# Amicus Curiae Brief — Eastern Enterprises v. Apfel

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0105%3A27

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1998
- **Citation:** 524 U.S. 498

## Text

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No. 97-42 i}

CLERK

IN THE

Supreme Court of the Anited States
OcTOBER TERM, 1997

Eastern Enterprises,
Petitioner,
Vv.

Kenneth S. Appel, Commissioner
of Social Security, et al.,

Respondents.

On Writ of Certiorari to the United States
Court of Appeals for the First Circuit

Brief Amicus Curiae of
Freeman United Coal Mining Company

in Support of Respondents

KATHRYN S. MATKOV
Counsel of Record

JOHN A. WASHBURN

BRIAN B. GILBERT

GOULD & RATNER

222 North LaSalle Street

Suite 800

Chicago, Illinois 60601

(312) 236-2003

January 20, 1998 Counsel for Amicus Curiae

Midwest Law Printing Co., Chicago 60610, (312) 321-0220

a ,

BEST AVAILABLE COPY

TABLE OF CONTENTS

PAGE
TABLE OF AUTHORITIES .................45. ii
STATEMENT OF INTEREST ................. 1
TY ow eu ck cd dv eudoeceené 2
GE otis ons wenn ne enckewheeds ens ees 4

A. THE COAL ACT WITHSTANDS SCRUTINY
UNDER THE DUE PROCESS CLAUSE BE-
CAUSE IT RATIONALLY ALLOCATES THE
FINANCIAL BURDENS OF FUNDING UMWA
BENEFITS AMONG THOSE PARTIES WHO
MOST LOGICALLY SHOULD BEAR SUCH
COSTS—THE FORMER EMPLOYERS WHO
PARTICIPATED IN THE CREATION OF THE
COAL INDUSTRY'S MULTI-EMPLOYER RE-
TIREE BENEFITS SYSTEM ............... 4

1. Pre-Coal Act History of Coal Industry
Provided Rationale for Adoption of the
GD. 6 Chandi nen 660% 28 ¥ed wwe ce 4

2. Coal Act Is a Rational Response to the
Problems Faced by the Coal Industry,
Combined Fund and Prior Fund Bene-
so WE 0 6 oe VEC ES CO ESC EH eee oe 6

B. THE IMPOSITION OF LIABILITY UNDER
THE COAL ACT ON PETITIONER IS NOT A
“TAKING” UNDER THE JUST COMPEN-
CST EEE Cec cc ces nendeseseccese 8

GE Sv ch cet we ibe te deve dctb ett 11

ii
TABLE OF AUTHORITIES
Cases PAGE

Blue Diamond Coal Co., In Re, 79 F.3d 516
(6th Cir.), cert. denied, 117 S. Ct. 682 (1996) .. 10

Concrete Pipe and Products of California v.
Construction Laborers Pension Trust for

Southern California, 508 U.S. 602 (1993) ..... 10
Connolly v. Pension Benefit Guaranty Corp.,
RE Sic Cecssescencecececcs 8

Davon, Inc. v. Shalala, 75 F.3d 1114
(7th Cir.), cert. denied, 117 S. Ct. 50 (1996) ... 11

Chateaugay Corp., In Re, 53 F.3d 478
(2d Cir.), cert. denied, 116 S. Ct. 298

Dh biota een as bene eee se 9000es 8, 10, 11
Pension Benefit Guaranty Corp. v. R.A. Gray
& Co., 467 U.S. 717 (1984) ... 6... eee eee 4

United States v. Northeastern Pharmaceutical
& Chemical Co., 810 F.2d 726 (8th Cir.),

cert. denied, 108 S. Ct. 146 (1986) .......... 10
Usery v. Turner Elkhorn Mining Co.,

PE eee aden eccesecccees 4,8
Statutes

The Coal Industry Retiree Health Benefit Act
of 1992, 26 U.S.C.A. § 9701-22 (West Supp.
i eek eee ab NS ebds cececece 1

Miscellaneous

Coal Commission Report: A Report to the
Secretary of Labor and the American
People (Nov. 1990) ........--++eee5: 5, 6, 7,9

