Secretary of Labor v. Kenamerican Resources, Inc.

Plain-English summary

MSHA proposed $4,623 for an accumulation citation and special assessments of $12,300 and $55,200 for alleged on-shift and preshift examination violations at Kenamerican's Paradise No. 9 Mine. Kenamerican asked the judge to remand the two special assessments, arguing that MSHA's unpublished General Procedures for Special Assessments were binding legislative rules adopted without Administrative Procedure Act notice and comment. Judge Thomas P. McCarthy held that the Commission had jurisdiction and that the prehearing challenge was timely, but found that the procedures preserved case-specific discretion over whether to use special assessment and what amount to propose. He treated the procedures as a nonbinding policy statement and denied reassessment, leaving the underlying merits and penalties for later adjudication.

Decision snapshot

• Underlying standards: 30 C.F.R. §§ 75.400, 75.362(b), and 75.360(g)
• Outcome: The motion to remand the two special assessments for reassessment was denied.
• Key point: MSHA's special-assessment procedures were treated as nonbinding policy because they preserved discretion and did not conclusively determine penalty amounts.

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

R.
ALEXANDER ACOSTA, SECRETARY OF LABOR, MINE SAFETY AND HEALTH ADMINISTRATION
(MSHA),

Petitioner

v.

KENAMERICAN
RESOURCES, INC.,

Respondent

CIVIL
PENALTY PROCEEDING

Docket
No. KENT 2017-0183

A.C.
No. 15-17741-433281

Mine:
Paradise #9

ORDER DENYING MOTION
TO REMAND FOR REASSESSMENT

Before:                        Judge
McCarthy

This
case is before me on a Petition for the Assessment of Civil Penalty under section
105(d) of the Federal Mine Safety and Health Act of 1977, 30 U.S.C. § 815(d)
(1994).  Currently pending are Respondent’s Motion to Remand for Reassessment, the
Secretary’s Response (Opposition), and Respondent’s Reply. For the reasons set
forth below, Respondent’s Motion to Remand for Reassessment is denied.

I. Background

This
matter arises from three violations issued under section 104(d)(1) of the Mine
Act. Citation No. 9044780 alleges a significant and substantial (“S&S”)
violation of 30 C.F.R. § 75.400. [1]
 Ex. A, Petition for the Assessment of Civil Penalties , Docket No. KENT
2017-0183. Order No. 9044781 alleges that the mine examiner performed an
inadequate on-shift examination of a head drive and tailpiece in violation of
30 C.F.R. § 75.362(b). [2]
The Secretary designated the alleged violation as S&S, reasonably likely to
result in injuries resulting in lost workdays or restricted duty for one person,
and the result of Respondent’s high negligence. The Secretary also designated
the violation in Order No. 9044781 as an unwarrantable failure to comply with
section 75.362(b). Id .; see also Narrative Findings for a Special
Assessment, Order No. 9044781, Petition for the Assessment of Civil
Penalties , Docket No. KENT 2017-0183.

Order
No. 9049726 alleges that the pre-shift examinations of the No. 9 entry were not
accurately recorded for two days in violation of 30 C.F.R. § 75.360(g). [3]
The Secretary designated the alleged violation as S&S, reasonably likely to
result in injuries resulting in lost workdays or restricted duty for two
miners, and the result of Respondent’s high negligence. The Secretary
designated the violation in Order No. 9049726 as an unwarrantable failure to comply
with section 75.360(g).  Ex. A; see also Narrative Findings for a
Special Assessment, Order No. 9049726, Petition for the Assessment of Civil
Penalties , Docket No. KENT 2017-0183.

The Secretary proposed the following
civil penalties: $4,623 for Citation No. 9044780; $12,300 for Order No.
9044781; and $55,200 for Order No. 9049726. The proposed civil penalty for
Citation No. 9444780 was calculated according to the Secretary’s Criteria and
Procedures for Proposed Assessment of Civil Penalties. See 30 C.F.R.
Part 100.  Pursuant to section 100.5, however, the Secretary elected to waive
the regular penalty assessments in favor of special assessments for Order Nos.
9044781 and 9049726. [4]
Id. Both orders were specially assessed using the Secretary’s General
Procedures for Special Assessments (“General Procedures”), which have not been
published in the Code of Federal Regulations. Secy’s Response at 2 ; see U.S.
Dep’t of Labor, Mine Safety and Health Administration, General Procedures, https://arlweb.msha.gov/PROGRAMS/assess/SpecialAssess/assessment%20procedures.PDF (last accessed
Aug. 29, 2017).

