Title: Pool v. Dravo Coal Co.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Pool v. Dravo Coal Co.1990 WY 27788 P.2d 1146Case Number: 89-167Decided: 03/15/1990Supreme Court of Wyoming
KELLY L. POOL AND CORRINA 
POOL, HUSBAND AND WIFE, 

APPELLANTS 
(PLAINTIFFS),

v.

DRAVO COAL COMPANY, A 
DELAWARE CORPORATION; AND UNION PACIFIC MINERALS, INC., FORMERLY ROCKY MOUNTAIN 
ENERGY COMPANY, A UTAH CORPORATION, APPELLEES (DEFENDANTS).

Appeal from the District 
Court, Carbon County, Larry L. Lehman, J.

Ford T. Bussart 
and John D. Rossetti of Greenhalgh, Bussart, West & Rossetti, Rock Springs, 
and Lisa A. Botham, Green River, for appellants.

Patrick Dixon of 
Murane & Bostwick, Casper, and Catherine MacPherson of Johnson, MacPherson 
& Noecker, Rawlins, for appellees.

Stanley K. 
Hathaway of Hathaway, Speight & Kunz, Cheyenne, and Pamela L. Jacklin and 
Tracy Pool Reeve of Stoel, Rives, Boley, Jones & Grey, Portland, Or., for 
amicus curiae Bridger Coal Co.

Before 
CARDINE, C.J., and THOMAS, URBIGKIT, MACY and GOLDEN, JJ.

GOLDEN, Justice.

[¶1]      The issue before 
us is whether a partnership employee who has received worker's compensation 
benefits for a work-related injury may maintain a tort action against an 
individual partner which contracted with the partnership employer to manage the 
partnership's day-to-day operations.1 The resolution of this issue turns 
on whether a managing individual partner is an employer entitled to immunity 
from an employee's tort action under the Wyoming Worker's Compensation act or an 
independent contractor potentially liable to such action.

[¶2]      Kelly L. Pool 
(Pool), an employee of Carbon County Coal Company (CCCC), received injuries on 
November 30, 1984, in a mining accident at his employer's underground coal mine 
near Hanna, Wyoming. He received worker's compensation benefits through his 
employer's statutory account established under the Wyoming Worker's Compensation 
Act. CCCC, a Colorado general partnership, was formed by partners Dravo Coal 
Company (Dravo), a Delaware corporation, and Union Pacific Minerals, Inc. 
(UPMI), formerly Rocky Mountain Energy Company (RMEC), a Utah corporation. 
Although Pool received worker's compensation benefits through the partnership's 
statutory account, he filed a tort action against the individual partners, Dravo 
and UPMI, as well as individual defendants, seeking money damages for his 
personal injuries. His theories of recovery were negligence, culpable 
negligence, strict liability, and corporate negligence. His wife sought damages 
for loss of consortium.

[¶3]      The Pools appeal 
from the trial court's order granting summary judgment for Dravo under a proper 
W.R.C.P. 54(b) certification.

[¶4]      We 
affirm.

[¶5]      In Brebaugh v. 
Hales, 788 P.2d 1128 (Wyo. 1990), a case of first impression, we held that an 
individual partner enjoys the same immunity as the partnership from suit by an 
injured partnership employee who has received worker's compensation benefits 
through the partnership's contribution. That decision was the logical result of 
our holding in Hays v. State, ex rel. Workers' Compensation Division, 768 P.2d 11 (Wyo. 1989), adopting the aggregate theory of partnership, namely, "[a] 
partnership is not an entity separate from its partners. 1C A. Larson, Workmen's 
Compensation Law, at § 54-31. Therefore, since the partnership is nothing more 
than the aggregate of the individuals making it up, a partner-employee would 
also be an employer." Hays, 768 P.2d  at 14.

[¶6]      Brebaugh involved 
the same partnership in issue here. In that case, the injured employee failed to 
present the partnership agreement and management contract executed by the 
partnership and Dravo in a timely manner for the summary judgment decision. 
Here, however, that partnership agreement and management contract are properly 
before us. Indeed, Pool precisely relies on those very contract documents in 
urging us to reverse the trial court's summary judgment.

[¶7]      Dravo and Pool 
agree that Pool was a partnership employee who received worker's compensation 
benefits from that employer's statutory account, thus entitling that employer to 
immunity from the present tort action. Further, they agree that this court must 
answer the issue at hand by deciding whether the effect of that management 
contract is to strip Dravo of the tort immunity it would otherwise enjoy. In 
Brebaugh, we said that unless an individual partner has contracted away the 
management powers of the employer, he is as much the employer as anyone can be. 
Here we must examine the contract documents to see whether in them Dravo 
contracted away its employer's powers of management.