1

STATEMENT Of INTEREST’

The amicus, Freeman United Coal Mining Company
(“Freeman”), and its predecessors have been mining coal
in Illinois since 1872. Freeman, which is a subsidiary of
General Dynamics Corporation, currently operates two
deep mines and one surface mine in the Central IIlinois
basin, and produces approximately 4.5 million tons of
coal annually. The Company employs approximately 500
people in the State of Illinois. Although Freeman is not
presently a member of the Bituminous Coal Operators
Association (“BCOA”) or a signatory to the new 1998
National Bituminous Coal Wage Agreement (““NBCWA”)
with other BCOA members, Freeman and its predeces-
sors were until recently members of the BCOA and were
signatories to all previous NBCWA’s executed through
and including the 1993 NBCWA.

Prior to the implementation of The Coal Industry Re-
tiree Health Benefit Act of 1992, 26 U.S.C.A. § 9701-22
(West Supp. 1997) (the “Coal Act”), Freeman contributed
to the UMWA 1950 Benefit Plan and Trust and the
UMWA 1974 Benefit Plan and Trust and the predecessor
UMWA Welfare and Retirement Fund of 1950 (“Prior
Funds”).

Freeman experienced adverse economic conditions in
the late 1980’s and early 1990's as a result of a change

' Counsel for all parties have consented to the filing of this
amicus brief, and amicus has filed those consents with the
Clerk of this Court in accordance with Rule 37.3. No person
other than amicus and its counsel made a monetary contri-
bution to the preparation or submission of this brief. Rule
37.6. The brief was not authored in whole or in any part by
counsel for a party. Rule 37.6.

in the demand for Illinois basin coal and the soaring
costs of required contributions to the Prior Funds. These
soaring costs were a direct result of severe inflation in
health costs and the shrinking universe of companies in
the coal industry available to fund these costs. The Coal
Act was a direct response to this dilemma faced by Free-
man and other similarly situated companies to insure
that bargained-for benefits guaranteed to the beneficia-
ries of the Prior Funds would be paid despite insufficient
contributions.

The amicus agrees with Respondents that the Coal Act
(a) is a rational exercise of Congress’ legitimate authority
and thus withstands scrutiny under the Due Process
Clause, and (b) does not constitute a taking of property
under the Just Compensation Clause.

STATEMENT OF FACTS

Freeman was created by the merger of Freeman Coal
Company and United Electric Coal Companies in 1975.
At the height of its operations in 1982, Freeman oper-
ated eight (8) coal mines and produced coal at a rate of
nearly eight million tons per year. As a signatory to
previous NBCWAs, Freeman made contributions to the
Prior Funds from their inception. Prior to the Coal Act,
Freeman’s contributions to the Prior Funds were based
upon an assigned hourly rate multiplied by the number
of man hours worked by UMWA miners for the applica-
ble period and/or a contribution rate per ton of coal pro-
duced. Between January of 1988 and January of 1993
when the Coal Act was implemented, Freeman’s hourly
contribution rate increased from $1.91 to $3.67. This con-
stituted a staggering increase of in excess of 92% during

3

this five (5) year period. As the Coal Commission found,
this increase was the direct result of soaring health costs
and fewer responsible operators in the coal industry
available to fund these costs. Before the adoption of the
Coal Act, Freeman was also required to pay benefits
costs for individuals that were never employed by Free-
man.

This increase in contribution rates occurred during a
time when Freeman was experiencing financial pressures
due to the fact that markets for Illinois basin coal were
shrinking as a result of Clean Air Act legislation and
increasing competition from Western coal sources.

Under the Coal Act, Freeman is currently assigned 796
beneficiaries covered by the UMWA Combined Fund
(“Combined Fund”). Freeman’s contributions in the cur-
rent year will total $1,791,289.68, which will constitute
approximately a 50% decrease from the contributions
Freeman was making to the Prior Funds prior to the
Coal Act. Although health costs continue to soar, the
beneficiaries assigned to Freeman all constitute former
employees of Freeman and their dependents. At present,
Freeman is paying for its own employees and former em-
ployees, not for those of other companies, like Eastern,
whom by their own volition have chosen to no longer
operate in the coal industry.

