Appendix — Unity Real Estate Co. v. Hudson
Supreme Court brief1999
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT.
UNITY REAL ESTATE COMPANY,
Appellant No. 97-3234,
v.
Marty D. HUDSON; Michael H. Holland;
Thomas O.S. Rand; Elliott A. Segal;
Carlton R. Sickles; Gail R. Wilensky;
William P. Hopgood; Trustees of the
United Mine Workers of America Combined Benefit
Fund; Thomas F. Connors;
Roberts Wallace; Trustees of the 1992
United Mine Workers of America Benefit
Plan; United States of America
(Intervenor in District Court); LTV Corporation
(LTV), NACCO Industries, Inc.
~ (NACCO), Amicus Curiae.
BARNES AND TUCKER COMPANY, Appellant No.
97-3236,
v.
Marty D. HUDSON, Trustee of the United Mine
Workers of America Combined Benefit
Fund and Trustee of the 1992 United Mine
Workers of America Benefit Plan;
Michael H. Holland, Trustee of the United Mine
Workers of America Combined
Benefit Fund and Trustee of the 1992 United
Mine Workers of America Benefit
Plan; Thomas O.S. Rand, Trustee of the United Mine
Workers of America Combined
Benefit Fund; Elliott A. Segal, Trustee of the
United Mine Workers of America
Combined Benefit Fund; Carlton R. Sickles,
Trustee of the United Mine Workers
of America Combined Benefit ! 1nd;
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Gail R. Wilensky, Trustee of the United Mine
Workers of America Combined Benefit Fund;
William P. Hopgood, Trustee of the
United Mine Workers of America Combined
Benefit Fund; Thomas F. Connors,
Trustee of the 1992 United Mine Workers
of America Benefit Plan; Robert G.
Wallace, Trustee of the 1992 United Mine
Workers of America Benefit Plan;
United States of America (Intervenor in the
District Court); LTV Corporation
(LTV), NACCO Industries, Inc. (NACCO),
Amicus Curiae.
Nos. 97-3234, 97-3236.
Decided March 29, 1999.
Before: BECKER, Chief Judge, ALDISERT and WEIS,
Circuit Judges.
OPINION OF THE COURT
BECKER, Chief Judge.
In Eastern Enterprises v. Apfel, 524 U.S. 498, 118 S. Ct.
2131, 141 L. Ed.2d 451 (1998), the Supreme Court held
unconstitutional the portion of the 1992 Coal Industry Retiree
Health Benefit Act (Coal Act), 26 U.S.C. §§ 9701- 9722 (1994
& Supp. II), that required former coal mine operators to pay for
health benefits for retired miners and their dependents, as
applied to a former operator who last signed a coal industry
benefit agreement in 1964. In this case, we are asked to apply
Eastern to former coal mine operators who were signatories to
coal industry agreements in 1978 and thereafter. Eastern was
decided by a sharply divided Court, and the parties disagree as
to what, if any, principles commanded a majority.
The plaintiffs, Unity Real Estate (“Unity”) and Barnes &
Tucker Co. (“B & T”), challenge the Coal Act as applied to
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them as both a violation of substantive due process and an
unconstitutional uncompensated taking. Although it is an
exceedingly close question, and we are highly sympathetic to
plaintiffs’ unfortunate situation, in which retroactively imposed
liability operates to bind them to commitments they had
thought satisfied when they left the coal industry, we conclude
that the Act is constitutional as applied to these plaintiffs.
Accordingly, their recourse must be to Congress rather than to
the courts.
First, we conclude, albeit with substantial hesitation, that the
Coal Act does not violate due process. Our due process
inquiry proceeds in two parts. We acknowledge at the outset
that there is a gap between what the contracts between the
union and the mining companies required and what the Coal
Act now mandates from those former mining companies.
Because this is a substantive due process challenge, we accord
deference to Congress’s judgments, based on the report and
recommendations of the Coal Commission. While reasonable
minds could differ on the point, we are satisfied that the
agreements signed by the plaintiffs in 1978 and thereafter
promised that miners and their dependents would receive
lifetime benefits from the benefit funds, and that, at all events,
these agreements informed reasonable expectations that the
benefits would continue for life. Similarly, we conclude that it
was reasonable for Congress to conclude that the plaintiffs’
withdrawal from the funds contributed to the funds’ financial
instability, though the agreements themselves permitted
withdrawal. The history of coal mining in this country also
supports Congress’s decision to step in when the funds that
provided health benefits to retired miners began to falter.
The question we must then answer is whether those
congressional judgments provide enough of a rationale for
closing the gap between the contracts and the needs of the
benefit funds through the mechanism of the Coal Act.
Consistent with our due process jurisprudence, we ask whether
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the Coal Act was a rational response to the problems Congress
identified, taking into account the Act’s retroactivity, which is
highly disfavored in our legal culture. In light of Congress’s
findings and in the context of extensive government regulation
of the coal industry, we hold that it was not fundamentally
unfair or unjust for Congress to conclude that the former coal
companies should be responsible for paying for such benefits,
even if they were no longer contractually obligated to pay into
the benefit funds. The retroactive scope of this enactment,
especially as applied to plaintiff Unity (eleven years),
approaches the edge of permissible legislative action, but we
cannot say that the law is beyond the legislative power.
We also decline to find a compensable taking on the ground
that the Coal Act will put the plaintiffs out of business, because
it is contrary to the reasoning of a majority of the Supreme
Court in Eastern. Moreover, granting relief whenever a
plaintiff could credibly argue that it would be driven out of
business by a regulation would create major difficulties in
evaluating the constitutionality of much modern legislation.
We therefore decline to construe this regulatory burden as a
“categorical taking” analogous to the total destruction of the
value of a specific piece of real property.
I. FACTS AND PROCEDURAL HISTORY
A. History of the Coal Act
1. Early Agreements in the Coal Industry
The history behind the Coal Act has often been discussed in
the pages of the federal reporters. See, e.g., Eastern, 118
S. Ct. at 2137-42 (plurality). Briefly, the relevant facts are as
follows: The coal industry has witnessed a series of particularly
vitriolic labor disputes over the past halfcentury. In 1946,
motivated principally by miners’ demands for decent health and
retirement benefits, the United Mine Workers of America
(“UMWAY”) called a nationwide strike. To forestall industrial
paralysis, President Truman nationalized the coal mines.
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Following the execution of what came to be known as the
Krug-Lewis Agreement, the government relinquished control
of the mines. The UMWA and the Bituminous Coal Operators’
Association (“BCOA”), a multiemployer group of coal
producers, then executed the first National Bituminous Coal
Wage Agreement (“NBCWA”). The 1947 NBCWA specified
terms and conditions of employment in the mines and, among
other things, extended the Krug-Lewis Agreement by providing
health and pension benefits to miners.
A new NBCWA signed in 1950 provided that, in exchange
for union concessions, the BCOA would create a welfare and
retirement fund financed by a per ton levy on coal mined by
signatory coal producers. The 1950 Fund was designed to
receive employer contributions and to use the funds to provide
health benefits to current and retired miners (and, in certain
cases, to family members). Several more NBCWAs were
signed over the next two decades. None of them altered this
basic benefits format, although beginning in 197] the UMWA
and the BCOA were given power over the levels of benefits
provided under the 1950 Fund, removing discretion formerly
vested in the Trustees of the Fund. See /n re Chateaugay
Corp., 53 F.3d 478, 482 (2d Cir. 1995).
2. The 1974 Agreement
In 1974, demographic changes that had increased the cost of
benefits, along with the passage of the Employee Retirement
Income Security Act (“ERISA”), 29 U.S.C. § 1001 ef seq., led
to a restructuring of the 1950 Fund. In its place, the 1974
NBCWA established four separate multiemployer plans, two
covering pension benefits and two dealing with nonpension
benefits. The nonpension entities were the 1950 Benefit Plan,
which provided health benefits to coal workers who retired
before 1976, and the 1974 Benefit Plan, which covered those
who retired on or after January 1, 1976. The 1974 NBCWA
explicitly guaranteed that miners and their dependents would
retain their health services cards — which gave them access to
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Plan health benefits — “for life.” No such express warranty
had appeared in any earlier agreement. We will discuss these
changes in more detail below. See infra Part III.
3. The 1978 Agreement
In response to continued labor unrest and unresolved
concerns over benefits, the 1978 NBCWA incorporated a new
provision assuring health care for “orphaned” miners (that is,
miners whose employers had abandoned either the coal industry
or the UMWA), together with complementary “guarantee” and
“evergreen” provisions. The “guarantee” clause obligated
signatories to make sufficient contributions to maintain benefits
at the negotiated levels during the period of agreement,
whereas before there had been no promise to maintain any
particular benefit level. The “evergreen” clause required
signatories who continued to mine coal to continue making
benefit contributions for as long as such contributions were
required by future NBCWAs, regardless of whether a particular
operator actually signed those subsequent NBCWAs.
Additionally, the 1978 NBCWA for the first time defined
specific health benefits that would be covered, a practice that
continued in later agreements. Finally, for miners leaving
covered service on or after January 1, 1976, primary
responsibility for retiree health care coverage was shifted from
the UMWA multiemployer system to individual coal
companies, with the 1974 Plan retained as an “orphan” plan for
retirees whose former employers went out of business.
4. The Coal Commission
The economic problems that prompted the remedial
measures in the 1974 and 1978 NBCWAs continued to plague
the industry. In particular, the cost of health care rose steeply
throughout the 1980s, the number of orphaned miners
increased dramatically as more and more employers left the
industry, and an aging population swelled the retired miners’
ranks. By 1990, contributions from a shrinking number of coal
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producers proved insufficient to fund the four benefit plans, and
those plans were awash in red ink.
The UMWA struck the Pittston Coal Company for nearly 11
months in 1989-90. The Secretary of Labor intervened,
brokered a rapprochement, and, as part of the negotiated
settlement, set up a commission to study the industry's
problems and recommend ways of rejuvenating the benefit
plans. The Coal Commission issued its report in late 1990.
Congress’s response to the commission’s suggestions took the
form of the Coal Act. The Act folded the 1950 and 1974 Plans
into a single UMWA-sponsored entity (the Combined Fund)
and wove an elaborate tapestry designed to ensure that all
retirees who were eligible to receive health benefits from the
preexisting Plans would obtain them from the Combined Fund.
The Act also created the 1992 Plan, which was designed to
provide benefits to eligible retirees and their dependents who
were not beneficiaries of the Combined Fund and who were not
receiving health care coverage directly from former employers.
The linchpin of the statutory scheme is contained in section
9706 of the Coal Act, which directs the assignment by the
Social Security Commissioner of every eligible beneficiary to
a “signatory operator” who is still “in business.” The signatory
operator (“SO”) must have signed at least one NBCWA and
must pay premiums to the Combined Fund sufficient to defray
the estimated annualized health care costs for its assigned
beneficiaries. See 26 U.S.C. § 9704.' A retired miner is
assigned first, if possible, to the SO that both signed the 1978
(or any subsequent) NBCWA and also employed him for at
least two years more recently than any other SO. See id.
' The law also provides that SOs must pay an additional amount,
proportional to the number of initial assignments, to provide coverage for
orphaned retirees. However, it has apparently not proven necessary to
assign SOs responsibility for orphaned retirees because of the availability
of other funding sources. See Eastern, 118 S. Ct. at 2142 n. 3 (plurality).
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§ 9706(a)(1). If no SO fits that description, the retired miner
is assigned to the 1978 (or any subsequent) SO that employed
him most recently for any length of time. See id. § 9706(a)(2).
If the retired miner never worked for a 1978 or subsequent SO
that is still in business, he is assigned to the SO that employed
him for the longest period of time. See id. § 9706(a)(3).
B. The Parties
1. Unity
Unity is a corporation owned by members of the Jamison
family. Unity is covered by the Coal Act as a “related person”
to several companies — formed by members of the Jamison
family — that were ultimately absorbed into Unity. One, South
Union-PA, had been mining coal since 1923 and signed the
1947 NBCWA and amendments thereto through 1961. South
Union-WVA, which took up mining when South Union-PA left
off, signed the 1974, 1978, and 1981 NBCWAs, although a
bankruptcy court granted it leave to reject the 1981 NBCWA
in 1981. Yet another Jamison company, Stewart Coal & Coke
Co., paid into the UMWA benefit funds from 1949 to 1958;
when it ceased operations, it stopped paying into the benefit
funds, but its former employees continued to receive benefits
from the Funds. Other related companies signed NBCWAs and
paid into UMWA benefit funds at various times from the 1960s
through the 1970s.’
? While attempting to distance itself from liability, Unity and its owners
have not ignored the benefits of close corporate relationships. Although we
do not suggest that it acted with bad faith, we note that Unity repaid the
Jamison family over $230,000 from promissory notes given by Stewart
Coal & Coke, which merged with Unity in 1969 (over $150,000 on those
notes was paid in 1992 and 1993), and that Unity sheltered $288,000 in
income from federal income tax because of net operating loss carryover
from South Union-WVA’s bankruptcy. At all events, Unity has never
presented any legal challenge to the “related persons” provision of the Act,
and hence its obligations must stand or fall regardless of how Unity was
assigned the beneficiaries.
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Unity currently owns a small commercial building and
parking lot in Greensburg, Pennsylvania and employs two
individuals, a corporate officer who earns $7,000 per year and
a janitor. Its annual gross revenues are approximately $50,000
and its net worth is approximately $85,000. Unity was
assigned 74 beneficiaries of the Combined Fund and owed the
Fund, as of September 30, 1995, over $440,000 in unpaid
premiums. In addition, Unity was assigned 2 beneficiaries of
the 1992 Plan and, as of January 31, 1996, owed that Fund
over $18,000. The assignment was based upon Unity’s prior
employment of 63 miners, who had worked for Unity and its
related companies, on average, for ten years.* Unity represents
that its Coal Act liabilities are over six times its total assets and
that, if forced to pay, it will be bankrupted. These
representations are not disputed by the Trustees.
2 B&T
B & T was assigned 1544 Combined Fund beneficiaries and
some twenty 1992 Plan beneficiaries. B & T had been, from
1905 on, engaged in large scale coal production until closing its
last mining operation in 1986. It terminated an agreement to
manage a mine effective January 1, 1987. At the peak of its
coal mining operations from the 1970s to the 1980s, B & T
employed approximately 1100 UMWaArepresented miners
B & T was a party to the 1971, 1974, 1978, and 198]
NBCWAs through its membership in the coal operators’
association. Although it withdrew from the association prior
to the 1984 NBCWA, it later agreed to be bound by that
NBCWA on a “me-too” basis, adhering to the Agreement’s
requirements. Its participation in the NBCWA terminated in
1988. At that time, B & T discontinued its individual employer
plan and its retirees were left to be covered by the 1974 Benefit
Plan (the “orphan” plan).
* Thirty miners had worked for the companies for more than ten years and
thirteen for more than fifteen years.
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B & T’s activities are currently confined to leasing its coal
reserves, paying workers’ compensation and black lung claims,
and treating acid mine drainage from its closed mines. B & T
claims that if it is forced to continue paying its Coal Act
liabilities, all of its assets will be consumed in less than two
years, and this is not in dispute.
C. Procedural History
The plaintiffs challenge the constitutionality of the Coal Act
as it applies to them (§ 9706(a)j(1) & (2)). Both moved for
preliminary injunctions to prevent the Trustees of the funds to
which the plaintiffs are required to pay under the Coal Act from
enforcing the Coal Act against them during the pendency of
these cases B & T withdrew its motion for a preliminary
injunction, and the District Court granted Unity’s motion for a
preliminary injunction. The court rejected Unity’s Due Process
Clause argument but granted the requested interim relief on
Takings Clause grounds. See Unity Real Estate Co. v. Hudson,
889 F. Supp. 818 (W.D Pa. 1995). All parties moved for
summary judgment. The District Court, reconsidering its views
of the merits, granted the defendants’ motions for summary
judgment and denied Unity’s and B & T’s motions for summary
judgment. Unity and B & T appeal.
ll. THE EASTERN DECISION
A. The Rationales
Eastern Enterprises was involved in coal mining until 1965,
and signed every NBCWA from 1947 until 1964. It was
assigned liability for over 1000 miners, based on Eastern’s
status as the pre-1978 signatory for whom the miners had
worked for the longest period of time; its total liability was
estimated to be between $50 and $100 million. Eastern sued,
claiming that the Coal Act was unconsititutional
Four Justices concluded that the Act was a compensable
taking as to Eastern. In practical terms, this meant that the Act
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was unconstitutional: Compensation for the taking would be
the return of sums required to be paid by the Act. Although
the law did not work a physical invasion, the plurality noted
that economic regulation can constitute a taking. See Eastern,
118 S. Ct. at 2146 (plurality). The plurality looked to three
factors of particular significance in determining whether a
taking had occurred: the economic impact of the regulation, its
interference with reasonable investment-backed expectations,
and the retroactive character of the government action. See id
(plurality).