[¶8]      Pool asserts that 
Dravo is a third party from whom he and his wife may seek tort damages, and not 
a statutory employer cloaked with immunity, because the management contract made 
Dravo an independent contractor which owed safety duties to the partnership's 
employees separate and apart from the safety duties owed to them by their 
statutory employer. We disagree.

[¶9]      As we examine the 
partnership agreement and the management contract, we are mindful that, "While 
it is true that a contract is not conclusive evidence of the status of the 
relationship between the parties, it is a strong indication of the intended 
association." Noonan v. Texaco, Inc., 713 P.2d 160, 165 (Wyo. 1986). The 
overriding consideration in establishing independent contractor status is 
whether or not the employer can control details of the work giving rise to 
potential liability. Id. at 164.

[¶10]   In 1978, Dravo and UPMI's 
predecessor in interest, RMEC, executed a written partnership agreement creating 
CCCC, a Colorado general partnership. In that agreement, the partners 
specifically referred to a written management contract between CCCC, the 
partnership, and Dravo, one of the partners. The parties executed the management 
contract the same day as the partnership agreement was executed.

[¶11]   Under the provisions of the 
partnership agreement, the partnership's business was to acquire, develop, and 
conduct underground coal mining operations on lands as to which UPMI (RMEC) 
owned mining rights. Dravo bore 56.5 percent and UPMI (RMEC) bore 43.5 percent 
of the initial funding of $45 million required for fixed assets, mine 
development, and railroad spur track. For working capital needs beyond that 
first $45 million, the partners shared equally. Each partner would recoup its 
share of that initial funding from partnership profit in proportion to each 
partner's initial outlay. As to all other partnership profits, issues, and 
expenses, the partners shared equally.

[¶12]   The partners had equal management 
rights which were exercised through a management committee. Each partner had two 
representatives on that committee. Dravo had the general charge of the conduct 
of the day-to-day partnership operations subject to the supervision and control 
of the management contract and the management provision of the partnership 
agreement. The partnership's management committee appointed the partnership's 
chief operating officer, called a general manager, who was responsible and 
reported to Dravo. The general manager had charge and control of the mine's 
day-to-day operation. The partnership paid as a partnership expense the 
compensation due Dravo as managing partner under the management 
contract.

[¶13]   Under the provisions of the 
management contract, Dravo supervised the operation and maintenance of the 
underground coal mine and performed all functions and services normally required 
for that operation and maintenance. In return for Dravo's management, the 
partnership paid Dravo a $500,000 annual management fee. In performing its 
management work Dravo:

 hired and fired the partnership's 
employees;

 acquired all property and assets required 
to conduct the partnership's business;

 paid the partnership's direct costs and 
expenses from the partnership's funds;

 obtained and maintained insurance 
coverage for the partnership's operations at the partnership's 
expense;

 complied with federal and state laws 
concerning compensation, social security, and unemployment benefits at the 
partnership's expense;

 made the partnership's business 
expenditures at the partnership's expense;

 protected the surface owners' lands 
against and paid damages resulting from the partnership's 
operations;

 prepared and submitted to the partnership 
operations reports, production programs, financial plans and budgets, and 
production and inventory reports;

 performed the partnership's operations 
diligently in accordance with generally accepted standards of the mining 
industry and partnership-approved programs;

 advised the partnership about operations 
and reserves development; and

 performed the partnership's 
administrative services.

[¶14]   In our judgment, the management 
contract does not establish an independent contractor relationship between Dravo 
and CCCC. To the contrary, the contract establishes Dravo as the managing or 
operating partner whose management duties are subject to and performed in the 
name of the partnership. We have no hesitation in concluding that the duties 
performed by Dravo under the management contract are the essence of the 
employer's duties. W.S. 17-13-401(a)(v) (June 1987 Repl.) specifically allows 
the partners to enter into agreements concerning their management rights in 
relation to the partnership. "As to the right to participate in management, the 
partners may concentrate management power inter sese in one or more managing 
partners." II A. Bromberg & L. Ribstein, Bromberg & Ribstein on 
Partnership § 6.03(b), at 6:39-6:40 (1988).

