Secretary of Labor v. Lone Mountain Processing, Inc.

Plain-English summary

After a D.C. Circuit remand, the Commission reconsidered Lone Mountain's requests to reopen three final penalty assessments totaling roughly $496,000. The operator had contested 11 underlying citations, but three times claimed that later penalty assessments were misplaced while moving between offices. It did not implement promised fixes, waited months after delinquency notices to seek relief, and did not answer the Secretary's good-faith concerns. The Commission held that a citation contest is evidence of intent but does not excuse a separate missed penalty contest when stronger factors show unreliable procedures and unexplained delay. It again denied all three reopening motions.

Decision snapshot

• Governing provisions: 30 U.S.C. §§ 815(a) and 815(d); 29 C.F.R. §§ 2700.20 and 2700.21
• Outcome: All three motions to reopen final penalty assessments were denied again on remand from the D.C. Circuit.
• Key point: Contesting an underlying citation is only one reopening factor and cannot overcome repeated paperwork failures, broken remedial assurances, unexplained delay, and unaddressed good-faith concerns.

Full text (FMSHRC public release)

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MicrosoftInternetExplorer4

FEDERAL MINE SAFETY AND HEALTH REVIEW
COMMISSION

1331
PENNSYLVANIA AVENUE, NW, SUITE 520N

WASHINGTON, D.C. 20004‑1710

November 22, 2013

SECRETARY OF LABOR,

MINE SAFETY AND HEALTH

ADMINISTRATION (MSHA)

v.

LONE MOUNTAIN PROCESSING,
INC.

Docket Nos.   KENT 2011-1153

KENT 2011-1154

KENT 2011-1530

BEFORE: Jordan, Chairman; Young, Cohen, Nakamura, and
Althen, Commissioners

DECISION

BY THE COMMISSION:

These civil penalty proceedings
arise under the Federal Mine Safety and Health Act of 1977, 30 U.S.C. ' 801 et
seq. (2006) (“Mine Act”). These cases come to the Commission on remand from the
United States Court of Appeals for the District of Columbia Circuit. Lone Mountain Processing, Inc. v. Sec’y
of Labor, 709 F.3d 1161 (D.C. Cir. 2013). The Court directed the
Commission to review the Commission’s denial of three motions filed by Lone
Mountain Processing, Inc. to reopen the penalty assessment cases, in light of
prior Commission decisions that an operator’s contest of an underlying citation
demonstrates an intent to contest the penalty. Id. at 1163. Consistent with the Court’s mandate and
our precedent, we again deny all three motions to reopen.

I.

Factual Background

In June 2010, the Mine Safety and
Health Administration (“MSHA”) issued 30 citations to Lone Mountain for a range
of violations in connection with a fatality that had occurred at the Clover
Fork No. 1 Mine. In July 2010, Lone Mountain filed timely pre-penalty notices
of contest with the Commission, challenging 11 of the 30 citations.

On August 24, 2010, Lone Mountain
received a proposed penalty assessment in the amount of $21,840. Because Lone
Mountain did not contest the proposed assessment, the assessment became a final
order of the Commission on September 23, 2010, pursuant to section 105(a) of
the Act. 30 U.S.C. ' 815(a). In December 2010, MSHA
mailed a notice of delinquency for nonpayment of the final penalty amount.

On January 18, 2011, Lone Mountain
received a second proposed assessment in the amount of $212,054. Because Lone
Mountain did not contest the second proposed assessment, it became a final
order on February 17, 2011. In April 2011, MSHA mailed Lone Mountain a notice of
delinquency for nonpayment of this second final penalty amount.

On June 6, 2011, Lone Mountain
filed two motions requesting that the two final orders be reopened. Lone
Mountain’s motions included an affidavit from its safety manager, asserting
that on two separate occasions in August 2010 and January 2011, the proposed
assessments were misplaced by Lone Mountain in the process of forwarding them
from one of its offices to another. The motions did not explain, or even
acknowledge, that the same failure had been repeated five months apart, or that
it took the operator nine months and four months, respectively, to file these
motions to reopen after the assessments had become final orders of the
Commission. The motions also failed to address the fact that MSHA had mailed
the operator delinquency notices in December 2010 (a month before the second
proposed assessment was delivered) and April 2011. In his affidavit, Lone
Mountain’s safety manager assured the Commission that in order to avoid a
repeat of this error, he would henceforth travel to
the other office himself to collect the proposed assessments. Aff. at 3.

