165 F.

3d 254

C & K COAL COMPANY, Petitioner,

v.
Virginia TAYLOR, widow of William Taylor, Lamp Coal
Company,
Old Republic Insurance Company, and Director,
Office of Workers' Compensation
Programs, United States
Department of Labor.
No. 98-3151.

United States Court of Appeals,

Third Circuit.
Argued Nov. 17, 1998.
Decided Jan. 25, 1999.

Martha A. Zeigler Eberhardt, Esquire (ARGUED), John B. Bechtol,

Esquire, Bechtol Lee & Eberhardt, Pittsburgh, PA, Attorney for Petitioner.
Mark S. Flynn, Esquire (ARGUED), Director, Office of Workers'
Compensation Programs, Marvin Krislov, Esquire, Deputy Solicitor for
National Operations, Allen H. Feldman, Esquire, Associate Solicitor for
Special Appellate and Supreme Court Litigation, Nathaniel Spiller,
Esquire, Deputy Associate Solicitor, United States Department of Labor,
,Washington, D.C., Attorneys for Respondent Director, Office of Workers'
Compensation Programs.
Mark E. Solomons, Esquire (ARGUED), Laura Metcoff Klaus, Esquire,
Arter & Hadden, LLP, Washington, D.C., Attorneys for Respondents
Lamp Coal Company and Old Republic Insurance Company.
Before: McKEE, RENDELL, and WEIS, Circuit Judges.OPINION OF
THE COURT
WEIS, Circuit Judge.

The issue in this Petition for Review is whether the successor operator of a coal
mine is responsible for payment of Black Lung benefits to a long-time
employee of the mine who worked for the successor for only a few months. We
conclude that, under the Black Lung Benefits Act and implementing
regulations, the successor operator, as opposed to the prior operator, is liable.
We also decide that, despite inexcusable and prolonged delay in the
administrative process, responsibility for payment should not be shifted to the
Black Lung Disability Trust Fund under the circumstances presented here.
Accordingly, we will deny the Petition for Review.

By Friday, August 23, 1974, William Taylor had worked as a coal miner for
Lamp Coal Company ("Lamp") for approximately twenty-seven years. On that
day, Lamp terminated all of its employees and sold its assets to Cambria Coal
Company, a subsidiary of C & K Coal Company. Taylor returned to work the
following Monday as a supervisor for C & K and he worked in that position
until November 23, 1974 when he retired.

Taylor applied for Black Lung benefits in January 1975, listing Lamp as his
most recent employer. The Office of Workers' Compensation Programs
("Office") preliminarily approved the application effective January 1, 1975 and
notified Lamp that it was responsible for payment. Lamp objected, informing
the Office that it was not Taylor's most recent employer.

Taylor's Social Security records confirmed that C & K was his last employer
but the Office, unaware of the sale and potential successor liability, determined
that C & K could not be responsible because Taylor had not worked for that
employer for a year as required by regulation. Lamp then formally controverted
the claim.

In September 1977, having learned of the sale of assets, the Office notified C &
K that it was the responsible operator. C & K then controverted the claim. In
November 1977, the Office acknowledged the objection but informed C & K of
its right to have the miner examined and forwarded a copy of the evidence file.
In January 1978, after development of additional uncertainty over the sale, the
claim was remanded to the Office at the Director's request for a
redetermination.

Pending designation of a responsible operator, Taylor received benefits from

the Black Lung Disability Trust Fund. He died in May 1980, and his widow
continued to receive benefits from the Fund. One month after Taylor's death,
the Office again designated C & K as the responsible operator. More questions

arose, however, and after further consideration, in 1981 the Office pointed back
at Lamp. This time, Lamp's insurer objected. Four more years passed before the
Office concluded in 1986 that C & K, as Lamp's successor, was the responsible
operator.
7

The matter was eventually assigned to an ALJ for a hearing in 1988. Both
operators were named and appeared as potentially responsible parties. They
convinced the ALJ that the lengthy procedural delay had violated their
respective due process rights. The ALJ ultimately dismissed both C & K and
Lamp and assigned liability to the Trust Fund.

The Director appealed to the Benefits Review Board. Five years later, in
February 1993, the Board reversed and remanded to the ALJ with directions to
consider both the widow's entitlement and C & K's liability. On August 25,
1995, the ALJ awarded benefits to the widow and held C & K responsible. The
Board affirmed, both initially and upon reconsideration. This petition for
review followed.