KenAmerican filed its Motion to Remand
for Reassessment contesting the special assessment process and seeking an Order
remanding the two proposed special assessments for reassessment without reference
to or reliance upon the Secretary’s General Procedures. Motion to Remand for
Reassessment at 1. Respondent argues that the General Procedures remove all
meaningful discretion, and as a result, the General Procedures are substantive
or legislative rules under the Administrative Procedure Act’s (“APA”) formal
notice and comment rulemaking requirements. See 5 U.S.C. §§ 551-584;
Mot. at 2. KenAmerican is not, however, challenging the Secretary’s discretion
under section 100.5 to decide whether to regularly assess or specially assess a
particular violation. Mot. at 2.

In
his Response, the Secretary asserts that the General Procedures are a general
statement of policy exempt from notice and comment. See 5 U.S.C. §
553(b)(3)(A); Resp. at 4-7. In particular, the Secretary contends that he maintains
significant discretion in determining penalty assessments because the General
Procedures account for varying facts and circumstances. Resp. at 5-7.

II. Jurisdiction

The Commission possesses jurisdiction to
rule on the validity of the General Procedures. The Commission has previously concluded
that it had jurisdiction to “require the Secretary to re-propose his penalties”
in limited circumstances. Youghiogheny & Ohio Coal Co. , 9 FMSHRC 673,
679 (April 1987). When the “Secretary's proceeding under Part 100 is a legitimate
concern to a mine operator, and the Secretary's departure from his regulations
can be proven by the operator, then intercession by the Commission at an early
stage of the litigation could seek to secure Secretarial fidelity to his
regulations and possible avoidance of full adversarial proceedings.” Id.
at 680.

The Commission held in Drummond that
while section 101(d) of the Mine Act vests exclusive jurisdiction over
challenges to the validity of promulgated “mandatory safety and health standards”
to the Courts of Appeal, section 101(d) does not state or imply that this
exclusive jurisdiction extends to non-binding agency pronouncements. 30 U.S.C.
§ 811(d); Drummond Company, Inc. , 14 FMSHRC 661, 673-74 Fn.14 (May 1992)
(the Commission examined both the language of the statute and Congressional
intent). In addition, the Commission emphasized that section 101(d) confers
exclusive jurisdiction only when a mandatory standard is promulgated under section
101 of the Act. See Brody Mining , 36 FMSHRC 2027, 2035 (Aug. 2014).

In cases where the operator contests the
Secretary’s proposed civil penalty under section 105(d), the Commission has held
that “where the statute creates Commission jurisdiction, it endows the
Commission with a plenary range of adjudicatory powers to consider issues . . .
to dispose fully of cases committed to Commission jurisdiction.” Drummond ,
14 FMSHRC at 674. Section 105(d) of the Mine Act also authorizes the Commission
to direct “other appropriate relief,” which includes declaratory relief in
contest proceedings. Id.

As the General
Procedures are not mandatory safety and health standards promulgated under section
101 of the Mine Act, they are outside the exclusive jurisdiction of the Courts
of Appeal. Further, it is appropriate for the Commission to determine whether
the General Procedures conform to section 100.5 in order to fully dispose
of this matter .
As a result, the Commission has jurisdiction over the Respondent’s Motion to
Remand for Reassessment.

III. Procedure

While
the Commission and its judges have jurisdiction over challenges to informal
procedures, the Commissions has limited the timeframe in which such challenges
may appropriately be considered. In Youghiogheny & Ohio Coal Co. , the
Commission deemed it appropriate for an operator, prior to a hearing, to have
an opportunity to “establish that in proposing a penalty the Secretary failed
to comply with his Part 100 penalty regulations.” 9 FMSHRC 673, 679-80 (1987). The
Commission in Drummond further clarified that it would be inappropriate
to require the Secretary to re-propose a penalty “where a hearing on the merits
of the penalty had already been held before a Commission judge.” 14 FMSHRC at 677.
Thus, the most suitable time to seek an order remanding for reassessment is
before a hearing on the merits of any alleged violation and the appropriateness
of the proposed penalty.

The
Respondent filed its Motion to Remand for Reassessment on June 20, 2017, the
same day it filed its Answer to the Secretary’s Petition for the Assessment of
Civil Penalty. Since the Motion to Remand for Reassessment was included within
its initial filings and this matter has not yet been set for hearing, I
conclude that the Commission may appropriately address Respondent’s Motion.

