Opinion ID: 6929869
Heading Depth: 3
Heading Rank: 2

Heading: Right to' Control Absent Corporate Affiliation — Fact or Law

Text: Accordingly, at this point we part company with Long's determination that “the question of whether the rights retained under the leases are equivalent to the terms ‘supervision’ and ‘control’ as used in the Act is ... a question of statutory construction and interpretation, i.e., a question of law and not of fact.” Long, 1 BLR at 1-164. Rather, we agree with Elliot that neither the regulations nor the statements of the Secretary concerning the meaning of the Act imply a per se rule. They speak in permissive, not mandatory terms, because the Secretary in her statements and the regulations themselves has indicated that whether a lessor is an operator responsible for black lung benefits must be determined on a case-by-case basis. Absent some corporate relation that gives lessor or owner de facto power to control the person nominally in charge of operations, 24 we think the decision whether a particular lessor has retained a substantial right or power to control its lessee’s operations is for the ALJ to resolve by inference from his findings of historical fact, not one for the Board to decide as a question of law. Indeed, the Board itself has stated that resolution of the control issue calls for a two-part inquiry requiring evaluation of the relationships of the parties to the leases, along with the lease terms themselves. Id. at 1-164. The Board’s statement, “What the Act is concerned with here is not the technical refinements of title, but rather the realities of supervision and control,” is not to the contrary. Id. at 1-174. The question of who determines the “realities” remains. Thus, while we agree with Long that the issue is the lessor’s right or power to control, not the actual exercise of control, we also believe that the determination of who is an operator is fact specific, absent evidence of interlocking corporate relationships which would always give the owner or lessor an effective right of control. 3. Substantial Evidence Supports the ALJ’s Finding That Elliot Had No Effective Power to Control Its Lessees’ Operations Here, there is no evidence that Elliot had any corporate power to control or influence the operation of its lessees. Elliot’s leases and subleases are arms-length transactions, not completely uniform in their terms, and not contracts of adhesion as in Long. See Long, 1 BLR at 1-165 to 1-168. In addition, Elliot had lost four million dollars when it ceased operations and sought only to recoup some of that loss by preserving its rights to the coal under its lease agreements. There is no evidence that the leases in the instant case yielded substantial revenue, or any revenue, for Elliot. In contrast, there is evidence in the record that the terms of Elliot’s subleases were dictated to it by its lessors in accord with the terms of the prime leases. Furthermore, revenues and royalties derived from Elliot’s subleases were primarily passed through to Elliot’s lessors. Deep mining was never continued after June 1973, on the lands Elliot owned in fee, though strip mining was conducted on them by independent contractors such as Helena up to 1978. Thereafter, Power leased them from Elliot under agreements that gave it the right to mine them to exhaustion. It follows that there is substantial evidence on the whole record from which the ALJ could have found that Elliot was not an owner or lessor who retained substantial power to control mining operations on lands it leased to others for its own economic benefit. There is likewise substantial evidence to show that Elliot is not an owner or lessor who simply changed corporate form, structure or method of operation in order to retain the economic value of coal mined from its lands while avoiding responsibility for black lung benefits due the miners who worked for it after the Act became effective. We also think the ALJ could properly infer that Elliot was a failed business seeking to liquidate its assets in preparation for dissolution. In doing so, he seems to have credited Elliot’s President’s testimony that the decision to shut down Elliot’s operations was based on economic factors arising out of the losses it had incurred, and that Elliot granted its sublessees mining rights to prevent complete loss of the rights its own lessors had given it. Perhaps most significantly, there is evidence in this record indicating that Elliot had no effective power to supervise to any substantial degree the strip mining done by the independent contractors who operated after June 1973, on lands leased from Elliot. The evidence also shows that Elliot gained little economic benefit from the mining that continued after June 30, 1973, on the lands it leased to others. Long, former President of Elliot, testified in his deposition that the revenue derived from strip mining by the independent contractors was paid to Elliot and then passed through to Elliot’s lessors. He stated: “We did not as Elliot have a