Opposition Brief — Unity Real Estate Co. v. Hudson

Supreme Ceurt, U.S,

RILED

SEP 27 i999

THE CLERK |

ie

No. 99-12

Jn the Supreme Court of the Gnited States

UNITY REAL ESTATE COMPANY, ET AL., PETITIONERS

Vv.

MARTY D. HUDSON, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

SETH P. WAXMAN

Solicitor General

Counsel of Record

DAVID W. OGDEN

Acting Assistant Attorney

General

DOUGLAS N. LETTER

Attorney

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

7 oek

QUESTION PRESENTED

Whether the provisions of the Coal Industry Retiree

Health Benefit Act of 1992, 26 U.S.C. 9701 et seq., that

assign responsibility for funding the health-care bene-

fits of retired coal miners and their dependents to the

coal mine operators that previously employed the

miners pursuant to collective bargaining agreements

that promised the miners health-care benefits for life

violate the Due Process or Just Compensation Clauses

of the Fifth Amendment.

(I)

TABLE OF CONTENTS

Page

Opinions below 1

Jurisdiction 1

Statement 2

Argument 14

Conclusion 23

TABLE OF AUTHORITIES

Cases:

Association of Bituminous Contractors, Inc. v.

Apfel, 156 F.3d 1246 (D.C. Cir. 1998) 15, 16, 21

Central States, S.E. & S.W. Areas Pension Fund v.

Midwest Motor Express, Inc., 181 F.3d 799

(7th Cir. 1999), petition for cert. pending, No.

99-420 21

Chateaugay Corp., In re, 53 F.3d 478 (2d Cir.),

cert. denied, 516 U.S. 913 (1995) 3

Connolly v. Pension Benefit Guar. Corp., 475 U.S.

211 (1986) 8, 17, 19

Eastern Enters. v. Apfel, 524 U.S. 498

(1998) passim

Holland v. Robert Coal Co., No. 97-5352, 1998 WL

794832 (D.C. Cir. Oct. 16, 1998), cert. denied, 119

S. Ct. 1803 (1999) 15

Marks v. United States, 430 U.S. 188 (1977) .......... 18, 19, 20

Parella v. Retirement Bd. of the R.I. Employees’

Retirement Sys., 173 F.3d 46 (1999) 21

Vermont Assembly of Home Health Agencies, Inc.

v. Shalala, 18 F. Supp. 2d 355 (D. Vt. 1998) ............000+ 22

Constitution and statutes:

U.S. Const. Amend. V:

Due Process Clause 8, 11, 14, 22

Just Compensation Clause 8,14

Coal Industry Retiree Health Benefit Act of 1992,

26 U.S.C. 9701 et seq. passim

(IID

IV

Statutes—Continued:

26 U.S.C. 9701(c)(2)

26 U.S.C. 9702

26 U.S.C. 9702(a)

26 U.S.C. 9702(a)(3)

26 U.S.C. 9706(a)

26 U.S.C. 9711(a)

26 U.S.C. 9712(a)(1)

26 U.S.C. 9712(a)(2)

26 U.S.C. 9712(b)(2)

26 U.S.C. 9712(b)(2)(A)

26 U.S.C. 9712(b)(2)(B)

26 U.S.C. 9712(d)

26 U.S.C. 9712(d)(3)

Employee Retirement Income Security Act of 1974,

29 U.S.C. 1001 et seq.:

29 U.S.C. 1002(1)

29 U.S.C. 1002(37)

Labor-Management Relations Act, 1947, 29 U.S.C.

186(c)(5)

28 U.S.C. 2403(a)

Miscellaneous:

138 Cong. Rec. 5331 (1992)

j

—_

AOA nnnwaananwn

—

am

In the Supreme Court of the Anited States

No. 99-12

UNITY REAL ESTATE COMPANY, ET AL., PETITIONERS

Vv.

MARTY D. HUDSON, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-60a)

is reported at 178 F.2d 649. The opinion of the district

court in the Unity Real Estate case (Pet. App. 61a-78a)

is reported at 977 F. Supp. 717. The opinion of the

district court in the Barnes & Tucker case (Pet. App.

