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Arch Mineral Corp v Babbitt

1) Case Name and Citation: Arch Mineral Corp. v. Babbitt, 894 F. Supp. 974 (S.D.W.Va. 1995); 2004 W. Va. LEXIS 24

2) Facts: A group of companies and subsidiaries (“Glendale” for short) incurred abandoned mine reclamation fees totaling $58,000 based on mining between 1984 and 1985. In 1986 Glendale received a notice of violation from The Office of Surface Mining Reclamation and Enforcement (OSM) and as a result incurred a penalty of $22,500. In 1987 Arch purchased the company which had operated the mining operations responsible for the reclamation fees and the OSM fine. In 1993 OSM notified Arch that it had been identified as the “presumed owner or controller” of the former Glendale operations, Arch had been given no prior notice of OSM’s claims against Glendale or of OSM’s intent to enforce such claims against Arch. Based on Greendale's unpaid civil penalty and AML fees, OSM informed Arch that, unless Arch successfully rebuts the ownership and control link it asserts exists between Arch and Greendale, Arch will be placed on the OSM's computerized mine permit-blocking system (known as the “Applicant/Violator System” or “AVS”) as permit-blocked because of the link to Greendale's undischarged debts. OSM informed Arch it can avoid becoming permit-blocked by paying the AML fees and penalties of Greendale.

3) Procedural History: both parties filed cross motions for summary judgment.

4) Issue: While the court evaluated ripeness and statute of limitation issues, the main issue for this case was whether Arch could be retroactively linked to Greendale even though the two companies had no dealings with each other during the time period in question.

5) Reasoning:
a)There are three ways in which a permittee can be related to a violation or delinquent penalty or fee: 1) directly responsible; 2) indirectly responsible; or, 3) linked to the violation, penalty or fee through ownership or control. Direct responsibility arises where the permittee is cited on the violation notice or penalty assessment, or specifically is identified in a requirement to pay a fee. Indirect responsibility may arise through an ownership or control link under certain circumstances where the permittee owns or controls the person who is directly responsible. Indirect responsibility generally will not arise through an ownership or control link where the permittee is owned or controlled by the person responsible. A link through ownership or control arises where, under the violations review criteria of the applicable regulatory program, the permittee either owns or controls, or is owned or controlled by, the person directly responsible for a violation, penalty or fee.
b)A link through ownership or control arises where, under the violations review criteria of the applicable regulatory program, the permittee either owns or controls, or is owned or controlled by, the person directly responsible for a violation, penalty or fee.”
c)The rule's purpose is to hold persons “responsible for any outstanding violations of the Act (including the nonpayment of civil penalties and AML fees) which such a person could have prevented or corrected.” 53 Fed.Reg. 38868, 38877 (Oct. 3, 1988) (Preamble to ownership and control rule). When a person is either directly or indirectly responsible for a delinquent penalty or fee, “(h)e or she cannot avoid this responsibility by severing his or her link with any other person.” 54 Fed.Reg. 18446 (April 28, 1989). However, when a person is linked only through ownership and control and has no direct or indirect responsibility for the violation, penalty, or fee, the person “may correct the defect in the permit and forestall the remedial measures of this rule by severing the ownership and control link.”
d)“(W)here a permittee has no personal responsibility for a violation, penalty, or fee, and effectively severs his or her link with the person responsible, there no longer exists any reason to consider permit rescission or other remedial action.... At that point the slate is as clean as it should have been on the date the permit was issued, and it is not only reasonable, but also fully in compliance with (SMCRA) and its implementing regulations, to allow the permittee to retain the permit and continue to operate without interruption.”

6) Holding: The court found that OSM’s claims were without merit, and held that OSM could not link Arch to the other companies under the ownership and control rule. Thus, the court entered a permanent injunction prohibiting OSM from linking the Arch to the other companies (Glendale).


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