J. MICHELLE CHILDS, District Judge.
Plaintiffs Kevin R. Vann and Kelli D. Vann (together "Plaintiffs") filed this action alleging that Kevin Vann was injured as a result of the negligence of Defendants Eastman Chemical Company ("Eastman") and Mundy Maintenance Services and Operations, LLC ("Mundy") (together "Defendants"). (ECF No. 1.)
This matter is before the court by way of Eastman's Motion to Dismiss pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure on the basis that Kevin Vann was a "statutory employee" under the South Carolina Workers' Compensation Act (the "Act"), S.C. Code §§ 42-1-10 to -19-50 (2017), such that the Act is Plaintiffs' exclusive remedy. (ECF No. 54.) Plaintiffs oppose Eastman's Motion in its entirety. (ECF No. 59.) For the reasons set forth below, the court
This case arises out of an industrial accident that occurred on December 6, 2016, at a chemical manufacturing facility (the "Facility") located "on the banks of the Congaree River near Sandy Run a few miles northeast of Gaston in Calhoun County, South Carolina." (ECF No. 59 at 2.) Eastman operated the Facility from 1967 until 2011 manufacturing polyethylene terephthalate ("PET"), a material "commonly used in soda bottles." (ECF No. 1 at 2 ¶ 8-3 ¶ 10.) On January 31, 2011, Eastman sold specified parts of the Facility to DAK Americas, LLC ("DAK"), "a subsidiary of Alpek S.A.B. de C.V., a Mexican chemical manufacturing company." (Id. ¶ 10.) "DAK purchased . . . polymer and chemical manufacturing lines, certain on-site utilities and services to support such operations, but specifically excluded some retained facilities at the Plant." (ECF No. 59 at 3.) "Among the retained assets [of Eastman] were: 1,000 acres of land, six to ten buildings and four production lines out of thirteen which are making substantially similar products to those produced prior to the sale (the `Retained Assets')." (Id. (citing ECF No. 78-1 at 29:14-30:25, 32:3-14, 53:1-25 & ECF No. 78-2 at 28:13-29:9, 53:3-15).) Additionally, "[w]hen Eastman sold the Facility to DAK, nearly all of Eastman's 400 employees at the site became DAK employees at the time of the sale and continued doing the same jobs." (ECF No. 54 at 4 (citing ECF No. 78-1 at 57:1-23).) As a result, DAK's employees "operate[d] and maintain[ed] Eastman's retained lines the same way that they did while they were employed by Eastman." (ECF No. 78-1 at 57:13-16.)
"Two contracts between Eastman and DAK memorialize that agreement." (ECF No. 54 at 5.) "First, under the Operating Agreement, Eastman pays DAK to provide its employees to operate the Eastman Retained lines, which generally run twenty-four hours a day." (Id. (referencing ECF No. 54-3).) "The operators report to supervisors within DAK's chain of command, and the DAK Area Manager serves as the liaison to Eastman." (Id.) "Second, there is a separate Services Agreement, under which Eastman pays DAK to provide, among other things, employees from DAK's maintenance department to perform maintenance and repairs on the Retained Lines." (Id. (referencing ECF No. 54-4).) "DAK's employees, including Plaintiff [Kevin] Vann, were Eastman's operations and maintenance workforce at the time of the Incident pursuant to the Operations Agreement and Services Agreement." (Id. at 6 (citations omitted).) As an operations and maintenance worker, Kevin Vann did the same type of work for DAK after the sale as he did for Eastman before the sale. (ECF No. 78-1 at 60:1-6.)
After purchasing the Facility, DAK contracted with Mundy to "provide[] maintenance services at the site." (ECF No. 78-2 at 126:19-20.) Employees of Mundy were asked on December 3, 2016, "to heat a drain pipe [] near the Pump with a torch flame." (ECF No. 55 at 3.)
On December 6, 2016, Kevin Vann, along with Alton Ray Zeigler and Jacob S. Jackson, were assigned to perform preventative maintenance on line A, one of the four Eastman "Retained Asset" production lines, which involved draining the AC-11 loop to clean out any molten material and pulling/separating the AC-11 pump from its housing to replace a leaking seal. (ECF No. 78-1 at 109:5-11, 114:9-14, 115:7-15 & 135:2-24.) During the performance of this maintenance, "an explosion erupted shortly after Plaintiff Kevin Vann [][, Zeigler, and Jackson] loosened bolts on the pump." (ECF No. 59 at 6.) The explosion sprayed hot molten polymer throughout the workspace, injuring Vann and Jackson and killing Zeigler. (Id.)
