Opposition Brief — Eastern Enterprises v. Apfel

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No. 97-42 Supreme Court, Us.

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In the SEP $3 1997

Supreme Court of the United States

October Term, 1997 ae

EASTERN ENTERPRISES,

Petitioner,

SHIRLEY S. CHATER,

COMMISSIONER OF SOCIAL SECURITY, ET AL.,

Respondents,

PEABODY HOLDING COMPANY, INC.,

EASTERN ASSOCIATED COAL CORP., AND

COAL PROPERTIES CORP.,

Respondents.

ON A PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE FIRST CIRCUIT.

RESPONDENTS BRIEF IN OPPOSITION

PEABODY HOLDING COMPANY, INC.

EASTERN ASSOCIATED COAL CORP.

COAL PROPERTIES CORP.

MITCHEL S. Ross

Counsel of Record

KENNETH A. SWEDER

LAURIE M. RUSKIN

STROOCK & STROOCK & LAVAN

100 Federal Street

Boston, Massachusetts 02110

(617) 482-6800

Counsel for Respondents

Peabody Holding Company, Inc.

Eastern Associated Coal Corp.

Coal Properties Corp.

aX!

BATEMAN & SLADE, INC. BOSTON, MASSACHUSETTS

QUESTIONS PRESENTED

1. Whether the Coal Act explicitly requires the assignment

of the beneficiaries in question to Eastern Enterprises.

2. Whether the Social Security Administration’s (“SSA”)

assignments to Eastern Enterprises are mandated by the

language of the Coal Act or are based upon the SSA’s

permissible construction of the statute.

3. Whether the Coal Act violates the Due Process Clause as

applied to Eastern Enterprises.

4. Whether the Coal Act violated the Takings Clause as

applied to Eastern Enterprises.

RULE 29.6 LISTING

Pursuant to Rule 29.6 of the Rules of the Supreme Court of

the United States, Respondents, Peabody Holding Company,

Inc., Eastern Associated Coal Corp., and Coal Properties

Corp., state that an ultimate parent corporation, The Energy

Group, PLC, is the only parent, subsidiary (except wholly-

owned subsidiaries), and affiliate that has issued shares to the

public (traded on the London and New York Stock

Exchanges).

LIST OF PARTIES

The Plaintiff to the proceedings below was the Petitioner,

Eastern Enterprises. The Defendants to the proceedings below

were the Respondents Shirley S. Chater in her capacity as

; issioner of the Social Security Administration, the

United Mine Workers of America Combined Benefit Fund,

and the Trustee of the United Mine Workers of America

Combined Benefit Fund. The Third-Party Defendants to the

action below were the Respondents Peabody Holding

Company, Inc., Eastern Associated Coal Corp., and Coal

Properties Corp.

TABLE OF CONTENTS

IND siicinicinnsicieiiinittiiatatiieaiatarati i

UEP UI cnicinisrninnececepianieiesenizarntemesnuatendaintatetisdeaas ii

SD ll

ee cenrerenncanescinirceriensensnnssnnnsnateninsien 2

A. The judgment under appeal involves Coal Act

beneficiaries who had no employment relation-

ship with the Peabody respondents ...................... 2

B. Eastern never severed its ties to the Coal Industry

when it established EACC; instead it reaped

millions of dollars in profits through its owner-

ER AN LATE ATA 5

C. There is no evidence that EACC was to assume

all of Eastern’s Coal related liabilities ................. 6

D. EACC has been assigned its own retirees and

EES STR a &

E. Other Coal Act decisions 2.............ccccccccccsecsseeceeees 4

Reasons for denying the writ ................cccsssscsseseeeseeeeseeees 10

I. The First Circuit correctly determined that

Eastern misconstrues the Coal Act when it

claims that it is unfairly burdened by the act ....... 10

ID einecictanieenetetemenniniehitiiiecienieenti a. 15

TABLE OF AUTHORITIES

CASES:

