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Columbia Gas Transmission, LLC v. Raven Co., Inc.

United States District Court, E.D. Kentucky, Southern Division, Pikeville

September 17, 2014

THE RAVEN CO., INC., et al., Defendants. SILVER SLATE, LLC, Third-Party Plaintiff,
ARCH SPECIALTY INSURANCE COMPANY, et al., Third-Party Defendants.


AMUL R. THAPAR, District Judge.

Wars are made of many battles; but each can be fought only once. When a party loses before an administrative agency, either because it fought hard and came up short, or because it chose not to fight at all, this Court does not offer a new battlefield on which to refight the same battle. Rather, an agency's final order cements the party's defeat-at least so far as the order goes. Where the order is a mere default judgment, the task of determining just how far it goes must start at the end result and work its way back, identifying the elements logically required to produce the final outcome.

During the course of the present litigation, Kentucky mine regulators charged the defendants with violating several state regulations based on the same conduct at issue here. The defendants chose not to contest those allegations, and so, in a final order, the state regulators deemed the violations admitted. The plaintiff now relies on that order to preclude relitigating certain elements of its claims. The Court previously concluded that most of the elements of preclusion were met, but two questions remained. The Court ordered additional briefing on which facts were actually decided in the state administrative proceedings, and whether those facts satisfy any elements of the plaintiff's claims. Because the necessary findings of the final order satisfy all the elements of the claims in the plaintiff's Motion for Partial Summary Judgment, the Court will grant the motion in part. The Court will deny the motion in part as to punitive damages.


This Court recounted the facts of this case in its prior opinion addressing the preclusive effect of the administrative final order. See Columbia Gas Transmission, LLC v. The Raven Co., CIV. 12-72-ART, 2014 WL 2711943 (E.D. Ky. June 13, 2014). For the purposes of this opinion, a brief review suffices.

A landslide damaged Columbia Gas Transmission, LLC's ("Columbia") gas pipeline in Floyd County, Kentucky. R. 1 ¶ 23. According to Columbia, The Raven Co., Inc. ("Raven") and Silver Slate, LLC ("Silver Slate") (collectively, "the defendants") are to blame. Id. ¶ 24. Columbia filed several causes of action including (among others) negligence per se, trespass, nuisance, and common law negligence, see R. 266 at 1-2 (summarizing claims).

Before Columbia had even filed its complaint, however, 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 Non-compliance" ("the Notice") citing Raven and Silver Slate for various regulatory violations. See R. 231-21 at 2-5. The Notice alleges that the defendants (1) allowed an off-permit landslide, (2) created conditions "reasonably expected to cause significant, imminent environmental harm" to natural resources, (3) failed to maintain the appropriate buffer zone around 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 mining inspector ordered the defendants to take various corrective measures, such as removing the materials from the off-permit area. Id. Neither company contested the Notice. R. 234-1 at 20 ¶ 30.

Repeated inspections concluded that the defendants failed to take meaningful corrective measures. R. 234-1 at 21-23 ¶¶ 34-39. Dissatisfied with administrative remedies, Columbia filed this suit. See R. 1. As the defendants failed to comply with order after order from the DMRE, the DMRE finally issued a "Notice of Proposed Assessment, " recommending a $33, 700 penalty for the ongoing regulatory violations. See R. 231-25 at 11. The defendants waived their right to an assessment conference on the penalty, R. 231-25 at 33, and then waived their right to a hearing on the Cabinet Secretary's acceptance of the Proposed Assessment. R. 234-1 at 28 ¶ 48. Accordingly, the Secretary issued a Final Order ("the Order") imposing the proposed penalty and declaring that (1) the defendants waived their right to a hearing, (2) the facts of the violations cited in the initial Notice of Noncompliance were deemed admitted, and (3) the recommended penalty assessment was 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.

Columbia moved for partial summary judgment, invoking the doctrine of administrative issue preclusion as to the Order. R. 234. Columbia sought summary judgment on its claims for negligence per se, trespass, nuisance, and two elements of common law negligence. The Court previously concluded that Kentucky courts would grant the Order and surrounding findings preclusive effect. R. 275. It was less clear, however, which findings the Secretary actually decided and whether those findings satisfy any of the elements of Columbia's claims. The Court ordered additional briefing on these questions and now concludes that Columbia's Motion for Partial Summary Judgment should be granted except as to punitive damages.


I. Revisiting One of the Court's Prior Holdings

Although the Court requested that the parties address only the two remaining questions, both parties included arguments challenging or supporting one of the Court's prior holdings. Because it has a duty to correct its own errors, the Court will take up the parties' invitation to revisit its earlier opinion. See Marconi Wireless Tel. Co. v. United States, 320 U.S. 1, 47-48 (1943); Simmons Co. v. Grier Bros. Co., 258 U.S. 82 (1922). Before final judgment, after all, there is no bar to reversing course. See Marconi Wireless Tel. Co., 320 U.S. at 48. Correcting errors now, rather than on appeal, tends to conserve the resources of the parties and the courts.