79a-95a) is unreported.

JURISDICTION

The judgment of the court of appeals was entered on

March 29, 1999. The petition for a writ of certiorari was

filed on June 28, 1999 (a Monday). The jurisdiction of

this Court is invoked under 28 U.S.C. 1254(1).

(1)

STATEMENT

1. Congress enacted the Coal Industry Retiree

Health Benefit Act of 1992 (Coal Act or Act), 26 U.S.C.

9701 et seq., to address a crisis in the funding of two

multi-employer welfare benefit plans that paid for the

health-care benefits of coal miners, retired miners, and

their dependents. Those multi-employer plans, the

United Mine Workers of America 1950 Benefit Plan and

Trust (1950 Benefit Trust) and the United Mine

Workers of America 1974 Benefit Plan and Trust (1974

Benefit Trust), were created and funded through a

series of national collective bargaining agreements,

known as National Bituminous Coal Wage Agreements

(NBCWAs), between the United Mine Workers of

America (UMWA) and the Bituminous Coal Operators

Association (BCOA). See generally Eastern Enters. v.

Apfel, 524 U.S. 498, 505-509 (1998) (plurality opinion).

Before 1974, a single multi-employer fund was the

exclusive source of pension and health-care benefits for

UMWA miners, retirees, and their dependents. See

Eastern, 524 U.S. at 505-506 (plurality opinion). In the

1974 NBCWA, the UMWA and the BCOA agreed to

separate that fund into two multi-employer pension

funds and two multi-employer welfare benefit funds.

Under the 1974 NBCWA, the 1950 Benefit Trust pro-

vided health-care benefits to miners who retired before

1976, and the 1974 Benefit Trust provided health-care

benefits to both the active work force and miners

who retired in 1976 or thereafter. Jd. at 509 (plurality

opinion). Unlike previous agreements, the 1974

NBCWA expressly stated that miners and their

spouses would be entitled to health-care benefits for

life. Jd. at 510 (plurality opinion); see also Pet. App.

102a (1974 NBCWA, providing that “[a]Jny pensioned

3

miner covered in this Plan will retain his Health

Services card until death, and upon his death his widow

will retain a [H]ealth Services card until her death or

remarriage”); In re Chateaugay Corp., 53 F.3d 478, 482

(2d Cir.), cert. denied, 516 U.S. 913 (1995).

The structure of the 1950 and 1974 Benefit Trusts

was changed in the 1978 NBCWA. In that agreement,

employers who were bound by the NBCWA (known as

signatory operators) agreed to provide benefits to their

active employees and future retirees through individual

employer health plans, rather than the 1974 Benefit

Trust. The 1974 Benefit Trust was retained to provide

health-care benefits to post-1975 “orphaned” retirees,

whose last employer had gone out of business. See

Eastern, 524 U.S. at 510 (plurality opinion). The 1950

Benefit Trust for miners who retired before 1976 (and

their dependents) was also retained. See id. at 511

(plurality opinion). The 1978 NBCWA, like the 1974

agreement, expressly promised that miners covered by

the agreement would receive health-care benefits for

life. See Chateaugay, 53 F.3d at 482; Pet. App. 122a-

123a.'

In the 1980s, the financial stability of the 1950 and

1974 Benefit Trusts was plagued by spiraling health-

care costs, the phenomenon of coal operators “dumping”

their retirees into the 1974 Benefit Trust by terminat-

ing their individual welfare benefit plans or leaving the

coal business, and judicial decisions maintaining the

trusts’ beneficiary population without corresponding

increases in coal operator contributions. The with-

drawal of coal operators from the 1950 and 1974 Benefit

! The 1981 and 1984 NBCWAs had similar express promises of

health-care benefits for life. See Pet. App. 14la, 142a, 145a, 146a

(1981 NBCWA); 162a, 163a, 166a, 167a (1984 NBCWA).

