failure had migrated into the Mains. Richmond Dep. 19:6-21:8. Before 10
a.m., Richmond spoke with Terry Price, MSHA’s field office supervisor, and John
Kinder, a representative of the West Virginia Miner’s Health, Safety, and
Training (WVMHST), to apprise them about the adverse ground conditions. Richmond
Dep. 30:20-32:2. Richmond told Price that Signature had stopped production
and withdrawn all its miners from the affected areas.  Richmond Dep.
30:22-31:3. Richmond also provided Price with assurances that Signature had
taken steps to monitor and correct the conditions. Richmond Dep.
31:5-10, 36:14-22.                 

Approximately fifteen minutes later, Joe Mackowiak, MSHA assistant
district manager, called Frank Canterbury, a mine foreman at Signature, to
inquire further about the adverse conditions. Mackowiak Dep. 57:8-12. Canterbury
informed Mackowiak that the ground failure had migrated into the Mains and that
men were underground setting jacks to prevent further migration of the adverse
ground conditions. Mackowiak Dep. 73:22-74:20, 97:3-13. Canterbury also told
Mackowiak that the ventilation controls of an abandoned mine 75 feet below the
Coalburg No. 1 had been crushed and the water sumps had gone dry. Order No.
8126005; Mackowiak Dep. 81:16-82:19. The subsidence led Mackowiak to conclude
that the pillar failures and ground conditions created regional instability. Mackowiak
Dep. 92:14-94:8.

Pursuant to Section 107(a) of the Act, Mackowiak orally
issued imminent danger Order No. 8126005 by phone. Mackowiak Dep. 87:12-14. Mackowiak
emphasized that the situation was so dangerous that everyone ought to be
withdrawn, without exception. Mackowiak Dep. 99:16-19, 103:2-5. Mackowiak then
instructed Price to dispatch inspectors to Coalburg

No. 1 and reduce
the Order to writing. Mackowiak Dep. 87:21-88:11. Mackowiak also faxed Price instructions
to issue the imminent danger order with “[n]o exceptions,” which meant that no
one was allowed to be in the mine site. Mackowiak Dep. 102:8-15; Price Dep.
54:10-20, dated November 8, 2011.

When Price and James Jackson, another MSHA inspector, arrived
at Coalburg No. 1, they reduced the Order to writing. Price Dep. 56:19-57:4. At
that time, 14 miners were underground. Price Dep. 60:22-61:6. Although none of
these miners were involved in running coal, Price and Jackson did not conduct
any investigation about why these miners were underground. Price Dep. 60:7-15. Price
and Jackson did not travel underground to examine the adverse conditions. Price
Dep. 64:14-65:5. Price instructed Signature that the entire mine site was
closed and no one was permitted underground without MSHA’s approval. Price Dep.
62:14-18, 63:4-64:8; see Richmond Dep. 36:15-20, 38:16-39:1.

On August 29, 2011, MSHA inspectors, Signature personnel, and
consultants from Alpha Engineering traveled underground to observe the adverse
conditions and determine whether the ground failure had stopped. Richmond Dep.
40:23-41:13. The inspection party determined that the 2 East Panel and
approximately ten crosscuts inby break 15 were the areas primarily affected by
the roof and rib conditions. See Appl. For Fees and Other Expenses at 3,
dated January 6, 2012. Mackowiak heard pillars breaking and continued to
express concern that the ground failure posed a regional threat given the
conditions of the underlying mine. Mackowiak Dep. 141:22-144:17. As a result,
the imminent danger Order remained in effect for the entire mine site. Order
No. 8126005; see Mackowiak Dep. 140:7-21. Thereafter, Signature filed a
Notice of Contest to Order Nos. 8139507 and 8126005. See Notice of
Contest to Orders Nos. 8139705 & 8126005.

On August 30, 2011, MSHA issued withdrawal Order No. 7257539
pursuant to Section 103(k) of the Act. Order No. 7257539. In this control Order,
MSHA alleged that a “coal and floor rock outburst accident” had occurred and
all mining activities inby had been disrupted. Id. The 103(k) Order
covered the entire mine because of hazards presented by crushed ventilation
controls and instability of mine pillars. Id.  MSHA was unsure about the
extent of damage and the need to conduct an accident investigation. Sec’y
Answer at 4. On August 31, 2011, Signature filed a Notice of Contest to Order
No. 7257539.

Six days before the scheduled hearing on the contest
proceedings, the parties entered into settlement negotiations. On December 2,
2011, the Secretary of Labor, MSHA, and Signature filed a Joint Motion to
Continue based on the terms of a proffered settlement agreement. Jt. Mot. to
Continue at 3-4. With respect to the Section 107(a) imminent danger Orders,
Signature agreed to withdraw its Notice of Contest to Order No. 8139507 in
exchange for MSHA’s promise to vacate Order No. 8126005. See Jt. Mot. to
Continue, at 3.  Negotiations on section 103(k) Order No. 7257539 were ongoing
at the time the Joint Motion was filed. Thereafter, MSHA agreed to narrow the
area of the mine affected by that control Order and to approve Signature’s
ventilation plan. Jt. Mot. to Continue, Ex. 2. On December 5, 2011, the
undersigned granted the parties’ Joint Motion to Continue. Order Granting
Continuance. 

On December 16, 2011, the undersigned granted Signature’s motion
to partially withdraw its Notice of Contest to Order No. 8139507. My
Order noted that the Secretary had agreed to vacate Order No. 8126005 and
directed that Order No. 8126005 be addressed in either a subsequent settlement
motion or hearing. On January 4, 2012, I granted the Secretary’s motion to dismiss
and vacate Order No. 8126005. On January 20, 2012, Signature filed a motion to
dismiss its Notice of Contest to Order No. 7257539. By Order dated January 26,
2012, the undersigned granted Signature’s motion.

B.        The EAJA Proceeding

On
January 9, 2012, Signature filed its Application for Fees and Other Expenses under
EAJA.  On August 30, 2013, the undersigned
issued a Decision and Order finding that (1) the judicially-sanctioned
negotiations that concluded the underlying contest proceeding were sufficient
to grant Signature prevailing party status under the EAJA and (2) Order No.
8126005 was overbroad and the Secretary’s decision to enforce it was without
merit and could not be substantially justified.[1]
The Decision and Order directed that further
proceedings address (1) whether Signature’s balance sheet met EAJA’s financial
eligibility requirements, (2) whether Patriot Coal Company controlled the
underlying contest proceedings (thereby precluding Signature from recovering
fees under the EAJA), and (3) the amount of attorneys’ fees, if any, to which
Signature was entitled after prevailing on Order No. 8126005.

The
parties engaged in additional discovery after issuance of my August 30, 2013,
Decision and Order clarifying the issues to be addressed at hearing. In
response to a discovery request from the Secretary, Signature’s counsel
produced a redacted copy of the Contract Mining Agreement, which detailed the
nature of the contractual relationship between Signature and Jarrell’s Branch. Resp’t
Ex. 24, Signature’s Response to the Secretary’s Requests for Production of
Documents. The redactions of putative confidential business information
included paragraphs 17, 18, and 20, which provided, in relevant part, that
Jarrell’s Branch would reimburse Signature for certain penalty assessments
issued by MSHA that did not arise from intentional misconduct or gross
negligence, and for attorneys’ fees and costs incurred in contesting penalty
assessments before the Commission. Resp’t Ex. 24, Signature’s Response to the
Secretary’s Requests for Production of Documents; Resp’t Ex. 21.

The
Secretary subsequently discovered an un-redacted copy of the contract on the
Patriot bankruptcy information website. The contract had been filed with the
bankruptcy court on

July
31, 2013, in support of Signature’s claim against Jarrell’s Branch.[2] The Secretary had previously
been unaware that Jarrell’s Branch had fully reimbursed Signature for the fees
incurred in the underlying contest proceeding and partially reimbursed
Signature for the fees incurred in the EAJA litigation. When the Secretary
notified Signature’s counsel that he had found an un-redacted copy of the
Contract Mining Agreement, counsel admitted that Signature had been reimbursed
for attorneys’ fees and costs. Secretary’s Mot. Summ. J. 10, n.6.

On
December 12, 2013, the parties filed a Joint Motion for Decision on Stipulated
Record. They stipulated to Signature’s net worth and to the amount of
attorneys’ fees incurred by Signature in its defense of Order Number 8126005
and the litigation of its EAJA application.

On
March 11, 2014, after additional discovery, the parties filed Cross Motions for
Summary Judgment stipulating to the facts, the record, and the amount of fees
Signature incurred in the contest proceeding and its EAJA application. The Cross
Motions for Summary Judgment present arguments on the primary issue of whether
the terms of the Contract Mining Agreement between Patriot Coal’s subsidiary
Jarrell’s Branch and Signature preclude Signature’s recovery of fees under the
EAJA.

C.        Summary of Stipulated Facts on
Cross Motions for Summary Judgment

Signature Mining Services is a West
Virginia limited liability corporation formed in 2008. Resp’t Ex. 22. Since its
formation, Signature has employed less than 500 people and its net worth has
never exceeded $7,000,000. See Signature’s Application under EAJA.

Jarrell’s Branch Coal Company is a
subsidiary of Patriot Coal Corporation. On August 29, 2011, Patriot Coal was
worth more than $7,000,000. Patriot Coal filed for Chapter 11 bankruptcy on
July 9, 2012.[3]

Order No. 8126005 was issued on
August 27, 2011. Resp’t Ex. 4. On August 29, 2011, Signature’s counsel filed a
Notice of Contest for Order Nos. 8126005. Resp’t Ex. 7. The litigation of Order
No. 8126005 continued through January 4, 2012, when the undersigned issued an
Order to Dismiss Docket No. WEVA 2011-2300. Resp’t Ex. 19.

