Secretary of Labor v. North American Quarry and Construction Services, LLC

Plain-English summary

The Secretary sought documents, an interrogatory answer, and a corporate deposition concerning whether North American Quarry and its parent, Austin Powder, should be treated as a unitary operator. Judge Alan G. Paez held that the requested information addressed interrelated operations, common management, centralized safety control, and common ownership, all relevant to joint liability and the Commission's independent penalty assessment. Earlier discovery involving other Austin Powder subsidiaries did not resolve North American Quarry's status, and the company did not substantiate its undue-burden objections. The judge granted the motion to compel.

Decision snapshot

• Governing rules: 29 C.F.R. §§ 2700.56 and 2700.58(c)
• Outcome: North American Quarry was ordered to produce eight categories of documents, answer an interrogatory, and designate a witness for a corporate deposition.
• Key point: Discovery into a parent-subsidiary relationship is proper when it tracks the four unitary-operator factors and the resisting party offers no concrete proof of burden.

Full text (FMSHRC public release)

FEDERAL MINE SAFETY AND HEALTH REVIEW COMMISSION

March 18, 2016

SECRETARY OF LABOR,

:     CIVIL PENALTY PROCEEDING

MINE SAFETY AND HEALTH

:

ADMINISTRATION (MSHA),

:     Docket No. YORK 2013-212-M

Petitioner,

:     A.C. No. 30-00287-330292 (2KX)

:

v.

:

:

NORTH
AMERICAN QUARRY AND CONSTRUCTION SERVICES, LLC,

:     Mine: Mt. Marion Pit and Mill

:

Respondent.

:

:

SECRETARY OF LABOR,

:     CIVIL PENALTY PROCEEDING

MINE SAFETY AND HEALTH

:

ADMINISTRATION (MSHA),

:     Docket No. YORK 2015-134-M

Petitioner,

:     A.C. No. 30-00287-387349A

:

v.

:

:

MARTY
HARRINGTON, formerly

employed
by NORTH AMERICAN

:     Mine: Mt. Marion Pit and Mill

:

QUARRY AND CONSTRUCTION

:

SERVICES, LLC,

:

Respondent.

:

ORDER GRANTING THE SECRETARY’S MOTION TO
COMPEL

These cases are before me upon the petitions for the assessment of civil penalty
filed by the Secretary of Labor (“Secretary”) pursuant to sections 105 and
110(c) of the Federal Mine Safety and Health Act of 1977 (“Mine Act”), 30 U.S.C. §§ 815,
820(c).[1] I consolidated Docket
Nos. YORK 2013-212-M and YORK 2015-134-M on December 8, 2015, and ordered the
parties to comply with my Prehearing Order by no later than April 20, 2016.

On February 25, 2016, the Secretary filed a
motion to compel North American Quarry and Construction Services, LLC (“NAQCS”), to produce requested discovery and to appear at a
Rule 30(b)(6) deposition focusing on the business relationship between NAQCS
and its parent company, Austin Powder Company (“Austin Powder”). See
Fed. R. Civ. P. 30(b)(6). NAQCS timely filed a response on March 7, 2016. On
March 15, 2016, the Secretary filed a motion requesting permission to file a
reply to NAQCS’s response, which I hereby DENY.

I.
 Background and Issues

On August 19, 2015, the
Secretary sent NAQCS a set of interrogatories and document requests. (Mot. at
6.) NAQCS objected to one interrogatory and eight document requests, which
sought information about NAQCS’s relationship with Austin Powder. (Mot. at 6–9.)
NAQCS’s objections stated that the information sought was irrelevant, overly
broad, unduly burdensome, not reasonably calculated to lead to the discovery of
admissible evidence, and protected by the attorney-client privilege and
work-product doctrine. (Id.) NAQCS provided no additional explanation in
its initial objections. (Id.)

On October 21, 2015, the
Secretary again requested this information, asserting its relevance to the Secretary’s
penalty assessment. (Mot. at Ex. K.) On November 10, 2015, NAQCS again refused to
comply but indicated it would stipulate (1) to the operator’s size alleged in
the Secretary’s Petition for the Assessment of Civil Penalty, and (2) that the
Secretary’s proposed penalty would not adversely affect the operator’s ability
to continue in business. (Mot. at Ex. L.) On January 13, 2016, the Secretary sent
a final letter demanding the information and averring that NAQCS’s proposed
stipulations did not resolve the penalty issue. (Mot. at Ex. M.) On February
16, 2016, the Secretary served NAQCS with notice of its Rule 30(b)(6) deposition
concerning these same topics. (Mot. at 2, Ex. A.) According to the Secretary,
NAQCS will not comply with the notice. (Mot. at 2.)

