IN THE UNITED STATES COURT OF APPEALS
FOR THE SIXTH
CIRCUIT
WOLF CREEK COLLIERIES, |
) |
|
|
) |
|
Petitioner |
) |
|
|
) |
|
vs. |
) |
|
|
) |
|
RUBY SAMMONS |
) |
No. 02-3528 |
|
) |
|
and |
) |
|
|
) |
|
DIRECTOR, OFFICE OF WORKERS' |
) |
|
COMPENSATION PROGRAMS, UNITED |
) |
|
STATES DEPARTMENT OF LABOR, |
) |
|
|
) |
|
Respondents |
) |
|
DIRECTOR’S
MOTION TO REINSTATE CASE TO ACTIVE DOCKET
The Director, Office of Workers'
Compensation Programs, United States Department of Labor, requests that this
Court vacate the Clerk’s determination of December 16, 2002, which held this
case in abeyance "pending disposition of [Wolf Creek Collieries'] Notice
of Bankruptcy and Automatic Stay."
The Director requests that the Court reinstate this case to its active
docket. As grounds for this motion, the
Director states:
INTRODUCTION
JURISDICTION
STATUTORY AND REGULATORY BACKGROUND
ARGUMENT
CONCLUSION
CERTIFICATE OF COMPLIANCE
INTRODUCTION
This case involves a claim under the
Black Lung Benefits Act (BLBA), 30 U.S.C. §§901-945, by Ruby Sammons, the widow
of a deceased coal miner. During the
initial processing of her claim, the Director identified Wolf Creek as the
responsible operator liable for the payment of benefits, an identification not
challenged in the subsequent litigation.
During the course of litigation, Horizon Natural Resources Company
acquired Wolf Creek. An administrative
law judge awarded Mrs. Sammons' claim in June 2000, and the Benefits Review
Board affirmed that award in March 2002.
Wolf Creek then appealed to this Court.
After the parties filed their briefs, Horizon and 77 of its
subsidiaries, including Wolf Creek, filed petitions under chapter 11 of the
Bankruptcy Code. In re Horizon
Natural Resources Co., Nos. 02-14261 and 02-14336 (Bankr. E.D. Ky.). Wolf Creek subsequently filed a notice of
its bankruptcy filing and of the Bankruptcy Code's automatic stay provision, 11
U.S.C. §362(a), in this case. In
response, the Clerk issued a form letter on December 16, 2002, stating that the
case would "be held in abeyance pending the disposition of . . . Notice of
Filing of Bankruptcy and Automatic Stay (filed by petitioner)." This Court's decision in In re Mansfield
Tire and Rubber Co., 660 F.2d 1108 (6th Cir. 1981), however, makes plain
that the administration of claims analogous to workers' compensation claims –
such as federal black lung claims – is exempt from the automatic stay under the
police and regulatory powers exception.
11 U.S.C. §362(b)(4). Thus, the
Clerk's determination should be vacated, and this case should be reinstated to
the active docket.
JURISDICTION
This
Court has jurisdiction to determine whether the automatic stay of Section
362(a) applies to this case, or whether this appeal is excepted from the
stay. Chao v. Hospital Staffing
Services, Inc, 270 F.3d 374, 384 (6th Cir. 2001). The Court's jurisdiction is concurrent with that of the
Bankruptcy Court. Id. at 383-84. The Court also "may enter orders not
inconsistent with the terms of the stay and any orders entered by the
bankruptcy court respecting the stay."
Id. at 384. Thus, the
Court has jurisdiction to determine whether this appeal is excepted from the stay
and, if so, to reinstate it to the active docket.
STATUTORY AND REGULATORY BACKGROUND
The BLBA Claims Adjudication Process
The BLBA provides benefits to former
coal miners who prove their total disability due to pneumoconiosis arising out
of coal mine employment, and to certain survivors of miners who died due to
pneumoconiosis. 30 U.S.C. §901(a); Usery
v. Turner Elkhorn Mining Co., 428 U.S. 1, 8 (1976); Southard v.
Director, OWCP, 732 F.2d 66, 68 (6th Cir. 1984). Under Part C of the BLBA, a claim is filed with a district
director of the Department of Labor's (DOL) Office of Workers' Compensation
Programs (OWCP). 33 U.S.C. §919(a)
(incorporated into the BLBA by 30 U.S.C. §932(a)). The district director is a subordinate of
the Director, OWCP, whom the Secretary has designated as the administrator of
the BLBA. 20 C.F.R. §701.202(f).