On June 1, 2011, Signature entered
into a Contract Mining Agreement with Jarrell’s Branch Coal Company governing
mining operations at the Coalburg #1 mine. Resp’t Ex. 21. The Agreement was
negotiated over a period of several weeks, and the amount of Signature’s
compensation pursuant to its terms was directly related to Jarrell’s Branch’s
obligation to reimburse Signature for costs incurred in operating the Coalburg
No. 1 Mine, including amounts for legal fees incurred in defending certain citations
and orders issued by MSHA.[4]
Signature’s Mot. Summ. J. 8, Stipulated Fact No. 11. Had Jarrell’s Branch not
agreed to reimburse Signature for costs incurred in operating the mine,
Signature’s compensation under the contract’s terms would have been higher. Signature’s
Mot. Summ. J. 8, Stipulated Fact No. 12. The reserves at Coalburg No.1 Mine
exceeded the term of the Contract Mining Agreement. Had Jarrell’s Branch and
Signature negotiated an extension or renewal of the contract upon its
expiration, the historical costs incurred in the mine’s operation would have
been an important consideration in negotiating Signature’s future compensation.
Signature’s Mot. Summ. J. 8, Stipulated Fact No. 13.

Under the Contract Mining
Agreement, Signature was responsible for managing the daily operations at the mine,
including compliance with the Federal Mine Safety and Health Act and its
regulations. Resp’t Ex. 21, ¶ 8. The agreement obligated Jarrell’s Branch to
reimburse Signature for its legal fees incurred as a result of matters pending
before the Commission, excluding matters arising under section 104 of the Mine
Act. Resp’t Ex. 21, ¶ 18. The agreement also obligated Jarrell’s Branch to pay
Signature for reasonable attorneys’ fees after the cancellation, expiration, or
termination of the agreement if the citation was issued prior to the effective
termination date. Id.[5]
The maximum hourly rate that Signature can recover in this matter is $275, the contractual
reimbursement rate from Jarrell’s Branch. Id.; see also Secretary’s
Mot. Summ. J. 10, n.6.

Signature decided when to initiate,
settle, and terminate actions before the Federal Mine Safety and Health Review
Commission. No person at Patriot Coal or Jarrell’s Branch had authority to make
these decisions. Signature’s Mot. Summ. J. 7, Stipulated Fact No. 9. The
contest proceedings regarding Order 8126005 were initiated and resolved at the
sole discretion of Signature. Signature’s Mot. Summ. J. 7, Stipulated Fact No.
10.

At the time the EAJA action was
filed on January 9, 2012, Signature had not been reimbursed for time spent in
December 2011 defending against Order 8126005. By March 9, 2012, Jarrell’s
Branch had reimbursed Signature for $39,789.59 in fees and expenses incurred in
connection with the defense of Order No. 8126005. Signature’s Mot. Summ. J. 9,
Stipulated Fact No. 18; Secretary’s Mot. Summ. J. 3, Stipulated Fact No. 11. Signature
incurred $16,734.07 in expenses from expert services provided by Alpha
Engineering Services, Inc. in connection with the defense of Order 8126005. Jarrell’s
Branch reimbursed Signature for all amounts Signature paid to Alpha
Engineering. Signature’s Mot. Summ. J. 9, Stipulated Fact No. 21; Resp’t Ex.
21, ¶ 17; Resp’t Ex. 23. Signature has not been and will not be reimbursed for $40,214.78
in legal fees and expenses incurred in the prosecution of the EAJA action. See
Signature’s Mot. Supplement R. Ex. 4.[6]

Signature has been fully reimbursed
for legal fees and expenses set forth in the invoices dated September 22,
October 18, November 16, and December 15, 2011; and January 18, February 21,
and March 21, 2012. Those invoices include all underlying contest proceeding
fees and some EAJA fees. Signature was partially reimbursed for the invoice
dated April 18, 2012 relating to EAJA fees. Signature has not and will not be
reimbursed for the invoices relating to EAJA fees dated May 24, June 22, August
21, October 1 and 22, and November 13, 2012; October 1, November 3, and December
5, 2013; and January 2, February 3, and April 1, 2014. Secretary’s Mot. Summ.
J. 5, Stipulated Fact No. 21; Signature’s Mot. Summ. J. 9, Stipulated Fact No.
19; Signature’s Mot. Supplement R. Ex. 4.

The parties stipulated in their
cross-motions for summary judgment that Signature could supplement the record
to reflect additional fees incurred in the preparation of the motion for
summary judgment. On May 28, 2014, Signature’s counsel filed a Motion to
Supplement the Record with invoices detailing those fees. Should the
undersigned find that Signature is entitled to all legal fees and expenses
incurred in the defense of Order No. 8126005 and the subsequent EAJA
application, the total amount is $80,004.37, as of May 28, 2014. Should the
undersigned find that Signature is entitled only to those fees for which it has
not been reimbursed, the total is $40,214.78, as of May 28, 2014.

III.       Principles of Law

A.        Standard of Review for Cross-Motions for Summary Judgment

Under Commission Rule 67(b), a motion for
summary decision shall be granted only if the entire record, including the
pleadings, depositions, answers to interrogatories, admissions, and affidavits
shows (1) that there is no genuine issue of material fact; and (2) that the
moving party is entitled to summary decision as a matter of law. 29 C.F.R. §
2700.67(b) (2014). The burden is on the moving party to establish its right to
summary decision. Wimsatt v. Green Coal Company, Inc., 16 FMSHRC 487
(Feb. 1994) (ALJ). In other words, the party seeking summary judgment
bears the initial responsibility of informing the court of the basis for its
motion, and identifying those portions of the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits, if
any, which demonstrate the absence of a genuine issue of material fact. See Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). Moreover, all reasonable
inferences from the underlying facts must be construed in the light most
favorable to the non-moving party. See e.g., Reeves v. Sanderson
Plumbing Pods., Inc., 530 U.S. 133, 135 (2000). In the case of cross-motions
for summary judgment, the Commission has recognized the well-established
principle that “the court must rule on each party’s motion on an individual and
separate basis, determining, for each side, whether a judgment may be entered
in accordance with a Rule 56 [of the Federal Rules of Civil Procedure]
standard.” Hanson Aggregates New York, Inc., 29 FMSHRC 4, 10 (Jan.
2007); see also Charles Allen Wright et al., 10A Federal Practice
& Procedure § 2720 (3d ed. 1998); Scottsdale Ins. Co. v. Cutz,
L.L.C., 543 F. Supp. 2d 1310 (S.D. Fla. 2007).[7]

Summary judgment, however, is an
extraordinary procedure and must be entered with care, especially in the case
of cross-motions. There are three reasons why courts must carefully evaluate
cross-motions for summary judgment separately and individually.

First, the question of whether
genuine issues of material fact still exist is a question of law reserved
exclusively to the judge, regardless of the parties’ opinions. Wright et al., supra,
§ 2720. The parties’ filing of cross-motions for summary judgment do not “conclusively
establish[] the universe of facts that [are] . . . material,” and
the judge must make the determination that no material fact issues remain
unresolved. Hanson Aggregates New York, Inc., 29 FMSHRC 4, 10 (Jan. 2007).[8]
The Third Circuit has explained that

[c]ross-motions are
no more than a claim by each side that it alone is entitled to summary
judgment, and the making of such inherently contradictory claims does not
constitute an agreement that if one is rejected the other is necessarily
justified or that the losing party waives judicial consideration and
determination whether genuine issues of material fact exist. If any such issue
exists it must be disposed of by plenary trial and not on summary judgment.

Raines v. Cascade Indus., 402 F.2d 241, 245 (3d Cir.
1968).

Second, a party’s claim that there
are no genuine issues of material fact for the purposes of summary judgment
does not prevent that same party from making the claim that there are
genuine issues of material fact that preclude judgment from being entered
against it. In other words, “the contention of one party that there are no
issues of material fact preventing entry of judgment in its favor does not bar
that party from asserting that there are issues of fact sufficient to prevent
the entry of judgment as a matter of law against it.” Schwabenbauer v. Bd.
of Educ., 667 F.2d 305, 313
(2d Cir. 1981); see also Zook v. Brown, 748 F.2d 1161 (7th Cir. 1984); Nafco
Oil & Gas, Inc. v. Appleman, 380 F.2d 323 (10th Cir. 1967); Cram v.
Sun Ins. Office, 375 F.2d 670 (4th Cir. 1967).

Finally, “the mere fact that a
[party] has failed to meet his burden of proof on his motion for summary
judgment does not entitle the [other party] to judgment on its motion.” Rothenberg
v. Chemical Bank New York Trust Co., 400 F. Supp. 1299, 1302 (S.D.N.Y.
1975). Rule 56 places the burden on the moving party to establish that
there is no genuine issue of material fact and that it is entitled to judgment
as a matter of law; when both parties file competing motions for summary
judgment, each party must separately and individually satisfy that burden. See
Fair Housing Council of Riverside County, Inc. v. Riverside Two, 249
F.3d. 1132, 1136 (9th Cir. 2001).

Summary judgment, therefore, may
only be entered when there is no genuine issue of material fact, and when the
party in whose favor it is entered is entitled to summary decision as a matter
of law. Missouri Gravel Co., 3 FMSHRC 2470, 2471 (Nov. 1981); see
also Poller v. Columbia Broad. Sys., Inc., 368 U.S. 464, 467 (1962)
(holding that summary judgment should be entered only when the pleadings,
depositions, affidavits, and admissions show no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a matter
of law).