In his motion, the Secretary
argues he is entitled to conduct discovery on the relationship between Austin
Powder and its subsidiary, NAQCS, to demonstrate that the two entities should
be treated as a “unitary operator.” (Mot. at 9–10.) The Secretary relies on the
Commission’s holding in Berwind Natural Resources Corporation, 21 FMSHRC
1284 (Dec. 1999), and claims Austin Powder may be held liable for both the
violation and penalty in this matter under the unitary operator theory.[2]
(Id. at 9–11.) The Secretary thus believes his discovery requests are necessary
to determine the full extent of Austin Powder’s control over NAQCS. (Id. at
11–12.)

In response, NAQCS argues that
the Secretary’s discovery requests are duplicative, are wasteful, and seek
irrelevant information. (Resp. to Mot. at 2–5.) NAQCS asserts that the
Secretary has already completed voluminous discovery on the unitary operator
issue in separate proceedings before another Commission Judge involving Austin
Powder and other subsidiaries (not NAQCS).[3] (Id. at
3.) NAQCS claims its relationship with Austin Powder has already been examined
in those separate proceedings. (Id.) Furthermore, NAQCS argues that the requested
information is irrelevant due to NAQCS’s proposed stipulations, as well as Austin
Powder’s limited involvement in the events leading to the issuance of the citations
here. (Id. at 4–5.)

Based on the parties’
arguments, the following issues are before me — (1) whether information
regarding NAQCS business relationship with its parent company, Austin Powder,
is within the scope of discovery; and (2) whether providing the requested
documents and an answer to the interrogatory and allowing the Federal Rule
30(b)(6) deposition would be duplicative and impose an undue burden on NAQCS.

II.  Principles
of Law

A.        Scope of Discovery

Under Commission Procedural Rule 56, parties may
use depositions, written interrogatories, requests for admissions, and requests
for documents or objects to “obtain discovery of any relevant, non-privileged
matter that is admissible evidence or appears likely to lead to the discovery
of admissible evidence.” 29 C.F.R. § 2700.56(a)–(b). A party served with a
request for production must respond within 25 days of service and state the
basis for any objections in its answer. 29 C.F.R. § 2700.58(c).

Commission Judges may look to the Federal Rules
of Civil Procedure for guidance on any procedural question not governed by the
Mine Act, the Commission’s Procedural Rules, or the Administrative Procedure
Act. 29 C.F.R. § 2700.1(b). Under Federal Rule 26(b)(1), a party may
discover “any non[-]privileged matter that is relevant to any party’s claim or
defense and proportional to the needs of the case[.]” Fed. R. Civ. P. 26(b)(1).
The scope of discovery under the Federal Rules is “construed broadly to
encompass any matter that bears on, or that reasonably could lead to other
matter that could bear on, any issue that is or may be in the case.” Oppenheimer
Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978). Parties may depose company
officials under Federal Rule 30(b)(6). Fed. R. Civ. P. 30(b)(6).

B.        Limitations on Discovery: Undue Burden or
Expense

Under Commission Procedural Rule 56(c),
a Commission Judge may “limit discovery to prevent undue delay or to protect a
party or person from oppression or undue burden or expense” for “good cause
shown.” 29 C.F.R. § 2700.56(c). This provision grants the Judge
considerable discretion to regulate the course of discovery. See also 29
C.F.R. § 2700.55 (empowering Commission Judges to regulate the course of
hearings, order depositions, and dispose of procedural requests).

Although the Commission has not
defined “good cause” or “undue burden,” Commission Judges have relied on
Commission Rule 56(c) to limit needless, speculative, overly broad, or
duplicative discovery. See Marfork Coal Co., 28 FMSHRC 742, 743 (Aug.
2006) (ALJ) (postponing “needless discovery” where contest cases had been stayed
pending the proposal of civil penalties); Eagle Energy, Inc., 21 FMSHRC
109, 113 (Jan. 1999) (ALJ) (denying motion to compel in camera review of
documents where requesting party failed to make a “threshold showing
identifying the nature of information to be discovered”); Newmont Gold Co.,
18 FMSHRC 1709, 1713­–14 (Sept. 1996) (ALJ) (limiting deposition questions to
prevent “broad, complicated, or lengthy hypothetical questions . . . that do
not relate to the facts at issue”); Scott McGlothlin v. Dominion Coal Corp.,
36 FMSHRC 3049, 3051 (Nov. 2014) (ALJ) (granting motion to quash subpoena
because information sought had already been obtained through other
documentation and would not necessarily lead to relevant evidence).

