Secretary of Labor obo Cheryl Garcia v. Veris Gold USA, Inc.

Plain-English summary

A default had been entered against Veris Gold USA in Cheryl Garcia's discrimination case after the company stopped participating while liquidating through an asset sale. Before assessing penalties or damages, Judge David P. Simonton sought to determine whether the mine's new operator, Jerritt Canyon Gold, could be liable as a successor. He ordered the Secretary, Veris Gold, and Jerritt Canyon Gold to address the Commission's nine-factor successorship test and whether the Judge could add the successor on his own initiative. The briefing also had to consider whether a bankruptcy sale's liability waiver prevented federal labor-law remedies against a successor. The proceeding was later stayed for Commission guidance and ultimately dismissed after settlement.

Decision snapshot

• Governing provision: 30 U.S.C. § 815(c)
• Outcome: The parties and current mine operator were ordered to brief successor liability and possible joinder.
• Key point: A mine asset sale and bankruptcy liability waiver do not automatically end the need to examine whether the new operator may bear successor responsibility for an adjudicated discrimination claim.

Full text (FMSHRC public release)

FEDERAL MINE SAFETY AND HEALTH REVIEW COMMISSION

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

February 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

SUCCESSORSHIP
BRIEFING 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). Following the listed
Respondent’s repeated failure to participate in mandatory prehearing
proceedings, the court entered a default order in favor of the Complainant, Ms.
Cheryl Garcia, on September 21, 2015. At the court’s request, the Secretary
submitted a civil monetary penalty and personal damages claim on behalf of Ms.
Garcia on October 9, 2015.

That same day, a different 105(c)(2)
Complainant petitioned the Commission to add the current operator of the Jerritt
Canyon Mill Mine, Jerritt Canyon Gold, (“JCG”) as a successor in interest in a separate
105(c)(2) proceeding against Veris Gold USA.[1]
On October 15, 2015, a Commission ALJ sought direction from the Commission on
whether JCG should be added as a successor in interest in yet another
discrimination claim against Veris Gold USA.[2]
The Commission remanded Lowe v. Veris WEST 2014-614 to the ALJ for
further consideration[3]
on January 12, 2016 and has not yet addressed the Motion to Reopen in Morreale
v. Veris WEST 2014-793.

Before assessing any penalty or
damages award in this docket, the court seeks to determine if any additional
party should be added as a liable entity. Accordingly, the Secretary, the
Respondent, and the Current Operator, JCG, are ordered to separately address
the following issues:

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?

BACKGROUND

The Chief Judge first assigned the
associated Temporary Reinstatement proceedings to this court on June 24, 2014. The
Respondent opposed the Secretary’s application for Temporary Reinstatement and
indicated that it had recently filed for Chapter 15 Bankruptcy protection. The
court subsequently granted the Complainant’s application for Temporary
Reinstatement on July 16, 2014.[4]
The Secretary filed a formal 105(c)(2) discrimination complaint with the
Commission on August 4, 2014. The court postponed the scheduled hearing on two
separate occasions with assurances from both parties 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.[5]
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. Squire Patton Boggs Notice of
Withdrawal.

However, the Respondent did not provide
the court with any documentation regarding the asset sale, update the court on
the resolution of the Respondent’s Chapter 15 U.S. bankruptcy proceedings, or
attempt to withdraw their contest of the subject claim. On July 28, 2015, the
Secretary forwarded an e-mail message from the Respondent’s bankruptcy monitor
counsel indicating that the Respondent did not intend to appear at hearing, as it
no longer had any employees located in the United States. July 30, 2015 Boris
Orlov e-mail.

On August 17, 2015, the court convened
a previously scheduled prehearing teleconference. The Secretary participated in
the conference but no representative for Veris Gold USA or the Jerritt Canyon
Mill Mine appeared for the call. The court subsequently determined that the Respondent’s
failure to appear for the prehearing conference, communicate with the
Secretary, or provide current contact information violated the court’s
prehearing order to maintain communication with opposing counsel and the court.
On August 26, 2015, the court issued an Order to Show Cause Why a Default Order
Should Not Be Entered pursuant to Commission Rule 2700.66.

As JCG assumed operation of the Jerritt
Canyon Mill Mine in June 2015, the court distributed the Order to Show Cause to
JCG counsel for record and notice purposes. The court made no findings
whatsoever on JCG’s potential liability for the claims at issue in this docket.
Neither the Respondent, the Respondent’s Bankruptcy monitor, nor JCG provided a
substantive response to the Order to Show Cause. The court entered a Default
Order in favor of the Complainant on September 21, 2015.

LEGAL
CONSIDERATIONS

The Secretary, the Respondent, and JCG
are directed to address the nine factor successorship test announced in 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). The court
notes that it may take judicial notice of Commission and ALJ findings,
bankruptcy filings, and public press releases relevant to JCG’s assumption of
mining operations at the Jerritt Canyon Mill Mine. [6]
[7]
[8]
[9]
Union Oil, 11 FMSHRC 289, 300 n.8 (March 1989)(judicial notice can be
taken of the existence or truth of a fact or other extra record information
that is not the subject of testimony but is commonly known, or can safely be
assumed to be true).

