Matthew A. Varady v. Veris Gold USA, Inc. and Jerritt Canyon Gold, LLC

Plain-English summary

After Jerritt Canyon Gold bought Veris Gold's mine assets through bankruptcy, Judge William B. Moran allowed Matthew Varady to add Jerritt Canyon as a possible successor in his discrimination case. Jerritt Canyon argued that the bankruptcy sale, automatic stay, res judicata, and federal bankruptcy policy barred the Commission from imposing successor liability. The judge rejected those arguments at this stage because Mine Act precedent permits successor relief and no cited case held that a bankruptcy sale automatically defeats a Mine Act discrimination claim. He found that discovery was still needed on the asset sale, ownership, management continuity, retained employees, production methods, and notice of pending claims. Because immediate review would not materially advance final disposition, he denied certification for interlocutory review.

Decision snapshot

• Governing rule: 29 C.F.R. § 2700.76
• Outcome: Jerritt Canyon Gold's motion to certify the successor-liability ruling for interlocutory review was denied.
• Key point: Factual discovery on successorship should proceed before appellate review of how bankruptcy protections interact with Mine Act discrimination remedies.

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:
202-434-9933 / FAX: 202-434-9949

April 26, 2016

MATTHEW A. VARADY,

Complainant,

v.

VERIS GOLD USA, INC.,

and

JERRITT CANYON GOLD, LLC,

Respondents.

DISCRIMINATION PROCEEDING

Docket No. WEST 2014-307-DM

WE-MD 14-03

Mine: Jerritt Canyon Mill

Mine ID: 26-01621

ORDER ON JERRITT
CANYON GOLD’S MOTION FOR CERTIFICATION OF INTERLOCUTORY REVIEW

Before:                        Judge
Moran

Dorsey &
Whitney LLP, on behalf of Jerritt Canyon Gold, LLC, (“JCG”) has filed a motion seeking
interlocutory review, per 29 C.F.R. § 2700.76.[1]  The Motion requests that
the Court “certify that [its] ruling to add JCG as a respondent in this matter
involves a controlling question of law and that immediate review will
advance the final disposition of the proceeding.”[2]
Motion at 1 (emphasis added).

For the reasons which
follow, the Court, by not having determined that immediate review will
materially advance the final disposition of the proceeding, DENIES the motion.[3]

In pertinent part,
the provision addressing interlocutory review by a judge provides:

(a) Procedure. Interlocutory review by the
Commission shall not be a matter of right but of the sound discretion of the
Commission. . . .

(1) Review cannot be
granted unless:

(i) The judge has
certified, upon his own motion or the motion of a party, that his interlocutory
ruling involves a controlling question of law and that in his opinion immediate
review will materially advance the final disposition of the proceeding;
or

(ii) The Judge has
denied a party's motion for certification of the interlocutory ruling to the
Commission, and the party files with the Commission a petition for
interlocutory review within 30 days of the Judge's denial of such motion for
certification.

29 C.F.R. § 2700.76
(emphasis added).

The motion contends
that there is no jurisdiction to add JCG as a party.  It then revisits all of
the arguments previously made to, and rejected by, this Court,[4]
in support of its claim of lack of jurisdiction, which arguments will not be repeated
here.[5]   

The motion incorrectly
describes the “Issue” as whether allowing the Complainant to amend his
discrimination complaint “to add JCG as an additional respondent in the case
[is] in contravention of the Canadian and U.S. Bankruptcy Courts’ automatic
stay, prior adjudication, discharge and free and clear sale of the Veris Gold
assets to JCG under Section 363(f) of the Bankruptcy Code.”  Motion at 7.  The
issue, however, is whether the asserted jurisdictional bar involves a controlling
question of law and whether, in the Court’s opinion, immediate review of that
issue will materially advance the final disposition of the proceeding.[6] 

Among the many
reasons advanced by JCG, all rejected by this Court in its previous ruling, are
that any actions taken in violation of the bankruptcy court’s automatic stay
are void ab initio, that only the bankruptcy courts can modify the
automatic stay and, because of that, all MSHA proceedings are stayed.  Id.
at 10.  JCG then continues with citations to the Canadian and U.S. Bankruptcy
Courts’ holding that JCG acquired the assets of Veris Gold free and clear of
any interest, claim or liability.  Id. at 10-12.  These claims rest upon
the asserted legitimacy of the § 363(f) proceeding under the Bankruptcy Code.  In
its prior ruling, the Court has addressed this issue as well.   

