USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 1 of 26

PUBLISHED

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 19-1643

SALLIE M. ZEIGLER, as Personal Representative of the Estate of Alton Ray Zeigler,

Plaintiff - Appellant,

v.

EASTMAN CHEMICAL COMPANY; MUNDY MAINTENANCE SERVICE AND OPERATIONS LLC,

Defendants - Appellees.

No. 19-1646

JACOB S. JACKSON,

Plaintiff - Appellant,

v.

EASTMAN CHEMICAL COMPANY; MUNDY MAINTENANCE SERVICE AND OPERATIONS LLC,

Defendants - Appellees.

No. 19-1647

KEVIN R. VANN; KELLI D. VANN,

Plaintiffs - Appellants, USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 2 of 26

v.

EASTMAN CHEMICAL COMPANY; MUNDY MAINTENANCE SERVICE AND OPERATIONS LLC,

Defendants - Appellees.

Appeals from the United States District Court for the District of South Carolina, at Orangeburg. J. Michelle Childs, District Judge. (5:17-cv-01010-JMC; 5:17-cv-01015- JMC; 5:17-cv-01013-JMC)

Argued: September 14, 2022 Decided: November 23, 2022

Before WYNN and HARRIS, Circuit Judges, and KEENAN, Senior Circuit Judge.

Reversed and remanded by published opinion. Judge Harris wrote the opinion, in which Judge Wynn and Senior Judge Keenan joined.

ARGUED: Louis M. Bograd, MOTLEY RICE LLC, Washington, D.C., for Appellant. Allen Mattison Bogan, NELSON MULLINS RILEY & SCARBOROUGH LLP, Columbia, South Carolina; Keith D. Munson, RIMON LAW, Greenville, South Carolina, for Appellees. ON BRIEF: Heath P. Taylor, TAYLOR LAW FIRM LLC, West Columbia, South Carolina, for Appellant Jacob S. Jackson. Charles T. Slaughter, WALKER MORGAN, LLC, Lexington, South Carolina, for Appellants Kevin R. Vann and Kelli D. Vann. George C. Johnson, JOHNSON, TOAL & BATTISTE, P.A., Columbia, South Carolina, for Appellant Sallie M. Zeigler. T. David Hoyle, John David O’Neill, Marlon E. Kimpson, MOTLEY RICE, LLC, Mount Pleasant, South Carolina, for Appellants. John F. Kuppens, Blake T. Williams, Columbia, South Carolina, Samuel O. Outten, NELSON MULLINS RILEY & SCARBOROUGH LLP, Greenville, South Carolina, for Appellee Eastman Chemical Company. Catherine F. Wrenn, WOMBLE BOND DICKINSON (US) LLP, Greenville, South Carolina, for Appellee Mundy Maintenance Service and Operations, LLC.

2 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 3 of 26

PAMELA HARRIS, Circuit Judge:

These consolidated tort actions arise out of a 2016 industrial accident at a South

Carolina chemical-manufacturing plant. Three independent contractors of Eastman

Chemical Company were severely injured, one of them fatally, when a pump exploded

during maintenance. Eastman moved to dismiss their state-law personal injury suits,

contending that the contractors qualified as Eastman’s “statutory employees” under the

South Carolina Workers’ Compensation Law – which would mean that workers’

compensation was their exclusive remedy and that the courts lacked jurisdiction to hear

their claims. See S.C. Code §§ 42-1-10 et seq.

The district court agreed that the plaintiffs were Eastman’s “statutory employees”

under the workers’ compensation law and dismissed their actions. On appeal, we held their

cases in abeyance pending the decision of South Carolina’s Supreme Court in Keene v.

CNA Holdings, LLC,

(2021).

That court has now clarified, in Keene, that when an employer makes a “legitimate

business decision” to outsource a portion of its work, the contractors it hires to perform

that work are not “statutory employees” for workers’ compensation purposes. 870 S.E.2d

at 163. No party here contests that Eastman’s outsourcing of its maintenance and repair

work was a “legitimate business decision.” It follows that the plaintiffs, independent

contractors performing maintenance at the time of the 2016 pump explosion, were not

statutory employees and may bring personal injury actions. Accordingly, we reverse the

district court’s judgment dismissing the actions for lack of subject matter jurisdiction and

remand for further proceedings.

3 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 4 of 26

I.

A.

