Coleman Hammons Const Co., Inc v. OSHC

Case: 18-60559 Document: 00515189567 Page: 1 Date Filed: 11/06/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
November 6, 2019
No. 18-60559 Lyle W. Cayce
Clerk
COLEMAN HAMMONS CONSTRUCTION
COMPANY, INCORPORATED,
Petitioner
v.
OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION;
EUGENE SCALIA, SECRETARY, U.S. DEPARTMENT OF LABOR,
Respondents
On Petition for Review from a Decision and
Order of the United States of America
Occupational Safety and
Health Review Commission
OSHRC No. 17-0992
Before HIGGINBOTHAM, JONES, and COSTA, Circuit Judges.
EDITH H. JONES, Circuit Judge:
This is an appeal from the Occupational Safety and Health Review
Commission’s decision that a construction company’s 18 working-days-late
response to a citation notice that had been misplaced in the company’s internal
mail system demonstrated “inexcusable neglect” and barred the company from
contesting the citations for nearly $70,000. The Commission’s decision
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misapplied Fed. Rule Civ. Pro. 60(b), which applies under the Commission’s
own regulations. See 29 U.S.C. § 661(g) (Commission proceedings in
accordance with the Federal Rules of Civil Procedure unless the Commission
has adopted a different rule). Accordingly, we VACATE and REMAND for
further proceedings.
I. BACKGROUND
Coleman Hammons (“Coleman”), a Mississippi construction company,
received four Occupational Health and Safety Administration (“OSHA”)
citations for alleged violations that occurred at one of the company’s job sites
in Madison, Mississippi. The penalties were assessed at $68,517. OSHA
mailed the citations by certified mail to Coleman’s office in Pearl, Mississippi,
where they arrived on March 15, 2017. The citation notice included standard
language requiring the employer to file a notice of contest within fifteen
working days of receipt, here, April 5. See 29 U.S.C. § 659(a). Failure to do so,
it warned, results in the citations’ becoming “a final order not subject to review
by any court or agency.”
Coleman’s standard operating procedures are undisputed. The
company’s office manager opens incoming mail and circulates it appropriately
to staff within the office. When the company receives OSHA-related mail, the
office manager directs the mail to the superintendent of the relevant project.
Coleman had received OSHA citations in each of the past seven years. On at
least three of those occasions, the system worked, and Coleman settled the
citations in a timely manner through informal conferences with OSHA
representatives. In this instance, however, Coleman’s office manager had left
her desk when the mail arrived on March 15. The company
secretary/treasurer, who was not normally a mail handler, signed the return
receipt, did not open the letter, and placed the OSHA letter on the Madison
project superintendent’s desk. Unfortunately, that superintendent was out of
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town, continuing to work on the Madison project until April 24. As soon as the
project superintendent returned to the office and discovered the OSHA citation
notice, he telephonically informed OSHA on April 25 of the company’s hope to
resolve the problem that would otherwise cause it considerable hardship. The
company followed up with a mailed notice of contest that was received by
OSHA on May 1, only 18 working days after the prescribed deadline.
Coleman attempted to challenge the citation in a hearing before an
administrative law judge (“ALJ”), but the government moved to dismiss the
notice of contest as untimely. The company admitted untimeliness but argued
that its error amounted to “excusable neglect” and deserved relief from the
statutory bar pursuant to Federal Rule of Civil Procedure 60(b)(1), which
applies to commission proceedings. See 29 U.S.C. § 661(g); Fed. R. Civ.
P. 60(b)(1). The ALJ noted that Coleman was acting in good faith; the
Secretary had not shown prejudice from the delay or an adverse effect on
judicial administration; and the Secretary stipulated that the company “has a
meritorious defense.” Nonetheless, the ALJ concluded the company’s failure
was inexcusable because “the delayed filing was within the control of Coleman
Hammons and could have been avoided if it had exercised reasonable
diligence.”
