FEDERAL MINE SAFETY AND HEALTH REVIEW COMMISSION

601 NEW JERSEY AVENUE, NW

SUITE 9500

WASHINGTON, DC 20001

March 7, 2012

BEFORE: Jordan, Chairman; Duffy, Young, Cohen, and Nakamura, Commissioners

DECISION

BY THE COMMISSION:

            In this civil penalty proceeding arising under the Federal Mine Safety and Health Act of 1977, 30 U.S.C. § 801 et seq. (2006) (“Mine Act” or “Act”), Administrative Law Judge Jerold Feldman determined that Bill Simola, an agent of a limited liability company (“LLC”), could be liable under Mine Act section 110(c). 32 FMSHRC 421, 424 (Apr. 2010) (ALJ). Pursuant to 29 C.F.R. § 2700.76, Simola sought interlocutory review of the judge’s determination. The judge certified the matter for interlocutory review, 32 FMSHRC 707, 708 (May 2010) (ALJ), which the Commission granted. For the reasons that follow, we affirm the judge’s determination.

I.

Factual and Procedural Background

            United Taconite, LLC (“United Taconite”) operates the United Plant in Minnesota. United Taconite is an LLC organized under the laws of the state of Delaware. 32 FMSHRC at 422.

            On October 1, 2008, the Department of Labor’s Mine Safety and Health Administration (“MSHA”) issued a citation and an order to United Taconite under Mine Act section 104(d)(1), 30 U.S.C. § 814(d)(1). Citation No. 6407901 (“the citation”) was issued for an alleged significant and substantial (“S&S”) violation of 30 C.F.R. § 56.11001, which requires that a safe means of access shall be provided and maintained in all working places. Order No. 6407902 (“the order”) alleged an S&S violation of 30 C.F.R. § 56.14107(a), which requires that moving machine parts shall be guarded to protect persons from injury. The Secretary alleged that both violations were the result of United Taconite’s unwarrantable failure to comply with the standards.

            At all relevant times, Bill Simola was the Pellet Plant Coordinator for United Taconite. On December 21, 2009, the Secretary issued a petition for assessment of civil penalties pursuant to section 110(c) of the Mine Act seeking to impose personal liability against Simola, as an agent of United Taconite, for the violations alleged in the citation and order. 32 FMSHRC at 421.

            Simola contested the proposed penalty assessment. He subsequently filed a motion for summary decision in which he maintained that section 110(c) does not apply to directors, officers, or agents of an LLC.

            On April 6, 2010, the judge issued an order dismissing Simola’s motion. 32 FMSHRC 421. Construing the motion for summary decision as a motion to dismiss, the judge determined that the Mine Act was silent on the question of whether agents of LLCs could be held liable under section 110(c) because the “operation of mines as LLC entities occurred after the legislation was adopted.” Id. at 422-23. Finding the Mine Act silent on the question, he deferred to the Secretary’s interpretation of the Mine Act, which treats agents of LLCs the same as agents for corporations. Id. at 423. In so doing, the judge determined that since “the purpose of section 110(c) is to pierce corporate-like liability shields, the Secretary’s interpretation that the provisions of section 110(c) apply to agents of mine operators as . . . limited liability companies is manifestly reasonable and consistent with the intent of the legislation.” Id.

II.

Disposition

            Simola argues that the language of section 110(c) plainly applies only to agents of corporations. He asserts that because the Mine Act is clear and unambiguous on this point, effect must be given to the plain language. Simola relies on Guess, employed by Pyro Mining Co., 15 FMSHRC 2440, 2442-43 (Dec. 1993), aff’d sub nom. Sec’y of Labor v. Shirel, 52 F.3d 1123 (D.C. Cir. 1995), which he argues held that the Mine Act provides for individual liability of agents of corporate operators only. He contends that the judge erred because LLCs are not the same as corporations. Simola also disputes the validity of the Secretary’s 2006 interpretive rule, which took the position that agents of LLCs should be treated as agents of corporations. Simola also maintains that because Congress has had two chances to revise section 110(c) since the Mine Act’s enactment, but has not done so, Congress has in effect validated the present language, which applies only to corporate agents.