We review this final order of the Board pursuant to 33 U.S.C. 921(c), as

incorporated into the Black Lung Benefits Act, 30 U.S.C. 932(a). Factual
determinations by the Board will be upheld if supported by substantial
evidence; questions of law receive plenary review. See 33 U.S.C. 921(b)(3);
Venicassa v. Consolidation Coal Co., 137 F.3d 197, 200 (3d Cir.1998).

10

The widow's entitlement to benefits is not contested in this petition. Rather, the
only question is the source of payment. C & K disputes its responsibility and
contends alternatively that the extended administrative delay violated its due
process rights.

I.
11

The Black Lung Benefits Act, 30 U.S.C. 901 et seq., seeks to hold operators
liable for the costs of pneumoconiosis. Because miners often shifted between
employers and operators went out of business, became insolvent or merged
with others, industry realities necessitated some complex rules for identifying a
responsible operator. The long latency period and complications associated
with pneumoconiosis posed additional problems in terms of the equitable
assignment of responsibility. Anticipating situations in which it would be
impossible to trace or assess the responsible operator, Congress established the
Trust Fund. See 26 U.S.C. 9501. Financed by the coal industry, the Fund
becomes a source of benefit payments only when a responsible operator cannot

be identified, has gone out of business or is financially incapable of assuming

liability. See 26 U.S.C. 9501(d).
12

Liability generally attaches to the affected miner's most recent employer.

Foreseeing problems attendant upon the transfer of mine ownership, however,
Congress specified in 30 U.S.C. 932(i)(1) that: "the operator of a coal mine
who ... acquired such mine or substantially all the assets thereof, from a ... 'prior
operator' ... shall be liable for ... the payment of all benefits which would have
been payable by the prior operator ... with respect to miners previously
employed by such prior operator as if the acquisition had not occurred and the
prior operator had continued to be an operator of a coal mine." A more specific
provision, aimed directly at the sale of mining assets, provides: "[i]f an operator
ceases to exist by reason of a sale of substantially all his or her assets ... the
successor operator ... shall be treated as the operator to whom this section
applies." See 30 U.S.C. 932(i)(3)(D).

13

Pursuant to statutory direction, the Secretary of Labor duly promulgated

regulations to determine "whether pneumoconiosis arose out of employment in
a particular coal mine or mines" and to identify the responsible operator. See 30
U.S.C. 932(h); 20 C.F.R. 725.490--725.493. The regulation at issue, 20
C.F.R. 725.493, designates as the responsible operator the employer with
which the miner has the most recent period of cumulative employment of not
less than one year. See 20 C.F.R. 725.493(a)(1); see also Appendix for text of
20 C.F.R. 725.493(a)(1), (a)(2)(i), (a)(2)(ii), (a)(4).

14

Echoing the Act, however, the paragraph immediately following provides that
the successor operator "shall be liable for ... benefits which would have been
payable by the prior operator with respect to miners previously employed by
such prior operator as if the acquisition had not occurred and the prior operator
had continued to be a coal mine operator." See 20 C.F.R. 725.493(a)(2)(i);
see also 30 U.S.C. 932(i)(1). The one-year minimum employment rule is
expressly made "[s]ubject to" the provisions of this paragraph. See 20 C.F.R.
725.493(a)(1) ("Subject to the provisions of paragraph[ ](a)(2)"). Moreover, as
the more specific provision, paragraph (a)(2), by its placement and content,
operates as an exception to the one-year minimum employment rule. Thus, the
successor situation, expressly covered by paragraph (a)(2)(i), is not governed
by the rule set forth in paragraph (a)(1), i.e., the minimum employment rule.