4

Trusts forced the remaining participating employers to

shoulder increasingly large contribution obligations to

pay for not only their own retirees, but also newly

“orphaned” retirees whose employers had ceased con-

tributing to the Trusts. Those rising costs, in turn,

influenced several still-contributing signatory operators

to withdraw from the Trusts, thus further shrinking the

trust-fund contribution base. See Eastern, 524 U.S. at

511 (plurality opinion). The Trusts’ ability to provide

health-care benefits was jeopardized, and the issue of

retiree health-care benefits contributed to a protracted

strike at the Pittston Coal Company. J[bid. (plurality

opinion).

2. In 1990, the Secretary of Labor established the

Advisory Commission on United Mine Workers Retiree

Health Benefits (Coal Commission) to examine the

financial crisis confronting the Trusts and to recom-

mend solutions. See Eastern, 524 U.S. at 511-512

(plurality opinion). As relevant here, the Coal Com-

mission recommended, as one alternative solution, that

current and past signatories to the NBCWAs should

bear the cost of providing health-care benefits to

“orphaned” retirees whose former employers were no

longer in the coal business, as well as to their own

retirees. See id. at 512-513 (plurality opinion). The

Coal Act was based in large part on that alternative

recommendation by the Coal Commission. See id. at

513-514 (plurality opinion); 138 Cong. Rec. 5331 (1992)

(statement of Sen. Wofford).

The Coal Act was designed to provide stable financ-

ing for the health-care benefits of all retired coal miners

and their dependents who were covered by either the

1950 or 1974 Benefit Trust, or by an individual em-

ployer plan under the NBCWAs. To that end, the Coal

Act creates two new, private multi-employer health-

5

care benefit trusts. The first new fund, the United

Mine Workers of America Combined Benefit Fund

(Combined Fund), the trust at issue in Eastern, was

created by the statutory merger of the 1950 and 1974

United Mine Workers Benefit Trusts. It provides

benefits to beneficiaries who were receiving (and were

eligible to receive) benefits from those trusts when the

Coal Act was enacted. See 26 U.S.C. 9702. Benefits are

financed through annual premiums paid by signatory

employers that remain in business, or by a “related

person” if the employer is no longer in business; the

amount of the premiums is determined by the Com-

missioner of Social Security under a formula estab-

lished by the Coal Act. 26 U.S.C. 9706(a).

The second new fund, the United Mine Workers of

America 1992 Benefit Plan (1992 Plan), is an entirely

new entity designed to provide lifetime health-care

benefits to individuals who should receive coverage

under an individual employer plan but do not. See 26

U.S.C. 9712(b)(2)(B).? To provide financing for benefits

under the 1992 Plan, the Coal Act assigns responsibility

for funding the health-care benefits of a miner and his

2 The Coal Act elsewhere requires a mine operator that was

providing health-care benefits to a miner or miner’s dependents

under an individual employer plan maintained under a 1978 or sub-

sequent NBCWA, as of February 1, 1993, to continue to provide

such benefits for as long as the operator remains in business. 26

U.S.C. 9711(a). If such an operator goes out of business or does not

provide such benefits, a miner eligible to receive benefits from the

operator’s individual employer plan will receive benefits from the

1992 Plan. See 26 U.S.C. 9712(b)(2)(B). The 1992 Plan also pro-

vides health benefits to individuals who, but for the enactment of

the Coal Act, would have been eligible to receive benefits under

the 1950 or 1974 Benefit Trusts as of February 1993. See 26 U.S.C.

9712(b)(2)(A).

6

dependents to the signatory employer that most re-

cently employed the miner. See 26 U.S.C. 9712(d).

The Coal Act directs the creation of the Combined

Fund and the 1992 Plan as private multi-employer

benefit plans and provides for the appointment of the

plans’ trustees. 26 U.S.C. 9702(a), 9712(a)(1). The Act

further provides that the Combined Fund and the 1992

Plan have the same legal status as any other private

multi-employer welfare benefit plan under the Em-

ployee Retirement Income Security Act of 1974 and the

Labor-Management Relations Act of 1947. 26 U.S.C.

9702(a)(3), 9712(a)(2); see 29 U.S.C. 1002(1) and (37); 29

U.S.C. 186(c)(5).

