Sterling Smokeless Coal Corp. v. Director, Office of Workers' Compensation Programs ( 2003 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
STERLING SMOKELESS COAL 
CORPORATION,
Petitioner,
v.
DIRECTOR, OFFICE OF WORKERS’  No. 02-1679
COMPENSATION PROGRAMS, UNITED
STATES DEPARTMENT OF LABOR;
BOBBY BALLENGEE,
Respondents.

On Petition for Review of an Order
of the Benefits Review Board.
(01-0205-BLA)
Argued: June 5, 2003
Decided: August 21, 2003
Before NIEMEYER, WILLIAMS, and TRAXLER, Circuit Judges.
Petition for review granted and remanded by unpublished per curiam
opinion.
COUNSEL
ARGUED: Mark Elliott Solomons, GREENBERG TRAURIG,
Washington, D.C., for Petitioner. William D. Turner, III, CRAN-
DALL, PYLES, HAVILAND & TURNER, L.L.P., Lewisburg, West
Virginia, for Respondent Ballengee. Barry H. Joyner, Office of the
2 STERLING SMOKELESS COAL CORP. v. DIRECTOR, OWCP
Solicitor, UNITED STATES DEPARTMENT OF LABOR, Washing-
ton, D.C., for Respondent Director. ON BRIEF: Laura Metcoff
Klaus, GREENBERG TRAURIG, Washington, D.C., for Petitioner.
Eugene Scalia, Solicitor of Labor, Donald S. Shire, Associate Solici-
tor, Christian P. Barber, Counsel for Appellate Litigation, Office of
the Solicitor, UNITED STATES DEPARTMENT OF LABOR,
Washington, D.C., for Respondent Director.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
In this claim for benefits under the Black Lung Benefits Act, Ster-
ling Smokeless Coal Corporation seeks review of the Benefits Review
Board’s determinations (1) that Sterling Smokeless is the operator
responsible for any award of benefits to claimant Bobby Ray Bal-
lengee and (2) that Ballengee is entitled to those benefits. We grant
review on the first issue, do not reach the second, and remand for fur-
ther proceedings consistent with this opinion.
I
Ballengee, the claimant, worked as a coal miner for over 20 years,
working first for Sterling Smokeless from 1972 to 1981. Thereafter,
he worked for several different coal companies, last working for
Green Mountain Energy, Incorporated from August 1990 to Septem-
ber 1993. In total, Ballengee worked for ten coal companies as fol-
lows:
Company Date of Employment
Sterling Smokeless Coal Corp. 1972-81
PG&H, Inc. 1982
Consolidated Coal Co. 1982
STERLING SMOKELESS COAL CORP. v. DIRECTOR, OWCP 3
Barrett Fuel Corp. 1982
Maben Energy Corp. 1982-85
Riteway Coal, Inc. 1984-85
Hendricks Mining, Inc. 1986-87
Hansford Smokeless Collieries, Inc. 1987
Stoney Coal Co. 1987-90
Green Mountain Energy, Inc. 1990-93
Of these, six companies each employed Ballengee for less than one
year: PG&H, Consolidated, Barrett, Riteway, Hendricks, and Hans-
ford. But according to Ballengee, Maben Energy and the companies
for whom he worked afterwards (Riteway, Hendricks, Hansford,
Stoney Coal, and Green Mountain) were "all the same company, it
just had different names."
After Ballengee quit working in 1993 on the advice of his doctors,
he filed a claim for benefits under the Black Lung Benefits Act, as
amended, 30 U.S.C. § 901 et seq. To obtain benefits under that Act,
he was required to prove that he had pneumoconiosis; that it arose out
of his coal mine employment; that he had a totally disabling respira-
tory or pulmonary condition; and that pneumoconiosis was a contrib-
uting cause of his disability. See Island Creek Coal Co. v. Compton,
211 F.3d 203, 207 (4th Cir. 2000); 20 C.F.R. §§ 718.201-.204.
Because Ballengee failed to prove total disability due to pneumoconi-
osis, his claim was denied. Ballengee did not request a hearing or oth-
erwise contest the decision.
Ballengee later filed a second or "duplicate" claim for benefits
based allegedly on a material change in conditions. Green Mountain,
Ballengee’s most recent coal mine employer, was originally identified
as the employer statutorily responsible for payment of Ballengee’s
benefits, but Green Mountain informed the administrative law judge
("ALJ") that it, along with its parent company Adventure Resources,
Incorporated and several other companies also owned by Adventure
Resources, had filed for bankruptcy in 1992 and that it was uncertain
whether Green Mountain could meet its obligation to pay the benefits.
