Secretary of Labor obo Cheryl Garcia v. Veris Gold USA, Inc. (ALJ decision, March 4, 2016)

Plain-English summary

The Secretary brought a Mine Act discrimination case for Cheryl Garcia against Veris Gold USA, which later dissolved after selling its mine assets to Jerritt Canyon Gold through bankruptcy. A default had been entered against Veris Gold, but the parties disputed whether Jerritt Canyon Gold could be liable as a successor despite the bankruptcy sale order. Judge David P. Simonton found that the Commission was considering the same asset-sale and successorship issues in a related case. He stayed Garcia's proceeding pending Commission action so the cases could be handled consistently.

Decision snapshot

• Governing authority: 30 U.S.C. § 815(c)
• Outcome: The discrimination proceeding was stayed pending Commission action in the related Morreale case.
• Key point: The ALJ deferred the unresolved interaction between Mine Act successorship law and a bankruptcy asset-sale liability waiver until the Commission supplied guidance.

Full text (FMSHRC public release)

FEDERAL MINE SAFETY
AND HEALTH REVIEW COMMISSION

OFFICE OF ADMINISTRATIVE LAW JUDGES

721 19th St. Suite 443

Denver, CO 80202-2500

TELEPHONE: 303-844-5266 / FAX: 303-844-5268

March 4, 2016

SECRETARY
OF LABOR, MSHA, on behalf of CHERYL GARCIA,

Complainant,

v.

VERIS
GOLD USA, INC.,

Respondent.

DISCRIMINATION
PROCEEDING

Docket
No.  WEST 2014-905-DM

WE
MD 14-16

Jerritt
Canyon Mill Mine

Mine
ID 26-01621

STAY ORDER

Before: 
Judge Simonton

This
discrimination case is before me
under section 105(c) of the Federal
Mine Safety and Health
Act of 1977, 30 U.S.C.
§ 815(c).  The listed
Respondent, Veris Gold USA, filed for Chapter 15 Bankruptcy on June 9, 2014, several weeks before the Secretary first filed for temporary reinstatement on behalf of Ms. Garcia in this matter.[1] On June 4, 2015, Jerritt Canyon Gold (JCG) purchased the Jerritt Canyon Mill Mine and other Veris Gold assets pursuant to a section 363(f) asset sale approved by the U.S. Bankruptcy Court.  As a condition of that sale, JCG obtained a liability waiver that stated the asset sale was “free and clear of all liens, claims, and interests.”  Sale Order, Docket No. 14-51015 (Bankr. D. Nev.).

During
that same time period, the court twice postponed the scheduled hearing in this matter with assurances that additional time would aid settlement negotiations.  On June 11, 2015, the Respondent’s bankruptcy counsel sent the Complainant a letter stating that Veris Gold USA would be liquidated through an asset sale and that no proceeds would be available to satisfy employee claims.  On June 16, 2015, Respondent’s previous counsel filed a Notice of Withdrawal stating that Veris Gold USA had instructed counsel to withdraw from this matter pending the Respondent’s corporate dissolution.

Veris
Gold then repeatedly failed to participate in mandatory prehearing proceedings, and the court entered a default order in favor of the Complainant on September 21, 2015.  At the court’s request, the Secretary submitted a civil monetary penalty and personal damages on behalf of Ms. Garcia on October 9, 2015.

Shortly
thereafter, two different actions were filed with the Commission that, in effect, sought to add JCG as a liable successor in interest for separate 105(c) violations originally filed against Veris Gold.  Morreale v Veris, WEST 2014-793, October 9, 2015 Motion to Reopen; Lowe v. Veris, 37 FMSHRC 2337 (October 2015)(ALJ Moran).  The Commission remanded

Lowe
to
the ALJ for further consideration on January 12, 2016 and has not yet addressed the Complainant’s Motion to Reopen in Morreale.

On
February 4, 2016, this court ordered the Secretary, Veris Gold, and JCG to address the following issues for this docket.

1.)    Is JCG liable as
a successor in interest for the discrimination claims contained in this docket. 

2.)    If the Secretary
does not move to add JCG as a successor in interest, may the court add JCG sua sponte pursuant to Rule 21 of the Federal Rules of Civil Procedure?

The
Secretary and JCG timely filed responses with the court on February 29, 2016.  Veris Gold did not file a response.  On February 16, 2016, JCG also filed a response with the Commission to the Complainant’s Motion to Expedite and Amend in Morreale v Veris, WEST 2014-793.