IV. Legal
Principles and Analysis

Legislative rules or substantive rules are
subject to a notice and comment process before promulgation, modification,
amendment, or repeal. 5 U.S.C. § 553. As defined in the Administrative
Procedure Act (APA),

“[r]ule” means
the whole or a part of an agency statement of general or particular
applicability and future effect designed to implement, interpret, or prescribe
law or policy or describing the organization, procedure, or practice
requirements of an agency and includes the approval or prescription for the
future of rates, wages, corporate or financial structures or reorganizations
thereof, prices, facilities, appliances, services or allowances therefor or of
valuations, costs, or accounting, or practices bearing on any of the foregoing.

5
U.S.C. § 551(4). While the definition of “rule” appears expansive, there are several
exceptions to the notice and comment requirements:

Except when
notice or hearing is required by statute, this subsection does not apply—(A) to
interpretative rules, general statements of policy, or rules of agency
organization, procedure, or practice; or (B) when the agency for good cause
finds (and incorporates the finding and a brief statement of reasons therefore
in the rules issued) that notice and public procedure thereon are
impracticable, unnecessary, or contrary to the public interest.

5 U.S.C § 553(b)(3).

Courts commonly consider the
distinction between a legislative rule and a general statement of policy to be
“enshrouded in considerable smog.” Noel v. Chapman , 508 F.2d 1023,
1030 (2d Cir. 1975); see also Friedrich v. Sec'y of Health & Human
Servs. , 894 F.2d 829 (6th Cir. 1990); General Motors Corp. v.
Ruckelshaus , 742 F.2d 1561 (D.C. Cir. 1984). An agency’s expressed
intentions may help distinguish between a legislative rule and a general
statement of policy. This analysis entails the “consideration of three factors:
(1) the agency's own characterization of the action; (2) whether the action was
published in the Federal Register or the Code of Federal Regulations; and (3)
whether the action has binding effects on private parties or on the agency.” Center
for Auto Safety v. Nat’l Highway Traffic Safety Admin. , 452 F.3d 798,
806-07 (D.C. Cir. 2006). While agency labels are indicative, it is the
substance of what the agency has “purported to do and has done which is
decisive.” Drummond , 14 FMSHRC 661, 683 (May 1992).

Another
consideration that helps clarify the difference between a legislative rule and
a general statement of policy is whether agency action creates a binding norm. Courts
consider the effects of agency actions, and determine whether the agency
pronouncement (1) imposes any rights and obligations or (2) genuinely leaves
the agency and its decision makers free to exercise discretion. Center for
Auto Safety , 452 F.3d at 806; Drummond , 14 FMSHRC at 684
(legislative rules “foreclose alternative courses of action or conclusively
affect rights of private parties”). A statement will likely “be considered
binding if it narrowly circumscribes administrative discretion in all future
cases, and if it finally and conclusively determines the issues to which it
relates.” Dyer v. Sec'y of Health & Human Servs. , 889 F.2d 682, 685
(6th Cir. 1989). Thus, th e distinction between legislative rules
and general statements of policy “turns on an agency’s intention to bind itself
to a particular legal policy position.” U.S. Tel. Ass’n v. F.C.C. , 28
F.3d 1232, 1234 (D.C. Cir. 1994) .

An agency
creates no binding norm when it is free to consider individual facts. National
Mining Ass’n v. Sec’y of Labor , 589 F.3d 1368, 1371 (11th Cir. 2009). Similarly,
when the whole context of a general statement of policy “is in a subject area
controlled by individual case-by-case discretion, the [statement] is by its
very nature not a binding rule.” Id. at 1372-73. A court should pay
particular attention to the language used in the agency’s pronouncement in
determining whether the agency action is mere discretionary policy or a binding
legislative rule. See Brody Mining, LLC ,
36 FMSHRC 2027, 2049 (Aug. 2014); Center for Auto Safety, 452 F.3d at 806.

In the instant
matter, the Secretary characterizes the General Procedures as a general
statement of policy that is discretionary in nature and exempt from notice and
comment under the APA. See 5 U.S.C. § 553(b)(3)(A); Resp. at 4-7. Further,
the General Procedures are not published in either the Federal Register or the
Code of Federal Regulations.