Blue Diamond Coal Co. v. Secretary of Health and

Human Services (In re Blue Diamond Coal Co.),

79 F.3d 516 (6th Cir. 1996), cert. denied, 117 S. Ct.

Ge UU crneruisintintednatsttininctnniibiasinensiniinailinsiiitmanetanaes 9

Carbon Fuel Company v. USX Corporation, 100 F.3d

1124 (4th Cir, 1996) ...c.sccccccscscssssveseseesssseeeeeees 13, 14, 15

Davon, Inc. v. Shalala, 75 F.3d 1114 (7th Cir.), cert

denied, 117 S. Ct. 50 (1996) ....ccvsscccsvssscsssesseesseeeeeesees 9

Eastern v. Chater, et al., 110 F.3d 150 (1st Cir. 1997) passim

Holland v. Keenan Trucking Co., (S.D. W.Va., slip

op., March 14, 1995), at 5, citing 138 Cong. Rec.

at $17603 (daily ed. Oct. 8, 1992) ........ccccccerserseeseneees 13

In re: Blue Diamond Coal Co., (Blue Diamond Coal

Co. v. Shalala), 174 B.R. 722 (E.D. Tenn. 1994) ....... 13

LTV Steel Co. v. Shalala (In re Chateaugay Corp.), 53

F.3d 478 (2d Cir.), cert. denied, 116 S. Ct. 298

COBB cqceeremmnmnntinnmumnmmmemmemnnenneae 9

Passamaquoddy Tribe v. State of Me., 75 F.3d 784

1: | en 12

Usery v. Turner Elkhorn Mining Co., 428 U.S. 1,

96 S. Ct. 2882, 49 L.Ed.2d 752 (1976).........ccceseeeeeees 15

STATUTES

United States Code

BE ULB. GR GSO cccccesscsssscssscsscsssesscssssessessenmssensee passim

No. 97-42

In the

Supreme Court of the United States

October Term, 1997

EASTERN ENTERPRISES,

Petitioner,

SHIRLEY S. CHATER,

COMMISSIONER OF SOCIAL SECURITY, ET AL.,

Respondents,

PEABODY HOLDING COMPANY, INC.,

EASTERN ASSOCIATED COAL CORP., AND

COAL PROPERTIES CORP.,

Respondents.

ON A PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE FIRST CIRCUIT.

RESPONDENTS BRIEF IN OPPOSITION

PEABODY HOLDING COMPANY, INC.

EASTERN ASSOCIATED COAL CORP.

COAL PROPERTIES CORP.

The Respondents Peabody Holding Company, Inc., Eastern

of the United States Court of Appeals for the First Circuit,

entered on April 7, 1997. That opinion is reported at 110 F.3d

150 (1st Cir. 1997) (reprinted, along with the Judgment and

Orders of the District Court, in the Appendix of Eastern’s

Petition for a Writ of Certiorari).

STATEMENT OF THE CASE

Respondents and Third-Party Defendants, Peabody Holding

Company, Inc. (“Peabody”), Eastern Associated Coal Corp.

(“EACC”) and Coal Properties Corp. (“CPC”) (collectively

the “Peabody Respondents”), find the Statement of the Case as

presented by Eastern Enterprises (“Eastern”) in its Petition For

A Writ Of Certiorari, dated July 7, 1997 (“Petition of

Eastern”), notable for the manner in which it obscures the

relationship between Eastern and the miners assigned to

Eastern under the Coal Industry Retiree Health Benefit Act of

1992, 26 U.S.C. §§ 9701-22 (“Coal Act”). Eastern’s

presentation of the facts thus obscures the underlying facts of

the case and misconstrues the liabilities that Eastern is

challenging.

A. The Judgment Under Appeal Involves Coal Act

Beneficiaries Who Had No Employment Relationship

With The Peabody Respondents.