B.        The Equal Access to
Justice Act

1.      EAJA
Generally and Commission EAJA Rules

The EAJA provides for the award of
attorneys’ fees and other expenses to a prevailing party against the United
States or an agency thereof, unless the position of the government was
substantially justified or that special circumstances make an award unjust. 5 U.S.C. § 504(a)(1)
(2014). The Supreme Court has recognized that eligibility for EAJA fees
requires (1) that the claimant be a “prevailing party,” (2) that the
Government’s position was not “substantially justified,” (3) that no special
circumstances make an award unjust, and (4) that the fee application must be
submitted to the court within 30 days and be supported by an itemized
statement. Commissioner, Immigration & Naturalization Serv. v. Jean,
496 U.S. 154, 158 (1990).

Pursuant to the directive of 5
U.S.C. § 504(c)(1), the Commission has promulgated its own rules and procedures
for EAJA applications. In order to be eligible for EAJA fees, a corporate
entity such a Signature -- as opposed to an individual or the sole owner of a
corporation -- cannot have a net worth in excess of $7 million nor employ more
than 500 employees. 29 C.F.R. § 2704.104 (2014). See, e.g.,
Bill Simola, 34 FMSHRC 539, 550–51 (Mar. 2012) (treating LLCs as
corporations under the Mine Act). Commission EAJA Implementation Rule 100
defines when eligible parties can recover:

An eligible party
may receive an award when it prevails over the U.S. Department of Labor, Mine
Safety and Health Administration (“MSHA”), unless the Secretary of Labor’s
position in the proceeding was substantially justified or special circumstances
make an award unjust.

29 C.F.R § 2704.100 (2014); see also 5 U.S.C. § 504(a)(4)
(2014).

Under Commission rules,

[a]
prevailing applicant may receive an award of fees and expenses incurred in
connection with a proceeding, or in a significant and discrete substantive
portion of the proceeding, unless the position of the Secretary was
substantially justified.  The position of the Secretary includes, in addition
to the position taken by the Secretary in the adversary adjudication, the
action or failure to act by the Secretary upon which the adversary adjudication
is based. The burden of proof that an award should not be made to a prevailing
applicant because the Secretary’s position was substantially justified is on
the Secretary, who may avoid an award by showing that his position was
reasonable in law and fact. An award will be reduced or denied if the applicant
has unduly or unreasonably protracted the underlying proceeding or if special
circumstances make the award unjust.

29 C.F.R. § 2704.105 (2014). Contest proceedings, such as
the one underlying Signature’s application, are expressly included in the types
of Commission proceedings in which eligible parties may apply for EAJA fees. See
29 C.F.R. §2704.103 (2014).

Although the Commission’s EAJA
Implementation rules normally cap fees at a rate of $125 an hour,[9]
the Commission may exercise its discretion to award fees at a higher rate to
account for increases in cost of living or the limited availability of
attorneys qualified to handle Commission proceedings. 29 C.F.R. § 2704.107
(2014). Eligible parties may apply for “reasonable expenses,” and awards may
also include attorneys’ fees and expert witness fees regardless of whether “the
services were made available without charge or at a reduced rate to the applicant.”
29 C.F.R. § 2704.106(a) (2014). The court may also award costs for
engineering studies and reports “to the extent that the charge for the service
does not exceed the prevailing rate for similar services, and the
study . . . was necessary for the preparation of the
applicant’s case in the underlying proceeding.” 29 C.F.R. § 2704.106
(2014). The amount of the EAJA award is thus left largely to the discretion of
the administrative adjudicator.

When determining the reasonableness
of fees to award, the following five factors must be considered:

1)     
If the attorney, agent or witness is in private practice, his or her
customary fee for similar services, or, if an employee of the applicant, the
fully allocated cost of the services;

2)     
the prevailing rate for similar services in the community in which the
attorney, agent, or witness ordinarily performs services;

3)     
the time actually spent in the representation of the applicant;

4)     
the time reasonably spent in light of the difficult or complexity of the
issues in the underlying proceedings; and

5)     
such other factors as may bear on the value of the services provided.

29 C.F.R. § 2704.106(c) (2014). The
EAJA also vests the adjudicator with the discretion to reduce or deny awards
“to the extent that the party during the course of the proceedings engaged in
conduct which unduly and unreasonably protracted the final resolution of the
matter in controversy.” 5 U.S.C. § 504(a)(3) (2014); see also 28 U.S.C.
§ 2412(a)(1)(C) (2014).

2.      EAJA’s
Purposes and Legislative History       

The EAJA was enacted shortly after
a period of rapid regulatory growth to address Congress’ concerns that small
businesses lacked the resources to litigate against the federal government. H.R.
Rep. 96-1418, at 9–10 (1980), reprinted in 1980 U.S.C.C.A.N. 4984,
4988–89. From a policy perspective, Congress was concerned that the greater
resources and expertise of the federal government might coerce small businesses
into regulatory compliance simply because they lacked the resources to contest
citations, thereby creating precedent on the basis of uncontested orders rather
than after the “thoughtful consideration and presentation of opposing views.” H.R.
Rep. 96-1418, at 10.  Therefore, the primary purpose of the EAJA is to
eliminate the financial disincentive to challenge unreasonable governmental
actions for eligible parties. H.R. Rep. No. 99-120, at 4 (1985), reprinted
in 1985 U.S.C.C.A.N. 132; Jean, 496 U.S. at 163 citing Sullivan
v. Hudson, 490 U.S. 877, 883 (1989)).

The EAJA’s legislative history
shows that Congress specifically intended the statute to serve dual functions:

1)
[to] diminish the deterrent effect of seeking review of, or defending against,
governmental action by providing in specified situations an award of attorney
fees, expert witness fees, and other costs against the United States; and

2)
[to] insure the applicability of the common law and statutory exceptions to the
“American rule” respecting the award of attorneys’ fees in actions by or
against the United States.[10]

The Equal Access to Justice Act, Pub. L. No. 96-481, 94
Stat. 2321 (1980) (codified as amended at 5 U.S.C. § 504; 28 U.S.C. § 2412
(2014)). Thus, the EAJA reduces the resource disparity between the federal
government and small business litigants, and creates an incentive for agencies
to police their enforcement and litigation activities by imposing the risk of a
fee award against them. See generally United States v. 329.73 Acres of Land
in Grenada & Yalobusha Counties, 704 F.2d 800, 801–03 (5th Cir. 1983) (discussing
congressional intent of the EAJA).  Accordingly, the “[g]overnment’s interest
in protecting the federal fisc is subordinate to the specific statutory goals
of encouraging private parties to vindicate their rights and curbing excessive
regulation and the unreasonable exercise of government authority.” Jean,
496 U.S. at 163 (1990) (citing H.R. Rep. No. 1418, at 12; S. Rep. No. 96-253,
at 7 (1979)).  

IV.       Positions
of the Parties

Signature and the Secretary have
stipulated that Signature, at the time the underlying contest proceeding was
initiated, was worth less than $7 million and had less than 500 employees, and
is therefore eligible to recover fees and expenses under the EAJA. The
undersigned’s August 30, 2013 Decision and Order, together with the Amended
Decision and Order issued December 6, 2013, found that Signature was a
prevailing party for the purposes of the EAJA in the contest proceedings
related to Order No. 8126005, and that the Secretary’s defense of that order
was not substantially justified. If the undersigned finds that Signature has
incurred fees within the meaning of the statute, Signature is therefore
eligible for a fee award. Further, the parties have stipulated that should the
undersigned find that Signature is entitled to all legal fees and expenses
incurred in the defense of Order No. 8126005 and its subsequent EAJA
application, the total amount is $80,004.37. In the alternative, should the
undersigned find that Signature is entitled only to those fees and expenses for
which it has not been reimbursed (the fees and expenses related to the EAJA
application incurred after the partial reimbursement in April 2012), Signature
is entitled to $40,214.78.

Given the purposes of EAJA, the
issue of whether Signature is entitled to EAJA fees in this matter turns on
whether Signature incurred fees under the EAJA given the terms of the contract
mining agreement between Signature and Jarrell’s Branch, a subsidiary of
Patriot Coal. The contract between Jarrell’s Branch and Signature obligated
Jarrell’s Branch to reimburse Signature for legal fees and costs incurred in
defending certain citations and orders before the Commission. Resp’t Ex. 21, ¶
18; see supra note 3. Signature argues that its contract mining agreement
with Jarrell’s Branch does not preclude collection of EAJA fees, despite
reimbursement from Jarrell’s Branch for all attorneys’ fees, costs, and
expenses, including those incurred by Alpha Engineering, associated with the
underlying contest proceeding, and for part of the fees arising from pursuit of
its EAJA application. The Secretary argues that the contract mining agreement
precludes Signature from incurring fees for the purposes of EAJA.  

Signature advances three legal
arguments in support of a summary award of EAJA fees. First, Signature
emphasizes that it was responsible for managing the daily operations at the
mine and had sole discretion to initiate, settle, or terminate actions before
the Commission. Therefore, Signature argues that it is the real
party-in-interest instead of a stand-in litigant applying for EAJA fees on
behalf of Patriot Coal, an ineligible party. Second, Signature argues that
nothing in the EAJA suggests a purpose to prevent contractual reimbursement
arrangements like that extant between Signature and Jarrell’s Branch. Therefore,
Signature argues for a fee award regardless of whether it was responsible for
paying the fees or whether the fees already have been paid. Third, Signature
argues that failure to award fees would circumvent EAJA’s purpose of deterring
unreasonable government action.  