We begin with a brief description of the governing statutory framework. This

appeal turns on one question: whether the South Carolina Workers’ Compensation Law

(“the Act”), S.C. Code §§ 42-1-10 et seq., which provides the exclusive remedy for covered

employment-related injuries, bars the plaintiffs’ tort actions. The Act creates a “quid pro

quo arrangement,” in which an “employee receives the right to swift and sure compensation

in exchange for giving up the right to sue in tort.” Harrell v. Pineland Plantation, Ltd.,

(1999) (internal quotation marks omitted). Consistent with that trade-

off, the Act’s exclusivity provision states that the workers’ compensation “rights and

remedies granted by this title to an employee . . . shall exclude all other rights and remedies

of such employee . . . against his employer, at common law or otherwise[.]” S.C. Code

§ 42-1-540 (emphasis added). This immunity extends both to the employer and to any co-

employees “conducting [the employer’s] business.” S.C. Code § 42-5-10. Eastman

contends that the plaintiffs’ injuries are covered by workers’ compensation, and that the

Act’s exclusive remedy thus deprives us of subject matter jurisdiction to hear their personal

injury actions.

The plaintiffs, on the other hand, point to an express exemption in the Act for

“injuries resulting from acts of a subcontractor of the employer,” which preserves a tort

remedy for workers – like themselves – who are independent contractors of a business

owner. S.C. Code § 42-1-540. But the Act clarifies that not all independent contractors

are exempt from its coverage. The so-called “statutory employee provision” – at the heart

4 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 5 of 26

of this case – makes independent contractors the equivalent of employees in certain

circumstances: When an employer “undertakes to perform or execute any work which is

a part of his trade, business or occupation and contracts” with an independent contractor

to complete that work, the terms of the Act apply as if “the work[er] had been immediately

employed by him.” Id. § 42-1-400 (emphasis added). Eastman claims that the plaintiffs,

though admittedly independent contractors, were injured while performing maintenance

work that was “part of [Eastman’s] trade, business or occupation.” As a result, Eastman

contends, we must treat the plaintiffs as if they were Eastman’s direct employees and

conclude that the Act bars their personal injury actions.

After jurisdictional discovery, the district court concluded that the plaintiffs’

maintenance and repair work was indeed part of Eastman’s “trade, business or occupation”

and that it therefore lacked subject matter jurisdiction to hear their tort claims. The

questions before us, then, are how South Carolina courts interpret the scope of an owner’s

“trade, business or occupation” under the statutory employee provision and whether the

plaintiffs’ labor qualifies under that definition.

B.

1.

On December 6, 2016, Alton Zeigler, Jacob Jackson, and Kevin Vann – three

maintenance employees of DAK Americas LLC – attempted to remove a faulty pump on

a chemical production line owned by Eastman Chemical Company. During this process,

the pump exploded, injuring or killing the DAK employees and giving rise to this action.

5 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 6 of 26

To understand the business relationship between Eastman and DAK, the plaintiffs’

employer, we first rewind several decades. In 1967, Eastman Chemical Company opened

the chemical-manufacturing facility at issue in this case, in Calhoun County, South

Carolina. It continuously operated the plant until 2011, when it sold the facility to DAK

Americas LLC, a subsidiary of a Mexican chemical company. In the sale, Eastman retained

several assets at the facility, including four of the plant’s 13 chemical production lines.

At the same time, Eastman terminated virtually its entire 400-person workforce at

the facility. Former Eastman workers were required to reapply for employment with DAK,

and nearly all 400 Eastman employees became DAK employees. Eastman then contracted

with DAK to operate and maintain its retained lines – to provide, in essence, the same labor

previously done by its own employees. Eastman preserved only a small managerial force

(three employees, at the time of the 2016 accident) to coordinate with DAK’s on-site labor.

DAK, in turn, contracted with Mundy Maintenance Service and Operations LLC, also a

defendant in this action, for supplemental maintenance and other services at the Calhoun

County plant.

These contractual relationships set the backdrop for the accident at issue here. In

December 2016, production halted on Eastman’s retained lines for an annual maintenance

shutdown. This maintenance included removal of a pump that helped feed superheated

liquid monomer through the production line. DAK employees planned to drain the

superheated chemicals from the line before removing the pump. The line’s drain was not

working, however, possibly because a cooled chemical was plugging the drainpipe. On

6 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 7 of 26

December 3, Mundy employees attempted to use a torch to heat the drainpipe, in hopes of

melting any chemicals clogging the drain. This attempt was apparently unsuccessful.

As a result, on December 6, DAK used an alternative procedure to remove the pump

“hot” – that is, without first draining the monomer. But soon after Zeigler, Jackson, and

Vann loosened the bolts securing the pump, an explosion erupted, spewing chemicals

across the room. The molten liquid – which was heated to approximately 300 degrees

Celsius – killed Zeigler and severely burned Jackson and Vann.

2.

In April 2017, the plaintiffs – Zeigler’s surviving spouse, Jackson, and Vann and

his spouse – commenced separate personal injury actions against Eastman and Mundy in

federal district court, invoking diversity jurisdiction under

. The plaintiffs

alleged, in sum, that Eastman’s employees were negligent in their management of the

retained line, and that Mundy’s employees were negligent in their attempt to unclog the

drainpipe prior to the explosion.