            The Secretary responds that section 110(c) is silent or ambiguous on the issue of whether it applies to agents of LLCs. She asserts that Congress did not express and “could not have expressed, any intent with respect to agents of LLCs because, when Congress enacted section 110(c), LLCs effectively did not exist.” Sec’y Br. at 6, 15. The Secretary maintains that because Congress expressed no intent with respect to agents of LLCs, the question becomes whether her interpretation is reasonable. The Secretary submits that her interpretation is reasonable, claiming that her interpretation is consistent with the history and purpose of section 110(c) and that the terms “corporate operator” and “such corporation” in section 110(c) can reasonably be read to encompass LLCs. Moreover, the Secretary explains that LLCs generally create the same sort of shield against personal liability that led Congress to impose personal liability on the agents of corporations. Accordingly, she argues that the same situations that warrant reaching behind the corporate shield warrant piercing the LLC shield.

            The first inquiry in statutory construction is “whether Congress has directly spoken to the precise question at issue.” Chevron U.S.A., Inc. v. Natural Res. Defense Council, Inc., 467 U.S. 837, 842 (1984). If a statute is clear and unambiguous, effect must be given to its language. Id. at 842-43. Deference to an agency’s interpretation of the statute may not be applied “to alter the clearly expressed intent of Congress.” K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291 (1988) (citations omitted). Traditional tools of construction, including examination of a statute’s text and legislative history, may be employed to determine whether “Congress had an intention on the precise question at issue,” which must be given effect. Coal Employment Project v. Dole, 889 F.2d 1127, 1131 (D.C. Cir. 1989) (citations omitted). The examination to determine whether there is a clear Congressional intent is commonly referred to as a “Chevron I” analysis. Id.; see Thunder Basin Coal Co., 18 FMSHRC 582, 584 (Apr. 1996); Keystone Coal Mining Corp., 16 FMSHRC 6, 13 (Jan. 1994).

            If, however, the statute is ambiguous or silent on a point in question, a second inquiry, commonly referred to as a “Chevron II” analysis, is required to determine whether an agency’s interpretation of a statute is a reasonable one. See Chevron, 467 U.S. at 843-44; Thunder Basin, 18 FMSHRC at 584 n.2; Keystone, 16 FMSHRC at 13. Deference is accorded to “an agency’s interpretation of the statute it is charged with administering when that interpretation is reasonable.” Energy West Mining Co. v. FMSHRC, 40 F.3d 457, 460 (D.C. Cir. 1994). The agency’s interpretation of the statute is entitled to affirmance as long as that interpretation is one of the permissible interpretations the agency could have selected. See Joy Technologies, Inc. v. Sec’y of Labor, 99 F.3d 991, 995 (10th Cir. 1996), cert. denied, 520 U.S. 1209 (1997); Thunder Basin Coal Co. v. FMSHRC, 56 F.3d 1275, 1277 (10th Cir. 1995).

            A.        Whether Congress directly addressed the question of whether agents of LLCs can be liable under section 110(c) of the Mine Act.

            Section 110(c) of the Mine Act states in relevant part:

Whenever a corporate operator violates a mandatory health or safety standard . . . , any director, officer, or agent of such corporation who knowingly authorized, ordered or carried out such violation, . . . shall be subject to the same civil penalties, fines, and imprisonment that may be imposed upon a person under subsections (a) and (d) [of this section.]

30 U.S.C. § 820(c).

            The initial step under a Chevron I analysis is to decide whether Congress directly addressed the question of whether an agent of an LLC can be held liable under section 110(c). That provision states that agents of corporations can be held personally liable, but does not mention agents of LLCs. However, it is important to recognize that Congress could not have been expected to expressly mention LLCs in section 110(c) because LLCs did not effectively exist in 1977 when Congress passed the Mine Act. Although the legislative history of section 110(c) provides valuable guidance as to Congressional intent in passing the provision, the legislative history likewise does not directly address liability for agents of LLCs.