While the bankruptcy court allowed the unsecured claim of the fed-
eral Black Lung Disability Trust Fund, which had been paying Bal-
lengee’s claims during the prolonged adjudication, other creditors’
claims would exhaust any assets of the bankruptcy estate before the
4 STERLING SMOKELESS COAL CORP. v. DIRECTOR, OWCP
Trust Fund could be compensated or any of Ballengee’s benefits paid.
And although Green Mountain had participated, as of 1989, in a self-
insured black lung benefits trust authorized by the Department of
Labor and run by Adventure Resources, funding the trust with
$705,556, the assets of that program had been exhausted by Novem-
ber 1996.
Green Mountain accordingly was released from liability, and Ster-
ling Smokeless was identified as the responsible operator. Upon that
company’s objections to the ALJ, the Director of the Office of Work-
ers’ Compensation Programs ("Director") was ordered to show cause
for holding Sterling Smokeless liable, given that several other coal
mine operators had more recently employed Ballengee. The Director
responded that all of Ballengee’s coal mine employers, other than
Sterling Smokeless, either had filed for bankruptcy with insufficient
assets to pay Ballengee’s benefits or had employed Ballengee for
periods less than one year and, pursuant to applicable regulations,
could not be the responsible operator. The Director also argued that
no successor operator could be identified, on the basis that "[t]o the
best of the Director’s knowledge . . . the assets of Adventure
Resources and its affiliates and subsidiaries have been and are being
sold by the bankruptcy trustee free and clear of such successor liabil-
ity." As evidence, the Director provided documents that identified
Adventure Resources, several subsidiaries (including Barrett, Maben
Energy, Hendricks, Hansford, Stoney Coal, and Green Mountain),
and its principal H. Paul Kizer as active in bankruptcy proceedings.
The Director also provided proofs of claims it had filed in those pro-
ceedings that acknowledged the inadequate assets of the bankruptcy
estate, bankruptcy court orders authorizing the sale free and clear of
all real property of Adventure Resources, and a Westlaw database
printout of the corporate structures of certain of Ballengee’s employ-
ers identifying Kizer as the primary officer.
Summarizing the Director’s evidence as "provid[ing] at most a
rather hazy and a limited view of a very complex corporate structure
and its financial situation," the ALJ dismissed Sterling Smokeless
from the case. The ALJ explained:
I am unable to conclude without resort to speculation that
there are simply no assets sufficient to cover [Ballengee’s]
STERLING SMOKELESS COAL CORP. v. DIRECTOR, OWCP 5
benefits in the possession of any entity which either
employed [Ballengee] for a cumulative period of not less
than one year subsequent to his employment with Sterling
Smokeless or which could be held liable as a successor
operator.
With no other operator named, the ALJ held the Black Lung Disabil-
ity Trust Fund responsible for continuation of Ballengee’s benefit
payments.
On appeal by the Director, the Benefits Review Board vacated the
ALJ’s decision and remanded. The Board stated:
[T]he Director met his burden of providing evidence suffi-
cient to demonstrate that all employers subsequent to Ster-
ling are either incapable of assuming liability for the
payment of benefits or employed [Ballengee] for less than
one year and do not otherwise satisfy the definition of a
responsible operator.
* * *
Concerning the issue of whether Hansford and Hendricks
were successor operators capable of assuming liability for
payment of benefits, the administrative law judge’s conclu-
sion that Hansford and Hendricks may possess assets with
which to pay benefits is speculative, and thus, insufficient
to support his inference that these companies could be held
liable for benefits. Similarly, the record lacks evidence to
bolster the administrative law judge’s assumption that Hans-
ford and Hendricks are successor operators to Green Moun-
tain, Stoney or Maben [noting that Ballengee worked for
Stoney Coal and Green Mountain after working for Hans-
ford and Hendricks]. In contrast, the record contains evi-
dence sufficient to support the Director’s position that
Hansford and Hendricks had filed for bankruptcy, and that
the physical location of the mines where claimant worked
for Hansford and Hendricks was different from the physical
location of the mines where claimant worked when
employed by Maben, Stoney, and Green Mountain.
6 STERLING SMOKELESS COAL CORP. v. DIRECTOR, OWCP
The Board denied Sterling Smokeless’ subsequent motion for recon-
sideration.
Bound by the Board’s holding and presented with evidence of Ster-
ling Smokeless’ ability to pay, the ALJ issued a decision and order
on September 29, 2000, that identified Sterling Smokeless as the
responsible operator and considered the merits of Ballengee’s claim.
