Davis A. Shoulders employed by Pyro Mining Co.

Plain-English summary

Davis A. Shoulders, the chief electrician at Pyro No. 9 Wheatcroft Mine, faced a proposed $1,000 individual penalty under section 110(c) of the Mine Act for allegedly authorizing or carrying out an electrical violation. The record established that Pyro Mining Company was a general partnership formed by two corporations, not a corporation itself. Judge David F. Barbour granted summary decision for Shoulders and dismissed the proceeding, holding that section 110(c) imposed individual liability on agents of corporate operators and did not authorize him to extend that liability to an agent of this partnership.

Decision snapshot

• Cited standard: 30 C.F.R. § 75.512
• Outcome: Summary decision was granted for Davis A. Shoulders, the individual penalty proceeding was dismissed, and no $1,000 penalty was assessed.
• Subsequent review: The Commission later vacated the direction for review and dismissed the proceeding in kent-92-17-commission.
• Key point: The Judge held that section 110(c)'s reference to agents of corporate operators did not cover an employee of a general partnership formed by two corporations.

Full text (FMSHRC public release)

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             FEDERAL MINE SAFETY AND HEALTH REVIEW COMMISSION

                    OFFICE OF ADMINISTRATIVE LAW JUDGES
                           2 SKYLINE, 10th FLOOR
                            5203 LEESBURG PIKE
                       FALLS CHURCH, VIRGINIA 22041

SECRETARY OF LABOR, : CIVIL PENALTY PROCEEDING
MINE SAFETY AND HEALTH :
ADMINISTRATION (MSHA), : Docket No. KENT 92-17
Petitioner : A.C. No. 15-13920-03720-A
:
v. : Pyro No. 9 Wheatcroft
:
DAVIS A. SHOULDERS :
EMPLOYED BY PYRO MINING CO., :
Respondent :

                                 DECISION

Appearances: Steve D. Turow, Esq., Office of the Solicitor,
U.S. Department of Labor, Arlington, Virginia
for Petitioner;
Flem Gordon, Esq., P.S.C., Madisonville,
Kentucky, for Respondent.

Before: Judge Barbour

 This civil penalty proceeding was initiated by the Secretary

of Labor ("Secretary") against Davis A. Shoulders pursuant to
Section 110(c) of the Federal Mine Safety and Health Act of 1977,
30 U.S.C. 801 et seq.(the "Act").(Footnote 1) The Secretary
charges, inter alia, that at all times relevant to this matter,
Shoulders was employed by Pyro Mining Company ("Pyro") as the
chief electrician at Pyro No. 9 Wheatcroft Mine and that on
October 26, 1990, he was acting as an agent of corporate operator
Pyro when he knowingly authorized, ordered or carried out a
violation of 30 C.F.R. 75.512, a violation for which Pyro was
cited.

1 Section 110(c) of the Act states:

 Whenever a corporate operator violates a mandatory health or safety

standard or knowingly violates or fails or refuses to comply with any order
issued under this Act or any order incorporated in a final decision issued
under this Act, except an order incorporated in a decision issued under
subsection (a) or section 105(c), any director, officer, or agent of such
corporation who knowingly authorized, ordered or carried out such violation,
failure, or refusal shall be subject to the same civil penalties, fines, and
imprisonment that may be imposed upon a person under subsections (a) and (d).

30 U.S.C. 820(c)

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The Secretary proposes that a civil penalty of $1,000 be assessed against
Shoulders for the knowing violation. Shoulders generally denies the
Secretary's allegations.

 Following the filing of the petition, the Secretary moved to stay the

matter, asserting that an ongoing criminal investigation of Pyro and several
employees at the mine by the U.S. Department of Justice warranted deferring
the civil penalty proceeding until the Department determined whether to bring
criminal charges against any individual involved in the civil penalty
proceeding. Shoulders did not oppose a stay, and the Secretary's motion was
granted. Subsequently, the stay was dissolved upon the Secretary's assertion
that the investigation no longer overlapped with conditions at issue in the
civil penalty proceeding, and the matter was scheduled to be heard on December
1, 1992, in Nashville, Tennessee.

 Counsel for Shoulders then moved for summary judgement, asserting as

uncontroverted fact that on October 26, 1990, Pyro was not a corporate entity
but was instead a partnership. Counsel attached to the motion a copy of a
Statement of Assumed Name filed on January 27, 1982, with the Secretary of
State of the Commonwealth of Kentucky. The document states that W. K. Y.
Mining (Pyro) Inc., and Costain Mining (Pyro) Inc., exist as a general
partnership in the State of Illinois and intend to conduct and transact
business in Kentucky under the assumed name of Pyro Mining Company. Because
Section 110(c) subjects only corporate agents to lability, counsel for
Shoulders moved that the case be dismissed. Motion for Summary Decision 1-3.