The
statute requires the district director to serve as the primary investigator of
each BLBA claim. 33 U.S.C. §919(c)
(incorporated by 30 U.S.C. §932(a)) (district director "must make or cause
to be made such investigations as he considers necessary in respect of the
claim"). The investigation entails
the development of evidence concerning both the miner's medical condition and
employment history in order to determine:
(1) whether the claimant is eligible for benefits, and (2) which, if
any, coal mine operator would be responsible for the payment of any benefits
awarded. The district director is
responsible for identifying the potentially liable responsible operator based
on specific statutory and regulatory criteria, including the past employment of
the miner. 30 U.S.C. §§802(d), 932(h);
20 C.F.R. §§725.490-725.495 (1999); e.g., Kentland Elkhorn Coal Co. v. Hall,
287 F.3d 555, 561 (6th Cir. 2002).
After the district director issues a
proposed decision and order, any dissatisfied party may request a hearing
before a DOL administrative law judge, whose decision, in turn, is subject to
review by DOL's Benefits Review Board, and then by the U.S. Court of Appeals for
the circuit in which the miner's coal mine employment occurred. 33 U.S.C. §§919(d), 921(a), (b), (c); 20
C.F.R. §§725.419(a), 725.481, 725.482, 802.410 (2002). Generally, black lung awards issued by
administrative law judges are effective, and require payment, even if the
operator appeals the award. 20 C.F.R.
§725.502(a) (2002). Congress intended
to insure that totally disabled coal miners would receive benefits while operators
pursue appeals. See 127 Cong. Rec. 29932 (1981) (statement of
Sen. Hatch) (quoting section-by-section analysis to effect that the Black Lung
Disability Trust Fund is to pay benefits when operator fails to do so while
case is on appeal). If an operator
fails to comply with an effective award, the Trust Fund must pay benefits. 26 U.S.C. §9501(d)(1)(A); 20 C.F.R.
§725.522(a) (2002).
After
a district director transfers a claim to the Office of Administrative Law
Judges for a hearing, the Director, OWCP, remains a party to the
proceedings. 30 U.S.C. §932(k); 20
C.F.R. §725.360(a)(5). In this
capacity, the Director submits evidence and argues in favor of findings that
uphold the district director's identification of the responsible coal mine
operator. Additionally, Congress
intended for the Secretary "to advance his views in the formal claims
litigation context whether or not the Secretary ha[s] a direct financial
interest in the outcome of the case."
Senate Comm. on Human Resources, S. Rep. No. 95-209, pp. 20-21, Black
Lung Benefits Reform Act and Black Lung Benefits Revenue Act of 1977, 96th
Cong. 624-25 (House Education and Labor Comm. Print 1979).
The BLBA Insurance Provisions
ARGUMENT
Workers' compensation
programs – and analogous programs, such as the federal black lung compensation
program – are valid exercises of police or regulatory power. In New
York Central R. R. Co. v. White, 243 U.S. 188, 206 (1917), the Supreme
Court rejected a constitutional challenge to the Workmen’s Compensation Law of
New York and held that the law was "a reasonable exercise of the police
power of the State." The Court
defined the rationale for the law:
principally that modern conditions of employment required a swift means
of compensating injured workers, who otherwise would bear the greater part of
loss from industrial accidents and become a burden on public or private
charity. Id. at 196-97. The Court held that the legislation was
a reasonable exercise of police powers, stating:
The subject matter in
respect of which freedom of contract is restricted is the matter of
compensation for human life or limb lost or disability incurred in the course
of hazardous employment, and the public has a direct interest in this as
affecting the common welfare. The
whole is no greater than the sum of its parts, and when the individual health,
safety, and welfare are sacrificed or neglected, the state must suffer.
Id. at
206-07. Subsequently, in upholding the
constitutionality of the BLBA, the Supreme Court relied upon White,
explaining, "this Court long ago upheld against due process attack the
competence of Congress to allocate the interlocking economic rights and duties
of employers and employees upon workmen's compensation principles analogous
to those enacted here . . . ." Turner
Elkhorn, 428 U.S. at 15 (emphasis added).
Relying
on White, this Court in Mansfield Tire concluded that the
"administration of claims" under a workers' compensation statute is a
"valid exercise of the police power of the state," and excepted from
the automatic stay under Section 362(b)(4).