The plurality examined several previous cases to set the
stage for its analysis. It looked to Usery v. Turner Elkhorn
Mining Co., 428 U.S. 1, 96 S. Ct. 2882, 49 L. Ed.2d 752
(1976), where the Court upheld provisions of the Black Lung
Benefits Act, which required coal operators to compensate
miners and their survivors for death or disability due to
mining-related black lung disease. The Eastern plurality
explained that Usery upheld that law because, even though
“stricter limits may apply to Congress’ authority. when
legislation operates in a retroactive manner,” holding the
companies liable for black lung benefits was justified as a
rational measure to spread the costs of black lung to companies
that profited from the miners’ labor. Eastern, 118 S. Ct. at
2147 (plurality).
Next, the plurality considered Pension Benefit Guaranty
Corp. v. R.A. Gray & Co., 467 U.S. 717, 104 S. Ct. 2709, 81
L. Ed.2d 601 (1984), where the Court upheld the
Multiemployer Pension Plan Amendments Act (MPPAA),
which was enacted to supplement ERISA. ERISA had created
the Pension Benefit Guaranty Corporation to exercise
discretionary authority to pay benefits when a multiemployer
pension plan terminated. The Corporation also had authority
to require employers who had contributed to the plan during
the five years before its termination to pay for an amount
proportional to their share of contributions to the plan during
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that five year period. As ERISA’s effective date approached,
many multiemployer pension plans were in a precarious
position, and so Congress enacted the MPPAA, which imposed
a payment obligation upon any employer withdrawing from
such plans. The obligation depended on the employer’s share
of the plan’s unfunded vested benefits.
The MPPAA applied retroactively to withdrawals within the
five months preceding its enactment. The Lastern plurality
explained that the Court upheld the MPPAA because
retroactive liability prevented employers from taking advantage
of a lengthy legislative process by withdrawing before Congress
revised the law. The retroactivity in Gray, the Eastern plurality
emphasized, was short, and limited to the needs generated by
the delays inherent in the legislative process. See Eastern, 118
S. Ct. at 2147 (plurality).
The plurality then reviewed Connolly v. Pension Benefit
Guaranty Corp., 475 U.S. 211, 106 S. Ct. 1018, 89 L. Ed.2d
166 (1986), where the MPPAA was again at issue, this time as
the subject of a takings challenge. The Eastern Court explained
that Connolly upheld the law despite the employers’
expectations that they would not have to pay, because
“legislation is not unlawful solely because it upsets otherwise
settled expectations.” Eastern, 118 S. Ct. at 2148 (plurality).
Even though the employers in Connolly had contractual agree-
ments expressly limiting their contributions to the pension plan,
the Court held that their express contracts could not impair
Congress’s authority. See Connolly, 475 U.S. at 223-24. The
Connolly Court noted that the MPPAA did not work a physical
invasion. Although the economic impact of the law was
substantial, the amount was directly related to the previous
relationship between the employer and its pension plan, and
therefore the economic impact factor did not establish that a
taking had occurred. See id. at 225. Moreover, there was no
interference with reasonable investment-backed expectations,
because at the time the MPPAA was enacted, prudent
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employers had notice that pension plans were regulated and
that withdrawal might trigger additional financial obligations.
See id. at 227.
The third time was not the charm for the MPPAA’s
challengers in Concrete Pipe & Products, Inc. v. Construction
Laborers Pension Trust, 508 U.S. 602, 113 S. Ct. 2264, 124
L. Ed.2d 539 (1993). In that case, the employer focused on the
fact that its contractual commitment to its pension plan did not
impose withdrawal liability. The Court rejected the claim that
the contract made a difference and reiterated its holding that
there was no taking as long as an employer’s liability would
generally not be “‘out of proportion to its experience with the
plan.” /d. at 645 (quoting Connolly, 475 U.S. at 226).
Although the employer’s liability under the MPPAA exceeded
ERISA’s original cap on withdrawal liability, the Court found
“no reasonable basis to expect that [ERISA’s] legal ceiling
would never be lifted.” /d. at 646. The employer voluntarily
negotiated a plan within ERISA’s scope, making its burden
under the MPPAA neither unfair nor unjust. See id. at 646-47.
The Eastern plurality summarized this line of cases as
follows:
Our opinions in Turner Elkhorn, Connolly, and Concrete
Pipe [ | make clear that Congress has considerable leeway
to fashion economic legislation, including the power to
affect contractual commitments between private parties.
Congress also may impose retroactive liability to some
degree, particularly where it is “confined to short and limited
periods required by the practicalities of producing national
legislation.” Our decisions, however, have left open the
possibility that legislation might be unconstitutional if it
imposes severe retroactive liability on a limited class of
parties that could not have anticipated the liability, and the
extent of that liability is substantially disproportionate to the
parties’ experience.
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Eastern, 118 S. Ct. at 2149 (plurality) (citation omitted). The
plurality held that the Coal Act, as applied to Eastern,
presented such an extreme case.
On the economic impact factor of the takings test, the
plurality found “no doubt that the Coal Act has forced a
considerable financial burden upon Eastern,” between $50 and
$100 million. /d. (plurality). The plurality referred to previous
cases requiring that liability be proportional to a party’s
experience with the object of the challenged legislation. In the
pension plan cases, the parties had voluntarily negotiated and
maintained pension plans, at least for a while, and consequently
their statutorily imposed liability was linked to their own
conduct. See id. at 2149-50 (plurality). Eastern did not
participate in the negotiations for the 1974 or subsequent
NBCWAs, nor did it agree to make contributions thereunder.
“{The 1974, 1978, and subsequent agreements] first suggest an
industry commitment to the funding of lifetime health benefits
for both retirees and their family members.” /d. at 2150
(plurality).
The plurality then concluded that the Coal Act substantially
interfered with Eastern’s reasonable investment-backed
expectations. See id. at 2151 (plurality). It reasoned that
retroactivity is generally disfavored in the law, and that the
length of the period of retroactivity and the extent of Eastern’s
liability raised substantial questions of fairness. See id. at 2152
(plurality). Finally, the plurality found the nature of the
government action to be quite unusual, because the liability
imposed was substantial, based on conduct thirty to fifty years
in the past, and unrelated to any commitment Eastern made or
injury it caused. See id. at 2153 (plurality).
The plurality declined to reach Eastern’s substantive due
process argument, although it noted that takings and due
process analyses are often correlated. See id. (plurality); see
also Connolly, 475 U.S. at 223. The plurality reiterated the
Court’s past concerns about using the “vague contours” of the
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due process clause to nullify laws. Eastern, 118 S. Ct. at 2153
(plurality) (citation omitted). Justice Thomas agreed with the
plurality’s Takings Clause analysis but wrote separately to
reaffirm his belief that the Ex Post Facto Clause would also
apply to Eastern’s predicament. See id. at 2154 (Thomas, J.,
concurring).
Justice Kennedy concurred in the judgment, providing the
critical fifth vote to strike the law down as applied to Eastern.
He found takings analysis inapplicable: “The Coal Act imposes
a staggering financial burden on the petitioner . . . but it
regulates the former mine owner without regard to property.
It does not operate upon or alter an identified property interest,
and it is not applicable to or measured by a property interest.”
Id. at 2154 (Kennedy, J., concurring). Instead, he emphasized
the law’s distaste for retroactivity and found that the Coal
Act’s extreme retroactivity violated due process as applied to
Eastern. See id. at 2158-59 (Kennedy, J., concurring). When
the Court upheld retroactive legislation in the past, he noted,
the statutes at issue were “remedial, designed to impose an
actual, measurable cost of [the employer’s] business which the
employer had been able to avoid in the past.” Jd. at 2159
(Kennedy, J., concurring) (citation and internal quotation marks
omitted) (alteration in original). Justice Kennedy concluded
that “[s]tatutes may be invalidated on due process grounds only
under the most egregious of circumstances. This case
represents one of the rare instances in which even such a
permissive standard has been violated.” Jd (Kennedy, J.,
concurring).
Four Justices dissented, finding neither a taking nor a due
process violation.
B. Drawing Instruction from Eastern: Does It Control
This Case?
The splintered nature of the Court makes it difficult to distill
a guiding principle from Eastern. There are five votes against
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the plurality’s Takings Clause analysis. However, Justice
Kennedy’s substantive due process reasoning is not a
“narrower” ground that we might take to constitute the
controlling holding. There is a fundamental conceptual
difference between a takings claim and a substantive due
process claim. If the government pays just compensation, it
may take property for public use under the Takings Clause.
Due process protections, by contrast, define what the
government may not require of a private party at all. It is the
difference between a liability rule and a property rule. See
Guido Calabresi & A. Douglas Melamed, Property Rules,
Liability Rules, and Inalienability: One View of the Cathedral,
85 Harv. L.Rev. 1089 (1972); Thomas W. Merrill, Zhe
Economics of Public Use, 72 Cornell L.Rev. 61, 66 (1986).
To be sure, in this case the result of the two claims would be
the same because the only potential taking is the imposition of
a monetary obligation, but neither constitutional ground is a
more limited version of the other.
Amici, other former coal companies, submit that the holding
of Eastern is that employee benefits funding legislation is
unconstitutional if it imposes substantial retroactive liability on
selected employers, and if that liability is unrelated to injuries
caused or promises made by those employers. While this may
be reasonably accurate in a general sense, it does not provide
guidance for determining how substantial is too substantial or
how tight the fit between parties’ past acts and the liability
imposed on them must be. Nor does it help define an
intersection between substantive due process and takings law,
as the word “unconstitutional” is here being used to cover, if
not a multitude of sins, at least two.
Eastern, therefore, mandates judgment for the plaintiffs only
if they stand in a substantially identical position to Eastern
Enterprises with respect to both the plurality and Justice
Kennedy’s concurrence. See Association of Bituminous
Contractors, Inc. v. Apfel, 156 F.3d 1246, 1254-55 (D.C. Cir.
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1998) [ABC, Inc.] (reaching the same conclusion about
Eastern). In addition, we are bound to follow the five-four
vote against the takings claim in Eastern, although we will
consider plaintiffs’ “categorical takings” claim, not presented
in Eastern, in greater detail infra Part IV.
Because the plaintiffs signed NBCWAs in 1974 and
thereafter, they are factually distinguishable from Eastern
Enterprises. Language in the plurality and the concurrence
suggesting that expectations fundamentally changed after 1974
supports our conclusion. See Eastern, 118 S. Ct. at 2150
(plurality) ( [The 1974, 1978, and subsequent agreements] first
Suggest an industry commitment to the funding of lifetime
health benefits for both retirees and their family members. ); id
at 2159 (Kennedy, J., concurring); see also id at 2161
(Stevens, J., dissenting) (stating that the miners’ and operators’
“implicit agreement was made explicit in 1974”). Although we
recognize that the Court was not presented with argument
focused on post-1978 signatories and thus may not have had
before it all the available evidence about later contracts, that
very distinction compels the conclusion that Eastern is not on
all fours with the case before us.
To the extent that Eastern embodies principles capable of
broader application, we believe that due process analysis
encompasses the relevant concerns. We must identify a set of
calipers with which to evaluate the challenged provisions of the
Coal Act, and we believe that the relevant measurement is the
extent of the gap between the coal companies’ contractual
promises to the Funds and the requirements of the Coal Act.
In making our decision, we first give deference to Congress’s
determination of the problem to be addressed, and then ask
whether Congress’s solution comports with fundamental
principles of due process.
18a
Ill. RETROACTIVITY AND DUE PROCESS
A. The Standard of Review
The standard of review when a substantive due process
violation is alleged is forgiving; it bars only arbitrary and
irrational congressional action. At the same time, our legal
system has a long-standing and well-justified distaste for
retroactive laws, because of their heightened potential for
unfairness. See, e.g., Eastern, 118 S. Ct. at 2158 (Kennedy, J.,
concurring) (discussing our “singular distrust of retroactive
statutes”); Bowen v. Georgetown Univ. Hosp., 488 U.S. 204,
208, 109 S. Ct. 468, 102 L. Ed.2d 493 (1988).
The situation is not unlike that faced in 7urner Broad-
casting System, Inc. v. Federal Communications Commission,
520 U.S. 180, 117 S. Ct. 1174, 137 L. Ed.2d 369 (1997). In
Turner, a case involving a First Amendment challenge to
Congress’s regulation of cable systems, the Court applied
intermediate scrutiny and required substantial evidence
justifying Congress’s conclusion that regulation was necessary,
but nonetheless emphasized the importance of deference to
Congress:
Our sole obligation is “to assure that, in formulating its
judgments, Congress has drawn reasonable inferences based
on substantial evidence.” . . . [S]ubstantiality is to be
measured in this context by a standard more deferential than
we accord to judgments of an administrative agency. We
owe Congress’ findings deference in part because the
institution “is far better equipped than the judiciary to ‘amass
and evaluate the vast amounts of data’ bearing upon”
legislative questions. This principle has special significance
in cases, like this one, involving congressional judgments
concerning regulatory schemes of inherent complexity and
assessments about the likely interaction of industries
undergoing rapid economic and technological change.
Though different in degree. the deference to Congress is in
SS OR A it RIT LI A ae ae! Be
gh alt eh eat car
19a
one respect akin to deference owed to administrative
agencies because of their expertise. This is not the sum of
the matter, however. We owe Congress’ findings an
additional measure of deference out of respect for its
authority to exercise the legislative power. Even in the
realm of First Amendment questions where Congress must
base its conclusions upon substantial evidence, deference
must be accorded to its findings as to the harm to be avoided
and to the remedial measures adopted for that end, lest we
infringe on traditional legislative authority to make
predictive judgments when enacting nationwide regulatory
policy.
Id. at 1189 (citations omitted).
While we are not applying a First Amendment test to this
due process claim, we consider 7urner instructive in a situation
such as this, where both careful scrutiny of the retroactivity
involved and deference to the legislature’s judgments about
cognizable harms and appropriate remedies are in order. We
must decide whether sufficient evidence exists to support
Congress’s judgment that post1978 signatories of NBCWAs
could justly be charged with responsibility for retirees’ health
benefits, based on the promises they made to coal miners and
on the effecis of their departure from the industry on the Funds.
See also Concrete Pipe, 508 U.S. at 639 (Congress’s judgment
receives deference even when its retroactive solution to a
problem has some weaknesses). We will then evaluate whether
it was rational for Congress to legislate to close the gap
between the coal companies’ promises and their contractual
obligations, taking into account the retroactivity of the law.
20a
B. Does the Evidence Support Congress’s Conclusion
that the Coal Companies Should Be Held Respon-
sible?
1. The Relationship Between Benefits and Work
Performed by Miners
Before we address the problems occasioned by the mass
departure of coal companies from the industry in the 1980s and
the expectations created by the NBCWAs, we must first
dispose of the plaintiffs’ argument that the Coal Act is
unjustified because it charges them with financial responsibility
for non-coal-mining-related health problems.*
The plaintiffs submit that their liability is disproportionate to
their actual responsibility because they are required to pay for
miners’ dependents and for all health conditions, however
unrelated to mining work. Thus, they conclude, their liability
does not depend in any rational way on benefits they received
from the miners’ work in the mines. That the company may be
responsible for a miner’s entire family does not make the
burden unrelated to past benefits, however. While it is true that
* The plaintiffs further argue that there is no reasonable relationship
between their potential liability and the former employment relationships;
they are responsible for the miners’ dependents even if the miners only
worked for them a day. This argument is skewed. In fact, the miners for
which the plaintiffs are responsible worked for the plaintiffs, on average,
for many years. There is no evidence in the record to suggest that the
plaintiffs’ hypothetical ever occurred; instead, the evidence indicates that
Congress correctly found that many beneficiaries were entitled to benefits
based on miners’ long years of service with particular companies.
Furthermore, one day of work would not qualify a miner for benefits under
the statute, since a miner must work for twenty years in the industry or be
disabled in the course of employment to qualify for benefits. See 26 U.S.C.
§ 9703(f); Jn re Chateaugay, 53 F.3d at 489. In combination with the
statutory scheme of assigning beneficiaries to the SO for whom a covered
miner worked longest, this initial eligibility requirement guards against
the disquieting result posited by the plaintiffs.
2
2la
a miner’s virility may have little to do with his productivity, the
post-1978 agreements clearly provided for family coverage;
when those agreements were signed, the companies could
predict, with some actuarial reliability, their responsibilities for
family benefits. Coverage for dependents was the price of
labor peace, and the companies received a benefit from the
promise of that coverage. See Nobel, 720 F. Supp. at 1178.
Proportionality does not require that the burdened parties
have physically injured the beneficiaries of a retroactive law.
The Eastern plurality relied on a concatenation of circum-
stances to find a lack of proportionality: First, the benefits were
not related to workrelated injuries, and, second, the benefits
were not related to anything Eastern Enterprises ever promised.
In Usery, the black lung benefit case, only the first factor was
present and the law was upheld as proportional, while in
Connolly only the second factor was present and the law was
also upheld. Those cases demonstrate that the necessary
proportionality may be of either type, and there is no need for
both to be present. The argument to the contrary limits the
coal companies’ responsibility for their past actions to physical
events. It makes more sense to recognize the relevance of the
companies’ promises and negotiations with the miners,
especially since the NBCWAs were just as necessary to the
companies’ continued operations as blasting or digging.
