Choice Electric Corporation

Plain-English summary

An ALJ entered default after Choice Electric failed to answer the Secretary's complaint, affirming two citations and assessing a $520 penalty. The company appeared without counsel and said it believed that returning a designation-of-representative form, requesting simplified proceedings, or filing its notice of contest had adequately responded. The Commission treated Choice's review petition as a motion to set aside sanctions but found the factual record too limited to decide whether the failure to answer had a sufficient excuse. It remanded for the ALJ to develop the record and decide whether to lift the default, after which the merits could proceed if relief was granted. The Commission ordered expedited proceedings. Commissioner Montoya would have set aside the default immediately and treated Choice's existing filings as an adequate answer.

Decision snapshot

• Cited standard(s): 29 C.F.R. § 1926.500(b)(5)
• Outcome: Default judgment remanded for findings on whether the pro se employer had sufficient reason for failing to answer.
• Key point: A pro se employer's procedural confusion may warrant relief from default, but the employer must provide enough facts for the judge to evaluate the excuse.

Full text (OSHRC public release)

Docket No. 88-1393

SECRETARY OF LABOR,

Complainant,

v.

CHOICE ELECTRIC CORPORATION,

Respondent.

OSHRC Docket No. 88-1393

DECISION AND ORDER

BEFORE: FOULKE, Chairman; MONTOYA and WISEMAN, Commissioners.

BY THE COMMISSION:

Administrative Law Judge James A. Cronin, Jr., issued a default
judgment against Choice Electric Corporation for failing to file an answer as required by
Commission Rule 34(d)(1).[[1/]] At issue is whether Choice, appearing in this case without
counsel, or pro se, has established a "sufficient" reason to set aside that
sanction under Commission Rule 41(b).[[2/]]

The Secretary issued two citations to Choice for serious and other violations, to which
choice responded by filing a timely Notice of Contest. The secretary then filed her
Complaint on August 19, 1988. Under Commission Rule 34(d)(1), the employer must file an
answer within 30 days after service of the complaint. Approximately a month after Choice's
answer was due, the Secretary filed a Motion for Default Judgment based on Choice's
failure to answer. Choice did not file a response to that motion. More than a month after
the motion was filed, the judge issued his decision, in which he declared Choice to be in
default, pursuant to Commission Rule 41(a)(2) (see note 2 supra),due to its failure to
file an answer, as required by Commission Rule 34. The judge affirmed the two citations
that had been issued to Choice and assessed a penalty of $520 for the serious violations.

In its Petition for Discretionary Review and its Brief on
Review, Choice asserts that it did not file an answer because: (1) it thought that by
completing and returning the Secretary's "Notice of Appearance and Designation of
Representative" form to the Solicitor's office, as requested by the Secretary in her
cover letter to Choice's copy of the Complaint, it had responded adequately to the
Complaint; (2) it had not been notified that this case was before a judge; and (3) it
thought that because it had requested simplified proceedings (see Commission Rules 200
through 212, 29 C.F.R. �� 2200.200-2200.212), under which there are no pleadings, no
answer needed to be filed. Choice also asserts that it has paid the penalty of $520
assessed by the judge, plus interest and administrative costs.[[3/]]

The Secretary contends that none of the reasons offered by
Choice for not filing an answer are "sufficient" under Commission Rule 41(b).
She argues that Choice had received more than adequate notice that an answer was required
within 30 days of receipt of the Complaint.