660 F.2d at 1113; see also In re Perkins, 1995 WL 468204
(Bankr. D. Idaho 1995); Rodriguez v. Continental Steel Corp., 483 N.Y.S.2d 832, 834 (1984); Matter of Penn Terra Ltd, 24 B.R. 427
(Bankr. W.D. Pa. 1982); cf. In re Mart, 34 B.R. 448,
449 (Bankr. D. Or. 1983) (lifting stay because state workers' compensation
proceedings are an exercise of state police or regulatory power). Failing to except such proceedings from the
automatic stay would improperly prevent the state from exercising "its
lawful powers and operate[] to hinder, delay, and deprive [the employer’s]
injured workers of the benefits to which they are lawfully entitled . . .
." Mansfield Tire, 660
F.2d at 1113.
This rationale applies with
equal force to BLBA proceedings. The
purpose of the statute is to "provide benefits . . . to coal miners who
are totally disabled due to pneumoconiosis and to the surviving dependents of
miners whose death was due to such disease." 30 U.S.C. §901(a).
Congress intended the BLBA to replace "State workmen's compensation
law" where the state statutes fail to "provide[ ] adequate coverage for
pneumoconiosis . . . ." 30 U.S.C.
§931(a); see 20 C.F.R. §§722.1-722.4 (2002). Indeed, this Court has recognized that the
BLBA was enacted in order to facilitate and liberalize the flow of compensation
to miners who become totally disabled due to pneumoconiosis arising out of
their coal mine employment. Wiley v.
Consolidation Coal Co., 892 F.2d 498, 503 (6th Cir. 1989).
Although
this Court has observed that the federal black lung program is "not
a workers' compensation statute for mine workers[,]" it has done so in the
context of a case that addressed the "narrow" question of whether a
widow could collect BLBA benefits when her husband committed suicide. Johnson
v. Peabody Coal Co., 26 F.3d 618, 618, 621 (6th Cir. 1994); but cf.
Turner Elkhorn, 428 U.S. at 15 (characterizing BLBA as
"analogous" to workers' compensation). Johnson simply did not involve the applicability of the
bankruptcy stay to BLBA claims.
Moreover, Johnson recognized that the BLBA serves to fill the
gaps in state workers' compensation laws, describing the BLBA as "a very
specific and limited piece of legislation designed to address a medical
condition that inflicts miners with such frequency that it required its own set
of rules and regulations, apart from any other workers' compensation coverage
that may have been afforded to miners."
Johnson, 26 F.3d at 621.
The
BLBA thus serves the same purpose as a workers' compensation statute by filling
a gap where state workers' compensation laws are inadequate. See 30 U.S.C. §901(a) ("Congress
finds . . . that few States provide benefits for death or disability due to
[pneumoconiosis] to coal miners or their surviving dependents."); 30
U.S.C. §921(a) (BLBA applies where "State workmen's compensation law"
does not "provide[] adequate coverage for pneumoconiosis"); Caney
Creek Coal Co. v. Satterfield, 150 F.3d 568, 570 n. 3 (6th Cir.
1998) (liability imposed against coal mine operator under BLBA "if the
state statute was inadequate"); Hawkins v. Director, OWCP, 907 F.2d
697, 701 (7th Cir. 1990) (BLBA "enacted in large part because
the state workers' compensation programs were inadequate to meet the needs of
disabled coal miners"). Congress
intended that "traditional workers' compensation principles" be
applied, as appropriate, in black lung proceedings. Senate Comm. on Human Resources, S. Rep. No. 95-209, pp.
13-14. Then-Deputy Undersecretary of
Labor Robert Collyer testified to the same effect in support of the 1981
amendments to the BLBA, stating that one of the purposes of the amendments was
to "make the Federal statute consistent with traditional workers'
compensation principles by limiting survivors' benefits to cases where death
was a result of black lung and not some unrelated event." Hearings on S. 1922 Before the Subcomm.
on Labor of the Senate Comm. on Labor and Human Resources, 97th
Cong., 1st sess. 17, 30 (1981).
Hence, as Congress enacted the BLBA to achieve the same policies that
underlie state workers' compensation statutes and to remedy a deficiency in
those statutes, Mansfield Tire's holding that state workers'
compensation proceedings are excepted from the automatic stay under the
"regulatory or police power" exception should apply equally to
federal black lung proceedings.
Additionally, the Ohio workers'
compensation program at issue in Mansfield Tire is similar to the
federal black lung benefits program in an important respect. Under the Ohio program, when a
self-insurer's indemnity bond failed to cover liability for claims, a state
insurance fund paid workers their benefits and then could seek reimbursement
from the employer. Similarly, under the
BLBA, when an employer defaults, the Trust Fund must pay benefits and then may
seek reimbursement from the employer.