2. Responsibility for the Funds’ Instability
The defendants argue that B & T’s and Unity’s liability to
the Funds is proportional to their general experience in the coal
industry. The companies have only been assessed liability
based on the miners they actually employed, and those miners’
dependents. The Eastern plurality considered the former
employment relationship alone insufficient because the
employers had not promised lifetime benefits, at least until
1974, years after Eastern left the industry. See Eastern, 118
S. Ct. at 2150 (plurality). Unlike Eastern, however, Unity and
B & T, as BCOA members, at some points in time negotiated
22a
for and adhered to the very agreements that established the
benefit funds at issue. Like the employers in Concrete Pipe and
Connolly, their liability is linked to their voluntary negotiation
of a benefit plan, even though Congress retroactively increased
the costs of that negotiation. See Eastern, 118 S. Ct. at
2149-50 (plurality).
Moreover, it can credibly be contended that the departure of
companies such as Unity’s subsidiaries and B & T helped to
create the financial crisis in the plans that ultimately led to the
Coal Act. When B & T, along with several other employers,
left the industry, litigation ensued. See United Mine Workers
v. Nobel, 720 F. Supp. 1169 (W.D.Pa. 1989), aff'd, 902 F.2d
1558 (3d Cir. 1990). As a consequence, the B & T retirees’
benefits became funded by the 1974 Plan for orphaned miners.
After these events, the Plan had to borrow funds and remaining
employers were required to increase their contribution rates to
make up the shortfall. Similarly, when South Union-WVA
declared bankruptcy, it informed the Funds that it was no
longer in business and would no longer provide health benefits
for its retirees. As Mr. Jamison contemplated when he notified
the Trustees that South Union-WVA had shut down, see J.A.
at 170, the 1974 Fund was forced to take responsibility for
those retirees. See Schifano v. United Mine Workers 1974
Benefit Plan & Trust, 655 F. Supp. 200 (N.D.W.Va. 1987)
(litigation arising out of South Union-WVA’s bankruptcy).
Thus, the plaintiffs’ acts increased the burden on the Fund,
contributing to its overstressed state, at least to some degree.
Although the Fund may, as plaintiffs argue, have been
financially stable when the plaintiffs left the industry, it was
surely foreseeable that departures would lead to instability,
given the benefit funding structure under the NBCWAs. While
the plaintiffs contend that the benefit funds only became
unstable after the plaintiffs left the industry and there were
changes in the contribution levels required from coal operators
who remained in the industry, it was also foreseeable that those
ne
23a
contribution levels could change, and it was the NBCWAs to
which the plaintiffs adhered that initially created a system
vulnerable to such changes. It was thus rational to conclude
that operators in this position should bear some responsibility
for the costs of the corrective legislation. “It is surely proper
for Congress to legislate retrospectively to ensure that costs of
a program are borne by the entire class of persons that
Congress rationally believes should bear them.” United States
v. Sperry Corp., 493 U.S. 52, 65, 110 S. Ct. 387, 107 L. Ed 2d
290 (1989).
The plaintiffs argue that holding them responsible for the
benefit funds’ financial instability because they left the coal
industry would obligate every operator to remain in the
industry no matter how unprofitable mining became, which
amounts to an “erosion taking.” We disagree, since this is
simply a variant of the total takings claim that we reject below
The law does not require the plaintiffs to stay in any business.
which was a necessary element of all the prior “erosion taking”
cases. See, e.g., Brooks-Scanion Co. v. Railroad Comm'n, 25
U.S. 396, 399, 40 S. Ct. 183, 64 L. Ed. 323 (1920) (legislature
cannot require a company to continue doing business, though
it may require the company to fulfill its legal obligations if it
chooses to continue operations). Instead, the Coal Act merely
recognizes that all acts have consequences, and that sometimes
it is not permissible for a company simply to walk away,
leaving its former employees in the lurch.
In ABC, Inc., the Court of Appeals for the D.C. Circuit
relied heavily on the distinction between pre-1974 participation
in the coal industry and post-1974 participation. The court
found the distinction relevant for two reasons: the post-1974
agreements began the explicit promises of lifetime benefits, a
matter we take up below, and also created a funding structure
that allowed (or even induced) companies to leave the industry
and slough off the burden of their retirees’ benefits on the
remaining companies. Before 1974, a company that left the
24a
industry did not create any obligations on the part of other
companies to increase contributions to the benefit funds, but
after 1974 that changed. Judge Silberman reasoned persua-
sively:
[I]t is surely rational for the Congress to expect that the
member companies’ failure to contribute while their retirees
received benefits contributed to the underlying crisis that the
plans faced in the late 1980s. Although the coal contractors
may not have been the dominant cause of that underfunding,
legislation need not burden the most responsible party to
survive rational basis review.
ABC, Inc., 156 F.3d at 1255-56.
ABC, Inc. also found that Justice Kennedy’s additional
concern that liability imposed based on a past employment
relationship should be “remedial” was satisfied for employers
who, unlike Eastern, withdrew from the industry after the 1974
agreements. Such employers “withdrew from their prior
commitment to contribute to the funds at precisely the point in
time . . . at which the benefit obligation dramatically expanded,
and therefore ‘contributed to the perilous financial condition of
the 1950 and 1974 plans which put the benefits in jeopardy.’”
Id. at 1257 (quoting Eastern, 118 S. Ct. at 2159 (Kennedy, J.,
concurring))
Unlike Eastern, Unity and B & T, as BCOA members,
participated in the negotiations that created the post-1978
funding structure. They benefited from the NBCWAs by
obtaining labor peace. Although the contract allowed the
companies to unload their obligations to the retirees onto the
Trustees, they should reasonably have anticipated that such a
strategy would threaten the Funds and might well prompt a
congressional response. We cannot say that it was irrational
for Congress to charge the miners’ former employers with the
costs of their benefits, when the miners qualified for lifetime
benefits from the Trustees because of their former employment
25a
(we expand on this point infra) and the employers’ departure
from the industry contributed to the problem confronting the
Trustees.
B & T and Unity urge that they are not responsible for most
of the burden on the Funds. However, B & T was a large
employer, whose departure from the industry added over a
thousand beneficiaries to the Funds’ “orphans,” and its
individual impact was therefore significant. In addition, Unity
may be held partially responsible because, though its individual
contribution to the problem was small, the aggregate effects of
its actions and parallel actions by other companies contributed
to the problem. Congress may reasonably include all of the
parties whose acts, taken together, gave rise to a problem, even
if the individual contributions of each are small. Cf. Wickard
v. Filburn, 317 U.S. 111, 127-28, 63 S. Ct. 82, 87 L. Ed. 122
(1942) (applying the same reasoning to Congress’s Commerce
Clause power).
3. The Background of Government Regulation
We consider the background of government regulation
significant as well. The coal industry has been heavily
regulated for decades, including the government-imposed 1948
Krug-Lewis Agreement, which created the basic health benefits
structure. The companies had no reasonable expectation that
the government would not expand its regulation of health
benefits in the coal industry, given the history of labor unrest
and government intervention. See 136 Cong. Rec. $17814
(daily ed. Oct. 27, 1990) (statement of Sen. Glenn) (containing
Congressional Research Service report on the extensive history
of federal intervention into the health status and benefits of coal
workers and into labor relations in the coal industry more
generally) .°
* Indeed, amicus LTV was the specific target of at least one bill to mandate
that it continue to fund health benefits for its retired miners as early as
26a
The coal operators were also aware of the growing number
of government requirements that vested benefits be paid,
whether or not an employer was contractually obligated to pay
for them, as the industry’s response to ERISA indicated. The
situation is thus analogous to those in Connolly and Concrete
Pipe, in which the Court found that, in light of the history of
federal pension regulation, employers could not reasonably
assume after 1978 that their obligations to pension funds would
never exceed the specific terms of their contracts, see
Connolly, 475 U.S. at 227, nor could they reasonably assume
that Congress would not increase the statutory cap on ERISA
withdrawal liability, see Concrete Pipe, 508 U.S. at 646. The
parties were well aware that pension plans could subject
employers to retroactive liability in cases of underfunding, and
could have foreseen that Congress might act similarly with
respect to health benefits.
4. The Contractual Language
Turning to the expectations created by the contracts, the
threshold question is whether we need to distinguish between
explicit and implicit promises of lifetime benefits. Although the
plaintiffs concentrate on explicit promises, an issue on which
their position is strong, we think that explicit promises are not
necessary in order to justify congressional action. The question
is what reasonable expectations the coal companies’ actions
created. While an expectation cannot be reasonable without
some foundation in the real world, an explicit representation
that the companies would provide lifetime benefits is not
required, since reasonable expectations may arise from a
consistent course of conduct as well.
1986. See 132 Cong. Rec. $9879 (daily ed. July 30, 1986) (bill discussed
by Sens. Byrd, Dole, Durenberger, Glenn, Heinz, & Specter); id. at E2714
(daily ed. Aug. 1, 1986) (statement of Rep. Rahall).
27a
Plaintiffs and amici argue that the coal companies never
made any promises, implicit or explicit, or raised any
expectations of lifetime benefits. They first point to the text of
the NBCWAs, which did not themselves require the coal
companies to provide lifetime benefits under all circumstances
They dissect the various contractual provisions and
characterize their import as follows: (1) the health card that
miners received for benefits “for life” did not guarantee any
specific benefits; (2) the “evergreen” clauses only referred to an
employer commitment to continue funding benefits, but did not
promise anything about the scope of those benefits, (3) the
“evergreen” clauses only applied to operators who stayed in the
coal business; (4) the contracts allowed benefits to be
suspended or reduced, and (5) the guarantee of benefits lasted
only through the term of the agreement. Additionally, an
UMWA negotiatior testified in the course of other litigation
that everything was up for renegotiation at the end of a
contract and that the parties could have agreed to eliminate
benefits entirely. See District 17, UMWA v. Allied Corp., 735
F.2d 121, 126 (4th Cir. 1984), vacated, 765 F 2d 412 (4th
Cir. 1985).
It is true that the funding contribution requirements were
limited to the life of the agreement, “ending when this Agree-
ment is terminated,” in 1978 and subsequent NBCWAs. Yet
all of these arguments have the same fundamental weakness,
which is that they go to the contract and not to the reasonable
expectations that might have been created by the contract. The
UMWA negotiator’s testimony is a particularly strong example
of this: the parties could have agreed to eliminate benefits in
any given negotiation, but there was no realistic chance that
they would. The defendants do not dispute that the contracts
did not provide for the payments mandated by the Coal Act. if
the contracts had so provided, the Coal Act would have been
unnecessary. The plaintiffs’ dissection of the contracts is a
brilliant exercise, and were we deciding a case on labor and
contract law principles the outcome would be clear in their
28a
favor.® But this is not an action brought for contractual
violations. We focus our attention instead on what conclusions
Congress might rationally draw about the parties’ relations and
expectations, and what it might fairly do to close the gap
between the contractual obligations of the coal companies and
the Funds’ actual liabilities.
The NBCWAs did not in themselves guarantee that the coal
companies would pay for lifetime benefits for retirees and their
dependents. There thus is a tenable argument that the
NBCWAs did not obligate the Trustees of the Funds to pay
lifetime benefits, because the evolution of the benefit structure
did not indisputably culminate in a lifetime guarantee. Indeed,
the former coal companies have a number of strong arguments,
and reasonable people could well disagree about Congress’s
choice to impose liability on them. Nonetheless, we conclude
that Congress could reasonably have reached the conclusions
it did about the expectation of lifetime benefits and about the
coal companies’ responsibility for the situation in which the
Funds found themselves after the changes of the 1970s and
1980s.
a. Contractual Clarity
The plaintiffs submit that Kastern turned on the fact that the
relevant NBCWA provisions clearly did not provide for lifetime
benefits. We believe that this is a subtle but significant “spin”
on the plurality’s view, which found that the obligations
imposed on Eastern were unrelated to its contractual
obligations. The plurality noted that, during Eastern’s
participation in the industry, retirement and health benefits were
far less extensive than they later became, the benefits were also
° However, not all of these arguments are persuasive even as a matter of
contractual interpretation. As we discuss below, after 1978 health benefits
were specified in the contract, and that the evergreen clause and the health
card sections of the agreement did not describe the other sections of the
contract does not mean that those specifications were without effect.
29a
not vested. Furthermore, benefits were subject to alteration or
termination with far fewer constraints than those later imposed
by the shift of control from the Trustees to the BCOA and the
UMWA. In fact, entire categories of beneficiaries provided for
under the Coal Act were not part of the older NBCWAs, and
“Eastern could not have contemplated liability for the provision
of lifetime benefits to the widows of deceased miners.”
Eastern, 118 S. Ct. at 2150 (plurality). All these facts meant
that there was no rational relationship between Eastern’ s past
acts and its Coal Act-imposed obligations.
If Connolly retains any force, as we think it does, the clarity
of contractual provisions is far from dispositive. Connolly itself
involved a contract whose limits were at least as clear as those
in the contracts at issue here. Even crystalline contractual
provisions, accompanied by well established practice and
understandings, can create reasonable expectations extending
beyond the four corners of a contract. Though courts may be
unable to enforce those expectations, Congress is not so
constrained. We believe that our position is bolstered by a
careful reading of the Eastern plurality opinion, which did not
suggest that an implicit promise (that is, one not clearly found
in the contract) would be insufficient to sustain the Coal Act if
that promise had a reasonable basis in actual practice or in the
penumbra created by contractual promises. Instead, the
plurality found no evidence of any implied lifetime promise.
See Eastern, 118 S. Ct. at 2152 (plurality). Justice Kennedy,
likewise, focused not on the clarity of the contract but on the
lack of a connection between pre-1978 coal operators and
retired miners’ reasonable expectations and instability in the
benefit structure. See id. at 2159 (Kennedy, J., concurring).
b. Lifetime Benefits
The plaintiffs argue that the NBCWAs never promised
“lifetime benefits,” and that the miners’ only reasonable
expectation based on the NBCWAs would have been that any
operators who remained in the coal industry and continued to
30a
sign agreements would pay for their benefits indefinitely. From
that perspective, the Coal Act retroactively transformed a series
of three or four-year commitments into an open-ended,
decades-long obligation.
The plaintiffs’ reading of the agreements is too crabbed. The
1974 NBCWA has thirteen separate references to health
service cards “for life” or “until death.” Plaintiffs submit that
this simply referred to a health card that no one would ever
take away but that could be reduced to a worthless piece of
paper at any time. However, not only did the 1978 NBCWA
have sixteen separate references to coverage “for life” or “until
death,” it also refers to an “entitle[ment] to receive health
benefits until death” in at least one section. 1978 NBCWA, Art.
XX, at 116. The plaintiffs submit that this reference was
inextricably linked to the references to health service cards.
We agree, but think that the slippage between lifetime health
cards and lifetime health benefits counsels against the plaintiffs’
position: The lifetime health card may just as easily be seen as
a shorthand reference to lifetime benefits, which may be why
the parties did not correct (in this carefully negotiated contract)
the reference to “benefits until death.”’ This language,
synonymous with the health card language, appears to reflect
the bargaining parties’ understanding that the lifetime provision
of health benefits was an absolute requirement for any contract.
See Nobel, 720 F. Supp. at 1175 (finding that the coal
operators understood that lifetime benefit language was crucial
to the ratification of any contract and that the BCOA therefore
abandoned its attempt to remove such language).
’ The plaintiffs also note that the “benefits until death” language appears
in a provision discussing restrictions on benefits whenever the beneficiary
exceeded the earnings limit. However, the point of the provision was that
the beneficiaries were entitled to benefits during any period that they did
not exceed the earnings limits until death.
3la
We do not rest our decision on the reference to “benefits
until death”, rather, it is a datun: supporting the overall conclu-
sion that the health card was expected to guarantee benefits for
life. The 1981 and 1984 NBCWAs continue in the same vein
with sixteen references to coverage “for life” or “until death.”
While we appreciate the force of the plaintiffs’ arguments to
the contrary, we are persuaded that it would have been
reasonable for miners to expect that the “lifetime” health card
actually meant that lifetime benefits would be provided to
anyone in possession of a health card.
Plaintiffs nonetheless argue that the appearance of the
phrases “for life” and “until death” in the 1974 and subsequent
agreements does not imply any commitment to provide life-
time benefits. According to them, we should understand the
lifetime health card as doing no more than serving the valuable
administrative function of ensuring portability. At most, the
plaintiffs argue, the possession of a health card merely entitles
a retiree to whatever benefits, if any, were available under the
NBCWA then in effect. The plaintiffs interpret “lifetime” to
mean simply that, if an NBCWA were in place, miners could
not lose their benefits after a fixed period of time (a problem
that had arisen in the past when the Trustees cut off retired
miners after five years or some other fixed period).
This is a strained reading of the terms “for life” and “until
death,” which refer to persons (the miners and their
dependents) and not to the continued existence of an NBCWA.
Furthermore, this argument does not aid the plaintiffs much, as
NBCWAs were in effect through the passage of the Coal Act
and even to this day, although the plaintiffs are no longer
signatories to them. There is no real-world difference between
a lifetime guarantee and a guarantee that lasts while NBCWAs
continue to exist, especially as the guarantee did not depend on
any particular employer's continued adherence to the
NBCWAs. The fact that NBCWAs continue is evidence that
it was reasonable to expect them to continue, and thus that it
32a
was reasonable to expect that a “lifetime” guarantee, even one
that could theoretically expire if the entire NBCWA system
collapsed, was in reality a lifetime guarantee. Cf D'Amico v.