15

In addition to these specific successor operator rules, the Act and regulations
establish a framework for determining which, as between the prior and
successor operator, is "primarily liable" for the payment of benefits. See 30
U.S.C. 932(i)(2); 20 C.F.R. 725.493(a)(2)(ii). Noting that Congress sought

to prevent an operator from circumventing responsibility by entering into

corporate or other business transactions which "make the assessment of liability
against that operator a financial or legal impossibility," subsection (a)(2)(ii) of
the regulation provides that a "prior operator ... shall remain primarily liable for
the payment of benefits under this part predicated on employment with the
prior operator" if it is able to assume financial responsibility through insurance
or otherwise. See 20 C.F.R. 725.493(a)(2)(ii); see also 30 U.S.C. 932(i)(2).
16

Applying these statutory and regulatory provisions, we must determine whether

Lamp, as the prior operator, or C & K, as the successor operator, is responsible.
The Director, seeking to uphold assignment of liability to C & K, contends that
under the regulations, because it employed Taylor, albeit for less than a year, C
& K is primarily liable as the successor. Lamp, in agreement with the Director,
maintains that employment by a successor operator overrides application of the
one-year minimum employment rule. Old Republic, Lamp's insurer, adopts its
insured's interpretation of the regulation.

17

C & K attacks the ALJ finding that Lamp ceased doing business upon sale of its
assets and, on that basis, argues that Lamp remains primarily liable. In addition,
C & K contends that even if it is a successor, it is not responsible because it
employed Taylor for less than one year. Finally, should we agree that it is
responsible, C & K asserts that Lamp had agreed to indemnify it against any
claims existing at the time of the sale.

18

We are persuaded that the Director's position is correct. In looking first, of

course, to the statute, we observe that the Act clearly specifies that the
successor operator is responsible for benefits which "would have been payable"
by the prior operator for miners previously employed by the prior operator as if
the prior operator had continued to operate the mine. See 30 U.S.C. 932(i)(1).
There is no dispute that Taylor previously worked for Lamp and was later
employed by C & K following the change of ownership. Section 932(i)(1), read
in isolation, unmistakably contemplates assigning responsibility to C & K.

19

The paragraph immediately following, however, complicates matters because it

states that "nothing in [subsection 932(i) ] shall relieve any prior operator of any
liability under this section." See 30 U.S.C. 932(i)(2). Together, these
provisions of the Act might be read to pose a contradiction between assigning
liability to the successor under (i)(1), yet specifically retaining liability in the
prior operator under (i)(2).

20

The Secretary's regulation, however, eliminates any apparent inconsistency.

Under 20 C.F.R. 725.493(a)(2)(ii), the successor becomes responsible for

miners previously employed by the prior operator once they are hired by the
successor following the change in ownership. If, however, the miner did not
work for the successor, the prior operator remains primarily liable. In that
situation, primary liability only shifts to the successor if the prior operator is
financially incapable of assuming payments. See 20 C.F.R. 725.493(a)(2)(ii).
21

Translated into the circumstances of this case, because Taylor worked for
Lamp and continued to work in the mine after C & K's subsidiary took it over,
C & K becomes primarily liable. In other words, once C & K purchased Lamp's
assets, thereby becoming Lamp's successor, it was as if Taylor had worked for
C & K twenty-seven years and three months. Only if C & K could not
otherwise assume liability would Lamp remain primarily liable. See 20 C.F.R.
725.493(a)(2)(iii).

22

That Taylor worked for C & K for less than a year does not alter the outcome.
The regulation's one-year minimum employment rule is specifically made
subject to the special rule for successors. See 20 C.F.R. 725.493(a)(1), (a)(2)
(i). Moreover, the one-year rule is not contained in the Act, which, to the
contrary, dictates a special rule for successors. See 30 U.S.C. 932(i)(1), (i)(3)
(D). We agree with the Director's interpretation of the regulation, one that does
not conflict with the Act, and therefore hold that C & K is primarily liable.

23

We reject, as based on an erroneous reading of the Act, C & K's argument that
if indeed Lamp continued as a viable entity following the sale of substantially
all of its mining assets, Lamp remains primarily liable. Neither the basic
successor rule, 30 U.S.C. 932(i)(1), nor its more specific formulation, 30
U.S.C. 932(i)(3)(D), requires total cessation of the prior operator's business
before the successor becomes potentially liable. In this situation, both operators
were potentially liable; the question was whether there existed any basis for
assigning primary liability to C & K.

24

We must also deny C & K's plea to apportion liability. We do this despite the
intrinsic appeal of allocating liability to reflect the fact that Taylor had worked
for Lamp for 27 years and for C & K only three months.

