Secretary of Labor v. Magoffin-Johnson & Morgan Stone Company (ALJ decision, July 17, 1985)

Plain-English summary

Magoffin-Johnson & Morgan Stone Company admitted the charged violation but argued that it could not pay the proposed $105 penalty. Judge Joseph B. Kennedy held that a prior final decision had already resolved the company's ownership and ability-to-pay arguments after a full opportunity to litigate them. He concluded that those findings barred the company from relitigating the same defense in this penalty case. Finding the violation serious and the negligence high, he ordered the company to pay $105. The decision does not identify the violated safety standard.

Decision snapshot

• Cited standard: The decision does not identify the safety standard underlying the admitted violation.
• Outcome: Violation affirmed; $105 penalty assessed.
• Key point: The operator could not relitigate its ability-to-pay defense after that issue was finally decided in a prior proceeding.

Full text (FMSHRC public release)

CCASE:
SOL (MSHA) v. MOGOFIN-JOHNSON & MORGAN STONE DDATE: 19850717 TTEXT:
~1088
Federal Mine Safety and Health Review Commission Office of Administrative Law Judges

SECRETARY OF LABOR,
CIVIL PENALTY PROCEEDING
MINE SAFETY AND HEALTH
ADMINISTRATION (MSHA),
Docket No. KENT 85-57-M
PETITIONER
A.C. No. 15-00061-05508

v. MJM Mine & Mill

MAGOFFIN-JOHNSON & MORGAN
STONE COMPANY,
RESPONDENT

DECISION

Before: Judge Kennedy

This matter is before me on the parties responses to my show cause order of June 7, 1985. This order required the parties to show cause why the decision in Secretary v. Adams Stone Corporation and Magoffin, Johnson & Morgan Stone Company, 7 FMSHRC 692, Judge Steffey, (May 1985), does not collaterally estop MJM from claiming that (1) it is not owned and controlled by Stuart Adams Stone Corporation, or (2) is not financially capable of paying the $105 penalty proposed in this proceeding for the single violation charged.

After reviewing the parties' responses, the decision in Adams Stone, and the undisputed facts of record, I find:

1. That in the prior proceeding the operator had a full and fair opportunity to litigate the claim that it was not an instrumentality owned and controlled by the single enterprise entity doing business under the name of Stuart Adams Corporation and Subsidiaries (SACS) and that it is not financially able to pay monetary penalties.

2. That these are the sole issues contested in this proceeding.

3. That the operator represents it is unable to attend an evidentiary hearing or to submit
~1089 any evidence on the contested issues that was not considered by Judge Steffey in the Adams Stone case.(FFOTNOTE.1)

4. That Judge Steffey's decision in Adams Stone was not appealed and has by operation of law become a final decision of the Commission.

5. That under the twin doctrines of res judicata and collateral estoppel Judge Steffey's finding that MJM is an instrumentality owned and controlled by the single enterprise entity
~1090 doing business under the name Stuart Adams Corporation and Subsidiaries (SACS) is final and conclusive on MJM in this proceeding.

6. That Judge Steffey's finding that MJM is financially capable of paying monetary penalties is final and conclusive in this proceeding.

7. That Judge Steffey's finding in Adams Stone that MJM failed to sustain its burden of showing that payment of monetary penalties will impair its ability to do business is final and conclusive in this proceeding.

Since the fact of violation is admitted and the sole issue contested is MJM's ability to pay, this is not a proceeding to determine responsibility for violating the law but only whether MJM and the single enterprise entity of which it is a part can pay the $105 penalty assessed. The Supreme Court has encouraged the use of the single enterprise entity theory to penetrate schemes that employ corporate shells or proprietary corporations to circumvent enforcement of regulatory statutes. NBC Energy, Incorporated, 4 FMSHRC 1860, 1861 (1982). Indeed, Congress has exempted regulatory enforcement proceedings, such as this penalty proceeding, from the automatic stay provisions of the Bankruptcy Act. 11 U.S.C. 362(b)(4); Leon's Coal Company, 4 FMSHRC 572 (1982).

Since, as Judge Steffey found, MJM is a mere instrumentality of the larger SACS enterprise it will be appropriate for the Secretary to seek recovery from the SACS enterprise if MJM defaults in payment of the penalty assessed. But since this has not occurred and since Adams Stone found MJM failed to sustain its burden of showing that payment of much larger penalties would result in economic jeopardy to MJM it is unnecessary to reassign liability at this stage.

If, the Secretary is unable to collect the penalty from MJM, he may pursue collection proceedings against the SACS enterprise and, if necessary pierce the corporate veil and collect from the stockholders of SACS. See NBC Energy, supra, WRW Corporation, 7 FMSHRC 245, 259 (1985).

Finally, I find that where, as here, there is an identity of parties and legal issues and where, as here, MJM has had a full and fair opportunity to litigate its financially ~1091 failing operator defense, accepted principles of issue preclusion, whether characterized as res judicata or collateral estoppel, operate to foreclose further redundant litigation of the defense in this proceeding. Windsor Power House Coal Company, 6 FMSHRC 2773, 2773 (1984).

For these reasons, I conclude that the violation charged did, in fact, occur and that payment of the small penalty assessed will not impair MJM's ability to continue in the business of mining limestone. Further, after considering the other criteria I find the gravity was serious, the negligence high and the amount of the penalty warranted, $105.

Accordingly, it is ORDERED that for the violation found the operator pay a penalty of $105 on or before Friday, August 2, 1985.

Joseph B. Kennedy
Administrative Law Judge

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FOOTNOTES START HERE:-

~Footnote_one

1. I note that Judge Steffey strongly condemned respondent's counsel, David H. Adams, Esq., for his "contemptuous approach" to compliance with the Commission's rules and judges' orders. Judge Steffey also admonished counsel for his repeated failures to appear at requested hearings or to present witnesses in support or explanation of his arguments or claims. Since the Commission has not moved to reprimand or strike sua sponte Judge Steffey's censure of Mr. Adams or to reprimand the judge for having the temerity to discipline Mr. Adams without referring the matter to the Commission pursuant to Rule 80, I assume the Commission believes Judge Steffey's derogatory comments on Mr. Adams professionalism were merited and well within the scope of the judge's jurisdiction and authority.

On other occasions, however, the Commission has declined to take disciplinary action for such "contemptuous" conduct on the ground that every lawyer that appears before the Commission is entitled to "flout" a judge's orders and authority on at least one occasion. Disciplinary Proceeding, D-84-1, 7 FMSHRC 623 (May 1985). The Commission's condonation of instances of unprofessional or unethical conduct also seems to be influenced by whether errant lawyers enjoy a protected status as a member of the Office of the Solicitor or a past close personal relationship with a member of the Commission or its staff. T.P. Mining, Inc., LAKE 83-97-D, decided July 2, 1985, 7 FMSHRC ----; Belcher Mine, Inc., SE 84-8-M, decided July 10, 1985, 7 FMSHRC ----; Disciplinary Proceeding, D-85-1, decided June 25, 1985, 7 FMSHRC ----; United States Steel Corp., 6 FMSHRC 1404 (1984). This ambivalence on the part of the Commission and its draconian sanctions for even merited criticism of those who enjoy a specially protected status demeans the status of its judges; undermines public confidence in the Commission's neutrality; and encourages condonation of lawyer conduct that would be deemed unacceptable by the courts.