There are a number of allegations made in Eastern’s

Statement of the Case which omit crucial facts with respect to

Eastern’s relationship to the Peabody Respondents and to the

retirees for whom it was assigned responsibility under the

Coal Act. Eastern neglects to note the fact that the judgment

and opinion of the United States Court of Appeals for the First

Circuit that it challenges here, actually involves the

assignment under the Coal Act of two beneficiaries: the late

Samuel East, who worked for Eastern for a significant period

of time until 1960, and never worked for EACC or any of the

Peabody Respondents; and his widow, Josephine East. See

Eastern v. Chater, et al., 110 F.3d 150, 154 (1st Cir. 1997)

(reprinted in the Appendix of the Petition of Eastern at A-1,

pp. A-6 to A-7). A request for judicial review ensued, in

which Eastern asked the lower court to assign responsibility

for the Easts to EACC, despite the complete lack of any

employment relationship with EACC.' Jd.

The First Circuit noted that Mr. East mined coal for Eastern

for 14 years, from 1946 to 1960, and that he then worked for

two other companies from 1960 to 1967, retiring in early

1967. Eastern v. Chater, et al., 110 F.3d at 154; Petition of

Eastern at A-6; JA 2111-2112 at %f 2, 4 and 6.2 Thus,

according to the First Circuit, for 14 of his 21 years as a miner,

Eastern benefited from the work of Mr. East. For many of

those years, Eastern contributed to the welfare and retirement

funds of the United Mine Workers of America (““UMWA

Funds”), and Mr. East and his beneficiary, Josephine East,

received benefits from those UMWA Funds. While there may

not have been a legal requirement to do so, during those same

years, miners such as Mr. East received benefits for life from

the UMWA Funds. From the time of his retirement unti! his

death, Mr. East received benefits from the UMWA Funds,

even though Eastern stopped contributing to the UMWA

Funds in the mid-1960s and even though the other companies

Mr. East worked for (C.C. & L. Coal Co. which became

' ‘The First Circuit notes that the Easts are a test case; that the SSA intends to

assign approximately 1400 similarly situated miners and beneficiaries to Eastern.

Eastern v. Chater, et al., 110 F.3d at 154 n.3; Petition of Eastern at A-7, n.3.

* ‘The joint record appendix from the United States Court of Appeals for the

First Circuit is referred to as “JA.”

Calvert Coal Co.) went out of business and ceased

contributions in 1977. JA 2112 at 9] 4 and 7. Mrs. East

continues to obtain benefits from the Combined Fund. JA

2112 atq 8.

Mr. East was never employed by a signatory to the 1978 (or

any more recent) National Bituminous Coal Wage Agreement

(“NBCWA”). Eastern v. Chater, et al., 110 F.3d at 154;

Petition of Eastern at A-6. “Thus, because Eastern was the

[signatory operator] which had employed East for the longest

period of time, the [Social Security Administration] assigned

him and his wife to Eastern pursuant to Coal Act

§ 9706(a)(3).” Eastern v. Chater, et al., 110 F.3d at 154;

Petition of Eastern at A-6.

Mr. East never worked for EACC. Eastern v. Chater, et

al., 110 F.3d at 158 n.5; Petition of Eastern at A-16, n.5; JA

2112 at 45. In fact, Mr. East had stopped working for Eastern

before EACC was even established and had retired entirely

from the industry shortly after a transfer of coal industry assets

to EACC by Eastern was completed as of 1966. Hence, no

contributions to the UMWA Funds were made by EACC with

respect to any work performed by Mr. East and EACC

obtained no benefits from any such work.

Thus, a crucial distinction, and one that Eastern glosses

over in its Petition, is that, in reaching its decision, the Court

below rested its judgment upon the fact that the beneficiaries

Eastern was challenging had become beneficiaries under the

Coal Act because of an extensive employment relationship

with Eastern; an employment history which never included

EACC or any of the other Peabody Respondents.

B. Eastern Did Not Sever Its Ties To The Coal Industry

When It Established EACC: Instead It Reaped Millions

Of Dollars In Profits Through Its Ownership Interest

In EACC.

statements,’ between 1966 and 1986 Eastern extracted over $76

million from EACC in the form of dividends and management

fees. Beginning in 1966, EACC paid the following dividends to

Eastern: 1970, $1,474,695; 1971, $16,000,000; 1972,

$20,000,000; 1976, $7,000,000; and 1977, $1,500,000. JA 357,

397, 439, and 496. Similarly, in that period Eastern caused

EACC to pay it the following fees: 1966, $261,940; 1971,

$846,272; 1972, $926,000; 1977, $2,141,000; and 1978,

$2,271,000. JA 278, 389, 432, 489, and 542. Additional

financial statements of EACC show that in 1986, EACC paid

$24,162,854 in dividends to Coal Properties Corp., which in

turn paid $33,195,159 in dividends to Eastem. JA 2188 and

2191.

