# Petition — Blue Diamond Coal Co. v. Boggs > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_0268%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1979 - **Citation:** 444 U.S. 836 ## Text t cae <, f P ' = “Bete baie ] > oo &f E D JUN 1 1979 IN THE \ [_KICHAEL RODAK, JR., CLERK SUPREME COURT OF THE UNITED STATES October Term, ne Q | 4 9 g SAE BLUE DIAMOND COAL COMPANY, - Petitioner, versus JENNIFER BOGGS, CAROL COMBS, GERALDINE COOTS, VERA GALLOWAY, LIBBY GIBBS, MADONNA GRIFFITH, DIANE McKNIGHT, GERALDINE McKNIGHT, PHYLLIS PEAVEY, VICKIE SCOTT, CELINDA SPARKMAN, ETHEL STURGILL, DEBBIE TURNER, REDA TURNER, and CHARLOTTE WIDNER, Admin- istratrices of their Decedents and Individually, Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT BERT T. COMBS CHARLES R. SIMONS ROBERT I. CUSICK, JR. TARRANT, COMBS & BULLITT 2600 Citizens Plaza Louisville, Kentucky 40202 FOSTER D. ARNETT ARNETT, DRAPER & HAGOOD 1212 United American Bank Building Knoxville, Tennessee 37902 L. R. COULLING, JR. HUDGINS, COULLING, BREWSTER & MORHOUS Box 529, 323 Law & Commerce Building Bluefield, West Virginia 24701 rf (List of Attorneys continued on inside cover) WESTERFIELD-BONTE CO., 619 W. KENTUCKY—P.O. BOX 3251, LOUISVILLE, KY. MAXWELL P. BARRET CRAFT, BARRET, HAYNES & WARD Combs Building Hazard, Kentucky 41701 HENRY STRATTON MARRS ALLEN MAY STRATTON, MAY & HAYS P. O. Box 851 Pikeville, Kentucky 41501 Counsel for Petitioner PAGE cn abscnsesavece 2 SOUL Wie sade h eas envevcasoes 2 ee ic. em be aves ave 2- 3 Statutes, Rules and Regulations Involved ........... 3-7 SE eae pass ccc ee eeseesecces 8-16 Reasons for Granting the Writ .................... 16-49 I. In Ignoring Kentucky’s Certification Procedure and Refusing to Certify to the Supreme Court of Kentucky the Controlling Public Policy Is- sues Involved as to the Proper Interpretation of Kentucky’s Workmen’s Compensation Act, the Court of Appeals Adopted an Approach Patently Contrary to the Teachings of This Court ...... 16-35 Il. The Court of Appeals’ Disregard of Kentucky’s Certification Procedure Directly Conflicts With the Established Practice Adopted by Other Cir- euits Under Similar Circumstances ...........35-41 Ill. The Court of Appeals Erroneously Determined an Important Question of State Law Under Ken- tucky’s Workmen’s Compensation Act in Viola- tion of the Duty Imposed Upon It by Erie R. Co. v. Tompkins, 304 U.S. 64 (1938) .......... 41-49 ESS 49 Ne BUDO a ss hvac ewscnsecncactes la-3la Opinion of the United States Court of Appeals.. la-17a Judgment of the United States Court of Appeals. 18a Order of the United States Court of Appeals Denying Petition for Rehearing............ 19a Memorandum Opinion of United States District Court for the Eastern District of Kentucky. .20a—-29a Order of the United States District Court for the Eastern District of Kentucky............... 30a-31a TABLE OF AUTHORITIES Cases: Adams v. Ford Motor Co., 573 F. 2d 1182 (10th Cir. TED kn Sidnia fs tha a wb ae ee seed a se Adamson vy. Okland Construction Co., 508 P. 2d 805 CR EE oe sep Nas OAs Ceara ue be cae Aetna Casualty & Surety Co. vy. Hertz Corp., 573 F. See Oe CU Oy. BOND <6 ke nd 05d Slew snowed vbie's Aldrich v. Aldrich, 375 U. S. 75, 249 (1963), on cer- tification, 163 So. 2d 276 (Fla. 1964), on receipt of answers following certification, 378 U. S. 540 CRD. 205 saa eae dk Ved eeeaIh a ee cas Allen v. Estate of Carman, 446 F. 2d 1276 (5th Cir. 1971), on certification, 281 So. 2d 317 (Fla. 1973), on receipt of answers following certification, 486 Bae Ge Ce GP: DENS ih vc duke ook cease. American Timber and Trading Co. v. First National Bank of Oregon, 511 F. 2d 980 (9th Cir. 1973), cert. dented, 421 U. S. 921 (1975) ............. Arnold v. Shell Oil Co., 419 F. 2d 48 (5th Cir. 1969) Bellotte v. Zayre Corp., 531 F. 2d 1100 (1st Cir. 1976), on certification, 352 A. 2d 723 (N.H. 1976) Bellotti v. Baird, 428 U. S. 182 (1976) ............ Blanchard v. Engine & Gas Compressor Services, Inc., 575 F. 2d 1140 (5th Cir. 1978), certification order, 590 F.. 2d 594 (Sth Cir. 1979) ........... Brennan v. University of Kansas, 451 F. 2d 1287 CPR ee MURS Sik oa.3 saatieW alae shea Ree R cae Bryant v. Old Republic Insurance Co., 431 F. 2d 1385 CO Te nn o's ov aast Caen aS enerere Castlewood International Corp. v. Simon, 564 F. 2d Bi Be St ROG mee ee ry eee Cincinnati Insurance Co. v. City of Talladega, Ala- bama, 529 F. 2d 718 (5th Cir. 1976), on certifica- tion, 342 So. 2d 331 (Ala. 1977), on recetpt of answers following certification, 552 F. 2d 128 SOE SG SUES, oS 5k 5nd eae bls I eean eee PAGE 43 43 37 30 20 ili Cases (Cont'd): Clay v. Sun Insurance Office, 363 U.S. 207 (1960), on certification, 133 So. 2d 735 (Fla. 1961) ..... 29, 30 Coco v. Winston Industries, 330 So. 2d 649 (La. App. 1975), judgment set aside on other grounds, Gn ee, Oh AO UTED on oa bine nek cddee sv 20, 44 Cole v. Chevron Chemical Company—Oronite Divi- sion, 477 F. 2d 3861 (Sth Cir. 1973), cert. denied, PAGE See rts eC UPTE. 6.60 dab oe clas was oases 43 Commissioner v. Estate of Bosch, 387 U. S. 456 SRR ia Okabe s SERRE Eke Cade eeus vob 24 D’ Ambra v. United States, 518 F. 2d 275 (1st Cir. 1975), on certification, 338 A. 2d 524 (R.I. 1975) 39 Dresner v. City of Tallahassee, 375 U.S. 136 (1963), on certification, 164 So. 2d 208 (Fla. 1964) ..... 30 Eagle Star Insurance Co. v. Deal, 474 F. 2d 1216 Cy Ce ON 5 SNK bs eek nee dv enone eine ks 47 Elkhorn-Hazard Coal Land Corp. v. Taylor, 539 8 fy) Be | ea eer eer 21-22, 46 Elkins v. Moreno, 435 U.S. 647 (1978) ............ 32 Erie R. Co. v. Tompkins, 304 U.S. 64 (1938) ....2, 24, 41 Fidelity Union Trust Co. v. Field, 311 U. S. 169 gee RRR ris eo ky Aes Coan rapa Sas ER at a eRe 24 Filley v. Kickoff Publishing Co., 454 F. 2d 1288 (6th CI OE at Ay Rig We earch Nie kch ale vias A OTs S 28 Gabhart v. Gabhart, 545 F. 2d 877 (7th Cir. 1977), on certification, 370 N. BE. 2d 345 (Ind. 1977) ...39, 40 Green v. American Tobacco Co., 304 F. 2d 70 (5th Cir. 1962), on certification, 154 So. 2d 169 (Fla. 1963), on receipt of answers following certifica- tion, 325 F. 2d 673 (Sth Cir. 1963), cert. denied, 377 U. S. 943 (1964), on appeal after retrial, 391 F. 2d 97 (5th Cir. 1968), rev’d on rehearing en banc, 409 F. 2d 1166 (5th Cir. 1969) ........ 36 Helvering v. Stuart, 317 U. S. 154 (1942), as modi- ad, SEF TAs We CEE) csi ec ess 41 Hiram Ricker & Sons v. Students International Meditation Society, 501 F. 2d 550 (1st Cir. 1974), on certification, 342 A. 2d 262 (Me, 1975) ...... 39 iv Cases (Cont'd): ‘ sae Hopkins v. Lockheed Aircraft Corp., 358 F. 2d 347 (5th Cir. 1966), on certification, 201 So. 2d 743 (Fla. 1967), on receipt of answers following certification, 394 F. 2d 656 (Sth Cir. 1968) ..... 37 In Re Glassman, 262 F. 2d 857 (6th Cir. 1958) ..... 28 In Re McClintock, 558 F. 2d 732 (5th Cir. 1977), on certification, 241 S. E. 2d 831 (Ga. 1978), on receipt of answers following certification, 571 FP. 92 S27 (Sth, Cin. SIRO) oo cinccka css sestscks 37 Jackson v. Southern Pacific Co., 285 F. Supp. 388 (D.C. Mey. WGR) ... ici cidcdiaekdeeeiecuee 43 Kaiser Steel Corp. v. W. S. Ranch Co., 391 U. 8. 593 (1968), rev’g, 388 F. 2d 257 (10th Cir. 1967) .... 33 Kaiser Steel Corp. v. W. S. Ranch Co., 467 P. 2d ke 8 ey 33 King v. Shelby Rural Electric Cooperative Corp., 502 S. W. 2d 659 (Ky. 2973), cert. denied, 417 U. @& SOB (09BO) 2c vccivccaceit eae 25, 48-49 Krutsinger v. Mead Foods, Inc., 546 F. 2d 328 (10th Cir. 1976), on certification, 560 P. 2d 195 (Okla. WET) . vw ccsccccseccesndS ele eee 40 Lehman Brothers v. Schein, 416 U. S. 386 (1974), on certification, 313 So. 2d 739 (Fla. 1975), on receipt of answers following certification, 519 F. 9d 453 Clad Ole. BPSD scscnksacivcwiees 31 Liles v. Riblet Products of Louisiana, Inc., 363 F. Supp. 358 (W.D. La. 1973), aff'd, 509 F. 2d 804 (Sth Che. BETG) 0 cncncckns cuncistaus eeeneeaee 44 Louisiana Power & Light Co. v. City of Thibodaua, 960. U. B& SB (CHRD)... co cunceks dawns 32-33 MacGregor v. State Mutual Co., 315 U.S. 280 (1942) 41 Mahan v. Litton, 321 S. W. 2d 248 (Ky. 1959) . .25, 44-45, 46, 49 Martin v. University of Louisville, 541 F. 2d 1171 (Gth Cir. 1996) ....0dcescannseapeseeeeee 28 Martinez v. Rodriquez, 394 F. 2d 156 (5th Cir. 1968), on certification, 215 So. 2d 305 (Fla. 1968), on receipt of answers following certification , 410 FB. 20 729 (Sth Cir, TRGB) oe ccs citicuuaee deen 37 Cases (Cont'd): Matters of Cedars of Lebanon Hospital Corp., Inc., 546 F. 2d 63 (5th Cir. 1977), on ceriification, 355 So. 2d 1202 (Fla. 1978), on receipt of answers following certification, 574 F. 2d 1323 (5th Cir. ea cite tid wei diet ah bh Shak Ripa daw ans Nardone v. Reynolds, 508 F. 2d 660 (5th Cir. 1975), on certification, 333 So. 2d 25 (Fla. 1976), on receipt of answers following certification, 538 Br ee Re ROE Ry BID oo ving tbh ccues vcneu N.L.R.B. v. Gass, 377 F. 2d 438 (1st Cir. 1967) ..... N.L.R.B. v. Patterson Menhaden Corp., 389 F. 2d Pn CR RNG SUE (o dwdaadakkns ta nOadausae ee Poyner v. Lear Stegler, Inc., 542 F. 2d 955 (6th Cir. 1976), cert. denied, 430 U. S. 969 (1977) ....... Reetz v. Bozamch, 397 U.S. 82 (1970) ............ Renfroe v. Higgins Rack Coating € Manufacturing Co., 169 N. W. 2d 326 (Mich. App. 1969) ....... Rudd-Melikian v. Merritt, 282 F. 2d 924 (6th Cir. | BERR eh eee Ha ny Cerne wey a Rutherford v. Modern Transportation Co., 320 A. 2d 522 (N.J. Super. L. Div. 1974) .............. Seltzer v. Isaacson, 371 A. 2d 304 (N.J. Sup. Ct. RR ical ewisnunaes ceanesydlba wees sae ewe Sia Companies of California v. Joint Highway Dis- PGCE, BEL Ws Te. SO LEMO beck sacewnsacvcsane Spector Motor Co. v. McLaughlin, 323 U. S. 101 EE Se ce iN Tee dh waa dees «haben tases Stoner v. New York Life Insurance Co., 311 U. 8. UR ee ON ik ba 2 aa wehiag sake baalD Stubbs v. Green Brothers Gravel Co., 206 So. 2d 323 caer e ad 6 che Nt G46.0s 0 wid ah Texaco, Inc. v. Pruitt, 396 F. 2d 237 (10th Cir. ha GAN eres als Wand whee ced ag tie dint he Thompson v. Consolidated Gas Co., 300 U. S. 55 > 4 DEE SURR ae Pere ver Sener Tee err Trail Builders Supply Co. v. Reagan, 409 F. 2d 1059 (5th Cir. 1969), certification order, 410 F. 2d 763 PAGE 37 28 42 vi Cases (Cont’d): sata (5th Cir. 1969), on certification, 235 So. 2d 482 (Fla. 1970), on receipt of answers following cer- tification, 430 F. 2d 828 (5th Cir. 1970) ........ 38 Tyler v. Insurance Company of North America, Inc., 520 F. 2d 341 (Sth Cir. 1975), on certifica- tion, 331 So. 2d 641 (Ala. 1976), on receipt of answers following certification, 539 F. 2d 1072 Ce Cy SOME Wi cv nied we tects FRRE Ret ae Ce baten 37 Union Light, Heat & Power Co. vy. U. S. District Court, 588 F. 2d 543 (€th Cir. 1978) ........... 28-29 United Engineers and Constructors, Inc. v. Bran- ham, 550 S. W. 2d 540 (Ky. 1977) .......... 25, 46-47 United States v. 16.33 Acres of Land in County of Dade, Florida, 537 F. 2d 182 (5th Cir. 1976), on certification, 342 So. 2d 476 (Fla. 1977), on re- ceipt of answers following certification, 551 F. 2d Ce RR Sees EN 5 5rs s Sees a eek ae bel 37 United States v. Davison Fuel and Dock Co., 371 Bs ee re Cee Ca SED ok ain hb a Vawtc chase aces 48 United States v. Durham Lumber Co., 363 U.S. 522 SEEN a cy Reed ak ok Dua een uAaeee Canad 41 Upper Elkhorn Coal Co. v. Thornberry, 564 S. W. BO Ee AEF, ec NET Ds hoes dhe sas eawseeens 23, 46 Walko Corp. v. Burger Chef Systems, Inc., 554 F. 2d 1165 (D.C. Cir. 1977), on certification, 378 A. 2d 1100 (Md. 1977), on receipt of answers following certification, 568 F. 2d 1389 (D.C. 6 NL. 2 Rete Ae ort pre Geen shar SEGRE ey ts 39 Wansor v. George Hantscho Co. Inc., 570 F. 2d 1202 (5th Cir. 1978), certification order, 580 F. 2d 726 (Sth Cir. 1978), cert. denied, 99 S. Ct. 350 To RE CRM eT RIO Serre hte r CAO a: aetna 36 Ward v. State Farm Mutual Automobile Insurance Co., 539 F. 2d 1044 (5th Cir. 1976) ..........4.. 37 West v. American Telephone and Telegraph Co., 311 1: Be See oc aka oe eee 24 West v. Caterpillar Tractor Co., Inc., 504 F. 2d 967 (5th Cir. 1974), on certification, 336 So. 2d 80 Vii Cases (Cont'd): — (Fla. 1976), on receipt of answers following cer- tification, 547 F. 2d 885 (5th Cir. 1977) ........ 36 Woods v. Cessna Aircraft Co., 553 P. 2d 900 (Kan. ROTO vga ises KReR Reda ea oe ee 43, 44 Wren v. New York Life Insurance Co., 493 F. 2d BOP Cite Cab, TATOD oc dccnc cane wee Oo cencores 28 Constitutional Provisions, Statutes, Rules and Regu- lations: Kentucky Constitution, Sections 109-124 .......... 35 SRA UREN i> iad iedospeeaees ies 4-5, 14, 19-20 KRS 342.610 ........ 5, 14, 15, 20, 21, 23, 25, 26, 46, 47, 48 ee PURO an ba van cas (eames ee bes ceaeewelen 5-6, 49 PR RD Sv o'ia as x sie ba nb Che ee oo eae 6-7, 14, 20 0 UR SERA) .. i ks kemis etic + su Naha Naa es 2 SA UGA AES 35 css Casket eee eeers.. Sues 8 Kentucky Rules of Civil Procedure, Rule 76.37. . .3-4, 16, 26, 35 803 Kentueky Administrative mecnmeE 25 :020, ORI Be occ ich cc ook Oe eae Reo e 7,18 Other Authorities: 101 C.J.S. Workmen’s Compensation § 918 (1958)... 43 2A Larson’s Workmen’s Compensation Law § 72.20 CROTED Siawiks ewles uiics bab tee ee er eane many oh 44 1A Moore’s Federal Practice J 1.807[2] (1978) .... 24 Restatement (Second) Agency § 213 (1958) ....... 48 12 U.L.A., Uniform Certification of Questions of Kenan Sct CURT |. ina ok Sa eee taeees 40 IN THE SUPREME COURT OF THE UMTED STATES October Term, 1978 No. Buivue Diamonp Coat CoMPAaNny - - - Petitioner, Vv. JENNIFER Bocas, Caro Comss, GERALDINE Coors, Vera GaLLoway, Lipsy Gress, Mavonna GrirritH, Diank McKnicut, GeraLpINE McKnieut, Puy.uts Pravey, Vickie Scott, CreLinpa SPARKMAN, Ernuet Sturaiy, Dessre Turner, Repa Turner, and CuHarLotTre WIDNER, Administratrices of their Decedents and Individually - - Bt e Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT Petitioner, Blue Diamond Coal Company, petitions for a writ of certiorari to review the judgment of the United States Court of Appeals for the Sixth Cireuit entered in this case on January 23, 1979, and the order entered by that court on March 9, 1979,.denying the petition for rehearing with suggestion for rehearing en bane. A panel of the court of appeals in a two to one decision reversed the judgment of 2 the United States District Court for the Eastern District of Kentucky which had sustained Petitioner’s motion for sum- mary judgment and dismissed the complaint. OPINIONS BELOW The majority and dissenting opinions of the court of appeals are reported at 590 F. 2d 655 and are contained in the Appendix hereto (App., 1-17a).. The memorandum opinion and the order of the district court are unreported but are contained in the Appendix hereto (App., 20-31a). JURISDICTION The judgment of the court of appeals was entered on January 23, 1979 (App., 18a). A timely petition for re- hearing with suggestion for rehearing en bane was denied on March 9, 1979 (App., 19a), and the mandate issued on March 19, 1979. Tae jurisdiction of this Court is invoked under 28 U.S.C. § 1254(1). QUESTIONS PRESENTED 1. Whether in this diversity case governed by Ken- tucky law the court of appeals erred in failing to certify to the Supreme Court of Kentucky the controlling questions of Kentucky law relating to the correct interpretation of the Kentucky Workmen’s Compensation Act where the resolu- tion of those questions affects vital state interests and re- quires an assessment of relevant state public policies? 