Thanks to Aggregates Manager Online and Adele Abrams, ESQ. for this timely article.
December 2, 2011
A stunning ruling from an Administrative Law Judge (ALJ) on Nov. 28, 2011, has undercut the legitimacy of the Mine Safety and Health Administration’s (MSHA) use of “flagrant penalties” against mine operators.
The order by ALJ Feldman in Conshor Mining LLP has the potential to eviscerate this strong enforcement tool, which was created by Congress under the 2006 “MINER Act” in the wake of the Sago mine disaster. Although the ruling occurred in a coal case and was issued as a preliminary order on the threshold issue of penalties, the arguments accepted by the judge can be offered by any mine who has been subjected to the heightened “flagrant” penalties.
The ruling on the novel issue of the appropriate standard for imposing the enhanced penalties came in Conshor, where MSHA cited the operator for failing to follow its roof control plan, and three section 104(d)(2) orders were issued with penalties totaling $328,000.
Although penalties are normally capped at $70,000 per violation, under the MINER Act of 2006, a new category of violation was created – the “flagrant” violation – which could be subject to hiked penalties of between $70,000 and $220,000 per violation. During preliminary discussions with the ALJ, Conshor challenged the legitimacy of MSHA’s imposition of flagrant penalties, and the judge ordered the parties to brief the issue. The November 2011 ruling followed.
The MINER Act created flagrant penalties by adding Section 110(b)(2) to the 1977 Mine Act, and the new law took effect August 17, 2006. That section states:
Violations under this section that are deemed to be flagrant may be assessed a civil penalty of not more than $220,000. For purposes of the preceding sentence, the term “flagrant” with respect to a violation means a reckless or repeated failure to make reasonable efforts to eliminate a known violation of a mandatory health or safety standard that substantially and proximately caused, or reasonably could have been expected to cause, death or serious bodily injury.
The judge noted that the applicable evidentiary requirements to support a flagrant violation based on a “reckless failure” to eliminate a known violation is pending before the full FMSHRC, on review of ALJ Paez’ ruling in Stillhouse Mining LLC. By comparison, in Conshor, ALJ Feldman analyzed the penalty structure itself without ruling on the merits of MSHA’s allegations against the mine operator. In Conshor, MSHA sought the enhanced penalties because it relied, in substantial part, on the operator’s past history of violations during the preceding 15 months.
In doing so, MSHA pointed to its two Procedure Instruction Letters (PILs), which were issued to “explain” the agency’s interpretation of the congressional language, and also an April 19, 2011, News Release.
The test articulated in the policies – both of which had expired by the time this case came before the ALJ – deemed a violation as “flagrant” (and eligible for the higher penalties) if the cited violation was attributable to an unwarrantable failure (citation/order issued under Section 104(d)(1) or 104(d)(2)) of a mandatory standard and there have been at least two prior unwarrantable failure violations of the same mandatory standard in the preceding 15 months.
In Conshor’s case, there had been prior unwarrantable violations that had become final concerning the roof control plan, but those were issued related to different plan provisions than the ones currently in litigation. Therefore, the issue of whether a “repeated” flagrant violation can be based on a history of previous violations in this case is one of first impression.
Conshor attacked the flagrant penalty program on several different bases. First, it argued that the PILs had no legal effect because they were not properly issued under the Administrative Procedure Act (APA), which require notice-and-comment rulemaking for any agency action that impacts substantive rights of mine operators.
It further claimed that the Secretary of Labor’s test for “repeated” flagrant violations was not entitled to deference because it was contrary to the plain meaning of the statutory language. It added, in the alternative, that no deference was required because the Secretary’s interpretation as based on the informal PILs and press release, which were not the subject of rulemaking. There is a long line of administrative law cases that hold agency policy statements that are not subject to the notice-and-comment rulemaking process lack the force of law and can be denied deference from the court.
The judge found that the proffered interpretation of the provisions of Section 110(b)(2) with respect to “repeated” failure could not take effect because the PIL and News release were, in fact, substantive rules that failed to abide by the APA requirements.
ALJ Feldman analyzed the statutory language, noting that the plain meaning of “flagrant” is “conspicuously bad, offensive, or reprehensible.” The specific language used by Congress reflects that a flagrant violation is based on either a reckless or repeated failure to eliminate a known violative condition that can proximately cause serious injury or death. He found that a flagrant violation based on repeated conduct must be, at a minimum, also reckless, and that a repeated failure to eliminate the condition deemed flagrant may constitute ever greater culpability because it would be evidence of conscious disregard for obligations to comply.
