Appeal from the Benefits Review Board (BRB No. 91-1528 BLA).
Present: Hutchinson and Nygaard, Circuit Judges, and Pollak, District Judge*fn*
HUTCHINSON, Circuit Judge.
Elliot Coal Mining Company ("Elliot") petitions for review of an order of the United States Department of Labor Benefits Review Board ("Board"). The ultimate question in this case is whether Elliot or the Black Lung Disability Trust Fund (the "Trust Fund"), financed by an excise tax on coal, must pay black lung benefits due Metro Kovalchick ("Kovalchick" or "claimant") and sixteen other miners who once worked in Elliot's mines.*fn1 The threshold issue is whether that question is one of law or fact. The Board, contrary to an administrative law Judge's ("ALJ's") finding, held Elliot liable for payment of black lung benefits to any of its employees after December 31, 1969*fn2 who suffer disability or death as a result of pneumoconiosis because it was a "responsible operator" within the meaning of the Black Lung Benefits Act, ("the Act"), 30 U.S.C.A. §§ 901-945 (West 1986 & Supp. 1993). Yebernetsky v. Elliot Coal Mining Co., BRB No. 84-2560 BLA 8-9 (June 30, 1988) ("Yebernetsky II "). It then remanded this case to the Department of Labor's Office of Administrative Law Judges for a determination of whether Kovalchick was entitled to black lung benefits under the standards of the Act relating to disability and causation. On remand, the parties stipulated Kovalchick did meet the standards of the Act and was entitled to benefits. The ALJ therefore directed Elliot to pay benefits to Kovalchick in accordance with the Act. The Board affirmed and this petition for review followed. In it, Elliot questions the Board's holding that it was a "responsible operator."
Respondent, the Director of the Office of Workers' Compensation Programs ("Director"), contends that Elliot was a responsible operator on three independent bases: (1) the Act imposes liability on all owners or lessees of coal lands without regard to their control or supervision of the mines; (2) Elliot qualifies as an operator who is responsible for black lung benefits due its former employees because, after June 30, 1973,*fn3 it retained a substantial right to control the mining operations of others who mined coal on its lands through provisions in their mining leases and subleases giving Elliot the right to monitor production, receive royalties based on minimum periodic tonnages, and to reenter coal lands for breach of those leases or subleases; and (3) Elliot employed "miners" after June 30, 1973.
We reject the Director's first argument as contrary to the text of the statute.*fn4 Our decision in that respect is supported by the text, punctuation and grammatical structure of § 802(d), the Secretary of Labor's ("Secretary") own regulations, and the legislative history of the Act in general and that of § 802(d) in particular.
We agree with the Director that a mining company that reserves an effective power to substantially control the coal mining operations of others on lands it once mined continues to be a coal mine operator responsible for black lung benefits due its former employees and that evidence showing this power to control has been exercised is not required. Moreover, where the lessor and the lessee are closely affiliated companies, we believe that existence of a power to control the lessee should be presumed. We believe, however, that in other cases, when the former operator is not related to or affiliated with the person to whom the right to mine coal has been given, the question whether an owner or lessor of coal lands has reserved a substantial power to control continuing operations involves inferences on which an ALJ's findings are conclusive if supported by substantial evidence. We think this holding is supported by the statements of the Secretary*fn5 concerning the 1977 amendments to the Act in which she said that the question of who is a responsible operator is to be determined on a case-by-case basis. Conversely, we do not believe that the statute or the regulations indicate that a lessor's bare reservation of a legal right of re-entry, combined with a requirement of minimum royalty payments, a right to an accounting for the tonnage produced from the leased land, and a right to monitor compliance with state and federal regulations demonstrate continuing operation as a matter of law.
Accordingly, whether Elliot had the power to exercise substantial control was a question of fact to be resolved by an ALJ. The record before us shows no interlocking corporate relationships between Elliot and any of the corporations or other persons from whom or to whom it had leased any of the coal lands it worked prior to June 30, 1973. There is evidence that the lease provisions concerning re-entry, minimum royalties and verification of tonnage were provisions that Elliot had to require of its lessees in order to avoid termination, at its own lessors' hands, of its rights to mine coal or allow others to do so. There is also evidence that all of the leases and subleases from Elliot to the operators who continued to mine coal after June 30, 1973 were made to facilitate Elliot's liquidation after it had suffered severe losses in its own mining operations on the coal lands in question. Thus, we believe the ALJ's finding that Elliot was not an operator after June 30, 1973 is supported by substantial evidence.