The Commission granted Coleman’s request for discretionary review of
the ALJ decision but, in a split decision, affirmed the ALJ. The Commission
explained that the Rule 60(b) inquiry for excusable neglect is guided by the
Supreme Court’s decision in Pioneer Invest. Servs. Co. v. Brunswick Assocs.
Ltd. P’ship, 507 U.S. 380, 113 S. Ct. 1489 (1993), which emphasizes the
equitable, multifactor nature of the provision. Nevertheless, the Commission
enforced its rulings that a “key factor in evaluating whether a party’s delay in
filing was due to excusable neglect is ‘the reason for the delay’ including
whether it was within the reasonable control of the movant.” (quoting Sec’y of
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Labor v. A.W. Ross, Inc., 19 BNA OSHC 1147, 1148 (2000)). Because the
reason for Coleman’s untimely response—its inadequate mail procedures—
was within the control of Coleman, the Commission majority discounted that
other factors favored granting the company an opportunity to defend against
the citations. The dissenting Commissioner would have granted relief. He
disagreed with the others’ factual findings, construed the record to establish
no more than a single unforeseeable human error, and criticized the majority’s
refusal to take into account all relevant factors, as stated in Pioneer. Coleman
seeks review in this court.
II. STANDARD OF REVIEW
This court reviews the Commission’s findings of fact under a substantial
evidence standard. 29 U.S.C. § 660(a) (Commission’s factual findings are
upheld only if they are “supported by substantial evidence on the record
considered as a whole”). The Commission’s conclusions of law receive the
ordinary deference afforded to agency decisions and are upheld unless they are
arbitrary, capricious, an abuse of discretion, or otherwise not in accordance
with law. 5 U.S.C. § 706(2)(A); Austin Indus. Specialty Servs., L.P. v. OSHRC,
765 F.3d 434, 438–39 (5th Cir. 2014).
III. DISCUSSION
The issue in this case is whether the Commission’s interpretation of
Rule 60(b)(1) was in accordance with law and, if not, whether its decision
refusing to find excusable neglect and reach the merits of Coleman’s contest
was supportable. 1
Rule 60(b)(1) authorizes courts, or in this case, the Commission, to
“relieve a party or its legal representatives from a final judgment, order, or
1 We note that a circuit split exists regarding whether the Commission may use
Rule 60(b) to grant relief following an untimely notice of contest. Compare Chao v. Russell
P. Le Frois Builder, Inc., 291 F.3d 219, 228-29 (2d Cir. 2002) with J.I. Hass Co., Inc. v.
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proceeding” in instances involving “mistake, inadvertence, surprise, or
excusable neglect.” Whether a party is entitled to relief for excusable neglect
is a determination that is “at bottom an equitable one, taking account of all
relevant circumstances.” Pioneer, 507 U.S. at 395, 113 S. Ct. at 1498. The
relevant factors include but are not limited to “the danger of prejudice to the
[opposing party], the length of the delay and its potential impact on judicial
proceedings, the reason for the delay, including whether it was within the
reasonable control of the movant, and whether the movant acted in good faith.”
Id. Although Pioneer was a civil bankruptcy case, this court and others have
applied it to “excusable neglect” inquiries under the Federal Rules of Civil
Procedure. See Halicki v. La. Casino Cruises, Inc., 151 F.3d 465, 469
(5th Cir. 1998).
The Commission in this instance placed virtually exclusive emphasis on
the reason for Coleman’s delay and accordingly barred relief even though
“there is no evidence that [Coleman] acted in bad faith, that its untimely notice
of contest had any impact on our proceedings, or that the delay in filing caused
any prejudice to the [government].” That analysis was in error, though not out
of step with previous Commission decisions.