City of New York, 132 F 3d 145, 151 (2d Cir 1998) (reasoning
that the occurrence of an event is evidence that a decision-
maker was justified in predicting that event).
The plaintiffs further point out that the 1950 and 1974 Plans
contained language stating that, if assets became insufficient,
benefits could be suspended or reduced. The Plans were
incorporated into the 1974, 1978, 1981, and 1984 NBCWAs
by reference Moreover, the plaintiffs note that the Plans were
subject to modification or amendment, and there were
provisions that would take effect “[i]n the event of the
termination of the 1950 Plan.” The plaintiffs also contend that
when miners received health cards, they were specifically told
that their benefits were subject to amendment or termination
“at any time.” 1958 Annual Report. Of course, later NBCWAs
were designed to limit the Trustees’ authority to do so, by
defining the benefits to be provided, by establishing lifetirne
eligibility for a health card, and by eliminating the Trustees’
ability to alter benefits without the consent of the union and the
BCOA after 1971
But the NBCWAs always clearly stated that they were in
effect for limited terms. The individual employer plans for
health benefits that were established under the 1978 NBCWA,
like the 1950 and 1974 Plans, had the stated purpose of
providing benefits “during the term of this Agreement.” The
plaintiffs conflate the issue of whether the coal companies’
contribution requirements were “lifetime,” which they clearly
were not under the contract, with the issue of whether the
contracts provided for lifetime health benefits. The lifetime
health card was intended to put an end to the Trustees’
pre-1974 practices of cutting beneficiaries off if their former
employers were delinquent in paying into the Funds or if they
had received benefits for a set period of time. Thus, the
33a
Trustees could reasonably be seen as required to pay lifetime
benefits to all retirees and their dependents in possession of a
health card; the contractual terms had the effect of binding the
Trustees to a lifetime commitment, although they did not of
themselves bind the coal companies to the same commitment.‘
Despite the plaintiffs’ contention that the numerous cases
holding that “for life” means lifetime benefits were wrongly
decided, we are unpersuaded that those cases lacked support
for their conclusion. See, e.g., Jn re Chateaugay Corp., 945
F.2d 1205, 1210 (2d Cir. 1991); District 29, UMWA v. UMWA
1974 Benefit Plan & Trust, 826 F.2d 280, 282-83 (4th
Cir. 1987), Grubbs v. UMWA, 723 F. Supp. 123, 128 (W.D.
Ark. 1989); Nobel, 720 F. Supp. at 1178.° The plaintiffs assert
that, at all events, astern throws these cases into doubt. We
* The plaintiffs also argue that the Trustees understood that benefits were
limited to the term of the agreement. When the 1974 NBCWA expired on
December 6, 1977, the Trustees stopped providing health benefits to
retired miners, and the subsequently negotiated 1978 NBCWA prohibited
retroactive funding of such benefits. This is significant, but, given that the
benefit funds were fundamentally reconfigured at the same time to focus
on individual employers, it would have been difficult to deal with those
few months retroactively during the transition to the new regime. The
short gap necessitated by the delay in negotiating a new contract during
bitter labor strife does not disprove the general promise of lifetime benefits
in the future.
* UMWA Health & Retirement Funds v. Robinson, 455 U.S. 562, 102 S.
Ct. 1226, 71 L. Ed. 2d 419 (1982), also refers to “lifetime” benefits. See
id. at 565-66. The plaintiffs argue that NBCWAs were in place at all
times relevant to Robinson, and so that case provides no basis for
suggesting that benefits would be available in the absence of an NBCWA.
However, this argument actually favors the defendants. We reiterate that
we are not construing the contract but deciding what reasonable
expectations it might generate. In that analysis, the fact that NBCWAs
persisted for decades, although it was always possible that they would
expire, favors the defendants, since the long history of NBCWA
renegotiation makes the expectation that benefits would continue more
reasonable.
34a
disagree, because the Supreme Court said nothing about the
Trustees’ obligations, nor did the Court take up the post-1978
contracts at all
Furthermore, contrary to the submission of the plaintiffs,
these lower court cases did analyze the provisions of the
contract, recognizing that the Trustees were obligated to
provide benefits only “during the term of this agreement,” just
as the companies were only required to contribute during the
term of the contract. Rather than ignoring this temporal
language, the decisions found that other language in the
contract, combined with testimony from the negotiators,
obligated the Trustees to provide lifetime benefits. See District
29, UMWA, 826 F.2d at 282. That the contracts may contain
contradictory language does not, as plaintiffs and amici
contend, make any construction requiring lifetime benefits
unreasonable, instead, there was evidence pointing in both
directions. Just as it was not unreasonable for courts to
conclude that the contracts provided lifetime benefits, it was
not unreasonable for Congress to rely on similar evidence, even
though Congress could also reasonably have disagreed. In fact,
we could even consider such judicial decisions, the earliest of
which were referenced in the Coal Commission Report, as data
justifying Congress's conclusion that lifetime benefits were
promised, since Congress may reasonably look to the findings
of a coordinate branch See Coal Comm'n Report at 3, 28, 47,
55-56
The question, then, is not whether the health benefits are
truly “for life” but whether the former coal companies can
justly be associated with the promises of lifetime benefits that
by contract run only against the Trustees. The argument is that
it was acceptable, by virtue of the contractual limitations, for
companies to walk away and leave the Trustees and the
companies remaining in the coal industry to pay the tab. And
it is this underlying claim that we think Congress could
35a
rationally reject. In this regard, we reiterate that our obligation
is to determine what Congress could reasonably have found
Congress certainly possessed credible evidence that miners
expected those benefits. The Coal Commission, for example,
reported to Congress in 1990 that
Retired coal miners have legitimate expectations of health
care benefits for life, that was the promise they received
during their working lives and that is how they planned their
retirement years. That commitment should be honored
/d at vii. The Commission based its conclusions on substantial
evidence, including testimony from many industry participants
on both sides of the issue. Even a dissenting member of the
Commission, who was the president of a coal company,
acknowledged that the post-1978 agreements created a promise
of lifetime benefits. See id. at 81 (statement of Commissioner
Holsten)."" Although the Coal Act’s statutory scheme was
proposed nine and two years, respectively, after Unity and B &
° The conclusions of the Coal Commission Report are not rendered
suspect by Lastern, although the plurality and Justice Kennedy concluded
that Congress could not reasonably decide that pre-1978 signatories were
responsible for creating expectations of lifetime benefits, it is notable that
the Coal Commission never proposed the “super reachback” provision
challenged in Eastern. See Eastern, 118 S. Ct. at 2141 (plurality), Coal
Comm'n Report at 61, 63, Supp.App. at 420, 422. The Commission's
proposal provided for liability under what became § 9706(a)(1) and
§ 9706(a)(2), which only apply to post-1978 signatories, while
§ 9706(a\(3) was added late in the legislative process. See J. Atwood Ives,
Federal Document Clearing House Congressional Testimony, House
Ways & Means Oversight, Coal Workers Retirement Benefits, June 22,
1995. The Coal Commussion's findings remain persuasive evidence from
which Congress could conclude that signatory operators remaining in the
coal industry after 1978 created a reasonable expectation of lifetime
benefits among miners and their families. See also 138 Cong. Rec
$5081, $5082 (daily ed. Apr. 8, 1992) (statement of Sen. Boren) (referring
to the expectations created by the 1978 agreement), id (statement of Sen
Dole) (same)
36a
T ceased to be bound by an NBCWA, and that is certainly a
significant period of time, we cannot say that it is beyond the
pale in light of the lifetime nature of the commitment at issue.
ce. Other Contractual Provisions
The negotiations of the 1970s took place in a changing legal
context, as the Coal Commission’s report to Congress
recognized. ERISA made clear that employers who promised
pension benefits were going to have to give them, and when the
parties negotiated the 1974 and later agreements, that idea was
certainly in mind. Moreover, starting in 1974, the new
agreements removed the Trustees’ discretion to set benefit
levels and eligibility standards. See Coal Comm'n Report at
24
By 1977, anxiety had intensified, and the miners struck for
nearly four months over, among other things, health benefit
issues. The federal government intervened to settle the strike.
The 1978 agreement introduced the “evergreen” and
“guarantee” clauses and rearranged the benefit funds in major
ways. See id at 26. The evergreen clause only applied to
companies that stayed in the coal mining industry. As such, it
has no bearing on these plaintiffs except insofar as it expresses
an intent by the negotiators to keep health benefits funded, as
the miners expected them to be, in the context of growing
burdens on NBCWA coal operators.
Under the guarantee clause, signatory employers committed
to make the contributions necessary to maintain the
contractually specified benefits throughout the term of the
agreement, even if that required an increase in the contribution
rates specified at the outset of the contract term. This was
essentially a shift “from a defined contribution obligation, under
which employers were responsible only for a predetermined
amount of royalties, to a form of defined benefit obligation,
under which employers were to fund specific benefits.”
Eastern, 118 S. Ct. at 2140 (plurality). The evergreen clause
eee Seer ne
37a
represented a similar effort by the bargaining parties to protect
the funding base for ongoing health coverage.
The coal companies contend that everyone recognized that,
when the contract ended, the benefits would end. The 1978
guarantee clause guaranteed benefits and provided for
increased contribution if necessary only “during the term of this
Agreement.” The defendants respond that the “end of
contract/end of benefits” equation is not the end of the story
They argue that it was reasonable for the miners to expect that
the contract would be replaced by another contract, and then
another, and then another, with at least comparable benefits,
even if the industry and its participants changed. After all, that
is what had taken place for the past fifty years: the slow but
steady expansion of benefits. The NBCWAs, they argue, were
negotiated in a context where the miners believed that, in return
for wage and employment concessions, they would be able to
guarantee their futures. In fact, as noted above, the NBCWAs
have endured for decades after the changes of the 1970s.
evidencing the reasonableness of a belief that the agreements
would continue.
We do not ignore the plaintiffs’ history in the industry, which
extended for many decades and ended over thirty years after
Eastern Enterprises left the coal industry. Unity mined coal for
58 years and B & T for 80. Coal companies such as Unity and
B & T received benefits from the steady expansion of health
and retirement benefits, including wage concessions and union
agreement to mechanization, during that period. Their
long-term participation made it particularly understandable that
miners would expect that the companies’ adherence to
promises of lifetime benefits in the NBCWAs would be
honored.
5. Conclusion
Our review of the evidence suggests that there are several
plausible interpretations of the events leading up to the Coal
38a
Act. It could well be the case that former coal companies are
not the most responsible parties in the deterioration of the
health of the benefit funds, but Congress could also rationally
find that they bore significant responsibility in setting up a
structure that invited operators to abandon mining and shunt
the burden of caring for retirees on other parties. Similarly, it
could be that the contracts did not create a lifetime benefit
obligation on the part of the Trustees, yet Congress had
substantial evidence to the contrary. We will defer to
Congress’s judgments on the nature of the problem before it,
including judgments about causation and _ reasonable
expectations. The next question, therefore, is whether
Congress’s reasonable evaluations of the problem justified the
corrective measures it mandated in the Coal Act.
C. Is the Coal Act a Rational Response to the Problem
Congress Identified?
Given that evidence exists to support Congress’s inter-
pretation of the history of the coal industry and the NBCWAs,
we must ask whether that evidence is enough to justify a
retroactive law of this scope. For the following reasons, we
conclude that the Coal Act’s retroactivity does not render it
irrational in violation of due process.
1. The Length of the Retroactivity
The heart of retroactivity analysis is an evaluation of the
extent of the burden imposed by a retroactive law in relation to
the burdened parties’ prior acts. We note as an initial matter
that the length of the retroactivity alone is not dispositive in this
case. The retroactivity is significantly less extensive than that
in Eastern. We evaluate retroactivity not from the time the
plaintiffs first signed an industry agreement, nor from the time
the miners’ right to benefits accrued, but rather from the end of
39a
the plaintiffs’ contractual obligations to pay for such benefits."
For Unity, that period is eleven years, and for B & T four
years, because B & T was bound by the 1984 NBCWA until
1988. This is substantially less time than the gap between
Eastern’s exit from the coal business and the enactment of the
Coal Act, although, at least for Unity, it is still quite long.'* We
conclude that this degree of retroactivity is not so extensive as
to violate Justice Kennedy’s standard, although Unity offers a
close case."
Instead of relying solely on the length of the retroactivity, we
assess the relationship of the retroactively imposed liability to
'' We choose the expiration of NBCWA obligations because, although
covered retirees may have stopped working for the plaintiffs before those
dates, the contracts obligated the plaintiffs to continue paying for benefits
until those contracts expired and, after 1978's evergreen clause, until the
plaintiffs left the industry. This was not true of the relevant contracts in
Eastern. Thus, the retroactivity extends not from the date of the miners’
retirement but from the period during which the plaintiffs were free of any
contractual obligation to pay for benefits.
" The retroactivity approved in Usery was actually much greater in some
circumstances. The black lung law was enacted in 1969 and began
imposing liability on employers in 1973. Yet benefits were given to
miners who left mine work as early as 1923. See Usery, 428 U.S. at 40
n. 4 (Powell, J., concurring in part). In addition, the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA),
42 U.S.C. §§ 9601-9657, has an unlimited retrospective temporal reach,
which has yet to be invalidated by any court to consider the issue. See,
e.g., United States v. Monsanto Co., 858 F.2d 160, 173-74 (4th Cir.
1988).
'? We focus on Justice Kennedy’s explication of the relevant due process
principles because the plurality did not reach Eastern’s due process claim.
See Rappa v. New Castle County, 18 F.3d 1043, 1058-61 (3d Cir. 1994)
(where “no single approach can be said to have the support of a majority
of the Court,” then “no particular standard constitutes the law of the land”
and lower courts are bound by the result as applied to “substantially
identical” cases).
40a
the governmental interests asserted in its defense. See astern,
118 S Ct. at 2159 (Kennedy, J., concurring) (retroactive
remedies must bear “‘a legitimate relation to the interest which
the Government asserts supports the statute”); id. at 2163
(Breyer, J., dissenting) (“[A] law that is fundamentally unfair
because of its retroactivity is a law which is basically
arbitrary.”’).
The plaintiffs argue that retroactivity has only been upheld
in three situations: (1) where the employer continues to operate
in the regulated industry after the enactment of a retroactive
law; (2) when employers would otherwise be able to take
advantage of the delays inherent in the legislative process; and
(3) where a worker’s injury or illness is related to his or her
work. This categorization is unsatisfactory. The first category
lacks adequate analytical foundation. If a law is truly
retroactive, applying to conduct completed before the law was
enacted, it would seem only marginally relevant that an
employer kept doing what it had been doing before, for the
liability would be based on past acts, not post-enactment acts;
the continuation in the old business would not seem to justify
the retroactivity. If it would be fundamentally unfair to make
a business pay for its long-past acts, it would seem equally
unfair to put that business to the choice of leaving its
established business or paying for its long-past acts.
We posit a different standard: Where Congress acts
reasonably to redress an injury caused or to enforce an
expectation created by a party, it can do so retroactively. The
ERISA and MPPAA cases establish that Congress may
retroactively bar employers from giving their employees vested
pensions in multiemployer plans and then leaving those plans to
collapse. Those cases did not examine whether the employers
continued to operate the same kind of business as they did
when their former employees’ pensions became vested. Our
categorization also recognizes that workers can be harmed not
just by late-appearing physical consequences of their jobs but
4la
also by an employer’s failure to live up to a long-term promise
that formed part of the worker’s reasonable expectations on the
job. Both a promise of benefits and a job-related illness have
a nexus to the worker’s employment, as we discussed supra
Subsection IIIB. 1.
2. The Size of the Burden
The amici (other former coal operators) call our attention to
the size of the burden imposed, arguing that, because the
Eastern plurality found that paying lifetime benefits imposed a
“considerable” burden on Eastern Enterprises, by definition the
same is true for all other entities required to pay benefits under
the Coal Act, since the amount of the payment per beneficiary
is the same under every part of the law. In Eastern, however,
the total amount at issue was between $50 and $100 million,
whereas here the total cost is well under $1 million to date for
Unity and around $2.5 million per year for B & T, an amount
that will continue to decrease as beneficiaries die. Therefore,
the plaintiffs are not in the same situation as Eastern
Enterprises.
We will not find a due process violation if the regulation is
proportional to the harm legitimately addressed by the
legislature. Yet the proportionality requirement will only be
applied when the harm inflicted by the government is
substantial enough to raise an issue as to whether a violation of
due process has occurred. As the total absolute burden
imposed by a statute increases, it becomes simpler for a court
to determine that the legislature has exceeded the bounds of
rationality, whereas a smaller burden means that Congress’s
error, if any, is less likely to justify the extreme sanction of
invalidation on due process grounds.