Both
the Secretary and JCG argue that this court should not add JCG as a liable successor in interest.  Both entities state, with extra-Commission support, that a section 363(f) asset sale liability waiver is a complete bar to recovery for claims based upon the preceding owner’s liabilities, including employment discrimination claims.  In re Trans World Airlines, Inc., 322 F.3d 283, 289-290 (3rd. Cir. 2003); In re New England Fish Co., 19 BR 323, 326-27 (Bankr. W.D. Wash. 1982).  However, neither party offered any binding guidance on the relationship between the Commission’s traditional successorship test and federal bankruptcy law. [2]
[3]

JCG’s
February 16, 2016 Commission filing in Morreale v. Veris WEST 2014-793 is substantially similar to the filing made with this court on February 29, 2016.  Therefore, it appears that the Commission is currently considering the same asset sale liability waiver and successorship issues presented in this case.  The Commission’s decision in Morreale will likely provide clarity for the adjudication of this docket.  Thus, a temporary stay is warranted in this matter to ensure administrative efficiency and consistency.[4]

ORDER

Accordingly, Docket No. WEST
2014-905 is STAYED pending Commission action in Morreale v Veris, WEST 2014-793.

/s/ David P. Simonton

David P. Simonton

Administrative Law Judge

Distribution: 
(U.S. First Class Mail)

Brad
Mantel, U.S. Department of Labor, Office of the
Solicitor, Division of Mine Safety and Health, 201 12th Street South, Suite 401, Arlington, VA 22202

Cheryl
Garcia, 450 Castle Crest Dr., Spring Creek, NV 89815

Annette
Jarvis, Dorsey & Whitney LLP, Counsel for Jerritt Canyon Gold, 136 South Main Street, Suite 1000, Salt Lake City, UT 84101

Shaun
Heinrichs, Veris Gold, 688 West Hastings Street, Suite 900, Vancouver, BC V6B 1P1, Canada

Tevia
Jeffries, Dentons Canada LLP, Counsel for Bankruptcy Monitor, 250 Howe Street, 20th Floor, Vancouver, BC V6C 3R8, Canada

Honorable
Gregg W. Zive, U.S. Bankruptcy Court, District of Nevada, C. Clifton Young Federal Bldg., 300 Booth St., Reno, NV 89509

Michael
McCord, General Counsel, Office of the General Counsel, Federal Mine Safety
& Health Review Commission, 1331 Pennsylvania Avenue NW, Suite 520N, Washington, DC 20004

[1]
Ms. Garcia’s last potential cause of action occurred on or about February 27, 2014. As such, Ms. Garcia’s claim is a pre-bankruptcy claim and collection of any monetary award is presumptively governed by federal bankruptcy law.

[2]
JCG does note that the Bankruptcy Court may extinguish “Coal Act” successor liability pursuant to 11 U.S.C. § 363(f)(5). JCG Br., 7 (citing Leckie Smokeless Coal Co., 99 F.3d 573, 585 (4th Cir. 1996)). Upon review the “Coal Act” referenced is the Coal Industry Retiree Health Benefit Act of 1992 that created a combined pension Fund and Plan for UMWA miners and retirees. Leckie, 99 F.3d 576-77. Accordingly, while the Leckie decision may be illustrative of the proper operation of section 363(f) asset sales in general, it is not pertinent to successorship liability under the subject Federal Mine Safety & Health Act of 1977.

[3]
Additionally, neither party addressed the explicit statutory requirement that 363(f) sales may proceed,

“only if – (1) applicable nonbankruptcy law permits sale of such property free and clear of such interest.” 11 U.S.C. 363(f)(1). To be clear, this court cannot and will not review the Bankruptcy Court’s approval of the asset sale itself. However, this court is not prepared to conclude that a section 363(f) liability waiver completely supersedes the Commission’s longstanding successorship test without further Commission direction. See Munsey v. Smitty Baker Coal Co., 2 FMSHRC 3463 (Dec. 1980), aff’d in relevant part sub nom. Munsey v. FMSHRC, 701 F.2d 976 (D.C. Cir. 1983).

[4]
As noted by the Secretary, Veris Gold USA has been officially dissolved and does not retain any assets against which Ms. Garcia could potentially recover. Therefore, placing this matter in stay will not prejudice or harm the Complainant.