            Simola articulates the issue differently, asking “whether Congress expressed the intent that section 110(c) be limited to agents of corporations?” Sim. Br. at 10; Reply Br. at 2-3. By positing the question in this manner, and defining “corporation” pursuant to Delaware state law, Simola attempts to persuade us that the clear language of section 110(c) applies only to agents of typical corporations and not to agents of business entities that share corporate attributes such as an LLC. Sim. Br. at 6. Relying on the Commission’s decision in Guess, Simola argues that “[t]he inapplicability of section 110(c) to agents of business entities other than corporations is well settled,” id. at 4, and since under Delaware law, corporations are clearly distinguished from limited liability companies, the plain meaning of section 110(c) would preclude application to agents of LLCs. Id. at 5. However, even if we were to frame the question in the manner that Simola suggests, we cannot agree that the use of the word “corporation” in this section of the Mine Act may only be read one way – that is, consistent with the definition of “corporation” as codified by one state.

            The terms “corporate officer” and “corporation” are not defined in the Mine Act. In the absence of a statutory or regulatory definition of a term, the Commission applies the ordinary meaning of that term. E.g., Jim Walter Res., Inc., 28 FMSHRC 983, 987 (Dec. 2006). In Webster’s Third New International Dictionary 510 (1993) “corporation” is defined as “a group of persons or objects treated by the law as an individual or unity having rights or liabilities distinct from those of the persons or objects composing it.” This definition also applies to LLCs (but not to partnerships), because of the limited liability shield. Thus, the term “corporate officer” in the Mine Act can be read to include operators of entities which are corporate in nature. Stated differently, the text of section 110(c) does not preclude the inclusion of LLCs in the definition of the word “corporation.”

            Where dictionary definitions are relied upon to establish the meaning of a term, and those definitions show that a term is open to alternative interpretations, the Commission has found the term to be ambiguous. See Wolf Run Mining Co., 32 FMSHRC 1669, 1680 (Dec. 2010); Island Creek Coal Co., 20 FMSHRC 14, 19 (Jan. 1998). Similarly, in National Cement Co. of California, 494 F.3d 1066 (D.C. Cir. 2007), appeal after remand, 573 F.3d 788 (D.C. Cir. 2009), the D.C. Circuit rejected the Secretary of Labor’s argument that the Mine Act’s jurisdictional definition of “mine” was clear and unambiguous because both of the relevant statutory terms used in that section (“private” and “appurtenant to”) were ambiguous under their respective dictionary definition. 494 F.3d at 1074-75. Consistent with these precedents, we conclude that a Chevron I “plain meaning” analysis does not apply here, due to the different possible interpretations of the dictionary definition of “corporation.”

            Moreover, Simola reads too much into the Commission’s decision in Guess. In that case, the Commission rejected the Secretary’s attempt to extend section 110(c) to an agent of a partnership. 15 FMSHRC at 2443. We concluded that the entity in question was in fact a partnership, despite its being composed of two corporations. Our acknowledgment of section 110(c)’s application to corporations can hardly be construed as excluding LLCs, since in that case we had no occasion to consider an entity such as an LLC.

            The agent of a limited liability company, like the agent of a corporation, (and unlike the agent of a partnership) is shielded from personal liability. Although LLCs are hybrid entities, it is undisputed that LLCs possess the distinctive corporate quality of limited liability, which Congress specifically intended to address when it enacted section 110(c).

            It is important to emphasize that Congress could not have been expected to expressly mention LLCs in section 110(c) because LLCs did not effectively exist in 1977 when the Mine Act was enacted. Thus, while it can be said that Congress rejected partnerships from the ambit of section 110(c), it cannot be said that Congress rejected a structure such as a limited liability company. Put another way, the word “corporation,” as used in the statute, cannot reasonably be read to include partnerships, but it can reasonably be read to include LLCs.

            Hence, examination of the text and legislative history of section 110(c) does not result in a conclusion that narrowing the definitions of “corporate operator” and “corporation” to how those terms were used in the Delaware law of corporations in 1977 is the only required interpretation of the terms. See Bell Atlantic Telephone Co. v. FCC, 131 F.3d 1044, 1049 (D.C. Cir. 1997). Accordingly, we conclude that section 110(c) is ambiguous or silent on the issue of whether an agent of an LLC may be held personally liable under the Mine Act.