Finally, there is substantial evidence to support the ALJ's finding that the two employees Elliot retained after June 30, 1973 were not miners within the meaning of the Act. Therefore, we will grant Elliot's petition for review and remand the case to the Board with instructions to vacate its order reversing the ALJ's finding that Elliot was not, after June 30, 1973, an operator who is responsible for benefits due its former miners and thereafter for further proceedings consistent with this opinion.
Elliot employed Kovalchick as a miner from 1965 until he retired for failing health on July 15, 1971. Before June 30, 1973, Elliot operated a number of surface and underground coal mines on coal lands it either owned or leased from others.*fn6 By June 22, 1973, Elliot had ceased active mining and was beginning to divest itself of its mining equipment. By that time, Elliot had accumulated losses of about four million dollars from its mining operations. Because of these losses, Elliot had been winding down its mining operations. In June 1973, Elliot's lessors asked why the lands Elliot leased from them were no longer being mined as required by the lease terms. Elliot's lessors included the Kittaning Coal Company, the Philipsburg Coal & Land Company, General Refractories, Phyllis Daughenbauch, Barney Finberg, James G. Clune, and Mid-State Bank & Trust Company (Middle Pennsylvania Coal Corporation). There is no evidence that any of these lessors were affiliated with Elliot, shared controlling stockholders or otherwise had common or related corporate ownership.
Elliot entered into sublease arrangements with independent contractors to avoid a continuing breach of its mining leases and a consequent loss of its right to the coal in place on the leased lands. The sublessees included Helena Coal Co. ("Helena"), W.C. Bowman ("Bowman"), Power Contracting Co. ("Power"), J. Arthur Minds ("Minds"), and Jerry Demchak ("Demchak"). There is no evidence that any of Elliot's lessees or sublessees were then affiliated with Elliot, shared controlling stockholders or otherwise had common or related corporate ownership.*fn7
According to Elliot, it had little choice in setting the terms of these subleases because operations under them had to be in compliance with the terms of the prime leases on which the subleases depended. Revenues generated from the subleases were, in the main, passed on to Elliot's lessors. A letter dated November 14, 1973 from John Murphy, then Elliot's president and general manager, addressed to L.T. Phillips, agent for the Kittaning Coal Co. and the Philipsburg Coal & Land Co., two of Elliot's lessors, stated:
Elliot Coal Mining Co. recently suspended its operations because it was impossible to make a profit at the existing coal prices for the quality coal we were able to produce.
We have under consideration a proposal, to be implemented within a few days, to employ contractors to mine the coal & to procede [sic] with the construction of a cleaning plant to improve coal quality.
We propose to employ sufficient contractors to raise the production rate to at least 300,000 tons per year over the next 12 months. We propose simultaneously to begin a coal drilling program to identify coal locations and quality so that we may construct a coal cleaning plant in approximately nine months from now. . . .
We recognize that the land owners would like to see more revenue income from these lands. Our company also would like to obtain substantial revenue so as to recoup our investment.
This program will be put into effect immediately and I trust we both will receive substantial economic benefit from it.
Appendix ("App.") at 413-14. Robert Long ("Long"), former President of Elliot, stated at his deposition that Murphy's letter was intended to forestall Elliot's lessors from terminating Elliot's mining rights for the breach of its leases until Elliot could find a buyer for them and perhaps recoup some of its own four million dollar operating loss. He stated that Elliot never attempted to construct a cleaning plant as mentioned in the letter and that Murphy was simply trying "to maintain the lease until he maybe could find a buyer for it or something." App. at 516. Although Elliot had shut down production, Murphy was still interested in retaining the leases "to have something to sell to recoup something against the four million dollars [Elliot had lost]. That was the only chance he had to recover anything other than equipment that was sold, and that was for very little pennies on the dollar, I suppose." App. at 516.