Eastman’s answers asserted “that all claims against it must be dismissed pursuant

to Rule 12(b)(1)” on the basis that the plaintiffs were Eastman’s statutory employees and

thus subject to the South Carolina Workers’ Compensation Commission’s exclusive

jurisdiction. J.A. 74. At an initial scheduling conference, the district court ordered limited

discovery and briefing on the statutory employment doctrine and its effect on the court’s

subject matter jurisdiction.

At the close of jurisdictional discovery, Eastman and Mundy each moved to dismiss

the actions under Federal Rule of Civil Procedure 12(b)(1). Though formally independent

7 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 8 of 26

contractors, they argued, the plaintiffs qualified as “statutory employees” of Eastman under

South Carolina’s Workers’ Compensation Law, making workers’ compensation their

exclusive remedy. Eastman cited South Carolina’s traditional three-part test for

determining when an activity, though performed by a contractor, is “part of [an owner’s]

trade, business or occupation,” S.C. Code § 42-1-400, and thus creates a statutory

employment relationship: “(1) [T]he activity of the subcontractor is an important part of

the owner’s trade or business; (2) the activity performed by the subcontractor is a

necessary, essential, and integral part of the owner’s business; or (3) the identical activity

performed by the subcontractor has been performed by employees of the owner.” J.A.

299–300 (quoting Collins v. Charlotte,

(2015)). “If any of these tests

is satisfied,” courts often stated, “the injured worker is considered the statutory employee

of the owner.” Collins,

(internal quotation marks omitted).

Eastman contended that the plaintiffs’ labor qualified under all three tests. It relied

primarily on a longstanding line of cases deeming repair and maintenance work

“important” and “integral” to business operations, making contractors who perform that

“essential” work the owner’s statutory employees in most instances. See Singleton v. J.P.

Stevens & Co.,

(D.S.C. 1982), aff’d,

(4th Cir. 1984).

It also noted, with respect to the third test, that Eastman had performed “the exact type of

work” with its own employees prior to its sale of the facility to DAK in 2016. J.A. 310.

The plaintiffs did not dispute the general three-part test laid out by the defendants.

But they cited a more recent line of South Carolina Supreme Court precedent that appeared

to put that traditional approach in some doubt. According to those cases, the “mere fact”

8 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 9 of 26

that an activity is “essential for the conduct of the business does not mean” that the activity

is part of the owner’s “trade, business or occupation” for purposes of the statutory

employee provision. J.A. 498 (quoting Abbott v. The Ltd., Inc.,

(2000)

(emphasis added)). If the contracted activity “is not the primary business” of the owner,

the Court reasoned in Olmstead v. Shakespeare,

(2003), then those

conducting it do not become the owner’s statutory employees. Moreover, the Court in

Olmstead purported to “overrule all prior cases to the extent they are in conflict” with its

holding, though it did not identify which cases that would be. Id. at 427.

Against this unsettled backdrop, the district court ruled in Eastman’s favor and

dismissed the plaintiffs’ actions. Citing the older line of caselaw describing maintenance

work as “necessary to” a business’s operation, the court held that the plaintiffs qualified as

statutory employees under the first of the three traditional tests: Maintenance on the

production lines retained by Eastman is an “important part of Eastman’s trade, business, or

occupation.” J.A. 160; see Collins,

.

Mundy’s immunity necessarily followed from this holding. Because Mundy’s

employees conducted this same “essential” maintenance work alongside the plaintiffs, and

because the Act extends its “employer immunity to statutory co-employees conducting a

statutory employer’s business,” the court ultimately concluded that Eastman’s statutory

immunity exempted Mundy from suit, as well. J.A. 180–81 (citing S.C. Code § 42-5-10);

J.A. 279–80.

Mundy’s motion to dismiss also raised a merits defense under South Carolina

common law, asserting that its employees were Eastman’s “borrowed servants” and that

9 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 10 of 26

any liability for their conduct thus flowed to Eastman, not Mundy. J.A. 1825–26. The

district court considered this alternative ground for dismissal but concluded that “based on

the current evidence of record,” Mundy could not “satisfy all of the elements of the

borrowed servant doctrine to exempt itself from liability.” J.A. 282.

3.

In February 2019 – three months after the district court dismissed the plaintiffs’

actions – the South Carolina Court of Appeals decided Keene v. CNA Holdings, LLC,

(Ct. App. 2019). Applying Olmstead, the Court of Appeals concluded that

maintenance contractors are not, as a general matter, manufacturers’ statutory employees.

at 190 (citing Olmstead,

; Abbott,

). Because the

Keene employer had “presented no evidence that its corporate purposes included

equipment maintenance,” the Court of Appeals held, the contractors it hired to conduct that

maintenance were not its statutory employees. Id. at 193 (internal quotation marks

omitted).