The Secretary opposed the motions
to reopen and argued, among other things, that the fatality and the large
penalty amounts should have alerted the operator to the consequences of its
inadequate internal procedures. The Secretary questioned whether the operator
was acting in good faith, in light of its delinquency record and its repeated
disregard of proposed penalty assessments.

In September 2011, while the first
two motions were pending before the Commission, Lone Mountain filed a third
motion to reopen another proposed assessment. This proposed assessment had been
delivered in July 2011, a month after the previous motions to reopen were
filed. Unlike the prior motions, Lone Mountain had not timely contested the
underlying citations resulting in this third assessment.[1] Nonetheless,
it contended that it was important to reopen the final order because the
penalty amount was $262,500.

Although the third motion mentioned
the two previous motions pending before the Commission, Lone Mountain provided
the same excuse for failing to timely contest the proposed assessment - another
affidavit by the same safety manager, again claiming that the proposed
assessment had been misplaced during delivery between the operator’s two
offices. There was no reference in the motion or the affidavit to the safety
manager’s prior assurances that he would collect the proposed assessments
himself. Nor was there any indication of an attempt to correct the asserted
repeated failures in the internal mail system and the lack of any procedures to
follow up on proposed assessments and file timely contests.

After consideration of all the
facts and arguments, we concluded that Lone Mountain had failed to establish
entitlement to extraordinary relief. We found that the operator had been put on
notice of its obligations but had neglected to fix the problems with its
internal procedures. Because the operator made no showing of good cause or
exceptional circumstances warranting reopening, we denied its motions to
reopen. Lone Mountain Processing, Inc., 33 FMSHRC 2373,
2376 (Oct. 2011).

Lone Mountain filed a petition for
review with the D.C. Circuit, seeking review of the Commission’s October 11,
2011 order. The Court subsequently remanded the case to the Commission for an
explanation of whether our denial of the motions was consistent with Commission
precedent that a contest of the underlying citation evidences an intent to contest the penalty. Lone Mountain, 709 F.3d at 1163-64.

II.

Legal Principles
Applicable to Motions to Reopen Final Penalty Assessments

Section 105(d) of the Mine Act
allows operators to challenge a citation or order within 30 days of receipt
regardless of whether a proposed penalty assessment has been issued. 30 U.S.C. ' 815(d). In accordance with the statute,
Commission Procedural Rule 20 permits operators to contest a citation within 30
days of receipt, before the Secretary of Labor issues a proposed assessment. 29 C.F.R. ' 2700.20.

Separately, under section 105(a) of
the Mine Act, the Secretary must notify a mine operator of the proposed civil
penalty for the issuance of any citation or order. 30 U.S.C. '
815(a). In turn, an operator who wishes to contest a proposed penalty
must notify the Secretary no later than 30 days after receiving the proposed
penalty assessment. If the operator fails to notify the Secretary within the
30-day period, the proposed penalty assessment becomes a final order of the
Commission by operation of the statute. Id. Commission Procedural Rule
21 explicitly states that the filing of a notice of contest of an underlying
citation does not constitute a challenge to a subsequently issued
proposed penalty assessment, which must be filed as a separate notice of
contest. 29 C.F.R. ' 2700.21; see Marfork Coal Co.,
29 FMSHRC 626, 636 (Aug. 2007).[2]

We have held that in appropriate
circumstances, we possess jurisdiction to reopen uncontested assessments that
have become final Commission orders under section 105(a). Jim
Walter Res., Inc., 15 FMSHRC 782, 786-89 (May
1993) (“JWR”). In
evaluating requests to reopen final section 105(a) orders, the Commission finds
guidance in Rule 60(b) of the Federal Rules of Civil Procedure under which a
party may be relieved from a final order of the Commission upon a showing of
mistake, inadvertence, surprise, excusable neglect, or other reason justifying
relief. See 29 C.F.R. ' 2700.1(b) (“the Commission and its Judges shall
be guided so far as practicable by the Federal Rules of Civil Procedure”); JWR,
15 FMSHRC at 787.