2. Whether the court of appeals disregarded the doc- trine of Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), when it held under the undisputed factual situation presented here that as a matter of law Petitioner as the parent cor- 3 poration could be neither a “contractor” nor an “employer” immune from tort liability to the employees of its wholly owned subsidiary corporation under the Kentucky Work- men’s Compensation Act where the sole business of the subsidiary was to perform mining work for Petitioner? STATUTES, RULES AND REGULATIONS INVOLVED 1. Rule 76.37 of the Kentucky Rules of Civil Procedure adopted by the Supreme Court of Kentucky effective Sep- tember 1, 1978, provides in pertinent part: (1) Power to answer The Supreme Court may answer questions of law certified to it by the Supreme Court of the United States, any Court of Appeals of the United States, or the highest appellate court of any other state or the District of Columbia when requested by the certifying court if there are involved in any proceeding before it questions of law of this state which may be determina- tive of the cause tin pending in the certifying court and as to which it appears to the certifying court there is no controlling precedent in the decisions of the Su- preme Court and the Court of Appeals of this state. (2) Method of invoking This Rule may be invoked by an order of any of the courts referred to in paragraph (1) of this Rule upon the court’s own motion or upon the motion of any party to the cause. (3) Contents of certification order A certification order shall set forth (a) The questions of law to be answered; (b) A statement of all facts relevant to the ques- tions certified and showing fully the nature of the controversy in which the questions arose ; 4 (c) The names of each appellant and appellee; and (d) The names and addresses of counsel for each appellant and appellee. (4) Preparation of certification order The certification order shall be prepared by the certifying court, signed by the judge presiding at the hearing, and forwarded to the Supreme Court by the clerk of the certifying court under its official seal. The Supreme Court may require the original or copies of all or such portion of the record before the certifying court as it deems necessary to a determination of the questions certified to it. (5) Costs of certification Fees and costs shall be the same as in civil appeals docketed before the Supreme Court and shall be equally divided between the parties unless otherwise ordered by the certifying court in its order of certification and each party shall pay his share of the $100 filing fee within the 60-day period allowed by paragraph (6) of this Rule for the filing of briefs. (6) Briefs and argument Each of the parties desiring to be heard shall within 60 days after the date of the certifying order file with the clerk of the Supreme Court 10 copies of a printed brief setting forth his arguments. Oral arguments will not be required or permitted unless so ordered by the Supreme Court. (7) Opinion The written opinion of the Supreme Court stating the law governing the questions certified shall be sent by the clerk under the seal of the Supreme Court to the certifying court and to the parties. 7 * * * * * * 2. Kentucky Workmen’s Compensation Act, KRS 342.- 004, provides: This chapter shall be liberally construed on ques- tions of law, as distinguished from evidence, and the 5 rule of law requiring strict construction of statutes in derogation of the common law shall not apply to this chapter. In any proceeding for the enforcer out of a claim for compensation under the law for pneumo- coniosis or silicosis it is presumed, in the absence of substantial evidence to the contrary, that the claim comes within the provisions cf the law. 3. Kentucky Workmen’s Compensation Act, KRS 342.- 610(1) and (2), provide: (1) Every employer subject to this chapter shall be liable for compensation for injury, occupational di- sease, or death without regard to fault as a cause of the injury, occupational disease, or death. (2) A contractor who subcontracts all or any part of a contract and his carrier shall be liable for the payment of compensation to the employes of the sub- contractor unless the subeontractor primarily liable for the payment of such compensation has secured the payment of compensation as provided for in this chapter. Any contractor or his carrier who shall be- come liable for such compensation may recover the amonnt of such compensation paid and necessary ex- penses from the subcontractor primarily liable there- for. A person who contracts with another (a) to have work performed consisting of the removal, excavation or drilling of soil, rock or mineral, or the cutting or removal of timber from land, or (b) to have work per-’ formed of a kind which is a regular or recurrent part of the work of the trade, business, occupation or pro- fession of such person, shall for the purposes of this section be deemed a contractor, and such other person a subcontractor. This subsection shall not apply to the owner or lessee of land principally used for agriculture. 4. Kentucky Workmen’s Compensation Act, KRS 342.- 640, provides in pertinent part: 6 The following shall constitute employes subject to the provisions of this chapter, except as exempted under KRS 342.650: (1) Every person, including a minor, whether law- fully or unlawfully employed, in the service of an em- ployer under any contract of hire or apprenticeship, express or implied, aad all helpers and assistants of employes whether paid by the employer or employee, i‘ employed with the knowledge, actual or constructive, of the employer. (2) Every executive officer of a corporation. * * . * * - > (4) Every person performing service in the course of the trade, business, profession or occupation of an employer at the time of the injury. . 5. Kentucky Workmen’s Compensation Act, KRS 342.- 690(1), provides: (1) If an employer secures payment of compensa- tion as required by this chapter, the liability of such employer under this chapter shall be exclusive and in place of all other liability of such employer to the em- ploye, his legal representative, husband or wife, par- ents, dependents, next of kin, and anyone otherwise entitled to recover damages from such employer at law or in admiralty on account of such injury or death. For purposes of this section, the term “employer” shall include a “contractor” covered by KRS 342.610, whether or not the subcontractor has in fact, secured the payment of compensation. The liability of an em- ployer to another person who may be liable for or who has paid damages on account of injury or death of an employe of such employer arising out of and in the course of employment and caused by a breach of any duty or obligation owed by such employer to such other shall be limited to the amount of compensation and 7 other benefits for which such employer is liable under this chapter on account of such injury or death, unless such other and the employer by written contract have agreed to share liability in a different manner. The exemption from liability given an employer by this section shall also extend to such employer’s carrier and to all employes, officers or directors of such employer or carrier, provided the exemption from liability given an employe, officer or director or an employer or ear- rier shall not apply in any ease where the injury or death is proximately caused by the wilful and unpro- voked physical aggression of such employe, officer or director. 6. 803 Kentucky Administrative Regulations 25 :020, Section 3, provides: Coverage of Subsidiary Corporations. Any cor- poration which can qualify hereunder as an own risk earrier which has wholly owned or controlled subsid- iaries may qualify for itself and such subsidiary or subsidiaries in one joint application to the board, pro- vided the parent corporation has sufficient assets to qualify as an own risk carrier both for itself and its subsidiary or subsidiaries. However, such joint appli- cation shall be accompanied by a certificate of the secretary of both the parent and the subsidiary cor- poration or each of the subsidiary corporations to the effect that such corporations are making such joint application and the joint and several liability of both the parent and the subsidiary or subsidiaries for all of the compensation claims asserted against them have been authorized by due and proper orders and resoln- tions of the respective boards of directors of such parent and each subsidiary company. Such certificates by such seeretaries of the parent and subsidiary cor- porations shall be effective until revoked by such cor- porations and until the board is notified in writing of such revocation. STATEMENT OF THE CASE Alleging diversity of citizenship jurisdiction under 28 US.C. § 13832, Plaintiffs-Respondents on October 21, 1976, instituted this action against Defendant-Petitioner arising out of an explosion which occurred on Mareh 9, 1976, in the Scotia Mine in Letcher County, Kentueky, and which re- sulted in the deaths of Respondents’ husbands. The Scotia Mine is operated by Scotia Coal Company (“Scotia”), Petitioner’s wholly owned subsidiary. Respondents sought to recover, individually and as per- sonal representatives of the decedents’ estates, compensa- tory and punitive damages under Kentucky law for, inter alia, the alleged wrongful deaths of the decedents. The original complaint alleged that Petitioner had “been in the coal-mining business since approximately 1926”; that “for the purpose of carrying on its activities in the production and sale of coal defendant directly and through its subsid- iary, Scotia Coal Company” operated three underground coal mines in Letcher County, Kentucky; and that Peti- tioner failed to cause the removal of unqualified super- visory and safety officers, failed to make necessary ex- penditures for personnel, equipment and training, failed to exercise reasonable care in supervising ventilation and safety, and failed to provide decedents with safe working conditions and a safe workplace. On June 21, 1977, Petitioner moved for summary judg- ment on the ground that it was liable to Respondents for the payment of workmen’s compensation benefits and was, therefore, immune from all other liability under the Ken- tucky Workmen’s Compensation Act, KRS 342.004-.990 (the “Act”). Petitioner contended, in the alternative, that it was either an “employer,” a “contractor,” or a “carrier” 9 under the Act, any one of which would render it liable for the payment of workmen’s compensation benefits and im- mune from all other liability. The following undisputed facts were relied upon by Petitioner in support of its motion for summary judgment : Petitioner was originally organized in 1915 under the laws of Tennessee and was reincorporated under the laws of Delaware in 1922. During the years since its creation, Petitioner has operated well in excess of twenty under- ground coal mines in the states of Virginia, Kentucky and Tennessee. On January 4, 1961, Petitioner formed Scotia as a wholly owned subsidiary for the purpose of developing a large tract of coal reserves in Letcher County, Kentucky. Prior to Scotia’s formation, Petitioner had purchased or leased 12,589 acres of coal land in Letcher County, Ken- tucky, and 2,460 adjacent acres in Virginia and had ex- pended substantial sums in determining the extent of the coal reserves on this property. These coal and mining rights were subsequently leased by Petitioner to Scotia. Petitioner later assigned its rights in the Scotia property to a wholly owned subsidiary corporation, and wholly owned subsidiary corporations presently sublease the coal and mining rights to Scotia., Petitioner, as one of the parties to that lease, guarantees its full performance by Scotia. Subsequent to December 4, 1974, all coal mining opera- tions have been earried on in the name of wholly owned subsidiary corporations of Petitioner with three subsidiary corporations including Scotia being engaged in the business of mining coal. However, the directors and officers of Petitioner hold identical positions with Scotia. The activ- ities and operations of Scotia are managed and directed by 10 these officers and directors who generally also hold the same positions in, and have the same responsibilities to, Petitioner’s other coal mining subsidiaries. Officers are carried on Petitioner’s payroll and are paid only on its check. Their salaries are allocated on the accounting records based upon the relation between the total | onnage produced by all mines and the tonnage produced by each mine. Directors for Petitioner and each wholly owned subsidiary receive a director’s fee only as directors of Blue Diamond Coal Company. Petitioner’s offices located in Knoxville, Tennessee are organized primarily into a general mining operations de- partment, an administrative department, and a sales de- partment. The functions performed by these departments are utilized by the various coal mining operations including Scotia as the needs of the various mines require. Salaries and other expenses incurred in the operation of these de- partments are paid by Petitioner and are allocated on the accounting records based primarily upon the relation be- tween the total tonnage produced by all mines and the tonnage produced by each mine. The Vice President of Operations is the head of the gen- eral mining operations department and is in charge of mining operations. The same individual serves in this capacity for Petitioner and for each of its coal mining sub- sidiaries including Scotia. The General Manager of Mines, who is carried as an employee on Petitioner’s payroll, is directly responsible to the Vice President of Operations for mining operations at all coal mines. Numerous other in- dividuals, such as the Personnel Director, Compensation Adjuster, Purchasing Agent, Chief Engineer, Industrial Engineer, Safety Engineer-All Mines, and members of Peti- tioner’s general mining operations staff and engineering 11 staff, have job responsibilities with respect to all coal min- ing operations. Other functions utilized by all coal mining operations on a centralized basis include a central mainte- nance shop, a central laboratory for analyzing coal, and a central warehouse for the purchase of all supplies and equipment. Petitioner’s accounting department prepares and