25

The Act authorized the Secretary to "establish[by regulation] standards for

apportioning liability for benefits." 30 U.S.C. 932(h). The Secretary proposed
an apportionment-based regulation in 1972, but withdrew it amidst adverse
comment. See 37 Fed.Reg. 18,167-68 (Sept. 7, 1972). Apportionment would
have introduced a substantial degree of complexity and it appeared that fixed

guidelines would better serve the mining industry. We note a ready analogy in
the commercial field where it is recognized that arbitrary rules known in
advance, even if inequitable in some specific instances, are on the whole
necessary for the efficient conduct of business. Accordingly, in the absence of a
regulation permitting apportionment, C & K must bear the full burden of
payment.
II.
26

Should it be the responsible operator, C & K argues vigorously that the

administrative delay has denied it due process. The remedy, C & K urges, is a
total transfer of liability to the Trust Fund.

27

It appears that the Office was aware as early as 1977 of the uncertainty
surrounding the responsible operator issue. As noted earlier, however, eleven
years of wrangling passed before all potential parties appeared before an ALJ
for a basic evidentiary hearing.

28

In one of the appeals to the Board, the Director did not file his brief for two
years beyond the time set by the Board's rules. See 20 C.F.R. 802.210802.217. In a subsequent appeal, the Director was again delinquent and again
the Board did not enforce its rules. The Board's ultimate decision, upon
reconsideration, to affirm was not docketed until January 8, 1998.

29

Thus, more than 23 years elapsed from the initial application to the date of the
responsible operator determination. Fortunately for the Taylors, interim
payments have been made from the Trust Fund.

30

Although we recognize that inadequate information initially hampered the

Office's ability to grasp the relationship among Taylor, Lamp and C & K, we
are appalled that this relatively straightforward issue bounced three times
between the Office and an ALJ, accompanied by unnecessary delays. Similarly,
we cannot ignore that the Board compounded the delay by permitting the
Director to flout its rules that set time limits for filing briefs.

31

Unfortunately, as we have observed in the past, such "dismaying inefficiency"

has long characterized the administration of this Act. See, e.g., Venicassa, 137
F.3d at 198 & n. 2 (12 years delay compounded by error of the Office); Lango
v. Director, OWCP, 104 F.3d 573 (3d Cir.1997) (benefits awarded after 14
years); see also Amax Coal Co. v. Franklin, 957 F.2d 355, 356 (7th Cir.1992)
("As so often in black lung cases, the processing of th[is] claim has been

protracted scandalously...."). We publicized our dismay in Lango, hoping to

bring the Act's poor administration "to the attention of authorities who can do
something about it." 104 F.3d at 576.
32

The tortured route that this matter took towards resolution simply cannot be
justified. Counsel for the current Director, with admirable candor, did not try to
do so at oral argument. Rather, he assured us that steps have been taken in the
last few years to ensure that Black Lung claims are expeditiously resolved.
Statistics reveal that the number and age of pending Black Lung cases has,
indeed, steadily decreased. We cannot hope but that this trend continues.
Recent progress, however, is of little consolation to C & K and we must
consider its due process challenge under the deplorable circumstances here.

33

In large part, we view the proposed remedy for the asserted due process
challenge violation through our perception of the Trust Fund's purpose and
nature. Congress intended operators to bear the costs of pneumoconiosis
whenever feasible. See S.Rep. No. 95-209, at 9 (1977), reprinted in House
Comm. on Educ. and Labor, 96th Cong., Black Lung Benefits Reform Act and
Black Lung Benefits Revenue Act of 1977, 612 (Comm. Print 1979); see also
Director, OWCP v. Oglebay Norton Co., 877 F.2d 1300, 1304-05 (6th
Cir.1989). The Trust Fund exists as a fail-safe mechanism and it is not a
creature of the Department of Labor, the Office or the Board. See 26 U.S.C.
9501.

34

Given the dismal history of the Act's administration, it is not hard to envision
how quickly a policy of liberal transfer of claims to the Fund would deplete its
resources. Such a remedy, it is generally held, should only be invoked where
prejudice other than mere delay has been demonstrated. For example, in
Venicassa, we found that the claimant, forced to litigate his entitlement to
benefits twice, had been prejudiced by the ten-year delay and improper
designation of the responsible operator. See 137 F.3d at 202-03. In those
circumstances, rather than allow the litigation to drag on, we concluded that the
Trust Fund should assume liability. See id. at 203-04.