Due to the extraordinary nature of
reopening a penalty that has become final, the operator has the burden of
showing that it is entitled to such relief, through a detailed explanation of
its failure to timely contest the penalty and any delays in filing for
reopening:

An operator seeking
to reopen a proceeding after a final order is effective bears the burden of
establishing an entitlement to extraordinary relief. At a minimum, the
applicant for such relief must provide all known details, including relevant
dates and persons involved, and a clear explanation that accounts, to the best
of the operator's knowledge, for the failure to submit a timely response and
for any delays in seeking relief once the operator became aware of the
delinquency or failure. . . .

Higgins Stone Co., 32 FMSHRC 33, 34 (Jan. 2010).

In reviewing an operator’s
explanation, we consider the entire range of factors relevant to determining
mistake, inadvertence, surprise, excusable neglect, or other good faith reason
for reopening. No precise formula exists for weighing the factors, and the
analysis is conducted on a case-by-case basis. However, key factors are readily
identifiable.[3]

We have repeatedly and
unequivocally held that a failure to contest a proposed assessment as a result
of an inadequate or unreliable internal processing system does not establish
grounds for reopening an assessment. Oak Grove Res., LLC, 33 FMSHRC 103,
104 (Feb. 2011); Double Bonus Coal Co., 32 FMSHRC 1155, 1156 (Sept.
2010); Highland Mining Co., 31 FMSHRC 1313, 1315 (Nov. 2009);
Pinnacle Mining Co., 30 FMSHRC 1066, 1067 (Dec. 2008); Pinnacle Mining
Co., 30 FMSHRC 1061, 1062 (Dec. 2008).

Further, we have emphasized the
importance of the operator’s explanation of the time it took to file for
reopening after receipt of a notice of delinquency. In Highland Mining Co.,
the Commission advised operators:

In the future, to
save time and conserve its resources, the Commission will ordinarily analyze the
question of whether the request to reopen was filed in a reasonable time in the
following manner. Motions to reopen received within 30 days of an operator’s
receipt of its first notice from MSHA that it has failed to timely file a
notice of contest will presumptively be considered as having been filed within
a reasonable amount of time.

Motions to reopen
filed more than 30 days after receipt of such information from MSHA should
include an explanation for why the operator waited so long to file for reopening.
The lack of such an explanation is grounds for the Commission to deny the
motion.

31 FMSHRC at 1316-17.

Of course, the good faith of the
operator’s actions is also a factor. Pioneer Inv. Servs.
Co. v. Brunswick Associated Ltd. P’ship, 507 U.S.
380, 395 (1993); FC Hemisphere Assocs., LLC v.
Democratic Republic of Congo, 447 F.3d 835, 838 (D.C. Cir. 2006); Oak
Grove Res. LLC, 33 FMSHRC 1130, 1132 (June 2011). An operator’s detailed
recounting of the circumstances should demonstrate that the operator acted at
all times in good faith and without any purpose of evasion or delay, taking
into account the nature of the violation, the amount of the penalty, the
circumstances of receipt and processing of the notice, whether errors were
within the operator’s control, and the reasons for any delay in filing the
motion itself, especially after notice of a delinquency.

We also consider MSHA’s
acquiescence or opposition to the motion. We do this not simply to ascertain
MSHA’s position, but also to determine if MSHA’s response contributes to the
analysis of the multitude of factors related to the operator’s failure to
contest the penalty in a timely manner.

