FEDERAL MINE SAFETY AND HEALTH REVIEW COMMISSION

601 NEW JERSEY AVENUE, NW

SUITE 9500

WASHINGTON, DC 20001

August 7, 2012

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

DECISION

BY THE COMMISSION:

            This proceeding arises under the Federal Mine Safety and Health Act of 1977, 30 U.S.C. § 801 et seq. (2006) (“Mine Act” or “Act”). This case involves eleven penalties proposed by the Department of Labor’s Mine Safety and Health Administration (“MSHA”) against Mize Granite Quarries, Inc. (“MGQ”), and four penalties proposed under section 110(c) of the Mine Act, 30 U.S.C. § 820(c), against the mine’s owner, Robert W. Mize III (“Mize”), and, separately, against the mine’s foreman, Clayborn Lewis (“Lewis”). Administrative Law Judge Priscilla M. Rae substantially reduced five of the penalties proposed against MGQ and three of the penalties proposed against Mize and Lewis, and she dismissed one penalty proposed against Mize and Lewis. 33 FMSHRC 886, 914-18 (Apr. 2011) (ALJ).

            The Commission granted the Secretary of Labor’s petition for discretionary review only as to the issue of whether the judge failed to adequately explain the basis for substantially reducing the penalties proposed against MGQ and for substantially reducing or entirely dismissing the penalties proposed against Mize and Lewis. Unpublished Order dated May 27, 2011. For the following reasons, we affirm the judge’s reduction of the penalties proposed against MGQ, affirm the judge’s dismissal of the penalties proposed against Mize and Lewis associated with Order No. 6505714, and remand the remaining penalties proposed against Mize and Lewis for further consideration consistent with our decision.

I.

Factual and Procedural Background

            Mize owns and operates MGQ, a stone quarry located in Elberton, GA. 33 FMSHRC at 888. MGQ employs one foreman, Clayborn Lewis, and, at the time of the hearing, seven miners. Id. The citations and orders at issue before the judge arose during two inspections conducted by authorized MSHA inspectors on January 13, 2009, and March 11-12, 2009. Id. at 888-90. The Secretary also conducted a special investigation which resulted in proposed assessments against Mize and Lewis under section 110(c) of the Act. Id. at 888.

            At issue before the judge were eleven proposed penalties against MGQ and four proposed penalties against Mize and Lewis, separately. In the “Citations and Orders” section of her decision, the judge detailed the issues, arguments, evidence, applicable law, and her conclusions regarding each separate citation or order. Id. at 890-913. The judge then listed the six statutory criteria that she must consider in her assessment of penalties under section 110(i) of the Act, 30 U.S.C. § 820(i). Id. at 914. The judge observed that “[t]he penalty assessment for a particular violation is within the sound discretion of the administrative law judge so long as the six statutory criteria and the deterrent purpose of the Act are given due consideration.” Id., citing Sellersburg Stone Co., 5 FMSHRC 287, 294 (Mar. 1983), aff’d, 736 F.2d 1147 (7th Cir. 1984); Cantera Green, 22 FMSHRC 616, 620 (May 2000). Of the eleven proposed penalties against MGQ, the judge vacated two citations, affirmed four citations and proposed penalties in full, and reduced the amounts of five penalties. Id. at 914-15. With regard to the four penalties proposed against Mize and Lewis, the judge dismissed the penalties for Order No. 6505714 and reduced the amounts of the remaining three penalties. Id. at 915-18.

II.

Disposition

            The Secretary argues that the judge failed to adequately explain the basis for substantially reducing five penalties against MGQ and three penalties against Mize and Lewis, and entirely dismissing one proposed penalty against Mize and Lewis. The Secretary maintains that the judge did not resolve the conflicting claims concerning the effect of the proposed penalties on MGQ’s ability to remain in business, and that the judge did not discuss the submitted corporate tax returns. In assessing penalties against MGQ, the judge stated: “I have considered the criteria in 110(i) in view of the evidence of record in making my findings herein. The following penalties w[i]ll not affect the operator’s ability to continue in business and are appropriate under the Act.” 33 FMSHRC at 914. The Secretary asserts that this conclusory statement fails to identify the basis for the judge’s penalty reductions, since it is unclear whether they were based on MGQ’s claim of financial hardship, the judge’s disagreement with the Secretary’s proposed penalty amounts, or some combination of both. Moreover, the Secretary asserts that since Lewis did not submit any financial information, and the judge did not address Mize’s net worth, the judge failed to resolve the conflicting claims concerning the individual financial abilities of Mize and Lewis to pay the proposed section 110(c) penalties. Finally, the Secretary states that there was no discernible method used by the judge in arriving at the penalty reductions.