            B.        Whether the Secretary’s interpretation of section 110(c) is reasonable and entitled to deference.

            As explained above, supra, at 5, in cases such as this, where the Mine Act is silent or ambiguous, the Commission must undertake a Chevron II analysis to determine whether the Secretary’s interpretation is a reasonable and permissible construction of the statute. 467 U.S. at 843; see also NationsBank of North Carolina, N.A. v. Variable Annuity Life Ins. Co., 513 U.S. 251, 257 (1995) (providing that courts will give “controlling weight” to the interpretation of the agency charged with enforcement of a statutory provision which “fills a gap or defines a term in a way that is reasonable in light of the legislature’s revealed design”); Wamsley v. Mutual Mining, Inc., 80 F.3d 110, 115 (4th Cir. 1995) (providing that when the Act is silent on an issue, the Secretary’s interpretation which reasonably effectuates the health and safety goals of the Act is controlling).

            The Secretary maintains that section 110(c) should be interpreted as providing that an agent of an LLC may be liable for civil penalties under that subsection. Among other things, the Secretary points to her 2006 interpretive rule in which she concluded that agents of LLCs should be personally liable under section 110(c) to the same extent as agents of corporations. 71 Fed. Reg. 38902.

            The legislative history underlying section 110(c) supports the Secretary’s interpretation. Section 110(c) was carried over without significant change from section 109(c) of the Federal Coal Mine Health and Safety Act of 1969 (“Coal Act”). 30 U.S.C. § 819(c) (1969). In passing section 109 of the Coal Act, Congress explained that it wanted to impose liability on individual agents of corporate operators in order to “penetrat[e] the corporate shield,” stating:

The committee expended considerable time in discussing the role of an agent of a corporate operator and the extent to which he should be penalized and punished for his violations of the act . . . . It was ultimately decided to let the agent stand on his own and be personally responsible for any penalties or punishment meted out to him . . . . The committee chose to qualify the agent as one who could be penalized and punished for violations, because it did not want to break the chain of responsibility for such violations after penetrating the corporate shield.

H.R. Rep. No. 91-563, at 11-12 (1969), reprinted in Senate Subcomm. on Labor, Comm. on Human Res., Part I Legislative History of the Federal Coal Mine and Health and Safety Act of 1969, at 1041-42 (1975) (“Coal Act Leg. Hist.”).

            In later passing section 110(c) of the Mine Act, Congress stated that it intended to hold individual officials as well as corporate entities responsible for violations in order to induce greater compliance with the Mine Act:

“[s]ince the basic business judgments which dictate the method of operation of a coal mine are made directly or indirectly by persons at various levels of corporate structure, [the provision for assessment of civil penalties is] necessary to place the responsibility for compliance with the Act and the regulations, as well as the liability for violations on those who control or supervise the operation of coal mines as well as on those who operate them.” In short, the purpose of a civil penalty is to induce those officials responsible for the operation of a mine to comply with the Act and its standards.

S. Rep. No. 95-181, at 40-41 (1977) (quoting S. Rep. No. 91-411, at 39, reprinted in Coal Act Leg. Hist. at 165), reprinted in Senate Subcomm. on Labor, Comm. on Human Res., Legislative History of the Federal Mine Safety and Health Act of 1977, at 628-29 (1978).

            The Sixth Circuit explained that section 110(c)’s legislative history demonstrated  Congressional intent to provide an additional compliance incentive to certain employees working within a corporate structure:

In a noncorporate structure, the sole proprietor or partners are personally liable as “operators” for violations; they cannot pass off these penalties as a cost of doing business as a corporation can. Therefore, the noncorporate operator has a greater incentive to make certain that his employees do not violate mandatory health or safety standards than does the corporate operator. Subsection [110(c)] attempts to correct this imbalance by giving the corporate employee a direct incentive to comply with the Act.

Richardson v. Sec’y of Labor, 689 F.2d 632, 633-34 (6th Cir. 1982), aff’g, Kenny Richardson, 3 FMSHRC 8 (Jan. 1981), cert. denied, 461 U.S. 928 (1983). Thus, Congress intended to impose personal liability on corporate agents through section 110(c) because otherwise those agents would generally be protected from liability by the corporate shield and have a reduced incentive to comply with the Act. Richardson, 689 F.2d at 633-34.

            With regard to the question of whether an agent of an LLC should be treated as an agent of a corporation for purposes of section 110(c), we note that there is universal agreement that an LLC possesses the distinguishing corporate characteristic of limited liability. Moreover, courts that have addressed the question whether LLCs should be categorized as corporations have concluded that this limited liability characteristic may require an LLC to be treated like a corporation when a statute is silent as to its applicability.