The Secretary advances three
arguments in support of a summary denial of EAJA fees. First, the Secretary
argues that the potential litigation costs had no deterrent effect on
Signature’s decision to defend against Order No. 8126005 because Signature knew
in advance that reasonable attorneys’ fees and costs incurred before the
Commission would be reimbursed by Jarrell’s Branch. Moreover, Signature has not
actually “incurred” any fees because most of its attorneys’ fees and all of its
expert costs have already been reimbursed by Jarrell’s Branch. Second, because
the contest costs and fees have already been paid, any fee award would
constitute a windfall for Signature, contrary to the EAJA’s intent. Third, the
Secretary argues that any EAJA award would impermissibly impose a fine on MSHA
and force taxpayers to finance Signature’s EAJA litigation.        

V.        Analysis
and Discussion

A.               
Circuit Court Disagreement on the Meaning of “Incur” under EAJA

The EAJA statute specifically
provides in pertinent part that “[a]n agency that conducts an adversary
adjudication shall award, to a prevailing party other than the United States,
fees and other expenses incurred by that party in connection with that
proceeding, unless the adjudicative officer of the agency finds that the
position of the agency was substantially justified or that special
circumstances make an award unjust.” 5 U.S.C. § 504(a)(1).  Neither the
text of the EAJA nor its legislative history provides a definition of “incur.” Sec.
& Exch. Comm’n v. Comserv Corp., 908 F.2d 1407, 1413 (8th Cir. 1990).  This
issue is one of first impression for the Commission.[11]
Accordingly, the undersigned has canvassed federal circuit Courts of Appeals
decisions for guidance, including the Fourth Circuit, which may have
appellate jurisdiction over the Commission’s final decision because Signature
is located in Raleigh County in Beckley, West Virginia.[12]

The federal Circuit Courts of
Appeals are divided on the issue, particularly when the EAJA award includes
fees that are incurred by the party’s liability insurer, or fees that are paid or
advanced by a third party (here Jarrell’s Branch) with a legal obligation to
indemnify or reimburse the prevailing party (here Signature).  See United
States v. Thouvenot, Wade & Moerschen, Inc., 596 F.3d 378 (7th Cir.
2010) (dicta finding that award of attorneys' fees under the EAJA can include
fees incurred by the prevailing party's liability insurer, because the party
had contracted with the insurance company to pay premiums in exchange for the
insurance company assumption of defense costs), accord Ed A. Wilson, Inc. v.
Gen. Servs. Admin., 126 F.3d 1406 (Fed. Cir. 1997) (contractor Wilson
incurred attorney fees and expenses even though Wilson’s insurer Bituminous was
responsible for paying monthly billings to law firm where Wilson received
interest-free loan from Bituminous to pay a denied repair claim against government
contracting officer and assigned any potential recovery against government to
Bituminous); Securities & Exch. Comm’n v. Zahareas, 374 F.3d 624 (8th
Cir. 2004) (broker incurred legal fees under EAJA, even though broker’s former
company had initially agreed to pay fees, where company went bankrupt, leaving
broker obligated to pay fees); see also Morrison v. Comm’r of
Internal Revenue, 565 F.3d 658 (9th Cir. 2009) (taxpayer may incur attorney
fees under 26 U.S.C. § 7430(a) even if those fees are paid initially by a third
party where there is either a contingent or non-contingent obligation to repay
the fees); Phillips v. Gen. Servs. Ass’n, 924 F.2d 1577 (Fed. Cir. 1991)
(EAJA attorney fees incurred by government employee challenging discipline where
contingency fee arrangement required that fee award be paid over to legal
representative).  Compare United States v. Paisley, 957 F.2d 1161
(4th Cir. 1992) (EAJA fees denied where employer paid attorneys' fees on behalf
of its former employees pursuant to statutory obligation to indemnify them) with
Securities & Exch. Comm’n v. Comserv Corp., 908 F.2d 1407 (8th Cir.
1990) (corporate officer not eligible for EAJA award where company's insurance
policy reimbursed company for its indemnification of officer and officer had no
legal obligation to pay fees); United States v. 122 Acres of Land, 856
F.2d 56 (8th Cir. 1988) (because property owner had no obligation under
contingent fee agreement to pay his attorney anything, he had not incurred
attorneys’ fees within meaning of Uniform Relocation Assistance and Real
Property Acquisition Policies Act, another fee-shifting statute); Owner-Operator
Indep. Drivers Ass’n v. Fed. Motor Carrier Safety Admin., 675 F.3d 1036 (7th
Cir. 2012) (commercial truck drivers not entitled to award of attorney fees
under EAJA where drivers’ association was the only party responsible for
payment under fee arrangement and therefore the burden of fees would not have deterred
litigation challenging government’s action); Jeroski v. FMSHRC, 697 F.3d
651 (7th Cir. 2012) ) (proprietorship performing janitorial services for cement
plant who financed litigation of withdrawal order against MSHA was not
prevailing party, and suggesting in dicta that janitorial contractor had not
incurred fees where it would not have been deterred from contesting MSHA action
where cement company financed the litigation and contractor would receive
windfall from EAJA award).[13]

Having carefully reviewed the
foregoing circuit precedent in apparent conflict, the undersigned resolves the
issue of whether Signature has “incurred” fees under its Contract Mining
Agreement with Jarrell’s Branch within the meaning of EAJA by focusing on
whether the award of fees and costs to Signature would give effect to EAJA’s specific
purpose and Congress’ intent to eliminate the financial disincentive to
challenge unreasonable government actions. See Jean, 496 U.S. at 164 (citing
Sullivan v. Hudson, 490 U.S. 877, 883 (1989)); Owner-Operator Indep.
Drivers Ass’n, 675 F.3d at 1040 (citing Krecioch v. United States,
316 F.3d 684, 686 (7th Cir. 2003)); Sullivan v. Hudson, 490 U.S. 877,
883–84 (1989)); see also Comserv, 908 F.2d at 1414–15 (“EAJA awards
should be available where the burden of attorneys’ fees would have deterred the
litigation challenging the government’s actions, but not where no such
deterrence exists.”); Paisley, 957 F.2d at 1164 (recognizing that
whether an award serves EAJA’s purpose in avoiding deterrence is the “critical
concern underlying the EAJA precondition that a fee claimant shall have
“incurred” the expense”). The undersigned agrees with that practical approach because
it is consistent with the purpose of the statute and its legislative history.  

Congress prefaced the EAJA with
this statement of its findings and purposes:

(a) The Congress
finds that certain individuals, partnerships, corporations, and labor and other
organizations may be deterred from seeking review of, or defending against,
unreasonable governmental action because of the expense involved in securing
the vindication of their rights in civil actions and in administrative
proceedings.

(b) The Congress
further finds that because of the greater resources and expertise of the United
States the standard for an award of fees against the United States should be
different from the standard governing an award against a private litigant, in
certain situations.

(c) It is the
purpose of this title-

(1) to diminish the
deterrent effect of seeking review of, or defending against, governmental
action by providing in specified situations an award of attorney fees, expert
witness fees, and other costs against the United States; and

(2) to insure the
applicability in actions by or against the United States of the common law and
statutory exceptions to the “American rule” respecting the award of attorney
fees.

Congressional Findings and
Purposes, note following 5 U.S.C. § 504. Furthermore, the Committee Reports of both the
House and Senate reflect the concerns of providing access for eligible
individuals, partnerships, corporations, and labor or other organizations, for
whom cost may be a deterrent to vindicating their rights, and improving
government policies by helping to assure that administrative decisions reflect
informed deliberation.  H.R. Rep. No. 96-1418, at 10 (1980); S. Rep. No.
96-253, at 7 (1979).  

In this case, I conclude that the
primary purpose of EAJA to eliminate the financial disincentive to challenge
unreasonable government action would not be served by awarding fees and
expenses to Signature. Denial of Signature’s attorney fees and expenses would
not remove any financial disincentive for Signature to challenge MSHA’s
overbroad imminent danger Order because Signature was contractually promised
and received full reimbursement for contesting MSHA’s action.  In this regard,
I find the Fourth Circuit’s reasoning and holding in Paisley, relied on
by the Secretary, to be persuasive here.

To hold that a
prevailing party with an unconditional legal right to indemnification of its
attorney fees by a manifestly solvent third party might nevertheless qualify
for an EAJA award because indemnification had not yet occurred is unacceptable
for several reasons. . . . [S]uch
a holding would not in fact serve a principal purpose of the EAJA: to avoid the
deterring effect which liability for attorney fees might have on parties'
willingness and ability to litigate meritorious civil claims or defenses
against the Government. The EAJA provides for fee-shifting precisely to avoid
this result. Consequently, in any situation in which the eligibility of a
particular prevailing party for an EAJA award is in issue, it is appropriate to
inquire whether that party would, as a practical matter, have been deterred
from litigating had it been known that a fee-shifting award was not available
upon a successful conclusion. If that question is asked here, it is obvious
that appellees, all but one of whom were funded by an advance which by contract
they need not refund if they prevailed in litigation, would not have been
deterred had the EAJA not then existed. This is the critical concern underlying
the EAJA precondition that a fee claimant shall have “incurred” the expense.

Accordingly, we hold
that, to effectuate the purposes of the EAJA, a claimant with a legally
enforceable right to full indemnification of attorney fees from a solvent third
party cannot be deemed to have incurred that expense for purposes of the EAJA,
hence is not eligible for an award of fees under that Act.

957 F.2d at 1164 (internal citations omitted).[14]

The prevailing parties in Paisley were
denied fees because they were indemnified per statute by a third party with no
obligation of repayment. Signature attempts to blunt Paisley by
reliance on the Federal Circuit’s decision in Wilson, where the Federal
Circuit found that denying EAJA fees to a prevailing small business that had
been indemnified by its liability insurer “would thwart the Act’s purpose of
deterring unreasonable governmental action.” Wilson, 126 F.3d at 1410. Signature
relies heavily on Wilson to support its argument that it incurred fees
for EAJA purposes.

