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Management Working for LLCs Subject to Personal Liability Under Mine Act

By Ellen Smith

Citing the legislative history of the 1969 and 1977 Mine Acts, along with corporate laws of several states, the Federal Mine Safety and Health Review Commission has ruled that “agents” working for companies who are limited liability corporations can be charged under the Mine Act’s 110(c) provisions.

The Commission’s decision was unanimous, and upholds a decision reached by ALJ Jerold Feldman.

The decision stems from a personal liability case that MSHA brought against a plant coordinator for United Taconite.

MSHA cited both United Taconite and the manager for violations under §56.11001, which requires that a safe means of access shall be provided and maintained in all working places, and an order issued under §56.14107(a), which requires that moving machine parts shall be guarded to protect persons from injury.

The plant manager contested the proposed penalty, arguing that section 110(c) does not apply to directors, officers or agents of an LLCs, only to corporations.

At the heart of the issue is Congressional intent since LLCs did not exist until after the passage of the Mine Act. In a noncorporate structure, the sole proprietor or partners are personally liable as “operators” for violations; they cannot pass off these penalties as a cost of doing business as a corporation can.

However, unlike a partnership, agents of LLCs and corporations in a corporate structure are shielded from personal liability.

In quoting the legislative history of the 1969 Act, the Commission pointed out that Congress wanted to impose liability on individual agents of corporate operators in order to “penetrate the corporate shield,” stating:

“The committee expended considerable time in discussing the role of an agent of a corporate operator and the extent to which he should be penalized and punished for his violations of the act . . . . It was ultimately decided to let the agent stand on his own and be personally responsible for any penalties or punishment meted out to him . . . . The committee chose to qualify the agent as one who could be penalized and punished for violations, because it did not want to break the chain of responsibility for such violations after penetrating the corporate shield.”

The Commission then went to the 1977 Act legislative history that relied on the 1969 history:

“[S]ince the basic business judgments which dictate the method of operation of a coal mine are made directly or indirectly by persons at various levels of corporate structure, [the provision for assessment of civil penalties is] necessary to place the responsibility for compliance with the Act and the regulations, as well as the liability for violations on those who control or supervise the operation of coal mines as well as on those who operate them.” In short, the purpose of a civil penalty is to induce those officials responsible for the operation of a mine to comply with the Act and its standards."

The Commissions said because of the clear legislative intent to pierce the corporate veil and reach agents who were shielded by limited liability, it is reasonable to conclude that Congress, if given the opportunity, would have explicitly included LLCs within the scope of section 110(c) as entities that shield their agents from personal liability.