The Commission also takes into
account, as we did in reaching our initial decision, that the filing of a
contest of an underlying citation is an indication of an initial intent to
contest the subsequent proposed assessment. E.g., Oldcastle Stone Prods., 31 FMSHRC
1103, 1104 (Oct. 2009). The Commission has not held that a challenge to the
citation creates a presumption, rebuttable or irrebuttable,
of a right to reopen after failing to contest the penalty. The filing of a
challenge to the underlying citation is a factor and, indeed, in many cases may
be an important factor. However, all factors relevant to reopening are weighed.
The challenging of a citation does not inevitably excuse the failure to contest
the penalty.

III.

Disposition

In accordance with the Court’s
remand, the Commission has again considered Lone Mountain’s motions to reopen,
in light of Lone Mountain’s contest of 11 citations issued in June 2010, that
were among the citations that were assessed in the proposed assessments issued
in August 2010 and January 2011.[4]
The filing of those 11 notices of contest is clearly outweighed by the
overwhelming evidence establishing that, in accordance with the Commission’s
precedent, the operator in this case should not be relieved of the
responsibility for the final orders imposed following its default.

First, as stated above, a primary
factor considered by the Commission is whether the operator’s failure to file a
timely contest resulted from “inadequate or unreliable office procedures.” Our
previous decision rested on our affirmative finding that Lone Mountain’s
failures “represent[ed] an inadequate or unreliable
internal processing system.” 33 FMSHRC at 2375. The identical problem assertedly occurred three separate times in less than a
year, and Lone Mountain, despite its safety manager’s assurances, took no
effective action to correct its internal processing system deficiencies. Its
failure to provide a reliable system was held to be dispositive.

In support of its motion to reopen
Docket No. KENT 2011-1153, the operator submitted the affidavit of Lone
Mountain’s Safety Manager, Wilburn Howard, dated June 2, 2011 in which Mr.
Howard stated in part:

Lone Mountain received the proposed
assessments for Assessment Case Numbers 000228827 and 000243808, but the sheets
were sent to Patrick Leedy our Chief Engineer, who
then forwarded them to me by courier. Mr. Leedy and I
are located in different office buildings approximately 10 miles away. During
the delivery of these assessments they were misplaced. We are changing the
way of delivery of these assessments in which I will personally travel to our
office weekly to collect these assessment sheets to avoid a repeat of this
error. [emphasis added] 

In support of its motion to reopen
Docket No. KENT 2011-1154, the operator submitted an identical June 2, 2011
affidavit in which Mr. Howard again represented that:

We are changing the way of delivery
of these assessments in which I will personally travel to our office weekly to
collect these assessment sheets to avoid a repeat of this error. [emphasis added]

Approximately a month and a half after
Mr. Howard executed the above-referenced affidavits, Lone Mountain was served
on July 20, 2011 with the proposed assessment it seeks to reopen in Docket No. KENT 2011-1530. In support of its motion to reopen, the
operator submitted an affidavit from Mr. Howard dated September 15, 2011.
Despite the prior representations Mr. Howard made to this Commission that the
operator was changing its internal processing system to avoid future problems,
in the most recent affidavit Mr. Howard stated:

The proposed assessment sheet for A.C.
Number 000261203 was addressed to Patrick Leedy our
Chief engineer. According to the “Retrieve Report” provided by the Civil
Penalty Office, the assessments sheet was delivered and signed or by “S. Roddy”
on July 20, 2011. Susie Roddy is a secretary of Lone Mountain. After
signing, Ms. Roddy would have placed this information in Patrick Leedy’s mailbox, who would have then forwarded it to me by
courier. During the delivery of these assessments they were apparently
misplaced or may have been sent to the wrong location. [emphasis
added]

Clearly, the operator had taken no
action to rectify the problem. Its final affidavit, which is inconsistent with
the assurances in the two previous affidavits, undermines its credibility and
leads us to question its sincerity in making its initial assurances of
procedural reform.

Second, in addition to the fatal
defect found in its internal processing system, Lone Mountain did not explain
its failures to respond to MSHA’s delinquency letters in a timely fashion.
Under Commission precedent set forth above, an operator that fails to move to
reopen within 30 days after learning that it did not file a timely challenge to
a proposed assessment must provide sufficient explanation for the delay. In
this case, Lone Mountain waited six months and two months after receiving its
first two delinquency notices before filing its motions to reopen. Then, even
though the Secretary pointed out Lone Mountain had failed to justify those
delays, Lone Mountain never provided any further explanation. It did not simply
provide an insufficient excuse for failing to file for months after receipt of
notices of delinquency - it failed to provide any excuse at all.