3. Petitioner Unity Real Estate Company was

assigned responsibility for the health-care benefits of 74

beneficiaries of the Combined Fund and two beneficiar-

ies of the 1992 Plan. Pet. App. 9a. Those assignments

were based upon the miners’ employment by Unity or

by one of its “related” entities (as defined by the Coal

Act, see 26 U.S.C. 9701(c)(2)). Thirty of the miners

assigned to Unity had worked for Unity or for a related

company for more than ten years, and 13 for more than

15 years; the average duration of the employment of the

miners assigned to Unity was approximately ten years.

Pet. App. 9a & n.3. One of Unity’s related entities,

South Union Coal Company (Pennsylvania), operated

coal mines from 1923 until its absorption into a Unity

subsidiary, and signed the NBCWAs of 1947 through

1961. Id. at 8a. It was succeeded in mining operations

by South Union Coal Company (West Virginia), a

wholly owned subsidiary of Unity, which signed the

1974, 1978, and 1981 NBCWAs. Ibid. Another related

company, Stewart Coal & Coke Company, operated a

coal mine and coke plant and made payments to the

UMWA Funds from 1949 to 1958, ceasing when it

7

ended coal mining operations; its former employees con-

tinued to receive benefits from the Funds. Jbid. Other

related companies signed NBCWAs and paid into bene-

fit Funds throughout the 1960s and 1970s. Jbid.*

4. Petitioner Barnes & Tucker Company was as-

signed 1544 Combined Fund beneficiaries and 20 1992

Plan beneficiaries. Pet. App. 9a. Barnes and its sub-

sidiary corporations were engaged in large-scale coal

production from 1905 until 1986, when its last mining

operation was closed; its last agreement to manage a

mine terminated on January 1, 1987. Ibid. At the peak

of its coal mining operations, Barnes employed approxi-

mately 1100 UMWA-represented miners. As a member

of the BCOA, Barnes was also a party to the NBCWAs

of 1971, 1974, 1978, and 1981, and contributed to the

UMWA Funds. Jbid. Barnes withdrew from the op-

erators’ association prior to the 1984 NBCWA, but it

agreed to be bound by the 1984 NBCWA. Ibid. Upon

the termination of the 1984 NBCWA in 1988, Barnes

discontinued its individual employer benefit plan, and

its retirees were left to be covered by the 1974 Benefit

Plan as “orphaned” beneficiaries. Jbid. Since 1986,

3 Unity is a corporation owned by the Jamison family, as were

the entities related to Unity. The relationships between and

among the Jamison family and the various related entities enabled

the Jamison family to receive substantial payments, in excess of

$230,000, from Unity for promissory notes given by Stewart Coal

& Coke. In addition, Unity was able to shelter $288,000 in income

from federal income tax because of net operating loss carryover

from the bankruptcy of its subsidiary South Union (W. Va.). Pet.

App. 8a n.2.

Unity’s current net worth is approximately $85,000, its annual

gross revenues are approximately $50,000, and as of September

1995, it owed the Combined Fund and 1992 Plan over $440,000 in

unpaid premiums. Pet. App. 9a.

8

Barnes has been involved in leasing and subleasing its

coal reserves to third parties, and managing its invest-

ment portfolio. Jd. at 10a.

5. Petitioners filed these actions against the

Trustees of the Combined Fund and the 1992 Plan,

challenging the constitutionality of the Coal Act under

the Due Process and Just Compensation Clauses of the

Fifth Amendment. The United States intervened to

defend the constitutionality of the Act, pursuant to 28

U.S.C. 2403(a). In 1997, before this Court decided

Eastern, the district court rejected petitioners’

constitutional challenges and granted summary

judgment for respondents. Pet. App. 6la-78a (Unity),

79a-95a (Barnes).

The district court first rejected petitioners’ argu-

ments that the application of the Coal Act to them

violated substantive due process. It followed several

appellate decisions upholding the constitutionality of

the Coal Act against due process challenges, Pet. App.