If, for example, Congress imposed a one-dollar burden on
each member of some industry, and we concluded that five
cents was the only amount that could be linked to Congress’s
asserted justification for the burden, we would still be
42a
disinclined to strike down the statute, the fact that the burden
imposed was twenty times the actual cost would not be
determinative. As the actual amount of the burden decreases,
errors in its calculation increase in relative magnitude, but the
leeway given to Congress in enacting social and economic
legisiation mandates that we look to absolute rather than
relative magnitudes, so that our review is limited to those laws
that work the most severe disruptions of settled expectations.
For similar reasons, we doubt that a former coal company
would have a credible claim of “considerable” burden if it were
only responsible for a small number of beneficiaries under the
Act, even if the company was in such dire financial straits that
the liability would push it over the economic edge. It is the
aggregate cost — the total size of the burden imposed — and
not the per-beneficiary cost that is significant under our due
process jurisprudence. While the burden in this case is certainly
substantial, and thus we will carefully scrutinize the Coal Act,
the burden is not dispositive in itself, We acknowledge that the
Coal Act will put these particular plaintiffs out of business, but
that fact is again a matter of relative burden, not absolute
burden and, because it does not determine the due process
issue, we reserve our discussion of this consideration for our
analysis of the plaintiffs’ takings challenge infra Part IV.
3. Proportionality and Congress’s Ability To Go
Beyond Private Contracts
As we stated above, proportionality is the proper test of
economic impact. The burden imposed on regulated parties
may be heavy, but the Connolly Court found that a large
burden is not unconstitutional if the liability actually imposed
is not out of proportion to the claimant’s prior experience with
the object of the legislation. See Connolly, 475 U.S. at 226;
see also Eastern, 118 S. Ct. at 2150-51 (plurality) (discussing
the justifications for imposing liability as part of the analysis of
the economic impact factor). Prior experience can consist of
conduct that creates reasonable expectations about the object
43a
of the legislation or conduct that creates the problems that
impelled the legislature to act. Given that the situation that
impelled Congress to enact the Coal Act contained elements of
both, we believe that the necessary proportionality exists.
The Coal Act bridges a gap between the contractual
promises of coal companies and the full extent of the funding
required to provide retired miners with lifetime health benefits.
The Trustees and the government argue that the companies’
extracontractual acts, signalled by contractual language but
going beyond that language, justify Congress’s decision to
bridge that gap. The extracontractual acts fall into two genera!
categories: the instability of the pre-Coal Act benefit funding
structure to which the former coal companies contributed, and
the expectation of lifetime benefits created by contractual
language combined with the parties’ consistent practices. As
we have explained, we consider these reasons sufficient
justification for the liability imposed by the Coal Act.
As the defendants put it, the NBCWAs made a long-term
commitment to provide health-care benefits but only a
short-term contractual commitment for funding.'* They argue
persuasively that this arrangement would be silly, even suicidal,
for the miners and the funds were it not made in the context of
a belief that the industry would continue on pretty much as it
had been for the past few decades. Given this, we think that
Congress could reasonably conclude that it would be fair to
hold the coal companies to the implicit part of their promise,
because when they left the industry the explicit part lost its
meaning. See ABC, Inc., 156 F.3d at 1255-57.
'' This disposes of plaintiffs’ contention that the guarantee clause of 1978
would have been superfluous if there were already a lifetime guarantee of
benefits. The guarantee clause was an attempt to insure that the Trustees
could live up to their obligations, an attempt that ultimately failed.
44a
The astern plurality did not reject the Connolly principle
that government may do more than require private parties to
live up to their contracts:
[CJontracts, however express, cannot fetter the constitu-
tional authority of Congress. Contracts may create rights of
property, but when contracts deal with a subject matter
which lies within the control of Congress, they have a
congenital infirmity. Parties cannot remove their trans-
actions from the reach of dominant constitutional power by
making contracts about them.
If the regulatory statute is otherwise within the powers of
Congress, therefore, its application may not be defeated by
private contractual provisions. For the same reason, the fact
that legislation disregards or destroys existing contractual
rights does not always transform the regulation into an
illegal taking .. . [H]ere, the United States has taken
nothing for its own use, and only has nullified a contractual
provision limiting liability by imposing an additional
obligation that is otherwise within the power of Congress to
impose.
Connolly, 475 U.S. at 223-24 (citation omitted); see also
Eastern, 118 S. Ct. at 2148 (plurality).
In Connolly, a contract limited the employers’ obligations
even if contributions proved insufficient to provide the
promised benefits. The challenged legislation converted that
defined contribution obligation to a broader defined benefit
obligation. Congress enacted the law so that retirees could
receive the vested benefits they had been promised and that
they legitimately expected. The Court found a reasonable
relation between the employers’ acts and ERISA-imposed
liability, even though the employers could not have foreseen a
defined benefit obligation from the face of the contract. Here,
the signatory operators created a benefit fund with a legal
obligation to pay out more than the operators were required to
45a
pay in, just as in Connolly, and the Coal Act was Congress’s
attempt to close that funding gap.
The plaintiffs distinguish Connolly by arguing that the
problem in that case was that companies had made broad
promises that the pension funds to which they contributed
would pay pensions, but only obligated themselves contrac-
tually to pay a much smaller amount to those pension funds.
The plaintiffs claim that, in this case, the promises that the
Funds would pay benefits were narrow, because those benefits
could be reduced or eliminated at any time, and the contractual
obligations were broad during the period of their existence. As
we have discussed above, however, Congress decided that even
though the coal companies’ contractual obligations were not
broad enough to sustain the Funds, their promises that the
Funds would pay benefits — made as part of the BCOA union
negotiations — were broad. This is a reasonable reading of the
NBCWAs, particularly given that the 1974 NBCWA removed
the Trustees’ discretion to change benefit levels without the
bargaining parties’ permission and that the 1978 NBCWA
began the practice of enumerating the exact health benefits to
be provided. Cf Nobel, 720 F. Supp. at 1180 (holding that
benefits could not be reduced or discontinued by the Trustees
despite the financial burden on the Trust).
The Coal Act extended the operators’ contractual obliga-
tions to include responsibility for the expectations generated
and invited by the contracts. Essentially, the Act is Congress’s
attempt to do equity. We agree with the court in ABC, Inc.,
which wrote:
The constitutionally significant feature about these later
agreements is that they made it reasonable for employers to
expect a similar state-imposed duty, and thus rendered such
a duty, when eventually imposed, not unfairly retroactive.
That appellants could have successfully defended a breach of
contract suit seeking lifetime benefits under the 1974
agreement is of no consequence.
46a
ABC, Inc., 156 F.3d at 1258
The plaintiffs argue that it is implausible that operators in an
industry with “very high turnover of employers,” Connors v.
Link Coal Co., 970 F.2d 902, 903 (D.C. Cir. 1992), would
have agreed to a perpetual funding obligation enforceable even
against operators who left the coal industry entirely, whether
for economic reasons (high labor costs, competition from other
fuels, and the like) as B & T did or because they were out of
coal. We agree that it is unlikely that the coal companies
intended to create this exact funding structure, although
modern employment relations often include post-retirement
promises that may prove burdensome when conditions change
for an employer. The crucial question, however, is whether the
companies’ actions, through the BCOA through which nego-
tiations with the unions were conducted, created reasonable
expectations about benefits and established a funding structure
vulnerable to “dumping” retirees when companies left the
industry. If so, Congress is not precluded from acting to
redress the harms caused by this situation.
4. Conclusion
We have evaluated the Coal Act against our traditional
standards of proportionality and distaste for retroactivity,
taking into account our deference to Congress on the evils to
be addressed by the law. Ultimately, although the issue is
close, we conclude that the Coal Act is targeted to address the
problem of insufficient resources in the benefit funds and that
it puts the burden on those who, in Congress’s reasonable
judgment, should bear it. The law’s retroactivity is troubling,
yet given the nature of the commitments at issue and the
relationship of Coal Act liabilities to past acts in the industry,
we cannot say that the Act violates due process.
IV. CATEGORICAL TAKINGS
Unity and B & T also maintain that the Coal Act is an
unconstitutional taking as applied to them. They ask us to
47a
apply a categorical takings approach because, they claim, their
businesses will be entirely destroyed if they have to pay benefits
under the Act. In Kastern, the argument that the Coal Act
would drive the plaintiff out of business entirely was not
presented to the Court, and so the plaintiffs argue that they
retain a viable takings claim.
Five Justices, however, rejected the idea that a law that
imposed only a financial burden without identifying a particular
property right could ever consitute a taking. The fact that in a
particular case a financial burden might consume all of a
particular entity’s assets would not seem to change Justice
Kennedy’s analysis: “The Coal Act neither targets a specific
property interest nor depends upon any particular property for
the operation of its statutory mechanisms.” astern, 118 S. Ct.
at 2156 (Kennedy, J., concurring). Similarly, the dissent would
require the governmental identification of “a specific interest in
physical or intellectual property” in order to find a compen-
sable taking. /d. at 2161 (Breyer, J., dissenting). The
reasoning of these five Justices was that any governmental
regulation that costs a business money could become a taking
if the plurality’s standards prevailed, and that this would be an
unacceptable result. See id. at 2155 (Kennedy, J., concurring);
id. at 2162 (Breyer, J., dissenting). This reasoning is
unaffected by the characterization of the burden as a “total”
taking because it consumes all of a particular company’s
resources. Moreover, even the plurality gave no indication that
it would extend the categorical takings approach outside the
context of regulations of real property.
Because the Eastern Court was not confronted with this
situation, however, we must set forth our reasons for rejecting
it in greater detail. To date, the categorical approach has only
been used in real property cases such as Lucas v. South
Carolina, 505 U.S. 1003, 112 S. Ct. 2886, 120 L. Ed.2d 798
(1992). In those cases, the concept of “total destruction” of
value refers not to the owner’s total assets but to some
48a
identifiable property interest. Indeed, even a multi-billionaire
would be eligible for an award under a categorical takings
approach if some small, distinct parcel of his holdings were
condemned or rendered worthless through regulation. There-
fore, the “total destruction” language of cases concerning real
property should not be mechanically applied to the situation at
bar. See Branch v. United States, 69 F.3d 1571, 1576-77 (Fed.
Cir. 1995) (“Because of ‘the State’s traditionally high degree
of control of commercial dealings,’ the principles of takings law
that apply to real property do not apply in the same manner to
statutes imposing monetary liability.” (quoting Lucas, 505 U.S.
at 1027)).
The Supreme Court has repeatedly rejected the argument
that a tax — even a tax on a small set of businesses — may
violate due process or constitute a taking simply because it may
force some of the regulated entities out of business:
The claim that a particular tax is so unreasonably high and
unduly burdensome as to deny due process is both familiar
and recurring, but the Court has consistently refused either
to undertake the task of passing on the “reasonableness” of
a tax that otherwise is within the power of Congress or of
state legislative authorities, or to hold that a tax is
unconstitutional because it renders a business unprofitable.
_... The premise that a tax is invalid if so excessive as to
bring about the destruction of a particular business, the
Court said, had been “uniformly rejected as furnishing no
juridical ground for striking down a taxing act.” [Magano
Co. v. Hamilton, 292 U.S. 40,] 47, 54 S. Ct. 599, 78 L. Ed.
1109 [ (1934) ]. Veazie Bank v. Fenno, 8 Wall. 533, 548,
19 L. Ed. 482 (1869); McCray v. United States, 195 U.S.
27, 24 S. Ct. 769, 49 L. Ed. 78 (1904); and Alaska Fish
Salting & By-Products Co. v. Smith, 255 U.S. 44, 41 S. Ct.
219, 65 L. Ed. 489 (1921), are to the same effect.
|
|
49a
In Alaska Fish, a tax on the manufacture of certain fish
products was sustained, the Court saying, id., at 48-49, 4]
S. Ct., at 220: “Even if the tax should destroy a business it
would not be made invalid or require compensation upon
that ground alone. Those who enter upon a business take
that risk... .” See also International Harvester Co. v.
Wisconsin Dept. of Taxation, 322 U.S. 435, 444, 64S. Ct.
1060, 1065, 88 L. Ed. 1373 (1944); Child Labor Tax Case,
259 U.S. 20, 30, 42 S. Ct. 449, 66 L. Ed. 817 (1922),
Brushaber v. Union Pacific R. Co., 240 U.S. 1, 24, 36
S. Ct. 236, 244, 60 L. Ed. 493 (1916); Flint v. Stone Tracy
Co., 220 U.S. 107, 168-169, 31 S. Ct. 342, 356, 55 L. Ed.
389 (1911)
City of Pittsburgh v. Alco Parking Corp., 417 U.S. 369,
373-74, 94S. Ct. 2291, 41 L. Ed.2d 132 (1974). We note in
this regard that we, along with other Courts of Appeals, have
held that Coal Act obligations are taxes. See Lindsey Coal
Mining Co. v. Chater, 90 F.3d 688, 695 (3d Cir. 1996) (finding
that the Act is “essentially a tax to continue a benefits
program’’).
The plaintiffs respond that these taxation cases all concerned
prospective, not retrospective, liability, but that argument
conflates two separate issues. The size of the liability does not
depend on whether or not the obligation is retrospective. If the
argument is that the complete consumption of a company’s
assets is a Categorical taking, retroactivity would be irrelevant:
if such a law would only be a categorical taking when it was
retroactive, then we are not really discussing a “categorical”
taking. We think that retroactivity, while crucial to our due
process analysis, is not properly considered as a part of the
categorical takings analysis.
The Court of Appeals for the Federal Circuit has also
rejected the plaintiffs’ argument, with reasoning we find
persuasive:
50a
The constitutionality of the assessment should not depend on
the happenstance of the financial condition of the assessed
bank at the time of the assessment. We are unaware of any
principle of takings law under which an imposition of
liability is deemed a per se taking as to any party that cannot
pay it. It would be perverse to hold that a statute resulting
in a $99 million liability would be constitutional as applied
to any [entity] having a net worth of more than $100 million
but unconstitutional per se as to any member having a net
worth of less than $100 million. The assessment in both
cases is based on the same theory of liability and should
meet the same constitutional fate.
Branch v. United States, 69 F 3d at 1577.'° Branch recognizes
that general regulatory laws, unlike the particu-larized
applications of zoning regulations that are the typical targets of
takings challenges, usually have the kind of general applicability
'* The plaintiffs dispute the Branch court's reasoning by citing to Lucas,
in which the Court wrote:
It is true that at least in some cases the landowner with 95% loss will
get nothing, while the landowner with total loss will recover in full.
But that occasional result is no more strange than the gross disparity
between the landowner whose premises are taken for a highway (who
recovers in full) and the landowner whose property is reduced to 5% of
its former value by the highway (who recovers nothing). Takings law
is full of these “all-or-nothing” situations.
Lucas, 505 U.S. at 1019 n. 8. However, Lucas is inapposite. In Lucas,
there was a strip of affected beachfront land; that land was reduced to zero
value by regulation, that was a taking. The Court did not inquire into
whether the landowners had enough other resources to survive the
reduction in value, because that was not relevant to the test. All that was
necessary was to look at the value of the affected land. Under the
plaintiffs’ interpretation, the Court should have examined Mr. Lucas's
financial condition before and after the regulation at issue, and there
would not have been a categorical taking if Mr. Lucas remained in the
black. This suggests the difficulties with a takings analysis that is
unanchored to a specific property interest.
Sla
that mutes the concerns behind takings jurisprudence. The
broader the reach of a law, the less likely it is that a powerless
segment of society is being unfairly singled out to bear a burden
that society as a whole should bear.'®
As the concurrence and the dissent in astern suggest,
considerable practical problems would arise were we to find
plaintiffs’ categorical takings claim cognizable. For example,
we would have to decide at what point we could justify
granting relief on these grounds. Unity will go out of business
as soon as it is ordered to pay. B & T, by contrast, will
apparently go under in two years, when its liabilities under the
Act consume the last of its reserves. Should we wait until B &
T is in the same position as Unity? Would being a year away
from bankruptcy be enough? Should B & T be required to
show that there is no potential “white knight” that might rescue
it from destruction? Alternatively, we might reduce B & T’s
obligations instead of eliminating them entirely so that it could
limp along, never showing a profit but never going under. That
would arguably be an appropriate, constitutional remedy for the
threatened harm, the way that transferable use credits can
mitigate what would otherwise be a taking when zoning
restrictions are at issue. See Penn Central Transp. Co. v. City
of New York, 438 U.S. 104, 98 S. Ct. 2646, 57 L. Ed.2d 631
(1978). If it is the total destruction of the business that
converts the Act into a taking, then perhaps we should simply
declare that part of the obligation that will drive B & T out of
business a taking and approve the rest. Yet this would only
plunge courts further into the intricacies of business finance.
Deciding for Unity and B & T because they will be forced
into bankruptcy by the Coal Act would open up a Pandora’s
* Breadth of application has its own dangers, however, and one of those
dangers is that a law will have irrationally large effects on regulated
businesses. Our substantive due process jurisprudence has developed to
address this situation, as we discuss supra in Section III.
52a
Box that would throw into question every economic regulation
imaginable. Companies could adjust their accounting practices
to prove that any particular regulation would be enough to
destroy them as profitable enterprises. The problem would be
compounded if, as counsel for plaintiffs suggested at oral
argument, we should evaluate the financial status of an entity
without looking at its corporate relatives for takings purposes.