An increase in Freeman’s required fund contributions
to the pre-Coal Act levels, in the face of the difficulty of
surviving any extended strike and shutdown at this time
similar to that experienced by The Pittston Company in
1992 over issues related to benefits contributions, could
threaten the future viability of the company.

4

ARGUMENT

A.

THE COAL ACT WITHSTANDS SCRUTINY UNDER THE
DUE PROCESS CLAUSE BECAUSE IT RATIONALLY
ALLOCATES THE FINANCIAL BURDENS OF FUNDING
UMWA BENEFITS AMONG THOSE PARTIES WHO
MOST LOGICALLY SHOULD BEAR SUCH COSTS—THE
FORMER EMPLOYERS WHO PARTICIPATED IN THE
CREATION OF THE COAL INDUSTRY’S MULTI-EM-
PLOYER RETIREE BENEFITS SYSTEM
To succeed on its claim, Petitioner must establish that
Congress “acted in an arbitrary and irrational” manner
Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15
(1976) in enacting the Coal Act. If the Coal Act:
“is supported by a legitimate legislative purpose
furthered by rational means, judgments about
the wisdom of such legislation remain within the
exclusive province of the legislative and executive
branches.” Pension Benefit Guaranty Corp. v.
R.A. Gray & Co., 467 U.S. 717, 729 (1984).
Even where a statute is applied retroactively or has
retroactive effects, such legislation should be upheld if
“the legislation is itself justified by a rational legislative
purpose.” Jd. at 730.

1. Pre-Coal Act History of Coal Industry Provided
Rationale for Adoption of Coal Act

A review of the history of the coal industry over the
period of time from the 1940’s to the passage of the Coal
Act does show that Congress was neither arbitrary nor
irrational in enacting this legislation. Petitioner and
certain of its amici would like this Court to forget this
history and conclude that each NBCWA was negotiated

5

in a vacuum for a finite + eriod of years without any view
toward the future or any expectation of ongoing responsi-
bility on behalf of coal operators. This view of the in-
dustry is jaundiced and inaccurate.

As the Coal Commission found, the provision of health
and welfare benefits to miners has been a critical issue
for labor and management since the 1940’s. Coal Com-
mission Report: A Report to the Secretary of Labor and
the American People (Nov. 1990) at 29. With the shut-
down of the coal industry in the 1940’s, the UMWA made
it clear that its members would no longer report to work
without the provision of health and welfare benefits to
miners and their dependents. Although, as Petitioner
points out in its brief, the NBCWA’s contained provisions
regarding the rev<cation, termination or amendment to
benefits, Brief for Petitioner at 5, amicus believes that it
was clear to every company operating in the industry
that subsequent NBCWAs or other agreements with the
UMWA would inevitably provide for retiree medical
benefits, in some form or another, for miners and their
dependents. For Petitioner to claim that it exited the
coal industry in 1965 without any inkling that such
benefits would remain a part of the NBCWA package is
simply disingenuous.

It must be remembered that the UMWA Welfare and
Retirement Fund of 1946 (“1946 W&R Fund”) instituted
the first union health and welfare fund. The Krug-Lewis
Agreement which created the 1946 W&R Fund was
reached only after a protracted and bitter strike in which
control of the mines was assumed by the Federal govern-
ment. Succeeding NBCWAs modified and furthered the
concept of a funded health and welfare fund. Although
each preceding NBCWA had contained provision for the

6

funding of these benefits, the 1978 NBCWA finally codi-
fied what the industry had been pointing towards for
many years—an assurance of health care to “orphaned”
miners (retired miners whose last employer was no
longer in business or otherwise ceased contributing to
the funds) and an obligation of signatories to maintain
benefits and to continue to contribute so long as the
operator remained in business (the so called “evergreen
clause”). In fact, the Coal Commission found that guar-
anteed health care benefits for miners had, many years
previous to the 1978 NBCWA, already become a well
entrenched expectation of miners and their dependents.
Coal Commission Report at 1.