35

In Lane Hollow Coal Co. v. Director, OWCP, 137 F.3d 799 (4th Cir.1998), the
alleged responsible operator was notified 17 years after notice could have been
given and three years after the claimant died. The Court of Appeals for the
Fourth Circuit concluded that because the inexcusable delay resulted in the loss
of an opportunity to mount a proper defense, the operator had been denied due
process. See id. at 808. In light of the substantial prejudice shown, payments
were assigned to the Trust Fund. See id.

36

Oglebay dealt with a similar delay for which an ALJ had seen fit to transfer
liability to the Trust Fund. See 877 F.2d at 1302. The Court of Appeals for the
Sixth Circuit disagreed with that drastic approach, because "none of the parties
... would suffer substantial prejudice by a further remand." Id. at 1304. The
claimant had been receiving interim benefits from the Trust Fund and the
operator had access to substantial medical evidence sufficient to provide an
adequate defense on remand. See id. Oglebay simply did not involve prejudice
comparable to that encountered in Venicassa and Lane Hollow.

37

The case before us is similar to Oglebay. C & K was notified in 1977 that its
status as a responsible operator was under consideration. Thus, it had three
years to procure appropriate medical evidence before Taylor died. On this
record, we see no prejudice other than that attendant on the failure to confirm
the liability that had been asserted years earlier. C & K makes some vague
reference to harm in connection with contractual rights it may have had to
indemnification from Lamp, but, as that position is not clearly articulated, we
do not find it persuasive.

38

Accordingly, we will not hold that this delay, albeit inexcusable, ipso facto
establishes a violation of C & K's due process rights. The fact that the delay
cannot be attributed to the Trust Fund is an important additional factor. Foisting
liability on the Trust Fund where no demonstrable prejudice has occurred
would run counter to Congressional intent by effectively shifting responsibility
for the Office's and the Board's failings onto contributing operators. We will
not take that action when there is an operator legally responsible and financially
capable of assuming payments.

39

We conclude that C & K is the legally responsible operator and that, while the
delay present in this case cannot be condoned, neither its occurrence nor its
consequences should be visited upon an innocent party, the Trust Fund.

40

Accordingly, the petition for review will be denied.

APPENDIX
20 C.F.R. 725.493 (1998)
. Criteria for identifying a responsible operator.
41
42

(a)(1) Subject to the provisions of paragraphs (a)(2) and (3) of this section, and
provided that the conditions of 725.492(a)(2) through (a)(4) are met, the
operator or other employer with which the miner had the most recent periods of

cumulative employment of not less than 1 year, as determined in accordance

with paragraph (b) of this section, shall be the responsible operator.
43

(2)(i) Except as otherwise provided in this paragraph, if the operator described

in paragraph (a)(1) of this section was an operator of a mine or mines or the
owner of the assets thereof on or after January 1, 1970, (a "prior operator") and
on or after January 1, 1970, transferred such mine or mines or substantially all
of the assets thereof to another operator (a "successor operator"), such successor
operator shall be liable for and shall secure the payment of all benefits which
would have been payable by the prior operator with respect to miners
previously employed by such prior operator as if the acquisition had not
occurred and the prior operator had continued to be a coal mine operator. A
lessor of a coal mine may be considered a prior or successor operator in
accordance with this subpart.

44

(ii) The stated congressional objective supporting section 422(i) of the Act is to
prevent a coal operator from circumventing liability under this part by entering
into corporate or other business transactions which make the assessment of
liability against that operator a financial or legal impossibility. Accordingly, a
prior operator under paragraph (a)(2)(i) of this section, which transfers a mine
or mines or substantially all the assets thereof, shall remain primarily liable for
the payment of benefits under this part predicated on employment with the
prior operator if such prior operator meets the conditions of 725.492(a)(2) and
(a)(4). If the conditions in 725.492(a)(2) and (a)(4) are not met, the successor
operator shall, if appropriate, be liable for the payment of such benefits.

45

....

46

(4) If there is no operator which meets the conditions of paragraphs (a)(1) or

(2) of this section, the responsible operator shall be considered to be the
operator with which the miner had the latest periods of cumulative employment
of not less than 1 year, subject to the provisions of paragraph (a)(2) of this
section and provided that the conditions of 725.492(a)(2)-(a)(4) are met.

47

....