A corporation subject to expensive regulation at some of its
production facilities could create a series of subsidiaries, each
of which would be insolvent on its own if forced to comply
with a particular set of regulations, and claim constitutional
protection against enforcement of the regulations, even though
a different corporate configuration would remain solvent."’
A decision on these grounds would also open the door to
plaintiffs attempting to choose government regulations from
which they wanted to be excused. It is notable that B & T
repeatedly discusses its other expensive government imposed
obligations, which involve cleaning up polluted coal mines and
paying out black lung benefits. The Coal Act alone, according
to B & T’s submissions, would not necessarily put B & T out
’ A supporting in ferrorem argument is not difficult to devise. For
example, an employer could resist an increase in the minimum wage on
the ground that the increased cost would drive it out of business.
Sumularly, many small-business owners find that anti-discrimination laws
generate significant expenses, and some might be forced out of business
by compliance costs. See Mike Hudson, Jobs for Disabled People:
Handicapping Businesses, Roanoke Times & World News, July 30, 1995,
at Fl. While such concerns might very well prove overstated in most
cases, courts would be forced into the dismal business of economic
prediction. Every economic regulation would have to be litigated on a
case-by-case basis. See Sheila A. Moloney, The Lady in Red Tape, Policy
Review, Sept/Oct. 1996, at 48 (discussing various regulations that
threaten the financial viability of specific businesses, including OSHA
safety regulations, FTC franchising rules, ADA accessibility requirements,
Endangered Species Act development restrictions, and EPA Superfund
clean-up costs).
ee ee
a ee a ee eT ee
53a
of business; it is only because the environmental and black lung
obligations are so large that this additional expense overwhelms
B & T. There is nothing in B & T’s constitutional argument
about “total takings” that distinguishes its other obligations
from those imposed by the Coal Act, nor is there a conceptual
reason to confine this definition of total takings to retroactive
laws.
We decline to enter into the conceptual morass that would
be engendered by the plaintiffs’ total takings theory. That a
regulation will put a particular plaintiff out of business cannot
be proof that a taking has occurred. Instead, the size of the
deprivation inflicted by a law must be evaluated in the context
of the other relevant facts. In Connolly, the Court noted that
the MPPAA “completely deprives an employer of whatever
amount of money it is obligated to pay to fulfill its statutory
liability.” Connolly, 475 U.S. at 225. But this did not lead to
the conclusion that there had been a taking because “[t]here is
nothing to show that the withdrawal liability actually imposed
on an employer will always be out of proportion to its
experience with the plan, and the mere fact that the employer
must pay money to comply with the Act is but a necessary
consequence of the MPPAA’s regulatory scheme.” /d. at 226.
We do not gainsay that the liability imposed on Unity in
particular is troubling. Unity’s assets are tiny, and its Coal Act
liabilities dwarf them. If we uphold the defendants’ position,
this small family business will be bankrupted instantly. But the
size of a liability only weighs in favor of finding a taking insofar
as it is out of proportion to the legitimate obligations society
may impose on individual entities. And, as we have discussed
in Part III, we find the proportionality test satisfied in this
instance.
54a
V. CONCLUSION
We hold that Congress could reasonably determine that the
plaintiffs, along with other coal operators in similar situations,
placed the coal industry retiree benefit funds in jeopardy after
creating an expectation of lifetime benefits. Moreover, the
actions that created the need for the Coal Act are not so far in
the past as to make it fundamentally unjust to impose liability
upon the plaintiffs, because the burden is proportional to their
contribution to the problem and the retroactivity is not too
extensive. We do not deny that Unity, in particular, presents a
sympathetic case. This family business has slowly decreased in
size as the economic changes of the past decades have buffeted
it. Yet small businesses, even businesses that have suffered
from the eroding pressures of time and economic change,
cannot be immune from reasonable government regulation
simply because that regulation has harsh effects. The Coal Act
may not be an ideal law; it may not even be a wise one. But its
wisdom, or lack thereof, in a particular case does not determine
its constitutionality.
For the foregoing reasons, the judgment of the District
Court will be affirmed.
ALDISERT, Circuit Judge, concurring:
I agree with the majority’s determination that the 1992 Coal
Industry Retiree Health Benefit Act, 26 U.S.C. §§ 9701-9722
(1994 and Supp II) (“Coal Act”), as applied to Unity Real
Estate Company and Barnes and Tucker Company does not
violate substantive due process and is not an unconstitutional
taking. I agree also that the retroactive scope of the Act is not
beyond appropriate legislative power.
Although Appellants vigorously contend that their cases are
analogous to Eastern Enterprises v. Apfel, 524 U.S. 498, 118
S. Ct. 2131, 141 L. Ed.2d 451 (1998), their analogical argu-
ment fails because the decisive material facts of the cases bear
no similarity. The decisive material facts in Eastern
55a
Enterprises are that the company (1) left the coal industry in
1965 and (2) was never a party to the 1974 and later Wage
Agreements that first suggested the commitment to lifetime
benefits for retirees and family members. See Eastern Enter-
prises, 118 S. Ct. at 2150 (plurality opinion). Unlike the
former coal operator in Eastern Enterprises, Appellants
remained in the coal industry until 1981 and 1984 respectively,
and participated in negotiations for the 1974 and later Wage
Agreements. As emphasized in Eastern Enterprises, “It is the
1974, 1978 and subsequent agreements that first suggest an
industry commitment to the funding of lifetime health benefits
for both retirees and their family members.” Jd Appellants’ act
of signing the 1974 and subsequent National Bituminous Coal
Wage Agreements (NBCWA or “Wage Agreement”) precludes
the rote application of Eastern Enterprises to these cases.
I.
On the due process question of “promises” and “represen-
tations” made to the miners, I would sustain the constitu-
tionality of the Act as applied to the Appellants for one reason
only: The evidence before Congress provided a rational basis
to believe that a promise of lifetime benefits had been made.
Congress relied on the Coal Commission Report, its appendices
and the Commissioners’ testimony at the Senate hearing. For
example, the Coal Commission Report stated:
The Commission firmly believes that retired miners are
entitled to the health care benefits that were promised and
guaranteed them and that such commitments must be
honored... .
Retired coal miners have legitimate expectations of health
care benefits for life; that was the promise they received
during their working lives and that is how they planned their
retirement years. That commitment should be honored.
See Supp. App. at 350, 360 (Secretary of Labor’s Advisory
Commission on United Mine Workers of America Retiree
56a
Health Benefits, Coal Commission Report (1990)). These were
important findings that were accepted by Congress.
Whether the Commission Report accurately portrayed the
state of affairs in the coal mining industry at the time the 1974
Wage Agreement was negotiated and signed is largely
irrelevant to what should be our analysis of the Coal Act’s
constitutionality. In considering the question of who promised
what to whom, I do not believe that it is appropriate for any
reviewing court to review de novo the history of the
agreements or to parse their language.
I say this because, to paraphrase Holmes, “That’s not our
job.”’ Once we get beyond that portion of the Due Process or
Takings Clause analysis relating to the Coal Act’s financial
effect on the Appellants, we must address whether there was
deprivation of property without due process of law on the
theory that the Appeilants never promised any benefits beyond
the lifetime of the Wage Agreements. Our job is not to
examine the materials and to make an independent
determination of this issue, a sort of ersatz fact-finding by
either a federal trial or appellate court.
On this issue, as I see it, our job is merely to determine
whether substantial evidence was presented before Congress on
this issue. And I conclude that there was. The Coal
Commission Report and other testimony before the Senate
Committee informed Congress that “[r]Jetired coal miners have
legitimate expectations of health care benefits for life; that was
' Learned Hand once reminisced: “I remember once I was with [Holmes];
it was a Saturday when the Court was to confer. It was before we had a
motor car, and we jogged along in an old coup. When we got to the
Capitol, I wanted to provoke a response, so as he walked off, I said to him:
“Well, sir, goodbye. Do justice!’ ... He replied: ‘That is not my job. My
job is to play the game according to the rules.”” Learned Hand, Continuing
Legal Education for Professional Competence and Responsibility, Report
on the Arden House Conference, at 116-123 (1958).
57a
the promise they received during their working lives and that is
how they planned their retirement years. That commitment
should be honored.” Supp. App. at 360 (Secretary of Labor’s
Advisory Commission on United Mine Workers of America
Retiree Health Benefits, Coal Commission Report (1990)).
This determination serves as the rational basis for the
legislation.
Our sole obligation is “to assure that, in formulating its
judgments, Congress has drawn reasonable inferences based on
substantial evidence.” Turner Broadcasting Sys. Inc. vy.
Federal Communications Comm n, 520 U.S. 180, 195, 117
S. Ct. 1174, 137 L. Ed.2d 369 (1997) (internal quotations
omitted). Substantial evidence “does not mean a large or
considerable amount of evidence, but rather ‘such relevant
evidence as a reasonable mind might accept as adequate to
support a conclusion.’” Pierce v. Underwood, 487 US. 552,
565, 108 S. Ct. 2541, 101 L. Ed.2d 490 (1988) (quoting
Consolidated Edison Co. v. National Labor Relations Bd., 305
US. 197, 229, 59 S. Ct. 206, 83 L. Ed. 126 (1938)). “We owe
Congress’ findings deference in part because the institution is
far better equipped than the judiciary to amass and evaluate the
vast amounts of data bearing upon legislative questions.”
Turner, 520 U.S. at 195 (internal quotations omitted). On the
basis of the record before Congress, I would conclude that
there was substantial evidence to provide Congress with a
rational basis for believing that the Coal Act was consistent
with promises that had been made by coal operators to their
former employees.
Il.
Important prudential considerations undergird the Court’s
limitations on the judicial role. In the case at bar, reasonable
persons can differ in evaluating the history of the critical Wage
Agreements and interpreting its provisions. For example,
although the majority has made a thorough and scholarly
analysis of these circumstances, my own conclusions would be
58a
somewhat different. 1 would not rely on promises and repre-
sentations made apparently dehors the explicit language of the
Wage Agreements.
Critical to me is that the Wage Agreements expressly limited
all of the promised retiree health benefits to the term of each
agreement. Miners who retired after 1975, but whose former
employers were no longer in the coal mining business, were
promised benefits through the United Mine Workers of
America 1974 Benefit Plan and Trust (“1974 Plan”). See
Eastern Enterprises, 118 S. Ct. at 2139-2140. Article
XX(c)(3)(ii) of the NBCWA stated that the purpose of the
1974 Plan was to provide employee health benefits only
“during the term of this Agreement.” Similarly, Article II of the
1974 Plan expressly stated that if the plan assets were to
“become insufficient” to continue providing benefits after the
NBCWA had expired, “the benefits may be suspended or
reduced to amounts which, in the judgment of the Trustees, can
be paid from the net assets.” The NBCWA contained a
“General Description” of all promised benefits that expressly
stated that health benefits were “guaranteed” at fixed levels
only “during the term of this Agreement.” Similar provisions
are found or incorporated in other agreements. I simply can
find no evidence of any “promise” of lifetime benefits contained
in any Wage Agreement. Any reliance on extracontractual
“promises” looks to a novel theory of law that turns a blind eye
to the centuries-old law of contracts and to the current law on
collective bargaining agreements.
To suggest that the clear language limiting benefits to the
term of the Wage Agreement is trumped by the “lifetime”
health card is a stretch.? By analogy, one could say that
? The basis for the claim of a “lifetime” health card is in the “General
Description” of the 1974 NBCWA, which states:
Any pensioned miner covered in this Plan will retain his Health
Services card until death, and upon his death his widow will retain a
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59a
possession of a Social Security card “for life,” without more
and without any proof of disability, entitles one to benefits.
The “evergreen” clauses included in the 1978 Wage
Agreement do not persuade me to reach a different result: My
reading of these clauses is that they addressed only employer
funding, not the scope of the underlying employee benefits.
As a native of Carnegie, Pennsylvania — a coal mining and
steel mill town near Pittsburgh — who is old enough to
remember the organizational efforts of John L. Lewis in the
coal fields in the 1930s and the 1947 Krug-Lewis Agreement,
I no doubt have a unique perspective. I know first-hand the
mantra of every coal miner through decades of strikes and
picketing: “No Contract, No Work.”
To the miner, the actual contract controlled, not the
expectation of future agreements. Without the contract in
hand, the miners would not pick up their lamps at the lamp
house and descend into the shafts. They worked under the
precise language in a given contract and under no other. repre-
sentations. The sordid history of the coal company towns that
surrounded Carnegie, and the inhumane treatment of the miners
and their families prior to effective unionization in the mines,
impelled the miners to require thereafter that every
representation of working conditions and benefits be set forth
in clear language in a hard-fought written collective bargaining
agreement.
The foregoing discussion is but my gratuitous interpretation
of some of the history and contents of the Wage Agreements,
and admittedly, it may be contrary to that expressed in most
other judicial opinions. My views and those of judges with
contrary interpretations are important in one respect only: My
healih Services card until her death or remarriage.
See Appellants’ Supp. Br. at 6-7.
60a
views and those of other judges are totally irrelevant. What is
relevant is only that on the basis of evidence before it, Congress
concluded that a promise of lifetime benefits had been made.
This furnished the rational basis for enacting the controversial
provisions of the Coal Act
Il.
This, too, must be said. I am conscious that in light of the
view that we take here, the handwriting is on the wall that a
kind of hydraulic pressure will generate economic disasters in
companies whose financial circumstances are similar to Unity
and Barnes and Tucker. Without additional and more realistic
Congressional intervention, we may see a phenomenon of the
“Jast man standing,” as companies disappear from the economic
scene and responsibility for paying benefits shifts to surviving
companies. If this case is any example and a forerunner of
things to come, the operation of the present statutory solution
to the vexing health benefit problem of retirees and their
dependents may serve as a full employment program for
bankruptcy lawyers of companies unable to make prescribed
payments. Sadly, I do not believe that this statement is an
argumentum ad terrorem.
J join in the judgment of the court.
6la
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT ~~
PENNSYLVANIA.
UNITY REAL ESTATE COMPANY,
Plaintiff,
V.
Marty D. HUDSON, et al.,
Defendants,
and
United States of America,
Intervenor-Defendant.
Civil Action No. 93-1802.
March 14, 1997.
MEMORANDUM ORDER
D. BROOKS SMITH, District Judge.
I. INTRODUCTION
This matter is currently before the Court on cross-motions
for summary judgment. In a published opinion and order,
Unity Real Estate Co. v. Hudson, 889 F. Supp. 818 (W.D.Pa.
1995), this Court granted a preliminary injunction in favor of
plaintiff Unity Real Estate Co. (“Unity”), finding that Unity had
demonstrated a likelihood of succeeding on the merits on its
claim that an application of the Coal Industry Retiree Health
Benefit Act of 1992, 26 U.S.C. §§ 9701-9722 (the “Coal Act’)
would effect an uncompensated “taking” in violation of the
Takings Clause of the Fifth Amendment.’
' The Fifth Amendment states in relevant part: “No person shall . . . be
deprived of life, liberty, or property, without due process of law; nor shall
private property be taken for public use, without just compensation.” U.S.
Const. amend. V.
62a -
In its motion for summary judgment, Unity reiterates its
takings claim, as well as its contention that the liabilities
imposed upon it by the Coal Act give rise to due process
violations, a claim that this Court rejected at the preliminary
injunction stage. Unity, 889 F. Supp. at 824-25 (finding
Congress had a rational basis for passing the legislation).
Defendants, Trustees of the UMWA Combined Benefit Fund
and the 1992 UMWA Benefit Plan, assert that new facts and
subsequent appellate decisions addressing the Takings Clause
issue, including a recent opinion by the Court of Appeals for
the Third Circuit, Lindsey Coal Mining Co. v. Chater, 90 F.3d
688 (3d Cir. 1996), compel a conclusion that the Coal Act, as
applied, does not effect an uncompensated taking.
I agree with the Trustees that recent decisions from the
Courts of Appeals and a more complete factual record require
a re-examination of Unity’s takings claim. Although it is
undisputed that enforcement of the Coal Act in this instance
will cause severe economic hardship, the current case law now
establishes that the Trustees’ motion for summary judgment
should be granted.
ll. FACTUAL FINDINGS
A. Unity and Its Related Companies
In their motion for summary judgment, the Trustees submit
new facts regarding Unity and its related coal companies that
have been obtained since the preliminary injunction. With a
few exceptions, as noted, Unity does not dispute the following
facts.
Incorporated in 1947 by members of the Jamison family,
Unity currently owns a commercial building and parking lot in
Greensburg, Pennsylvania. Unity, 889 F. Supp. at 821. With
annual gross revenues of approximately $50,000 and a net
worth of approximately $85,000, Unity only employs two
individuals, an officer at a salary of $7,200 per year, and a
janitor. Jd.
————————
63a
In 1969, Unity became the surviving entity of the merger of
three inactive coal companies: South Union Coal Company,
Penn View Coal, and Stewart Coke & Coal. Unity is also a
successor to two additional coal companies, Jamison Coal
Company and Moremet Coal Company. Unity, 889 F. Supp.
at 821.
The following is a description of the individual coal
companies that were merged into or created by Unity.