The plaintiffs moved for reconsideration in light of Keene. The district court

recognized that it was now “constrained . . . to conclude that in South Carolina,

maintenance and repair work of equipment by the employees of an independent contractor,

without something more, generally does not qualify” as statutory employment. J.A. 269.

Nonetheless, Keene did not change the court’s conclusion that “maintenance on a line that

produces chemicals that Eastman sells is an important part of Eastman’s trade, business, or

occupation.” J.A. 270. The court found it dispositive that “nearly all of DAK’s 400

employees at the manufacturing facility were formerly Eastman’s employees,” and that,

10 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 11 of 26

had the sale never occurred, each plaintiff “would have been performing this same task as

an Eastman employee on the day the incident occurred.” Id. Because DAK’s maintenance

work was “just as important to Eastman’s business” in 2016 as it was before the 2011 sale,

the court denied the plaintiffs’ motions. J.A. 270–71. 1

On June 17, 2019, the plaintiffs filed timely notices of appeal. We consolidated the

appeals, see Fed. R. App. P. 3(b)(2), and then put the case in abeyance pending the South

Carolina Supreme Court’s review of the Court of Appeals’ decision in Keene. The

Supreme Court decided Keene on August 11, 2021. See Keene v. CNA Holdings, LLC,

(2021), reh’g denied (Apr. 5, 2022).

In affirming the Court of Appeals, the Supreme Court moved away from the

formalism of the three-part test to “refocus” the inquiry “on the key question posed by the

statute”: whether “the work contracted out is ‘part of [the owner’s] trade, business or

occupation.’”

at 162–63 (quoting S.C. Code § 42-1-400). The Supreme Court

emphasized that this “is a question of business judgment, not law”: When a company

makes the “legitimate business decision to outsource” a portion of its labor force, the

contractors it then hires are no longer part of its “trade, business or occupation.” Id. at 163.

Because there was “no question” the Keene manufacturer made a legitimate business

1 The district court also cited an “Operating Agreement” between Eastman and DAK that “expressly contracted [for] DAK’s employees to be considered statutory employees of Eastman.” J.A. 270 n.4. But it is undisputed that the Operating Agreement covered only Eastman’s operation of the retained lines, and that the plaintiffs were covered exclusively by a different Services Agreement – for maintenance, repair, and other ancillary services – that includes no similar statutory employment provision. On appeal, no party asks us to adopt this part of the district court’s reasoning.

11 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 12 of 26

decision to outsource its maintenance and repair work, the contractors it hired were not its

statutory employees. Id.

The South Carolina Supreme Court denied rehearing on April 5, 2022. We are now

tasked with applying Keene to the plaintiffs’ claims in the first instance.

II.

We review de novo a district court’s dismissal for lack of subject matter jurisdiction

pursuant to Federal Rule of Civil Procedure 12(b)(1). Balfour Beatty Infrastructure, Inc.

v. Mayor & City Council of Baltimore,

(4th Cir. 2017). A Rule 12(b)(1)

motion to dismiss should be granted “only if the material jurisdictional facts are not in

dispute and the moving party is entitled to prevail as a matter of law.” Evans v. B.F.

Perkins Co., a Div. of Standex Int’l Corp.,

, 647 (4th Cir. 1999) (internal

quotation marks omitted).

Because federal jurisdiction here rests on the parties’ diversity of citizenship, we

apply South Carolina law. See Erie R. Co. v. Tompkins,

(1938). In

determining state law, we start with the decisions of the South Carolina Supreme Court,

giving “appropriate effect to all [their] implications.” Stahle v. CTS Corp.,

(4th Cir. 2016). To the extent the state’s highest court has not “directly addressed” an

issue, we “anticipate” what its decision would be.

So our task here is to determine

whether the Supreme Court of South Carolina would conclude that the plaintiffs were

Eastman’s statutory employees at the time of the 2016 accident.

12 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 13 of

.

Fortunately, we need not do much anticipating, as Keene’s “refocused” inquiry

squarely resolves the case before us. To understand Keene’s import, we begin with the

history of the South Carolina Workers’ Compensation Law. Prior to the enactment of the

original Workmen’s Compensation Act of 1936, Act No. 610,

, “an

employee who sustained a work related injury had no choice but to look to the courts for

compensation.” Parker v. Williams & Madjanik, Inc.,

, 526 (1980). This

remedy was “usually unsatisfactory,” as employers could assert several affirmative

defenses to common-law liability, and “employees generally received little or no

compensation because at least one defense was usually applicable.” Id.

Over time, “society recognized the need for a comprehensive approach to provide

adequate compensation for injured employees.” Id. Workers’ compensation law – in South

Carolina and across the country – developed in “recognition of the advisability, from the

standpoint of society as well as of employer and employee, of discarding the common law

idea of tort liability” in favor of routinized, no-fault compensation for workers injured on

the job. Case v. Hermitage Cotton Mills,

(1960). This “recognition”

led to the Act’s “quid pro quo”: “The employee receives the right to swift and sure

compensation in exchange for giving up the right to sue in tort; the employer receives such

tort immunity in exchange for complying with those provisions of the Act” – namely, the

procurement of adequate insurance – “that insure swift and sure compensation for the

employee.” Harrell,

(internal quotation marks omitted).