            In response to the Secretary’s brief, the respondents, appearing pro se (with Mize appearing on behalf of Lewis), submitted copies of MGQ’s corporate tax returns for fiscal years 2007-2009. In the accompanying cover letter, MGQ maintains that it is a small mine and that the proposed penalties will affect its ability to remain in business. These tax returns had previously been submitted to the Judge at the close of the evidentiary hearing.

            Section 110(i) of the Mine Act grants the Commission the authority to assess all civil penalties provided under the Act. 30 U.S.C. § 820(i). It further directs that the Commission, in determining penalty amounts, shall consider:

the operator's history of previous violations, the appropriateness of such penalty to the size of the business of the operator charged, whether the operator was negligent, the effect on the operator's ability to continue in business, the gravity of the violation, and the demonstrated good faith of the person charged in attempting to achieve rapid compliance after notification of a violation.

30 U.S.C. § 820(i).

            Under this clear statutory language, the Commission alone is responsible for assessing final penalties. See Sellersburg Stone Co. v. FMSHRC, 736 F.2d at 1151-52 (“[N]either the ALJ nor the Commission is bound by the Secretary’s proposed penalties . . . we find no basis upon which to conclude that [MSHA’s Part 100 penalty regulations] also govern the Commission.”). While there is no presumption of validity given to the Secretary’s proposed assessments, we have repeatedly held that substantial deviations from the Secretary’s proposed assessments must be adequately explained using the section 110(i) criteria. E.g., Sellersburg Stone, 5 FMSHRC at 293; Hubb Corp., 22 FMSHRC 606, 612 (May 2000); Cantera Green, 22 FMSHRC at 620-21 (citations omitted). A judge need not make exhaustive findings but must provide an adequate explanation of how the findings contributed to his or her penalty assessments. Cantera Green, 22 FMSHRC at 622. In addition to considering the statutory criteria, the judge must also set forth a discernible path that allows the Commission to perform its review function. See, e.g., Martin Co. Coal Corp., 28 FMSHRC 247, 261 (May 2006).

            As the judge noted in her decision, the penalty assessment for a particular violation is within the sound discretion of the administrative law judge so long as the six statutory criteria are given due consideration. 33 FMSHRC at 914; Sellersburg Stone Co., 736 F.2d at 1152; Cantera Green, 22 FMSHRC at 620. The parties stipulated that MGQ is a small operator with no prior history of accidents or injuries, and that it demonstrated good faith in abating the violations. Tr. 9, 151-52, 180, 187. Besides these stipulated factors, the judge also considered the negligence and gravity of the violations, the operator’s history of violations, and the effect of the penalties on the operator’s ability to remain in business. MGQ submitted tax returns indicating that it has been losing money and operating at a net loss in fiscal years 2007-2009. Resp. Ex. 1. Based on all of this information, the judge found “several of the penalty amounts proposed by the Secretary to be out of proportion to the size of the mine and the facts presented.” 33 FMSHRC at 914. She further noted that the penalties she assessed “w[i]ll not affect the operator’s ability to continue in business and are appropriate under the Act.” Id. We find that the judge adequately considered the statutory criteria and, in her detailed analysis of each violation, applied her findings to her decision to reduce the operator’s penalties, and that her findings are supported by substantial evidence. Therefore, we conclude that the judge did not abuse her discretion, and affirm her decision to reduce the operator’s penalties.

            The six statutory criteria also apply, with revisions appropriate to individuals, to the assessment of section 110(c) penalties against individuals. Sunny Ridge Mining Co., 19 FMSHRC 254, 272 (Feb. 1997). As the judge noted, the relevant inquiries include whether the penalty will affect the individual’s ability to meet his financial obligations and whether the penalty is appropriate in light of the individual’s income and net worth. 33 FMSHRC at 916; Ambrosia Coal and Constr. Co., 19 FMSHRC 819, 824 (May 1997).

            At the outset of consideration of the judge’s section 110(c) penalties against Mize and Lewis, we affirm the judge’s dismissal of the penalties proposed by the Secretary that were associated with Order No. 6505714. 33 FMSHRC at 917. She had held that the underlying violation was not a result of the operator’s unwarrantable failure to comply with the mandatory standard (although she determined that a finding that the operator was highly negligent was supported by the evidence). Id. 909-10. Her reasoning was that the “danger posed by this condition [in contrast with the unwarrantable failure violation in Citation No. 6505709 and Citation No. 6507102] . . . was not of such grave concern that a failure to address it constituted aggravated conduct.” Id. at 910. Additionally, the judge found that the fact that MSHA did not cite this same condition in the previous inspection two months earlier “does militate against a finding that [MGQ] was on notice that greater efforts were necessary to comply with the standard.” Id. Her finding that the violation was not unwarrantable sufficiently explains why in her view no penalties against the individuals should be assessed, because she did not find them liable under section 110(c). Id. at 917.

