1999 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

1-25-1999

C & K Coal Co v. BRB

Precedential or Non-Precedential:

Docket 98-3151

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Recommended Citation

"C & K Coal Co v. BRB" (1999). 1999 Decisions. Paper 19.

http://digitalcommons.law.villanova.edu/thirdcircuit_1999/19
Filed January 25, 1999 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 98-3151 

C & K COAL COMPANY, 

 Petitioner 

v. 

VIRGINIA TAYLOR, widow of William Taylor, LAMP COAL

COMPANY, OLD REPUBLIC INSURANCE COMPANY, and 

DIRECTOR, OFFICE OF WORKERS' COMPENSATION 

PROGRAMS, UNITED STATES DEPARTMENT OF LABOR, 

ON APPEAL FROM A PETITION 

FOR REVIEW OF A DECISION AND ORDER 

OF THE BENEFITS REVIEW BOARD 

DATED JANUARY 8, 1998 

(BLA No. 95-1531) 

Argued November 17, 1998 

Before: McKEE, RENDELL, and WEIS, Circuit Judges. 

Filed: January 25, 1999 

 Martha A. Zeigler Eberhardt, 

 Esquire (ARGUED) 

 John B. Bechtol, Esquire 

 Bechtol Lee & Eberhardt 

 The Ewart Building, 2nd Floor 

 925 Liberty Avenue 

 Pittsburgh, PA 15222 

 Attorney for Petitioner 
 Mark S. Flynn, Esquire (ARGUED) 

 Director, Office of Workers' 

 Compensation Programs 

 Marvin Krislov, Esquire 

 Deputy Solicitor for National 

 Operations 

 Allen H. Feldman, Esquire 

 Associate Solicitor for Special 

 Appellate and Supreme Court 

 Litigation 

 Nathaniel Spiller, Esquire 

 Deputy Associate Solicitor 

 United States Department of Labor 

 200 Constitution Avenue, N.W. 

 Room N-2700 

 Washington, D.C. 20210 

 Attorneys for Respondent Director, 

 Office of Workers' Compensation 

 Programs 

 Mark E. Solomons, Esquire 

 (ARGUED) 

 Laura Metcoff Klaus, Esquire 

 Arter & Hadden, LLP 

 Suite 400K 

 1801 K Street, N.W. 

 Washington, D.C. 20006 

 Attorneys for Respondents Lamp 

 Coal Company and Old Republic 

 Insurance Company 

OPINION OF THE COURT 

WEIS, Circuit Judge. 

The issue in this Petition for Review is whether the 

successor operator of a coal mine is responsible for 

payment of Black Lung benefits to a long-time employee of 

the mine who worked for the successor for only a few 

months. We conclude that, under the Black Lung Benefits 

 2 
Act and implementing regulations, the successor operator, 

as opposed to the prior operator, is liable. We also decide 

that, despite inexcusable and prolonged delay in the 

administrative process, responsibility for payment should 

not be shifted to the Black Lung Disability Trust Fund 

under the circumstances presented here. Accordingly, we 

will deny the Petition for Review. 

By Friday, August 23, 1974, William Taylor had worked 

as a coal miner for Lamp Coal Company ("Lamp") for 

approximately twenty-seven years. On that day, Lamp

terminated all of its employees and sold its assets to 

Cambria Coal Company, a subsidiary of C & K Coal 

Company. Taylor returned to work the following Monday as 

a supervisor for C & K and he worked in that position until 

November 23, 1974 when he retired. 

Taylor applied for Black Lung benefits in January 1975, 

listing Lamp as his most recent employer. The Office of 

Workers' Compensation Programs ("Office") preliminarily 

approved the application effective January 1, 1975 and 

notified Lamp that it was responsible for payment. Lamp 

objected, informing the Office that it was not Taylor's most 

recent employer. 

Taylor's Social Security records confirmed that C & K was 

his last employer but the Office, unaware of the sale and 

potential successor liability, determined that C & K could 

not be responsible because Taylor had not worked for that 

employer for a year as required by regulation. Lamp then 

formally controverted the claim. 