68a-69a, 88a-89a, and concluded that “the Coal Act is

rational economic legislation that comports with the

substantive requirements of the Due Process Clause,”

id. at 88a. As for petitioners’ claims that the Coal Act

effected an uncompensated taking, the district court

sustained the Act under this Court’s three-factor test,

set forth in Connolly v. Pension Benefit Guaranty

Corp., 475 U.S. 211, 225 (1986), for determining whether

a regulatory measure gives rise to a taking. The dis-

trict court noted that the Coal Act does not appropriate

any property to governmental use but rather “acts to

ensure the stability of a private fund,” Pet. App. 75a,

93a; that, as measured by comparing their liabilities

under the Act to their commitments under the

NBCW4As or to the Benefit Trusts, the assessments

upon petitioners are proportional, id. at 74a, 91a; and

9

that, as signatories to NBCWAs that explicitly pro-

mised lifetime benefits, Unity, its related companies,

and Barnes participated in a system that fostered the

miners’ legitimate expectation of lifetime benefits and

did not have a reasonable expectation of completely

avoiding liability for those benefits, id. at 77a-78a, 94a.

6. While these cases were pending on appeal to the

Third Circuit, a divided Court held in Eastern Enter-

prises v. Apfel that the Coal Act was unconstitutional

as applied to a coal mine operator that signed NBCWAs

in effect between 1947 and 1964, but ceased coal mining

operations in 1965. See Eastern, 524 U.S. at 516-517

(plurality opinion) (recounting history of Eastern’s in-

volvement in the coal business). The Coal Act obligated

Eastern to pay premiums to the Combined Fund to

cover the health benefits.of more than 10600 retired

miners (or the dependents of the miners) who had

worked for the company before 1966. Jd. at 517 (plural-

ity opinion). Eastern contended that the Coal Act

violated substantive due process as applied to it and

effected an unconstitutional taking of its property

without just compensation by retroactively creating an

obligation to finance the benefits of miners who, when

employed by Eastern, had no expectation that they

would receive open-ended health-care benefits at

Eastern’s expense.

The plurality concluded that the application of the

Coal Act to Eastern effected an unconstitutional taking

without just compensation. See Eastern, 524 U.S. at

524-527. Applying the Court’s three-factor test for

analyzing regulatory taking claims (id. at 523-524), the

plurality found a constitutional problem as to each

factor. In particular, the plurality found it significant

that the Coal Act imposed liability on Eastern for

lifetime health-care benefits even though Eastern had

10

withdrawn from the coal industry before any of the

NBCW4As had promised lifetime benefits to the miners.

See id. at 532 (with respect to the burden placed on

Eastern, noting that Eastern “had no control over the

activities of its former employees subsequent to its

departure from the coal industry in 1965”); ibid. (with

respect to investment-backed expectations, stressing

that Eastern never participated in an industry-wide

agreement creating expectations of lifetime benefits);

id. at 532-533 (with respect to the nature of the govern-

mental action at stake, stating that “Eastern cannot be

forced to bear the expense of lifetime health benefits

for miners based on its activities decades before those

benefits were promised”).

Justice Kennedy, concurring in the judgment and

dissenting in part, disagreed with the plurality’s con-

clusion that the Coal Act should be analyzed as a

taking, see Eastern, 524 U.S. at 539-547, but concluded

that the application of the Coal Act to Eastern violated

“lalecepted principles” of substantive due process in-

hibiting the operation of severely retroactive laws, id.

at 547-550. Justice Kennedy noted that “the imposition

of liability on former employers based on past employ-

ment relationships” may be upheld under due process

principles as remedial legislation designed to allocate

properly the costs of the employer’s business. Jd. at

549. We concluded, however, that the Coal Act did not

serve that purpose as applied to Eastern because,

aithengh “Eastern was once in the coal business and

evopieyed many of the beneficiaries, * * * it was not

responsible for their expectation of lifetime health

benefits or for the perilous financial condition of the

1950 and 1974 Plans which put the benefits in jeopardy.

* * * [Tjhe expectation was created by promises and

1]

agreements made long after Eastern left the coal busi-

ness.” Id. at 550.

Four Justices dissented, and concluded that the Coal

Act, as applied to Eastern, was not unconstitutional

under either due process or taking principles. Eastern,

524 U.S. at 553-568. The four dissenting Justices

agreed with Justice Kennedy that the Coal Act should

not be analyzed as a taking at all. Jd. at 554-557.