The Commission has broad discretion in reviewing a sanction
imposed on a party for not proceeding under Commission rules. In the only two Commission
decisions interpreting Commission Rule 41(b), which both involved pro se
employers who failed to file timely answers, the Commission stated that the burden of
producing evidence that there was a "sufficient" reason for failing to answer,
as required by Commission Rule 34(d)(1), is on the sanctioned employer. Wes Jones &
Son, Inc., 13 BNA OSHC 1277, 1279, 1986-87 CCH OSHD � 27,924 p. 36,625 (No. 86-1095,
1987); Bywater Sales & Service, Byco-MCS Div . [" Byco "], 13 BNA
OSHC 1268, 1269, 1986-87 CCH OSHD � 27,896 p. 36,597 (No. 86-1214, 1987) [[4/]] This
approach is consistent with the general rule in administrative proceedings that the moving
party has the burden of proof. "Except as otherwise provided by statute, the
proponent of a rule or order has the burden of proof." Section 7(c) of the
Administrative Procedure Act, 5 U.S.C. � 556(d). See Sarasota Concrete Company, 9
BNA OSHC 1608, 1612 & n.9, 1981 CCH OSHD � 25,360, p. 31,531 & n.9 (No. 78-5264,
1981), aff'd, 693 F.2d 1061 (11th Cir. 1982).

Although the term "sufficient" is not defined in the
Commission rules, the Commission has given it meaning by borrowing concepts from the
following Federal Rules of Civil Procedure that are analogous to Commission Rule 41: Fed.
R. Civ. P. 55(c), which permits the court to set aside an entry of default "[f ]or
good cause shown"; and Fed. R. Civ. P. 60(b), which allows the court on motion to
relieve a party from judgment for "excusable neglect." See Wes Jones , 13
BNA OSHC at 1279, 1986-87 CCH OSHD at p. 36,625 (burden of proving "good cause for
its failures to respond" on employer); Byco, 13 BNA OSHC at 1269, 1986-87 CCH OSHD at
p. 36,597 (burden of proof of "good cause for its failure to respond" on
employer; insufficient information to determine if failure to answer due to
"excusable neglect") Also, the Commission has wide latitude in granting relief
from sanctions under its own Rule 41(b).

Addressing how an employer can meet its burden of proof, the
Commission has stated that "[o]rdinarily we would expect a party seeking such relief
[under Rule 41(b)] to make a formal motion supported by sworn affidavits or other evidence
showing good reason for setting aside the dismissal." Wes Jones, 13 BNA OSHC
at 1279, 1986-87 CCH OSHD at p. 36,625; see Byco, 13 BNA OSHC at 1269,
1986-87 CCH OSHD at p. 36,597. In this case, such information is lacking.

However, the Commission is under an obligation to ensure that
all parties to a controversy have a full, fair, and equal opportunity to be heard. It is
also sensitive to the needs of parties appearing pro se and recognizes that
persons who are not trained in the law may require additional consideration of their
circumstances. Thus, in view of Choice's pro se status and apparent lack of
understanding of Commission procedures, we shall treat its Petition for Discretionary
Review as a formal Motion to Set Aside Sanctions under Commission Rule 41(b).

Choice's statements relating to its reasons for not filing an
answer are briefly set forth in its Petition for Discretionary Review and Brief on Review.
However, Choice has failed to provide adequate factual information from which we could
determine whether any of its stated reasons for failing to file an answer are
"sufficient" to justify setting aside the default sanction. Because Choice is
not represented by counsel and seems to lack sufficient knowledge of Commission
procedures, probably most strongly demonstrated by its claimed payment of the penalty plus
interest and costs, its failure to provide the necessary factual information will not be
fatal to Choice's case at this juncture. See Wes Jones , 13 BNA OSHC
at 1279, 1986-87 CCH OSHD at p. 36,625; Byco , 13 BNA OSHC at 1269, 1986-87 CCH OSHC
at p. 36,597.

Accordingly, we remand this case to the judge, who may hold a
hearing, take evidence in the form of sworn affidavits, or follow other procedures that he
may deem appropriate to develop enough of a factual record for him to rule on whether
Choice had a "sufficient" reason for failing to file an answer, as would justify
setting aside the default sanction. If the sanction is lifted, then Choice would have an
opportunity to file an answer. The judge could then proceed toward a determination of the
merits of the case.