main- tains accounting records for Petitioner and its subsidiary corporations including Scotia. Consolidated federal income tax returns are filed, and a consolidated balance sheet is prepared. Separate accounting books and ledgers are main- tained for Petitioner and for Scotia although numerous ac- counts which would be necessary for a completely separate bookkeeping system are omitted from the Scotia books. All coal produced by Petitioner’s subsidiary corpora- tions including Scotia is sold by Petitioner in its name, and almost all of the coal sold by Petitioner is produced by its subsidiaries. All coal is shipped as directed by Petitioner, and sales are invoiced to the customer by Petitioner. All receipts are paid to it and are deposited in its bank account and retained by it. Sales of coal are credited on the ac- counting records to the particular subsidiary that produced the coal so that it can be determined whether a particular mine is making or losing money, and, consequently, the Scotia ledgerbooks show income to Scotia from the sale of coal. All salesmen are on Petitioner’s payroll. Petitioner does not identify the coal sold by reference to a subsidiary corporation but by reference to the mine from which it was produced and by trade name. The cash needs of each mine are met by a transfer of funds from Petitioner to a bank account for that mine with an appropriate entry in the inter-company accounts. Money is transferred by Petitioner to a Scotia bank account only 12 to the extent necessary to pay expenses incurred. There is no payment of interest or cash dividends among Petitioner and its wholly owned subsidiaries. Investments are made in Petitioner’s name. Prospective employees submit applications at each mine site on a standard form prepared by Petitioner. The appli- cation of a person approved for hiring by Scotia’s General Mine Superintendent is investigated by the Claims Adjuster for all mines. The application and investigative report are forwarded to Petitioner’s Personnel Director for all mines and to its Administrative Vice President who have author- ity to disapprove hiring any applicant. Petitioner has for many years filed a joint application with its operating subsidiaries to act as a self-insurer for workmen’s compensation liabilities and has been permitted to be a self-insurer by the Kentucky Workmen’s Compensa- tion Board with liability in excess of a specified amount being covered by insurance. The bond in effect at the time of the explosion is executed solely by Petitioner and consti- tutes a direct obligation by it to persons entitled to sums due under the Act. The “Certificate” issued by the Ken- tucky Workmen’s Compensation Board for the relevant period certifies that Petitioner and its named subsidiaries being engaged in the business of mining coal and being sub- ject to the Act have made proof of financial ability to pay compensation directly. Necessary funds to provide for the payment of workmen’s compensation benefits are paid into trust by Petitioner, and a bookkeeping entry is subse- quently made allocating this expense. The facts upon which Respondents primarily relied in opposition to the motion for summary judgment were that Petitioner and Scotia have separate payrolls, paychecks, and bank accounts; that they have separate federal em- 13 ployer identification numbers and file separate payrell tax withholding returns; that the bargaining unit employees at Scotia are covered by a collective bargaining agreement entered into by Scotia and the Scotia Employees Associa- tion, Ine.; and that Petitioner and Scotia have over ‘he years sued and been sued in their respective corporate names and have been identified by their separate corporate names in various legal documents and government filings. The district court, by order of July 26, 1977, passed the motion for summary judgment to the merits. Shortly thereafter, Respondents filed an amended complaint which deleted many of the allegations contained in the original complaint. The amended complaint alleged that Petitioner “provides management, sales, accounting, engineering, in- vestment and other services” to Scotia including services relating to mine safety. It was alleged that Petitioner “had begun to prepare for the resumption of daily mining in the deadend heading of Two Southeast Mains” and had decided to open and operate a new section without proper prepara- tion and planning; that Petitioner “caused, encouraged, per- mitted to continue, and failed to correct” various conditions and practices in the Scotia Mine; and that Petitioner failed to authorize, approve, or permit necessary expenditures for personnel, equipment, and training and failed to exercise reasonable care in supervising ventilation and safety at the Scotia Mine. A trial before a jury commenced on September 6, 1977. At the close of Respondents’ case after three days of testi- mony before the jury, Petitioner moved for a directed ver- dict and also renewed its motion for summary judgment. After hearing arguments, the district court orally sustained Petitioner’s motion for summary judgment. 14 A separate Order and Memorandum Opinion were en- tered on September 21, 1977. The district court stated (App., 27a) : The undisputed course of conduct between Blue Dia- mond and Scotia, considered as contracting parties, is clear. The intent of the parties as to their respective functions in the Oven Fork, Kentucky mining opera- tion and the consideration to be exchanged between them are beyond doubt. I find a contract to exist be- tween the parties from 1962 to date. The district court held that the contract was for Scotia to perform work for Petitioner which involved the removal, excavation or drilling of mineral or which was a part of Petitioner’s regular or recurrent business or occupation (App., 28a). Accordingly, the present common law action was held barred because Petitioner was a “contractor” within the meaning of KRS 842.610 and was exempt from tort liability under KRS 342.690 which provides that the lia- bility of an “employer” under the Act “shall be exclusive and in place of all other liability” and that an “employer” shall “include a ‘contractor’ covered by subsection (2) of KRS 342.610, whether or not the subcontractor has in fact, secured the payment of compensation.” Respondents appealed to the United States Court of Ap- peals for the Sixth Cireuit. On January 23, 1979, that court rendered its opinion, written by Judge Merritt with Judge Cecil concurring and Judge Peck dissenting, reversing Judge Hermansdorfer and holding that Petitioner is neither an “employer” nor a “contractor” within the meaning of the Act. The majority opinion rests essentially upon three premises : (1) The principle requiring workmen’s compensation statutes to be liberally construed (KRS 342.004) does not ee 15 apply if immunity from tort liability is the issue. The ma- jority so held despite the fact that it is well settled that workmen’s compensation statutes are to be liberally con- strued regardless of whether the injured party seeks to in- voke their protection or to deny coverage. (2) Petitioner did not contract with Scotia within the meaning of KRS 342.610 for Scotia to perform work for the parent company thereby making it liable for workmen’s compensation benefits and conversely immune from a tort action. The majority so held notwithstanding the district judge’s finding that a contract did exist between Petitioner and Scotia and the recognition by the court of appeals that Scotia performed mining work for Petitioner. : (3) Petitioner was not. an “employer” under the Act so as to be subject to workmen’s compensation liability and to be immune from tort liability. The majority so held despite its earlier holding that Petitioner and Scotia were not sufli- ciently separate to be regarded as contracting parties within the meaning of KRS 342.610. As noted in Judge Peck’s disseuting opinion, “the ma- jority’s decision means that a parent company cannot be held liable for Workmen’s Compensation benefits owed to the employees of its subsidiary” (App., 17a). Thus, the holding of the majority opinion will obviously lessen the in- centive for the parent to maintain workmen’s compensation coverage and, as a corollary, to be responsible for safety functions in that workmen’s compensation and safety are interrelated, the injury experience having a direct bearing on the cost of workmen’s compensation coverage. Under the majority opinion, the parent can free itself from these workmen’s compensation obligations with impunity and is encouraged to withdraw from involvement with safety func- 16 tions because to do otherwise would subject it to potential but undefined tort liability. Petitioner timely filed a petition for rehearing with a suggestion for rehearing en bane. In that petition the court of appeals was requested to make use of Rule 76.37 of the Kentucky Rules of Civil Procedure which authorizes the Kentucky Supreme Court to answer questions of law certi- fied to it by a United States Court of Appeals. On March 9, 1979, the court of appeals entered its order summarily deny- ing the petition for rehearing and reciting that a majority of the judges had not requested a rehearing en bane (App., 19a). That order did not indicate what, if any, considera- tion had been given to invoking Kentucky’s recently adopted certification procedure and did not state why that procedure was not employed to authoritatively determine the con- trolling issues of Kentucky law. REASONS FOR GRANTING THE WRIT I. In Ignoring Kentucky’s Certification Procedure and Re- fusing to Certify to the Supreme Court of Kentucky the Controlling Public Policy Issues Involved as to the Proper Interpretation of Kentucky’s Workmen’s Com- pensation Act, the Court of Appeals Adopted an Ap- proach Patently Contrary to the Teachings of This Court. A. This Case Presents Substantial Issues of Kentucky Statu- tory Law Involving Important State Public Policy Con- siderations. The availability of the workmen’s compensation defense to bar maintenance of the present action turns upon the in- terpretation of several key sections of Kentucky’s Work- men’s Compensation Act. The proper construction of these sections undeniably is of the utmost importance to adminis- es 17 tration and implementation of Kentucky’s Workmen’s Com- pensation Act. All of the sections of the Act relied upon by Petitioner were added as a part of extensive amendments to the Act in 1972 and were patterned upon model legisla- tion recommended by the Council on State Governments. The construction of these key sections of the Act for the first time with respect to the precise situation presented here should be made by the Supreme Court of Kentucky. Faced with the present decision, a parent corporation such as Petitioner could take one of two courses of action either of which would have a profound impact upon Ken- tucky law. If the parent is not liable for workmen’s com- pensation, its incentive to maintain that coverage is lessened and its concern with safety measures, which have a direct bearing upon the cost of maintaining workmen’s compensa- tion coverage, will be correspondingly reduced. At the same time, a parent is further encouraged to withdraw its involvement (and its purse strings) in order to maintain the established balance between liability without regard to fault for compensation and immunity from tort liability. On the other hand, a parent corporation deciding not to withdraw from such direct operational involvement may deem it necessary to dissolve or alter its existing corporate structure in order to restore that balance. In either event, these potential ramifications of the present decision should be evaluated by the Supreme Court of Kentucky rather than by the court of appeals which, although referring to the absence of Kentucky lay, vefused to use the only certain way to determine state law. The majority opinion refers to certain social policy con- siderations such as the lleged inadequacy of workmen’s compensation benefits and\the needfor occupational safety. To the extent that these considerations are matters for 18 judicial rather than legislative resolution, Kentucky’s public policy is peculiarly suited for consideration by the Ken- tucky Supreme Court and not by the court of appeals. On the other hand, the majority opinion fails to properly assess or consider highly relevant public policies under- lying Kentucky’s workmen’s compensation scheme. For ex- ample, the majority does not consider whether its decision may frustrate the regulatory policy adopted by the Ken. tucky Workmen’s Compensation Board, the state agency charged with administration of the Act, authorizing a par- ent corporation to qualify as a self-insurer for itself and its wholly owned or controlled subsidiaries so that the parent and subsidiary corporations are jointly and severally liable for all compensation claims asserted against them. 803 KAR 25 :020, Section 3. Moreover, as noted in Judge Peck’s dissenting opinion, the effect of the decision is to insulate a parent corporation such as Petitioner from liability for workmen’s compensa- tion benefits to employees of its wholly-owned subsidiary corporation. Where the parent-subsidiary relationship is adopted as a means of carrying on an integrated business operation with the parent actively controlling and directing the operations of the subsidiary in carrying out the busi- ness, the clear effect of the decision is to undermine a funda- mental policy of workmen’s compensation laws. That policy is that those who carry on and benefit from a busi- ness should be directly responsible to the workers to provide without regard to fault guaranteed payments to all injured employees and should not be allowed to avoid that obliga- tion by getting work done through others. The majority acknowledges that there is no question that Scotia performed mining work for Petitioner. Certainly the policy of contractor-under statutes to prevent evasion 19 of workmen’s compensation obligations applies regardless of whether a corporation decides to accomplish its business by interposing an unrelated third party or a wholly owned subsidiary, between itself and the employees who are util- ized in performing that business. Simply stated, this case requires an assessment of important state policies and that assessment should be made by the Supreme Court of Kentucky. B. Certification Was Mandatory Where the Majority Opinion Was Without Basis in Kentucky Law. In an obviously result oriented opinion, the majority either fails to correctly apply or ignores Kentucky law bear- ing directly upon the important issues of Kentucky statu- tory law presented by this case. There exists no con- trolling precedent for the majority’s decision which is so lacking in support in Kentucky law as to render certifica- tion mandatory. First, the