Court Opinion

ID: 6329751
Source: CourtListenerOpinion
Date Created: 2022-04-12 22:10:42.030145+00
Date Added: 2024-06-11T09:25:06.292979
License: Public Domain

RENDERED: APRIL 1, 2022; 10:00 A.M.
                        NOT TO BE PUBLISHED

               Commonwealth of Kentucky
                         Court of Appeals

                            NO. 2021-CA-0022-MR

VIKING ACQUISITION GROUP, LLC                                     APPELLANT

                   APPEAL FROM PIKE CIRCUIT COURT
v.                HONORABLE EDDY COLEMAN, JUDGE
                        ACTION NO. 19-CI-00993

COMMONWEALTH OF KENTUCKY,
ENERGY AND ENVIRONMENT
CABINET AND REBECCA W.
GOODMAN, SECRETARY, ENERGY
AND ENVIRONMENT CABINET                                            APPELLEES

                                  OPINION
                                 AFFIRMING

                                 ** ** ** ** **

BEFORE: ACREE, CETRULO, AND TAYLOR, JUDGES.

TAYLOR, JUDGE: Viking Acquisition Group, LLC (Viking) appeals an Opinion

and Order entered December 23, 2020, by the Pike Circuit Court granting

summary judgment in favor of the Commonwealth of Kentucky, Energy and

Environment Cabinet (Cabinet). We affirm.
                                        Background

              In 2011, the Cabinet issued a surface coal mining and reclamation

permit to Viking. The permit involved approximately 394 acres of land in Pike

County, Kentucky. In order to obtain the permit, Viking was required to post

various performance bonds. The permit expired in September of 2014. Also,

beginning in 2014, the Cabinet issued at least ten notices of noncompliance and

failure to abate cessation orders. Viking failed to contest the factual basis of each

noncompliance, resulting in final orders from the Cabinet’s Secretary in each

instance. On March 27, 2017, pursuant to 405 Kentucky Administrative

Regulations (KAR) 10:050, the Cabinet initiated the forfeiture of the bonds on the

permit and issued a Determination of Bond Forfeiture to Viking, forfeiting all

bonds and citing the numerous notices of noncompliance and failure to abate

cessation orders.1

              On May 23, 2017, Viking filed a petition for review with the Cabinet

pursuant to 400 KAR 1:110, Section 9, challenging the Cabinet’s determination.

Therein, the sole issue raised by Viking was the Cabinet’s failure to file a petition

for an administrative hearing to initiate a bond forfeiture action in accordance with

1
 Viking Acquisition Group, LLC (Viking), did not file a petition for an administrative hearing
within thirty days to contest the assessment of civil penalties as provided by 405 Kentucky
Administrative Regulations (KAR) 7:092, Section 9, recodified to 400 KAR 1:110, Section 7,
effective Aug. 4, 2017.

                                              -2-
400 KAR 1:110, Section 5. The parties filed cross-motions for summary

disposition and the Administrative Hearing Officer recommended bond forfeiture

and permit revocation. Viking filed exceptions to the Hearing Officer’s report;

however, the Cabinet’s Secretary entered a final order on August 23, 2019,

adopting the Hearing Officer’s report and recommendations without modification.

Thereafter, on September 23, 2019, Viking filed a complaint in the Pike Circuit

Court seeking review of the Cabinet’s final order. Cross-motions for summary

judgment were filed by the parties. Following a hearing on the motions, the circuit

court entered an Opinion and Order on February 23, 2020, granting summary

judgment to the Cabinet. This appeal followed.

                               Standard of Review

            Customarily, our review of a summary judgment is guided by

Kentucky Rules of Civil Procedure (CR) 56.03 and Steelvest, Inc. v. Scansteel

Service Center, Inc., 807 S.W.2d 476 (Ky. 1991). However, judicial review of an

administrative agency’s decision is generally concerned with arbitrariness. Our

review is provided by Kentucky Revised Statutes (KRS) 13B.160 and is guided by

KRS 13B.150:

            (2) The court shall not substitute its judgment for that of
            the agency as to the weight of the evidence on questions
            of fact. The court may affirm the final order or it may
            reverse the final order, in whole or in part, and remand
            the case for further proceedings if it finds the agency’s
            final order is:

                                        -3-
                (a) In violation of constitutional or statutory
                    provisions;

                (b) In excess of the statutory authority of the agency;

                (c) Without support of substantial evidence on the
                    whole record;

                (d) Arbitrary, capricious, or characterized by abuse of
                   discretion;

                (e) Based on an ex parte communication which
                    substantially prejudiced the rights of any party and
                    likely affected the outcome of the hearing;

                (f) Prejudiced by a failure of the person conducting a
                    proceeding to be disqualified pursuant to KRS
                    13B.040(2); or

                (g) Deficient as otherwise provided by law.