The Wilson court emphasized that
it had previously awarded EAJA fees to prevailing parties who had no obligation
to pay any fees to their attorneys, such as those represented pro bono or by
union counsel.[15]
The Federal Circuit was unable to discern any material distinction between
those cases and Wilson’s case since in each instance the litigant paid a third
party in advance for the benefit of legal representation as a component of
union dues or insurance premiums, and incurred no additional obligation of
payment to counsel.  Id. at 1409–10. The Wilson court reasoned
that denying the EAJA application “would neither remove the financial
disincentives of litigating against the government nor deter the government’s
unreasonable denial of minor claims filed by its small business contracting
partners.” Id. at 1410.  Rather, the court reasoned as follows:

Denying a small
business, which in its keen acumen has obtained insurance to insulate itself
from liability for accidents during contract performance, and thus from
potential insolvency, an award of fees for the attorney services that it
procured as part of its policy would thwart the Act's purpose of deterring
unreasonable governmental action. In fact, it would act as an incentive to deny
meritorious claims, thereby requiring the small business to litigate. If the
small business has insurance, the government could deny the contractor's claim
and litigate any appeal of the denial without any pecuniary risk. Even if the
contractor were to win the appeal, there would be no award of attorney fees.
The government could act unreasonably not only in its initial denial of the
small business' claim but also during the litigation of the appeal, confident
in the knowledge that it will be exposed to no attorney fee award.

Id. Whereas the Fourth Circuit in Paisley
focused on the EAJA’s primary purpose of eliminating financial disincentives
for eligible parties who would defend against unjustified government action, the
Federal Circuit in Wilson emphasized Congressional intent to deter
unreasonable action by encouraging agencies to police their enforcement and
litigation activities.

B.     This
Case is Factually More Analogous To, and Legally More Consonant With, Paisley
than Wilson; Accordingly, Signature Did Not Incur Fees Within the Meaning
of the EAJA

1.         Pre-Bankruptcy
Fees

This case is more factually akin
to and legally consonant with Paisley than Wilson before Patriot
filed for bankruptcy. In Paisley, the employer indemnified its
former employees pursuant to a legal obligation imposed by state statute. Similarly,
in this case, Jarrell’s Branch reimbursed Signature for legal fees pursuant to
contractual obligation. Both Signature and the prevailing parties in Paisley
had a legally enforceable right to full indemnification or reimbursement of
attorney fees from a solvent third party and therefore would not be deterred by
liability for attorney fees and expenses from challenging the government’s
action had the EAJA not then existed. This is the critical concern underlying
the EAJA precondition that the fee applicant “incurred” the expense.  Paisley,
957 F.2d at 1164.  

The prevailing parties in Paisley
were former employees who never incurred or paid insurance premiums. Similarly,
Signature never incurred attorney’s fees and expenses in the underlying MSHA
contest proceeding since Jarrell’s Branch reimbursed Signature.  

By contrast, the prevailing party
in Wilson actually paid for its own indemnification in the form of
monthly insurance premiums. Wilson specifically involved a fixed-price
contract between Wilson and the General Services Administration for the
remodeling of a federal building. During the remodel, a sprinkler line broke
and caused damage to the building’s interior. Wilson denied responsibility, but
complied with the GSA officer’s instruction to repair the damage. The GSA
denied Wilson’s subsequent claim to cover the additional cost of the repair. Wilson
then submitted a claim to its third-party liability insurer, and received an
“interest-free loan” that partially covered the cost of the repairs. The loan
was “repayable only in the event and to the extent of any net recovery [Wilson]
may make from any [party] causing or liable for the loss or damage to the
property.” Wilson, 126 F.3d at 1407. In exchange, Wilson assigned to its
insurance carrier any claim against the government, any potential recovery, and
the authority to appeal GSA’s denial of its claim to the GSA Board of Contract
Appeals. Although the appeal was filed in Wilson’s name, the insurance carrier
had exclusive direction and control of the appeal and covered all the expenses
related to the proceeding. Id.

The Wilson court equated the
monthly premiums with prepaying attorneys’ fees in advance, and reasoned that
Wilson had effectively “incurred” fees under the EAJA. Id. at 1411, n.4.
In other words, “the insurance premiums are the fee that the insured pays for
the insurance company’s defense of his case. . . . [T]he
cost of defense, to the extent borne by the insurance company, is a cost that
the insured has paid for, just as he would have paid a lawyer for his defense
had he had no insurance.” Thouvenot, 596 F.3d at 383 (discussing the
reasoning in Wilson). In that context, denying Wilson EAJA fees would
almost certainly increase insurance premiums, thereby “reintroduc[ing] the cost
of litigation as a factor in the small business’ decision whether to contest
governmental action it deems unreasonable.” Wilson, 126 F.3d at 1411. As
a consequence, “the small business would have to decide whether it is worth the
increased premiums, which it will incur regardless of whether it prevails, to
challenge the government.” Id.

Thus, courts have found that an award
of attorney fees under the EAJA could properly include fees incurred by the
prevailing party's liability insurer because liability insurance is essentially
a contingent loan.  The insured pays premiums in exchange for the promise that
the insurance company will bear the cost of the insured’s defense (subject to a
deductible) if the insured is sued on a claim that the policy covers, and to
minimize the premiums, the insured agrees to repay that cost to the extent it
is covered by an award of attorney fees under EAJA.  Thouvenot, 596 F.2d
at 383.

Signature contends that the relationship
between Jarrell’s Branch and Signature is analogous to that between the insurance
carrier and the insured in Wilson.  Signature argues that its
compensation and other benefits under the Contract Mining Agreement were
directly related to Jarrell’s Branch’s obligation to reimburse Signature for
operating costs. Signature’s Mot. Summ. J. 13; Stipulated Fact No. 11. Moreover,
Signature argues that it assumed the risk that Jarrell’s Branch would not be
able to reimburse the fees and costs it owed to Signature. Signature further argues
that this reduced compensation and the assumed risk for failure to reimburse
constitute forms of consideration paid in exchange for Jarrell’s Branch’s
agreement to pay the mine’s operating costs. Signature’s Mot. Summ. J. 13–14.[16]
This consideration, Signature contends, is analogous to the insurance premiums
paid in Wilson and does not bar Signature from recovering fees under the
EAJA. Signature’s Mot. Summ. J. 14.

Signature’s
arguments are not persuasive.  Lower compensation and assumption of risk are
not explicitly mentioned as forms of consideration in the Contract Mining Agreement.
See Resp’t Ex. 21, at 1; Signature’s Mot. Summ. J. 8, Stipulated Facts
Nos. 11-12. Likewise, Signature’s argument that the historical costs of
operating the mine would be an important factor in negotiating Signature’s
future compensation should there have been an extension or renewal of the
Agreement is not certain and is not explicitly mentioned in the Agreement. See
Signature’s Mot. Summ. J. 8, Stipulated Fact No. 13. The Federal Circuit in Wilson
specifically noted that denying Wilson fees would almost certainly increase
Wilson’s monthly insurance premiums and thereby reintroduce the cost of
litigation as a factor in Wilson’s decision to contest the government action. Wilson,
126 F.3d at 1411.  By contrast, Signature’s argument that the costs of
defending against Order No. 8126005 would “necessarily result in a reduction of
[its] compensation” in the event that Signature renegotiates the contract with
Jarrell’s Branch is speculative, at best. The undersigned is unconvinced that such
speculative reduction in future compensation is akin to the more certain increase
in insurance premiums that concerned the Federal Circuit in Wilson. Signature’s
Mot. Summ. J. 17.

On
the other hand, the Contract Mining Agreement does explicitly reference safety bonus
payments payable to Signature.  Signature was entitled to a $2,000 per month
safety bonus if Signature and its contractors had zero lost time accidents
during a calendar month. In addition, Signature was eligible for an additional
monthly $2,000 safety bonus if its MSHA violations per inspection day were
between 1.0 and 1.4 each calendar month. If Signature’s MSHA violations per
inspection day were less than 1.0, the safety bonus increased to $3,000. Resp’t
Ex. 21, ¶ 20(c). In my view, these bonuses appear to negate Signature’s
argument that it agreed to lower compensation in exchange for Jarrell’s
Branch’s obligation to cover its operating costs. Furthermore, the risk that Jarrell’s
Branch might fail to fulfill the terms of its contract due to bankruptcy is
inherent in any contract, and such an assumption of insolvency risk is not a
particular form of consideration under the Contract Mining Agreement with
Jarrell’s Branch. In short, Signature’s arguments regarding contractual
exchanges of consideration are speculative, illusory and much less persuasive
than the bargained-for insurance exchange in Wilson.  

More importantly, even were the
undersigned persuaded that Signature’s lower compensation and assumption of
risk were particular forms of consideration, Signature’s reliance on Wilson’s
insurance contract analogy for an award of EAJA fees is still misplaced.  The
relationship between Signature and Jarrell’s Branch is not analogous to the
relationship between Wilson and its insurance carrier. The
Wilson court specifically recognized that “the insurance premiums are
the fee that the insured pays for the insurance company’s defense of his
case. . . . [T]he cost of defense, to the extent borne by
the insurance company, is a cost that the insured has paid for, just as he
would have paid a lawyer for his defense had he had no insurance.” Thouvenot,
596 F.3d at 383 (discussing the insurance premiums at issue in Wilson). The
petitioner in Wilson received a reimbursement designated as an
interest-free loan from its third-party insurance carrier to cover the costs of
its initial claim against the government. In consideration of that loan, Wilson
assigned its right to pursue an EAJA action and any subsequent award to its
insurer. Wilson, 126 F.3d at 1407. Signature’s Mot. Summ. J. 9,
Stipulated Fact No. 13. Unlike Wilson, there is no right of subrogation here
under which Signature assigned its right to pursue an EAJA action to Jarrell’s
Branch, thereby allowing Jarrell’s Branch to pursue third party MSHA for
attorney’s fees and costs that Jarrell’s Branch has already paid Signature.  Also
unlike Wilson, Signature retained the responsibility for controlling the
underlying contest litigation at all times. Otherwise, Jarrell’s Branch would
be found to be an EAJA-ineligible stand-in litigant. Accordingly, I find Wilson
inapposite.