The Court previously held that "questions of law application, such as whether the defendants violated Kentucky mining regulations, are ineligible for preclusive effect." R. 275 at 15-16. Though traditional issue preclusion doctrine "extends beyond findings of historical fact to include some determinations that mingle facts with conclusions of law, " id. (quoting Wright & Miller, 18 Fed. Prac. & Proc. Juris. § 4425 (2d ed.) [hereinafter Wright & Miller]), the Sixth Circuit seemed to "expressly hold[] otherwise." Id. (citing Noyes v. Channel Products, Inc., 935 F.2d 806, 809 (6th Cir. 1991)). In Noyes, the court explained that a state agency's decision "resolved a mixed question of law and fact, and therefore was not entitled to preclusive effect in federal court." Noyes, 935 F.2d at 809 (citing Yates v. Avco Corp., 819 F.2d 630, 636 (6th Cir. 1987)).

But courts must interpret text in light of its cited authority. Upon close scrutiny, Noyes does not hold that, as a matter of federal common law, an agency's resolution of mixed questions is not entitled to preclusive effect in federal court. Rather, Noyes ' holding is best read as an application of Ohio's preclusion law. The confusion is understandable. When the Noyes court seemed to expressly deny the preclusive effect of mixed questions resolved by state agencies, it cited Yates -another Sixth Circuit case. Id. (quoting Yates, 819 F.2d at 636 ("[C]onstructive discharge is, at least partially, a question of law and must therefore be reviewed by this Court de novo. ")).

To understand what Noyes means, then, we must look to Yates. But Yates cannot support the proposition for three reasons. First, Yates had nothing to do with preclusion or with state law. 819 F.2d 630 (involving a sexual harassment claim brought under Title VII of the Civil Rights Act of 1964). It only endorsed considering "constructive discharge" as a legal question-the same issue raised in Noyes. See id. at 636 ("[C]onstructive discharge is, at least partially, a question of law and must therefore be reviewed by this Court de novo. "). And, of course, because Yates did not involve state law or preclusion, it is only natural that the court of appeals would review de novo the lower court's resolution of legal questions. Indeed, Yates cites for the proposition a case that also reviews de novo legal questions related to constructive discharge under Title VII-a case that, once again, has nothing to do with preclusion or state law. See Jacobs v. Martin Sweets Co., 550 F.2d 364, 370-71 (6th Cir. 1977).

Second, Yates cannot stand for the sweeping proposition that the Sixth Circuit reviews all mixed questions of fact and law de novo, even in the context of issue preclusion. Such a holding would make no sense-especially with no explanation-because the Sixth Circuit has repeatedly looked to state law to determine what preclusive effect to give state court resolutions of mixed questions. See, e.g., Knott v. Sullivan, 418 F.3d 561, 567 (6th Cir. 2005) (looking to Ohio law to determine what preclusive effect to give a state court's ruling that a search violated the Fourth Amendment).

Finally, Yates cannot stand for the narrower proposition that the Sixth Circuit reviews de novo all state- agency resolutions of mixed questions, even in the context of preclusion, because Yates did not involve a state agency. 819 F.2d 630 (remanding a Title VII claim so that the district court could recalculate damages).

On what authority, then, did the Noyes court rely for its refusal to preclude mixed questions? It seems to have relied on its reading of state law: "Ohio state courts accorded full preclusive effect to the factual determinations of the state unemployment agency." Noyes, 935 F.2d at 809 (citing Pullar v. UpJohn Health Care Servs., Inc., 488 N.E.2d 486, 490 (1984)).[1] The Noyes court looked to Ohio law because, "[w]hen the factfinding of a state agency is involved, a federal court must accord such findings the same degree of preclusive effect that they would receive in the courts of that state." Id. (citing Univ. of Tenn. v. Elliott, 478 U.S. 788, 799 (1986)). Admittedly, the Supreme Court limited its discussion in Elliott to factfinding by a state agency. It did not, however, explicitly address whether legal conclusions should be treated any differently. Indeed, just eight days before the Sixth Circuit decided Noyes, the Supreme Court reaffirmed that "administrative estoppel is favored as a matter of general policy." Astoria Fed. Sav. & Loan Ass'n v. Solimino, 501 U.S. 104, 109 (1991). Though, like Elliot, Astoria only involved agency factfinding, the Supreme Court explained in broad terms its "long favored application of the common-law doctrines of collateral estoppel (as to issues) and res judicata (as to claims) to those determinations of administrative bodies that have attained finality." Id. at 107.

This question is far from settled among the circuits. Compare White v. Palmer, 229 F.3d 1161 (9th Cir. 2000) (unpublished) (holding that "plaintiff's claims were precluded under California law and, consequently, the Administrative Law Judge's findings of fact and conclusions of law in the license revocation proceedings precluded plaintiff's claims before the federal court" (emphasis added)), Crossroads Cogeneration Corp. v. Orange & Rockland Utilities, Inc., 159 F.3d 129, 135 (3d Cir. 1998) (holding that "factual findings and legal conclusions of the [state agency] should be given preclusive effect to the extent afforded under [state] law" (emphasis added)), and Solomon v. Dixon, 904 F.2d 701 (4th Cir. 1990) (unpublished) (interpreting Elliott as applying to questions of both law and fact) with Edmundson v. Borough of Kennett Square, 4 F.3d 186, 192 (3d Cir. 1993) (holding that a legal ...

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