            To the extent questions of law arise out of an administrative

proceeding, the court’s review is de novo. Aubrey v. Off. of the Att’y Gen., 994

S.W.2d 516, 519 (Ky. App. 1998). Further,

             [t]he purpose of judicial review of an appeal from an
            administrative agency is to ensure that the agency did not
            act arbitrarily. Baesler v. Lexington-Fayette Urban
            County Government, 237 S.W.3d 209 (Ky. App. 2007).
            If the Court concludes that the agency applied the correct
            rule of law to the facts supported by substantial evidence,
            the final order of the agency must be affirmed. Bowling
            v. Natural Resources and Environmental Protection
            Cabinet, 891 S.W.2d 406 (Ky. App. 1994).

Com., Energy and Env’t Cabinet v. Spurlock, 308 S.W.3d 221, 223 (Ky. App.

2010).

                                         -4-
                                           Analysis

              We begin by noting that Viking has not, at any time, made a factual

argument regarding the Notices of Non-Compliance or the resulting final orders of

the Cabinet’s Secretary. The only issue Viking has presented is whether the

Cabinet followed the proper administrative procedure set out in the applicable

regulations regarding the forfeiture of the bonds. Specifically, Viking argues the

Cabinet improperly proceeded under 405 KAR 10:050, which does not require a

hearing prior to forfeiture of the bonds. Viking asserts the Cabinet is required to

conduct an administrative hearing prior to bond forfeiture pursuant to 400 KAR

1:110, Section 5(1)(c) because this regulation is more specific regarding bond

forfeiture.2 Like the circuit court, we disagree with this argument.

              405 KAR 10:050 is entitled “Bond Forfeiture” and states, in relevant

part,

              NECESSITY, FUNCTION, AND CONFORMITY:
              KRS Chapter 350 requires the cabinet to regulate surface
              coal mining and reclamation operations in a manner as to
              ensure that satisfactory reclamation is accomplished.
              This administrative regulation establishes the procedures
              and criteria by means of which a bond may be forfeited
              to the cabinet. This administrative regulation establishes
              that certain violations of KRS Chapter 350 and
              administrative regulations promulgated pursuant to that
              chapter may cause a bond to be forfeited. This
              administrative regulation establishes that a hearing may

2
 When two statutes involve the same subject matter, one broadly and one specifically, the
specific statute is controlling. Destock #14, Inc. v. Logsdon, 993 S.W.2d 952, 959 (Ky. 1999).

                                              -5-
             be requested before forfeiture can be effected. This
             administrative regulation establishes the method to
             determine the amount of bond forfeiture.

             405 KAR 10:050 Section 2 is entitled “Procedures” and states, in

relevant part,

             (1) Except as established in subsection (2) of this section,
             if forfeiture of the bond is required by Section 3 of this
             administrative regulation, the cabinet shall:

                    (a) Send written notification by certified
                    mail, return receipt requested, to the
                    permittee, and to the surety on the bond, if
                    applicable, of the cabinet’s determination to
                    initiate forfeiture of the bond and the
                    reasons for the forfeiture;

                    (b) Advise the permittee and surety, if
                    applicable, of their right to challenge the
                    determination pursuant to 400 KAR 1:110,
                    Section 9; and

                    (c) If no hearing is requested within thirty
                    (30) days following notification and the
                    bond proceeds are not received, enter a final
                    order of forfeiture and proceed in an action
                    for collection on the bond.

             (2) The cabinet may, as an alternative to following the
             procedures of subsection (1) of this section, initiate
             formal hearing procedures concerning forfeiture of the
             bond alone or in conjunction with the cabinet’s action for
             other appropriate remedies against the permittee pursuant
             to 400 KAR 1:110, Section 5.

(Emphasis added.)

                                         -6-
              405 KAR 10:050 Section 3 is entitled “Criteria for Forfeiture” and

states, in relevant part,

              (1) A bond for a permit area or increment shall be
              forfeited, if the cabinet finds that:

                     (a) The permittee has violated any of the
                     terms or conditions of the bond and has
                     failed to take corrective action;

                     (b) The permittee has failed to conduct the
                     surface mining and reclamation operations
                     in accordance with KRS Chapter 350, the
                     conditions of the permit or 405 KAR
                     Chapters 7 through 24 within the time
                     required;

                     (c) The permit for the area or increment
                     under bond has been revoked or the
                     operation terminated, unless the permittee,
                     surety, or other financial institution
                     providing bond assumes liability pursuant to
                     an agreement for the completion of
                     reclamation; or

                     (d) The permittee, surety, or other financial
                     institution providing bond has failed to
                     comply with a compliance schedule
                     approved pursuant to Section 1(2) or (3) of
                     this administrative regulation.

                     ....

              (2) A bond may be forfeited if the cabinet finds that:

                     (a) 1. The permittee has become insolvent;
                     or

                                          -7-
                         2. A creditor of the permittee has
                         attached or executed judgment
                         against the permittee’s equipment,
                         materials, or facilities, at the permit
                         area; and

                    (b) The permittee cannot demonstrate or
                    prove the ability to continue to operate in
                    compliance with KRS Chapter 350, 405
                    KAR Chapters 7 through 24, and the permit.

(Emphasis added.)