Because discovery is still on-going in the third party action, the Peabody

Respondents have only reviewed EACC’s financial statements for about one-half

of the twenty years in question.

First Circuit recognized, “for all the protestations of

independence which Eastern makes on EACC’s behalf, the fact

remains that EACC returned tens of millions of dollars in

dividends to Eastern during the post-1966 period.” Eastern v.

Chater, et al., 110 F.3d at 158; Petition of Eastern at A-15.

C. There Is No Evidence That EACC Was To Assume All

Of Eastern’s Coal Related Liabilities.

As Eastern acknowledges, from 1946 to 1965, Eastern’s Coal

Division operated mines, primarily in West Virginia and

Pennsylvania. Petition of Eastern at 5. In 1963, Eastern

incorporated EACC and began to transfer coal assets to EACC.

Id. at 6. By 1966, Eastern had transferred certain assets of its

Coal Division to EACC. Jd Eastern claims that EACC

assumed all of Eastern’s coal-related liabilities, “known and

unknown.” Petition of Eastern at 6. But nowhere in Eastern’s

Petition or in its voluminous papers submitted to the lower

courts is there any evidence of an express agreement on the part

of EACC to assume all of Eastern’s Coal Division liabilities,

known and unknown, let alone the Coal Act liability. In

particular, there is no evidence of any written or other

made at the time of the transfer of assets from

Eastern to EACC whereby EACC agreed to assume from

Eastern: (a) liabilities under laws not enacted at the time of the

transfer of assets to EACC; (b) unforeseeable liabilities; (c)

liabilities not in existence at the time of the asset transfer to

EACC; or (d) any statutorily created liabilities, such as those

imposed by the Coal Act, for lifetime health benefits for retirees

and their dependents. JA 2116 at { 21.

The Stock Exchange Agreement of 1987, pursuant to which

Peabody purchased EACC and CPC from Eastern, conclusively

shows that EACC had never assumed Eastern’s liabilities under

the Coal Act for miners who had never worked for EACC. See

JA 2206, et seg. The Stock Exchange Agreement is explicit as

to the liabilities of Eastern for which CPC and EACC were

liable. It expressly states that: “CPC, EACC or the other

Subsidiaries of CPC shall be liable, in respect of the class of

individuals hereinafter specified, for payments of premiums and

benefits, and for the reimbursement of benefit costs, under the

plans listed on Schedule 5(c) hereto.” JA 2260. The class of

individuals specified consisted of persons who had “retired or

otherwise ceased to be employed by CPC or any of its

Subsidiaries (including EACC).” JA 2116 at ¥ 22. This class of

individuals did not include Eastern retirees who had never

worked for CPC or EACC. Schedule 5(c) also makes reference

only to a “Benefit Plan for UMWA Represented Employees of

EACC and Subs” — not for Eastern employees who had never

worked for EACC. See Schedule 5(c) to the Stock Exchange

Agreement. JA 2116 at 22.

Eastern claims that EACC is the successor to Eastern’s Coal

Division and should be deemed to have assumed the liabilities

of its Coal Division under the Coal Act. Petition of Eastern at

6-7. Even if EACC was a “successor” for some purposes, the

assignment by the Social Security Administration to Eastern

under the Coal Act was found by the First Circuit to be,

nevertheless, correct. Eastern v. Chater, et al., 110 F.3d at

155; Petition of Eastern at A-9. (Nor will any such successor

relationship ultimately support an indemnification or other

claim of Eastern against the Peabody Respondents).