In any event, Elliot did sublease its coal mining rights for various lease terms, as determined by its prime leases. All had similar, though not identical provisions, but all were negotiated at arms length. The terms of the subleases ranged from one to fifteen years with options to renew. Elliot's lessees and sublessees continued to operate under surface mine permits that state regulatory authorities had issued to Elliot.
The Helena and Bowman subleases dated September and October 1973, and February and March 1975, are typical. In them, Helena and Bowman agreed to a minimum annual tonnage production as well as minimum monthly royalty payments to be credited against any royalties due on tonnage actually produced. Elliot reserved the right to inspect weighing and shipping records and had a right of entry or re-entry into the mine in order to survey the workings and produce current maps. Elliot had the right to terminate in the event of breach, and the Bowman lease also included a forfeiture clause.*fn8
The monthly tonnage royalty and minimum tonnage production required by Elliot's 1978 lease of all the coal seams to which it had title to Power were subject to reduction at Elliot's option if it were shown by a study of the coal seams that extraction of the minimum was not practicable. Power also had to provide maps demonstrating past and projected mine workings. Power's "lease" provided if Power defaulted in the minimum monthly tonnage royalty payments or violated any other lease conditions Elliot had a right of re-entry and an irrevocable and exclusive option to lease back from Power those tracts of land covered by the Philipsburg and Kittaning leases. If Elliot exercised this right of re-entry, Power agreed to do "each and every act necessary or helpful to Elliot to assist Elliot in evaluating the lands covered by this option . . . including, but not limited to, permitting Elliot to operate on any mining permits held by Power or its affiliates to the extent permitted by law or regulation." App. at 245. Elliot also had the right to enter the mines for inspection and sampling purposes and to reenter upon default without a court order.
Elliot ceased its own mining operations on June 22, 1973, and none of the lease agreements were effective until after June 30, 1973. After June 22, 1973, Elliot retained only two employees, Larry Kanour ("Kanour") and Judi Matia ("Matia"), to ensure the lessees' and sublessees' compliance with the lease terms. After June 1973, Matia assisted in winding up Elliot's business affairs and closing its books but continued to process royalty payments and tonnage reports from Elliot's lessees and sublessees. In the fall of 1973, Helena took over Elliot's office and thereafter both Matia and Kanour went on Helena's payroll.
Because the subcontractors were still working under Elliot's permits, from June 1973 until September 1975, Kanour continued to do some of the environmental inspection duties he had done for Elliot since 1962. Kanour also continued to do on-site inspections at the five strip mines occupied by Elliot's sub-lessees and provided them with advice on various mining subjects. He was instructed to report any problems to Elliot, but there were none.
Demchak, one of Elliot's contractors, stated in an answer to interrogatories that Elliot had not operated any coal mine after June 30, 1973. Demchak did not know anyone who worked as a miner for Elliot and he said his own coal production was not aided or directed by Elliot in any way. Bowman and Fred Fruguiel, two other contractors who worked some of Helena's mines under Elliot's permits, gave similar answers to interrogatories. Minds, who also worked Helena's mines under the Elliot permits, said on direct examination that Elliot did not exercise any control over his mining operations. Long and Beatrice Avery ("Avery"), President of Helena and later the President of Power as well, stated in their depositions that Elliot was not producing coal after 1973 and did not send people out to supervise or assist with the mining operations. Avery admitted listing Elliot as the operator of the mines in production reports to the Pennsylvania Department of Environmental Resources ("DER") but explained that either Helena or Power at all times after June 30, 1973 was the actual operator mining in accord with state regulations under Elliot's permits. Avery was under the impression that if a mining violation had occurred, Helena or Power, not Elliot, would have been cited. According to her, Helena and Power continued operating under Elliot's permits from 1973 until April 1978 when both Helena and Power were sold.