Awarding benefits, the ALJ found that Ballengee suffered from com-
plicated pneumoconiosis, which qualified as a material change in con-
ditions to permit his duplicate claim to proceed and, consequently, to
invoke the irrebuttable presumption of total disability due to pneumo-
coniosis entitling him to benefits.
On Sterling Smokeless’ appeal, the Board affirmed and subse-
quently denied the request for reconsideration.
On appeal before this court, Sterling Smokeless petitions for
review of (1) its liability as responsible operator and (2) the merits of
Ballengee’s claim.
II
Sterling Smokeless’ principal claim on appeal is that it is not the
coal mine operator statutorily responsible for paying any award of
benefits to Ballengee under the Black Lung Benefits Act. Among the
various arguments it advances on this issue, it contends first that the
Director breached his duty to ensure that Green Mountain’s self-
insurance program was sufficiently funded to pay benefits and, were
it not for this failure, Green Mountain would be the responsible opera-
tor because it employed Ballengee more recently than Sterling
Smokeless. As support for imposing liability on the Black Lung Dis-
ability Trust Fund in this instance, Sterling Smokeless relies on the
principle embodied in 20 C.F.R. § 725.495(a)(4) (2001), conceded to
be a new regulation not controlling in this case, see id. § 725.2(c),
which provides that the Trust Fund will assume liability where the
Department of Labor has authorized self-insurance but at an inade-
quate level. Second, Sterling Smokeless contends that the Director
failed to satisfy his obligation to investigate sufficiently whether Bal-
lengee’s employers other than Sterling Smokeless had the ability or
responsibility to pay, arguing that liability does not attach to Sterling
STERLING SMOKELESS COAL CORP. v. DIRECTOR, OWCP 7
Smokeless if any of Ballengee’s more recent employers qualify as the
responsible operator. Third, Sterling Smokeless contends that the offi-
cers of Green Mountain and Adventure Resources’ other affiliates
failed to fund adequately the self-insurance program and, as a conse-
quence, are personally obligated to pay any benefits due to Ballengee
that their companies are unable to pay. Finally, Sterling Smokeless
claims that it should be excused from liability on due process
grounds.
Ballengee’s claim for benefits is governed by the Black Lung Ben-
efits Act. That Act imposes liability on the coal industry for the pay-
ment of black lung benefits, and for claimants who worked as coal
miners beyond January 1, 1970, the Act places liability on the indi-
vidual "responsible operator" — the coal mine operator that most
recently employed the claimant for periods of employment of not less
than one year. See 20 C.F.R. § 725.490(a) (2001); id. § 725.493(a)(1)
(1999).1 But if that operator is "[in]capable of assuming its liability
for the payment of continuing benefits," see id. § 725.492(a)(4), and
there is no "successor operator" liable for the payment of benefits, see
id. § 725.493(a)(2), then the next most recent employer satisfying the
definition "shall be considered" the responsible operator, see id.
§ 725.493(a)(4). "[I]f no responsible operator can be identified, bene-
fits are paid by the Black Lung Disability Trust Fund." Id. § 725.1(d)
(2001). And under the regulations applicable to this case, it is the
Director’s burden to develop evidence sufficient to support the con-
clusion that a potentially responsible operator is incapable of assum-
ing liability and consequently does not qualify as the responsible
operator. See Director, OWCP v. Trace Fork Coal Co., 67 F.3d 503,
507 (4th Cir. 1995) (holding that the applicable regulations "give the
Director, not [the designated responsible operator], the power to
develop evidence on [the responsible operator] issue"); see also id. at
506-07 (stating that "[w]e review the factfindings of the ALJ to see
if they are based on substantial evidence in the record considered as
a whole").2
1
Because this claim was filed before January 19, 2001, the version of
§§ 725.491-495 set forth in 20 C.F.R., parts 500 to end, edition revised
as of April 1, 1999, apply. See 20 C.F.R. § 725.2(c) (2001).
2
We note that while the current version of regulations governing the
responsible operator issue place on the designated responsible operator
8 STERLING SMOKELESS COAL CORP. v. DIRECTOR, OWCP
We conclude in this case that the Director has failed to present suf-
ficient evidence to identify Sterling Smokeless as the proper responsi-
ble operator. See Trace Fork, 67 F.3d at 505, 507 (agreeing with the
Benefits Review Board and the ALJ that the Director’s evidence of
a more recent employer’s dissolution was insufficient to establish
inability to pay benefits). Ballengee testified that Maben Energy and
the companies for whom he worked afterwards were "all the same
company, it just had different names." This indicates that some or all
may have been successors to one another. See 20 C.F.R.