30 U.S.C. §934. Where, as in Mansfield
Tire, the employer was in bankruptcy, the state insurance fund could file a
claim against the employer in the bankruptcy proceeding. See Mansfield Tire, 660 F.2d at 1110,
1115.
C. This case
should be excepted from the automatic stay under both the "pecuniary
interest" and "public policy" tests.
In Hospital Staffing
Services, this Court set forth a two-part test for determining whether an
action qualifies for the police or regulatory power exception under Section
362(b)(4): the "pecuniary
interest" test and the "public policy" test. 270 F.3d at 385-86. (Although Mansfield
Tire did not mention this two-part test, the Court endorsed Mansfield
Tire in Hospital Staffing Services.
270 F.3d at 390, n. 13.) The
instant case passes muster under both tests.
An
action qualifies for exception from the automatic stay under the
"pecuniary interest" test where the government's action would not
"'result in a pecuniary advantage to the government vis-à-vis other
creditors of the debtor's estate.'"
Hospital Staffing Services, 270 F.3d at 388 (quoting In re
Commonwealth Cos., 913 F.2d 518, 523-24 (8th Cir. 1990)). Entry of a judgment or order for monetary
damages provides no pecuniary advantage to a governmental unit vis-à-vis other
creditors. In contrast, enforcement of a
money judgment would provide a pecuniary advantage to the government. Hospital Staffing Services, 270 F.3d
at 388, n. 10; see generally MCorp., 502 U.S. at 41 (stay does not apply
to agency's making of final order, but precludes agency enforcement of a final
order that affects the Bankruptcy Court's control over the property of the
estate). Accordingly, proceedings
initiated by or before a governmental unit up to and including entry of a
judgment are within the police power and satisfy the "pecuniary
interest" test. See Hospital
Staffing Services, 270 F.3d at 388, n. 10 ("Therefore, in excepted
cases, non-bankruptcy fora have jurisdiction to reduce claimed civil liability
to a money judgment.").
The
entry of a final black lung benefits award against a coal mine operator is
analogous to a money judgment, but also gives rise to a lien against the
operator in favor of the United States for the amount of any benefits paid by
the Trust Fund, plus interest. 30
U.S.C. §934(b)(2). A lien generally
elevates a creditor to secured status in bankruptcy proceedings. 11 U.S.C.
§506. But no lien would attach against
Wolf Creek if the Court affirms the award in this case. A lien arising under the BLBA is treated as
a federal tax lien. 30 U.S.C.
§934(b)(3)(B). Federal tax liens
generally do not attach against a bankruptcy debtor's property. 11 U.S.C. §362(b)(9)(D) ("any tax lien
that would otherwise attach to property of the estate . . . shall not take
effect unless such tax is a debt of the debtor that will not be discharged in
the case and such property or its proceeds are transferred out of the estate
to, or otherwise revested in, the debtor"); see In re Avis, 178
F.3d 718, 722-24 (4th Cir. 1999) (automatic stay prevents attachment and
perfection of federal tax liens); see also 30 U.S.C. §934(b)(4)(B) (time
for enforcing the lien is "suspended for any period during which the
assets of the operator are in the custody or control of any court of the United
States, . . . and for 6 months thereafter . . . ."). Accordingly, entry of a final award against
Wolf Creek would not afford the government a pecuniary advantage vis-à-vis
other creditors of the debtor's estate; rather, it would merely give rise to a
debt to the United States for which DOL may file a proof of claim against the
bankruptcy estate as a general unsecured creditor. See Mansfield Tire, 660 F.2d at 1113 ("[t]he exercise
by the Commission of its lawful powers . . . gives it no preference over the
creditors of the debtor"). Adjudication of the instant appeal will,
nevertheless, serve an important purpose: it will finally resolve a pending
black lung claim and thus settle the rights and obligations of the
parties.
This
case also qualifies for the police and regulatory power exception to the
automatic stay under the "public policy" test. As defined in Hospital Staffing Services,
an action qualifies for exemption from the automatic stay under the
"public policy" test where the "particular lawsuit is
undertaken by a governmental entity in order to effectuate public policy,"
but not where its purpose is to "adjudicate private rights" or where
"a successful suit would result in a pecuniary advantage to certain
private parties vis-a-vis other creditors of the [bankruptcy]
estate . . . ."