majority bases its decision upon the statement that “[cJourts have responded by liberally construing the coverage provisions of workmen’s compensation acts while narrowly construing the immunity provisions” (App., 6a) and that “Kentucky courts have given the ‘liberal’ construc- tion required by the express language of the Act by broadly construing the coverage provisions of the Act and narrowly construing the immunity provisions” (App., 7a). As is more fully discussed in Section III of this Petition, the uni- versally accepted rule is that workmen’s compensation stat- _ utes are to be liberally construed regardless of whether the injured party seeks the protection of those statutes or to deny coverage and that one who can be held liable for work- men’s compensation is not liable in tort. The Act specifi- eally states that it “shall be liberally construed” (KRS 20 342.004), and the exclusive remedy provision (KRS 342.690) is a part of the Act. To apply a double standard and con- strue the Act liberally or narrowly depending upon the remedy sought by the injured worker would plainly violate the Act. The majority opinion cites its earlier decision in Bryant v. Old Republic Insurance Co., 481 F. 2d 1885 (6th Cir. 1970), for the proposition that the Kentucky court “seems to be narrowing the concept of employer’s immunity” under the Act. (Emphasis added.) Bryant was itself a two to one decision where the Sixth Cireuit rejected the view of an experienced Kentucky federal district court judge and held an insurance company subject to a tort suit under Kentucky law for negligently inspecting, or failing to inspect, a coal mine on which it was the workmen’s compensation carrier. At the next regular session of the Kentucky legislature in 1972, the Kentucky General Assembly extensively amended the Act to broaden its coverage and, as a part of those amendments, specifically overruled the result in Bryant. Yet, the majority opinion continues to rely on Bryant and refuses to certify the question to the only court which would not need to guess what “seems” to be the Kentucky law but which could conclusively adjudicate the issue. Secondly, the majority’s construction of Kentucky’s con- tractor-under statute (IKRS 342.610) is of such questionable validity as to require certification of this important state public policy question. The majority opinion concludes 1In this regard it is noteworthy that the court of appeals neg- lected to refer to the only decision cited to it specifically consider- ing the applicability of a ‘‘contractor under’” statute similar to KRS 342.610 in the parent-subsidiary context. Coco v. Winston Industries, 330 So. 24 649 (La. App. 1975), judgment set aside on other grounds, 341 So. 2d 332 (La. 1976), directly holds that, as applied to the parent corporation, a parent-subsidiary relationship under facts similar to those existing here is covered by a statute like KRS 342.610. 21 that there is no question that Scotia performed mining work for Petitioner and that the only question was whether the work was performed pursuant te a “contract.” The ma- jority cites Elkhorn-Hazard Coal Land Corp. v. Taylor, 539 S. W. 2d 101 (Ky. 1976), as authority that the phrase “one who contracts” contained in KRS 342.610 should be read narrowly in that it “appears to contemplate a regular, en- forceable contract between independent parties dealing with each other at arm’s length.” (Emphasis added.) Here again, the court speculates as to what “appears” to be the Kentucky law rather than allowing the Kentucky court to reliably adjudicate that issue. The court’s con- struction is an unmistakable example of judicial legislation and underetts the whole philosophy underlying workmen’s compensation laws. To reach a result which would allow an injured worker’s compensation claim to be defeated by the parent corporation because of some defect in a contract between it and its subsidiary would be a definite step back- ward in an area where workmen’s compensation ‘aws have been substantially improved for workers in recent years. Elkhorn-Hazard simply held that a lessor of coal land like any other lessor is not liable to the lessee’s employees for workmen’s compensation benefits. There was no issue in that case as to the existence of a contract because there was a formal written lease. It would be an unprecedented departure from existing law if any court should hold that an ordinary lessor is merely by reason of the lease liable for workmen’s compensation benefits to the lessee’s em- ployees. The Kentucky court succinctly stated the reasons why the “contractor under” statute did not apply in that ease: In this case however there is no lease of premises to be used as a marketing outlet and aside from a pro- 22 vision in its articles of incorporation listing mining as one of its many business purposes there is no evidence in the record upon which it could be concluded reason- ably that Elkhorn-Hazard has actually engaged in the business of mining. There is no basis in the record for a conclusion that Elkhorn-Hazard was conducting a mining business through the use of a lease or that it was conducting any work through the use of a lease which was a regular part of its business operations and which normally would have been accomplished through the use of its own employees. It does not appear to us that the lease can be con- strued as a contract to have work done for Elkhorn- Hazard. The work performed by M & A Coal Company was done for itself in a proprietary capacity. M& A Coal Company was mining the coal for its own use and not for Elkhorn-Hazard. Under the lease in question M & A Coal Company alone benefited from increases in the market price of coal or from efficiencies in opera- tion. Likewise M & A alone bore the loss of decreased prices or inefficient operation. oad * * There is no showing in the record that the lease ar- rangement resulted in a payment to M & A Coal Com- pany of a price less than the true market value or price of the coal. Consequently we do not regard it as a matter of controlling importance that the lease required the coal to be weighed at the tipple of corporations con- trolled by the president of Elkhorn-Hazard. 539 S. W. 2d at 104-05. As noted in the opinion of the dis- trict court, “fe]ach of the factors identified by the Elkhorn- Hazard court as being factually material to application of the Act is satisfied by undisputed facts in the instant case” (App., 28a). 23 The majority’s narrow construction of KRS 342.610 di- rectly conflicts with the decision of the Kentucky Court of Appeals in Upper Elkhorn Coal Co. v. Thornberry, 564 S. W. 2d 842 (Ky. App. 1977) (discretionary review denied by Kentucky Supreme Court on May 16,1978). The court there held, in a closely analogous situation, that KRS 342.610 was applicable and that the company was liable for workmen’s compensation benefits to the dependents of a deceased miner because the company received the benefit of the coal production. The decisive effect of this decision is vividly demonstrated in Judge Peck’s dissenting opinion (App., 16-17a) : For example, in Upper Elkhorn Coal Co. v. Thorn- berry, Ky. App., 564 S. W. 2d 843 (1977), the Coal Company was being sued for Workmen’s Compensa- tion benefits. The Company argued that it was not a contractor under the Act, and thus not liable for bene- fits. A partnership owned the lease for the coal fields, and had contracted with the decedent’s employer to produce coal and deliver it to Upper Elkhorn. Despite the fact that there was no contract at all with Upper Elkhorn, much less a “formal” one, the court held that the company was liable for benefits under the Act as a “contractor” because the two partners were acting for the benefit of Upper Elkhorn. It noted that the pur- pose of the arrangement was to secure production for Elkhorn, and that the benefit of all coal production fell to Upper Elkhorn. Similarly, in this case, there may not be a formal contract, but there is certainly an “ar- rangement,” through which Blue Diamond obtains the benefit of the production of coal. Astonishingly, the majority opinion makes no effort to consider the effect of Upper Elkhorn upon the proper in- terpretation of KRS 342.610 and does not even cite that de- 24 cision. There can be no doubt, however, that the court of appeals was required to give effect to that decision under the Erie doctrine. The rule is summarized as follows in 1A Moore’s Federal Practice § 1.307[2] (1978): [Where the state law supplies the rule of decision, it is the duty of federal courts to ascertain and apply that law even though it has not been expounded by the high- est state court, and * * * since a lower state court is an organ of the state, its determination, in the ab- sence of more convincing evidence of.what the state law is, must be followed by a federal court i in deciding a question governed by state law. * * * Where the federal court, however, cannot, on the available materials, make a confident guess how the state’s highest court would rule on a particular point, certification to the state’s highest court, if available, should be utilized. As was stated in West v. American Telephone and Tele- graph Co., 311 U.S. 223 (1940): Where an intermediate appellate state court rests its considered judgment upon the rule of law which it announces, that is a datum for ascertaining state law which is not to be disregarded by a federal court unless it is convinced by other persuasive data that the high- est court of the state would decide otherwise. 311 U.S. at 237. See also Fidelity Union Trust Co. v. Field, 311 U. S. 169 (1940) ; Six Companies of California v. Joint Highway District, 311 U. S. 180 (1940) ; Stoner v. New York Life Insurance Co., 311 U.S. 464 (1940) ; Cf. Commissioner v. Estate of Bosch, 387 U. S. 456 (1967). — Nor does the majority opinion refer to several other Kentucky cases which are clearly not consistent with its 25 narrow construction of KRS 342.610. For example, United Engineers and Constructors, Inc. vy. Branham, 550 8S. W. 2d 540 (Ky. 1977), indicates how the Kentucky court would rule on this issue. In that common law action for damages where the Kentucky court held that substance must prevail over form in considering the existence of an employment relationship, one question related to the existence of a sub- contract. The court said: Whether that arrangement justifies the inflexible label of “subcontract” as it might be considered apart from the compensation statutes we need not decide. Under those statutes, however, we think that it does. . . . In the “up-the-ladder” context we construe the relation- ship between United and Lowman to have been that of contractor and subcontractor. United therefore was not “some other person than the employer.” 550 S. W. 2d at 547. That the Kentucky court will not adopt a narrow statu- tory construction which would allow avoidance of work- men’s compensation liability is further indicated by the result reached when one subject to an employer’s control hires others to assist him in the performance of the busi- ness. Those so hired will be deemed employees, and the employer wili net be liable in tort but will be prevented from avoiding liability for workmen’s compensation bene- fits in this fashion. Mahan v. Litton, 3218. W. 2d 243 (Ky. 1959). See King v. Shelby Rural Electric Cooperative Corp., 502 S. W. 2d 659 (Ky. 1973), cert. denied, 417 U.S. 932 (1974). Thirdly, the majority’s reasoning in holding that Peti- tioner is not an “employer” represents but further evidence, as is more fully discussed in Section III of this Petition, that certification was essential. In discussing the ”con- 26 tractor-under” issue, the majority for all practical purposes holds the finding of the district court that a contract existed to be clearly erroneous; it refuses to accept the proposition that a parent and subsidiary corporation can enter into a contract implied in fact although it is beyond question that contracts implied in fact are recognized under Kentucky law. The majority even implies that a parent and sub- sidiary cannot enter into a contractual relationship. The majority thus effectively disregards the separateness of the corporations when considering the issues raised under KRS 342.610. However, in concluding that Petitioner and its wholly owned subsidiary cannot be considered a single, in- tegrated enterprise for purposes of the Act, the majority again adopts a double standard and blatantly ignores the reasoning employed in deciding that Petitioner and Scotia are too close to contract for purposes of the issues raised under KRS 342.610. We submit that the Supreme Court of Kentucky, if given the chance, would not adopt such a tortured, illogical, and contradictory line of reasoning. C. Certification Was The Only Sensible Alternative Once It Became Apparent the Federal Judges Who Considered the Case Were in Disagreement as to the Correct Interpretation of Kentucky Law. This case was argued and submitted for decision prior to adoption by the Kentucky Supreme Court of Rule 76.37. However, Rule 76.37 became effective on September 1, 1978, several months prior to rendition of the decision on Jan- uary 23, 1979. It is our contention that the need for cer- tification became acutely apparent during the course of deliberation by the court of appeals and that that court should have invoked Rule 76.37 sua sponte and, in any event, should have made use of the certification procedure 27 when requested to do so by Petitioner on petition for rehearing. The majority opinion states that this case raises “serious questions of first impression under Kentucky’s Workmen’s Compensation Act” (App., 2a); that the Act does not “ad- dress the question of a parent corporation’s immunity from common law tort liability for injuries to its subsidiary’s em- ployers, [sic] nor does the Kentucky case law interpreting the Act”; and that “[f]ew cases from other jurisdictions touch upon the question, and the general legal literature in the field does not deal with it” (App., 5a). As previously indicated, Kentucky law is not nearly so devoid of guidance as the majority would have one believe. The majority opinion in fact ignores or misapplies relevant Kentucky law and is so lacking in controlling Kentucky precedent as to have required certification. However, under the majority’s own characterization, the need for certification is clear. Instead, the court of appeals chose to rely upon abstract law review articles and theories of jurisprudence espoused by the legal commentators rather than upon the judicial pro- nouncement of the only court which could authoritatively answer the important issues raised by this case. The case for certification became even more compelling once it became apparent that the federal judges who con- sidered the case could not agree as to the applicable Ken- tucky law. At the