§ 725.493(a)(2)(i) (1999) (defining "successor operator" as one who
receives a "mine or mines or substantially all of the assets thereof"
from another operator). And the Director’s evidence supports this
contention that some of Ballengee’s employers were successors to
one another. The Director submitted information obtained from a
Westlaw database — from 1998 — that listed Maben Energy and
Stoney Coal as active corporations and at the same address. And the
Director’s exhibits on Ballengee’s employment history list Barrett,
Maben Energy, Hendricks, Hansford, Stoney Coal, and Green Moun-
tain as sharing the same address and even the same payroll manager.
While the Board was correct to note that Ballengee was assigned to
several mines identified by different numbers,3 it is no more specula-
tive to assume from this evidence that the mines were at physically
different locations than it is to assume that they were the same mine
or mines but renumbered by a successor operator. Acknowledging the
different numbers does not answer the lurking concern that a later
employer of Ballengee may have succeeded to the assets of a prior
employer of Ballengee. This is especially true given the extensive
structure of Adventure Resources and its affiliates, once touted as "the
the burden to prove that "it is not the potentially liable operator that most
recently employed the miner," 20 C.F.R. § 725.495(c)(2) (2001), those
regulations apply only to claims filed after January 19, 2001, see id.§ 725.2(c). Because the claim here was filed prior to that date, the appli-
cable regulations are contained in the April 1, 1999, version of 20 C.F.R.
§§ 725.491-495, see id., and are subject to the burden of proof identified
in Trace Fork.
3
The records indicate that Ballengee worked as a coal miner at the fol-
lowing mines: mine #3 at Barrett; mines #5 and #8 at Maben Energy;
mine #3 at Hendricks; mine #3 at Hansford; mines #5, #7, and #8 at
Stoney Coal; and mines #6 and #7 at Green Mountain.
STERLING SMOKELESS COAL CORP. v. DIRECTOR, OWCP 9
largest independent coal producer in West Virginia and the 49th larg-
est independent coal producer in the United States." Adventure
Resources, Inc. v. Holland, 193 B.R. 787, 791 (S.D. W.V. 1996)
(internal quotation marks omitted), aff’d in part & rev’d in part on
other grounds, 137 F.3d 786 (4th Cir. 1998).
As to ability to pay, not all of Adventure Resources’ affiliates filed
for bankruptcy. Although the Director indicated that Barrett, Maben
Energy, Hendricks, Hansford, Stoney Coal, and Green Mountain had
all filed bankruptcy proceedings, that information — contained in a
letter from Adventure Resources — does not satisfy the Director’s
burden. Indeed, the bankruptcy action (a liquidation proceeding) iden-
tifies as bankrupt only four of the companies for whom Ballengee
worked and notably missing are Hendricks and Hansford. See Adven-
ture Resources, Inc. v. Holland, 137 F.3d 786 (4th Cir. 1998) (listing
Barrett, Maben Energy, Stoney Coal, and Green Mountain among the
debtors in bankruptcy). Indeed, the bankruptcy court noted that at
least eight affiliates, although participating in the bankruptcy action,
had not themselves filed for bankruptcy. See Adventure Resources,
193 B.R. at 791 n.5.
From all of this, we conclude that the Board had insufficient evi-
dence to identify Sterling Smokeless as the responsible operator
because the evidence in the record is insufficient to show that all of
Ballengee’s employers, subsequent to Sterling Smokeless, are unqual-
ified to assume liability as the responsible operator. Accordingly, we
remand this case for the development of further evidence on the abil-
ity of Ballengee’s more recent employers to pay. Because of this
remand, we need not address Sterling Smokeless’ other arguments on
the responsible operator issue.
Given our conclusion on the responsible operator issue, we also
refrain from ruling on the sufficiency of the evidence either to estab-
lish a material change in conditions pursuant to 20 C.F.R.
§ 725.309(c) (1999) to permit the duplicate claim to proceed or to
establish complicated pneumoconiosis pursuant to 20 C.F.R.
§ 718.304 (2000) to entitle Ballengee to benefits. In the event that an
employer other than Sterling Smokeless is designated Ballengee’s
responsible operator, that employer should have the opportunity to
dispute Ballengee’s claim on the merits.
10 STERLING SMOKELESS COAL CORP. v. DIRECTOR, OWCP
Accordingly, we grant Sterling Smokeless’ petition for review of
the decision of the Benefits Review Board on the responsible operator
issue and remand for further proceedings consistent with this opinion.
THE PETITION FOR REVIEW IS
GRANTED AND THE CASE REMANDED