In September 1977, having learned of the sale of assets, 

the Office notified C & K that it was the responsible 

operator. C & K then controverted the claim. In November 

1977, the Office acknowledged the objection but informed C 

& K of its right to have the miner examined and forwarded 

a copy of the evidence file. In January 1978, after

development of additional uncertainty over the sale, the 

claim was remanded to the Office at the Director's request 

for a redetermination. 

Pending designation of a responsible operator, Taylor 

received benefits from the Black Lung Disability Trust 

Fund. He died in May 1980, and his widow continued to 

 3 
receive benefits from the Fund. One month after Taylor's 

death, the Office again designated C & K as the responsible 

operator. More questions arose, however, and after further 

consideration, in 1981 the Office pointed back at Lamp. 

This time, Lamp's insurer objected. Four more years passed 

before the Office concluded in 1986 that C & K, as Lamp's 

successor, was the responsible operator. 

The matter was eventually assigned to an ALJ for a 

hearing in 1988. Both operators were named and appeared 

as potentially responsible parties. They convinced the ALJ 

that the lengthy procedural delay had violated their 

respective due process rights. The ALJ ultimately dismissed 

both C & K and Lamp and assigned liability to the Trust 

Fund. 

The Director appealed to the Benefits Review Board. Five 

years later, in February 1993, the Board reversed and 

remanded to the ALJ with directions to consider both the 

widow's entitlement and C & K's liability. On August 25, 

1995, the ALJ awarded benefits to the widow and held C & 

K responsible. The Board affirmed, both initially and upon 

reconsideration. This petition for review followed.

We review this final order of the Board pursuant to 33 

U.S.C. S 921(c), as incorporated into the Black Lung 

Benefits Act, 30 U.S.C. S 932(a). Factual determinations by 

the Board will be upheld if supported by substantial 

evidence; questions of law receive plenary review. See 33 

U.S.C. S 921(b)(3); Venicassa v. Consolidation Coal Co., 137 

F.3d 197, 200 (3d Cir. 1998). 

The widow's entitlement to benefits is not contested in 

this petition. Rather, the only question is the source of 

payment. C & K disputes its responsibility and contends 

alternatively that the extended administrative delay violated 

its due process rights. 

I. 

The Black Lung Benefits Act, 30 U.S.C. S 901 et seq., 

seeks to hold operators liable for the costs of 

pneumoconiosis. Because miners often shifted between 

employers and operators went out of business, became 

 4 
insolvent or merged with others, industry realities

necessitated some complex rules for identifying a 

responsible operator. The long latency period and 

complications associated with pneumoconiosis posed 

additional problems in terms of the equitable assignment of 

responsibility. Anticipating situations in which it would be 

impossible to trace or assess the responsible operator, 

Congress established the Trust Fund. See 26 U.S.C. S 9501. 

Financed by the coal industry, the Fund becomes a source 

of benefit payments only when a responsible operator 

cannot be identified, has gone out of business or is 

financially incapable of assuming liability. See 26 U.S.C. 

S 9501(d). 

Liability generally attaches to the affected miner's most 

recent employer. Foreseeing problems attendant upon the 

transfer of mine ownership, however, Congress specified in 

30 U.S.C. S 932(i)(1) that: "the operator of a coal mine who 

. . . acquired such mine or substantially all the assets 

thereof, from a . . . `prior operator' . . . shall be liable for 

. . . the payment of all benefits which would have been 

payable by the prior operator . . . with respect to miners 

previously employed by such prior operator as if the 

acquisition had not occurred and the prior operator had 

continued to be an operator of a coal mine." A more specific 

provision, aimed directly at the sale of mining assets, 

provides: "[i]f an operator ceases to exist by reason of a sale 

of substantially all his or her assets . . . the successor 

operator . . . shall be treated as the operator to whom this 

section applies." See 30 U.S.C. S 932(i)(3)(D). 