The Commission has long considered the reason for the employer’s delay
in responding to a citation to be a “key factor” in its analysis. See Sec’y of Labor
v. A.W. Ross, Inc., 19 BNA OSHC 1147, 1148 (2000). The Commission has
focused on the employer’s “control” of the circumstances causing an untimely
response to the exclusion of other equitable factors. But pursuant to Pioneer,
“key factor” cannot mean “the only factor.” Rule 60(b)(1) contains leeway for
parties who make good-faith mistakes. Pioneer held that “neglect” by
OSHRC, 648 F.2d 190, 194 (3d Cir. 1981). Here, however, we assume arguendo that
Rule 60(b) applies because the parties do not contest its applicability.
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definition encompasses “omissions caused by carelessness.” Pioneer,
507 U.S. at 388, 113 S. Ct. at 1495. The excusable neglect inquiry is not
limited to whether a party’s mistake caused the delay, such cause being
expressed in the term “neglect,” but equally concerns whether the party’s
mistake or omission was “excusable.” Focusing narrowly on whether a party
is at fault for the delay and denying relief if it bears any blame clearly conflicts
with Pioneer’s more lenient and comprehensive standard. See Halicki,
151 F.3d at 468 (reconfirming that the decision in Pioneer “abrogated our
previous caselaw stringently construing ‘excusable neglect’” in a comparable
Federal Rules provision); see also Robb v. Norfolk and W.Ry. Co.,
122 F.3d 354, 361-62 (7th Cir. 1997) (“excusable neglect” has a new and
broader meaning following Pioneer).
The Commission’s misinterpretation of Pioneer has been rejected before
in circumstances not unlike those before us. In George Harms Constr. Co., Inc.
v. Chao, 371 F.3d 156 (3d Cir. 2004), the court vacated a final order of the
Commission that refused to grant Rule 60(b)(1) relief to an employer whose
internal mail delivery failed, as here, causing the company to delay contesting
a citation for well over a month after its filing was due. The Third Circuit
rejected the Commission’s weighing of the “control” factor at the expense of the
other equitable factors identified in Pioneer. The court’s explanation is fully
applicable in this case:
[9] The ALJ’s “excusable neglect” calculus was improper. Under
Pioneer, a court must take into account all relevant circumstances
surrounding a party’s failure to file, and failing to disprove
“reasonable control” is not necessarily fatal to a petitioner’s
request for relief. To state it differently, the “control” factor does
not necessarily trump all other relevant factors. As the Supreme
Court concluded in Pioneer: “[T]he lack of any prejudice to the
[opposing party] or to the interests of efficient judicial
administration, combined with the good faith of respondents and
their counsel, weigh strongly in favor of permitting the tardy
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claim.” 507 U.S. at 398, 113 S. Ct. 1489. As the Commission has
recognized, in Fed.R.Civ.P. 60(b)(1) late filing cases, it is usually a
given that there is “a lack of prejudice to the Secretary or to the
interests of efficient judicial administration, combined with a lack
of bad faith by the employer.” CalHar Constr. Inc., No. 98-0367,
2000 OSAHRC LEXIS 28, *6 n. 5. But just because those factors
may nearly always favor the petitioner does not mean that the
Commission should ignore them.
Harms, 371 F.3d at 164.
Notably, the court completed its analysis by finding that the employer’s
explanation for its mishandling of the citation in this single instance was “an
unforeseeable human error beyond its reasonable control.” Id. at 165.
Consequently, on balance the equitable factors, taken as a whole, supported
the grant of excusable neglect relief for the employer. The court vacated and
remanded for a hearing on the merits. The court issued similar relief in
another case in which, due to an employee’s losing or destroying mail, an
employer did not respond to OSHA citations until about two months after the
deadline. Avon Contractors, Inc. v. Sec. of Labor, 372 F.3d 171, 172 (3rd Cir.
2004). The Commission had nonetheless rejected a Rule 60(b)(1) motion based
on its artificially narrow interpretation of Pioneer. 2 We find the Third Circuit’s
reasoning persuasive.
