Blackhawk Mining Co. v. Department of the Interior

No. 79-136 (E.D. Ky. February 11, 1982)

The courtupholds the constitutionality of § 518(c) of the Surface Mining Control and Reclamation Act (SMCRA), which requires an alleged violator to prepay the proposed civil penalty into escrow prior to obtaining an evidentiary hearing. Initially the court rejects plaintiff's contention that it is entitled to a hearing under § 518(b) of SMCRA. It rules that plaintiff's failure to comply with the prepayment requirements of § 518(c) constitutes a waiver of the hearing provided for by § 518(b). The court also rules that § 518(c) does not deprive the mine operator of the right to procedural due process since the statute provides for sufficient administrative and judicial review prior to final assessment of penalties. Although the prepayment requirement may temporarily deprive plaintiff of its property, the court rules that the degree of potential deprivation is slight. In addition, the procedures available prior to prepayment substantially reduce the risk of erroneous deprivation. Finally, the public's interest in insuring compliance with the environmental requirements of the Act outweigh the harm to plaintiff.

Counsel for Plaintiff
Dan Jack Combs
Combs & Lester
207 Caroline Ave., Pikeville KY 41501
(606) 437-6218

Counsel for Defendants
Louis G. DeFalaise, U.S. Attorney
P.O. Box 1490, Lexington KY 40591
(606) 233-2661

[12 ELR 20781]

Unthank, J.:

Order and Judgment

This action came on for consideration of cross-motions for summary judgment by the parties before the Court. The issues having been considered in the Memorandum Opinion ordered herewith, and the Court being sufficiently advised,

IT IS ORDERED and ADJUDGED

1. That defendants' motion for summary judgment be GRANTED;

2. That plaintiff's motion for summary judgment be DENIED;

3. That defendants recover of plaintiff the sum of $1,900.00, together with COSTS of this action. This the 11th day of February, 1982.

Memorandum Opinion

This is a civil action arising under the Constitution and the laws of the United States. The Court has jurisdiction by virtue of 28 U.S.C. §§ 1331 & 1337, and by virtue of 5 U.S.C. §§ 701, 702, and 30 U.S.C. § 1276. Plaintiff seeks a declaration of rights pursuant to 28 U.S.C. §§ 2201 & 2202. In particular, plaintiff seeks a declaratory judgment concerning the constitutionality of 30 U.S.C. § 1268(c) of the Surface Mining Control Act of 1977 and the regulations adopted pursuant thereto.

Section 518(c) of the Surface Mining Control and Reclamation Act of 1977 (hereinafter "the Act"), 30 U.S.C. § 1268(c), provides that, in order to obtain formal administrative review of a proposed civil penalty assessment, a mine operator must first pay the amount of the proposed penalty into an escrow account. On July 13, 1979, the Secretary of the Interior issued a final order denying plaintiff's request for an administrative hearing under this section because of plaintiff's failure to comply with this pre-payment requirement. On August 6, 1979, plaintiff commenced this action to obtain judicial review of the Secretary's decision and to obtain a declaratory judgment regarding the constitutionality of § 518(c).

Defendants filed an answer and counterclaim on December 5, 1979, denying plaintiff's assertion that the Act is unconstitutional, and asking the Court to grant judgment against plaintiff for the amount of the unpaid civil penalty. On the same day, defendants filed a motion to dismiss with respect to plaintiff's alleged cause of action and for summary judgment with respect to defendants' counterclaim against plaintiff for $1,900. Plaintiff filed a cross-motion for summary judgment on February 11, 1980.

On October 22, 1980, upon defendants' motion, the Court stayed this action pending the decision of the Supreme Court in Andrus v. Virginia Surface Mining and Reclamation Ass'n, No. 79-1538. That case involved an appeal by the Secretary from a district court ruling that § 518(c) (hereinafter § 1268(c)) was unconstitutional. The Supreme Court recently handed down its decision in that case, and this Court granted the parties additional time in which to file supplemental memoranda.Both parties have done so, and this Court is prepared to rule upon the motions filed by the parties. The Court will treat defendants' motion to dismiss the cause of action as a motion for summary's judgment pursuant to Rule 12(b), F.R.C.P., inasmuch as matters outside the pleadings have been presented to the Court; e.g., the administrative record. The Court also recognizes that there are no genuine issues of material fact.

1. Statutory Construction of 30 U.S.C. § 1268(c)

Section 1268 reads in relevant part as follows:

(b) Hearing. A civil penalty shall be assessed by the Secretary only after the person charged with a violation described under subsection (a) of this section has been given an opportunity for a public hearing. Where such a public hearing has been held, the Secretary shall make findings of fact, and he shall issue a written decision as to the occurrence of the violation and the amount of the penalty which is warranted, incorporating, when appropriate, an order therein requiring that the penalty be paid. When appropriate, the Secretary shall consolidate such hearings with other proceedings under section 521 of this Act [30 USCA § 1271]. Any hearing under this section shall be of record and shall be subject to section 554 of title 5 of the United States Code [5 USCA § 554]. Where the person charged with such a violation fails to avail himself of the opportunity for a public hearing, a civil penalty shall be assessed by the Secretary after the Secretary has determined that a violation did occur, and the amount of the penalty which is warranted, and has issued an order requiring that the penalty be paid.