13 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 14 of 26

This context also explains the purpose of the Act’s so-called “statutory employee”

provision. Because the Act exempts independent contractors from its coverage, the South

Carolina legislature feared that employers “might be tempted to subdivide their regular

operations among subcontractors, thus escaping direct employment relations with the

workers” and avoiding the Act’s duty to secure adequate workers’ compensation insurance.

Keene, 870 S.E.2d at 158 (quoting Lex K. Larson et al., Larson’s Workers’ Compensation

Law § 70.05 (2020)). Accordingly, the statutory employee provision clarifies that when

an employer uses an independent contractor “to perform or execute any work which is part

of his trade, business or occupation,” the Act applies as if “the work[er] had been

immediately employed by him.” S.C. Code § 42-1-400.

But what constitutes “part of” an employer’s “trade, business or occupation” is a

question that has vexed South Carolina courts from the beginning. See Keene, 870 S.E.2d

at 157 (“For eighty-two years, this Court struggled to correctly apply . . . the ‘statutory

employee doctrine.’”). As the Keene Court noted, the “resulting body of jurisprudence is

confusing, often conflicting, and always difficult for the workers’ compensation

commission and the circuit court to apply.” Id.

In Keene, the Court set out to synthesize and clarify this muddled doctrine. In the

“early years” after the Act’s passage, the Court recognized, “this Court viewed the scope

of an employer’s ‘trade, business or occupation’ quite broadly.” Id. at 158. This broad

interpretation – relied upon by Eastman and the district court here – appeared “to include

any work we deemed necessary to the owner’s business.” Id. at 159; see Marchbanks v.

Duke Power Co.,

(1939) (holding that a contractor who painted a power

14 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 15 of 26

company’s metal power poles every two years was a statutory employee because “it was

necessary that the poles be protected from the weather” (cleaned up)); Boseman v. Pacific

Mills,

(1940) (same, for painting a water tower); Bell v. South Carolina

Electric & Gas Co.,

(1959) (same, for “repair and maintenance . . . of

poles and wire”).

On this reading of the Act, contractors performing essential maintenance work on a

manufacturing line surely qualify as statutory employees. But “[t]he reality,” the Court

continued, “is that none of our recent jurisprudence on this question is consistent with the

broad interpretation of ‘trade, business or occupation’ in our original cases.” Keene, 870

S.E.2d at 160. In these more recent decisions – on which the plaintiffs here relied – the

Court, rather than evaluating the “necessity” of the contractor’s labor to the employer’s

operation, instead prioritized employers’ “legitimate choices about the scope of their

company’s business.” Id. (citing Bridges v. Wyandotte Worsted Co.,

(1963);

Wilson v. Daniel Int’l Corp.,

(1973); Glass v. Dow Chem. Co.,

(1997); Abbott,

; Olmstead,

).

This more recent focus on the “business decisions of management,” Keene

concluded, best comports with the text and purpose of the Act. 870 S.E.2d at 162. As the

Court noted, the “original purpose of the statutory employee doctrine was to prevent

business managers from outsourcing work for the purpose of avoiding workers’

compensation costs. That purpose has nothing to do with outsourcing work for legitimate

business reasons.” Id. at 163. Consistent with that understanding, the Supreme Court laid

out its holding in Keene as follows:

15 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 16 of 26

If a business manager reasonably believes her workforce is not equipped to handle a certain job, or the financial or other business interests of her company are served by outsourcing the work, and if the decision to do so is not driven by a desire to avoid the cost of insuring workers, then the business manager has legitimately defined the scope of her company's business to not include that particular work.

Id. Courts, in other words, must “focus initially on what the owner decided is part of its

business.” Id. (emphasis added). At core, “what is or is not ‘part of’ the owner’s business

is a question of business judgment, not law.” Id.

As for the three traditional tests, the Court noted only that “[w]hile each test remains

a valid consideration, today we refocus” on the core inquiry: how the employer has

“legitimately defined the scope of her company’s business.” Id. Because in Keene there

was “no question [the employer] made a legitimate business decision to outsource its

maintenance and repair work,” those maintenance workers were not its statutory

employees. Id. The Keene Court did not think it necessary to consider the three-part test

in reaching this conclusion.

We have little trouble reaching the same conclusion here. When Eastman sold the

Calhoun County plant in 2011 and laid off nearly all 400 of its workers, it made a

“legitimate business decision to outsource” its operations and maintenance work to DAK.