Pursuant to statutory direction, the Secretary of Labor 

duly promulgated regulations to determine "whether 

pneumoconiosis arose out of employment in a particular 

coal mine or mines" and to identify the responsible

operator. See 30 U.S.C. S 932(h); 20 C.F.R. SS 725.490 - 

725.493. The regulation at issue, 20 C.F.R. S 725.493, 

designates as the responsible operator the employer with 

which the miner has the most recent period of cumulative 

employment of not less than one year. See 20 C.F.R.

S 725.493(a)(1); see also Appendix for text of 20 C.F.R. 

S 725.493(a)(1), (a)(2)(i), (a)(2)(ii), (a)(4). 

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Echoing the Act, however, the paragraph immediately

following provides that the successor operator "shall be 

liable for . . . benefits which would have been payable by 

the prior operator with respect to miners previously 

employed by such prior operator as if the acquisition had 

not occurred and the prior operator had continued to be a 

coal mine operator." See 20 C.F.R. S 725.493(a)(2)(i); see 

also 30 U.S.C. S 932(i)(1). The one-year minimum 

employment rule is expressly made "[s]ubject to" the 

provisions of this paragraph. See 20 C.F.R. S 725.493(a)(1) 

("Subject to the provisions of paragraph[ ] (a)(2)"). Moreover, 

as the more specific provision, paragraph (a)(2), by its 

placement and content, operates as an exception to the 

one-year minimum employment rule. Thus, the successor 

situation, expressly covered by paragraph (a)(2)(i), is not 

governed by the rule set forth in paragraph (a)(1), i.e., the 

minimum employment rule. 

In addition to these specific successor operator rules, the 

Act and regulations establish a framework for determining 

which, as between the prior and successor operator, is 

"primarily liable" for the payment of benefits. See 30 U.S.C. 

S 932(i)(2); 20 C.F.R. S 725.493(a)(2)(ii). Noting that 

Congress sought to prevent an operator from circumventing 

responsibility by entering into corporate or other business 

transactions which "make the assessment of liability 

against that operator a financial or legal impossibility," 

subsection (a)(2)(ii) of the regulation provides that a "prior 

operator . . . shall remain primarily liable for the payment 

of benefits under this part predicated on employment with 

the prior operator" if it is able to assume financial 

responsibility through insurance or otherwise. See 20 

C.F.R. S 725.493(a)(2)(ii); see also 30 U.S.C. S 932(i)(2). 

Applying these statutory and regulatory provisions, we 

must determine whether Lamp, as the prior operator, or C 

& K, as the successor operator, is responsible. The

Director, seeking to uphold assignment of liability to C & K, 

contends that under the regulations, because it employed 

Taylor, albeit for less than a year, C & K is primarily liable 

as the successor. Lamp, in agreement with the Director, 

maintains that employment by a successor operator 

overrides application of the one-year minimum employment 

 6 
rule. Old Republic, Lamp's insurer, adopts its insured's 

interpretation of the regulation. 

C & K attacks the ALJ finding that Lamp ceased doing 

business upon sale of its assets and, on that basis, argues 

that Lamp remains primarily liable. In addition, C & K 

contends that even if it is a successor, it is not responsible 

because it employed Taylor for less than one year. Finally, 

should we agree that it is responsible, C & K asserts that 

Lamp had agreed to indemnify it against any claims 

existing at the time of the sale. 

We are persuaded that the Director's position is correct. 

In looking first, of course, to the statute, we observe that 

the Act clearly specifies that the successor operator is 

responsible for benefits which "would have been payable" 

by the prior operator for miners previously employed by the 

prior operator as if the prior operator had continued to 

operate the mine. See 30 U.S.C. S 932(i)(1). There is no 

dispute that Taylor previously worked for Lamp and was 

later employed by C & K following the change of ownership. 

Section 932(i)(1), read in isolation, unmistakably 

contemplates assigning responsibility to C & K. 

