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Thursday, May 06, 2010

Ind. Decisions - Two Indiana cases today decided by 7th Circuit

In Amercian Land Holdings of Ind. v. Jobe, et al (SD Ind., Lawrence), a 16-page decision, Judge Posner writes:

This diversity suit, brought by affiliates of the Peabody Energy Corporation (for simplicity we’ll pretend there is a single plaintiff and call it Peabody), seeks both a declaration that Peabody has the right to strip mine coal on the defendants’ land, and specific performance of an option to purchase the land. The land is in Indiana, and the substantive issues in the case are governed by Indiana law. The district judge, after conducting a bench trial, entered judgment for the defendants, 655 F. Supp. 2d 882 (S.D. Ind. 2009), and Peabody appeals. * * *

The defendants own a total of 62 acres of farmland in Sullivan County, Indiana; there are farmhouses and other buildings on the land. The land is an island in an area that Peabody is busy strip mining for coal, and it is eager to strip mine the defendants’ land as well, and insists that a 1903 deed entitles it to do so. The coal beneath the land is worth $50 million (of course minus the cost of extraction) at the current spot price of $42 per ton for coal of this type and quality. * * *

Peabody contends that the deed entitles it both to strip mine the land without compensating the owners and also, if it wants, to obtain full title to the land (that is, fee simple) for $30 an acre. Under the first entitlement the right to use the surface would revert to the defendants when Peabody was finished strip mining it; under the second it would be Peabody’s property to do with it as it wanted, forever. One might wonder why Peabody would prefer litigating rather than just digging an underground mine, as the deed allows. But the district judge found that strip mining was necessary to remove all the coal—underground mining wouldn't do it because the coal seams aren’t very thick and in places they are layered over one another so that a good amount of the coal would have to be left in place in order to support the shafts required for getting at and extracting the rest of the coal.

The deed, given by the defendants’ predecessors to Peabody’s predecessor, grants the latter and its successors “all the coals, clays, minerals and mineral substances underlying” the defendants’ land, “together with the right to mine and remove said coals [etc.—we can ignore the reference to ‘clays, minerals and mineral substances,’ as do the parties] without further payment of any nature whatsoever.” * * *

But the further portions of the deed that we quoted seem to confine the coal company’s use of the surface to structures and activity relating to underground mining. For $30 an acre the company can purchase portions of the surface for structures related to such mining, but removal of the surface for purposes unrelated to underground mining is nowhere authorized unless by the reference to “all the coals.”

The tension between the right to mine “all the coals” and the limits on the mining company’s use of the surface of the land marks the deed as ambiguous. And so the judge admitted extrinsic evidence (evidence beyond the deed itself) to help him decide whether the deed had conveyed, either directly or by grant of the purchase option, the right to strip mine the land. * * *

The key extrinsic evidence presented at the bench trial was that there was no strip mining of coal in Sullivan County, Indiana, in 1903; and apparently no strip mining of coal anywhere in the United States at that time, beyond isolated experimentation. * * *

Because strip mining is a more valuable use of the defendants’ land than farming and home occupying, our decision will not prevent the land from being put to its most valuable use, which is indeed for strip mining. It will simply affect the terms on which Peabody acquires the right to strip mine the land. It would like to be able to acquire the right for $1860 (62 acres times $30). With $50 million worth of coal under the land (though its net value, as we said earlier, is less because of the cost of extraction—but may be more because Peabody needs to strip mine the defendants’ land in order to extract more coal from beneath the surrounding land), it will have to pay the defendants a good deal more. The judgment is affirmed and the cross-appeal denied.

In Fal-Meridian, Inc. v. US HHS (Petition for Review of an Order of the Departmental Appeals Board of the U.S. Department of Health and Human Services.), a 13-page opinion, Judge Posner writes:
The Meridian nursing home asks us to set aside a final decision by the Department of Health and Human Services that imposed a civil penalty of $7,100 on the nursing home for having violated a regulation under the Medicare and Medicaid provisions of the Social Security Act. 42 U.S.C. §§ 1302, 1395hh. The regulation requires a skilled nursing facility to “ensure that—(1) the resident environment remains as free of accident hazards as is possible; and (2) each resident receives adequate supervision and assistance devices to prevent accidents.” 42 C.F.R. § 483.25(h). The size of the penalty was based on the Department’s further determination that Meridian’s violation of the regulation was “likely to cause . . . serious injury, harm, impairment, or death to a resident.” 42 C.F.R. §§ 488.301, 488.438(a)(1)(i).

It may seem odd that the nursing home would be seeking judicial review of such a tiny penalty, when its lawyer told us that the Department’s determinations would not jeopardize the nursing home’s license to serve Medicare and Medicaid patients. But the episode (which we’re about to narrate) giving rise to those determinations has also incited a tort suit for wrongful death against the nursing home, and the home does not want the finding used to bolster a claim of negligence. Regulatory violations are not negligence per se but they are evidence of negligence. Beta Steel v. Rust, 830 N.E.2d 62, 73- 74 (Ind. App. 2005); Zimmerman v. Moore, 441 N.E.2d 690, 696-97 (Ind. App. 1982). Meridian may also fear that the imposition of a civil penalty for an accidental death may make it harder to attract new residents.

Posted by Marcia Oddi on May 6, 2010 02:58 PM
Posted to Ind. (7th Cir.) Decisions