December 1, 2012
Federal Mine Safety and Health Review Commission approves heightened scrutiny, and less clarity, over proposed settlements.
By Ben McFarland
Most who are familiar with penalty assessments under the Federal Mine Safety and Health Act of 1977, 30 U.S.C. § 801 et seq. (Mine Act) are aware of the six statutory factors that the Commission must consider when assessing monetary penalties. I am, of course, referring to Section 110(i) of the Mine Act, which plainly provides that, “In assessing civil monetary penalties, the Commission 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.”
Despite this seemingly clear and unambiguous statutory language, the Federal Mine Safety and Health Review Commission (Commission) recently held, in Secretary of Labor v. Black Beauty Coal Co., that in addition to the six statutory factors set forth above, the Commission is also authorized to consider a seventh factor when assessing monetary penalties in settlement proposals: the deterrent effect that the penalty will have on the operator from repeat violations. Black Beauty arose from a settlement conference in which the Secretary of Labor (Secretary) and Black Beauty reached an agreement to settle three separate dockets. When the Secretary filed her motions to approve the settlements, ALJ Miller rejected the settlements and denied all three motions, opining, in part, that the reduced penalties would not adequately effectuate “the deterrent purpose underlying the Act’s penalty assessment scheme.” ALJ Miller specifically concluded that her “discretion in assessing penalties is [not bounded by] the factors set forth in [Section] 110(i), but also by the deterrent purposes” of the Mine Act’s assessment scheme.
While deterrence is clearly a principle that underlies the civil penalty scheme, it is not a separate factor that can be used to adjust the penalty. The proper level of deterrence is achieved through an evaluation and application of the six statutory criteria set forth in Section 110(i).
On appeal before the Commission, both the Secretary and Black Beauty agreed and asserted that ALJ Miller was not authorized to consider “the deterrent effect” of the penalty amounts as a factor independent of the six statutory criteria set forth in Section 110(i) of the Mine Act. The Commission in Black Beauty — at least the majority — was not persuaded, holding that Commission judges can and should consider “deterrence” when determining whether to approve a settlement. The majority in Black Beauty looked to the legislative history of the Mine Act and noted that Congress clearly “intended civil penalties assessed pursuant to the Mine Act to induce compliance with safety and health laws and regulations,” and, in turn, to “deter operators from violating such mandates.” The majority also relied on prior decisions in which it was recognized that civil penalties under the Mine Act are clearly intended to deter operators from violating the Mine Act and its corresponding regulations.
What the majority in Black Beauty missed, and what the dissenting opinion quite succinctly stated, is that, while civil assessments under the Mine Act are unquestionably designed to deter operators from repeat violations, the Mine Act’s intended ‘deterrent’ effect is achieved through the application of the six factors set forth in Section 110(i). In other words, while deterrence is clearly a principle that underlies the civil penalty scheme, it is not a separate factor that can be used to adjust the civil penalty, because the proper level of deterrence is achieved only through an evaluation and application of the six statutory criteria set forth in Section 110(i). After all, the monetary penalty, and hence the deterrent effect on an operator, will always increase when appropriate if one simply follows the criteria set forth in Section 110(i).
As the dissenting opinion points out, the majority’s decision in Black Beauty not only overrules very sound and long-standing precedent, it also opens the door for extensive inconsistency and uncertainty surrounding settlement approvals, because each judge will be left to subjectively decide what “deterrence” means when evaluating settlements. The majority gave no indication as to whether it is error to fail to consider deterrence as a separate factor, or on what is required and forbidden when considering deterrence as a separate factor. Thus, the inevitable result is that the majority’s decision in Black Beauty will lead to situations in which one ALJ approves a settlement, while another rejects a highly similar settlement based on differing subjective opinions as to what monetary penalty constitutes the appropriate level of “deterrence.”
Despite the dissent’s well-reasoned opinion, alas the dissenting opinion is not the law, and operators must therefore be prepared to arm themselves with as much factual support as possible justifying penalty reductions reached during settlement negotiations, particularly when the monetary reductions are significant.
Benjamin M. McFarland is a member of Jackson Kelly PLLC’s Wheeling, W.Va., office, where he works with the firm’s Oil and Gas Group. He can be reached at 304-233-4000 or via email at firstname.lastname@example.org.