time the case was submitted to the court of appeals, a respected federal district court judge experi- enced in Kentucky law had rendered an opinion analyzing applicable Kentucky law and applying it to the factual situation. In view of the nature of the questions involved, established practice dictated that great weight be accorded cudge Hermansdorfer’s view as to Kentucky law. The rule is well settled in the Sixth Circuit that, when state courts have not adjudicated a doubtful question of 28 statutory construction, considerable weight must be given to the view of the district judge as to the law of the state in which he sits. Martin v. University of Louisville, 541 F. 9d 1171 (6th Cir. 1976); Filley v. Kickoff Publishing Co., 454 F. 2d 1288 (6th Cir. 1972); Rudd-Melikian v. Merritt, 282 F, 2d 924 (6th Cir. 1960) ; Jn Re Glassman, 262 F. 2d 857 (6th Cir. 1958). That rule is established in other cireuits as well. See, e.g., American Timber and Trading Co, v. First National Bank of Oregon, 511 F. 2d 980 (9th Cir. 1973), cert. denied, 421 U. 8S. 921 (1975) (clearly wrong) ; Wren v. New York Life Insurance Co., 493 F. 2d 8389 (5th Cir. 1974) (great weight); Brennan v. University of Kan- sas, 451 F. 2d 1287 (10th Cir. 1971) (clearly erroneous) ; Texaco, Inc. v. Pruitt, 396 F. 2d 237 (10th Cir. 1968) (court of appeals would accept federal trial judge’s interpretation of Utah Workmen’s Compensation Act unless convinced that he was clearly wrong). Thus, once the court of appeals recognized that it might not follow the view of a Kentucky district judge as to an important issue of unsettled statutory law, the need for certification should have been apparent, and the available certification procedure should have been used. With all due deference, neither of the two judges who formed the major- ity can be regarded as having any expertise in Kentucky law. The majority certainly cannot claim to be as con- versant with Kentucky law as the district judge who sits in Kentucky and obviously was not as well qualified to deter- mine Kentucky law as the Kentucky Supreme Court would have been. There can be no doubt the court was aware of the certi- fication procedure prior to rendering its decision. The author of the majority opinion in fact referred to Ken- tucky’s certification procedure with approval in Union 29 Light, Heat and Power Co. v. U. S. District Court, 588 PF. 2d 543 (6th Cir. 1978) (argued October 31, 1978), a case similar to this in that both involve highly publicized and tragic incidents in recent Kentucky history, i.e., the Beverly Hills Supper Club fire in Northern Kentucky and the Scotia Mine explosions in Eastern Kentucky. Moreover, if there was ever any doubt about the need for certification that doubt disappeared when it developed that the appeals court would not only reject the view of an experienced Kentucky federal district judge but could not itself agree as to the proper interpretation of the Act. See Spector Motor Co. v. McLaughlin, 323 U.S. 101, 104 (1944), where, in ordering abstention, this Court stated: “That the answers are not obvious is evidenced by the different con- clusions as to the scope of the statute reached by the two lower courts.” The net effect is that the federal judges who heard this case are evenly divided as to whether the present common law action is barred under Kentucky law. Nevertheless, the court of appeals refused to allow the only court which could authoritatively resolve this deadlock to do so. D. Under the Circumstances Presented by This Case Certifica- tion was Required by the Decisions of this Court. In light of the foregoing circumstances, certification of the important issues of Kentucky law raised by this case affecting the state’s public policy in administering its work- men’s compensation law was mandatory and the failure to certify those issues was a clear abuse of discretion. Specific attention was first directed to the use of a state certification procedure in Clay v. Sun Insurance Office, 363 U. S. 207 (1960), on certification, 183 So. 2d 735 (Fla. 1961), a di- versity action seeking recovery on an insurance policy. The 30 district court had awarded judgment to petitioner based upon a Florida statute, but the court of appeals reversed on the ground the Florida statute could not be applied, con- sistent with due process, to a policy made in [linois. Noting that the court of appeals had indicated it could not make a confident guess how the Florida Supreme Court would construe the statute, this Court in reversing stated that the Florida legislature with rare foresight, has dealt with the problem of authoritatively determining unresolved state law in- volved in federal litigation by a statute which permits a federal court to certify such a doubtful question of state law to the Supreme Court of Florida for its de- cision. * * * Even without such a facilitating stat- ute we have frequently deemed it appropriate, where a federal constitutional question might be mooted thereby, to seeure an authoritative state court’s de- termination of an unresolved question of its loeal law. 363 U.S. at 212. Shortly thereafter, this Court itself invoked Florida’s certification procedure in Aldrich v. Aldrich, 375 U.S. 75, 949 (1963), to obtain an authoritative answer to questions of Florida law. The advisability of certification quickly became apparent when, after receiving the answers of the Florida Supreme Court (163 So. 2d 276 (Fla. 1964)), this Court summarily reversed noting that it had become “plain that the judgment of the Supreme Court of Appeals of West Virginia, based as it was on a misapprehension re- garding the law of a sister state, cannot stand.” Aldrich v. Aldrich, 378 U. S. 540, 548 (1964). See also Dresner v. Cily of Tallahassee, 375 U. S. 136 (1963), on certification, 164 So. 2d 208 (Fla. 1964), where this Court also invoked Florida’s certification procedure. ae 31 The wisdom of certification was again demonstrated in Lehman Brothers v. Schein, 416 U.S. 386 (1974), where the point had been first presented to the court of appeals on petition for rehearing. In reversing and remanding for consideration of the propriety of invoking certification, the Court stated the following guidelines : We do not suggest that where there is doubt as to local law and where the certification procedure is available, resort to it is obligatory. It does, of course, in the long run save time, energy, and resources and helps build a cooperative judicial federalism. Its use in a given case rests in the sound discretion of the federal court. Here resort to it would seem particularly appro- priate in view of the novelty of the question and the great unsettlement of Florida law, Florida being a distant State. 416 U.S. at 390-91. The Supreme Court of Florida subse- quently rejected the majority opinion originally rendered by the Second Circuit and approved the dissenting opinion of Judge Kaufman. On certification, 313 So. 2d 739 (Fla. 1975), on receipt of answers following certification, 519 F. 2d 453 (2nd Cir. 1975). This Court again spoke with approval of certification in Bellotti v. Baird, 428 U. S. 132 (1976), an abstention case where a three-judge district court had enjoined operation of a Massachusetts statute governing the type of consent re- quired before an abortion could be performed on an un- married woman under eighteen. In holding abstention ap- propriate and remanding for certification of relevant issues of state law, the Court noted that it often had remarked that the equitable practice of abstention is limited by considera- tions of delay and expense but that the availability of an adequate certification procedure does in the long run save time, energy and resources and helps build a cooperative oo 32 judicial federalism. The Court observed that in abstention eases the availability of certification greatly simplifies the analysis, At issue in Elkins v. Moreno, 435 U.S. 647 (1978), was whether non-immigrant alien residents of Maryland had been wrongly denied “in-state” status for tuition purposes under federal law. This Court concluded that whether “G-4" aliens had capacity to aequire Maryland domicile turned in part upon Maryland common law and sua sponte certified that issue to the Court of Appeals of Maryland. The Court observed that, in a federal system, it is desirable that questions of law which, like domicile, are both intensely local and immensely important to a wide spectrum of state government activities be decided in the first instance by state courts. This may not always be possible nor is it always required, but where as here there is an efficient method for obtaining a ruling from the highest court of a state we do not hesitate to avail ourselves of it. 435 U.S. at 662 n. 16. Decisions of this Court directing abstention under cir- cumstances similar to those existing here clearly support the conclusion that the court of appeals should have used the far less drastic and more desirable certification pro- cedure. For example, in Louisiana Power & Light Co. v. City of Thibodaux, 360 U. S. 25 (1959), the city had filed a petition for expropriation in state court for the taking of land and the action was removed to federal court. In up- holding the action of the district court which on its own motion stayed proceedings and directed the parties to secure a declaratory judgment in state court, this Court noted that a statute seemed to grant the power exercised by the city but stated; 33 But that statute has never been interpreted, in respect to a situation like that before the judge, by the Louisi- ana courts and it would not be the first time that the authoritative tribunal has found in a statute less than meets the outsider’s eye. Informed local courts may find meaning not discernible to the outsider. The con- sequence of allowing this to come to pass would be that this case would be the only case in which the Louisiana statute is construed as we would construe it, whereas the rights of all other litigants would be thereafter governed by a decision of the Supreme Court of Louisiana quite different from ours. 360 U.S. at 30. In Kaiser Steel Corp. v. W.S. Ranch Co., 391 U.S. 598 (1968), at issue was whether a trespass was permitted by state law in order to use water rights. In a per curiam opinion, this Court reversed holding that the court of ap- peals erred in denying a motion to stay until the state law issues could be settled in a declaratory judgment suit then pending in state court.2. The state law issues were deemed of “vital concern” to the state and the issue to be “a truly +] novel one.” Sound judicial administration required “that the parties in this ease be given the benefit of the same rule of law which will apply to all other businesses and land owners concerned with the use of this vital state resource.” 391 U. S. at 594. Following this Court’s decision, the Supreme Court of Nevada determined that a private cor- poration did have the right to condemn under state law for the purpose of securing water and expressly rejected the holding of the Tenth Cireuit. Kaiser Steel Corp. v. W. S. Ranch Co., 467 P. 2d 986 (N. M. 1970). See also Reetz v. Bozanich, 397 U.S. 82 (1970), where this Court held that a 2The motion to abstain apparently was made on petition for rehearing. See W. S. Ranch Co, v. Kaiser Steel Corp., 388 F. 2d 257 (10th Cir. 1967). 34 stay should have been granted so that the first judicial application of Alaska constitutional provisions pertaining to a natural resource the management of which was a matter of great state concern would be by an Alaska court. The scope and proper application of Kentuecky’s Work- men’s Compensation Act is unquestionably of grave concern to Kentucky. The present case requires an assessment of relevant state public policies in the context of the present factual sitnation, and, as noted in the majority opinion, the multi-unit enterprise is now the norm in the American economy. The statutes construed by the courts below have been considered by the Supreme Court of Kentucky on only one other oceasion and have never been interpreted by Kentucky’s highest court with respect to the precise situa- tion presented here. In view of the importance of the issues presented and the fact that the federal judges considering the case were divided as to the proper resolution of these difficult state law issues, the failure to certify the issues to the Supreme Court of Kentucky was an abuse of discretion and in conflict with principles established by the foregoing decisions of this Court. With certification, the decision of the court of appeals need not rest upon a speculative forecast but could be based upon an authoritative determination. With certification, uniformity of state law could be assured, and the parties would have the benefit of the same rule which would be applied in a state court. Future litigants would know whether claims such as those asserted here are maintainable under Kentucky law, and a possible conflict with later state court decisions would be avoided. With certification, determination of an important ques- tion of statutory law involving a significant policy choice for the state would be made by the court which should make 35 that determination. By enacting the certification pro- cedure, it must be assumed that the Kentucky Supreme Court indicated its desire to decide such important ques- tions of Kentucky law. With certification, the disadvantages associated with ab- stention would be largely avoided. For example, under Rule 76.37 of the Kentucky Rules of Civil Procedure, each party may within 60 days after the date of the certifying order file a brief setting forth his position. Oral argument will not be permitted unless specifically ordered by the Su- preme Court of Kentucky. Thus, the added expense is not that of a separate lawsuit but only of additional briefing. The delay is not that of instituting a separate lawsuit and proceeding through state trial and appellate courts but only the sixty day period plus the time required to obtain the answers to the certified questions from the Kentucky Su- preme Court. In this respect, it is significant that Ken- tucky has recently adopted a new judicial article, Kentucky Constitution, Sections 109-24, creating an intermediate appellate court in Kentucky. In view of Kentucky’s recent reform of its judicial system, the workload of the Supreme Court of Kentucky has been substantially reduced, and certification to that court of the questions raised by this case would not result in any undue delay. II. The Court of Appeals’ Disregard of Kentucky’s Cer- tification Procedure Directly Conflicts With the Estab- lished Practice Adopted by Other Circuits Under Simi- lar Circumstances. Under the established practice in other circuits, Ken- tucky’s certification procedure would have been utilized before deciding this case of “first impression under Ken- tucky’s Workmen’s Compensation Act.” However, the court 36 of appeals apparently did not even consider certification. The opinion makes no reference to it and the order denying the petition for rehearing does not refer to it or indicate why certification was not used as requested on petition for rehearing. The leading exponent of certification has been the Fifth Cireuit. One of the early cases in which it invoked Florida’s certification procedure was Green v. American Tobacco Co., 304 F. 2d.70 (5th Cir. 1962). In that case, a petition for rehearing was granted to the extent necessary to permit certification because of the importance of the question and because one judge had dissented on the original hearing of the case. The Florida Supreme Court later came to a different conclusion on the issue certified (154 So. 2d 169 (Fla. 1963)), and the Fifth Cireuit observed that it had been saved “from committing a serious error as to the law of Florida which might have resulted in a grave miscar- riage of justice.” Green v. American Tobacco Co., 325 F. 2d 673, 674 (Sth Cir. 1963), cert. denied, 377 U.S. 948 (1964), on appeal after retrial, 391 F. 2d 97 (5th Cir. 1968), rev'd on rehearing en bane, 409 F. 2d 1166 (Sth Cir. 1969). The certification procedure has since been utilized by the Fifth Cireuit on a wide range of issues including the fol- lowing: application of the doctrine of strict liability in tort’; tolling of statute of limitations'; proper interpreta- 8Wansor v. George Hantscho Co., Inc., 570 F. 2d 1202 (5th Cir. 1978), certification order, 580 F. 2d 726 (5th Cir, 1978), cert. denied, 99 S. Ct. 350 (1978) (Georgia law); West v. Caterpillar Tractor Co., Inc., 504 F. 2d 967 (5th Cir, 1974), on certification, 336 So. 2d 80 (Fla. 1976), on receipt of answers following certifi- cation, 547 F. 2d 885 (Sth Cir. 1977) (Florida law). 