A party objecting to a discovery
request on the basis of undue burden or expense must demonstrate such a burden
or expense. See Greyeagle Coal Co., 35 FMSHRC 3321, 3327–29 (ALJ)
(refusing to limit discovery because party failed to detail the burden or
expense involved in responding to discovery request); Rail Link, Inc.,
20 FMSHRC 181, 182–83 (Jan. 1998) (ALJ) (denying motion for protective order
because party failed to show the requested deposition would cause undue
burden); Newmont Gold Co., 18 FMSHRC 1304, 1306–08 (July 1996) (ALJ) (denying,
in part, motion for protective order as depositions would not be overly
burdensome).

III.  Analysis
and Conclusions of Law

A.        Scope of Discovery – Relevancy

The Secretary seeks information to determine
Austin Powder and NAQCS’s unitary operator status. (Mot. at 11.) NAQCS argues
the unitary operator issue was the focus of discovery with regard to Austin
Powder’s other subsidiaries, and the Secretary should not be permitted to delve
into it again with NAQCS. (Resp. to Mot. at 2–4.)

Here, the interrogatory, eight
document requests, and notice of deposition ask NAQCS to produce information
pertaining to its corporate relationship with Austin Powder: contractual
agreements between the two entities; NAQCS’s placement within Austin Powder’s
organizational structure; NAQCS’s leasing of employees; NAQCS’s worker and
unemployment compensation policies; any goods, products, or services Austin
Powder provides to NAQCS; and Austin Powder’s role in this litigation. (Mot. at
6–9, Ex. A.) Under Berwind, the Commission considers four factors to
determine whether multiple entities will be treated as a unitary operator — (1)
interrelation of operations; (2) common management; (3) centralized control
over mine health and safety; and (4) common ownership. Berwind, 21
FMSHRC at 1317. The Secretary’s discovery requests relate to each of the four Berwind
factors and would allow the Secretary to identify whether Austin Powder could
be jointly liable with NAQCS for both the violation and payment of the civil
penalty. Thus, the information the Secretary seeks is quite relevant to the
unitary operator theory, especially given that no legal determination by a
Commission Judge has been made that NAQCS and Austin Powder are a unitary
operator. Of course, a stipulation to the unitary operator issue and an
unopposed motion adding Austin Powder as a party would obviate the need for any
such discovery.

NAQCS next argues its offered
stipulations about the Secretary’s proposed penalty eliminate the relevance of
NAQCS’s relationship with Austin Powder. (Resp. to Mot. at 4.) Commission
Judges, however, are not bound by the Secretary’s proposed penalty assessment. See,
e.g., Sellersburg Stone Co., 5 FMSHRC 287, 290­–93 (Mar. 1983), aff’d,
737 F.2d 1147, 1151–52 (7th Cir. 1984) (“[I]t is clear that under the [Mine]
Act the Secretary of Labor’s and the Commission’s role regarding the assessment
of penalties are separate and independent”). Consequently, information about
the relationship between NAQCS and Austin Powder remains relevant to the
Commission’s own determination of the civil penalty in this matter. NAQCS’s
suggested stipulations, therefore, would not fully resolve the issue regarding
the appropriate civil penalty.

Additionally, NAQCS argues that
the information sought is not relevant to the actual violations at issue. (Resp.
to Mot. at 4­–5.) NAQCS claims the Secretary has no evidence that Austin Powder
provided either the training or equipment that led to the violations. (Id.)
Yet contrary to NAQCS’s claim, the Secretary has provided evidence that NAQCS’s
employees drive vehicles carrying Austin Powder’s logo and are subject to the
Austin Powder Company Employee Handbook, which contains the company’s safety
policy. (Mot. at 10, Exs. J, C.) This evidence signals that a further inquiry
into the extent of Austin Powder’s involvement in NAQCS’s operations is warranted.[4]
The Secretary’s discovery requests would lead him to the very information NAQCS
claims the Secretary does not have. NACQS’s circular reasoning why this information
is not relevant therefore lacks merit.

Accordingly, I determine that the information
the Secretary seeks in his discovery requests is relevant or appears likely to
lead to the discovery of admissible evidence under Commission Rule 56, and is
thus within the scope of discovery in this matter.

B.        Undue Burden or Expense

NAQCS argues that
the Secretary’s discovery requests are duplicative and wasteful. (Resp. to Mot.
at 2.) In support of this argument, NAQCS asserts that the Secretary has
already completed voluminous discovery on the unitary operator issue in a
separate Commission proceeding involving Austin Powder and a number of its
other subsidiaries. (Id.)