In addition to the fact, recognized by the First Circuit, that a

proper interpretation of the Coal Act supports the assignment of

tuo Sheen Wntheems 2 to chee dnebbk an “tamale Ut of 0

evidence cited by Eastern to support its “successor” claim

comes from statements of Eastern, or from statements made by

EACC during the time that it was owned and controlled by

Eastern. JA 2113-2115; Jd. at J] 14, 16-18. It is undisputed

that from 1963 to 1987, EACC was a wholly-owned subsidiary

of Eastern or one of Eastern’s other wholly-owned subsidiaries.

As such, Eastern controlled EACC and had the power to direct

EACC to make statements and representations concerning its

alleged status as successor.

Eastern also controlled EACC’s Board of Directors. For

example, in 1967 Eastern’s President, Eli Goldston, was

Chairman of the Board of Directors of EACC. JA 276.

Eastern’s Senior Vice President-Administration and Finance,

J.N. Philips, was Vice Chairman of the Board of Directors of

EACC. Id. EACC’s President, A.P. Boxley, was also Senior

Vice President of Eastern. Jd. Given these facts, and others, it

is obvious that Eastern directed the statements made and

positions taken by EACC on all issues, including the

statements upon which Eastern relies to claim that EACC is

the successor to Eastern’s Coal Act liability.

D. EACC Has Been Assigned Its Own Retirees And

Beneficiaries.

It should also be noted that pursuant to the Coal Act, EACC

itself has been assigned its own retirees and their dependents.

As of October 1, 1994, the SSA had assigned 1,860

beneficiaries to EACC. JA 2112-2113 at | 9. Between

October 1, 1994, and September 30, 1995, EACC paid

premiums to the Combined Benefit Fund pursuant to the Coal

Act of more than $4,000,000.00. Jd. Among these assignees

to EACC are employees who formerly worked for Eastern and

then worked for EACC, unlike Mr. East and the others

assigned to Eastern who are at issue in this action, who never

worked for EACC. Jd. at { 10.

E. Other Coal Act Decisions.

In Eastern’s final section of its Statement of the Case, it

cites to three other cases which have been denied certiorari

before this Court. See Blue Diamond Coal Co. v. Secretary of

Health and Human Services (In re Blue Diamond Coal Co.),

79 F.3d 516 (6th Cir. 1996), cert. denied, 117 S. Ct. 682

(1997); Davon, Inc. v. Shalala, 75 F.3d 1114 (7th Cir.), cert

denied, 117 S. Ct. 50 (1996); LTV Steel Co. v. Shalala (In re

Chateaugay Corp.), 53 F.3d 478 (2d Cir.), cert. denied, 116 S.

Ct. 298 (1995). Eastern attempts, however, to distinguish

these cases from the case at bar by asserting that none of these

cases involved a situation similar to Eastern’s in that in these

cases, the companies challenging the Coal Act left the coal

industry without making any provision for the continued

contributions to the UMWA. Petition of Eastern at 11.

However, even if this fact is true, it is irrelevant given that the

decisions cited did not rely on whether or not these companies

had made such provisions. To the contrary, each of these

decisions considered essentially the same arguments proffered

by Eastern here and reached the same conclusion as the First

Circuit, i.e., that the Coal Act, as it was applied to each of the

companies, did not violate the Due Process and the Takings

Clauses of the Constitution.

The fact remains that the Second, Sixth and Seventh Circuit

Courts have all considered, and affirmed, the constitutionality

of the Coal Act. As the First Circuit’s decision challenged

here, is, in fact, consistent with these three other circuits, there

is no reason for any further appellate review.

REASONS FOR DENYING THE WRIT

I. THE First Circurr CORRECTLY DETERMINED THAT

EASTERN MISCONSTRUES THE COAL ACT WHEN IT

CLAIMS THAT IT Is UNFAIRLY BURDENED By THE ACT.