4Nardone v. Reynolds, 508 F. 2d 660 (5th Cir. 1975), on cer- tification, 333 So. 2d 25 (Fla. 1976), on receipt of answers following certification, 588 F. 2d 1131 (Sth Cir. 1976) (Florida law). 37 tion of insurance policies®; effect under state law of com- mercial and real estate transactions®; legality of prices charged by wholesaler under state’s regulatory scheme for alcoholic beverages’; exemption from state ad valorem taxation*; recovery for mental anguish, humiliation, and embarrassment based upon breach of insurance contract? ; validity and enforceability of surety bonds'’; mother’s con- tributory negligence as barring father’s right to sue for his child’s wrongful death"; and application by Florida court of an Illinois monetary limitation on damages recoverable for wrongful death of a Florida citizen in Illinois.'2 The Fifth Cireuit has frequently used certification to resolve questions relating to the proper interpretation of *Aetna Casualty & Surety Co. v. Hertz Corp., 573 F. 2d 306 (5th Cir. 1978) (Louisiana law) ; Tyler v. Insurance Company of North America, Inc., 520 F. 2d 341 (5th Cir. 1975), on certifica- tion, 331 So. 2d 641 (Ala. 1976), on receipt of answers following certification, 539 F. 2d 1072 (5th Cir. 1976) (Alabama law). ®In Re McClintock, 558 F. 2d 732 (5th Cir. 1977), on certifica- tion, 241 S. E. 2d 831 (Ga. 1978), on receipt of answers following certification, 571 F. 2d 317 (5th Cir. 1978) (Georgia law) ; United States v. 16.33 Acres of Land in County of Dade, Florida, 537 F. 2d 182 (5th Cir. 1976), on certification, 342 So. 2d 476 (Fla. 1977), on receipt of answers following certification, 551 F. 2d 678 (5th Cir. -1977) (Florida law). TCastlewood International Corp. v. Simon, 564 F. 2d 695 (5th Cir. 1977) (Florida law). 8Matters of Cedars of Lebanon Hospital Corp., Inc., 546 F. 2d 63 (5th Cir. 1977), on certification, 355 So. 2d 1202 (Fla. 1978), on receipt of answers following certification, 574 F. 2d 1323 (5th Cir. 1978) (Florida law). *Ward v. State Farm Mutual Automobile Insurance Co., 539 F. 2d 1044 (5th Cir. 1976) (Louisiana law). 10Cincinnati Insurance Co. v. City of Talladega, Alabama, 529 F. 2d 718 (5th Cir. 1976), on certification, 342 So. 2d 331 (Ala. 1977), on receipt of answers following certification, 552 F. 2d 128 (5th Cir. 1977) (Alabama law). 11Martinez v. Rodriquez, 394 F. 2d 156 (Sth Cir. 1968), on cer- tification, 215 So. 2d 305 (Fla. 1968), on receipt of answers follow- ing certification, 410 F. 2d 729 (5th Cir. 1969) (Florida law). 12Hopkins v. Lockheed Aircraft Corp., 358 F. 2d 347 (5th Cir. 1966), on certification, 201 So. 2d 743 (Fla. 1967), on receipt of answers following certification, 394 F. 2d 656 (5th Cir. 1968) (Florida law). 38 workmen’s compensation statutes. For example, in Blan- chard v. Engine & Gas Compressor Services, Inc., 575 F. 2d 1140 (5th Cir. 1978), certification order, 590 F. 2d 594 (5th Cir. 1979), the Fifth Cireuit, referring to the certification procedure as an important device of federalism, has re- quested the Louisiana Supreme Court to determine the meaning of a statutory employee under Louisiana’s work- men’s compensation statute. At issue in Allen v. Estate of Carman, 446 F. 2d 1276 (5th Cir. 1971), on certification, 281 So, 2d 317 (Fla. 1973), on receipt of answers following certification, 486 F. 2d 490 (5th Cir. 1973), was whether the defendant employer could invoke the exclusive remedy provision of Florida’s work- men’s compensation statute to bar maintenance of the common law action. In certifying that issue the court stated that it deferred to the state court because “assess- ments of legislative policies underlying the statute are in- volved here, and because such matters are peculiarly within the competence of State courts * * *” 446 F. 2d at 1277. In Trail Builders Supply Co. v. Reagan, 409 F. 2d 1059 (5th Cir. 1969), certification order, 410 F. 2d 763 (Sth Cir. 1969), on certification, 235 So. 2d 482 (Fla. 1970), on receipt of answers following certification, 430 F, 2d 828 (5th Cir. 1970), the question was whether an employer may be liable for indemnity to a third party who has been sued by the injured employee where the negligence of the employer who has paid workmen’s compensation is alleged to be primary. That question was certified to the Florida Su- preme Court because there were “no guidelines under existing Florida jurisprudence to assist us in making a determination, and since our interpretation of the exclusive remedy provision of the Florida Workmen’s Compensation Act would have a significant state-wide impact.” 409 IF. 2d at 1061. ere 39 In addition to the Fifth Cireuit, other cireuit courts of appeals have utilized available state certification proce- dures. For example, Walko Corp. v. Burger Chef Sys- tems, Inc., 554 F. 2d 1165 (D.C. Cir. 1977), on certifica- tion, 378 A. 2d 1100 (Md. 1977), on receipt of answers fol- lowing certification, 568 F. 2d 1389 (D.C. Cir. 1977), certi- fied to the Court of Appeals of Maryland whether the pend- ency of an unsuccessful motion to intervene tolled the run- ning of the statute of limitations. The court there observed that fortunately Maryland had enacted the Uniform Cer- tification of Questions of Law Act and that “by utilizing it we may avoid the hazards inherent in any attempt to fore- cast how the Maryland courts might rule by the simple ex- pedient of affording the Maryland Court of Appeals an opportunity to address the question.” 554 F. 2d at 1173. Bellotte v. Zayre Corp., 531 F. 2d 1100 (1st Cir. 1976), on certification, 352 A. 2d 723 (N. H. 1976), certified to the Supreme Court of New Hampshire whether the term “un- reasonably dangerous” as applied in 1 products liability case had reference to the child user rather than to the pur- chasing parent. Earlier, the First Cireuit had invoked Rhode Island’s certification procedure, D’ Ambra v. United States, 518 F. 2d 275 (1st Cir. 1975), on certification, 338 A. 2d 524 (R.I. 1975) (right of mother who witnessed child’s death to sue for negligent infliction of emotional distress), and Maine’s certification procedure, Hiram Ricker & Sons v. Students International Meditation Society, 501 F. 2d 550 (1st Cir. 1974), on certification, 342 A. 2d 262 (Me. 1975) (failure te comply with Maine licensing statute as bar to recovery based upon the performance of services for which licenses were required). A situation analogous to that presented here arose in Gabhart v. Gabhart, 545 F. 2d 877 (7th Cir. 1977), on cer- tification, 370 N. E. 2d 345 (Ind. 1977). Stating tat there 40 existed “important questions of first impression under In- diana corporation law,” the Seventh Cireuit certified the question whether a minority shareholder’s only right in a merger is to the fair value of his shares if the only purpose is to squeeze him out. That issue was regarded as “an im- portant question requiring interpretation of state statutes and state corporation policy which, in view of the eertifica- tion procedure made available to us by Rule 15(N) of the Indiana Supreme Court should be answered by that court as the authoritative and final arbiter of state law.” 545 F. 2d at 881. Oklahoma’s certification procedure was utilized by the Tenth Cireuit in Arutsinger v. Mead Foods, Inc., 546 F. 2d 328 (10th Cir. 1976), on certification, 560 P. 2d 195 (Okla. 1977), an action alleging price maintenance in violation of the anti-trust laws. At issue was whether under Oklahoma law a price maintenance contract had to be a formal written agreement to be entitled to the exemption from the anti- trust laws granted by the Miller-Tydings Amendment to the Sherman Act in the case of price maintenance contracts authorized under state law. Because the state of the law in Oklahoma and nationally was far from definitive, the court certified that question to the Oklahoma Supreme Court." The present case raises important issues of state law having a substantial impact beyond this case which are of particular significance to Kentucky because they involve 18The Uniform Certification of Questions of Law Act, upon which Kentucky's certification procedure was based, was approved by the National Conference of Commissioners of Uniform State Laws and the American Bar Association in 1967. 12 U.L.A., Uni- form Certification of Questions of Law Act, p. 49 (1975). The Act has also been adopted by Colorado, Florida, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, North Dakota, Okla- homa. Rhode Island, Washington, and West Virginia. Id. 1979 Supplement, p. 11. From the foregoing cases it can be seen that certification procedures have also been adopted in Alabama, Louisi- ana, Georgia, and Indiana. 41 sensitive policy choices to be made by Kentucky affecting the administration of its workmen’s compensation law. Many other circuit courts of appeals undoubtedly would have certified these issues to the Supreme Court of Ken- tucky had this case arisen there. The conflicting views with respect to this important policy of federal judicial ad- ministration inherent in the failure of the court of appeals to invoke certification is a matter peculiarly appropriate for resolution by this Court. III. The Court of Appeals Erroneously Determined an Im- portant Question of State Law Under Kentucky’s Workmen’s Compensation Act in Violation of the Duty Imposed Upon It by Erie R. Co. v. Tompkins 304 U. S. 64 (1938). Obedient to its duty under Erie R. Co. v. Tompkins, 304 U. S. 64 (1988), the district court in this diversity case recognized that it could reach only the result which would be reached if the matter were before the Kentucky courts and that Frie precluded it “from altering the expressed policy determinations of the applicable state court of last resort” (App., 21a). The court of appeals, on the other hand, disregarded those restrictions imposed upon it by Erie which the district court had so carefully observed. We, of course, recognize that this Court generally is “hesitant to overrule decisions by federal courts skilled in the law of particular states unless their conclusions are shown to be unreasonable.” United States v. Durham Lum- ber Co., 363 U. S. 522, 527 (1960). Deference is given the interpretation placed upon purely local law by federal judges of long experience in the jurisprudence of the state whose law is applied. MacGregor v. State Mutual Co., 315 U.S. 280 (1942) ; Helvering v. Stuart, 317 U. S. 154 (1942), as modified, 317 U. S. 602 (1942). As was stated on direct 42 appeal in Thompson v. Consolidated Gas Co., 300 U. 8. 55 (1937), this Court is disposed to accept the construction given a state statute by a lower court “particularly when that court is composed * * * wholly of citizens of the state, familiar with the history of the statute, the local con- ditions to which it applies, and the character of the State’s laws.” 300 U.S. at 74-5. We submit, however, that the normal deference given to an interpretation of state law by the lower federal courts is not due the majority opinion. The only judge who con- sidered this case having a background in Kentucky law was the district judge. The two judges who composed the ma- jority in the court of appeals had no particular expertise in the issues of Kentucky law raised here but nevertheless seemingly gave no weight whatsoever to the district judge’s view of Kentucky law. In fact, the author of the majority opinion is the newest member of the court of appeals, hav- ing been appointed October 31, 1977, from a state other than Kentucky. The concurring judge is a senior circuit judge from a state other than Kentucky. That no particular deference should be accorded the majority opinion under these circumstances is especially so since the federal judges who considered the case were evenly divided as to the proper interpretation of Kentucky’s Workmen’s Compensa- tion Act. More importantly, however, examination of the majority opinion discloses that the court of appeals was clearly wrong in at least three major respects in its interpretation and application of Kentucky law. First, the majority opin- ion erroneously concludes that courts liberally construe the coverage provisions of workmen’s compensation acts but narrowly construe the immunity provisions (App., 6a, 7a). The universally accepted rule is that workmen’s compen- MN cin 43 sation statutes are to be liberally construed regardless of whether the injured party seeks to invoke the protection of those statutes or to deny coverage. The rule was cogently set forth in Adams v. Ford Motor Co., 573 F. 2d 1182 (10th Cir. 1978) : Auother rule of construction here pertinent is that the Workmen’s Compensation Act is to be liberally con- strued. The rule of liberal construction is most fre- quently invoked by employees who have suffered injury and are seeking their remedy under the Act. But no different rule of construction can be adopted where an injured workman for reasons which he regards suffi- cient seeks a remedy outside the Compensation Act. 573 F. 2d at 1185. Similarly, in Adamson v. Okland Construction Co., 508 P, 2d 805 (Utah 1973), the court states the rule: Fundamental standards of justice dictate that it would be inconsistent to apply the act liberally in favor of the injured workman in order to find coverage by one employer on a project, and then to reverse that policy and adopt a restrictive view to exclude coverage of another employer on the project so that a suit could be maintained against him. 508 P. 2d at 807." As a corollary, it is also uniformly held that one who is liable for workmen’s compensation benefits is not liable in “Among the other decisions adhering to this principle are Cole v. Chevron Chemical Company—Oronite Division, 477 ¥. 