In order to facilitate prompt resolution of this case, we order
that all further proceedings in this case be expedited in accordance with Commission Rule
103, 29 C.F.R. � 2200.103.

Edwin G. Foulke, Jr.

Chairman

Donald G. Wiseman

Commissioner

Dated: November 7, 1990

MONTOYA, Commissioner, concurring in part and dissenting in
part:

I agree with my colleagues that this case should be remanded to
the Administrative Law Judge. However, I disagree with their unnecessarily legalistic
disposition of this case because it involves an employer that is appearing before the
Commission without an attorney, that is, a pro se employer. Employers who
appear before the Commission pro se comprise 30 to 40 percent of all
employers who appear in contested cases. In my view, the majority opinion ignores relevant
Commission precedent that addresses some of the difficulties encountered by small
employers appearing pro se . I would consider Choice's Petition for
Discretionary Review to be a motion to set aside the sanctions imposed under Commission
Rule 41(b) and would grant the motion, thereby setting aside the judge's default judgment
against Choice and reinstating Choice's Notice of Contest. I would accept Choice's Notice
of Contest and Brief on Review as an adequate answer to the Secretary's Complaint, and
find that Choice has substantially complied with Rule 34(d) of the Commission's Rules of
Procedure, which requires the filing of an answer. Finally, I join my colleagues in
remanding this case to the judge for a hearing, but I would limit that hearing to the
merits of the contested citation items.

The majority narrowly interprets[[1/]] the broadly-worded
Commission Rule 41(b) to impose on the party seeking relief from a sanction the burden of
showing a "sufficient" reason for lifting the sanction. However, the rule itself
imposes no such burden; rather, it states that the Commission can set aside sanctions
"[f]or reasons deemed sufficient by the Commission or Judge ......" In the
decisions relied on by the majority, the Commission never explained why it chose that
interpretation of the rule. Wes Jones & Son. Inc., 13 BNA OSHC 1277, 1986-87
CCH OSHD � 27,924 (No. 86-1095, 1987); Bywater Sales & Service, Byco-MCS Div. ,
13 BNA OSHC 1268, 1986-87 CCH OSHD � 27,896 (No. (?) 1214, 1987).

Rather than imposing such a burden on the sanctioned party,
especially when that party is, like Choice, a small business that has chosen not to incur
the expense of hiring an attorney and instead is appearing pro se, I would read Commission
Rule 41(b) in the context of the commission decisions on sanctions that preceded the
adoption of that rule but were not superseded by the rule.[[2/]] In Duquesne Light
Company, 8 BNA OSHC 1218, 1222, 1980 CCH OSHD � 24,384 p. 29,719 (No. 78-5034, 1980),
the Commission concluded that, in the "absence of contumacious conduct on the part of
the delaying party, we consider lack of prejudice to [the opposing party] as the
controlling factor in determining that dismissal is too harsh a sanction under the
circumstances."

As the majority correctly points out, Duquesne Light was
decided prior to a major revision of the Commission's Rules of Procedure in September
1986. 51 Fed. Reg. 32,002, 32,015 (1986). This revision included the adoption of
Commission Rule 41, which is the rule at issue in this case. The purpose of this rules
change was to establish procedures for the imposition and lifting of sanctions for
violations of the Commission's rules. Nevertheless, despite this change, I conclude that Duquesne
Light is based on a principle that is still valid in interpreting and applying the
Commission's current procedural rules, and I would therefore follow the reasoning, as well
as the express holding, of Duquesne Light in interpreting and applying Rule 41.