The motion then
discounts this Court’s reference to the Commission’s Order “in a recent
parallel proceeding, Lowe v. Veris Gold USA, Inc., No. WEST 2014-614-DM,
2016 WL 197500, at *2 n.4 (FMSHRC Jan. 2016), in stating that JCG’s asset
purchase in bankruptcy ‘free and clear’ of employment claims may not extinguish
successorship liability,” as dicta and contends that the Court’s reference to “the
much criticized 35 year old NLRB opinion, In International Technical
Products Corp. (“ITP”), 249 NLRB 1301 (June 1980),” is misplaced as
outdated.  Id. at 14.  The motion also contends that this Court’s
reference to “dicta in Chicago Truck Drivers, Helpers, and Warehouse Union
(Independent) Pension Fund v. Tasemkin, Inc., 59 F.3d 48, 49 (7th Cir.
1995), in stating that a bankruptcy disposition did not preclude creditors from
a successor liability claim . . . is distinguishable from the facts of the
Varady case.”  Id. at 15.

The motion also maintains
that “[t]he doctrine of res judicata bars the Complainant from
attaching his discrimination claim to JCG.”  Id. at 17.  However, the
Court notes that this theory extends the res judicata claim beyond the
bankruptcy court’s sale order, asserting that it controls any Mine Safety and
Health Review Commission decision.  The Court, in the context of the entirety
of its previous order addressing JCG and Varady, has spoken to this claim and
rejected it. 

JCG’s motion ends
with the assertion that “[t]here are strong preemptive and public policy
considerations under the Bankruptcy Code that support the conclusion that the
ALJ and Commission do not have jurisdiction to add JCG as a respondent to
Varady’s claims against Veris Gold, in an effort to manufacture a
successor liability claim.”  Id. at 19 (emphasis added).  

Discussion

The Court
cannot, in effect, endorse JCG’s Motion because its previous ruling points in a
very different direction.[7]  That previous ruling
provides a detailed basis for the Court’s conclusion but the reasoning will be
briefly highlighted here. 

While JCG refers to
cases in which it has been held that any actions taken in violation of the
bankruptcy court’s automatic stay are void ab initio, and that only the
bankruptcy courts can modify the automatic stay and that, in light of those
arguments, all MSHA proceedings are stayed, no cases involving MSHA discrimination
proceedings have been cited.  The same point applies to the assertion that no
challenge can be made contravening a bankruptcy court’s holding that assets of
a successor are acquired free and clear of any interest, claim, or liability — there
is no case law applying such a holding to MSHA discrimination actions.    

The issue at this
point is whether JCG and potentially others may be liable as successors for
acts of discrimination committed by Veris Gold.  The Commission has found that
successorship liability may be available in a given case where an action is
brought under section 105(c)(2) of the Mine Act, and no case has held that such
relief is unavailable merely because a discrimination claim has been brought
under section 105(c)(3).  Munsey v. Smitty Baker Coal Co., 2 FMSHRC 3463,
3465-66 (Dec. 1980), aff’d in relevant part sub nom. Munsey v. FMSHRC,
701 F.2d 976 (D.C. Cir. 1983), cert. denied sub nom. Smitty Baker
Coal Co. v. FMSHRC, 464 U.S. 851 (1983); see also Sec’y of Labor
on behalf of Keene v. Mullins, 888 F.2d 1448, 1453 n.15 (D.C. Cir. 1989).  Certainly
there is no suggestion in the language employed by Congress in section
105(c)(3) matters that miners proceeding under that provision are to be treated
as second class complainants.  Though it may be that some other court may side
with JCG’s position, it is not for the Commission’s judges to anticipate what
another tribunal may conclude about the breadth and effect of Mine Act
discrimination. 

Discovery remains
vital to the fair determination of potential successor liability for a number
of reasons.[8]  First, though the §
363(f) proceeding under the Bankruptcy Code has been held up by JCG as a badge
of authority, this Court’s March 4, 2016, Order noted that several commenters
have criticized that provision as being extended beyond its natural language
and seriously deficient from a due process standard.  The Court raised several
concerns in this regard, including the nature of the hearing which occurred before
the bankruptcy courts and the transcript of such proceeding.  Also, as the
Court previously noted, the bankruptcy monitor was apparently aware of, and
inferentially approved, Veris Gold’s attempt to defend the Varady
discrimination claim at the hearing.[9]  That action, in the
Court’s view, implicitly accepted that the bankruptcy proceeding may not have
barred the discrimination action.  More likely, Veris might have calculated
that it could prevail at the hearing but, after it did not, it employed a “heads
I win, tails you lose” strategy, the latter approach now being asserted. 

Accordingly, for
the reasons expressed both in this Court’s March 4, 2016, Order on Complainant’s
Motion to Amend as well as those stated above, in this Order on Jerritt Canyon
Gold’s Motion for Certification of Interlocutory Review, JCG’s Motion is
DENIED.