 The Secretary opposes the motion. Counsel for the Secretary contends

that while Section 110(c) contemplates liability only for agents of "corporate
operators," Shoulders is not entitled to summary judgement since Shoulders
"was employed by a corporate operator on the date the alleged violation
occurred." Br. in Op. to Resp's. Mot. for Sum. Judg't. 2. The essence of the
Secretary's position is that:

       Pyro Mining Company is the product of two
       corporations, W. K. Y Mining (Pyro) Inc., and Costain
       Mining (Pyro) Inc., that apparently formed a "general
       partnership." Thus, the issue is not whether an
       employee of a non-corporate entity can be subject to
       110(c) liability, but whether a corporation can
       exonerate its agents from the responsibility that
       Congress intended then to shoulder simply by entering
       into partnership with another corporation. Affirming
       this proposition would create a result completely
       contrary to [the] language and the spirit of

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the Act. . . . Agents of an entity created and
controlled by two or more corporations are agents of a
"corporate operator."

Id. 3.

                 REQUIREMENTS FOR SUMMARY DECISION

 Commission Rule 64(b) is clear. 29 C.F.R.    2700.64(b). It states

that, "A motion for summary decision shall be granted only if the entire
record, including the pleading, depositions, answers to interrogatories,
admissions, and affidavits shows:
(1) That there is no genuine issue as to any material fact; and (2) that the
moving party is entitled to summary decision as a matter of law."(Footnote 2)
Id. As the Commission has pointed out, summary decision is an extraordinary
procedure and must be entered with care, for it has the potential, if
erroneously invoked, of denying a litigant the right to be heard. Thus, it
may only be entered when there is no genuine dispute as to material facts 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 (November 1981).
Here, the burden is on Shoulders, as the moving party, to establish his right
to summary decision, and I conclude that Shoulders has met that burden.

                             RATIONALE

 The language of Section 110(c) is unambiguous in imposing liability upon

"corporate operators" and upon "any director, officer, or agent of such
corporation" (emphasis added). The Secretary does not dispute that Pyro is a
general partnership composed of two corporations.(Footnote 3) However, the
Secretary's position

2 Commission Rule 64(a) provides that a motion for summary decision may be
filed "at any time after commencement of a proceeding and before scheduling of
a hearing on the merits". 29 C.F.R. 2700.64(a). Although, Shoulders'
motion was filed out of time in that a hearing had been scheduled prior to its
submission, for the reasons stated in this decision it would make a little
sense to proceed with the scheduled hearing.

3 Indeed, there is no factual dispute in this case. The parties have
stipulated as follows:

 (1)   Pyro Mining Company was a general partnership composed of two

corporations, W. K. Y. Mining (Pyro), Inc. and Costain Mining (Pyro), Inc.;

 (2)   Pyro Mining Company was a general partnership pursuant to the laws

of the State of Illinois;

 (3)   Pyro Mining Company was recognized and authorized to do business

in the Commonwealth of Kentucky as a general partnership;

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is that Pyro, as a partnership entity composed of two corporations, has a
"corporate nature" and that Shoulders was thus the employee of a "corporate
operator." Id. 5 In short, the Secretary argues that because Pyro's business
arrangement is much closer to that of a traditional corporation than to that
of

3(...continued)
(4) Pyro Mining Company was not incorporated in any jurisdiction;

 (5)   The Uniform Partnership Act had been adopted in both the State of

Illinois and the Commonwealth of Kentucky;

 (6)   Pyro Mining Company was authorized to do business as a general

partnership in the Commonwealth of Kentucky and operated in good standing
within the Commonwealth;

 (7)   W. K. Y. Mining (Pyro), Inc., had its primary corporate offices at

653 South Hebron Avenue, Evansville, Indiana;

 (8)   Costain Mining (Pyro), Inc., had its principal corporate offices

at 653 South Hebron Avenue, Evansville, Indiana;

 (9)   Pyro Mining Company operated the Pyro No. 9 Wheatcroft Mine, Mine

I.D. No. 15-13920;

 (10) Respondent, Davis A. Shoulders, was an employee of Pyro Mining

Company, a general partnership;

 (11) The year in which the violation was issued, the Pyro No. 9

Wheatcroft Mine produced approximately 2,651,687 tons of coal per year;

 (12) The year in which the violation was issued, approximately 350

employees were employed at the Pyro No. 9 Wheatcroft Mine;

    (13)   Respondent, Davis Shoulders, worked at the Pyro No. 9 Wheatcroft

Mine;

 (14) On October 29, 1990, Mr. Curtis Harte, MSHA Inspector and

authorized representative of the Secretary of Labor, issued a
Section 104(d)(2) order pursuant to the Federal Mine Safety Health Act of 1977
and the order issued is Number 3551162;

 (15) The order charged that Pyro Mining Company violated

Section 30 C.F.R. 75.512, an alleged electrical hazardous condition;

 (16) On July 10, 1991, and after an investigation, the Mine Safety &

Health Administration assessed a $1,000 penalty against Respondent Davis
Shoulders, alleging that Respondent was an agent of a corporate operator, that
he knew or should have known of the violative condition cited in Order No.
3551162, and pursuant to Section 110(c) of the Act, he would be held
personally liable for the violation cited in Order No. 3551162;

 (17) The notice of contest was timely and properly filed by Respondent;

this tribunal has jurisdiction over the named parties and subject matter.