NACQS, however, was not a party in any
of the dockets contained in the separate action. (Resp. to Mot. at 3.) Non-parties
who are not privy to a legal action generally cannot be bound by the
adjudication of issues in that action. Richards v. Jefferson Cty., 517
U.S. 793, 798 (1996) (“A judgment or decree among parties to a lawsuit resolves
issues as among them, but it does not conclude the rights of strangers to those
proceedings.” (quoting Martin v. Wilks, 490 U.S. 755, 762 (1989))). Furthermore,
although another Commission Judge ruled on the unitary operator issue for other
Austin Powder subsidiaries, decisions by a Commission Judge are not binding
legal precedent. 29 C.F.R. § 2700.69(d). Thus, whether Austin Powder and
NAQCS may be considered a unitary operator remains at issue in the matter
before me. Accordingly, I determine that discovery by the Secretary on the
issue would not be duplicative or wasteful.

Finally, NAQCS provided no information about the
burden or expense of complying with the discovery. Based on the information
before me, the discovery sought by the Secretary does not appear to be
needless, speculative, overly broad, or duplicative. Rather, the discovery appears
relevant and sufficiently tailored to the unitary operator issue. Lacking any
additional details regarding the burden or expense of producing the requested
information, I therefore determine that NAQCS has not demonstrated any undue
burden or expense. Absent good cause, I conclude there is no basis to limit the
Secretary’s pending discovery requests.

IV.  Order

Based on the above reasoning, the Secretary’s
motion to compel is GRANTED. It is hereby ORDERED that NAQCS
shall (1) identify and produce the documents in the Secretary’s eight document
requests, unless otherwise privileged; (2) provide an
answer to the Secretary’s interrogatory; and (3) designate a person or persons
to appear at the Secretary’s properly noticed Rule 30(b)(6) deposition.[5]

/s/
Alan G. Paez

Alan G. Paez

Administrative Law Judge

Distribution (Via Electronic Mail & U.S. Mail):

Patrick M. Dalin, Esq.,
U.S. Department of Labor, Office of the Solicitor, 201 Varick Street, Room 983,
New York, NY 10014

([email protected])

David J. Hardy Esq., Hardy Pence PLLC, P.O. Box 2548,
Charleston, WV 25329-2548

([email protected])

Robert B. Allen, Esq., Kay Casto & Chaney PLLC, P.O. Box
2031, Charleston, WV 25327

([email protected])

/ivn

[1] On January 2,
2014, Chief Administrative Law Judge Robert J. Lesnick assigned me Docket
No. YORK 2013-212-M. On April 14, 2014, I stayed this docket, yet allowed
discovery to proceed, pending completion of the Secretary’s related section
110(c) investigation. On September 25, 2015, the Secretary filed a petition in Docket No. YORK 2015-134-M, seeking penalties against
Marty Harrington (“Harrington”) under section 110(c). Chief Judge Lesnick assigned
me
Docket No. YORK
2015-134-M on
December 2, 2015, attaching a copy of my Prehearing Order directing the parties
to settle the case or position it for hearing within 140 days.

[2] In Berwind,
the Commission held that a corporation and its subsidiary may be considered a
single operator under the Mine Act for purposes of establishing joint and
several liability and assessing civil penalties. See Berwind Natural
Res. Corp., 21 FMSHRC at 1316.

[3] On March 27,
2015, Administrative Law Judge Kenneth R. Andrews consolidated sixteen dockets
to determine preliminarily whether Austin Powder and a number of its
subsidiaries constitute a unitary operator. Austin Powder Co., FMSHRC
Docket No. KENT 2013-1078 (Mar. 27, 2015) (ALJ) (order). On
March 9, 2016, Judge Andrews issued an order affirming the entities’ “unitary
operator” status. Austin Powder Co., FMSHRC Docket No. PENN 2012-172
(Mar. 9, 2016) (ALJ) (order). However, NAQCS admits it was not a subsidiary involved
in the consolidated proceedings before Judge Andrews. (Resp. to Mot. at 3.)

[4] A Commission Judge’s
decisions are not binding upon the Commission. 29 C.F.R.
§ 2700.69(d).
Nevertheless, Judge Andrew’s order affirming Austin Powder’s
unitary operator status
with a number of its other subsidiaries strongly suggests that Austin Powder’s
control over its subsidiary NAQCS is a lot more pervasive than NAQCS seems to
present.
Austin Powder Co., FMSHRC
Docket No. PENN 2012-172 (Mar. 9, 2016) (ALJ) (order).

[5] Under the
Commission’s rules a party that fails to comply with an order compelling
discovery may be subject to an order, as is just and appropriate, in favor of
the party seeking discovery, including deeming as established the matters
sought to be discovered or dismissing the proceedings altogether. 29 C.F.R. §
2700.59.