            For example, in Meyer v. Oklahoma Alcoholic Beverage Laws Enforcement Comm., 890 P.2d 1361, 1362 (Okla. Ct. App. 1995), the court addressed the issue of whether an LLC was eligible for a liquor license when the Oklahoma Constitution prohibited corporations from obtaining liquor licenses but permitted partnerships to acquire them. Noting that this was an issue of first impression because LLCs had not been in existence at the time of the state constitution’s enactment, the court ruled that “limitation of liability” was the substantial characteristic that made the LLC fall under the prohibition against corporate license holders. 890 P.2d at 1363-64. The court reasoned that “business forms that did not ensure such personal responsibility were excluded from eligibility for licensing.” Id. at 1364. Accordingly, the court treated the LLC like a corporation even though the Oklahoma constitution limited the exclusion to a “corporation.” In doing so, the Court stated that the “most important feature” of the LLC is “the limitation of liability of its members.” Id.

             Additionally, “given the similar liability shields that are provided by corporations and LLCs,” most courts apply corporate law standards to pierce the liability shields of LLCs. NetJets Aviation, 537 F.3d at 176 (applying Delaware law); see also Ruffin, 773 F. Supp.2d at 40 (providing that the general rule that a corporation is regarded as an entity separate and distinct from its shareholders applies to LLCs and corporate veil piercing principles apply to the LLC shield). In McWilliams Ballard, Inc. v. Broadway Mgmt Co., 636 F. Supp.2d 1, 8 (D.D.C. 2009), the court determined that members of an LLC could be held liable under the corporate doctrine of piercing the limited liability shield. Accord Taurus IP, LLC v. DaimlerChrysler Corp., 534 F. Supp.2d 849, 871 (W.D. Wis. 2008) (providing that the corporate veil of a corporation and of a limited liability company may be pierced when the corporate fiction is used as a means of perpetrating fraud).

            Because of the clear legislative intent to pierce the corporate veil and reach agents who were shielded by limited liability, it is reasonable to conclude that Congress, if given the opportunity, would have explicitly included LLCs within the scope of section 110(c) as entities that shield their agents from personal liability. Accordingly, it is reasonable to construe section 110(c) as including LLCs within the scope of the liability scheme.

            We also note that

[l]egislation is often written in terms broad enough to cover many situations which could not be anticipated at the time of enactment. . . . So a statute, expressed in general terms and written in the present or future tense, will be applied not only to existing things and conditions, but also prospectively to future things and conditions. . . . The rule that a statute will operate prospectively . . . has received frequent application in situations where automobiles are included in pre-automobile statutes enacted for stage coaches and carriages. Likewise, radio performances have been held to come within the meaning of copyright laws, talking pictures have been held to come within the terms of statutes applying to films, and telephones have been included within statutes applying to the telegraph.

Norman J. Singer & J.D. Shambie Singer, 2A Sutherland Statutory Construction, § 49.2 (7th ed. 2008).

            An early Florida Supreme Court case, Taylor v. Roberts, 84 Fla. 654 (1922), is illustrative of this point. There, the plaintiff challenged an automobile parking violation on the basis that the ordinance that authorized the regulation of parking only dealt with “hackney carriages, carts, omnibuses, wagons and drays.” Id. at 657. Automobiles were not in use when the ordinance was passed. Id. The court ruled, however, that the ordinance evidenced an intent to regulate “all the then known classes of vehicles using the streets, and the subsequent use of the streets by a new and different kind of vehicle warrants the extension . . . to the . . . automobile.” Id.; see also Cain v. Bowlby, 114 F.2d 519, 522 (10th Cir. 1940) (holding that “it is a general rule in the construction of statutes that legislative enactments . . . apply to persons, subjects and businesses within their general purview and scope, though coming into existence after their passage, where the language fairly includes them”). Likewise, because Congress, at the time of the Mine Act enactment, was including within the purview of section 110(c) all known entities that shielded its agents from personal liability, it is logical to extend the reach to LLCs, who share the limited liability shield with corporations.