As a result of the foregoing, Plaintiffs filed an action in this court on April 19, 2017, alleging claims against Eastman for negligence, negligent failure to warn, and loss of consortium and against Mundy for negligence and loss of consortium. (ECF No. 1 at 8 ¶ 56-12 ¶ 77.) Additionally, Plaintiffs alleged that they are entitled to an award of punitive and exemplary damages. (Id. at 12 ¶ 78-13 ¶ 81.) After engaging in court-ordered jurisdictional discovery with Plaintiffs (see ECF No. 39 at 1 ¶ 2), Eastman filed the instant Motion to Dismiss for Lack of Subject Matter Jurisdiction on November 30, 2017, asserting that Kevin Vann was a "statutory employee" under the Act such that the Act is Plaintiffs' exclusive remedy. (ECF No. 54.) In their December 21, 2017 Response in Opposition, Plaintiffs expressly did not agree that Kevin Vann was Eastman's statutory employee for purposes of its Motion. (ECF No. 59.) In the alternative, Plaintiffs argued that Eastman cannot avail itself of tort immunity under the Act's exclusive remedy provision because it failed to secure the payment of compensation as prescribed by the Act. (Id. at 11.)
The court heard argument from the parties regarding the instant Motion on January 9, 2018. (ECF No. 66.) At the hearing, counsel for Alton Ray Zeigler in a related case suggested during his presentation that the best evidence of an insurance policy that provides workers' compensation coverage "is to have an affidavit from the insurance company." (ECF No. 71 at 36:24-25.) Thereafter, on January 12, 2018, Eastman submitted the Declaration of David Kroll (ECF No. 67-1), the Assistant Vice President of Workers' Compensation Claims for ACE American Insurance Company ("Ace Insurance"). Kroll declared that:
(Id. at 3 ¶ 12.) In response to an Objection to and Motion to Exclude Kroll's Declaration (ECF No. 72) filed by Plaintiffs on January 23, 2018, the court entered a Text Order (ECF No. 97) on May 21, 2018, that "allow[ed] the parties sixty (60) days, or until July 20, 2018, to conduct the following discovery:" (1) service of appropriate discovery on Ace Insurance and (2) the deposition of Kroll. (Id.) After the parties conducted this additional limited discovery, they filed supplemental briefs between October 2-4, 2018. (See ECF Nos. 108, 109, 110.)
Article III of the Constitution limits the jurisdiction of the federal courts to the consideration of "cases" and "controversies." U.S. Const. art. III, § 2. "Federal courts are courts of limited subject matter jurisdiction, and as such there is no presumption that the court has jurisdiction." Pinkley, Inc. v. City of Fredrick, Md., 191 F.3d 394, 399 (4th Cir. 1999). A Rule 12(b)(1) motion for lack of subject matter jurisdiction raises the fundamental question of whether a court has jurisdiction to adjudicate the matter before it. Fed. R. Civ. P. 12(b)(1). In determining whether jurisdiction exists, the court is to "regard the pleadings' allegations as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment." Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991) (citing Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982)). "The moving party should prevail only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law." Id. (citation omitted). The plaintiff bears the burden of proof on questions of subject matter jurisdiction. See Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999).
Normally, this court would have jurisdiction over the instant matter under 28 U.S.C. § 1332(a)(1) because the minimum requirements of diversity are met.
The Act "contains an `exclusivity provision.'" Poch, 686 S.E.2d at 694 (citing Edens v. Bellini, 597 S.E.2d 863, 867 (S.C. Ct. App. 2004)). "This exclusivity provision states:
Poch v. Bayshore Concrete Prods./S.C., Inc., 747 S.E.2d 757, 761 (S.C. 2013) (quoting S.C. Code Ann. § 42-1-540 (1985)). "The exclusivity provision of the Act applies both to `direct' employees and to those termed `statutory employees' under § 42-1-400." Id. (quoting Edens, 597 S.E.2d at 869). Pursuant to the exclusivity provision, "[a] statutory employee may not maintain a [] [tort] action against his direct employer or his statutory employer [for a work related accident or injury]; rather, the [statutory] employee's sole remedy for work-related injuries is under the Act."
Three tests are applied to determine whether the activity of a worker is sufficient to make him a statutory employee of the owner or upstream employer within the contemplation of the Act: "(1) is the activity an important part of the owner's business or trade; (2) is the activity a necessary, essential, and integral part of the owner's trade, business, or occupation; or (3) has the identical activity previously been performed by the owner's employees?" Edens, 597 S.E.2d at 868. "If the activity at issue meets even one of these three criteria, the worker qualifies as the statutory employee of the owner." Id. "Since no easily applied formula can be laid down for determining whether work in a particular case meets these tests, each case must be decided on its own facts." Glass v. Dow Chem. Co., 482 S.E.2d 49, 51 (S.C. 1997). "Any doubts as to a worker's status should be resolved in favor of including him or her under the Worker's Compensation Act." Poch, 747 S.E.2d at 761 (quoting Posey, 661 S.E.2d at 400).