1. South Union Coal Company
South Union was incorporated in 1922 by the Jamison
family. From 1923 through 1961, the company operated two
mines in Pennsylvania and West Virginia employing more than
100 UMWA-represented miners at each mine. (Def. facts
1 43, 44). South Union was signatory to the National
Bituminous Coal Wage Agreements (“NBCWA”) of 1947
through 1961. (Def. facts 45).2 From 1923 to 1941, South
Union was a member of the Western Pennsylvania Coal
Operators’ Association (“WPCOA”), and from 1943 to 1961,
it was a member of the Northern West Virginia Coal
Operators’ Association (“NWVCOA”). (Def. facts J 46). The
latter association was.a member of the Bituminous Coal
Operators’ Association, Inc. (“BCOA”). South Union earned
a profit in every year from 1946 to 1960. (Def. facts ¥ 49).
In 1961, South Union closed down and remained idle until
its merger with Unity in 1969. (Def. facts 951). At the time
of the merger, Unity assumed all of the assets and liabilities of
South Union. (Def. facts § 52). Although South Union
stopped making payments to the UMWA benefits funds at the
* In its Counter Statement of Material Facts, Unity cites this Court for the
statement that South Union was a signatory member of the NBCWA for
the years 1950, 1951, 1952, 195[5], 1956 and 1959. (PI. facts § 10). Most
of Unity’s facts are drawn from my opinion granting a preliminary
injunction.
64a
time it ceased operations in 1961, it was aware that its former
employees continued to receive benefits. (Def. facts 9] 53, 54)
2. Penn View Coal
The parties have not provided much information on Penn
View Coal. The Jamison family was the major stockholder of
Penn View, a strip mining and mine equipment company. (Def.
facts | 55). Penn View merged into Unity in 1969. /d. The
parties do not specify to which NBCWAs Penn View was a
signatory. (PI. objections to def. facts ¥ 2).
3. Stewart Coal & Coke
Stewart was incorporated by the Jamison family in 1949 and
family members owned a majority of the stock. (Def. facts
4 56). Stewart operated both a coal mine and a coke
manufacturing plant, employing approximately sixty UMWA-
represented employees. (Def. facts 57). It had a represen-
tative on the WPCOA and made payments to the UMWA
benefit funds from 1949 to 1958. (Def. facts J] 58-59). When
it ceased operations in the late 1950s, Stewart stopped paying
into the UMWA funds. Its former employees, however,
continued receiving benefits. (Def. facts J 60).
In 1970, Unity executed new promissory notes to the
Jamison family to replace notes Stewart had given them in the
amount of $212,857.70. Unity repaid approximately $80,000
of these notes in 1974 and 1975, $100,000 in 1992, and
$52,000 in 1993. (Def. facts 4] 95-98).
4. Jamison Coal Company
Jamison Coal Company was incorporated in 1958. Although
the Jamison family controlled the company, Unity purchased
more than 15% of its stock at the time of its incorporation.
(Def. facts 9] 62, 63). In addition, South Union purchased
approximately 41.5% of the stock, Stewart approximately 9%,
and members of the Jamison family bought approximately
32.2%. (Def. facts J] 64- 66).
_ ces pehnnannateenes reenact
65a
The Trustees assert that Jamison Coal was a signatory to the
NBCWAs, but do not specify which years. Jamison Coal was
a board member of the WPCOA. (Def. facts § 68). The
company paid into the UMWA Funds from 1961 to 1967,
apparently pursuant to the NBCWAs. (Def. facts § 69).
5. Moremet Coal
Unity purchased Moremet Coal Company in 1975 to mine
the coal assets it had acquired by its merger with Stewart.
(Def. facts ] 72). It was a wholly-owned subsidiary of Unity.
Id. Moremet employed UMWA miners and made payments to
the UMWA Funds, but maintained no other benefit plan. (Def.
facts J] 73,74).
6. South Union Coal Company (West Virginia)
South Union-WV was incorporated in 1974 as a
wholly-owned subsidiary of Unity. (Def. facts ] 75). From
1975 to 1981, South Union-WV operated the Edna, West
Virginia coal mine formerly run by South Union-PA. (Def.
facts | 77). South Union-WV was a signatory to the 1974,
1978, and 1981 NBCWAs. (Def facts § 76). As a member of
both the NWVCOA and the WPCOA, South Union-WV had
representatives on both boards. (Def. facts J] 78,79). David
Jamison, Unity’s current president, attended meetings of both
boards on behalf of South Union-WV. (Def. facts ] 80).
South Union-WV employed approximately fifty-five UMWA
miners and made payments into the UMWA Funds from 1975
to 1981. (Def. facts § 81, 82). Pursuant to the 1978 NBCWA,
South Union-WV provided individual retiree benefits to its
former miners. (Def. facts J 84). In 1981, South Union-WV
declared liquidation bankruptcy. The bankruptcy court allowed
South Union-WV to repudiate the 1981 NBCWA. (Pl.ob.§ 4).
Unity advanced $243,500 to South Union-WV and paid
$186,414 as guarantor on behalf of the company. Unity also
indemnified David Jamison and his wife for loan guarantees
66a
they made on behalf of South Union-WV. (Def. facts J] 93,
94)
Following the bankruptcy, David Jamison notified the
UMWA Funds that South Union Coal Company was no longer
in business. He stated: “I am aware that the Trustees of the
UMWA 1974 Benefit Trust will presently authorize payment
of medical and other benefits for eligible former employees of
the South Union Coal company and their dependents according
to the provisions of the amended 1974 Benefit Plan and Trust.
| understand that payment of those benefits will be made in
reliance upon this statement that South Union Coal Company
is no longer in business.” (Def. facts J 88). From 1982 to
1995. Unity paid no federal tax on income of approximately
$288,346 because of the carryover of net operating losses
attnbutable to the coal mining operations of South Union-WV.
(Def facts J 87)
B. The Coal Act
The history of the Coal Act has been recited in detail in
numerous opimons. See, e.g., Jn re Chateaugay Corp., 53 F.3d
478. 485-86 (2d Cir 1995). I will only briefly outline the
structure of the Act and its hierarchy of liability. Enacted in
|992 following a divisive coal strike over retiree benefits, the
Coal Act’s stated purpose was to “identify persons most
responsible for [benefit] plan liabilities in order to stabilize plan
funding and allow for the provision of health care benefits to
retirees’ Coal Industry Retiree Health Benefit Act of 1992,
Pub L No. 102-486, § 19142, reprinted in 1992 U.S.C.C.A.N.
2776, 3037. A Combined Fund was created to provide benefits
to coal industry retirees who, as of July 20, 1992, were eligible
to receive benefits or were receiving benefits from an earlier
fund 26U SC. § 9703. Congress created the 1992 UMWA
Benefit Plan to “provide health benefits coverage to any eligible
beneficiary who is not eligible for benefits under the Combined
Fund.” 26 U.S.C. § 9712(b)(1).
eal i aoe! ll
67a
The Coal Act establishes a hierarchy of employers who are
designated to pay into the Funds. First, the Secretary of Labor
must identify retired coal miners and their dependents who
were entitled to health care benefits under the 1974 Funds and
assign those beneficiaries to NBCWA signatory coal operators,
or related persons,’ that have remained in business. .6 U.S.C.
§ 9706. Within that category, the Secretary must assign the
beneficiaries to the coal mine operators that most recently
employed them for at least two years, and were signatories to
1978 or later NBCWAs. 26 U.S.C. § 9706(a)(1). If no such
operator exists, the Secretary then tries to assign the
beneficiaries to a pre-1978 signatory operator that employed
the beneficiary for the longest period of time. 26 U.S.C.
§ 9706(a)(3). For each beneficiary assigned to it, the operator
must pay a premium to the Combined Fund. 26 U.S.C.
§ 9704(a).
Pursuant to the Coal Act, the Secretary of Labor initially
assigned seventy-eight beneficiaries to Unity based on the
employment of sixty-three miners by Unity or its related
entities. The average length of employment of the sixty-three
miners with Unity or the related coal companies was ten years.
Thirty miners worked for the companies for more than ten
years and thirteen worked for more than fifteen years. (Def.
facts J] 104-06).
As of September 1995, Unity had seventy-four assigned
beneficiaries and owed the Combined Fund $440,694 in unpaid
premiums. Unity owed an additional $18,243 to the 1992
UMWA Plan for the benefits of a retired South Union-PA
miner and his wife. (Def. facts J 109).
* Unity qualifies as a “related person” under section 9701(c)(2) of the Act.
Unity’s liability arises because it is a successor in interest to signatory
operators that are no longer in business.
68a
Ill. CONCLUSIONS OF LAW
A. Standard for Summary Judgment
Federal Rule of Civil Procedure 56(c) provides that
summary judgment may only be granted “if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with affidavits, if any show that there is no genuine
issue as to any material fact and that the moving party is
entitled to judgment as a matter of law.” The parties agree that
there are no genuine issues of material fact and that summary
judgment is appropriate.
B. Due Process Challenge
Although this Court found at the preliminary injunction stage
that Congress had a rational basis for enacting the Coal Act,
Unity, 889 F. Supp. at 824-25, Unity renews its due process
claim, this time asserting that the retroactive effects of the Coal
Act give rise to a violation.
This is precisely the same argument that the Court of
Appeals for the Seventh Circuit reyected in Davon, Inc. v.
Shalala, 75 F.3d 1114, 1122 (7th Cir. 1996). The Court
agreed that the Coal Act, as applied to the plaintiffs, was
retroactive. Retroactivity did not, however, require courts to
exercise a greater degree of scrutiny in reviewing the
legislation. On the contrary, courts examine due process
challenges to retroactive laws as they do prospective ones by
asking the same question: is the legislation justified by “a
legitimate legislative purpose furthered by rational means”? Jd.
at 1123 quoting General Motors Corp. v. Romein, 503 U.S.
181, 191, 112 S. Ct. 1105, 1112, 117 L. Ed.2d 328 (1992).
Using this inquiry, the Davon Court concluded that
Congress acted rationally in enacting the retroactive compo-
nents of the Coal Act because of four grounds. “First, every
NBCWA signatory company profited from the labor of its
retired miners.” /d. at 1124. “Second, every NBCWA
Sh
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signatory company shared some responsibility in creating a
legitimate expectation among miners of lifetime health
benefits.” /d. at 1124-25. “Third, mandatory contributions
from all NBCWA signatory companies were necessary to
secure adequate funding for the Combined Fund.” Jd. at
1125-26. “Fourth, restricting the statutory obligation to fewer
than all NBCWA signatory companies could have resulted in
economic conflict in the coal industry.” Jd. at 1126
Unity raises no new arguments that would dispute the
conclusion that Congress acted rationally in giving the Coal Act
retroactive effect. Since this Circuit has endorsed the views
expressed in Davon, Lindsey, 90 F.3d at 694. Unity’s due
process challenge is rejected.
C. Takings Claim
The Takings Clause of the Fifth Amendment “is designed to
bar Government from forcing some people alone to bear public
burdens which, in all fairness and justice, should be borne by
the public as a whole.” Penn Central Transportation Co. v.
New York City, 438 U.S. 104, 123, 98 S. Ct. 2646, 2659, 57 L.
Ed.2d 631 (1978) (quoting Armstrong v. United States, 364
U.S. 40, 49, 80 S. Ct. 1563, 1569, 4 L. Ed.2d 1554 (1960)).
To evaluate a takings challenge to a statute, the Supreme Court
has laid out a three-pronged analysis that must be conducted as
an “ad hoc” factual inquiry into the circumstances of each case.
Connolly v. Pension Benefit Guaranty, 475 U.S. 211, 106
S. Ct. 1018, 89 L. Ed.2d 166 (1986). Courts must give
“particular significance” to three factors: (1) the economic
impact of the regulation on the plaintiff: (2) the extent to which
the statute has interfered with distinct investment-backed
expectations; and (3) the nature or character of the government
action. Connolly, 475 U.S. at 224-25, 106 S. Ct. at 1025-26.
Since the issuance of a preliminary injunction in this Case, a
number of appellate decisions from other circuits have fleshed
out the takings analysis. See, e.g., In re Blue Diamond Coal
70a
Co., 79 F.3d 516 (6th Cir. 1996); Davon, 75 F.3d at 1114.
The Court of Appeals for the Third Circuit has approved these
decisions, noting that “[a]s with the Due Process challenge,
every court of appeals to consider a ‘takings’ challenge to the
Coal Act has rejected it. We endorse the reasoning of these
cases.” 90 F.3d at 695 (internal citations omitted).*
1. The Nature or Character of the Government Action
The Davon and Blue Diamond Courts analogized the
character of the government action in the Coal Act to the
Mutiemployer Pension Plan Amendments Act (the “MPPAA”),
which the Supreme Court unanimously held did not effect a
taking. See Connolly, 475 U.S. at 211, 106 S. Ct. at 1019.
“Like the Coal Act, the MPPAA does not permit the
government to ‘physically invade or permanently appropriate
any of the employer’s assets for its own use.” Davon, 75 F.3d
at 1129 quoting Connolly, 475 U.S. at 225, 106 S. Ct. at 1026.
Instead, the “interference with the property rights of an
employer arises from a public program that adjusts the benefits
and burdens of economic life to promote the common good and
. . does not constitute a taking requiring Government
compensation.” Connolly, 475 U.S. at 225, 106 S. Ct. at 1026.
At the preliminary injunction stage, this Court stated that
“the nature of the governmental action often ‘blends’ into its
analysis of the economic impact of the governmental action on
the claimant.” Unity, 889 F. Supp. at 826. Legislation that
goes too far may “be properly characterized as action by the
* The following is a list of the cases with their subsequent procedural
history: Davon, Inc. v. Shalala, 75 F.3d 1114 (7th Cir.) cert. denied, __
U.S. __, 117 S. Ct. 50, 136 L. Ed.2d 14 (1996); Jn re Blue Diamond
Coal Co. 79 F.3d 516 (6th Cir. 1996) cert. denied, US. ,117
S. Ct. 682, 136 L. Ed.2d 608 (1997); Barrick Gold Exploration, Inc. v.
Hudson, 47 F.3d 832 (6th Cir.) cert. denied, US. __, 116S. Ct. 64,
133 L. Ed.2d 26 (1995); Jn re Chateaugay Corp., 53 F.3d 478 (2d Cir.)
cert. denied, _US.___, 116 S. Ct. 298, 133 L. Ed.2d 204 (1995).
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government in which it ‘permanently appropriate[s] . . . the
employer's assets for its own use.” /d. at 827 quoting
Connolly, 475 U.S. at 225, 106 S. Ct. at 1026; see also
Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415, 43 S. Ct.
158, 160, 67 L. Ed. 322 (1922). Thus, a full examination of
the nature of the government action turns on an evaluation of
the economic impact prong.
2. Economic Impact of the Government Regulation
In the employee benefits realm, the Supreme Court has
broken down this prong into three more factors: (1) “mere
diminution in the value of property” is insufficient to establish
a taking; (2) the employer’s liability must not be “out of
proportion to [the employer’s] experience” with the benefit
plan; and (3) the legislation should contain provisions “that
moderate and mitigate the economic impact of an individual
employer’s liability.” Concrete Pipe and Prods., Inc. v.
Construction Laborers Pension Trust, 508 U.S. 602, 645, 113
S. Ct. 2264, 2291, 124 L. Ed.2d 539 (1993); Connolly, 475
U.S. at 225-26 & n. 8, 106 S. Ct. at 1026-27 &n. 8.
The Davon Court explained that the economic impact factor
“turns on the question of proportionality.” 75 F.3d at 1127.
In that case, a consolidated appeal was taken by plaintiff coal
companies that had signed the 1950 NBCWA, the reach-back
date of the Coal Act. Because the Davon plaintiffs had an even
more attenuated connection to the benefit plans than Unity, it
is worth describing these companies in some detail.
* Templeton, closed its last mine in 1954 and was no longer
engaged in any coal-related enterprise. A signatory to the
1950, 1951 and 1952, NBCWAs, it was assigned thirty-nine
beneficiaries.
* Sherwood, sold its last mine in 1960 and was currently
operating a business unrelated to coal. Sherwood signed the
1950, 1951, 1952, 1955, and 1958 NBCWAs. It was assigned
four beneficiaries.
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* Princeton stopped mining in 1966 and was also currently
engaged in non-coal activities. Princeton was a signatory to the
1950 NBCWA, as well as the 1951, 1952, 1955, 1956 and
1958 agreements. Princeton was assigned 117 beneficiaries.
* Berwind signed the 1950, 1951, 1952, 1955, 1956, and 1958
NBCWAs. It closed its last mine in 1960; however, in 1963,
the company merged with another coal company and its
successor entity signed the 1968, 1971, 1974, 1978, and 1981
NBCWAs. Berwind was currently the parent to several coal
companies. It was assigned 914 beneficiaries.
* Davon was the successor to the New York Coal Company,
which mined from 1933 to 1954. New York was a signatory
to the 1950, 1951 and 1952 NBCWAs. In 1954, New York
sold its coal mining business to another company and agreed
not to engage in coal-related operations. In 1957, New York
became Davon, Inc. The Secretary assigned Davon
ninety-eight beneficiaries.