Eastern erroneously argues in its Petition that, as a former

coal industry participant, the retroactive cost-spreading of the

Coal Act is unnecessarily burdensome. Eastern’s reasoning is

that a former participant, like Eastern, is not responsible for

creating the financial crises that inspired the legislation

because Eastern “took the prudent step of creating a

substitute,” i.e., a successor which maintained a financial

commitment to its miners. Petition of Eastern at Section I-B,

16-19, & Section I-C, 19-21. Eastern seeks to support its

Petition for a Writ of Certiorari on the illusory building block

that a “successor” relationship between Eastern and EACC is

relevant to the assignment of beneficiaries who never worked

for EACC. Thus, according to Eastern, EACC and the other

Peabody Respondents somehow became obligated under the

Coal Act for Mr. East, and the other employees like him, who

never even worked for EACC. This argument was vehemently

rejected by the First Circuit:

There are two gaping flaws in the fabric of

Eastern’s analysis. In the first place, it is not

accurate to claim that only those [signatory

operators] which executed NBCWAs in or after

1974 created a legitimate expectation of

lifetime health benefits for miners. Congress

and the Coal Commission both reviewed the

historical evidence and concluded that pre-1974

signatories had made an implicit commitment

to furnish such benefits [cites omitted]. Since

Eastern as a signatory of the earlier NBCWAs,

contributed directly to mine workers’ legitimate

expectations of lifetime health benefits,

requiring it to pay for the realization of those

expectations is hardly irrational. . . .

The second hole in [Eastern’s] argument is

even more ringent. Eastern insists that the Coal

Act was a bail-out of the benefit plans, pure and

simple; that it did not contribute to the funding

shortfalls which necessitated the bail-out; and,

thus, that holding it liable under the Act is

bizarre. But this is much too crabbed a view of

the historical record. The crisis in retiree

benefits occurred in two stages: first, the

inculcation of an expectation of lifetime health

benefits; and second, the inadequacy of the

initial method chosen by the parties (through

negotiation, albeit with § government

intervention) to respond to this expectation.

Both elements were necessary in order to forge

the problem which Congress eventually

addressed. If the expectations had not been

created by Eastern and its counterparts, the

need for the later plans, and eventually for the

Combined Fund, would never have arisen.

Thus, it is disingenuous for Eastern to focus

solely on its lack of involvement in more recent

benefit plans while ignoring its role in the

events leading to their establishment.

Eastern v. Chater, et al., 110 F.3d at 157-58; Petition of

Eastern at A-13 through A-15.

The First Circuit held that the statute itself does not permit

an assignment to any purported “true successor,” contrary to

the contention of Eastern. The First Circuit’s characterization

of Eastern’s argument and the Court’s response to that

argument is as follows:

Because section 9706(a) [of the Coal Act] is

silent on the question of successor liability,

Eastern’s thesis runs, the law is ambiguous and

the SSA ought to have filled the resultant

vacuum in such a way as to have dictated

assignment of the Easts to EACC....

[However,] [s]ection 9706(a) of the Coal Act

unambiguously delineates a classification

regime — end that regime, literally applied,

requires East’s assignment to the appellant as

the pre-1978 signatory which employed him for

the longest interval . . . Eastern’s claim that

Congress overlooked the possibility of

assignment to successors of a (signatory

operator] is unpersuasive. . . . [RJeviewing the

language and architecture of the Coal Act as a

whole . . . we think it is obvious that Congress

purposely omitted any reference to successors

in writing section 9706(a)’s assignment

scheme. See generally Passamaquoddy Tribe

v. State of Me., 75 F.3d 784, 794 n.6 (1st Cir.

1996)(rejecting idea that statutory silence

necessarily indicates ambiguity; in an

appropriate context, failure to mention an item

demonstrates specific congressional intent).

[Thus,] the Easts were properly assigned by the

SSA in pursuance of the plain terms of the Coal

Act.

Eastern v. Chater, et al., 110 F.3d at 154-55; Petition of

Eastern at A-7 through A-9.

Even if Eastern had “bargained out” of certain of its

obligations with respect to its mining operations (which it did

not do in any event with respect to the obligations in

question), “Congress reasoned that an equitable solution

would permit reaching back to place responsibility on those

companies which the miners had worked for, notwithstanding

their bargaining out of their obligations.” Carbon Fuel

Company v. USX Corporation, 100 F.3d 1124, 1133 (4th Cir.