Third, Lone Mountain failed to
establish that its motions to reopen were filed in good faith, a factor
specifically challenged by the Secretary in her response. The Secretary highlighted
Lone Mountain’s repeated failures to meet deadlines in this case, and its
outstanding delinquency total of approximately $550,000 (which includes the
penalties involved in the first two motions to reopen), in arguing that Lone
Mountain may not have filed the motions in good faith. Lone Mountain did not
rebut the Secretary’s argument. We have held that silence in the face of a
delinquency history with nearly identical facts militates against the grant of
extraordinary relief. Oak Grove Res., LLC, 33 FMSHRC at 1132.

It is thus apparent that the facts
and our precedent impose significant barriers to granting extraordinary relief
in this case. Against this backdrop, we now turn to the D.C. Circuit’s
admonition that we should have explained why we had ruled in some prior cases
that operators’ challenges to citations justified granting motions to reopen,
but that the contest of the citations in Lone Mountain did not warrant relief. 709 F.3d at 1164. As set forth below, those cases are
substantially distinguishable from Lone Mountain and do not support reopening
when compared to the number and weight of factors against reopening.

In Oldcastle Stone Prods.,
the operator was inexperienced with MSHA contest procedures and asserted that
it did not know it had to contest the proposed assessment in addition to
contesting the underlying citation. Oldcastle’s counsel discovered the
delinquency one month after the proposed assessment became a final order of the
Commission (before receiving any notices from MSHA) and filed a motion to
reopen within one week. 31 FMSHRC at 1104. We
determined that Oldcastle had demonstrated an intent
to contest the proposed penalty and reopened the citation. Id. at
1104-05.

Oldcastle did not involve a
defect in the operator’s internal processing of penalty assessments. Rather, it
claimed ignorance of a requirement to also contest the penalty where it
had contested the citation. In Oldcastle, we re-opened the penalty for
one citation which had been contested and refused to reopen those where no
contest had been filed, consistent with the operator’s excuse. Id. at 1104. It is also noteworthy that Oldcastle
discovered its failure on its own and acted promptly to seek reopening, unlike
the present case.

In contrast to Oldcastle, Lone
Mountain is an experienced operator that was fully aware of the procedures for
contesting proposed assessments. Lone Mountain does not argue that it was
unaware of the contest procedures; it maintains instead that it repeatedly
misplaced the critical paperwork. Unlike the instant case, Oldcastle did
not involve a deficient internal processing system, unexplained delays in
filing motions to reopen, and no response to the Secretary’s allegation of bad
faith.

The other two cases cited by the
Court - McCoy Elkhorn Coal Corp., 33 FMSHRC 1 (Jan. 2011), and Phelps
Dodge Sierrita, Inc., 24 FMSHRC 661 (July 2002) -
arose in a very different context from Lone Mountain. Both of those
cases involved inadvertent payments of proposed penalties where each operator
argued that it intended to contest the proposed assessments. Commission case
law establishes that the payment of a proposed penalty forecloses the operator
from challenging the underlying citation and the penalty itself unless the
operator can show that the payment was inadvertent. See,
e.g., Ranger Fuel Corp., 12 FMSHRC 363, 370 (Mar. 1990). Thus, the
operators’ prior challenges of the underlying citations in the two cases were
significant only because they supported the operators’ claims that the penalty
payments had been inadvertent. Because the instant case does not involve an
inadvertent payment issue, the holdings in the two cases do not apply to this
case. Likewise, neither McCoy Elkhorn nor Phelps Dodge involved
major factors such as deficient internal processing systems, unexplained delays
in filing motions to reopen, or allegations of bad faith.