As in Keene, Eastman’s “business managers considered the economic interests of the

company and determined maintenance and repair was not ‘work which is a part of [its]

16 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 17 of 26

trade, business or occupation.’” Id. The 2011 Services Agreement between the parties is

unequivocal: DAK was to be “at all times an independent contractor.” J.A. 405. 2

Eastman does not claim that it still employs production, maintenance, or repair

workers at the plant. And it has never claimed that its outsourcing operation was somehow

illegitimate or “driven by a desire to avoid the cost of insuring workers.” See Keene, 870

S.E.2d at 163. Eastman conceded at oral argument that it does not allege illegitimate

motivations, and there is nothing in the record that could support such a finding. Indeed,

it is uncontested that the plaintiffs here were insured by – and received worker’s

compensation from – their direct employer, DAK. Under a straightforward application of

Keene, these undisputed facts are sufficient to resolve the case.

Eastman’s limited attempts to distinguish Keene are unavailing. Eastman’s primary

argument is that one of the facts relied on by the district court – that plaintiffs’ labor had

been performed by Eastman employees prior to the 2011 sale – still supports its conclusion

that maintenance work is part of Eastman’s “trade, business or occupation” under the

statutory employee provision. The Court in Keene, Eastman urges, confirmed that each of

the original three tests remains “a valid consideration.” Keene, 870 S.E.2d at 163. And

2 Unlike the Operating Agreement, which provided that DAK employees performing operations work would be “considered employees of Eastman [] for the purposes of worker’s compensation laws,” J.A. 457–58, the Services Agreement made no exception to the independent-contractor status of DAK’s maintenance employees. Because the plaintiffs here, as maintenance workers, were covered exclusively by the Services Agreement, we need not evaluate the impact of the Operating Agreement’s terms on the Keene analysis. But the absence of any such provision in the Services Agreement only highlights Eastman’s unqualified decision to exit the business of maintenance and repair.

17 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 18 of 26

under the third test – whether “the identical activity . . . has been performed by employees

of the owner,” Collins,

– Eastman contends, the fact that Eastman’s own

employees had performed the same maintenance work as the plaintiffs until the 2011 sale

means that the plaintiffs are statutory employees.

Whatever the precise status of this third test after Keene, it cannot do the work

Eastman hopes – at least, not consistent with the actual holding of Keene. If Eastman is

right, then the fact that Eastman used its own employees for maintenance work at the

Calhoun County facility before it sold that facility in 2011 and five years before the 2016

accident is enough to establish that DAK’s contractors remained statutory employees in

2016 and, presumably, remain so today. Once a company uses its own employees to

perform a certain activity, that is, it freezes into place that original employee relationship,

which may not be altered by a subsequent decision to “outsourc[e]” the work “for

legitimate business reasons.” Cf. Keene, 870 S.E.2d at 163.

But that outcome, as should be clear from what we have said already, would turn

Keene on its head. The animating principal of Keene is that business managers are entitled,

for legitimate business reasons, to “outsourc[e] work that formerly was handled as a part

of the business,” and that when they do, the contractors who perform that work will not

become statutory employees by virtue of this new “business judgment.” See id. at 163.

Instead, Eastman’s deliberate and final decision to remove itself from the maintenance

business altogether establishes the opposite: that Eastman “legitimately defined the scope

of [its] company’s business to not include that particular work.” Id.

18 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 19 of 26

That is not to say, of course, that whether an activity “has been performed by

employees of the owner” – the third of the traditional tests – may never be a “valid

consideration” after Keene. The Keene court itself pointed to one context in which it might

be probative, in its approving description of Bridges v. Wyandotte Worsted Co.,

(1963), as the first in the line of cases in which it began to “narrow[]” its “original view”

of the statutory employee provision. Keene, 870 S.E.2d at 160. In that case, a company

that ordinarily employed its own maintenance workers made a “temporary change,” using

independent contractors on one occasion “due to the excessive amount of overtime that its

men had already worked.” Id. (quoting Bridges, 243 S.E.2d at 20). “Honor[ing] the

original business decision,” the Keene court explained, those contractors were deemed

statutory employees: that “the work was performed on one occasion by a contactor did not

change the defendant’s business decision to include maintenance and repair . . . as part of

its business.” Id.

There may well be cases, in other words, in which it is not clear whether an employer

has “defined the scope” of its business, id. at 163, to include certain outsourced work, and

whether the outsourced work is regularly performed by the business’s own employees, as

in Bridges – or, indeed, any of the three traditional tests – may shed important light on that

inquiry. But this is not such a case. Eastman’s choice to outsource its maintenance and

repair operations over a decade ago, in conjunction with a sale of its facility, was complete,

unequivocal, and final. There is no contention that this choice was anything but a

“legitimate business decision.” Id. Keene instructs us to “put value on the business

decisions of management,” id. at 162, and here it is plain that management has “defined

19 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 20 of 26

the scope of [Eastman’s] business to not include” the maintenance work performed by

DAK’s contractors, id. at 163. It follows under Keene that the plaintiffs are not Eastman’s

statutory employees, and that their actions may proceed.