[¶15]   The Pools claim, however, that the 
annual fee paid by CCCC to Dravo contravenes the requirement that "No partner is 
entitled to remuneration for acting in the partnership business * * *." W.S. 
17-13-401(a)(vi). This statutory provision, however, like the provision relating 
to partners' management rights, is subject to a contrary agreement between the 
partners. W.S. 17-13-401(a). Commenting on this point, Bromberg and Ribstein 
inform us, "The basic rule is often altered by express agreement." II A. 
Bromberg and L. Ribstein, supra, § 6.02 at 6:28, and see cases 
cited.

[¶16]   The Pools urge us to treat 
individual partners as separate entities from the partnership, inviting us to 
apply the parent corporation/subsidiary corporation rationale found in Stratman 
v. Admiral Beverage Corporation, 760 P.2d 974 (Wyo. 1988), and Fiscus v. 
Atlantic Richfield Company, 742 P.2d 198 (Wyo. 1987). We reject that invitation. 
We made clear in Hays the fundamental legal difference between a corporation and 
a partnership:

     A corporation has a 
separate legal existence, distinct from its officers. The corporation, as 
separate entity is the employer, and the officers are employees [Citation.] The 
partnership, however, is fundamentally unlike a corporation. A partnership is 
merely the aggregate of the individuals comprising it, and is not an entity 
distinct from its members.

Hays, 768 P.2d  
at 16.

[¶17]   In conclusion, we hold that a 
partnership employee who has received worker's compensation benefits for a 
work-related injury may not maintain a tort action against an individual partner 
who manages the partnership's day-to-day operations under a contract with the 
partnership. The managing partner is an employer for purposes of the immunity 
provisions of the Wyoming Worker's Compensation law.

[¶18]   Affirmed.

URBIGKIT, Justice, 
dissenting.

[¶19]   I dissent for essentially the same 
reasons offered in Brebaugh v. Hales, 788 P.2d 1128 (Wyo. 1990). I would hold 
Dravo Coal Company is not entitled to that summary judgment as a matter of law. 
Stephenson v. Pacific Power & Light Co., 779 P.2d 1169 (Wyo. 1989); Cordova 
v. Gosar, 719 P.2d 625, 634-40 (Wyo. 1986).

[¶20]   Beyond that, I also differ with the 
majority's statement that W.S. 17-13-401(a)(v) (June 1987 Repl.) "specifically 
allows the partners to enter into agreements concerning their management rights 
in relation to the partnership." W.S. 17-13-401(a)(v) (June 1987 Repl.) provides 
"[a]ll partners have equal rights in the management and conduct of the 
partnership business," which subparagraph is subject to the initial clause of 
the section which, in predominating effect, states: "subject to any agreement 
between them, * * *." W.S. 17-13-401(a) (June 1987 Repl.). It is an external 
agreement made here, not between the partners, but by the partnership with a 
contractor, albeit a partner, that is involved in this case as the actual 
business relationship.

[¶21]   My primary difficulty, however, is 
with the pathway to decision taken by the majority. The argument for decision 
comes in segments which seem disconnected and for that reason does no work in 
logical conclusion to sustain the holding. We are told the overriding 
consideration in establishing independent contractor status is whether or not 
the employer can control details of the work giving rise to potential liability. 
Then we are told the "partners had equal management rights which were exercised 
through a management committee" when they contracted away any equality of 
management and paid Dravo Coal Company $500,000 per year to be a contractor and, 
as such, to "perform[] all functions and services normally required for 
[management]." Finally, we learn that Dravo Coal Company cannot be an 
independent contractor because we hold a managing partner is an employer. The 
syllogistic quality escapes me.

[¶22]   While I agree partners typically 
are not distinct from the partnership, Hays v. State ex rel. Wyoming Workers' 
Compensation Div., 768 P.2d 11 (Wyo. 1989), I would not agree a corporate 
entity, such as Dravo Coal Company, can never, by separate provisions or 
agreement, acquire an identity beyond that of a partner. In this case, it did by 
a written management contract.

[¶23]   In application of an entity 
analysis which recognizes the separate contractor creation of the parties by 
their written agreement, I respectfully dissent from the summary judgment 
contrarily granted.

Footnote

1 Bridger Coal Company 
filed an amicus curiae brief with the issue:

Are 
all members of a partnership or joint venture, as well as the partnership or 
joint venture itself, the employer of all employees working in pursuit of the 
partnership's or joint venture's business for purposes of the Wyoming Worker's 
Compensation Act?