On May 15, 1978, Kovalchick filed a Part C claim for medical benefits with the Department of Labor ("DOL").*fn9 Under Part C, coal mine operators who are liable for benefits payable to their former employees are included in a regulatory category called "responsible operators."*fn10
A delegate of the Secretary initially made an administrative decision that Elliot was a "responsible operator" liable to pay any black lung benefits Kovalchick was entitled to. Elliot appealed and asked for a hearing before an ALJ. It was held on July 13, 1982 for the purpose of determining whether the administrative ruling that Elliot was a coal mine "operator" and the "responsible operator" was in accord with 30 U.S.C.A. § 802(d) and 20 C.F.R. Part 725, Subpart F. On July 26, 1982, ALJ Kerr decided to remand the case to a DOL deputy commissioner for further consideration of this issue. On remand, one of the DOL's deputy commissioners reaffirmed the administrative decision that Elliot was the responsible operator. On August 18, 1983, DOL sent the Kovalchick case back up to its Office of Administrative Law Judges, where it joined fifteen others in which Elliot had been designated a responsible operator. The ALJ consolidated all sixteen claims in order to resolve the common issue of whether Elliot was a "responsible operator." See Yebernetsky II, BRB No. 84-2560 BLA at 8-9. Elliot argued it was not a responsible operator because it did not operate, supervise or control any coal mine after June 30, 1973.*fn11 The Director relied on Long v. Clearfield Bituminous Coal Corp., 1 BLR 1-149 (1978), in which the Board held that an owner of coal mines who had ceased operations but leased the mines to other entities which continued to mine the property was a responsible operator for purposes of the Act. Specifically, the Board held that retention of a substantial right of control, even where there was no direct evidence that such control was exercised, was sufficient to impose liability as an operator for purposes of the Act. The Director argued that Elliot had the right, after June 30, 1973, to exert substantial control over mining operations on its own coal lands under the terms of the leases or subleases described earlier and therefore was a "responsible operator" liable for benefits to its own former employees. See 20 C.F.R. § 725.491(a), (b)(4). The Director also argued that Elliot was an operator under the Act because it employed Kanour as a miner after June 30, 1973. See 20 C.F.R. § 725.491(a) ("It is Congress' intent that any employer of a miner . . . shall . . . be considered an operator for purposes of this [Act] . . . .").
An ALJ found that the leases and subleases were arms-length transactions and that Elliot, as lessor, did not have the substantial right to exercise control and supervision that existed in Long. He therefore concluded Long was not controlling. Yebernetsky v. Elliot Coal Mining Co., BRB No. 84-2560 BLA 5 (Oct. 19, 1984) ("Yebernetsky I "). He also found that Matia was an office worker, not a miner, and that Kanour was not in and around the mines enough to meet the Act's situs requirement for status as a coal miner. Id. Because Elliot had ceased its own mining operations before June 30, 1973, had no substantial power to control its lessees' and sublessees' independent mining operations, and did not employ any miners after that date, the ALJ held that Elliot was not a responsible operator. Id.
The Director appealed to the Board. On June 30, 1988, the Board held that its decision in Long was controlling because Elliot's leases included substantially the same legal rights to supervise its lessees and sublessees as the leases present in Long had given the lessor. Yebernetsky II, BRB No. 84-2560 BLA at 7-9. The Board therefore reversed ALJ Stratton's finding that Elliot was not a responsible operator, and remanded the case for consideration of the claimants' entitlement. Id. at 9. According to the Board, Elliot satisfied all of 20 C.F.R. § 725.492(a)(2)'s criteria for the status of a responsible operator liable, as in Long, for black lung benefits due its former employees. The Board's Conclusion that Elliot continued to operate after June 30, 1973 made it unnecessary for it to consider the Director's alternate argument that Elliot was an operator after June 30, 1973 because it employed Kanour as a "miner" after that date. Id.
After remand, it was determined that Kovalchick was entitled to benefits. The Board then entered a final order affirming that decision and Elliot ultimately filed this petition for review on July 23, 1992.*fn12
III. Jurisdiction and Standard of Review
We have jurisdiction to review the Board's final order affirming ALJ Tierney's award of benefits under § 921(c) of the Longshoremen's and Harbor Workers' Compensation Act ("LHWCA"), 33 U.S.C.A. § 921(c) (West 1986), incorporated into the Black Lung Benefits Act by 30 U.S.C.A. § 932(a) (West 1986). See Harmar Coal Co. v. Director, OWCP, 926 F.2d 302, 308 (3d Cir. 1991).