2.

Eastman has a final, alternative argument: Even if Keene makes clear that the

plaintiffs are not its statutory employees, Eastman contends, we should affirm the district

court’s decision because that court correctly applied South Carolina’s prior precedent and

the Keene decision should apply only prospectively. We disagree. We need not resolve

whether the premise of Eastman’s argument – that but for Keene, the plaintiffs would

qualify as statutory employees under South Carolina law – is correct. The South Carolina

Supreme Court has decided Keene, and Keene applies to this case.

In assessing the retroactive effect of a state court decision while sitting in diversity,

we apply governing state law, and again “anticipate,” to the extent necessary, whether the

state’s highest court would choose to apply a decision retroactively. See Stahle,

. Under South Carolina law, “judicial decisions in civil cases are presumptively

retroactive.” Lord v. D & J Enterprises, Inc.,

(2014) (internal

quotation marks omitted). The South Carolina Supreme Court has recognized two narrow

scenarios in which prospective-only application may be appropriate: decisions “creat[ing]

a new cause of action,” and – the exception relied on by Eastman here – those “in which

immunities have been dissolved.” Toth v. Square D Co.,

(1989). Both

20 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 21 of 26

sets of cases, the Court has reasoned, “create[] liability where none had previously existed,”

making it “unfair and inappropriate” to impose retroactive liability without due notice.

3

On the other hand, if a decision merely “restated the focus” of an inquiry, Carolina

Chloride, Inc. v. S.C. Dep’t of Transp.,

(2011), or “clarified the test

in assessing the scope” of a right or duty, Lord,

, it will be applied

retroactively. Keene, which set out to “refocus” the statutory employment inquiry and

“apply the doctrine in light of the General Assembly’s original purpose for enacting it,”

Keene, 870 S.E.2d at 157, 163, falls squarely on this side of this line. For one, Keene

neither created a right nor abolished an immunity, but rather interpreted the scope a

decades-old immunity established by statute. Moreover, the Court in Keene clearly did not

view itself as fundamentally altering the state’s statutory employment jurisprudence. To

the contrary, the Keene Court determined that “none of [its] recent jurisprudence . . . is

consistent with the broad interpretation” of immunity posited by Eastman. 870 S.E.2d at

160 (emphasis added). Rather than diverging from – let alone abrogating – a well-settled

immunity doctrine, Keene synthesized a line of cases that long preceded the accident at

issue here. Indeed, Keene’s immediate predecessor, Olmstead – in which the Court

purported to “overrule all prior cases to the extent they are in conflict with” its analysis –

3 These cases generally involve situations where the Supreme Court expressly created a new common-law cause of action or abrogated a common-law immunity, see Walton v. Stewart,

(1982) (abolishing parental immunity); Ludwick v. This Minute of Carolina,

(1985) (creating tort of retaliatory discharge), or where the South Carolina legislature passed a statute creating a right or rescinding an immunity, see Douglass v. Florence Gen. Hosp.,

(1979) (modifying charitable immunity).

21 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 22 of 26

was decided in 2003, almost a decade before Eastman’s initial decision to outsource its

labor to DAK. Olmstead,

.

The South Carolina Supreme Court’s denial of rehearing in Keene further supports

this conclusion. The Keene defendant’s petition for rehearing requested, in part, that the

Court render its decision solely prospective in application, but the Court declined to grant

rehearing on that basis. And the South Carolina Court of Appeals has deemed such a denial

relevant to the retroactivity inquiry. See Miranda C. v. Nissan Motor Co.,

,

40 n.4 (Ct. App. 2013) (“Branham specifically argued in his petition for rehearing that the

supreme court declare its decision only applied prospectively based on fairness and justice

to the parties. Despite Branham’s argument, the supreme court denied his petition for

rehearing.”). The Court’s denial of rehearing, though not binding law, thus helps us

“predict,” to the extent it is not already clear under South Carolina law, “how the question

would be decided” by that very Court. Stahle,

.

Eastman is correct that Keene will alter the statutory employment analysis

undertaken by lower courts and may affect the outcome in some cases. But the same can

be said of virtually any state supreme court case that clarifies or untangles a messy area of

the law, and it is not, without more, enough to rebut the presumption of retroactive

application under South Carolina law. When a Supreme Court decision “restate[s] the

focus” or “clarifie[s] the test” in assessing the scope of a right or duty, that decision is to

be applied retroactively. Carolina Chloride, Inc.,

; Lord,

. Keene falls clearly within that category, and we therefore apply it to the case before

us.

22 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 23 of 26

B.