royalty to us. It was a pass-through to the owner of the land.” App. at 508. “We were obligated to pay the owner those lands of royalties [sic]. And if somebody else was there through us, they had to abide by the terms of the owners of the land whatever they were. Not by our rules, but by theirs.” App. at 509. The testimony of Minds, one of Elliot’s sublessees, also supports the ALJ’s finding that Elliot had no substantial power to control mining operations on the leased coal lands. He stated: “The property I was on Elliot didn’t even own. They had it leased from Kittanning [sic] Coal.” App. at 463. There is similar testimony from other lessees that they were not supervised or controlled in any way by Elliot and that Elliot never inspected any records despite the provision in some leases that permitted their inspection. Elliot did not have any right to tell its lessees to whom the coal they mined should be sold. It did not inspect operations. The independent contractors were responsible for insurance and compensation, determining what type of equipment to use, and inspection for safety hazards. The independent contractors who mined coal under Elliot’s leases also testified that they had undertaken the responsibility for safety or environmental violations. Finally, the sublease agreements between Elliot and Power provided that “[i]t is understood by Elliot and Power that this sublease agreement is derivative from Elliot’s rights under the GR Prime Lease and Power shall do nothing to violate any term, condition, covenant, stipulation or agreement contained in the GR Prime Lease and that any such violation by Power shall give Elliot the right to terminate this sublease.” App. at 191 (sublease between Elliot and Power). This same provision is contained in four other subleases with Power. The contract between Minds and Elliot also includes a consent to the sublease by the owner of the land, Kit-taning Coal. Though we agree with the Board that the key issue is whether there is evidence of a lessor’s right to control, not evidence that actual control was exercised, the lessor’s ability to control must be substantial. On this record, Elliot, given its financial condition and the pressures exerted by its own lessors, had only a limited ability to control and supervise its lessees and sublessees. The Board’s determination that “Elliot not only retained ownership of the mining permits but also possessed, under its lease agreements, the right of inspection, the right of ejectment and confession of judgment and the right to direct the manner of coal extraction,” though correct, is not controlling on Elliot’s status as a responsible operator liable for black lung benefits due Kovalchick and its other former miners. App. at 24-25 (emphasis deleted). It is instead a fact that could be inferred from the record, but it is not a proper conclusion of law made necessary from the facts and record in this case. Although legal rights that evidence some power of control were enumerated in some of the leases Elliot granted after June 30, 1973, the ALJ, as factfinder, had before him substantial evidence that they were required by Elliot’s own prime lessors who were the ones who had substantial power to control coal mining operations on the facts of this case. Elliot’s lessors received the economic benefit of mining operations on the lands Elliot leased to others when it paid over to them the money collected from the persons, such as Helena, Power, and Minds, to whom it had granted mining rights. By doing so, Elliot hoped only to avoid breaching its lease agreements and preserve whatever value its mining leases had while it attempted to liquidate its assets. Elliot itself did not derive substantial revenue from the lease agreements and was not changing corporate form to evade liability as the responsible operator regulations were intended to prevent. The ALJ found that: Elliot was not a lessor with enough substantial control to make it a Responsible Operator within the meaning of the regulations. The regulations were enacted to prevent a coal mine company from circumventing responsibility for black lung benefits by merely changing the form with which it does business. Here, there were arms-length leases and Elliot exerted little or no control over the lessees. Moreover, the control and supervision in Long v. Clearfield Bituminous Coal Corp., 1 BLR 1-149 (1977) is not present here. See Moore v. Duquesne Light Co., ... BRB No. 80-147 BLA (June 19, 1981). App. at 13. Because this finding is supported by substantial evidence, the Board erred when it decided that any owner or lessor who, like Elliot, retains rights similar to those present here in lease agreements executed and effective after June 30, 1973, is a responsible operator under § 3(d) of the Act and 20 C.F.R. § 725.492(a)(2). The Board exceeded its power in overturning the ALJ’s decision and concluding that Elliot was an operator who was liable to former employees like Kovalchick because it continued to operate coal mines after June 30, 1973.