/s/ William B.
Moran

William
B. Moran

Administrative
Law Judge

Distribution:

Mark Kaster, Dorsey & Whitney, LLP, 1500 South 6th
Street, Minneapolis, MN  55402

Annette Jarvis, Dorsey & Whitney, LLP, 136 South Main
Street, Suite 1000, Salt Lake City, UT  84101

Matthew Varady, 701 S. 5th Street, #6, Elko, NV  89801

Cathy L. Reece, Fennemore Craig, P.C., 2394 East Camelback
Rd., Suite 600, Phoenix, AZ  85016

[1] The Court, after checking
with the Commission’s electronic filing system, emailed the Complainant on
April 19, 2016, to determine if any response was made to this motion.  The
Respondent confirmed via email the same day that he had not submitted a
response. 

[2] An unexplained oddity, under
§ 2700.76, when a judge is addressing a motion for interlocutory review, part
of the test is whether immediate review will materially advance the
final disposition of the proceeding, but the same section provides that, if the
motion is denied by the judge, the Commission’s review is whether “immediate
review may materially advance the final disposition of the proceeding.” 
29 C.F.R. § 2700.76(a)(1)(i), (a)(2) (emphasis added).  

[3] Given this Court’s denial
of the motion, the provisions at 29 C.F.R. § 2700.76(a)(1)(ii) and (a)(2) come
into effect.  JCG Counsel is aware of these provisions.

[4] In fact, and as a matter
of practicality, the motion essentially repeats, verbatim, large portions from
previous submissions to this Court.

[5] The Court’s March 4, 2016,
Order on Complainant’s Motion to Amend addresses JCG’s contentions.  See
generally Varady v. Veris Gold USA, Inc., No. WEST 2014-307-DM, 2016
WL 944251 (FMSHRC Mar. 4, 2016) (ALJ).

[6] JCG also requests that
“in the interest of judicial economy and fairness to the parties, [the]
proceedings in th[is] docket . . . be stayed pending a final determination on
the issue of jurisdiction.” Motion at 8.  This request is DENIED.  The proceedings
are stayed but only until the Commission rules on the motion for interlocutory
review. 

[7] See generally Varady,
2016 WL 944251.

[8] It is noted that fellow
Administrative Law Judge David Simonton recently issued a briefing order
relevant to these issues.  After noting that there is legal ambiguity concerning
the “correct interaction of bankruptcy law and the Commission’s successorship
doctrine,” Judge Simonton concluded that “the most prudent course of action is
to first resolve the factual question of JCG’s successorship status before
proceeding to potential bankruptcy protection issues,” and, in line with view, that
stated “further discovery into the facts of JCG’s acquisition and operation of
the Jerritt Canyon Mill mine is necessary to determine if JCG, Eric Sprott and
Whitebox Asset Management are liable as successors in interest for the conduct
of Veris.”  Briefing Order at 2, Sec’y of Labor on behalf of Morreale v.
Veris Gold U.S.A. Inc., WEST 2014-793 (FMSHRC Apr. 21, 2016).  Helpfully,
Judge Simonton directed the respondents to respond to the following
non-exclusive, preliminary questions regarding successorship:

1) Did JCG
management learn of the finalized settlement agreement between the Secretary,
Ms. Morreale, and Veris prior to JCG’s purchase of the Jerritt Canyon Mill
mine?

2) Did JCG
management learn of any pending 105(c) discrimination claim against Veris Gold
USA prior to JCG’s purchase of Veris?

3) What
percentage of Veris Gold USA did Eric Sprott and his subsidiary holdings, own
and/or control prior to JCG’s acquisition of the Jerritt Canyon Mill mine?

4) What
percentage of JCG does Eric Sprott and his subsidiary holdings own and/or
control?

5) What
percentage of Veris employees employed at the Jerritt Canyon Mill mine did JCG
rehire following their assumption of mining operations in June 2015?

6) What
percentage of Veris supervisory agents at the Jerritt Canyon Mill mine were
retained by JCG?  In addition to senior management personnel, the Commission
generally considers supervisors with production and safety responsibilities
agents of the operator.  Nelson Quarries, Inc., 31 FMSHRC 318, 328-31
(Mar. 2009) (affirming ALJ holding that onsite foremen who conducted safety
examinations and assigned tasks were agents of the operator). 

7) Has JCG
substantially altered production methods at the Jerritt Canyon Mill mine?

Id. at 3.

[9] Only through discovery
can Complainant learn both of the legitimacy of the § 363(f) proceeding and the
appropriateness of any successorship application.  Questions abound.  For
example, in the related matter of Daniel Lowe v. Veris Gold USA, Inc., and
Jerritt Canyon Gold, LLC, WEST 2014-614-DM, it was earlier suggested that two
secured creditors, owed $120 million, received nothing.  See Lowe v.
Veris Gold USA, Inc., No. WEST 2014-614-DM, 2016 WL 1553724, at *6 n.6 (FMSHRC
Apr. 7, 2016) (ALJ).  Yet, in the present Motion for Certification of
Interlocutory Review, JCG advises that “the secured creditors received no monetary
payments.”  Motion at 20 (emphasis added).