(c) Notice; waiver. Upon the issuance of a notice or order charging that a violation of the Act has occurred, the Secretary shall inform the operator within thirty days of the proposed amount of said penalty. The person charged with the penalty shall then have thirty days to pay the proposed penalty in full or, if the person wishes to contest either the amount of the penalty or the fact of the violation, forward the proposed amount to the Secretary for placement in an escrow account. If through administrative or judicial review of the proposed penalty, it is determined that no violation occurred, or that the amount of the penalty should be reduced, the Secretary shall within thirty days remit the appropriate amount to the person, with interest at the rate of 6 percent, or at the prevailing Department of Treasury rate, whichever is greater. Failure to forward the money to the Secretary within thirty days shall result in a waiver of all legal rights to contest the violation or the amount of the penalty.

Plaintiff argues that despite its admitted failure to pre-pay the amount of the proposed penalty into an escrow account, it is entitled to a hearing under subsection (b). Defendants argue that such a holding would require the Court to disregard subsection (c) entirely. The issue for resolution is whether the hearing provided in subsection (b) is one of the "legal rights" provided for in the concluding sentence of subsection (c). If so, then plaintiff has waived its right to the hearing by failing to pre-pay the amount of the proposed penalty within thirty days after receiving notice of it. The Court finds that the hearing in subsection (b) is one of the legal rights provided for in subsection (c). As noted in defendants' supplemental memorandum, there is no legislative history on judicial authority to support plaintiff's attempt to divorce subsection (b) from subsection (c). (See p. 3 of defendants' Supplemental Memorandum.) The Court's own reading of the two subsections is that a [12 ELR 20782] waiver of the right to the hearing described in subsection (b) occurs when the person charged with a violation fails to pre-pay. The language "all legal rights" logically includes the hearing described in subsection (b). As noted by the Supreme Court in Hodel v. Virginia Surface Mining and Reclamation Ass'n, U.S. , 101 S. Ct. 2352, 2374 n.47 [11 ELR 20569] (1981), subsection (b) refers to the final imposition of a civil penalty, which, of course, cannot be imposed until after the operator has had an opportunity for a hearing. The hearing is guaranteed by pre-payment of the proposed penalty into an escrow account. The Supreme Court's discussion of the procedure under subsection (b) and (c) supports this conclusion. To read the two subsections otherwise would be to hold for naught the effect of the sentence on waiver in subsection (c). Since the pre-payment requirement of 30 U.S.C. § 1268(c) is found by this Court to be a prerequisite to the public hearing afforded by subsection (b), plaintiff's failure to pre-pay the proposed penalty ($1,900) constitutes a waiver of its right to said hearing. Accordingly, the Court will grant defendants' motion for summary judgment as to their counterclaim against plaintiff in the amount of $1,900.

2. Whether Pre-Payment Requirement Violates Plaintiff's Due Process Rights

Plaintiff argues that the pre-payment requirement of § 1268(c), 30 U.S.C., violates its rights to due process. Defendants contend that there are numerous other administrative and judicial appeal rights provided in the Act and in the Secretary's regulations, and that the issue is whether the totality of procedures, not just § 1268(c) standing alone, set forth therein comport with the requirements of due process. The Court finds that the following administrative and judicial appeal rights became available to plaintiff upon the issuance of the notice of violation in this case:

(1) Within ten days of service of notice of violation, plaintiff could have submitted written informaion concerning the violations to the Office of Surface Mining Assessment Office [sic]. Any such information would have been considered by the Assessment Office in determining whether to assess a civil penalty and how large a penalty to assess. 30 C.F.R. § 723.16(a).

(2) Within 30 days of the issuance of the notice, plaintiff could have applied for formal administrative review of the notice under 30 U.S.C. § 1275; 43 C.F.R. § 4.1160 et seq. Plaintiff would have been entitled to a full, adversarial, evidentiary hearing before an impartial administrative law judge with the power to vacate, affirm, or modify the citation. Appeals to an administrative review board and judicial review rights were also available. 43 C.F.R. § 4.1271 et seq.; 30 U.S.C. § 1276(a)(2).

(3) Within 15 days of receipt of a notice of proposed assessment of civil penalty, plaintiff was entitled to — and did — request an informal conference to review the amount of the penalty. 30 C.F.R. § 723.17(a).