Finally, we turn to the question of Eastman’s co-defendant, Mundy, which

employed the contractors who made the initial attempt to clear the drainpipe before the

explosion. As noted above, the district court held that Mundy’s statutory immunity

followed as a direct consequence of Eastman’s. That is because the Act bars suit by a

statutory employee against both a business owner and “those conducting [the owner’s]

business,” S.C. Code § 42-5-10, codifying the common-law “fellow-servant doctrine”

under which employees may not sue co-employees for negligence, see Powers v. Powers,

(1962). At the time of the 2016 accident, Mundy’s employees, like

DAK’s, “were performing preventative maintenance on one of the lines that produces

chemicals for Eastman,” J.A. 177, and under the district court’s reasoning, that made both

sets of contractors Eastman’s statutory employees. Because the plaintiffs were thus

statutory co-employees of Mundy’s workers, the court held, the codified fellow servant

doctrine barred their claims against Mundy as well as against Eastman. 4

No party challenges this aspect of the district court’s ruling. And the implications

for this appeal are clear: If the plaintiffs are not Eastman’s statutory employees, as the

district court believed, then they also are not the statutory co-employees of Mundy’s

workers, and the fellow servant doctrine does not bar their tort actions against Mundy. Our

4 The district court initially held that, although the fellow servant doctrine exempted Mundy’s employees from suit, this immunity did not flow vicariously to Mundy itself. On reconsideration, the court concluded that Mundy was, in fact, vicariously immune, and the plaintiffs do not appeal that determination.

23 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 24 of 26

holding that the plaintiffs are independent contractors and not statutory employees under

Keene, in other words, means that their suits may proceed against Mundy as well as against

Eastman.

Mundy does not argue otherwise. Instead, it asks that we affirm the district court’s

judgment on an alternative ground: that South Carolina’s common-law “borrowed servant

doctrine” independently warrants dismissal. Under the borrowed servant doctrine, “if an

employer lends his employee to a second employer, and if the employee is under the control

of the second employer, the employee is considered employed by the second employer.”

Eaddy v. A.J. Metler Hauling & Rigging Co.,

(Ct. App. 1985). Mundy

contends that when its employees attempted to heat the clogged drainpipe at the Calhoun

County plant, they acted as Eastman’s borrowed servants, so that any liability for their acts

would flow to Eastman and not to Mundy. See Cooke v. Palmetto Health All.,

(Ct. App. 2005). The district court addressed this alternative ground for dismissal,

but it concluded only that on the “current evidence of record,” Mundy had not established

that the borrowed servant doctrine justified dismissal. J.A. 282.

Whatever the merits of Mundy’s borrowed servant argument, we decline to reach it

at this stage in the proceedings. Mundy moved to dismiss the plaintiffs’ actions only for

lack of subject matter jurisdiction under Rule 12(b)(1). And the district court ordered

limited discovery “only on issues related to the court’s subject matter jurisdiction and the

workers’ compensation statutory employment doctrine.” J.A. 5. On a Rule 12(b)(1)

motion, a district court may properly consider such “evidence outside the pleadings without

24 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 25 of 26

converting the proceeding to one for summary judgment.” Richmond, Fredericksburg &

Potomac R.R. Co. v. United States,

(4th Cir. 1991).

But no party contends that Mundy’s borrowed servant argument, as a common-law

defense to substantive tort liability, is in any manner jurisdictional. Indeed, this alternative

defense presupposes that the court does have jurisdiction and posits that all resulting

liability should flow to Eastman, not Mundy. It is not clear how this merits defense could

be brought by way of a Rule 12(b)(1) motion; instead, it appears to be in essence an

argument that the limited record here, developed solely to determine subject matter

jurisdiction, also justifies a grant of summary judgment on the merits under Rule 56. See

Fed. R. Civ. P. 56(a) (“The court shall grant summary judgment if the movant shows that

there is no genuine dispute as to any material fact and the movant is entitled to judgment

as a matter of law.”).

The district court did not convert Mundy’s Rule 12(b)(1) motion to one for summary

judgment, nor did it apply Rule 56 in addressing Mundy’s borrowed servant argument.

Instead, the district court held only that it was “not persuaded” that the “current evidence

of record” – which was, again, developed only to resolve the court’s jurisdiction – required

dismissal on this alternative ground. Mundy is free to again raise its borrowed servant

defense, and all other merits defenses, on a complete record developed through the usual

discovery process. Accordingly, even if we may properly reach this issue on appeal,

“nothing requires us to do so, and we decline to engage in such lengthy alternative analyses

here.” Goldfarb v. Mayor & City Council of Baltimore,

(4th Cir. 2015).

25 USCA4 Appeal: 19-1646 Doc: 159 Filed: 11/23/2022 Pg: 26 of 26

III.

For the foregoing reasons, we reverse the district court’s judgment dismissing the

plaintiffs’ actions for lack of jurisdiction and remand the case for further proceedings

consistent with this opinion.

REVERSED AND REMANDED

26