The central premise of Duquesne Light is the policy
favoring the resolution of cases on their merits rather than the dismissal of cases for
the failure of a party to comply with procedural rules. As the Commission stated in Duquesne
Light, "there is a policy in the law in favor of deciding cases on their
merits." 8 BNA OSHC at 1222, 1980 CCH OSHD at p. 29,719. See Pearson v,
Dennison, 353 F.2d 24, 28-29 (9th Cir. 1965); 9 C. Wright and A. Miller, Federal
practice and Procedure � 2370 at 216-17 (1971). Thus, Duquesne Light should be
viewed in the context of a vast body of case law arising under the Act in which the
Commission and the court's have consistently shown an antagonism toward the dismissal of
cases on procedural grounds because this disposition deprives all of the parties of a
resolution of contested citations on their merits. See, e.g., Stephenson
Enterprises Inc. v. Marshall, 578 F.2d 1021, 1023 (5th Cir. 1978) (Secretary's failure
to issue citations with reasonable promptness); Marshall v. Western Waterproofing Co. ,
560 F.2d 947, 951-52 (8th Cir. 1977) (Secretary's failure to comply with procedures for
walkaround and presentation of credentials); Accu-Namics, Inc. v. OSHRC, 515 F.2d
828, 833-34 (5th Cir. 1975), cert . denied, 96 S. Ct. 1492 (1976) (same); Atlantic
Marine, Inc. v, OSHRC, 524 F.2d 476, 478 (5th Cir. 1975) (employer's failure to file
timely notice of notice); Samsonite Corporation , 10 BNA OSHC 1583, 1587, 1982 CCH
OSHD � 26,054, p. 32,736 (No. 79-5649, 1982) (Secretary's noncompliance with discovery
rules and orders); The Boardman Company, 9 BNA OSHC 1163, 1164, 1981 CCH OSHD �
25,017, p. 30,905 (No. 80-75, 1980) (Secretary's failure to file timely complaint); Browar
Wood Products Co., 7 BNA OSHC 1165, 1166-67, 1979 CCH OSHD � 23,326, pp. 28,214-15
(No. 78-2230, 1979) (employer's noncompliance with technical procedural requirements).

I see no reason to depart from this fundamental policy merely
because the Commission's procedural rules have been changed. There is no indication in the
official record of the rules change that the Commission deliberately intended to shift the
burden of proof from the party seeking dismissal on procedural grounds to the party
seeking to preserve its right to a hearing on the merits. Rules of Procedure, Final
Rule, 51 Fed. Reg. 32,002, 32,009 (Sept. 8, 1986); Rules of procedure, Proposed
Rule , 51 Fed. Reg. 23,184, 23,187 (June 25, 1986). The policy underlying the
majority's opinion in this case is one that will turn the Commission's procedures into an
obstacle course for unwary pro se employers, who may find themselves "stepping on
land mines," that is, unexpectedly losing their right to a hearing on the merits, at
any one of several points along the way. In my opinion, the Commission should give greater
weight to the Congressional objective, in creating the Commission, of providing a forum
for employer challenges to OSHA citations than to the Commission's own objective of
ensuring strict compliance with our own procedural rules.

Applying the Duquesne Light test to this case, the
Commission should deny Choice's motion to set aside the default judgment only if Choice
engaged in contumacious conduct or the Secretary demonstrated that she was prejudiced in
the preparation or presentation of her case. There is no evidence of either factor here.
Choice's failure to file an answer was not due to any contumacious conduct. Rather, it was
the result of its confusion over the Commission's procedural rules, which the Secretary
and the judge could have, but did not, clarify. The Secretary does not even suggest that
she was prejudiced by the lack of an answer. Choice gave her fair notice of its primary
defense to the alleged violations early in the case when it filed its Notice of Contest.
Choice supplemented this in its Brief on Review. Therefore, the default judgment sanction
against Choice should be set aside.