The General
Procedures also fashion no binding norms. No additional obligations or rights
are created, and target penalties, which can fluctuate significantly (±25% or
more), preserve prosecutorial discretion. Gen. Proc. at 2. Because they
are the exception to the norm, special assessments are inherently
discretionary. See 30 C.F.R. § 100.5. As a result, the decision to apply
a special assessment, rather than a regular assessment, is based upon
individual case-by-case discretion that extends into the determination of the
penalty amount. While the General Procedures provide guiding charts and tables,
the General Procedures also state that MSHA is free to adjust the special
assessment based on “unique facts and circumstances.” Gen. Proc. at 2. The
Secretary is not bound to a specific norm or rule. There are many courses of
action available.

KenAmerica
argues that U.S. Telephone Association provides guiding precedent. I
disagree. While the penalty schedule at issue in U.S. Telephone Association
has some similarities to the General Procedures, the FCC abandoned its
traditional case-by-case approach for assessing forfeitures and adopted a base
forfeiture schedule as a percentage of maximum fines for each category of
licensee that violated the Communications Act. 28 F.3d 1232, 1233 (D.C. Cir.
1994) .
The instant case, by contrast, involves special assessments, which are inherently
discretionary and assessed on a case-by-case basis. Further, the court in U.S.
Tel. Ass’n went to great lengths to show that the FCC had rigidly applied
their allegedly discretionary penalty schedule in 299 out of 300 instances. Id. at 1235. There is no such
evidence here. [5]

Similarly, the
Respondent’s reliance on Drummond is misplaced. In that case, Drummond asserted
that the Secretary unlawfully enforced a substantive program policy letter
(“PPL”), which outlined an interim excessive history program, without following
the necessary APA notice and comment process. The Secretary claimed that the penalty
proposals under the PPL fell within section 100.5 special assessments. The
Commission rejected the Secretary’s argument, but emphasized that “[s]pecial
assessments are based on the condition surrounding the violation and ‘neither
the nature nor the seriousness of a particular violation will automatically
result in a special assessment.’” 14 FMSHRC at 690, citing 47 Fed. Reg. 22292
(1982). The Commission went on to state that “[a]lthough Secretarial discretion
is a cornerstone of the section 100.5 special assessment program, the PPl
creates a rigid formula for the proposed assessment of all excessive history
cases.” 14 FMSHRC at 690. The Drummond PPL outlined a mathematical
formula that “allowed no room for maneuver either with respect to the existence
or consequences of an excessive history.” 14 FMSHRC at 687, 690. Conversely,
the General Procedures not only maintain the discretion to apply a regular or
special assessment, but they also provide substantial flexibility in the
proposed penalty. Unlike the Drummond PPL, the General Procedures are
not determinative in nature.

On the surface, the General
Procedures may appear mechanical, but in reality, they are non-binding
pronouncements that do not create obligations or bestow benefits. Because the Secretary
retains significant discretion in proposing special assessment penalties, I
conclude that the General Procedures are not legislative or substantive rules
subject to notice and comment under the APA.

V. Order

WHEREFORE , Respondent’s Motion
to Remand for Reassessment is DENIED .  

/s/
Thomas P. McCarthy

Thomas
P. McCarthy

Administrative
Law Judge

Distribution:

Christopher
M. Smith, Esq., Office of the Solicitor, U.S. Dept. Of Labor, 618 Church
Street, Suite 230, Nashville, TN 37219

Jason
W. Hardin, Esq., Fabian VanCott, 215 S. State Street, Suite 1200, Salt Lake
City, UT 84111

/dtm

[1] Section 75.400
provides that “[c]oal dust, including float coal
dust deposited on rock-dusted surfaces, loose coal, and other combustible
materials, shall be cleaned up and not be permitted to accumulate in active
workings, or on diesel-powered and electric equipment therein.” 30 C.F.R. §
75.400.

[2] Section
75.362(b) requires, in relevant part, that, “ [a]
person designated by the operator shall conduct an examination and record the
results and the corrective actions taken to assure compliance with the
respirable dust control parameters specified in the approved mine ventilation
plan.” 30 C.F.R. § 75.362(b).

[3] Section
75.360(g) provides, in relevant part:

A
record of the results of each preshift examination, including a record of
hazardous conditions and violations of the nine mandatory health or safety
standards and their locations found by the examiner during each examination,
and of the results and locations of air and methane measurements, shall be made
on the surface before any persons, other than certified persons conducting
examinations required by this subpart, enter any underground area of the mine. 

30
C.F.R. § 75.360(g).

[4] Section 100.5 deals
with determinations of penalty amounts and special assessments. 30 C.F.R. § 100.5

[5] It is unreasonable to infer any broad conclusions based
only on the two special assessments at issue.