            Similarly, in People of Puerto Rico v. Shell Co. (P.R.), Limited, 302 U.S. 253 (1937), the Supreme Court considered whether the phrase “territory of the United States” in section 3 of the Sherman Anti-Trust Act of 1890, 15 U.S.C. § 3, applied to Puerto Rico, an insular dependency, given that insular dependencies of the United States did not exist when the Sherman Act was enacted. In holding that Puerto Rico was a “territory” within the meaning of section 3 of the Sherman Act, the Court said: “Words generally have different shades of meaning, and are to be construed if reasonably possible to effectuate the intent of the lawmakers; and this meaning in particular instances is to be arrived at not only by a consideration of the words themselves, but by considering, as well, the context, the purposes of the law, and the circumstances under which the words were employed.” Id. at 258. The same principle applies to the Secretary’s interpretation of the words “corporate operator” and “corporation” in this case.

            In addition, the Secretary’s interpretation furthers the safety and remedial goals of the Mine Act by giving operators a “greater incentive” to comply with the Mine Act. Richardson, 689 F.2d at 633-34. Congress intended the Act to be liberally construed to achieve its primary purpose, which is to protect the miner. Cannelton Industries, Inc., 867 F.2d 1432, 1437 (D.C. Cir. 1989). In contrast, Simola’s interpretation excluding agents of LLCs would result in piecemeal enforcement of responsible agents – allowing some to hide behind a limited liability shield while other can be cited. See Alcoa Alumina & Chemicals, LLC, 23 FMSHRC 911, 916 (Sept. 2001) (rejecting operator’s interpretation that would have resulted in piecemeal enforcement).

            We conclude that the Secretary’s interpretation, which holds agents of LLCs personally liable under section 110(c), is consistent with the text of section 110(c) in that section 110(c) applies to corporate operators and the limited liability shield of an LLC is a corporate characteristic. The Secretary’s interpretation also is fully consistent with the legislative history, which indicates that Congress sought to pierce the corporate shield to impose personal liability on responsible agents that otherwise would not have a personal incentive to comply with the Mine Act. LLCs share the limited liability shield with corporations and, unlike in partnerships, the responsible individuals would be able to evade personal liability because of this limited liability. The liability shield of LLCs brings the agents of LLCs within the ambit of section 110(c). In light of the purpose of the Mine Act and the legislative history of section 110(c), the Secretary’s interpretation is reasonable and consistent with the safety-promoting goals of the statute. We conclude that agents of LLCs may be personally liable for civil penalties under section 110(c).

III.

Conclusion

             For the reasons set forth above, we hereby affirm the judge’s order denying Simola’s motion to dismiss. We direct that the case proceed pursuant to the Mine Act and the Commission’s Procedural Rules, 29 C.F.R. Part 2700.

                                                                                    /s/ Mary Lu Jordan.

                                                                                    Mary Lu Jordan, Chairman

                                                                                    /s/ Michael F. Duffy

                                                                                    Michael F. Duffy, Commissioner

                                                                                    /s/ Michael G. Young

                                                                                    Michael G. Young, Commissioner

                                                                                    /s/ Robert F. Cohen, Jr.

                                                                                    Robert F. Cohen, Jr., Commissioner

                                                                                    /s/ Patrick K. Nakamura

                                                                                    Patrick K. Nakamura, Commissioner

Distribution:

R. Henry Moore, Esq.

Jackson Kelly, PLLC

Three Gateway Center, Suite 1340

401 Liberty Avenue

Pittsburgh, PA 15222

Robin Rosenbluth, Esq.

Office of the Solicitor

U.S. Department of Labor

1100 Wilson Blvd., Room 2228

Arlington, VA 22209

W. Christian Schumann, Esq.

Office of the Solicitor

U.S. Department of Labor

1100 Wilson Blvd., Room 2220

Arlington, VA 22209-2296

Melanie Garris

Office of Civil Penalty Compliance

MSHA

U.S. Dept. Of Labor

1100 Wilson Blvd., 25^th Floor

Arlington, VA 22209-3939

Administrative Law Judge Jerold Feldman

Federal Mine Safety & Health Review Commission

Office of Administrative Law Judges

601 New Jersey Avenue, N. W., Suite 9500

Washington, D.C. 20001-2021