Examining the totality of circumstances under Rule 60(b)(1), Pioneer’s
interpretation of excusable neglect, and this court’s authorities, we are
compelled to find the Commission’s decision arbitrary and capricious and not
2A recent unpublished decision of the D.C. Circuit denied a petition for review of an
untimeliness decision of the Commission premised on an employer’s failure to explain why
the OSHA citation was not forwarded to company headquarters. David E. Harvey Builders,
Inc. v. Sec. of Labor, 724 F.App’x 7, 10 (D.C.Cir. 2018). Notably, however, although
unpublished opinions of that court issued after January 1, 2002 “may be cited as precedent,”
“a panel’s decision to issue an unpublished disposition means that the panel sees no
precedential value in that disposition.” U.S.Ct. of App. D.C. Cir. Rules 32.1(b)(1)(B), 36(e)(2).
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in accord with law. Coleman admits neglect, but its proof shows that the
missed deadline was attributable to a single instance of unforeseen human
error. Contrary to the Commission’s finding of inadequate procedures, the
company showed that all mail is ordinarily received, opened and distributed
by the office manager or the company controller. Far from being inadequate,
the procedures enabled the company to handle seven previous OSHA citations
and in at least three instances, to contest them by informal means within the
statutory time limit. This track record demonstrates the company’s usual
procedures were sufficient to respond to OSHA matters. In this single
deviation from the procedures, however, the OSHA citations here were not
received or opened by the usual employees. That the project supervisor did not
see the citations on his desk until after the deadline and after his return from
out of town was also not shown to be a common occurrence, indeed it was
apparently unique. The circumstances prove neglect of a very minor sort that
had minimal consequences in the context of the excusable neglect inquiry.
With regard to the other equitable factors, the company responded to the
citations as soon as the project superintendent saw them, which was within 18
business days of the response deadline. The delay evinces no lack of good faith,
nor is there the least showing of prejudice to the agency or its mission. Judicial
proceedings to contest the citations were not prejudiced, as the Commission
acknowledged. Not only does a majority of the non-exclusive Pioneer factors
favor granting relief to Coleman, but the qualitative assessment of relevant
factors is even more persuasive. The Commission’s improperly narrow focus
on the company’s “control” and “inadequate” mail handling procedures led it to
ignore that a nearly $70,000 penalty had been assessed—on a company that it
admits has meritorious defenses. As a small company, Coleman asserts this
penalty would pose a financial hardship. Further, because one of the citations
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was classified as a “willful” violation, its affirmance would significantly
prejudice Coleman’s bonding capacity, insurance, bidding, and reputation.
For all these reasons, the equities weigh in favor of Coleman’s having an
opportunity to assert its defenses in OSHA’s administrative proceedings. The
Commission’s contrary determination denying relief from the untimely filing
was legally in error and thus an abuse of discretion.
IV. CONCLUSION
Because the Commission abused its discretion when it ruled that
Coleman’s untimely response was caused by inexcusable neglect, that decision
is VACATED, and the case is REMANDED for a hearing on the merits of the
OSHA violations.
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EDITH H. JONES, Circuit Judge, concurring:
Although I authored the opinion here reversing the Occupational Safety
and Health Review Commission’s decision to reject the petitioner’s late-filed
response to a citation notice, I believe a further explanation of that result is
warranted. The Occupational Safety and Health Act provides that the
“Commission is authorized to make such rules as are necessary for the orderly
transaction of its proceedings. Unless the Commission has adopted a different
rule, its proceedings shall be in accordance with the Federal Rules of Civil
Procedure.” 29 U.S.C. § 661(g). Federal Rule Civ. Proc. 60(b) statutorily
governs this case because the Commission has not determined otherwise.
Whether because of its incorporation by statute into OSHRC matters, or simply
because the Rule itself is part of the Federal Rules that pertain to federal civil
litigation, Rule 60(b)(1) should be interpreted by courts de novo and without
deference to the Commission’s unusual and unforgiving approach to the
Pioneer decision. Thus, our opinion relies on the Third Circuit’s decisions in
cases like George H. Harms and Avon Contractors by reviewing the totality of
circumstances and finds the Commission’s decision arbitrary and capricious.