2d 361, 365 (5th Cir. 1973), cert. denied, 414 U. S. 858, 978 (1973) ; Arnold v. Shell Oil Co., 419 F. 2d 43, 47 (5th Cir. 1969) ; Jackson v. Southern Pacific Co., 285 F. Supp. 388, 389 (D. Nev. 1968) ; Woods v. Cessna Aircraft Co., 553 P. 2d 900, 902-03 (Kan. 1976) ; Stubbs v. Green Brothers Gravel Co., 206 So. 2d 323, 325 (Miss. 1968) ; Rutherford vy. Modern Transportation Co., 320 A. 2d 522, 525-26 (N.J. Super. L. Div. 1974). Sce 101 C.J.S. Workmen’s Compensation § 918 (1958). 44 tort. The quid pro quo for compensation liability is im- munity from suit in tort. For example, in Renfroe v. Hig- gins Rack Coating & Manufacturing Co., 169 N. W. 2d 326 (Mich. App. 1969), it is stated at pages 328-29: “Con- sequently, our inquiry must be whether the facts of this case would make defendant Higgins Co. liable to pay work- men’s compensation benefits under the act. If the answer is yes, we must affirm the summary judgment denying the separate tort claim.” In Liles v. Riblet Products of Louisiana, Inc., 363 F. Supp. 358 (W.D. La. 1973), af’d, 509 F. 2d 804 (5th Cir. 1975), the court states: If plaintiff w king to hold defendants liable here for workmen npensation under the provisions of § 1061, it is clear u. would sueceed * * * Under the jurisprudence of Louisiana, the mere fact that de- fendants are asserting this protection under its Com- pensation Act in order to obtain immunity from plain- tiff’s tort action cannot effect a different result here. 363 F. Supp. at 365. See also Woods v. Cessna Aircraft Co.. 553 P. 2d 900 (Kan. 1976) ; Coco v. Winston Industries, 330 So. 2d 649 (La. App. 1975), judgment set aside on other grounds, 341 So. 2d 332 (La. 1976); 2A Larson’s Workmen’s Compensation Law § 72.20 (1976). The district court properly determined that application of the Act should not be approached on any different policy ground because the “employer”: was asserting coverage, citing Mahan v. Litton, 321 8. W. 2d 248 (Ky. 1959). There, a helper employed, paid, and directed by a bottling com- pany’s route man sued the company for damages in tort, but the suit was dismissed because the helper’s exclusive remedy was compensation under the Act. That the district court correctly analyzed Mahan is amply demonstrated by the following statements from that opinion; 45 Wherever the Workmen’s Compensation law is ap- plicable, the rights and remedies granted or provided thereby are exclusive with certain exceptions which the statute makes. Hence, the right to maintain an action for damages for personal injuries and any correspond- ing liability of the employer to the employee for negli- gence of the employer, directly or under the doctrine of respondeat superior, are extinguished, and no common law action can be maintained to recover damages. iad * - The question of the relationship of employer and employee has usually arisen in respect of liability or non-liability for tort and in claims for workmen’s com- pensation. The test in the two categories is substan- tially the same. If there is any difference, it lies in the attitude of greater liberality in workmen’s compensa- tion cases to hold the relationship to exist than in eases of vicarious liability for tort. * * * In connection with these two aspects of the question of whether the plaintiff in this action is precluded from maintaining a common law action for damages, the appellant company submits analogous suppositious cases. It submits that if Litton, while carrying a heavy case of the beverage from the truck to the customer, had dropped it on his own foot, he would clearly have had the right to workmen’s compensation; and the fact that he was receiving a part of the per-case payment to Mahan, the driver-salesman, would not have deprived him thereof. * * * The other illustrative case is that if Litton had dropped the case of bottles on the foot of a customer of the store into which he was carrying it, the company would be liable for his negligence. * * * We regard the analogies as apt. The same law and principle must be applied to the condition and cireum- stances of the case at bar. 321 S. W. 2d at 245-46, 46 That the majority labored under a total misapprehen- sion as to the applicable Kentucky law is well illustrated by its treatment of and misleading quotation from the Mahan ease in footnote six of the majority opinion (App., 7a). The majority simply ignores the effect of that decision and, in the process, places Kentucky in the position of being a minority of one, resting its entire decision on an unsound and unsupportable premise. The other decisions cited by the majority in footnote six of its opinion do not hold that the rule favoring coverage is inapplicable when immunity is the issue. Those decisions were decided under the Act as it existed prior to the extensive 1972 amendments and merely recognize that immunity should not be extended where to do so would violate the plain meaning of the Act. The second major error in the majority’s interpretation of Kentucky law is its conclusion that there was no con- tract between Petitioner and Scotia within the meaning of KRS 342.610 (notwithstanding that the district court found such a contract to exist). In so holding, the majority opin- ion totally disregards applicable Kentucky law and com- pletely misreads the decision of the Kentucky Supreme Court in Elkhorn-Hazard Coal Land Corp. v. Taylor, 539 S. W. 2d 101 (Ky. 1976). Elkhorn-Hazard has been dis- cussed in detail at pages 21-2 of this Petition, and we will not repeat that analysis here. As is also more fully discussed at pages 23-5 of this Petition, the majority opinion does not even refer to the decision of Kentueky’s intermediate appellate court in Upper Elkhorn Coal Co. v. Thornberry, 564 S. W. 2d 842 (Ky. App. 1977) (discretionary review denied by Ken- tucky Supreme Court on May 16, 1978), although the ra- tionale of that ease is determinative of the present case. Nor does the majority opinion refer to the decision of the Supreme Court of Kentucky in United Engineers and Con- 47 structors, Inc. v. Branham, 550 8. W. 2d 540 (Ky. 1977), which is most instructive as to what would be the atti- tude of the Kentucky court if faced with the issues pre- sented here. The third point upon which the majority opinion is clearly wrong lies in its conclusion that Petitioner was not an “employer” under the Act. In so deciding, the majority for the second time in its opinion adopts a double standard. In holding KRS 342.610 inapplicable, Petitioner and Scotia are said to be too close to contract notwithstanding the finding of the district court that a contract existed between them. However, on the question whether the relationship is such as to render Petitioner an “employer” within the meaning of the Act, the majority opinion completely ignores that reasoning and holds that they are too far apart. There is nothing in Kentucky law to indicate that Kentucky would adopt such an inconsistent and illogical line of reasoning. Poyner v. Lear Siegler, Inc., 542 F. 2d 955 (6th Cir. 1976), cert. denied, 430 U. S. 969 (1977), is cited by the majority on this point. That case involved a shareholder’s liability for corporate debts as applied in the parent- subsidiary context. The majority opinion cites no Ken- tucky case indicating that Keutucky’s attitude toward dis- regarding corporate entities for financial responsibility reasons applies with the same force in the workmen’s com- pensation field. Cases from other jurisdictions recognize that in applying remedial legislation different considera- tions are involved than in the case of a common law action seeking to hold a shareholder liable for corporate torts or debts. As was pointed out in Eagle Star Insurance Co. v. Deal, 474 F. 2d 1216, 1219 (8th Cir. 1973), the considera- tions pertinent to “piercing the corporate veil” for financial responsibility reasons and those relevant to determining 48 the employment relationship “are not identical and they are weighted differently in light of the distinct purposes to be resolved.” In United States v. Davison Fuel and Dock Co., 371 F. 2d 705 (4th Cir. 1967), an action to compel payment of wages to coal miners, the defendant, which had con- tracted to supply the coal but which operated no coal mines directly, and its wholly owned subsidiaries which operated the mines were held to be an integrated produc- tion structure for the purpose of enforcing the Walsh- Healey Act. Affiliated corporations having the same offi- cers, business, and operating procedures or dividing re- sponsibilities in operating a business have been held to constitute a single employer for purposes of enforcing the National Labor Relations Act. N.L.R.B. v. Patterson Men- haden Corp., 389 F. 2d 701 (Sth Cir. 196$); N.L.R.B. v. Gass, 377 F. 2d 488 (1st Cir. 1967). See Seltzer v. Isaac- son, 371 A. 2d 304 (N.J. Sup. Ct. 1977) (employee limited to one recovery where a unitary employer-entity exists in substance, whether or not technically). Moreover, the majority opinion acknowledges that Scotia performed mining work for Petitioner. That being true, and assuming that Petitioner and Scotia are separate en- tities and that KRS 342.610 does not apply, then Scotia had to be acting as agent or servant for Petitioner. The ma- jority in fact cites section 213 of the Restatement (Second) of Agency in concluding that Petitioner should be liable for harm resulting from its own negligent or reckless conduct (App., 15a). That section governs the liability of a prin- cipal conducting an activity through servants or other agents. Under Kentucky law, the employees of the servant or agent become the employees of the master or principal and cannot maintain a common law action for injuries arising out of their employment. King v. Shelby Rural ' aa 49 » or of Electric Cooperative Corp., 502 S. W. 2d 659 (Ky. 1973), cert. denied, 417 U. S. 9382 (1974); Mahan v. Litton, 321 S. W. 2d 243 (Ky. 1959). See KRS 342.640. CONCLUSION For all of the reasons set forth herein, the petition for a writ of certiorari should be granted and the judgment of the Court of Appeals for the Sixth Circuit reversed. Respectfully submitted, Bert T. Comss CuHarues R. Srmons Rosert I. Cusick, Jr. Tarrant, Comps & BuLuitr 2600 Citizens Plaza Louisville, Kentucky 40202 Foster D. ARNETT Arnett, Draper & Hacoop 1212 United American Bank Building Knoxville, Tennessee 37902 L. R. Couture, Jr. Hvuperns, CouLttinc, Brewster & Mornous Box 529, 323 Law & Commerce Building Bluefield, West Virginia 24701 Maxwetu P. Barrer Crart, Bankut, Haynes & Warp Combs Building Hazard, Kentucky ' 41701 Henry STRATTON Marrs ALLEN May Srratron, May & Hays P. O. Box 851 Pikeville, Kentucky 41501 Counsel for Petitioner la UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT | No. 77-1724 ’ | JENNIFER Boaes, Caro. Comss, GERALDINE Coots, Vera Gattoway, Lippy Gtsss, | Maponna GrirritH, Diane McKnicut, Puyuus Peavy, Vickie Scott, CELINDA SparkMAN, ErxHet Srurciy, Dessie Turner, Repa Turner, and CHARLOTTE Wipner, Administratrices of their de- cedents and individually - Plaintiffs-A ppellants v. A P P BE N D I X Buve Diamonp Coat Company - - Defendant-Appellee ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF KENTUCKY Decided and Filed January 23, 1979 Before: Merritt, Cireuit Judge; Crecn. and Peck, Senior Circuit Judges. Merritt, Circuit Judge, delivered the opinion of the Court, in which Cecri, Senior Circuit Judge, joined. Peck, Senior Circuit Judge, (pp. 15-16) filed a separate dissent- ing opinion. In this diversity case, fifteen widows of coal miners killed in a mine disaster appeal the District Court’s dis- missal of their wrongful death action. The miners worked for a subsidiary corporation owned by the defendant, the 2a Opinion parent corporation. Plaintiffs allege acts of negligence of the parent corporation separate and distinct from the con- duct of the subsidiary. The case raises serious questions of first impression under Kentueky’s Workmen’s Compensa- tion Act. The Act, like other workmen’s compensation laws, grants immunity from common law negligence to an “employer” covered by the Act and to’ “contractors” who provide eer- tain types of services to an “employer.” The immunity is given in exchange for the guaranteed insurance benefits payable to injured employees without regard to fault.! The principal issue is whether the parent is an “employer” or “contractor” :mmunized from tort liability under these provisions, Finding an implied contract for the subsidiary to mine coal for the parent, the Distriet Court concluded that the parent was a “contractor” exempt from tort liability under Kentucky's Workmen’s Compensation Act. We hold that the parent should not be characterized as either a “con- tractor” or an “employer” under the Act. We reverse the District Court’s judgment and remand the ease for trial. I. On March 9, 1976, fifteen coal miners were killed when methane gas exploded in Scotia Mine No. 1 at Oven Fork in I1Ky. Rev. Stat. Ann. § 342.690 (1978), the immunity section, provides: [T]he liability . . . under this chapter shall be exclusive and in place of all other liability of such employer to the employee . . . For purposes of this section, the term “employer” shall include a “contractor” covered by subsection (2) of KRS 342.610 . . . The exemption from liability given an employer by this section shall also extend to such employer’s carrier and to all employes, officers or directors of such employer or carrier... . § 342.610(2) defines “contractor” as: a person who contracts with another (a) to have work performed consisting of the removal . . . of . .. minerals ... or (b) to have work performed of a kind which is a regular . . . part of the work of the . . . business . . . of such person... . 