In addition to disagreeing with the majority as to the burden
of proof imposed on Choice, I also take issue with the procedural requirements that the
majority imposes on Choice once the case is remanded to the judge. The majority relies on
language in Wes Jones that provides that the party seeking relief from the sanction
is expected to "make a formal motion supported by sworn affidavits or other evidence
showing good reason for setting aside the dismissal." 13 BNA OSHC at 1279, 1986- 87
CCH OSHD at p. 36,625; see Byco , 13 BNA OSHC at 1269, 1986-87 CCH OSHD at p.
36,597. Especially where it is a pro se employer who is seeking relief under
Rule 41(b), the procedure of obtaining notarized affidavits in support of its motion is
particularly burdensome. See note 2 supra . This was recognized in Browar Wood
Products Co., 7 BNA OSHC at 1167, 1979 CCH OSHD at p. 28,215, where the Commission
admitted into evidence unsworn statements made by the employer because it was a small
business appearing pro se and "may not have been aware of the legal technicalities of
the judicial process and the need to submit affidavits in support of its motion." An
even greater burden for this employer would be imposed if it chooses the option of
participating in a separate hearing solely on the procedural question of "whether any
of its stated reasons for failing to file an answer are 'sufficient' to justify setting
aside the default sanction." The majority's disposition of this case will force
Choice to decide whether to make what I find to be unnecessary expenditures of time and
resources for affidavits or a hearing that does not even address the merits of the case,
or to abandon its challenge to the Secretary's citations.

Even if the burden of proving a sufficient reason were on
Choice, I believe that the explanations that Choice presents in its Petition for
Discretionary Review and Brief on Review, as summarized in the majority opinion, satisfy
that burden. Thus, contrary to the majority, I would find that Choice has provided
adequate factual information from which we could determine that Choice's reasons for
failing to file an answer are "sufficient" to justify setting aside the default
sanctions. As I noted above, the Commission has great flexibility under Commission Rule
41(b) in determining when to set aside a sanction, and it need not be bound by the
strictures of the Federal Rules of Civil Procedure.

Particularly compelling is Choice's explanation that it did not
file an answer because it thought that by completing and returning the "Notice of
Appearance and Designation of Representative" form to the Regional Solicitor's
office, as requested by the Secretary, it had responded to the complaint. I consider this
to be a credible reason given the confusing nature of the form. Although the form is
attached to the back of the complaint for return to the Regional Solicitor's Office, a pro
se employer could reasonably conclude that, by completing and sending back the
form, it was entering an appearance before the Commission under commission Rule
23(a).[[3/]] Choice's president asserts in the Petition for Discretionary Review that he
thought that, by completing and returning the form as directed, "we assumed that OSHA
would realize that we were pleading not guilty." His assumption is understandable.

Having voted to set aside the default judgment and reinstate
Choice's Notice of Contest, I would not require Choice to file a separate new document
called an "Answer." Choice's response to the allegations in the Complaint is
clearly set forth in its Brief on Review, which reiterates and expands upon points made in
its Notice of Contest. Among Choice's defenses on the merits of the case are that it
lacked the requisite knowledge for the violations to be "serious" under section
17(k) of the Act because its office was 240 miles away from the worksite. Choice also
asserts that it had no knowledge of the unguarded open "pits" and open-sided
floors involved in the citations because they were constructed by another contractor on
the multi-employer site. In addition, regarding one of the citation items, Choice argues
that the cited standard requiring protective covers, 29 C.F.R. � 1926.500(b)(5), does not
apply because the cited planter boxes were not "pits." Those and other
statements in its Brief on Review constitute an adequate answer under Commission Rule
34(d), requiring the filing of an answer, as well as Commission Rule 36, prescribing the
content of the answer.[[4/]]

Having concluded that Choice has substantially satisfied the
answer requirements, I would remand this case to the judge for a hearing limited to the
merits of the contested citation items.

Velma Montoya

Commissioner

Dated: November 7, 1990

UNITED STATES OF AMERICA

OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION

SECRETARY OF LABOR,

Complainant,

v.

CHOICE ELECTRIC CORPORATION,

Respondent.

OSHRC DOCKET NO.

88-1393

DECISION AND ORDER

Complainant moves for a default judgment in this proceeding.
Respondent has not filed any response to this motion.

