United States District Court, E.D. Kentucky, Southern Division, Pikeville
MEMORANDUM OPINION AND ORDER
AMUL R. THAPAR, District Judge.
While this case was pending in federal court, Kentucky mine regulators charged the defendants with violating several state regulations based on conduct related to the landslide at issue here. The defendants chose not to contest those allegations, and a final order from the state regulators accordingly deemed them admitted. Relying on that order, the plaintiff says litigation over certain elements of its claims is precluded, and hence moved for partial summary judgment. Most of the elements of preclusion are met, but the Court requires additional briefing regarding which facts were actually decided in the state administrative proceedings, and whether those facts satisfy any elements of the plaintiff's claims.
This lawsuit arises out of a landslide that damaged Columbia Gas Transmission, LLC's ("Columbia") gas pipeline in Floyd County, Kentucky. R. 1 ¶ 23. Columbia alleges that the coal mining and reclamation activity of The Raven Co., Inc. ("Raven") and Silver Slate, LLC ("Silver Slate") is to blame. Id. ¶ 24. Asserting several causes of action including (among others) negligence, trespass, nuisance, and breach of certain agreements, see R. 266 at 1-2 (summarizing claims), Columbia seeks declaratory and injunctive relief, as well as compensatory and punitive damages, see R. 1 at 9-11, 19-21; R. 188 ¶¶ 72, 96.
For the defendants, legal trouble was already brewing, however, before this action even commenced. In February 2012, an inspector from the Kentucky Division of Mine Reclamation and Enforcement ("DMRE") - an agency within the State's Energy and Environment Cabinet, see Ky. Rev. Stat. § 224.10-020(2) - issued a "Notice of Noncompliance" citing Raven and Silver Slate for various regulatory violations. See R. 231-21 at 2-5. Both companies allegedly (1) allowed an off-permit slide to occur, (2) created conditions "reasonably expected to cause significant, imminent environmental harm" to natural resources, (3) failed to maintain the appropriate buffer zone surrounding Columbia's gas pipeline, and (4) failed to mine in such a way as to minimize damage to that line. Id. at 4-5 (citing 405 Ky. Admin. Regs. 7:040, 8:010, and 16:250). The DMRE inspector also ordered Raven and Silver Slate to correct the violations by, among other measures, removing materials from the off-permit area to the greatest extent possible. Id. Neither company contested the Notice. R. 234-1 at 20 ¶ 30.
Several months later, Columbia brought this suit, see R. 1, but the state administrative proceedings marched on alongside the federal litigation. Despite the initial inspector's order, subsequent inspections over the following year revealed little if any corrective action by Raven or Silver Slate, resulting in further orders to comply and to clean up the slide. R. 234-1 at 21-23 ¶¶ 34-39. Eventually the DMRE had enough, and in June 2013 issued a "Notice of Proposed Assessment, " recommending a $33, 700 penalty for a number of ongoing regulatory violations. See R. 231-25 at 11. According to the assessment officer's report, Raven and Silver Slate damaged Columbia's pipeline as a result of its reckless mining activity. Id. at 8-10. In response, the defendants initially sought an assessment conference regarding the penalty, but then withdrew that request, reserving the right to seek a formal administrative hearing. R. 231-25 at 33. As a result, with the agreement of the parties, a conference officer in September recommended to the Cabinet Secretary that the proposed penalty assessment be affirmed, subject to a possible later hearing. Id. Raven and Silver Slate then had 30 days to request that hearing. See 405 Ky. Admin. Regs. 7:092 § 4(10).
No request for a hearing contesting the violations ultimately came. R. 234-1 at 28 ¶ 48. Had the defendants pursued such a hearing, however, they would have been free to make oral or written argument, offer testimony, cross-examine witnesses, and seek judicial review of the resulting decision. See 405 Ky. Admin. Regs. 5:095 1(8), (19). But they did not so choose. So, in accordance with the regulations, the Cabinet Secretary issued a Final Order imposing the proposed penalty and declaring that as a result of the failure to timely request a hearing (1) the defendants waived their right to a hearing, (2) the fact of the violations cited in the initial Notice of Non-compliance was deemed admitted, and (3) the recommended penalty assessment was similarly deemed admitted. See R. 231-25 at 39-40. The Secretary also ordered Raven and Silver Slate to "perform all remedial measures" required by prior orders. Id. at 40.
Based on the Final Order and the associated DMRE proceedings, Columbia now moves for partial summary judgment. See R. 234. Invoking the doctrine of administrative issue preclusion, Columbia seeks to head off litigation over key questions in this case, including breach as to negligence per se, unreasonable interference as to nuisance, and the defendants' state of mind. See R. 266. The Court heard argument over the motion on May 27, 2014, taking the matter under advisement. See R. 267. Argument focused on whether Kentucky courts would accord the Secretary's order and the surrounding findings preclusive effect. Because they would, the Court will order the defendants to respond to Columbia's supplemental brief, R. 266, analyzing which facts the Secretary actually decided and whether those findings match up with any of the elements of Columbia's causes of action.
As a matter of federal common law, state administrative decisions generally have the same preclusive effect in federal court as they would in state court. "[W]hen a state agency acting in a judicial capacity resolves disputed issues of fact properly before it which the parties have had an adequate opportunity to litigate, federal courts must give the agency's factfinding the same preclusive effect to which it would be entitled in the State's courts." Univ. of Tennessee v. Elliott, 478 U.S. 788, 799 (1986) (internal quotation marks, ellipsis, and citation omitted). The federal test for state administrative issue preclusion thus has three basic elements: First, was the agency acting in a judicial capacity? Second, would the decision have preclusive effect under state law? And last, does the federal action seek to litigate issues already determined by the state agency? Nelson v. Jefferson Cnty., 863 F.2d 18, 19 (6th Cir. 1988).
Because the issues adjudicated by the Cabinet Secretary and the DMRE would receive preclusive effect under Kentucky law, the parallel state administrative proceedings bar the defendants from relitigating any overlapping issues in this case. The parties therefore must fully address what facts were necessary to the Secretary's Final Order, and whether those facts satisfy any of the elements of Columbia's claims, warranting summary judgment.
I. Acting in a Judicial Capacity and the Opportunity to Litigate
Now to the first element of Elliott 's test: A state agency "acts in a judicial capacity when it hears evidence, gives the parties an opportunity to brief and argue their versions of the facts, and gives the parties an opportunity to seek court review of any adverse findings." Peterson v. Johnson, 714 F.3d 905, 912 (6th Cir. 2013) (quoting Herrera v. Churchill McGee, LLC, 680 F.3d 539, 547 (6th Cir. 2012) (internal quotation marks and alteration omitted)). The key is simply the opportunity to present evidence, argue the facts, and seek judicial review; the parties need not actually go through the motions for an agency to act in a judicial capacity. See Herrera, 680 F.3d at 550 (holding that a party's "failure to avail [itself] of the full procedures provided by state law does not constitute a sign of their inadequacy" (internal quotation marks omitted)). Providing an adequate opportunity to litigate is thus what it means for an agency to act in a "judicial capacity"; they are two sides of the same coin. See Peterson, 714 F.3d at 913 (analyzing both together); Herrera, 680 F.3d at 550 (same).
The defendants concede that in the state administrative proceedings at issue, the Secretary acted in a judicial capacity. Raven admitted as much in its response brief, R. 253 at 10, but Silver Slate initially held out, R. 254 at 5-6. By oral argument, ...