3a Opinion Letcher County, Kentucky. The Scotia Mine is owned and operated by Scotia Coal Company, a wholly owned sub- sidiary of Blue Diamond Coal Company, whose offices and principal place of business are located in Knoxville. Blue Diamond operates several coal mines and related businesses. It describes itself ‘in its brief as a multi-unit enterprise consisting of a group of wholly owned sub- sidiary corporations controlled by a central holding com- pany: Blue Diamond enters into sales contracts based upon coal to be produced from the mines of its wholly owned subsidiaries. . . . All coal produced by Scotia is sold by Blue Diamond and shipped as directed by Blue Diamond. Sales are invoiced to customers by Blue Diamond and deposited in its bank accounts. A sale of coal from Scotia is entered as a credit to Scotia on the accounting records, but all money is retained by Blue Diamond and is used as it chooses. Funds needed to pay expenses at Scotia are furnished by Blue Diamond with an appropriate entry in the intercom- pany accounts. (Emphasis added.) The District Court found that within this corporate ar- rangement the management of Blue Diamond, the parent, had the primary responsibility for “mine safety functions” at the Scotia mine. Simply stated, the theory of plaintiffs’ case is this: Blue Diamond provided management, engineering and safety services to Scotia, including advice and assistance in mine ventilation. Blue Diamond’s management recog- nized that improvements in the ventilation of the Scotia Mine were needed in order to minimize the accumulation of methane gas but negligently delayed construction of these improvements. Blue Diamond authorized removal da Opinion of existing ventilation and safety deviees in order to open a new tunnel of the mine but concealed the changes from federal mine inspectors who would have taken immediate steps to correct the dangerous condition or to close the mine had they known of the changes. The ventilation changes increased the methane gas in the existing tunnel and caused the explosion. Blue Diamond recklessly created a dangerous situation and put the miners’ lives at risk in order to increase its profits in a rising market. The parent corporation moved for summary judgment claiming immunity from tort under the Kentucky’s Work- men’s Compensation Act on the ground that the parent and subsidiary produce coal as part of an integrated business and should be considered a joint or single “employer.” The parent argued, in the alternative, that the subsidiary pro- duces coal for it under an agreement and that the parent should be considered a “contractor” expressly exempt from common law liability under the Act.? At the close of plaintiff's case after three days of testi- mony before a jury, the parent moved for a directed verdict and also renewed its motion for summary judgment. The District Judge sustained its motion for summary judgment. He concluded that the “undisputed course of conduct” evi- denced an implied contract “from 1962 to date” for the sub- sidiary to mine coal for the pareut. The parent, he held, should be deemed a “contractor” exempt from common law liability. On this appeal we must decide the extent to which workmen's compensation laws abrogate the common law liabilities of a parent corporation or holding company for injuries to its subsidiary’s employees. Il. Workmen’s compensation laws were passed before the multi-unit enterprise became the norm in the American 2The relevant language of the Act is quoted in note 1, supra. Pree rn Da Opinion economy and before the accompanying managerial revolu- tion in American business. See Chandler, The Visible Hand 377-498 (1977): For this reason, state workmen’s compensation laws, including Kentucky’s Workmen’s Com- pensation Act, do not address the question of a parent cor- poration’s immunity from common law tort liability for injuries to its subsidiary’s employers, [sic] ner dees the Kentucky case law interpreting the Aet. Few eases from other jurisdictions touch upon the question, and the general legal literature in the field does not deal with it. In the absence of controlling authority, we look to the language of the Act, its history and purpose, and the general eon- cepts underlying workmen’s compensation laws in order to find a sound approach to the problem. The dominant purpose of the movement to adopt work- men’s compensation laws in the early decades of this century was not to abrogate existing common law remedies for the protection of workmen. It was to provide social insurance to compensate vietims of industrial accidents because it was widely believed that the limited rights of recovery avail- able under the common law at the turn of the century were inadequate to protect them. The so-called “unholy trinity” of judicially-created em- ployer defenses, assumption of the risk, contributory neg- ligence and the fellow servant rule, were developed and stiietly enforced as legal rules in the last half of the nineteenth century. The result, according to Deans Prosser and Wade, was recovery in less than a quarter of work- related accidents, as injured workmen subsidized economic growth.* ~ 8Prosser & Wade, Cases and Materials on Torts 619 (5th ed. 1971) ; Prosser, Handbook of the Law of Torts § 80 (1971). See Larson, The Nature and Origins of Workmen’s Compensation, 37 CorNELL L. Q. 206 (1952). See also Horowitz, The Transformation of American Law 251- 66 (1977); Pound, The Spirit of the Common Law 29-31, 47 (1921). 6a Opinion Kmployers generally opposed the movement for “re- form’; labor generally favored it. Workmen’s compensa- tion laws were adopted as a compromise between these con- tending forees. Workmen were willing to exchange a set of common-law remedies of dubious value for modest work- men’s compensation benefits schedules designed to keep the injured workman and his family from destitution. Since the adoption of workmen’s compensation laws, common law tort principles have been modified gradually. Liability has expanded. The defenses of contributory neg- ligence, assumption of the risk and the fellow servant rule have been narrowed or abolished. But workmen’s compen- sation benefits have remained low, and the compromise which extended immunity from common-law liability to em- ployers has remained in place. Congress, responding to rising public consciousness of the need for occupational safety, has viewed the safety in- centives provided by existing laws as inadequate. It has enacted new regulatory arrangements to insure more safety at mines* and at work places generally.® Courts have responded by liberally construing the cov- erage provisions of workmen’s compensation acts while narrowly construing the immunity provisions. Judge Cele- brezze, writing for this Court, described the developments of Kentucky case law in this direction in Bryant v. Old Re- public Insurance Co., 431 F. 2d 1385 (6th Cir. 1970), a case which held that an employer’s workmen’s compensation 4Federal Coal Mine Health and Safety Act of 1969, 30 U.S.C. S$§ 801 et seq., as amended by the Federal Mine Safety and Health Act of 1977, 30 U.S.C. $$ 801-78. SSee the Occupational Safety and Health. Act of 1970, 29 U.S.C. 651-78, including § 27 in which Congress “finds and declares” that “in recent years serious questions have been raised concerning the fairness and adequacy of present workmen’s compensation laws in the light of . . . new risks to health and safety, and increases in the general level of wages and the cost of living.” 29 U.S.C. § 676. 7a Opinion insurance carrier is not an “employer” for purposes of the tort immunity provisions of the Act: A review of the Kentucky constitution .. . reveals that the personal representatives of an estate have a constitutionally protected right to recover for wrongful death, “unless otherwise provided by law.” Constitu- tion of Kentucky § 241 . The General Assembly of Kentucky subsequently codified this constitutional right. . . . The Workmen’s Compensation Act is an express exception to Kentucky’s constitntional and statutory right... . [T]he Kentucky Court of Appeals seems to be narrow- ing the concept of employer’s immunity under its work- men’s compensation laws and in the absence of any compelling statutory language or social policy justifi- cation . . . we believe that Kentucky Courts will pre- serve that State’s constitutional and statutory right . . « (Emphasis added.) 431 F, 2d at 1387-88. Kentucky courts have given the “liberal” construction re- quired by the express language of the Act by broadly con- struing the coverage provisions of the Act and narrowly construing the immunity provisions.*® Professor Arthur Larson, a leading authority in the field, justifies this approach for the following reasons: 6See Ky. Rev. Stat. § 342.004 (1978); Bright v. Reynolds Metals Co., 490 S. W. 2d 474 (Ky. 1973); Peters v. Radcliff Ready Mix, Inc., 412 S. W. 2d 854 (1967); Cove Fork Coal Co. v. Newcomb, 343 S. W. 2d 838 (Ky. 1961); Mahan v. Litton, 321 S W. 2d 243, 245 (Ky. 1959) (case appears to say that the “test” of the “relationship of employer and employee” is “substantially the same” under the Act, but courts have adopted an “attitude of greater liberality in . . . compensation cases . than in cases . . . for tort’’). Sa Opinion [T]here is no strong reason of compensation policy for destroying common law rights . . . [and] every presumption should be on the side of preserving those rights, once basic compensation protection has been assured . . . . The injured employee has a right to be made whole — not just partly whole. . . . [AJll the reasons for making the wrongdoer bear the costs of his wrongdoings still apply, including the moral rightness of this result as well as the salutary effect it tends to have as an incentive to careful conduct and safe work practices. (Emphasis added.) 2A Larson, The Law of Workmen’s Compensation §| 72.50 at 14-95 (1976). In light of this history and policy, we agree that “every presumption should be on the side of preserving” common law rights in the absence of “compelling statutory language or social policy justification.” We approach the problem from this perspective. II. 1. “Contractor” Immunity.— The District Court con- cluded that the parent is a “contractor” for the mining services of its subsidiary and hence immune under the “con- tractor” provision of the Act. The Act provides that a “contractor” shall be deemed an “employer” under the Act. For purposes of this case, a “contractor” is one who (a) “contracts with another” (b) “to have [mining] work per- formed.’* There is no question that the subsidiary per- formed mining work for the parent; the only question is whether the parent performed the work under a “contract” with the subsidiary. In its brief on appeal, Blue Diamond argues first that there was an “implied contract” between the parties based 7See note 1, supra. 9a Opinion upon their conduct; and second, even if there were no con- tract “in the technical sense” of “a formal, enforceable” agreement, the contractor provision requires only a “fune- tional relationship by which one person” mines coal for another. In the only case to date defining its scope, Kentucky’s highest court read the “contractor” provision narrowly, even for the purpose of determining compensation coverage under the Act. It held that a mining company employee could not recover workmen’s compensation from a separate company that had leased coal land to his employer. Elk- horn-Hazard Coal Land Corp. v. Taylor, 539 8. W. 2d 101, 103 (Ky. 1976). The court described the contractor pro- vision as “limited in application,” limited to “persons who contract with another.” Its legislative purpose was to “discourage owners and contractors from hiring financially irresponsible contractors and subcontractors” in order to avoid coverage under the Act. This language, as well as the language of the statute itself, appears to contemplate a regular, enforceable con- tract between “independent” parties dealing with each other at arm’s length. Here, there is no formal, integrated agree- ment, either written or oral. If we view the course of con- cuet of the parties as creating a “contract implied in fact” from the conduct of the parties, as did the District Court, it is unclear what the terms of the contract are, what mutual promises were made, what consideration was given, what the duration of the contract is, or what contractual obliga- tions or expectations were created. The principle of reciprocity or mutuality of obligation is the very essence of contract. Here it is missing. As Blue Diamond says in its brief, “all money is retained by Blue ‘ Diamond and is used as it chooses.” Kentucky couris have declined to characterize and enforce such arrangements as 10a Opinion “contracts” under Kentucky law, finding that they are so one-sided and unspecific as to be “illusory” and “lacking in mutuality.” See Baber v. Lay, 305 8. W. 2d 912 (Ky. 1957). This does not end the matter, however. Blue Diamond stresses its second point that the Act does not require a specifie contract “in the technical sense.” It argues that the parent should be immune as a “contractor” if the realities of the situation create a “functional relationship” suffi- ciently like a contractual relationship to come within the purposes of the Act. : This argument does not strengthen Blue Diamond's po- sition. Even if we were willing to stretch the point and dispense with the need for an actual contract, the relation- ship between the parties under such a reading of the con- tractor provision should at least fit within basic contract theory. Here it does not fit. Coutract theory either does not recognize, vr charac- terizes as voidable, arrangements between parties who lack adequate bargaining power. Restatement of Contracts, ° Chaps. 1-2 (1988). A number of contract doctrines render ineffective arrangements where one party is subject to coercion or where there is no real exchange. For example, contract theory has not viewed the relationship between parent and’ child as contractual, and children and others without real bargaining power do not have the capacity to contract. The doctrines of duress, undue influence and un- conscionability are based on similar considerations. /d. at Chaps. 15-18. The doctrine of consideration itself requires a real exchange between autonomous parties. Jd. at §§ 6, 75-84. The doctrines of fraud and mistake presuppose a meeting of the minds between real parties with freedom to deal at arm’s length. Jd. at Chaps. 15, 17. Contract obliga- tions are enforceable as a matter of “right,” and contract ee lla Opinion theory is based on the intention of parties who possess the freedom to agree or disagree.* These various contract doctrines suggest that the “fune- tional relationship” between a parent and a subsidiary is not a contractual relationship. The expectations of the parties are not based on mutual promises, consideration or consent, for one party owns and has custody of the other party. The relationship between parent and subsidiary is based npon the status of the parties and is more like the relationship between parent and child, warden and prisoner, and other similar relationships. The relationship is not based upon the bargaining power of the parties. We [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_0268%3A1. Public record. Not legal advice.