The deeper reason for our overruling the Commission lies in its failure
to conform its approach to Pioneer with the default judgment case law
prevalent under Rule 60(b)(1). By prioritizing the regulated party’s reason for
delay, a single factor in the multifactored Pioneer analysis, the Commission
ignored a large body of case law that has examined civil default judgments
under the “excusable neglect” standard. The Commission should have
harmonized its approach with those analogous cases. In particular, this court
has long held that default judgments are “generally disfavored in the law.”
Mason & Hanger-Silas Mason Co., Inc. v. Metal Trades Council, 726 F.2d 166,
168 (5th Cir. 1984). Moreover, “[b]ecause of the seriousness of a default
judgment,…even a slight abuse of discretion may justify reversal.” CJC
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Holdings, Inc. v. Wright & Lato, Inc., 979 F.2d 60, 63 n.1 (5th Cir.
1992)(internal quotation marks, brackets, and citation omitted). Indeed, the
equities “militate strongly in favor of relief” from a default judgment unless
“no injustice was done by the judgment.” Seven Elves, Inc. v. Eskenazi,
635 F.2d 396, 403 (5th Cir. 1981).
Consistent with Pioneer, this court considers several factors when a
party seeks relief from a default judgment, including: (1) whether the default
was willful; (2) whether setting aside the default would prejudice the opposing
party; and (3) whether the party seeking relief presents a meritorious defense.
Lacy v. Sitel Corp., 227 F.3d 290, 292 (5th Cir. 2000). “A finding of willful
default ends the inquiry, for when the court finds an intentional failure of
responsive pleadings there need be no other finding.” Id. (internal quotation
marks omitted). As noted, however, there is no evidence—and the Commission
does not allege—that Coleman’s failure to respond was willful. Furthermore,
the Commission’s decision noted “no evidence” that Coleman’s untimely
response prejudiced the government. And importantly, the Secretary
stipulated that Coleman has a meritorious defense to the citations. This court
has emphasized the importance of a defendant’s assertion of a meritorious
defense in the calculus of comparative prejudice that informs the grant of
Rule 60(b)(1) relief. See Jenkens & Gilchrist v. Groia & Co., 542 F.3d 114, 120-
21 (5th Cir. 2008); Lacy, 227 F.3d at 293-94.
The Commission argues that caselaw authority governing relief from
default judgments under the Rule is not relevant, because unlike civil litigation
to which no presumption of liability attaches, OSHA citations are an
enforcement mechanism for alleged workplace safety deficiencies. There are
several easy rejoinders to this contention. Preliminarily, OSHA no doubt has
emergency remedies available to address immediate workplace safety hazards,
but this case and others cited in briefing involve only monetary fines or
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penalties; such enforcement actions are no different than any ordinary agency
enforcement cases. Second, the Supreme Court has construed the Rule in
Pioneer, and the Court’s explanation of “excusable neglect” is definitive as a
matter of law. An equitable calculus governs the ultimate decision, and
“neglect” or “control” are not more probative than other factors. Third, this
court’s decisions explain why default judgments ought to be vacated under the
Rule when, in the absence of willful conduct or prejudice to the plaintiff, and
where a meritorious defense is asserted, the consequences may be
demonstrably unjust. In this case, all three factors favor the employer; it is
hard to fathom why the Commission’s erroneous imposition of fines and
penalties would be less unjust than an erroneous default judgment. And
because the company’s meritorious defense was conceded, the Secretary’s
expressed concern about prompt remediation of workplace safety problems
rings hollow. Finally, if the Secretary chooses to institute rulemaking to
depart from Rule 60(b)(1) as interpreted by the Supreme Court and this court,
it is free to do so.
The Commission, in my view, misapplied Pioneer and Rule 60(b) not only
by placing undue emphasis on one factor out of a set of non-exclusive factors,
but also by failing to follow long-established case law concerning the equities
due to defendants in default judgment situations.
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