The paragraph immediately following, however, 

complicates matters because it states that "nothing in 

[subsection 932(i)] shall relieve any prior operator of any 

liability under this section." See 30 U.S.C. S 932(i)(2). 

Together, these provisions of the Act might be read to pose 

a contradiction between assigning liability to the successor 

under (i)(1), yet specifically retaining liability in the prior 

operator under (i)(2). 

The Secretary's regulation, however, eliminates any

apparent inconsistency. Under 20 C.F.R. S 725.493(a)(2)(ii), 

the successor becomes responsible for miners previously 

employed by the prior operator once they are hired by the 

successor following the change in ownership. If, however, 

the miner did not work for the successor, the prior operator 

remains primarily liable. In that situation, primary liability 

only shifts to the successor if the prior operator is 

financially incapable of assuming payments. See 20 C.F.R. 

S 725.493(a)(2)(ii). 

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Translated into the circumstances of this case, because 

Taylor worked for Lamp and continued to work in the mine 

after C & K's subsidiary took it over, C & K becomes 

primarily liable. In other words, once C & K purchased 

Lamp's assets, thereby becoming Lamp's successor, it was 

as if Taylor had worked for C & K twenty-seven years and 

three months. Only if C & K could not otherwise assume 

liability would Lamp remain primarily liable. See 20 C.F.R. 

S 725.493(a)(2)(iii). 

That Taylor worked for C & K for less than a year does 

not alter the outcome. The regulation's one-year minimum 

employment rule is specifically made subject to the special 

rule for successors. See 20 C.F.R. S 725.493(a)(1), (a)(2)(i). 

Moreover, the one-year rule is not contained in the Act, 

which, to the contrary, dictates a special rule for

successors. See 30 U.S.C. S 932(i)(1), (i)(3)(D). We agree with 

the Director's interpretation of the regulation, one that does 

not conflict with the Act, and therefore hold that C & K is 

primarily liable. 

We reject, as based on an erroneous reading of the Act, 

C & K's argument that if indeed Lamp continued as a viable 

entity following the sale of substantially all of its mining 

assets, Lamp remains primarily liable. Neither the basic 

successor rule, 30 U.S.C. S 932(i)(1), nor its more specific 

formulation, 30 U.S.C. S 932(i)(3)(D), require total cessation 

of the prior operator's business before the successor 

becomes potentially liable. In this situation, both operators 

were potentially liable; the question was whether there 

existed any basis for assigning primary liability to C & K. 

We must also deny C & K's plea to apportion liability. We 

do this despite the intrinsic appeal of allocating liability to 

reflect the fact that Taylor had worked for Lamp for 27 

years and for C & K only three months. 

The Act authorized the Secretary to "establish[by 

regulation] standards for apportioning liability for benefits." 

30 U.S.C. S 932(h). The Secretary proposed an 

apportionment-based regulation in 1972, but withdrew it 

amidst adverse comment. See 37 Fed. Reg. 18,167-68 

(Sept. 7, 1972). Apportionment would have introduced a 

substantial degree of complexity and it appeared that fixed 

 8 
guidelines would better serve the mining industry. We note 

a ready analogy in the commercial field where it is

recognized that arbitrary rules known in advance, even if 

inequitable in some specific instances, are on the whole 

necessary for the efficient conduct of business. Accordingly, 

in the absence of a regulation permitting apportionment, 

C & K must bear the full burden of payment. 

II. 

Should it be the responsible operator, C & K argues

vigorously that the administrative delay has denied it due 

process. The remedy, C & K urges, is a total transfer of 

liability to the Trust Fund. 

It appears that the Office was aware as early as 1977 of 

the uncertainty surrounding the responsible operator issue. 

As noted earlier, however, eleven years of wrangling passed 

before all potential parties appeared before an ALJ for a 

basic evidentiary hearing. 

In one of the appeals to the Board, the Director did not 

file his brief for two years beyond the time set by the 

Board's rules. See 20 C.F.R. SS 802.210-802.217. In a 

subsequent appeal, the Director was again delinquent and 

again the Board did not enforce its rules. The Board's 

ultimate decision, upon reconsideration, to affirm was not 

docketed until January 8, 1998. 