Rather, the Fourth Circuit’s rationale
in Paisley is more persuasive on these facts. Paisley precludes an
award of fees to parties with a legally enforceable right to full
indemnification from solvent third parties because such awards do not advance
the primary purpose of the EAJA to diminish the deterrent effect of defending
against governmental action. Paisley, 957 F.2d at 1164. Because Signature
no longer has any outstanding attorneys’ fees associated with the underlying
contest proceeding, any such fees awarded would not further the EAJA’s purpose of
diminishing the deterrent effect of defending against governmental action. Since
Signature was fully reimbursed by Jarrell’s Branch for fees incurred in
challenging the contest proceeding, Signature was not deterred from defending
against MSHA’s prosecution of the overbroad imminent danger order. Rather, awarding
fees for the contest proceeding for which Signature already has been reimbursed
by Jarrell’s Branch would constitute a windfall for Signature. See Jeroski,
697 F.3d at 656. Accordingly, on the instant record, the undersigned concludes
that an award of EAJA fees is contrary to the primary purpose of the EAJA to eliminate
the financial disincentive to challenge unreasonable governmental actions for
eligible parties. H.R. Rep. No. 99-120, at 4; Jean, 496 U.S. at 163 (citing
Sullivan, 490 U.S. at 883).

The undersigned also concludes that
the secondary or dual purpose of the EAJA is not materially advanced by an
award of fees here. That purpose is to ensure the applicability of the common
law and statutory exceptions to the “American rule,” which generally provides
that each party pays its own attorneys’ fees, but allows an award of fees
against a party who has acted under common law in bad faith or to preserve a
common fund, or when a statute, such as EAJA, provides that fees may be
awarded.  See supra text accompanying note 10; see also H.R. Rep.
99-120, at 5. Although EAJA provides fees when, as here, the government’s
position is not substantially justified, I conclude that any EAJA statutory
exception to the American rule is subservient to the primary purpose of EAJA,
which as explained above, has not been advanced here where Signature has not
“incurred” fees under the EAJA statute because it has not been deterred from
challenging MSHA given reimbursement from Jarrell’s Branch. Accordingly, I find
any statutory exception to the American rule inapplicable here. Nor has the
common fund exception under common law been advanced here because Signature’s
contest proceeding did not have the effect of preserving or recovering a common
fund for the benefit or equitable trust of others. Finally, the common law bad-faith
exception to the American rule is inapposite.  Although the federal government
(MSHA) may be subject to punitive awards for bad faith, see e.g., Am.
Hosp. Ass’n v. Sullivan, 938 F.2d 216, 219 (D.C. Cir. 1991), such bad faith
is a narrow basis for recovery and may be “imposed only in exceptional cases
and for dominating reasons of justice.” Havrum v. United States, 204
F.3d 815, 819 (8th Cir. 2000) (citing Brown v. Sullivan, 916 F.2d 492,
495 (9th Cir. 1990)). The EAJA’s “not substantially justified” standard is less
stringent than the bad faith required for punitive damages. Here, the
Secretary’s insistence on an overbroad imminent danger order during
pre-litigation through settlement does not rise to the level of “vexatious,
wanton, or oppressive” conduct necessary for a finding of bad faith. Zahareas,
374 F.3d at 630 (citing Brown, 916 F.2d at 495).

Finally, the undersigned is not persuaded
that awarding EAJA fees would deter unreasonable government action. In the
circumstances of this case, I find more compelling the Secretary’s argument
that allowing Signature to recover fees for which it has already been reimbursed
by Jarrell’s Branch would be an impermissible windfall for Signature for
pursuing an overly broad imminent danger order to voluntary settlement prior to
any litigation. Jeroski, 697 F.3d at 656. The stated Congressional
intent behind the EAJA is ameliorative, not punitive. EAJA was enacted to
remove the financial disincentives that small businesses face when litigating
against the government and to concurrently “impose the risk of a fee award that
must be paid by the agency as an incentive to police their enforcement and
litigation activities so that only well-founded cases would be litigated.” See
329.73 Acres of Land in Grenada & Yalobusha Counties, 704 F.2d at 802. Those
purposes are not advanced here.

Accordingly, I find that Signature
is not eligible to recover EAJA fees related to the underlying contest
proceeding and is therefore not entitled to the full $80,004.37 requested in
its EAJA application. The Fourth Circuit standard in Paisley, which I
find most instructive here, does not permit an award of fees to Signature
because Signature received full reimbursement for the contest proceeding from
Jarrell’s Branch and any additional award would not advance the primary purpose
of the EAJA to diminish the deterrent effect of defending against MSHA’s action.
See Paisley, 957 F.2d at 1164. When initiating its underlying
contest proceeding, Signature knew that Jarrell’s Branch had a contractual
obligation to reimburse Signature for any costs it might incur, except for
intentional misconduct or gross negligence attributable to Signature or its
agents. See Resp’t Ex. 21, ¶ 18. Therefore, since no intentional
misconduct or gross negligence has been alleged by MSHA, Signature suffered no
deterrent effect from the costs of litigation, which might have dissuaded Signature
from defending against the breadth of imminent danger Order No. 8126005 to
voluntary settlement short of actual litigation.

2.      Post-Bankruptcy
Fees

The Fourth Circuit’s holding in Paisley
referred explicitly to a legally-enforceable right to indemnification from solvent
third-parties. Paisley, 957 F.2d at 1164.  It is arguable that Paisley
does not apply after the third-party indemnifier becomes insolvent. Accordingly,
after Patriot’s July 2012 bankruptcy filing, the Eighth Circuit’s decision in Securities
& Exchange Commission v. Zahareas, 374 F.3d 624 (8th Cir. 2004), is
instructive because it addresses the issue of reimbursement of EAJA fees post-bankruptcy.

Zahareas involved a prevailing
party whose employer agreed to pay his attorneys’ fees in the underlying
litigation. Prior to doing so, however, the corporation filed for bankruptcy. The
Eighth Circuit found that since the obligation to pay the attorneys’ fees
passed to the prevailing party upon the corporation’s dissolution, the
prevailing party had incurred the attorneys’ fees for the purposes of the EAJA.
Zahareas, 374 F.3d at 631. Signature argues that like the respondent in Zahareas,
it has incurred fees in spite of Jarrell’s Branch’s contractual obligation to
reimburse it for fees. Signature’s Mot. Summ. J. 17.

I disagree. A key factor in Zahareas
was that the employer’s bankruptcy prevented fulfillment of its obligation to
pay respondent’s attorney fees, and respondent then became responsible for
payment. Zahareas, 374 F.3d at 631. That is clearly not the case here. Prior
to Patriot’s bankruptcy, Jarrell’s Branch reimbursed Signature for all the fees
and expenses incurred in the contest proceeding regarding Order No. 8126005 and
part of the fees incurred in the EAJA application. See supra, note 6. Thus,
Patriot’s bankruptcy had no effect on Jarrell’s Branch’s fulfillment of its
contractual obligation to reimburse Signature for fees related to the underlying
contest proceeding and the pre-bankruptcy EAJA fees.[17]
Regarding the outstanding $40,214.78 related to Signature’s EAJA action after
Patriot’s July 9, 2012 bankruptcy, Signature and Patriot entered into a
Settlement and Release Agreement that resolved Signature’s allowed claims in
the amount of $164,687 (Exhibit B) and released Patriot from any further
liability.[18]

Furthermore, the undersigned finds
that Signature is not entitled to reimbursement for post-bankruptcy fees concerning
pursuit of the EAJA litigation because Signature was not entitled to
reimbursement for EAJA fees for the underlying contest proceeding. That is, but
for the contest proceeding for which EAJA fees have been denied, additional
fees for pursuing the EAJA litigation would not have been incurred. In short, a
party cannot obtain EAJA fees for pursuing an EAJA application when it is not
entitled to EAJA fees for the underlying action on the merits.  

A.    Alternatively, Special
Circumstances Warrant Denial of EAJA Fees After Patriot’s Bankruptcy

Alternatively, the undersigned
finds that even if un-reimbursed fees for pursuing the EAJA litigation were
incurred by Signature within the meaning of the statute, special
circumstances make an EAJA award unjust. As noted, EAJA provides for the award
of attorneys’ fees and other expenses to a prevailing party against the United
States or an agency thereof, unless the position of the government was
substantially justified or that special circumstances make an award unjust.
5 U.S.C. § 504(a)(1) (emphasis added); see also 29 C.F.R
§ 2704.100. The undersigned finds in the alternative that special circumstances
make an award of any un-reimbursed EAJA fees incurred by Signature after
Patriot’s bankruptcy unjust.