The instant dispute between the parties presents two questions for the court's consideration: (1) was Kevin Vann a statutory employee of Eastman on December 6, 2016; and (2) did Eastman have workers' compensation insurance to cover Kevin Vann in accordance with the requirements of the Act? The court addresses each issue separately below.
Eastman argues that it is entitled to dismissal of Plaintiffs' lawsuit because Kevin Vann "was a statutory employee of Eastman at the time of the incident giving rise to this lawsuit." (ECF No. 54 at 1.) In support of this argument, Eastman asserts that it is able to satisfy all three tests to result in a finding that it was a statutory employer for Kevin Vann.
First, as to whether the activities that led to the December 2016 accident were an important part of its business or trade, Eastman asserts as follows:
(ECF No. 54 at 18 (internal citations omitted).)
Next, as to whether the activities that led to the December 2016 accident were necessary, essential, and integral parts of its trade or business, Eastman asserts as follows:
(Id. at 23 (internal citations omitted).)
Finally, as to whether the activities that led to the December 2016 accident were identical to those previously performed by its employees, Eastman asserts that the maintenance work performed by Kevin Vann was "historically the exact type of work performed by Eastman's own employees." (Id. at 24.) Eastman further asserts that "[p]rior to the 2011 sale to DAK, Eastman did its own maintenance work, including the type of work performed by Plaintiff Vann, with its own workforce at the Facility." (Id. at 24-25; see also at 27-28 ("Both Rister and Leonhardt have testified that Eastman previously employed maintenance mechanics at the Columbia site prior to the 2011 sale, and that those maintenance mechanics performed the same tasks that were being performed by Plaintiff Vann at the time of the incident." (citations omitted)).)
Plaintiffs do not agree that Kevin Vann was Eastman's statutory employee arguing that Kevin Vann's "status as a statutory employee of Defendant Eastman is a question of fact to be determined by the jury in this case." (ECF No. 59 at 8-9 (citing Byrd v. Blue Ridge Rural Elec. Coop., Inc., 356 U.S. 525 (1958)).) Plaintiffs assert that Kevin Vann was not Eastman's statutory employee under the first or second test because he was not performing "routine maintenance, but rather was specialized repair work that had never been done before on the subject equipment and that Eastman was not capable of handling with its own onsite work force." (Id. at 19.) Moreover, Plaintiffs assert that the work Kevin Vann was performing was unrelated to Eastman's "trade or business" because "after the 2011 sale to DAK, Eastman was no longer in the business of manufacturing chemicals or maintaining the equipment for the manufacturing of those chemicals." (Id. at 21.) Finally, Plaintiffs assert that Kevin Vann is not a statutory employee of Eastman under the third test because after February 1, 2011, "Eastman has not had any direct employees at the Plant capable of performing the type of repair work that Plaintiff Kevin Vann was performing [] on December 6, 2016 pursuant to an Unusual Job Permit issued by Eastman." (Id. at 22-23.)
Despite Plaintiffs' protestations, this court can decide a statutory employee issue for reasons stated as follows:
Carrier v. Westvaco Corp., 806 F.Supp. 1242, 1244-45 (D.S.C. 1992).
To determine whether Kevin Vann was a statutory employee of Eastman at the time he was injured, the court considered the parties' evidence concerning Eastman's general trade, business, or occupation. See Poch, 747 S.E.2d at 761 ("[T]his Court has the power and duty to review the entire record and decide the jurisdictional facts in accord with the preponderance of the evidence." (citation omitted)). Upon its review, the court observes that the parties dispute what is Eastman's business, trade, or occupation. Eastman asserts that it is in the business of producing specialty chemicals. (ECF No. 78-1 at 22:21-23; ECF No. 78-2 at 31:10-13, 166:19-167:4.) Plaintiffs assert that Eastman is "a chemical product sales company, selling chemicals produced by DAK employees on equipment owned by Eastman" because it "does not receive the raw materials, does not have any employees capable of running the operations of the lines, does not remove the product from the line, and does not place the product into shipping containers." (ECF No. 59 at 21 (citing ECF No. 78-2 at 92:15-93:19)). Despite the parties' contrasting positions, there is no dispute of fact that Eastman's business requires the presence of chemical product and without such chemical product, Eastman cannot sell or produce anything. Moreover, caselaw does not necessarily require that such product be exclusively produced by Eastman's employees. See Singleton v. J.P. Stevens & Co., Inc., 533 F.Supp. 887, 890 (D.S.C. 1982) ("[A] person is performing the trade, business or occupation of the employer if the person contracts with the owner to perform a duty which is essential to the function of the owner's continued business despite the fact the owner may never have performed the same chore with his own employees." (citations omitted)).