He found the PILs were not valid. The first expired on March 31, 2008, and the second lapsed on March 31, 2010. The agency admitted that they had not been reissued. In the PILS, MSHA outlined its view of the requirements for a flagrant violation based on “repeated failure” to eliminate a known violation. The requirements in the PIL were the following:
(1) a citation or order is evaluated as significant and substantial (S&S);
(2) the injury or illness is evaluated as at least permanently disabling;
(3) the type of action is evaluated as an unwarrantable failure; and
(4) at least two prior “unwarrantable failure” violations of the same safety or health standard have been cited within the past 15 months. After the PILs expired, MSHA issued the April 2011 News Release, which recapped the criteria above, but added a fifth one: “Negligence is evaluated as reckless disregard.”
The judge acknowledged that MSHA did do a rulemaking on heightened penalties, and that final rule was issued on March 22, 2007. It spelled out criteria and procedures for penalties under Part 100 but – with regard to flagrant penalties – simply republished the statutory language without any reference to the first PIL, therefore depriving the regulated community of the right to comment on the agency’s enforcement scheme.
The judge found that the PILs were not interpretative policy because they are substantive and legislative in design, implementing the elevated operator liability contained in the MINER Act, with penalties threefold higher than before.
In finding that the PILs were an invalid exercise of rulemaking authority, the ALJ noted: “Pronouncements affecting fundamental rights and liabilities are not relieved of their substantive effect simply because the actions are committed to agency discretion. In the final analysis, the Secretary may not escape notice-and-comment requirements by, in effect, labeling a major substantive addition to section 100.5(e) of her regulations governing special assessments as a mere interpretation.”
After discarding the challenged policies, the judge examined whether the Commission had authority to evaluate the higher special assessments in contested cases, and found that it did. He stressed: “the outcome of a civil penalty proceeding before the Commission is dependent on whether the Secretary can satisfy her burden of proving that a cited violation has been properly designated as S&S, unwarrantable and/or flagrant.”
The FMSHRC retains authority, rather than deferring the MSHA, in matters concerning the appropriate tests for evaluating the specific charges brought against a mine operator. The ALJ added, “authorizing the Secretary to define the requisite evidentiary parameters necessary to satisfy her burden of proof is anathema to the Mine Act’s goal of ensuring due process.”
The discussion then turned to whether MSHA’s interpretation of the statute was legitimate. ALJ Feldman found that the statutory language had two essential elements:
(1) a repeated failure to eliminate a known violation: and
(2) the hazard posed by the violation reasonably could be expected to cause death or serious injury. The first element of a repeated flagrant violation requires both knowledge of the violation and a repeated failure to eliminate it. MSHA argued that a history of past similar violations was sufficient to constitute a “repeated” failure for section 110(b) (2) purposes.
The judge disagreed. He viewed the congressional language as referring to a singular known violation rather than a series of recurring violations: current repeated conduct evidenced by failure to eliminate the hazard posed by the discrete violation rather than a past history of violations. One example of a true repeated flagrant violation the ALJ offered would be where conspicuous dangerous violative conditions exist that are either indifferently overlooked during a series of pre-shift and on-shift examinations, or are reported and ignored.
He said relying on the operator’s past history imposed an additional element that was not included in the statute. The statutory language was intended to deter flagrant violations (known violations that could proximately cause death) rather than to promote mine safety in general. He noted that, if Congress’ intent was to create a safer mining environment by deterring repeated unwarrantable failure violations, it would have amended section 110(a)(1) and raised the general statutory penalty ceiling of $70,000.
Moreover, if the intent was to create a “super 104(d) chain” by elevating penalties for repeated unwarrantable violations within a specific time frame, it would have amended section 104(d) of the Act instead. He also found that a disproportionate reliance on a previous history of violations was inconsistent with precedential Commission tests for resolving such charges.
For unwarrantable failures, the FMSHRC looks at a variety of factors, including the extent of the violative condition, the length of time it has existed, whether the violation is obvious, whether the violation poses a high degree of danger, whether the operator was on notice that greater efforts were necessary for compliance, and the operator’s compliance efforts made prior to the issuance of the citation or order. Although repeated similar violations are relevant, because they impact the operator’s “notice” that greater efforts were necessary, they are not dispositive of unwarrantable findings. Therefore, such reliance for flagrant purposes was inconsistent with the Commission’s tests for both S&S and unwarrantable failure findings.
ALJ Feldman ordered the agency to provide written statements specifying whether, in light of his ruling, flagrant allegations remain, what specific facts evidence the requisite reckless conduct, and the basis for the allegations. Whether the Secretary of Labor will seek interlocutory review of this ruling from the full Commission remains to be seen. However, any operators who are currently facing flagrant penalties under the “repeated” criteria articulated by the agency in this case would be wise to offer the same arguments that were accepted in Conshor to void the assessment strategy.
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