The briefing parties shall also
address the Commission’s ability to reinstate a miner to an operator’s
successor in interest. Sec y of Labor on behalf of Corbin v. Sugartree Corp.,
9 FMSHRC 394 (Mar. 1987), aff'd sub nom., Terco v. Fed. Coal Mine Safety
& Health Review Comm 'n, 839 F.2d 236 (6th Cir. 1987), cert. denied,
488 U.S. 818 (1988); Simpson v. Kenta Energy, 11 FMSHRC 770, 778 (May
1989).

The court notes that an asset purchaser’s
liability waiver does not necessarily protect a successor in interest from
liability for employee claims adjudicated by a federal administrative body. Lowe
v. Veris, January 12, 2016 Commission Order, 4 n.4 (citing International
Technical Products Corp. , 249 NLRB 1301 (Jun. 1980)(holding that a company
which purchased all of the assets of a predecessor company "free and clear
of all liens, claims and encumbrances" pursuant to an order of a
bankruptcy court could be held responsible for the predecessor's backpay
liability under federal labor law); Leiferman Enterprises, LLC, 355 NLRB
364 (Aug. 2010), incorporating by reference 354 NLRB 872 (Oct. 2009), aff'd sub
nom. NLRB v. Leiferman Enterprises, LLC, 649 F.3d 873 (8th Cir.
2011 ), cert. denied, 132 S. Ct. 1741 (2012)); See also Perma Vinyl Corp.
164 NLRB No. 119(1967); Golden State Bottling Co., Inc. v. N.L.R.B. 94
S.Ct. 414 (1973).

Finally, the briefing parties shall
address the ability of a Commission ALJ to independently join a party in
interest. Jones v. Federal Mine Safety and Health Review Com'n, 827 F.2d
769, (U.S. Sixth Circuit Court of Appeals)(1987)(reversing Commission finding
that ALJ could not add party sua sponte on grounds that joined party had
adequate notice and suffered no undue prejudice); See also Macke Laundry
Service Co. of D.C., 190 NLRB No. 1 (1971)(finding that sua sponte
joinder did not violate due process as the operational connections between companies
were so intertwined that there was not an element of surprise to the Board’s
actions).

ORDER

The
Secretary, the Respondent, and JCG are ORDERED to submit briefs on the
issues outlined above no later than Monday, February 29, 2016.

/s/
David P. Simonton

David
P. Simonton

Administrative
Law Judge

Distribution: (U.S. First Class Mail)

Boris Orlov, U.S. Department of Labor, Office of the Solicitor,
World Trade Center, 350 South Figueroa Street, Suite 370, Los Angeles, CA 90071

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

[1]
Morreale v Veris, WEST 2014-793, October 9, 2015 Motion to Reopen

[2]
Lowe v. Veris, 37 FMSHRC 2337 (October 2015)(ALJ Moran).

[3]
Lowe v. Veris, WEST 2014-614 January 12, 2016 Commission Order

[4]
The court denied the Complainant’s request for temporary economic reinstatement
and also denied the Secretary’s Motion for Reconsideration of the same issue on
August 22, 2014.

[5]
June 11, 2015 Ernst and Young Letter.

[6]
Lowe v. Veris, WEST 2014-0614 October 15, 2015 Decision,12 n. 9

[7]
Marianne K. McKown, Veris Gold sells Jerritt Canyon, Elko Daily Free
Press (June 25, 2015), http://elkodaily.com/mining/veris-gold-sells-jerritt-canyon/article_9a84e5c1-c299-5179-8bc6-49f02d15e513.html.

“(Veris Gold USA) sold its Elko County gold mines
Thursday to Jerritt Canyon Gold LLC, but most of the miners will remain on the
job. The assets sold include the Jerritt Canyon facilities. . . . Jerritt
Canyon Gold President and CEO Greg Gibson said the majority of the 250 Veris
Gold employees at the site were hired. . .”

[8]
Morreale v. Veris Motion to Reopen: June 11, 2015 Ernst and Young
Letter, JCG State of Nevada Business Registration Filing.

[9]
http://www.law360.com/articles/546363/gold-mining-company-veris-files-ch-15-to-shield-us-assets

“As of March 31, Veris claimed assets worth
approximately $323 million and liabilities of about $282 million, according to
the filing. The company said it does not believe it will require any interim
financing to maintain its operations during the case, based on its cash flow
forecasts.

Also on Monday, Veris announced that the Supreme Court
of British Columbia had granted its application for creditor protection under
Canada's Companies Creditors Arrangement Act. The order also extends the
protection to its subsidiaries, including Veris Gold USA Inc. and Queenstake
Resources Ltd.

The company called the move “the most prudent and
effective way to carry on business and maximize value for the company's
stakeholders,” and said it will continue to explore restructuring alternatives,
including reducing its obligations and operating costs, as it navigates the
bankruptcy proceedings.

It also assured investors that its primary U.S. mining
operation — the Jerritt Canyon mine in Elko County, Nevada — will continue
producing gold during the case and currently has a positive cash flow.

In re: Veris Gold Corp., case number 14-51015, in the
U.S. Bankruptcy Court for the District of Nevada.”