(4) Finally, within 15 days of the conclusion of the assessment conference, plaintiff could have obtained formal review of both the validity of the citation and the amount of the proposed penalty under 30 U.S.C. § 1268(c), if plaintiff had been willing to pay the $1,900 proposed penalty into an escrow account. A full, adversarial, evidentiary hearing would have been available, as under the second remedy described above. If plaintiff had succeeded in having the penalty reduced further or eliminated in this formal review process, any amount determined not to be owed would have been refunded to plaintiff with interest at the prevailing Department of Treasury rate. 30 U.S.C. § 1268(c).

Defendants concede that the pre-payment requirement of § 1268(c) constitutes a temporary a deprivation of the operator's property; e.g., the use of the money paid into escrow. However, as stated above, the issue is whether, given the existence of the appeal rights listed above, the pre-payment requirement itself offends the Due Process Clause. The Court finds that it does not.

Plaintiff argues that the district court's decision in Virginia Surface Mining and Reclamation Ass'n v. Andrus, 483 F. Supp. 425 [10 ELR 20128] (W.D. Va. 1980), declaring the pre-payment requirement unconstitutional, should be followed. Defendants point out that the district court ignored the availability of alternative remedies for challenging the Secretary's actions. The decision was appealed to the Supreme Court, and on June 15, 1981, the Supreme Court reversed the district court's decision, holding that the challenge to § 1268 was premature. Hodel, supra.

Since the Supreme Court's decision, only one other court has ruled on the constitutionality of § 1268(c). In United States v. Hill, No. CIV-1-81-50 [12 ELR 20662] (E.D. Tenn. 1982), the court held that, in light of the various administrative remedies available to the operator (already described in detail above), there could be no finding of an absence of procedural due process accorded to the operator-defendant (slip op. at 10). This Court agrees, and finds that § 1268(c) does not violate plaintiff's due process rights.

On the notice of the violation, plaintiff was advised of the first two remedies set forth above, but plaintiff chose not to avail itself of them. The third remedy, the informal conference, was requested by plaintiff and was held, with the result being a reduction in the amount of the penalty from $5,400 to $1,900. The fourth remedy, that of the full, adversarial hearing, was then available to plaintiff, but plaintiff refused to pay into escrow the amount of the proposed penalty. Thus, plaintiff's failure to comply with the pre-payment requirement of § 1268(c) amounted to a waiver of the hearing provided for by § 1268(b).

In Mathews v. Eldridge, 424 U.S. 319 (1976), the Supreme Court reiterated the three factors to be considered by courts in determining what procedures due process may require under any given set of circumstances.

First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional and substitute procedural safeguards; and finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.

Id. at 355.

The only private interest affected by the requirement of prepayment is the temporary deprivation of the operator's money. However, should the operator succeed in having the penalty reduced or eliminated, the statute requires the Secretary to remit within thirty days the appropriate amount to the person, with interest at the rate of 6 percent, or at the prevailing Department of Treasury rate, whichever is greater. See 30 U.S.C. § 1268(c). Since the possible length of wrongful detention of pre-payment monies is one month, the impact of official action on the private interests is minimal.The Court finds that the degree of potential deprivation that may be created by the pre-payment requirement is slight and significantly less than that of the welfare recipient in Goldberg v. Kelly, 397 U.S. 254 (1970).

The risk of an erroneous deprivation of such interest through the procedures set out above is also slight. As mentioned by defendants, prior to paying any money into escrow, the operator can obtain formal review of the facts of the violation, submit written information concerning the proposed penalty, and obtain an informal conference regarding the proposed penalty amount. The full-blown review of the facts of the violation would substantially minimize the risk of an erroneous deprivation. However, in this case, plaintiff availed itself of only one of the alternative remedies; the informal hearing. Nonetheless, plaintiff benefitted greatly from the assessment conference in that the amount of the proposed penalty was reduced by almost two-thirds. Thus, it would appear that the additional substitute procedures have substantial value, are fair, and adequately safeguard against the risk of erroneous deprivations.

Finally, the Government's interest is to be considered. Defendants argue that the Government has an interest in the prompt assessment and collection of civil penalties to insure compliance with the environmental requirement of the Act. In addition, defendants state that the procedures set forth in § 1268 promote an expeditious review of violations and penalty assessments, as well as the prompt collection of penalties finally adjudged to be owing. The Court finds that the public's interest in curtailing violations of the environmental requirement of the Act is substantial. Considering the three factors together, the Court is of the opinion that the procedures are tailored to "the capacities and circumstances of those who are to be heard," Goldberg v. Kelley, supra, at [12 ELR 20783] 268-69 (footnote omitted), to insure them a meaningful opportunity to present their case. Wherefore, the Court holds that § 1268(c), when considered in conjunction with the other available remedies, satisfies the demands of procedural due process, and is, therefore, constitutional.

An order will enter granting the summary judgment motion of defendants denying plaintiff's motion for summary judgment and awarding a judgment in favor of defendants and against plaintiff in the principal sum of $1,900, together with costs.

This 11th day of February, 1982.