Stipulations 1-2.

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a traditional partnership, Pyro should be considered a defacto corporation for
the purpose of this proceeding. I reject this view.

 The language of Section 110(c) of the Act restates

Section 109(c) of the Federal Coal Mine Health and Safety Act
of 1969, 30 U.S.C. 819(c)(1976), and is designed to reach decision makers
responsible for the illegal acts of corporate operators. Congress, in
choosing to make corporate directors, officers and agents legally responsible
for violations of the Act, purposefully distinguished between those working
for and/or acting on behalf of corporate operators and those similarly
situated working for and/or on behalf of non-corporate operators; e.g. for
partnerships or sole proprietorships. This distinction has been upheld by the
courts and by this Commission. Richardson v. Secretary of Labor, 689 F.2d.
632 (6th Cir. 1982), off'g Secretary v. Kenny Richardson, 3 FMSHRC 8 (January
1981). Moreover, it is a distinction based upon a generally accepted concept
of business organization that recognizes the corporation as a legal creation
of the state with powers derived from the state and applicable law.

 While the Secretary notes that at common law a corporation, generally,

was not permitted to form a partnership with another corporation, she fails to
acknowledge that "in most jurisdictions, the power to participate in a
partnership is recognized by statute or granted in corporate charters." 18 B.
Am Jur 2d, Corporation 2117 (1985); Partnership Act 2.6. Certainly, when
the Mine Act was enacted, it was not unheard of for a partnership to be
composed of corporate partners, and in limiting individual liability for
knowing violations to directors, officers and agents of corporations, I assume
Congress meant exactly what it stated. In my view, the judges of this
Commission are not authorized to decide that the directors, officers and
agents of a non-corporate business entity acting as an operator may be held
liable under Section 110(c) because the entity embodies and/or exercises
various corporate attributes. Not only would such a decisional approach run
counter to the specific wording of Section 110(c), it would invite legal
uncertainty by premising liability upon whether an organization was
sufficiently "corporate-like" in nature to be considered for Mine Act purposes
a "corporate operator."

 The Secretary points out, and I fully recognize, that by subjecting

directors, officers and agents of corporations to personal liability, Congress
was attempting to create an added incentive for compliance, since corporations
might pass off their monetary penalties as the cost of doing business. See
Richardson, 689 F.2d at 632-633, (6th Cir. 1982) Cowin and Company v. FMSHRC,
612 F.2d 838, 840 (4th Cir. 1979). The Secretary may well be right in
asserting that excusing personal liability in the circumstances of this case
has the potential for creating a

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loophole in the operator's incentive to comply with the Act and its
regulations. However, I agree with Commission Administrative Law Judge Gary
Melick, who after entertaining similar arguments from the Secretary, stated:

       The Secretary, in essence would have me amend Section
       110(c) to hold liable agents, not only of corporate
       operators, but also agents of partnerships, composed
       of two corporations. An administrative law judge is
       certainly not in a position to make such an amendment
       and . . . [is] certainly bound by the plain, clear and
       unambiguous language of the statute.

Paul Shirel, employed by Pyro Mining Co., 14 FMSHRC ____, Docket No. KENT 92-
73, etc. (November 17, 1992) (ALJ Melick) slip op.3. As Judge Melick cogently
pointed out, it is Congress that has chosen to base personal liability upon a
corporate distinction, and it is Congress that should decide whether amendment
of the provision is warranted in light of these and similar circumstances.
Id. Accordingly, and for the foregoing reasons, this proceeding is
DISMISSED.(Footnote 4)

                              David F. Barbour
                              Administrative Law Judge
                              (703) 756-5232

Distribution:

Steve D. Turow, Esq., Office of the Solicitor, U.S. Department of Labor, 4015
Wilson Boulevard, Arlington, VA 22203 (Certified Mail)

Flem Gordon, Esq., Gordon and Gordon, P.S.C., P.O. Box 1305, Madisonville, KY
42431-1305 (Certified Mail)

/epy

4 In opposing Shoulder's Motion for Summary Judgement, counsel for the
Secretary also argued that if the Secretary's pleadings failed to allege
sufficiently the presence of a corporation, the Secretary should be allowed to
amend her petition to include W. K. Y. Mining (Pyro) Inc., and Costain Mining
(Pyro) Inc., as entities that operated the mine in which Shoulder's worked.
Br. in Op. to Resp's. Mot. for Sum. Judg't 10 N.8. In effect, the Secretary's
pleadings would then allege that Shoulders was an agent of either of the two
corporations. However, in a letter dated November 30, 1992, Counsel for the
Secretary, in effect, withdrew this request.