             The Cabinet argues the bond forfeiture was required by 405 KAR

10:050, Section 3(1)(a) and Section 3(1)(b). Viking does not dispute any facts

relating to that determination. The Cabinet also argues it complied with the

requirements of 405 KAR 10:050 Section 2(1) by providing notice to Viking and

informing Viking of its right to a hearing. Viking does not dispute that it received

notice. However, as the Cabinet points out, 405 KAR 10:050 Section 2(2)

provides that the Cabinet “may,” in the alternative, initiate formal hearing

procedures for bond forfeiture pursuant to 400 KAR 1:110 Section 5. In other

words, the Cabinet argues the regulation provides a choice in how it is to proceed

and it is not required to initiate a hearing.

             We now turn to 400 KAR 1:110, which is entitled “Administrative

hearings relating to matters brought under KRS Chapter 350 or KRS 351.310

through 351.375[.]” The regulation states, in relevant part,

                                           -8-
             NECESSITY, FUNCTION, AND CONFORMITY:
             KRS Chapter 350 requires the cabinet to promulgate
             rules and administrative regulations pertaining to surface
             coal mining and reclamation operations and coal
             exploration operations. KRS Chapter 351 authorizes the
             cabinet to promulgate rules and administrative
             regulations pertaining to explosives and blasting
             operations. This administrative regulation establishes
             hearing, conference, notice, penalty assessment, and
             other procedural and due process provisions for the
             permanent regulatory program under KRS Chapter 350,
             and the hearing procedures pursuant to KRS Chapter 351.

             Additionally, 400 KAR 1:110 Section 5(1)(c) states,

             The cabinet shall initiate an administrative hearing and
             shall seek revocation of the permit and forfeiture of the
             bond or suspension of the permit pursuant to KRS
             Chapter 350 if:

                    1. The permittee, operator, or person has
                    willfully failed to comply with a cessation
                    order; or

                    2. The criteria of 405 KAR 10:050, Section
                    3(1) apply.

(Emphasis added.)

             Viking argues that 400 KAR 1:110 Section 5 is the more specific

regulation because it provides only one procedure for bond forfeiture, i.e., the

Cabinet must initiate a hearing. We disagree. Looking to the titles of the two

regulations, it is clear that 405 KAR 10:050 is specific to bond forfeiture and 400

KAR 1:110 applies generally to administrative hearings and penalty assessments.

Moreover, the “Necessity, Function, and Conformity” section of 405 KAR 10:050

                                         -9-
specifically states that it “establishes the procedures and criteria by means of which

a bond may be forfeited to the [C]abinet.” This includes specifics such as

forfeiture by increment, abatement procedures, and agreements regarding

compliance schedules. We agree with the Cabinet Secretary’s reasoning that,

should Viking’s argument prevail, 405 KAR 10:050 would be rendered

meaningless. By accepting the Cabinet’s argument, the two supposedly conflicting

regulations are harmonized by providing the Cabinet with a choice in how to

proceed with regard to bond forfeiture.3 We find no error in this interpretation.

              Accordingly, we do not agree with the circuit court’s reasoning that

the two regulations are equally specific with regard to bond forfeiture and its

finding that, “[h]ad this been an original case between two competing statutory

provisions, the Court would be inclined to rule that the provisions are

irreconcilable and give effect to neither[.]” December 23, 2020, Opinion and Order

at 7 (footnote omitted). However, we do agree with the circuit court’s conclusion

that a court “is not free to substitute its judgment as to the proper interpretation of

the agency’s regulations as long as that interpretation is compatible and consistent

with the statute under which it was promulgated and is not otherwise defective as

arbitrary or capricious.” December 23, 2020, Opinion and Order at 7 (quoting

3
 By analogy, our analysis is similar to how we approach the harmonization of statutes, being
cognizant of the purposes that the underlying statutes intended to accomplish. See Campbell
Cnty. Libr. Bd. of Trs. v. Coleman, 475 S.W.3d 40, 46-47 (Ky. App. 2015).

                                             -10-
Commonwealth, Cabinet for Health Servs. v. Family Home Health Care, Inc., 98

S.W.3d 524, 527 (Ky. App. 2003) (citation omitted)); see also KRS 13B.150(2).

We cannot say that the Cabinet’s interpretation of the relevant regulations was

incompatible or inconsistent with any statutory authority in KRS Chapters 350 and

351, nor can we say that the Cabinet’s conduct was arbitrary or capricious.

              In conclusion, we affirm the circuit court’s order granting summary

judgment in favor of the Cabinet upholding the bond forfeiture.4

              ALL CONCUR.

    BRIEFS FOR APPELLANT:                       BRIEF FOR APPELLEE
                                                COMMONWEALTH OF
    Billy R. Shelton                            KENTUCKY, ENERGY AND
    Jordan W. Morgan                            ENVIRONMENT CABINET:
    Lexington, Kentucky
                                                Lance Huffman
                                                Erritt Griggs
                                                Frankfort, Kentucky

4
 “If the summary judgment is sustainable on any basis, it must be affirmed.” Fischer v. Fischer,
197 S.W.3d 98, 103 (Ky. 2006).

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