During the additional discovery
conducted after my August 30, 2014 Decision and Order, Signature’s counsel
produced a redacted copy of the Contract Mining Agreement between Signature and
Jarrell’s Branch. The redacted portions included Jarrell’s Branch’s obligation
to reimburse Signature for certain fees and costs incurred in Commission
proceedings. The Secretary subsequently found an un-redacted copy of the
Agreement on the Patriot Coal bankruptcy website, which had been filed on July
31, 2013, in support of Signature’s bankruptcy claims against Jarrell’s Branch.[19]
Prior to finding the un-redacted copy, the Secretary had been unaware of
Jarrell’s Branch’s reimbursement obligation. After the Secretary notified
Signature’s counsel of his discovery, Signature’s counsel admitted that
Signature had been partially reimbursed for attorneys’ fees and costs. Secretary’s Mot. Summ. J. 10, n.6.

Signature
argues that counsel proceeded in good faith by redacting confidential business
information from the contract. Signature further argues that Paragraph 34 of
the Contract Mining Agreement requires prior consent of the parties or a court
order to disclose confidential material, and that Signature would have been
subject to a breach of contract claim had it produced the un-redacted content
without a court order compelling production.[20]
Signature also argues that the headings of the redacted paragraphs 17, 18, and
20 were left intact to allow the Secretary to evaluate the nature of the
redacted material and file a motion to compel if he so chose. Signature’s Resp.
to Secretary’s Mot. Summ. J. 4.

I
find Signature’s arguments unconvincing. As noted, the un-redacted Contract
Mining Agreement became a public record on July 31, 2013 when Signature filed
it in support of its bankruptcy claim. Cf., Foster-Miller, Inc., v.
Babcock & Wilcox Canada, 210 F.3d 1, 10 (1st Cir. 2000) (jury
instructions providing that “[i]nformation ... readily known or knowable to the
interest of the public cannot ... be made confidential simply by slapping it
with a restrictive label”).  In these circumstances, I find Signature’s
confidentiality arguments disingenuous and waived by public revelation.

Further,
even assuming no waiver of Signature’s confidentiality claim by public
disclosure, the undersigned is not persuaded that the headings of the redacted
paragraphs were sufficient to allow the Secretary a fair opportunity to
evaluate the nature or potential relevancy of the redacted materials. For
example, un-redacted paragraph 16 is titled “Indemnification,” redacted
paragraph 17 is titled “Fines or Penalties,” redacted paragraph 18 is titled “MSHA
and WVOMHST Identification Numbers Number: MSHA and WVOMHST Assessments,” and
redacted paragraph 20 is titled “Compensation.” Despite un-redacted paragraph
16’s title of “Indemnification,” it is redacted paragraph 17 that requires
Jarrell’s Branch to reimburse Signature for the penalties and assessments at issue,
and it is redacted paragraph 18 that requires Jarrell’s Branch to reimburse
Signature for reasonable attorneys’ fees and costs incurred in the contest
proceeding. Since no reimbursement obligations regarding MSHA penalties and
attorneys’ fees were referenced in the paragraph headed “Indemnification,” the
Secretary’s review of un-redacted paragraph 16 and the titles of redacted
paragraphs 17 and 18 could reasonably have led the Secretary to believe that no
such obligations existed.  Redacted paragraph 20, titled “Compensation,”
contained the terms under which Signature was entitled to bonus payments from
Jarrell’s Branch for Signature’s safe operation of the mine. Resp’t Ex. 21, ¶

20. In these circumstances, I conclude that the Secretary had justifiable
    grounds for failing to file a motion to compel discovery under Commission
    Procedural Rule 59.[21]

In short, the redactions of
paragraphs 17, 18, and 20 contained contractual obligations between Signature
and Jarrell’s Branch that were central to the Secretary’s case against
Signature’s application for EAJA fees. Signature
should have realized that these contractual obligations were responsive to the
Secretary’s discovery request and relevant to the remaining issues as defined
in my August 30, 2013, Decision and Order, as amended on December 6, 2013. Rather
than redacting allegedly confidential but relevant facts for fear of breaching
the terms of the Agreement, the more appropriate course for Signature would
have been to work with the Secretary toward a mutually agreeable accommodation
that would protect the confidentiality of the purportedly sensitive information,
after disclosure.  See Fed. R. Civ. Proc. 26(c)(1)(G); cf., Pennsylvania
Power Co., 301 NLRB 1104, 1105-06 (citing Minnesota Mining & Mfg.,
Co., 261 NLRB 27 (1982), enfd. 711 F.2d 348 (D.C. Cir. 1983)). If
Signature’s counsel and the Secretary had been unable to reach such an
accommodation, Signature could have filed a motion for a protective order, a motion
for in camera review, or a motion to file the allegedly confidential
information under seal.[22]
Rather, Signature chose to hide the ball. 

In these circumstances, the
undersigned finds in the alternative that Signature’s failure to disclose the
nature of its contractual reimbursement agreement with Jarrell’s Branch during
discovery constitutes special circumstances that make an EAJA award for unreimbursed
fees and costs after Patriot’s bankruptcy unjust. See 5 U.S.C. §
504(a)(1).

VI.       Conclusion and Order

Having reviewed the record, cross motions,
and supporting briefs, the undersigned finds this matter appropriate for
summary decision. The undersigned finds as a matter of law that there are no
material facts that preclude summary judgment from being entered against
Signature. Having evaluated the arguments presented by each party and having
applied the relevant law, the undersigned finds that the Secretary has met his
burden of proof and is entitled to summary disposition denying any award of
EAJA fees. 

WHEREFORE,

Pursuant to the stipulations agreed
to by Signature and the Secretary in their Cross Motions for Summary Judgment,
Signature’s Motion to Supplement the Record is GRANTED.

For the reasons set forth above,
Signature’s Motion for Summary Judgment is DENIED. The Secretary’s
Motion for Summary Judgment is GRANTED, and it is ORDERED that
each party bear their own costs.

/s/
Thomas P. McCarthy

Thomas
P. McCarthy

Administrative
Law Judge

Distribution:

Karen Barefield, Esq., Office
of the Solicitor, U.S. Department of Labor, 1100 Wilson Blvd., 22nd
Floor West, Arlington, VA 22209-2247

David Hardy, Esq., &
Christopher Pence, Esq., Hardy Pence, PLLC, 500 Lee Street East, Suite 701,
Charleston, WV 25329

/ccc

[1] During a
conference call with the parties on November 21, 2013, Signature informed the
undersigned that a clarification of my August 30, 2013, Decision and Order was
warranted and Signature conceded that its application for fees was limited to Section
103(k) Order No. 7257539 and Section 107(a) Order No. 8126005. The
Secretary then filed a Motion for Modification on November 25, 2013. An Amended Decision and Order was issued on December
6, 2013, which stated that Signature was only eligible to be awarded fees and
costs related to Section 107(a) Order No. 8126005. While the Secretary may have
lacked substantial justification for enforcing 107(a) Order No. 8139507, Signature did not apply for
fees related to that order within thirty days of the Commission’s final
disposition of the underlying proceeding, Docket No. WEVA 2011-2299, and thus is
ineligible to be awarded fees incurred in its defense of that Order. 29 C.F.R. § 2704.206
(2013).

[2]
See Amended
Proof of Claim No. 1394, at Part 9, In re Patriot Coal Corp., et al.,
No. 12-51502-659 (Bankr. E.D. Mo. July 31, 2013), available at https://cert.gardencitygroup.com/pcx/readPdf/3839_020101.pdf?secondTime=yes&fileType=rmi&.value=101.

[3]
The parties have stipulated to Jarrell’s
Branch’s status as a Patriot Coal subsidiary and to Patriot’s net worth as of
August 29, 2011. The undersigned takes judicial notice that Patriot Coal’s
Joint Plan of Reorganization was confirmed by the United States Bankruptcy
Court, Eastern District of Missouri, Eastern Division on December 18, 2013 and
went into effect that same day. In re Patriot Coal Corp., et al., No.
12-51502-659 (Bankr. E.D. Mo. Dec. 18, 2013), available at http://patriotcaseinformation.com/pdflib/Dkt_No._5169A.pdf. Additional information on Patriot Coal’s bankruptcy
proceedings is available at patriotcaseinformation.com.

[4] Paragraph 17 of the Contract Mining Agreement states:

For all assessments, penalties, or fines imposed by
federal, state, or local agency for any local, state, or federal law or
regulation, except those issued for safety and environmental violations as set
for in Articles 18 and 26 of this Agreement, which arise out of the contractors
or its Labor Contractor’s operation at the Mine, Owner shall reimburse
Contractor for the payment of such assessments, penalties, or fines; provided
that Owner shall not reimburse Contractor for assessments, penalties or fines
arising from Contractor’s or its Labor Contractor’s intentional misconduct or
gross negligence.

Resp’t Ex. 21. Paragraph
18, in relevant part, provides that “Owner agrees to pay Contractor for the
cost of penalty assessments received by Contractor on citations issued by
MSHA . . . for Contractor’s or it’s Labor Contractor’s
alleged violation of federal or state mandatory health and safety standards,”
except for violations arising under sections 104(d), 104(b)(2), and 104(c) of
the Mine Act. See 30 U.S.C §§ 804(d), 804(b)(2), 820(c) (2013). In addition,
“Owner shall pay Contractor for the reasonable attorneys’ fees and costs
incurred by Contractor in contesting penalty assessments and/or citations. Owner
considers reasonable attorneys’ fees to be those that are based on an hourly
rate not in excess of $275 per hour.”  Id.

[5] Paragraph 18 of the Contract Mining Agreement states
that “Owner shall continue to reimburse Contractor for the cost of penalty
assessments and reasonable attorneys’ fees incurred by Contractor after the
cancellation, expiration, or termination of this agreement if the citation was
issued prior to the effective termination date.” Resp’t Ex. 21.