In again denying Lone Mountain’s
motions to reopen, the Commission is not departing from precedent. We have
carefully considered all the facts and arguments to decide whether
extraordinary relief is warranted, including the contests of 11 of the
citations. Having done so, we find Lone Mountain’s failures to be far more
significant, including the grossly deficient internal processing procedures,
unexplained delays in filing motions to reopen after learning it had missed
deadlines through receipt of delinquency notices, and its failure to establish
that the motions were filed in good faith. The fact that Lone Mountain
challenged some of the underlying citations does not overcome its numerous
failures to file timely penalty contests and its lack of adequate explanations
of those failures. A different result is not warranted by Commission precedent
regarding contests to underlying citations.

IV.

Conclusion

For the reasons set forth above, we
again conclude that Lone Mountain has failed to establish that it should be
granted extraordinary relief because of mistake, inadvertence, excusable
neglect, or other just cause. Because of its repeated failures to meet its
obligations, its lack of adequate explanations for its delays, and its
inability to demonstrate that its motions were filed in good faith, Lone
Mountain falls far short of establishing good cause for granting relief.

Accordingly, we again deny Lone
Mountain’s motions to reopen.

/s/ Mary Lu
Jordan                   

Mary Lu Jordan, Chairman

/s/Michael G.
Young                 

Michael G. Young, Commissioner

/s/ Robert F.
Cohen, Jr.               

Robert F. Cohen, Jr., Commissioner

s/ Patrick K.
Nakamura                 

Patrick K. Nakamura, Commissioner

/s/ William I.
Althen                   

William I. Althen, Commissioner

Distribution:

Marco M. Rajkovich, Esq.

Rajkovich, Williams, Kilpatrick
& True, PLLC

3151 Beaumont Centre Circle, Suite 375

Lexington, KY 40513

Melanie J. Kilpatrick, Esq.

Rajkovich, Williams, Kilpatrick
& True, PLLC

3151 Beaumont Centre Circle, Suite 375

Lexington, KY 40513

Jerald S. Feingold, Esq.

Office of the Solicitor

U.S. Department of Labor

1100 Wilson Blvd., Room 2220

Arlington, VA  22209-2296

W. Christian Schumann, Esq.

Office of the Solicitor

U.S. Department of Labor

1100 Wilson Blvd., Room 2220

Arlington, VA  22209-2296

Melanie Garris

Office of Civil Penalty Compliance

MSHA

U.S. Dept. Of Labor

1100 Wilson Blvd., 25th Floor

Arlington, VA 22209-3939

Chief Administrative Law Judge Robert J. Lesnick

Federal Mine Safety & Health Review Commission

1331 Pennsylvania Avenue, N. W., Suite 520N

Washington, D.C. 20004-1710

[1] In its first two
motions, Lone Mountain erroneously referred to 13 previously contested
citations and orders. We clarify that two of the 13 were actually not included
in the two proposed assessments for which these motions were filed. Lone
Mountain’s third motion to reopen contained four underlying citations which
were not timely contested.

[2] MSHA’s notice of the
proposed penalty assessment specifically informs operators that filing a prior
notice of contest does not relieve them of the obligation to timely contest the
proposed assessment.

[3] The Commission has
provided guidance to operators on its website with regard to factors that will
generally be considered in determining whether to grant relief:

The Commission has
considered a number of factors in determining whether good cause exists: the
error does not reflect indifference, inattention, inadequate or unreliable
office procedures or general carelessness; the error resulted from mistakes
that the operator typically does not make; procedures to prevent, identify and
correct such mistakes have been adopted or changed, as appropriate; in cases
where receipt of the penalty assessment is an issue, the operator maintains
proper addresses with MSHA. Motions for relief must identify and explain: why a
timely contest was not filed; how and when you first discovered the failure to
timely contest the penalty and how you responded once this was discovered. . .
.

FMSHRC, Requests to Reopen,
http://fmshrc.gov/content/requests-reopen (last visited November 18, 2013).

[4] Lone Mountain did
not contest any of the four citations that were assessed a total civil penalty
of $262,500 mailed by MSHA in July 2011 and addressed
in its third motion to reopen. Therefore, the factor of a prior contest of the
underlying citations does not come into play with respect to that motion.