The Board has jurisdiction to review final decisions of an ALJ under § 21(b)(3) of the LHWCA, 33 U.S.C.A. § 921(b)(3) (West 1986), also as incorporated by 30 U.S.C.A. § 932(a). The Board is bound by an ALJ's findings of fact if they are rational, supported by substantial evidence, and consistent with applicable law. 33 U.S.C.A. § 921(b)(3); see O'Keeffe v. Smith, Hinchman & Grylls Assocs., Inc., 380 U.S. 359, 362, 13 L. Ed. 2d 895, 85 S. Ct. 1012 (1965).
We review the Board's decision for the limited purpose of determining whether it committed an error of law, but a Board decision dependent on a ruling which sets aside findings of an ALJ that are supported by substantial evidence is legally erroneous. See Hillibush v. United States Dept. of Labor, Benefits Review Bd., 853 F.2d 197, 202 (3d Cir. 1988); Curtis v. Schlumberger Offshore Serv., 849 F.2d 805, 806-08 (3d Cir. 1988). The key issue is whether Elliot did have a substantial right to control its lessees' and sublessees' mining operations. If the statute and regulations make every lessee's reservation of the right to demand a minimum tonnage or royalty, coupled with a right to monitor production and a right of re-entry for breach of condition or broken "operation," a reservation of a right to control the coal mining operations of others within the meaning of § 802(d) and the Secretary's regulations implementing it, the decision of the Board must be affirmed. If neither the statute, the regulations, nor any consistent, plausible interpretation the Secretary or the Director has adopted under them necessarily brings Elliot within the definition of responsible operator, the question of control resolves itself into a question whether the ALJ's decision that Elliot did not have any substantial power to control mining operations after June 30, 1973 is supported by substantial evidence on the whole record. See Kowalchick v. Director, OWCP, 893 F.2d 615, 619 (3d Cir. 1990); Curtis, 849 F.2d at 807-08 (citing Oravitz v. Director, OWCP, 843 F.2d 738, 739 (3d Cir. 1988)).
The threshold question, whether Elliot's retention of these rights makes it an "operator" as a matter of law, is a question of statutory construction that includes both the interpretation and application of legal precepts, such as the definition of "operator." In that respect, this Court's review is plenary. We also have plenary review over the interpretation and application of the definition of "miner." See Hanna v. Director, OWCP, 860 F.2d 88, 91 n.6 (3d Cir. 1988) (plenary review exercised over Board's determination that claimant was "miner" because it was based on erroneous interpretation of Act); see also Director, OWCP v. Barnes & Tucker Co., 969 F.2d 1524, 1527 (3d Cir. 1992) (plenary review with respect to questions of law). Though our review of this legal issue is plenary, our construction of the statute and regulations must be made with deference to the meaning the regulatory authority charged with administering the law has given a statute in its regulations or other consistent exposition of its meaning. See Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843-44, 81 L. Ed. 2d 694, 104 S. Ct. 2778 (1984).
It is clear that the Board is not the regulatory body whose decisions are entitled to judicial deference, but there is division among the courts of appeals on whether the Director's interpretation of the statutes he administers, as opposed to the Secretary's, is entitled to deference. We recognized that division of authority in Cort v. Director, OWCP, 996 F.2d 1549, 1551-52 n.4 (3d Cir. 1993) (citing Liberty Mut. Ins. Co. v. Commercial Union Ins. Co., 978 F.2d 750, 757 (1st Cir. 1992) (citing cases)). Indeed, our own case law is not entirely clear on this point. Prior to Chevron, we had held that the Director's interpretation is not owed "great deference." Id. at 1552 n.4 (quoting Director, OWCP v. O'Keefe, 545 F.2d 337, 343 (3d Cir. 1976)). In Barnes, we stated that "we owe such deference to the Director, not to the Board, for the Director makes policy under the Black Lung Act." Barnes, 969 F.2d at 1527 (citing Director, OWCP v. Mangifest, 826 F.2d 1318, 1323 (3d Cir. 1987)); see also Bethlehem Mines Corp. v. Director, OWCP, 766 F.2d 128, 130 (3d Cir. 1985). In Barnes, however, we also stated that "we will not defer to an 'interpretation' in an adversary proceeding that strains 'the plain and natural meaning of words in a standard,' . . . nor will we give deference to an interpretation of a regulation that implies language that does not exist in the regulation." Barnes, 969 F.2d at 1527 (citation omitted); see also Mangifest, 826 F.2d at 1323-24.*fn13 In any event, because the Director is merely a delegee of the Secretary, we conclude that the Secretary's interpretation of the Act must prevail over the Director's if the two are in conflict.