The crisis that lead to the adoption of the Coal Act was
caused by a multitude of factors, the most significant
being the increasing cost of health care coupled with the
continuing contraction of the coal industry. Coal Com-
mission Report at 2. Given the number of miners and
dependents receiving benefits under the Prior Funds, the
increasing cost to provide such benefits and the shrink-
ing base of companies available to fund such costs, it
became clear that something needed to be done. The
Pittston strike in 1992 brought these issues to a head
and Congress stepped in to investigate the crisis and
develop a solution.

2. The Coal Act Is a Rational Response to the Prob-
lems Faced by the Coal Industry, Combined Fund
and Prior Fund Beneficiaries

Congress was faced with the prospect of either (a)
doing nothing, which would have increased the chaos in
the coal industry, led to more strikes, left in excess of

7

100,000 individuals without health coverage and poten-
tially crippled the coal industry, or (b) devising a plan to
fund these benefits through the natural life cycle of the
Prior Funds. Congress investigated several mechanism’s
including an industry wide assessment or the “pay for
your own” plan that it eventually adopted. Coal Commis-
sion Report at 61-69.

By assigning fund beneficiaries to current and former
NBCWA signatories who employed such beneficiaries,
Congress selected a scheme that was fair and equitable.
Responsibility for the payment of benefits would at least
fall on companies that had a clear nexus with the cov-
ered individuals and profited from the employment of
such individuals while they were members of the work
force. In addition, by creating a tiered approach for the
assignment of beneficiaries, Congress insured not only
that plan beneficiaries would be assigned to the company
that had the strongest nexus with such beneficiary, but
also that the number of unassigned beneficiaries would
be kept to a minimum. This would reduce the burden
placed on existing coal operators to fund the costs of
these unassigned beneficiaries, which was one of the pri-
mary causes of the crisis in the first place. The resulting
framework is certainly more rational than the Petition-
er’s “solution” which, if accepted, would increase the
number of “orphaned” miners and shift the cost of paying
health benefits for such miners and their dependents to
companies, like Freeman, that never employed, and had
no connection whatsoever with, such miners.

Perhaps, a better scheme could have been developed by
Congress, although it is difficult to imagine what such a
system might look like. Nevertheless, to withstand Due
Process scrutiny, Congressional solutions need only be

8

rational and not arbitrary. Turner Elkhorn, 428 U.S. at
19. Clearly, given the historical background and the
problems identified to be resolved, the Coal Act is a
rational response.

THE IMPOSITION OF LIABILITY UNDER THE COAL
ACT ON PETITIONER IS NOT A “TAKING” UNDER
THE JUST COMPENSATION CLAUSE

Three factors are of particular significance in determin-
ing the existence of a Fifth Amendment “taking”: (1) the
economic impact of the regulation on the claimant; (2)
the extent to which the regulatory action interferes with
reasonable investment-backed expectations; and (3) the
character of the government action. Connolly v. Pension
Benefit Guaranty Corp., 475 U.S. 211, 225 (1986).

With respect to economic impact, the appropriate
“yardstick of economic impact is proportionality.” In Re
Chateaugay Corp.,.53 F.3d 478 (2d Cir.), cert. denied,
116 S. Ct. 298 (1995). As discussed above, the frame-
work adopted by the Coal Act is a perfectly proportional
scheme. Stated simply, each coal operator or former coal
operator that were signatories to NBCWAs are required
to pay for their own former employees and their depen-
dents. Beneficiaries that are unassigned are paid for pro-
portionately by all contributers to the fund. This places
liability for funding exactly where it should be, on those
companies that employed the fund beneficiaries and who
participated as employers in the creation of the multi-
employer benefit system. In contrast, the pre-Coal Act
scheme was grossly disproportionate in that it placed
liability for all beneficiaries on the few remaining com-

9

panies in the coal industry, even though they had no
nexus with these beneficiaries.