Commission Rule 34 requires that an employer shall file with
the Commission an answer to the complaint within 30 days after service of the complaint.
The complaint was filed on August 19, 1988. No answer to the complaint has been filed by
respondent employer.

Because of respondent's failure to file an answer, respondent
is in default.

Accordingly, it is ORDERED:

1. Citation No.1 and Citation No. 2, issued May 18, 1988, are
   AFFIRMED.

2. The total proposed penalty of $520.00 for Citation No. 1,
   issued May 18, 1988 is ASSESSED.

James A. Cronin, Jr.

Judge, OSHRC

Dated: December 14, 1988

FOOTNOTES:

[[1/]] Commission Rule 34(d)(1), 29 C.F.R. � 2200.34(d)(1),
provides that, with specific exceptions not applicable to this case,

the employer shall file with the Commission an answer
conforming to the requirements of � 2200.36 [rule on content of the answer] within 30
days after service of the complaint.

[[2/]] Rule 41(b) is part of Commission Rule 41, 29 C.F.R. �
2200.41, which provides:

� 2200.41 Failure to obey rules.

(a) Sanctions. when any party has failed to plead or otherwise
proceed as provided by these rules ..., he may be declared to be in default either: (1) On
the initiative of the Commission or Judge, after having been afforded an opportunity to
show cause why he should not be.....; or

(2) On the motion of a party......

(b) Motion to set aside sanctions. For reasons, deemed sufficient by the Commission
or Judge and upon motion expeditiously made, the Commission or Judge may set aside a
sanction imposed under paragraph (a) of this rule......

[[3/]] In response to Choice's request that the Commission
return its penalty payment, we note that civil penalties for OSHA violations are paid to
the Secretary, not the Commission. See Section 17(1) of the Occupational Safety and
Health Act of 1970, 29 U.S.C. � 666(1). Therefore, the Commission can provide no relief
to Choice regarding this request.

[[4/]] Unlike these two decisions that directly address the
circumstances at issue in this case, such pre-Rule 41(b) decisions as Duquesne Light
Company , 8 BNA OSHC 1218, 1980 CCH OSHD � 24,384 (No. 78-5034, 1980), where the
Commission considered whether the judge abused his discretion in sanctioning the Secretary
for failing to file a timely conference report, are inapposite. In that case, there could
be no consideration of the approach set forth in Commission Rule 41(b) because the
Commission had not yet adopted it. Moreover, the Commission noted in that case that,
because it was the Secretary (not the employer) who was being sanctioned, to dismiss the
complaint and vacate the citations would frustrate the remedial purposes of the Act.

[[1/]] The majority relies on provisions in the Federal Rules
of Civil Procedure to interpret Commission Rule 41(b) . However, the Commission adopted
its own rules to free itself of the constraints of the Federal Rules of Civil Procedure,
which would otherwise apply. See Commission Rule 2(b), 29 C.F.R. � 2200.2(b).

[[2/]] I emphasize that this case involves an employer
appearing pro se and that the sanction imposed by the judge was the most extreme sanction
possible, dismissal of the employer's Notice of Contest. This results in affirmance of the
contested citations and assessment of the proposed penalties and also takes away the
employer's opportunity to present its case. In a case where both sides are represented by
counsel or a case involving lesser sanctions, the approach taken by my colleagues,
including imposition of the burden of proof on the party seeking relief from sanctions,
might very well be appropriate. Here, in my opinion, it is not.

[[3/]] Failure of pro se employers to understand the
distinction between OSHA and the Review Commission is a commonplace occurrence in
litigation under the Act. Even the U.S. Courts of Appeals have frequently been confused
about this distinction.

[[4/]] Commission Rule 36 (a), 29 C.F.R. 2200.36(a), provides
that employer "shall specifically admit or deny each allegation or, if the employer
is without knowledge of the facts, the answer shall so state." Commission Rule 36(b)
requires employers to set forth their affirmative defenses in the answer.