IV. Statutory History of the Federal Black Lung Benefits Program
The question whether Elliot is a responsible operator within the meaning of the statute and regulations, and so liable for payment of any black lung benefits its former miners are entitled to, requires some preliminary consideration of the statutory history of the federal black lung benefits program. We begin with the 1969 act and its amendments.
This Court set forth the legislative history of the federal black lung benefits program in detail in Helen Mining Co. v. Director, OWCP, 924 F.2d 1269, 1271-73 (3d Cir. 1991). We repeat here only so much of that history as is essential to an understanding of this case.
The black lung program stems from Title IV of the Federal Coal Mine Health & Safety Act of 1969, Pub. L. No. 91-173, 83 Stat. 742 (1969) (the "1969 Act") (effective December 30, 1969).*fn14 Congress enacted Title IV because it recognized the economic and social problems that the many coal miners and their families who were seriously affected by pneumoconiosis suffered. Pneumoconiosis is a deadly respiratory disease peculiar to coal miners, popularly known as black lung disease. Congress created the black lung program because it felt that the states had failed to adopt programs adequate to alleviate the suffering among miners disabled by black lung disease and the destitution visited on their dependents. See generally Allen R. Prunty & Mark E. Solomons, The Federal Black Lung Program: Its Evolution and Current Issues, 91 W. Va. L. Rev. 665 (1989).
Initially, benefits were paid from public funds, but Congress thought that responsibility for the benefits many would claim would in due course be taken over by the states under improved state black lung programs Congress hoped the 1969 Act would encourage. Thus, under Part B of the 1969 Act, claims filed on or before December 31, 1972 were to be processed by the Social Security Administration ("Social Security") and paid from the federal fisc. DOL was to handle all claims for black lung benefits filed "on and after January 1, 1973." They were called Part C claims. Kovalchick's claim is a Part C claim. In 1969 Congress assumed that it would be paid from state or private funds in accord with the yet to be enacted "adequate" state workers' compensation statutes Congress expected to spring up to meet the perceived serious problems of death, disability and destitution in the nation's coal towns. If a particular state's program proved inadequate under DOL regulations, DOL was directed to instruct the mine operators who had employed the afflicted miner, or their successors, that they were to pay or be responsible for benefits due that state's coal miners. If the operator who had employed the miner or a successor could not pay or be found, then the federal government was to secure the claim. Pub. L. No. 91-173, §§ 411(a), 422(a)-(d), 83 Stat. 742, 796 (codified at 30 U.S.C.A. § 921(a), 932(a)-(d) (1970)).
The 1969 Act created several presumptions to aid claimants in establishing entitlement, but the black lung program soon came under fire because many former miners were unable to secure evidence of employment in the nation's coal mines for a long enough time to meet presumptive standards on the cause and presence of disabling pneumoconiosis. See S. Rep. No. 743, 92d Cong., 2d Sess., reprinted in 1972 U.S.C.C.A.N. 2305, 2313-20. These criticisms resulted in the first of three sets of amendments.
The Black Lung Benefits Act of 1972, Pub. L. No. 92-303, 86 Stat. 150 (1972) (the "1972 Act"), liberalized eligibility criteria, expanded the scope of coverage, extended the government's responsibility for payment of benefits by continuing coverage under Part B to June 30, 1973, and continued Part C in existence until December 30, 1981. It was made retroactively effective to December 30, 1969. Pub. L. No. 92-303, § ...