Petitioner argues that proportionality is not served
since Petitioner did not “contribute to the financial prob-
lems of the Benefit Plans” or promise lifetime health
benefits to miners. Petitioner Brief at 42. Petitioner con-
veniently divorces itself from this class of companies,
ignoring the fact that the crisis in the funds is not some-
thing that developed over night but had its roots back in
the days when Petitioner and others participated as con-
tributor in the creation of the multi-employer benefits
system. See Coal Commission Report at 29. Funding has
always been an issue for health and welfare benefits
since the 1940’s. As stated earlier, at the time Eastern
and other operators left the BCOA, it was only reason-
able to expect that the continuation of these benefits for
miners in the future would be a linchpin of any manage-
ment/labor compact. The main cause of the ensuing fi-
nancial crisis was increasing health care costs coupled
with fewer companies available in the coal industry to
bear these costs. Coal Commission Report at 2. These
developments did not arise as a result of any act of
Freeman or the BCOA. Petitioner wants to retain all of
the benefits from coal operations and earlier NBWCA’s
(such as the receipt of significant dividends from EACC
over the years), but does not want to bear any corre-
sponding responsibility. Thus, Petitioner’s position favors
disproportionality and is consequently inequitable.

Certain of Petitioner's amici argue that the Coal Act
is a “taking” because certain of the former operators
affected by the Coal Act cannot afford to make the pay-
ments required thereby. See Brief Amici Curiae of Unity

10

Real Estate Company, et al. Yet, as long as the Coal
Act’s application is proportionate, as is demonstrably the
case, it should withstand scrutiny under the “takings”
clause. Similar requirements of funding or cost sharing
under the Multiemployer Pension Plan Amendments Act
and the Comprehensive Environmental Response, Com-
pensation Liability Act of 1980 have not rendered such
statutes unconstitutional. See Concrete Pipe and Prod-
ucts of California v. Construction Laborers Pension Trust
for Southern California, 508 U.S. 602 (1993); and United
States v. Northeastern Pharmaceutical & Chemical Co.,
810 F.2d 726 (8th Cir.), cert. denied, 108 S. Ct. 146
(1986) at 734.

With respect to the second prong of the “takings”
analysis, Petitioner argues that there was no way to
foresee the Coal Act, the guarantee of lifetime benefits or
the imposition of liability on former employees. As dis-
cussed above, however, Petitioner simply ignores history
including the importance of the coal industry to the
national economy, the fact that miners clearly would not
stand for operators not providing these benefits (as evi-
denced by the 1940’s shutdown and the negotiation of
each NBCWA since), and the Federal government’s will-
ingness to get involved to insure health care benefits for
retired miners. In Re Chateaugay Corp., 53 F.2d at 495-
496; In Re Blue Diamond Coal Co., 79 F.3d 516 at 525-
526 (6th Cir.), cert. denied, 117 S. Ct. 682 (1996).

Finally, the Coal Act was enacted by Congress in
response to labor disputes in the coal industry to avoid
disruption of interstate commerce and to insure that a
significant group of individuals, who had reason to ex-
pect a different result, are not left without privately

11

funded health care benefits (which, if this occurred,
would certainly increase the burden on the government
and the rest of the country to fund these costs). The Coal
Act is intended to promote the common good by “adjust-
ing the benefits and burdens of economic life” and is
therefore not the type of governmental action that would
be deemed a “taking” of property. In Re Chateaugay
Corp., 53 F.2d at 496, Davon, Inc. v. Shalala, 75 F.3d
1114 (7th Cir.), cert. denied, 117 S. Ct. 50 (1996).

CONCLUSION

The judgment of the United States Court of Appeals
for the First Circuit should be affirmed.

Respectfully submitted,

KATHRYN S. MATKOV
Counsel of Record

JOHN A. WASHBURN

BRIAN B. GILBERT

GOULD & RATNER

222 North LaSalle Street

Suite 800

Chicago, Illinois 60601

(312) 236-2003

January 20, 1998 Counsel for Amicus Curiae

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0105%3A27. Public record. Not legal advice.