On the day Kevin Vann was injured, there is also no dispute of fact that he was performing preventative maintenance on one of the lines that produces chemicals for Eastman. (ECF No. 78-1 at 112:2-117:2.) The appellate courts of South Carolina have held that maintenance considerations are an important part of a statutory employer's trade, business, or occupation. In Marchbanks v. Duke Power Co., 2 S.E.2d 825 (S.C. 1939), "the [South Carolina Supreme] Court found that an independent contractor who was hired to paint telephone poles on behalf of Duke Power was a statutory employee under the Workmen's Compensation Law on the basis that Marchbanks was engaged in part of the defendant's business, because the maintenance of utility poles was necessary to the distribution of electricity." Singleton, 533 F. Supp. at 890 (citing Marchbanks, 2 S.E.2d at 837). In Boseman v. Pac. Mills, 79, 8 S.E.2d 878, (S.C. 1940), the South Carolina Supreme Court stated as follows in finding that the maintenance of the water tank was an integral part of the mill's business for fire prevention purposes:
Id. at 880. In Bridges v. Wyandotte Worsted Co., 132 S.E.2d 18 (S.C. 1963), the Supreme Court of South Carolina again held that maintenance was part of the trade, business, or occupation of the statutory employer:
Id. at 23.
Therefore, upon consideration of the foregoing caselaw in the context of the facts presented by the parties, the court is persuaded that maintenance on a line that produces chemicals that Eastman sells is an important part of Eastman's trade, business, or occupation. E.g., Singleton, 533 F. Supp. at 891 ("The continued maintenance and repair of these electrical lines were absolutely essential to the continued operation of the textile plant."). Accordingly, the court finds that Kevin Vann was a statutory employee of Eastman.
In support of the position that it had secured workers' compensation coverage for Kevin Vann prior to the December 6, 2016 accident, Eastman cites to the plain language of its workers' compensation policy (the "Policy") which states that Ace Insurance "will pay promptly when due the benefits required of you [Eastman] by the workers compensation law." (ECF No. 110 at 2 (citing ECF No. 110-5 at 11 Part 1(B)).) In addition, Eastman cites to Kroll's Declaration (supra ECF No. 67-1) and his testimony at a June 29, 2018 deposition wherein he stated that (1) Eastman had the Policy in place on the date of the accident that injured Kevin Vann, (2) the Policy will pay workers' compensation benefits required by law of Eastman in South Carolina, and (3) a finding by the court that Kevin Vann was a statutory employee of Eastman would result in the payment of workers' compensation benefits due to him. (ECF No. 110-7 at 7:3-21, 11:14-12:24.)
Plaintiffs challenge Eastman's position arguing that it cannot demonstrate its entitlement to coverage under the Act because it "failed to produce any evidence showing compliance with [S.C. Code] section 42-1-415
For its protections to apply, the Act required Eastman to "comply with [South Carolina Code] section 42-5-20 by either directly purchasing insurance to cover its potential workers' compensation liabilities or qualifying as a self-insurer before the owner may claim immunity under the Act's exclusive remedy provision." Glover v. United States, 523 S.E.2d 307, 311 (S.C. 1999); see also Harrell v. Pineland Plantation, Ltd., 523 S.E.2d 766, 773 (S.C. 1999) ("Thus, an employer who fails to secure the payment of compensation as prescribed in section 42-5-20 loses its immunity under the Act's exclusive remedy provision." (citing 6 Arthur Larson, Workers' Compensation Law § 67.22 (1998))). Because there has not been any argument that Eastman qualifies as a self-insurer, the relevant inquiry is whether Eastman directly purchased insurance to cover its liability to Kevin Vann and other similarly situated statutory employees. Upon its review, the court observes that the dispute between the parties is governed by Poch, the seminal decision by the South Carolina Supreme Court relevant to this issue.