1996). With the Coal Act:

Congress has chosen to spread the costs of the

Combined Fund’s benefits to those employers

who had profited from the labor of UMWA

miners and who, at some time in their histories,

had contributed to multi-employer welfare

benefit funds.

In re: Blue Diamond Coal Co., (Blue Diamond Coal Co. v.

Shalala), 174 B.R. 722, 727 (E.D. Tenn. 1994).

Congress’ “express intent” was “that responsibility for

financing the cost of providing health benefits to eligible

retirees should be placed on those companies which employed

[them] and thereby benefited from their services.” Holland v.

Keenan Trucking Co., (S.D. W.Va., slip op., March 15, 1995),

at 5, citing 138 Cong. Rec. at $17603 (daily ed. Oct. 8, 1992).

Thus, as the First Circuit affirmed, the SSA’s assignment of

Mr. East to Eastern rather than to EACC is wholly consistent

with the intent of the Coal Act. Mr. East worked for Eastern,

as noted by First Circuit, for 14 years. Eastern obtained the

benefit of all of those years of labor. Mr. East did not work

for EACC at any time and EACC obtained no benefits from

his work. The profits generated by Mr. East went into the

coffers of Eastern before EACC even came into existence.

Moreover, as the First Circuit observed, Mr. East

was in Eastern’s employ during a 14-year

period in which he developed a reasonable

expectation of lifetime health benefits. In

contrast, he never worked for EACC, yet

Eastern’s alternative would have that company

assume responsibility for him. Requiring

Eastern to pick up the tab strikes us as a less

arbitrary step.

Eastern v. Chater, et al., 110 F.3d at 158 n.5; Petition of

Eastern at A-16 1.5.

Congress clearly intended that assignments be made to the

employer for whom the retiree worked longest, since that

employer obtained the greatest benefit from the retiree’s

labors. As the company which employed him for the longest

period and benefited most from his labor, it is surely Eastern,

and not EACC, which Congress intended to make responsible

for the benefits received by Mr. East and his dependents.

Eastern argues that because it was replaced in the coal

business by EACC, which took over its ongoing

responsibilities under the then-existing UMWA funds, it was

not one of those companies which primarily caused the crisis

by creating “orphan” retirees. Petition of Eastern at 18-19.

But in Carbon Fuel, the Court also dealt with companies

which had others take over their responsibilities under the

existing UMWA agreements. The Fourth Circuit in Carbon

Fuel found that, in fact, “those companies that bargained out

of their obligations and left the mining business, helped, in

part, to cause near financial collapse of the Benefit Plans by

causing a small number of signatory companies to bear the

entire burden.” Carbon Fuel Company v. USX Corporation,

100 F.3d. at 1133. The Fourth Circuit found that Congress

to reach

the then existing UMWA Funds. Jd.

The Fourth Circuit in Carbon Fuel also directly answers

“practical importance” to Eastern in its having raised funds on

the assumption that it had no further coal-related liabilities.

The Fourth Circuit held:

All economic legislation can be said to upset

settled economic expectations of someone.

“(Legislation readjusting rights and burdens is

not unlawful solely because it upsets otherwise

settled expectations.” Usery v. Turner Elkhorn

Mining Co., 428 U.S. 1, 16, 96 S. Ct. 2882, 49

L.Ed.2d 752 (1976). That principle holds true

“even though the effect of the legislation is to

impose a new duty or liability based on past

acts.”

Carbon Fuel Company v. USX Corporation, 100 F.3d at 1137.

Thus, Congress very clearly intended that Eastern would be

responsible under the Coal Act for the premiums for Mr. East

and the others who worked for it and from whom it benefited,

notwithstanding the purported expectations of Eastern and the

other “reachback” companies that they would not have such

CONCLUSION

For all of the foregoing reasons, Respondents and Third-

Party Defendants, Peabody Holding Company, Inc., Eastern

Associated Coal Corp. and Coal Properties Corp. respectfully

request that Eastern’s Petition for Certiorari be denied.

Respectfully submitted,

MITCHEL S. ROSS