[6]
The undersigned takes administrative notice of
Signature’s bankruptcy claims against Patriot. In its Amended Proof of Claim
No. 1394, Signature included the following Explanation of Proof of Claim:

At the time of the bankruptcy filing, Patriot assured
Signature Mining that it would continue to pay the fines and defense costs
associated with MSHA violations as they arose post-bankruptcy. Signature
originally filed two proofs of claim representing expenses that arose prior to
the time of the bankruptcy filing. Signature was operating under the assumption
that Patriot would reimburse Signature for costs and fees that were continuing
to accrue post-bankruptcy. Subsequently, Patriot informed Signature that
Patriot does not intend to pay the fines and defense costs as they arise.

Amended Proof of Claim
No. 1394, at Part 2, In re Patriot Coal Corp., et al., No. 12-51502-659
(Bankr. E.D. Mo. July 31, 2013), available at https://cert.gardencitygroup.com/pcx/readPdf/3839_0201.pdf?secondTime=yes&fileType=rmi&.value=1. On January 16, 2014, Signature and Patriot entered
into a Settlement and Release Agreement that resolved Signature’s claims in the
amount of $164,687 (Exhibit B) and released Patriot from any further liability.
See Settlement and Release Agreement, In re Patriot Coal Corp., et
al., No. 12-51502-659 (Bankr. E.D. Mo. January 16, 2014), available at https://cert.gardencitygroup.com/pcx/fs/viewreconPdf?fileName=Signature%20Mining.

[7]
Although the Commission’s Procedural Rules do not directly address cross-motions
for summary judgment, Rule 1(b) provides that “on any procedural questions not
regulated by the [Mine] Act, these Procedural Rules, or the Administrative
Procedure Act, the Commission and its Judges shall be guided so far as
practicable by the Federal Rules of Civil Procedure and the Federal Rules of
Appellate Procedure.” 29 C.F.R. § 2700.1(b) (2014). Motions for summary
judgment are governed by Rule 56 of the Federal Rules of Civil Procedure, and
the jurisprudence regarding standards of review for cross-motions for summary
judgments is well-developed. See e.g., Wright et al., supra, §§
2720, 2725 (3d ed. 1998).

[8] Summary judgment may be particularly appropriate,
however, where the parties have stipulated to the facts. See e.g., Trevino
v. Yamaha Motor Corp., 882 F.2d 182 (5th Cir. 1989); Estate of Reddert
v. United States, 925 F. Supp. 261 (D.C.N.J 1996).

[9] See 29 C.F.R. § 2704.106(a)
(2014); see also 28 U.S.C. § 2412(d)(2)(A).

[10] The American Rule generally provides that each party
pays its own attorneys’ fees, but allows an award of fees against a party who
has acted under common law in bad faith or to preserve a common fund, or when a
statute, such as EAJA, provides that fees may be awarded.  See generally
Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240 (1975)
(discussing application of the American rule doctrine in federal courts).

[11]
Jeroski v. FMSHRC, 697 F.3d 651 (7th Cir. 2012), comes close, but that case
turned on the “prevailing party” issue. Id. at 655. The Seventh Circuit affirmed
the final order of the Commission judge dismissing the contest proceeding,
without prejudice, because the MSHA-targeted janitorial contractor, whose
attorney fees were paid by a cement plant, was not a prevailing party under
EAJA, but suggested in dicta that contractor had not incurred fees where it
would not have been deterred from contesting MSHA action where the cement
company financed the litigation and the contractor would receive a windfall
from an EAJA award. Id. at 655-56.

[12]
See
30 U.S.C. § 816(a) (2013) (“Any person adversely affected or aggrieved by
an order of the Commission . . . may obtain review
. . . in any United States court of appeals for the circuit in which
the violation is alleged to have occurred or in the United States Court of
Appeals for the District of Columbia Circuit.”). The D.C. Circuit has not
addressed the particular issue of whether prevailing parties indemnified by
third parties “incur” fees under the EAJA.

[13]
The circuits have generally recognized an
exception to the requirement that a legal liability for attorneys' fees must be
incurred for an EAJA award where the prevailing party is represented by counsel
appearing pro bono or by a legal services organization. Cornella v.
Schweiker, 728 F.2d 978, 987 (8th Cir. 1984). For example in Cornella,
the Eight Circuit relied in part on legislative history suggesting that awards
to pro bono organizations were contemplated by Congress. Id. (quoting
H.R. Rep. No. 1418, 96th Cong., 2d Sess. 15, reprinted in 1980 U.S.C.C.A.N.
4994). The court held that where a pro bono attorney “forgives” a fee to a
client unable to afford legal expenses, that client is eligible for an EAJA
award on the basis of that fee arrangement.  Other circuits have reached a
similar result. See, e.g., American Ass’n of Retired Persons v. E.E.O.C., 873
F.2d 402, 406 (D.C. Cir. 1989); Watford v. Heckler, 765 F.2d 1562, 1567
n. 6 (11th Cir. 1985). Similarly, an EAJA award has been found
appropriate where the prevailing party is an attorney appearing pro se. Jones
v. Lujan, 883 F.2d 1031 (D.C. Cir. 1989).

[14]
The issue in Paisley was whether the
prevailing parties, former Boeing employees, had “incurred” fees for the purposes
of the EAJA when a Delaware state statute required Boeing to indemnify them if
they successfully defended against the underlying government suit. Since Boeing
paid the former employees an advance to cover the fees, the prevailing parties
argued that the indemnification had actually been a “mere” possibility, because
Boeing could have, in theory, demanded repayment from the employees in the
event that they lost the suit. The Fourth Circuit, however, rejected that
argument as inconsistent with the purpose of EAJA and found the prevailing
parties to be ineligible for fees. 957 F.2d at 1164.  

[15]
See Devine v. Nat’l Treasury Employees Union, 805 F.2d 384 (Fed. Cir. 1986); Goodrich v. Dept.
of the Navy, 733 F.2d 1578 (Fed. Cir. 1984) (construing 5 U.S.C. §
7701(g)(1)); see also Nat’l Treasury Employees Union v. Dept. of Treasury,
656 F.2d 848 (D.C. Cir. 1981) (construing 5 U.S.C. § 552a(g)(3)(B) (1976)).

[16]
The Contract Mining Agreement states that the parties are contracting “for and
in consideration of undertakings and agreements set forth, and other good and
valuable consideration not fully set forth herein, the sufficiency of which is
acknowledged.” Resp’t Ex. 21, at 1. Under the Agreement, Signature was
generally responsible for mining and transporting the coal to the preparation
facility, maintaining a comprehensive general liability insurance policy, and
obtaining the required state and federal operator identification numbers.  Resp’t
Ex. 21, at ¶ 1, ¶ 16, ¶ 18.  In exchange, Jarrell’s Branch retained title to
the coal mined by Signature, covered all operating costs of the mine (including
certain penalty assessments and attorneys’ fees and costs incurred in
Commission proceedings), and granted Signature the use of the equipment and
premises to mine the coal. Resp’t Ex. 21, at ¶ 4, ¶ 7, ¶ 18, ¶ 3.  Based
on these contractual provisions, Signature argues that it “clearly paid
consideration in the form of reduced compensation and the risk of bankruptcy in
exchange for Jarrell’s Branch’s agreement to pay the costs of operating the
mine.” Signature’s Mot. Summ. J. 14.

[17] Signature filed its EAJA application on January 9,
2012, and Patriot filed for bankruptcy on July 19, 2012. As previously noted,
Jarrell’s Branch reimbursed Signature for all contest proceeding fees and
costs and part of its EAJA litigation costs, prior to Patriot’s bankruptcy
filing.

[18]
See Settlement and Release Agreement, In re
Patriot Coal Corp., et al., No. 12-51502-659 (Bankr. E.D. Mo. January 16,
2014), available at
https://cert.gardencitygroup.com/pcx/fs/viewreconPdf?fileName=Signature%20Mining.

[19] See Amended Proof of Claim No. 1394, supra
notes 2 and 6. Filings in bankruptcy proceedings are public records open for examination.
See 11 U.S.C. § 107(a) (2013). The Contract Mining Agreement became a
public record on July 31, 2013 when Signature filed it in support of its
bankruptcy claim. See Amended Proof of Claim No. 1394, supra note
2.

[20] Paragraph 34 states that

Owner and Contractor agree with each other that both
shall treat . . . information relating to the other party
or Owner’s and Contractor’s business operations as confidential and shall not
divulge, transmit, or otherwise disclose any such information received without
first obtaining prior written consent of the other party unless such
information is required by any governmental agency or court of law pursuant to
due process of law.

Resp’t Ex. 21.

[21] Commission Procedural Rule 59 governs discovery
disputes:

Upon the failure of any person, including a party, to
respond to a discovery request or upon an objection to such a request, the
party seeking discovery may file a motion with the Judge requesting an
order compelling discovery. If any person, including a party, fails to comply
with an order compelling discovery, the Judge may make such orders with regard
to the failure as are just and appropriate, including deeming as established
the matters sought to be discovered or dismissing the proceeding in favor of the
party seeking discovery. For good cause shown the Judge may excuse an objecting
party from complying with the request.

29 C.F.R. §2700.59
(2013) (emphasis added).

[22] Signature’s counsel inadvertently disclosed
Signature’s balance sheet, which contains confidential business information, as
Exhibit 5 attached to Signature’s Application for Fees and Costs under the
EAJA. The balance sheet thus became part of the public record in this proceeding.
Signature’s counsel moved to seal Exhibit 5, and the undersigned granted
that motion. Signature’s counsel is therefore well aware of this tribunal’s
ability and willingness to protect from public disclosure alleged confidential,
albeit relevant documents.  See Signature’s Mot. Seal.