In Poch, petitioners argued to the South Carolina Supreme Court that the South Carolina Court of Appeals had erred in finding that respondents could benefit from the Act's tort liability immunity since they failed to offer proof of or secure workers' compensation coverage for petitioners. 747 S.E.2d at 765. The majority of the South Carolina Supreme Court disagreed with petitioners and held that respondents preserved their immunity because there was evidence to support the circuit court's finding that both respondents retained workers' compensation insurance that would have covered the petitioners. Poch, 747 S.E.2d at 767. Respondents offered the affidavit of the construction underwriter for the insurance company, who attested that respondents "had workers' compensation coverage at the time of the accident as there was an `insurance policy [that] cover[ed]'" respondents. Id. The underwriter also attested that the insurance policy covered petitioners. Id. at 767-68.
In considering the aforementioned evidence, the court's majority found that an affidavit from an underwriter of the insurance carrier is sufficient evidence of proof of workers' compensation insurance. Poch, 747 S.E.2d at 767-68 ("The affidavit of the construction underwriter for St. Paul/Travelers Insurance Company specifically stated that the insurance policy covered Poch's and Key's workers' compensation claims."). The majority further noted that, under the Act, the responsibility for filing proof of compliance falls on the insurance carrier because the corporations were not self-insured. Id. The court reasoned that, without evidence to the contrary, respondents complied with the procurement of insurance requirements discussed in Harrell and reaffirmed in Glover. Id. The court also noted that no allegation or evidence in the record suggested that proof of compliance with S.C. Code Ann. § 42-5-20 was not filed. Id.
In contrast, the dissenters in Poch concluded that respondents did not submit adequate proof that they had secured or filed evidence of workers' compensation coverage as required by the Act and Harrell. Id. at 768. The dissenters concluded that the underwriter's affidavit did not contain the requisite specificity required because it did not refer to the precise type of coverage or time period covered. Id. at 769 ("An affidavit from an underwriter to the effect `[t]hat the insurance policy [covering both Bayshore entities] as written would have provided Workers' Compensation coverage for petitioners is insufficient to support a finding that the policy to which he refers contains the provisions required by S.C. Code Ann. § 42-5-70 (1984) or that imposed by § 42-5-80(A) (Supp. 2012).").
In this matter, Plaintiffs argue this case is distinguishable from Poch because Eastman failed to produce any evidence showing that it procured insurance and Plaintiffs have provided evidence showing that Eastman failed to procure insurance. Plaintiffs contend that Eastman's evidence by way of Kroll is insufficient because, unlike the affidavit in Poch, Kroll is neither an underwriter nor does he specifically state Kevin Vann is covered. However, the court fails to find significance in this distinction. Kroll as Ace Insurance's Assistant Vice President of Workers' Compensation Claims attests that Eastman's Policy provides coverage to statutory employees. The question of whether an individual is a statutory employee is one for the courts. E.g., Lentine, 2009 WL 792495, at *2 ("The determination of whether a worker is a statutory employee is . . . a question of law." (citing Posey, 661 S.E.2d at 398)). Because the court has determined that Kevin Vann is a statutory employee and Kroll attests that statutory employees are a covered group under the Policy, the failure to state Kevin Vann's name is of little consequence and does not render insufficient the evidence submitted by Kroll.
The court is also not persuaded by Plaintiffs' argument that there is no coverage because coverage "under the Policy is contingent upon future action of a court." (ECF No. 110 at 14.) The court perceives this to not be any different than when an insurer seeks a declaration of coverage pursuant to the Federal Declaratory Judgment Act, 28 U.S.C. § 2201. E.g., Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 375-76 (4th Cir. 1994) ("[W]e have frequently approved the use of federal declaratory judgment actions to resolve disputes over liability insurance coverage, . . . ." (citations omitted)).
Moreover, even if Plaintiffs' assertions regarding Eastman's actions that are alleged to be inconsistent with those of an insured seeking coverage for an employee under the terms of the Policy are taken as fact, this evidence does not invalidate ACE Insurance's coverage as to Kevin Vann. Plaintiffs' evidence does not directly contradict Eastman's evidence that ACE Insurance would provide workers' compensation insurance coverage for a workers' compensation claim filed by Plaintiffs. Therefore, the court finds that the affidavit and testimony from Kroll are sufficient evidence of workers' compensation insurance provided to statutory employees, a group which includes Kevin Vann. The evidence Plaintiffs point to is more closely tied to Eastman's duties under its policy to ACE Insurance rather than its duties under the Act.
Because Plaintiff Kevin R. Vann is a statutory employee of Defendant Eastman Chemical Company and Eastman had secured the payment of compensation for Kevin Vann as required by the South Carolina Workers' Compensation Act, the court finds that Plaintiffs' exclusive remedy against Eastman is pursuant to the South Carolina Workers' Compensation Act. Accordingly, for the reasons set forth above, the court hereby
Id.