The plaintiffs further pointed out that many of the
beneficiaries assigned to them had only the weakest
connections — some beneficiaries worked for less than a day
at the assigned company. Davon, 75 F.3d at 1120. Thus, the
companies contended that applying the Coal Act to them was
an unconstitutional taking, given their relative inexperience
with the benefit plans.
The Seventh Circuit first explained that the “important
question” was “whether the basis for regulating plaintiffs under
the Coal Act — their participation in prior NBCWAs — is
proportional to the economic impact caused by the Act.” /d.
at 1128. Rejecting the plaintiffs’ argument that their
experience was with earlier NBCWAs, not the ones that
promised lifetime benefits, the Court reasoned:
Each consecutive NBCWA, including those after 1974,
accomplished the same end — to provide benefits to miners
until the next NBCWA — using the same means — funding
Dn et aie eee eee
a ee ee
eT eS eee
73a
on a multi-employer basis. Nothing radical happened in
1974. As we stated in the due process context, the promise
of lifetime benefits was not an unforeseeable inclusion in an
NBCWA; every coal operator that participated in the
multi-employer plans contributed directly to the retirees’
legitimate expectations of lifetime benefits. Plaintiffs’
‘experience with the plan[{s]’ that eventually became the
Combined Fund is easily deduced on the facts of this case.
Davon, 75 F.3d at 1128.
In Blue Diamond, the coal company was in Chapter 1]
bankruptcy and had ceased employing union miners in 1964
The company had terminated its obligations to the UMWA
Fund that same year. The Secretary assigned 1400 benefi-
ciaries to Blue Diamond. Although all 1400 had worked for
the company at some point, they had retired from other
operators. Blue Diamond, 79 F 3d at 520.
After rejecting a due process challenge, the Sixth Circuit
addressed the company’s takings claim, stating that the “proper
inquiry under the economic impact prong of the takings inquiry
in a multiemployer benefit plan context is whether the plaintiff s
liability is proportionate to the plaintiff s experience with the
fund at issue.” /d. at 525. Applying this standard to Blue
Diamond, the Court concluded that the company’s
liability under the Coal Act is at least roughly proportional
to Blue Diamond’s experience with the UMWA Fund.
Nearly all of the approximately 1400 living beneficiaries
assigned to Blue Diamond either worked for Blue Diamond
or were related to someone who worked for Blue Diamond,
and Blue Diamond provided service credits to those
employees. The beneficiaries assigned to Blue Diamond
were assigned to Blue Diamond only after they could not be
assigned to a signatory to a more recent NBCWA.
Blue Diamond, 79 F 3d at 525.
74a
This Court’s primary concern at the preliminary injunction
stage was the apparent lack of proportionality between Unity’s
liability and its experience with the NBCWAs or the Benefit
Trusts. See Unity, 889 F. Supp. at 830-31. However, under
the reasoning of Davon and Blue Diamond, it is clear that the
proper inquiry must be the relationship between the assigned
beneficiaries and their employment by Unity or its related
companies. Applying this analysis, Unity’s liability is
proportional.
During discovery, Unity produced employment records for
536 former employees of its related companies. Of these 536
former employees, 188 were identified as receiving, or as
having received before their death, benefits from the UMWA
Funds. Of this group, 120 are eligible to receive benefits, either
for themselves or their dependents. As of September 1995,
Unity has only been assigned seventy-four beneficiaries. Unity
does not dispute that all of the retirees assigned to it were once
employed by coal companies to which Unity is related, nor
does Unity challenge the fact that the assigned beneficiaries
worked for its related companies longer than any other
signatory operator.
Instead, Unity would have this Court give it special
treatment because it is a “related person,” not a signatory
operator. Congress specifically provided a hierarchy of
assignments for imposing liability. Unity was assigned
beneficiaries because its related companies employed the miners
longer and more recently than any currently operating signatory
operator. In Davon, liability was imposed upon “related
persons” of coal companies that had ceased operations in the
1950s; in Blue Diamond, the Court upheld the assignment of
beneficiaries to a company that had withdrawn from the
UMWA in the 1960s. It cannot be said that Unity’s experience
with the Benefit Funds or the NBCWAs was any more
attenuated.
75a
Moreover, Unity cannot argue that it has not received any
benefits from its relation to the coal companies. From 1982 to
1995, Unity paid no federal tax on income of approximately
$288,346 because of the carryover of net operating losses
attributable to the coal mining operations of South Union-WV.
Apparently, Unity’s owners decided that it was in their best
interest to maintain the company as a successor in interest to
the defunct coal companies. After receiving this “benefit,”
Unity is bound to accept the concurrent liabilities imposed by
such a connection.
It is undisputed that enforcement of the Coal Act will have
a severe economic impact on Unity, and this Court continues
to have concern over the wisdom of legislation that may have
the effect of driving a company into bankruptcy. I am
persuaded, however, that even when a regulation results in a
claimant’s loss of property in its entirety, if the government
does not appropriate the property for its own use, but instead
acts to ensure the stability of a private fund, then no
unconstitutional taking can be found. See Connolly, 475 U.S.
at 225, 106 S. Ct. at 1026 (“Given the propriety of the
governmental power to regulate, it cannot be said that the
Takings Clause is violated whenever legislation requires one
person to use his or her assets for the benefit of another.”).
This conclusion is consistent with a line of Supreme Court
decisions which have distinguished between action taken bya
government which results in the government’s control and
dominion over a property interest, and action which does not
exert control or dominion over a property interest. See United
States v. General Motors Corporation, 323 U.S. 373, 378, 65
S. Ct. 357, 359-60, 89 L. Ed. 311 (1945) (compensation for
taking of leasehold limited to market value of lease and fixture
and permanent equipment destroyed or depreciated and not to
consequential damages such as loss of good will or injury to
business); United States v. Causby, 328 U.S. 256, 66 S. Ct.
1062, 90 L. Ed. 1206 (1946) (military’s easement of flight over
76a
real property was an exercise of complete dominion and control
over the land which constituted a taking); United States v.
Central Eureka Mining Company, 357 U.S. 155, 169, 78
S. Ct. 1097, 1104-05, 2 L. Ed.2d 1228 (1958) (inability to
operate gold mine due to government order to close gold mine
during World War II resulted in damages which were
“incidental to the Government’s lawful regulation” and did not
effect a taking); and Armstrong v. United States, 364 U.S. 40,
80 S. Ct. 1563, 4 L. Ed.2d 1554 (1960) (transfer of marine
vessel from builder to government effected a taking since it
extinguished the supplier’s materialmen lien).
The distinction made in the foregoing cases is significant
because “not every destruction or injury to property by
governmental action has been held to be a ‘taking’ in the
constitutional sense.” Armstrong, 364 U.S. at 48, 80 S. Ct. at
1568-69. As the Supreme Court cautioned in United States v.
General Motors Corporation, 323 U.S. at 378, 65 S. Ct. at
359-60, the “Fifth Amendment concerns itself solely with the
‘property,’ 1.e., with the owner’s relation as such to the
physical thing and not with other collateral interests which may
be incident to his ownership.” This holding was refined in
Armstrong, which acknowledged “the difficulty of trying to
draw the line between what destructions of property by lawful
governmental actions are compensable ‘takings’ and what
destructions are ‘consequential’ and _ therefore not
compensable.” 364 US. at 48, 80 S. Ct. at 1568. This rule
that consequential damages do not constitute a compensable
taking was embraced again in Connolly which noted that the
economic impact of the MPPAA upon the employer was “not
out of proportion to its experience with the plan, and the mere
fact that the employer must pay money to comply with the Act
is but a necessary consequence of the MPPAA’s regulatory
scheme.” 475 US. at 226, 106 S. Ct. at 1026 (emphasis
added).
a or
<= pee 8
77a
I agree that Unity’s assessment under the Coal Act yields a
harsh result. Yet it is a result — a consequence — of an
otherwise lawful government regulation, and in no way flows
from the exertion of control by the government over a property
interest held by Unity. As such, the nature of the governmental
action and the economic impact of the regulation weigh in
favor of finding that the Coal Act, as applied to Unity, does not
offend the Fifth Amendment
3. Reasonable Investment-Backed Expectations
As to the plaintiffs’ reasonable investment-backed expecta-
tions, the Davon Court framed the issue as “whether the
plaintiffs had a ‘reasonable expectation that [they] would not
be faced with liability for promised benefits.’”” Davon, 75 F.3d
at 1128 quoting Concrete Pipe, 508 U.S. at 644-48, 113 S. Ct
at 2291-92. The Davon Court held that they did not. First,
the government had a long history of intervening in the coal
industry. Second, from 1950 onward coal companies
“substantially participated in a system that provided continuous
benefits and created legitimate expectations that such
provisions would not cease.” /d. at 1129. Thus, “{aJny
expectation that [the companies] could never be held liable for
retired miners’ health benefits, in light of their participation in
the NBCWAs, was not reasonable.” /d.
The Blue Diamond Court also held that the Coal Act did not
interfere with reasonable investment-backed expectations
Blue Diamond, 79 F.3d at 525. As in Davon, the Court cited
the federal government’s pervasive regulation of the coal
mining industry and the coal operator’s participation in the
“NBCWA system that fostered UMWA members’ legitimate
expectations of lifetime benefits.” /d.
As signatories to at least two NBCWA agreements that
explicitly promised lifetime benefits, Unity’s related companies
had more reason to expect some government enforcement in
such a heavily regulated industry than the Blue Diamond or
a
78a
Davon plaintiffs. None of those plaintiffs signed an NBCWA
that contained express references to benefits “for life,” yet both
the Sixth and Seventh Circuits held that the companies had
substantially participated in a system that fostered the
legitimate expectation of lifetime benefits. See Davon, 75 F.3d
at 1129; Blue Diamond, 79 F.3d at 516. Given the holdings
of Davon and Blue Diamond, and their adoption by the Third
Circuit in Lindsey, at 695, it cannot be said that Unity had a
reasonable expectation of avoiding liability.
IV. CONCLUSION
A takings challenge to legislation requires a fact-specific
analysis of the circumstances of each case. At the preliminary
injunction stage, this Court was faced with a sparse factual
record and limited case law interpreting the constitutionality of
the Coal Act. Since that time, a more factually developed
record, and decisions from the Court of Appeals for the
Seventh, Sixth, as well as the Third Circuits, lead to the
conclusion that the Coal Act, as applied to Unity, does not
violate due process nor effect an unconstitutional taking.
79a
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF
PENNSYLVANIA
BARNES & TUCKER COMPANY,
Plaintiff,
VS.
MARTY D. HUDSON, MICHAEL H. HOLLAND, THOMAS OS.
RAND, ELLIOT A. SEGAL,
CARLTON R. SICKLES, GAIL R. WILENSKY,
and WILLIAM P. HoBGoop,
TRUSTEES OF THE UNITED MINE
WORKERS OF AMERICA
COMBINED BENEFIT FUND, and
MARTY D. HUDSON, MICHAEL H.
HOLLAND, THOMAS F. CONNORS,
and ROBERT WALLACE, TRUSTEES OF
THE 1992 UNITED MINE WORKERS OF AMERICA BENEFIT
PLAN, DEFENDANTS, and
UNITED STATES OF AMERICA,
Defendant-Intervenor.
Civil Action No. 93-264]
Filed March 18, 1997
JUDGES: D. Brooks Smith, United States District Judge.
OPINION: MEMORANDUM and ORDER
SMITH, District Judge
I. INTRODUCTION
Plaintiff, Barnes & Tucker Company (B&T), initiated this
civil action in November of 1993 challenging the
constitutionality of the Coal Industry Retiree Health Benefit
80a
Act of 1992 (“the Coal Act”), 26 U.S.C. §§ 9701-9722. The
Coal Act established a Combined Benefit Fund and a 1992
United Mine Workers of America (UMWA) Benefit Fund to
provide retired miners and their dependents health care
benefits. The Act assigned responsibility for the health care
benefits provided by the funds to those companies which
employed the retired miners. B&T received notice of its
assessment pursuant to the Coal Act and sued the Trustees of
the Combined Fund and the 1992 Benefit Fund asserting that
the Act violated the due process and takings clause of the Fifth
Amendment’ to the United States Constitution. The United
States subsequently intervened as a defendant. Before the court
are motions for summary judgment filed by both the United
States and the Trustees. For the reasons set forth below, the
motions for summary judgment will be granted.
Ii. FACTS AND PROCEDURAL HISTORY
B&T is a Pennsylvania corporation with its principal place
of business in the Allegheny Mountains region of Western
Pennsylvania. Dkt. no. 3, P 7. It was incorporated in 1905 and
established a number of subsidiary corporations over the years
which were engaged in coal production. B&T’s stock was
acquired by Alco Standard Corporation in July 1970, after
which B&T continued to produce coal as a subsidiary of Alco
Standard. Dkt. no. 33, P 16.
‘At the peak of its coal mining operation, [B&T] employed
approximately 1100 [United Mine Workers Association
(UMWA)] miners, and from 1974 through 1982, produced
more than 15 million tons of coal. In 1984, [B&T] continued
to employ UMWA-represented employees at nine separate
The Fifth Amendment provides, in relevant part: “No person shall be
depnved of life, liberty or property, without due process of law; nor shall
private property be taken for public use, without just compensation.” U.S.
Const., amend. V.
8la
facilities, consisting of four deep mines, two cleaning plants,
a preparation plant, a loadout facility and a service center.”
Dkt. no. 28., P 42.
B&T closed its last mining operation, however, before
September 1986 and terminated an agreement to manage a
mine, effective January 1, 1987. Dkt. no. 28, P 43, dkt. no. 33,
P 8. On September 30, 1986, five employees of B&T
purchased all of its stock from Alco Standard. B&T’s stock
continues to be held by those five individuals. Dkt. no. 33,
P 16. B&T’s primary activities since 1986 consist of “leasing
or subleasing small tracts of its coal reserves to third parties,
administering and paying hundreds of ongoing workers’
compensation and federal black lung claims, and pumping and
treating approximately 10,000,000 gallons of acid mine
drainage per day from its closed mines.” Dkt. no. 33, P 8. In
addition, B&T manages its investment portfolio.’
During much of its heyday, B&T was a member of the
Bituminous Coal Operators’ Association, Inc. (BCOA) and a
signatory to the National Bituminous Coal Wage Agreements
(NBCWAs) of 1971, 1974, 1978, and 1981. It severed its
membership with the BCOA prior to the 1984 NBCWA,
although it agreed to be bound on a “me-too” basis. Dkt. no.
28, P 44; dkt. no. 33, P 7. The “me-too” agreement executed
in 1984 expired on January 31, 1988. Dkt. no. 33, P 7.
The purchase of all of B&T’s stock from Alco Standard by
the five individual employees on September 30, 1986 occurred
after all of B&T’s mining operations had ceased. The
transaction included a contractual promise from Alco Standard
* B&T’s Answer to defendant Trustees’ interrogatories in January 1994
indicated that its investment portfolio had a “market value of
approximately $ 6 million.” Dkt. no. 32, exh. R, attachment 3, P 3. Robert
Roland, B&T’s vice-president and assistant treasurer, affirmed that as of
September 1995 the value of B&T’s investment portfolio was $3,250,000.
Dkt. no. 32, exh. 5, at 61-62.
82a
“to indemnify [B&T] for 95% of [B&T’s] cost of providing
health benefits to the UMWaA-retirees in its Individual
Employer Plan pursuant to commitments which existed on or
before September 30, 1986.” Dkt. no. 33, P 17.
Subsequently, Congress enacted the Coal Act. Its political
and social history is extensive and need not be reiterated here.
See In re Chateaugay Corp., 53 F.3d 478 (2d Cir.), cert.
denied, 516U.S. _, 1168S. Ct. 298, 133 L. Ed. 2d 204 (1995).
For purposes of the motions before me, it is sufficient to note
Magistrate Judge Pesto’s succinct observation that:
Congress passed the Coal Act to spread the costs of UMWA
benefit plans established and funded by the NBCW4As since
1950. Congress did this by imposing liability for the
lifetime health (and other) benefits promised in the
NBCWAs to members of the UMWA on entities that had
previously signed NBCWAs but which were no longer
currently operating under a NBCWA.
Unity Real Estate Co. V. Hudson, 889 F. Supp. 818, 837 (W.D.
Pa. 1995). In accordance with the provisions of the Act, the
Social Security Administration (SSA) advised B&T by letters
dated September 28, 1993, that it had been assigned
responsibility for the benefit premiums of 803 miners and 741
dependents, or a total 1,544 beneficiaries.’ Dkt. no. 29, exh.
E, P 14 and exh. H. By letter dated October 22, 1993, B&T
advised the Assistant Regional Commissioner of the SSA that
it had received the September 28, 1993 notice of assignment
and disagreed with its assessment. B&T requested information
* It is not clear from the record how many beneficiaries were assigned
initially or even in the years following. The deputy associate commissioner
for the SSA affirms that B&T was assigned 1,544 beneficiaries in 1993.
Dkt. No. 29, exh. E, P 14. The notice from the Combined Fund to B&T,
however, advised that it was assigned 1,239 beneficiaries for the first year.
The discrepancy in the number of beneficiaries is not material to the
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