Thus, more than 23 years elapsed from the initial 

application to the date of the responsible operator

determination. Fortunately for the Taylors, interim

payments have been made from the Trust Fund. 

Although we recognize that inadequate information 

initially hampered the Office's ability to grasp the 

relationship among Taylor, Lamp and C & K, we are 

appalled that this relatively straightforward issue bounced 

three times between the Office and an ALJ, accompanied by 

unnecessary delays. Similarly, we cannot ignore that the 

Board compounded the delay by permitting the Director to 

flout its rules that set time limits for filing briefs. 

Unfortunately, as we have observed in the past, such 

"dismaying inefficiency" has long characterized the

 9 
administration of this Act. See, e.g. , Venicassa, 137 F.3d at 

198 & n.2 (12 years delay compounded by error of the 

Office); Lango v. Director, OWCP, 104 F.2d 573 (3d Cir. 

1997) (benefits awarded after 14 years); see also Amax Coal 

Co. v. Franklin, 957 F.2d 355, 356 (7th Cir. 1992) ("As so 

often in black lung cases, the processing of th[is] claim has 

been protracted scandalously . . . ."). We publicized our 

dismay in Lango, hoping to bring the Act's poor 

administration "to the attention of authorities who can do 

something about it." 104 F.3d at 576. 

The tortured route that this matter took towards 

resolution simply cannot be justified. Counsel for the 

current Director, with admirable candor, did not try to do 

so at oral argument. Rather, he assured us that steps have 

been taken in the last few years to ensure that Black Lung 

claims are expeditiously resolved. Statistics reveal that the 

number and age of pending Black Lung cases has, indeed, 

steadily decreased. We cannot hope but that this trend 

continues. Recent progress, however, is of little consolation 

to C & K and we must consider its due process challenge 

under the deplorable circumstances here. 

In large part, we view the proposed remedy for the 

asserted due process challenge violation through our 

perception of the Trust Fund's purpose and nature. 

Congress intended operators to bear the costs of 

pneumoconiosis whenever feasible. See S. Rep. No. 95-209, 

at 9 (1977), reprinted in House Comm. on Educ. and Labor, 

96th Cong., Black Lung Benefits Reform Act and Black 

Lung Benefits Revenue Act of 1977, 612 (Comm. Print

1979); see also Director, OWCP v. Oglebay Norton Co., 877 

F.2d 1300, 1304-05 (6th Cir. 1989). The Trust Fund exists 

as a fail-safe mechanism and it is not a creature of the 

Department of Labor, the Office or the Board. See 26 U.S.C. 

S 9501. 

Given the dismal history of the Act's administration, it is 

not hard to envision how quickly a policy of liberal transfer 

of claims to the Fund would deplete its resources. Such a 

remedy, it is generally held, should only be invoked where 

prejudice other than mere delay has been demonstrated. 

For example, in Venicassa, we found that the claimant, 

forced to litigate his entitlement to benefits twice, had been 

 10 
prejudiced by the ten-year delay and improper designation 

of the responsible operator. See 137 F.3d at 202-03. In 

those circumstances, rather than allow the litigation to 

drag on, we concluded that the Trust Fund should assume 

liability. See id. at 203-04. 

In Lane Hollow Coal Co. v. Director, OWCP, 137 F.3d 799 

(4th Cir. 1998), the alleged responsible operator was 

notified 17 years after notice could have been given and 

three years after the claimant died. The Court of Appeals 

for the Fourth Circuit concluded that because the 

inexcusable delay resulted in the loss of an opportunity to 

mount a proper defense, the operator had been denied due 

process. See id. at 808. In light of the substantial prejudice 

shown, payments were assigned to the Trust Fund. See id. 