            Regarding the remaining individual penalties, after the parties filed post-hearing briefs, the judge ordered Mize and Lewis to provide documentary evidence of their personal income and financial responsibilities because it was germane to the determination of appropriate penalties for a section 110(c) assessment. Unpublished Order Reopening for Submission of Evidence at 1-2 (Mar. 4, 2011). The judge further noted that the corporate finances are not relevant to the issue of personal liability. Id. at 1 (citing Sunny Ridge, 19 FMSHRC 254). However, in her decision the judge stated that she had considered:

th[e] fact that [MGQ] has been assessed rather significant 110(i) penalties for the violations which will also be paid by Mr. Mize. I have taken this overlapping effect of the penalties into account in the assessment of the personal penalties. I find the penalties proposed by the Secretary are disproportionate to the size of the mine vis a vis the income of the agents, and their lack of personal histories for previous violations.

33 FMSHRC at 916-17.

            However, we have made clear that the proper inquiries for the determination of individual penalties ought not include the size of the mine nor the penalties levied against the corporation. Sunny Ridge, 19 FMSHRC at 271-72. MGQ is a corporation, with the advantages of a corporate structure, including limited liability. By assuming that Mize would pay the penalties assessed against MGQ, the judge in effect was treating it as a partnership or an individual proprietorship. Thus, the judge’s assumption that Mize would pay the operator’s penalties is incorrect. Therefore, we remand for the judge to consider the individual penalties assessed against Mize based solely on Mize’s personal financial status.

            Regarding the penalties assessed against Lewis, the judge said, “[t]aking into account that Mr. Lewis is a paid employee of Mize, and not the owner, but otherwise for the same reasons set forth above regarding Mr. Mize, I assess the following penalties.” 33 FMSHRC at 917. The judge also noted that Lewis did not respond to her March 4, 2011 Order reopening the record for the submission of financial information. Id. at 916. However, the judge stated, “[u]nder the circumstances, I find that making additional inquiries and delaying the case further would not be fruitful. Instead I make the finding that the penalties I assess will not adversely affect the ability to meet individual financial obligations of Mr. Lewis.” Id. (citation omitted). We conclude that the Judge did not adequately explain her reasons for reducing the penalties for Lewis.

            We note that the Judge’s March 4, 2011 Order was not sent to Lewis directly but was addressed to him c/o Mize Granite Quarries, Inc. Moreover, the order was written in language which might not readily be understandable by a layman. Lewis was represented by Mize at the hearing and the answer to the petition was submitted on his behalf by Mize. Although Lewis testified at the hearing, his testimony was confined to the circumstances of the violations and did not touch on his personal financial situation. Tr. 161-78. Mize’s closing statement at the end of the hearing did not address the personal liability issues. Tr. 179-83. There is nothing in the record which indicates that Lewis understood that the amount of his penalty would be affected by consideration of his income and net worth, and his ability to meet his financial obligations.

            As a result, we remand for the judge to reconsider the individual penalties assessed against Lewis, after he is directly notified of the penalties proposed by MSHA (a total of $17,600), and given another opportunity to provide documentary evidence and an affidavit or declaration regarding his personal income and financial responsibilities. Lewis should be specifically notified that (1) the amount of the penalties the judge will impose may be affected by the amount of his income and net worth, and by the impact of the penalties on his ability to meet his financial obligations; and (2) if Lewis fails to provide evidence of income, net worth, and financial obligations, the judge may presume that the imposition of the assessed penalties would not adversely affect his ability to meet financial obligations.

            Although we remand for the judge’s consideration of the individuals’ personal financial information, in order to preserve the individuals’ privacy, we do not expect a detailed financial analysis in the judge’s decision. Rather, we seek an adequate explanation of which conflicting claims the judge considered with regard to each separate penalty, how the claims were resolved, and how the statutory criteria were applied to substantially reduce or entirely dismiss each proposed penalty.

            Pursuant to our direction for review, the petition for discretionary review remains under seal because it contains confidential financial information, and any subsequent filings by the parties containing confidential financial information shall also be placed under seal.

III.

Conclusion

            For the reasons set forth above, we affirm the penalties imposed by the judge against MGQ, affirm the judge’s dismissal of the penalties proposed against Mize and Lewis associated with Order No. 6505714, vacate the remaining penalties imposed against Mize and Lewis, and remand this matter for further proceedings consistent with our decision.

                                                                                    /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:

Clayborn Lewis

P.O. Box 881

Elberton, GA 30635

Clayborn Lewis,

Mize Granite Quarries, Inc.

P.O. Box 299

Elberton, GA 30635

Robert W. Mize, III, President

Mize Granite Quarries, Inc.

P.O. Box 299

Elberton, GA 30635

W. Christian Schumann, Esq.

Edward Waldman, 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 Priscilla M. Rae

Federal Mine Safety & Health Review Commission

Office of Administrative Law Judges

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

Washington, D.C. 20001-2021