270 F.3d at 389, 390. Like the adjudication of the workers'
compensation claims at issue in Mansfield Tire, adjudication of this
black lung claim would serve the public policy of resolving a pending benefits
claim and, if the award is affirmed, of ensuring that an entitled claimant
receives the benefit payments due (from a source other than the debtor). Nor would successful prosecution of this
claim "result in a pecuniary advantage to [Mrs. Sammons] vis-a-vis other
creditors of the [Horizon's bankruptcy] estate." If Mrs. Sammons' award is affirmed, she will continue to receive
benefit payments either out of the indemnity bond posted by Wolf Creek's prior
corporate parent or, if the bond assets are exhausted, by the Trust Fund. By contrast, in Hospital Staffing
Services, successful prosecution of DOL's "hot goods" injunction
action under the Fair Labor Standards Act would have resulted in payment of
employees' minimum wages out of the assets of the bankruptcy estate ahead of
the claims of other creditors. 270 F.3d
at 393-94.
Although
adjudication of black lung claims ensures that totally disabled miners and
eligible survivors of deceased miners receive the benefits to which they are
entitled, administration of the black lung program is not merely a
quasi-judicial action by DOL to adjudicate the rights of private parties. To be sure, BLBA administrative proceedings,
in part, adjudicate the private rights of employers and their employees. As we have shown, however, DOL's
responsibility begins when a district director investigates a claim. 33 U.S.C. §919(c) (incorporated by 30 U.S.C.
§932(a)). The district director must
gather evidence as to the miner's employment history, notify potentially liable
coal mine operators of the claim, and afford such operators an opportunity to
submit relevant evidence. The district
director also schedules the miner for a complete pulmonary evaluation and
determines, based on all the evidence gathered: (1) whether the claimant is
entitled to benefits, and (2) which coal mine operator (and insurance carrier,
if any) is liable for the claim. 20
C.F.R. §§725.406-725.408, 725.490-725.495 (1999); Kentland Elkhorn, 287
F.3d at 566 ("The regulations require that the Director identify, notify
and develop evidence regarding potential responsible operators.").
Additionally,
as a statutory party in BLBA proceedings before the ALJ, Benefits Review Board
and Courts of Appeals, the Director's role in the black lung program is more
than quasi-judicial. In this role, the
Director not only defends the district director's responsible operator
determination, but also advocates the proper interpretation and application of
the BLBA and its implementing regulations in any given case. In sum, the Director's administration of the
BLBA constitutes "action . . . by a governmental unit" that promotes
public health and safety and therefore satisfies the "public policy"
test. See Mansfield Tire, 660
F.2d at 1114 ("the administration of workers' compensation claims by the
State of Ohio and the agencies created for that purpose is a valid exercise of
the police or regulatory power of a government unit"). As with the state workers' compensation
proceeding at issue in Mansfield Tire, staying proceedings under
the BLBA would "hinder, delay and deprive [the debtor’s] injured workers
of the benefits to which they are lawfully entitled . . . ." 660 F.2d at 1113.
This
Court said in Mansfield Tire that it would be unprecedented for a
bankruptcy court to assert jurisdiction over workers' compensation claims:
"we are not aware that any Bankruptcy Court in all the long years of the
old Bankruptcy Act of 1898 attempted to exercise jurisdiction over the
administration of workers' compensation laws." Mansfield Tire, 660 F.2d at 1113-14. Conversely, there is no reason to foist upon
bankruptcy courts the burden of adjudicating federal black lung claims.
CONCLUSION
Respectfully submitted,
HOWARD
M. RADZELY
Acting
Solicitor of Labor
DONALD
S. SHIRE
Associate
Solicitor
CHRISTIAN
P. BARBER
Counsel
for Appellate Litigation
_________________________
SARAH M. HURLEY
Attorney
U.S.
Department of Labor
Office
of the Solicitor
Suite
N-2117
200
Constitution Ave., N.W.
Washington,
D.C. 20210
(202)
693-5654
Attorneys
for the Director, Office of
Workers' Compensation Programs,
United States Department of Labor
CERTIFICATE OF COMPLIANCE
I hereby certify that on July 7, 2003, a copy of the
foregoing motion was mailed, postage prepaid, to the following:
Ronald E. Gilbertson,
Esq.
Bell, Boyd &
Lloyd, PLLC
1615 L Street,
N.W.
Suite 1200
Washington,
D.C. 20036-5610
Stephen A. Sanders, Esq.
Appalachian
Citizens Law Center
207 West Court
Street
Suite 202
Prestonsburg,
Kentucky 41653
___________________________
SARAH
M. HURLEY
Attorney