Oglebay dealt with a similar delay for which an ALJ had 

seen fit to transfer liability to the Trust Fund. See 877 F.2d 

at 1302. The Court of Appeals for the Sixth Circuit

disagreed with that drastic approach, because "none of the 

parties . . . would suffer substantial prejudice by a further 

remand." Id. at 1304. The claimant had been receiving 

interim benefits from the Trust Fund and the operator had 

access to substantial medical evidence sufficient to provide 

an adequate defense on remand. See id. Oglebay simply did 

not involve prejudice comparable to that encountered in 

Venicassa and Lane Hollow. 

The case before us is similar to Oglebay. C & K was

notified in 1977 that its status as a responsible operator 

was under consideration. Thus, it had three years to 

procure appropriate medical evidence before Taylor died. 

On this record, we see no prejudice other than that

attendant on the failure to confirm the liability that had 

been asserted years earlier. C & K makes some vague

reference to harm in connection with contractual rights it 

may have had to indemnification from Lamp, but, as that 

position is not clearly articulated, we do not find it 

persuasive. 

Accordingly, we will not hold that this delay, albeit 

inexcusable, ipso facto establishes a violation of C & K's 

due process rights. The fact that the delay cannot be 

attributed to the Trust Fund is an important additional 

 11 
factor. Foisting liability on the Trust Fund where no 

demonstrable prejudice has occurred would run counter to 

Congressional intent by effectively shifting responsibility for 

the Office's and the Board's failings onto contributing 

operators. We will not take that action when there is an 

operator legally responsible and financially capable of 

assuming payments. 

We conclude that C & K is the legally responsible 

operator and that, while the delay present in this case 

cannot be condoned, neither its occurrence nor its 

consequences should be visited upon an innocent party, 

the Trust Fund. 

Accordingly, the petition for review will be denied. 

APPENDIX 

20 C.F.R. S 725.493 (1998). Criteria for identifying a 

responsible operator. 

(a)(1) Subject to the provisions of paragraphs (a)(2) and 

(3) of this section, and provided that the conditions of 

S 725.492(a)(2) through (a)(4) are met, the operator or other 

employer with which the miner had the most recent periods 

of cumulative employment of not less than 1 year, as 

determined in accordance with paragraph (b) of this

section, shall be the responsible operator. 

(2)(i) Except as otherwise provided in this paragraph, if 

the operator described in paragraph (a)(1) of this section 

was an operator of a mine or mines or the owner of the 

assets thereof on or after January 1, 1970, (a "prior 

operator") and on or after January 1, 1970, transferred 

such mine or mines or substantially all of the assets thereof 

to another operator (a "successor operator"), such 

successor operator shall be liable for and shall secure the 

payment of all benefits which would have been payable by 

the prior operator with respect to miners previously 

employed by such prior operator as if the acquisition had 

not occurred and the prior operator had continued to be a 

coal mine operator. A lessor of a coal mine may be 

considered a prior or successor operator in accordance with 

this subpart. 

 12 
(ii) The stated congressional objective supporting section 

422(i) of the Act is to prevent a coal operator from 

circumventing liability under this part by entering into 

corporate or other business transactions which make the 

assessment of liability against that operator afinancial or 

legal impossibility. Accordingly, a prior operator under 

paragraph (a)(2)(i) of this section, which transfers a mine or 

mines or substantially all the assets thereof, shall remain 

primarily liable for the payment of benefits under this part 

predicated on employment with the prior operator if such 

prior operator meets the conditions of S 725.492(a)(2) and 

(a)(4). If the conditions in S 725.492(a)(2) and (a)(4) are not 

met, the successor operator shall, if appropriate, be liable 

for the payment of such benefits. 

. . . . 

(4) If there is no operator which meets the conditions of 

paragraphs (a)(1) or (2) of this section, the responsible 

operator shall be considered to be the operator with which 

the miner had the latest periods of cumulative employment 

of not less than 1 year, subject to the provisions of 

paragraph (a)(2) of this section and provided that the 

conditions of S 725.492(a)(2)-(a)(4) are met. 

. . . . 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 13