7. After this Court’s decision in Eastern, the court of

appeals in this case affirmed the grant of summary

judgment to respondents. Pet. App. la-60a. In reach-

ing that decision, the court observed that it was “diffi-

cult to distill a guiding principle from Eastern” because

the rationale of Justice Kennedy’s concurring opinion

(relying on the Due Process Clause) was not a “nar-

rower” ground of decision than the plurality’s rationale

(based on taking principles). /d. at 15a-16a. Given the

“splintered nature” (id. at 15a) of the decision in

Eastern, the court of appeals concluded that that deci-

sion “mandates judgment for [petitioners] only if they

stand in a substantially identical position to Eastern

Enterprises with respect to both the plurality and

Justice Kennedy’s concurrence.” Jd. at 16a. The court

then held that the Eastern decision “is not on all fours

with [this] case,” id. at 17a, because petitioners herein

signed NBCWAs in 1974 and thereafter, rendering

them “factually distinguishable from Eastern.” Ibid.‘

* Judge Aldisert agreed in a concurring opinion that “the deci-

sive material facts” of the instant case and Eastern “bear no simi-

larity” because in Eastern, “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 bene-

fits for retirees and family members,” whereas petitioners “re-

mained in the coal industry until 1981 and 1984 respectively, and

12

Those points, in combination with the “five-four vote

against the takings claim” in Eastern, ibid., led the

court to conclude that “due process analysis encom-

passes the relevant concerns” when evaluating the con-

stitutionality of the Coal Act as applied to petitioners.

Ibid.

With respect to petitioners’ substantive due process

claim, the court first considered whether “sufficient

evidence exists to support Congress’s judgment that

post[-]1978 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 effects of their departure from the industry on the

[1950 and 1974 Benefit Trusts].” Pet. App. 19a. After

reviewing the history of the Trusts, including the fact

that, “[uJnlike Eastern, * * * [petitioners] at some

points in time negotiated for and adhered to the very

agreements that established the benefit funds at issue,”

id. at 2la-22a, the court ruled “that Congress could rea-

sonably have reached the conclusions it did about the

expectation of lifetime benefits and about the coal

companies’ responsibility for the situation in which the

[1950 and 1974 Benefit Trusts] found themselves after

the changes of the 1970s and 1980s,” id. at 28a. The

court rejected petitioners’ argument that holding them

responsible for their miners’ health-care benefits

impermissibly obligated them, in effect, to remain in the

coal business perpetually, and noted that the Coal Act

participated in negotiations for the 1974 and later Wage Agree-

ments.” Pet. App. 54a-55a.

5 The court separately considered and rejected petitioners’

“categorical takings” challenge to the Coal Act, based on the con-

tention that the application of the Act to petitioners would “en-

tirely destroy[]” their businesses. Pet. App. 17a, 46a-53a. Peti-

tioners do not renew that “categorical takings” claim in this Court.

13

“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.” Jd. at 23a.

The court also concluded that the duration of the Coal

Act’s retroactive operation in this case does not render

it irrational in violation of due process. Pet. App. 38a.

The court noted that the period of retroactivity

applicable to petitioners’ case is “significantly less

extensive” than that in Eastern, ibid., but it did not rely

solely on the diminished retroactivity in this case, id. at

38a-39a. Rather, the court held, based on this Court’s

_previous retroactivity decisions, that “[w]here Con-

gress acts reasonably to redress an injury caused or to

enforce an expectation created by a party, it can do so

retroactively.” Jd. at 40a. Based on that approach, the

court found the application of the Coal Act permissible

in this ease because “workers can be harmed * * * by

an employer’s failure to live up to a long-term promise

that formed part of the worker’s reasonable expecta-

tions on the job.” Jd. at 40a-4la.

The court distinguished the financial burden imposed

by the Coal Act on petitioners (less than $1 million to

date for Unity, and about $2.5 million per year for

Barnes) from the liability at issue in Eastern (over $50

million), and observed that petitioners “are not in the

same situation as Eastern Enterprises.” Pet. App. 41a.

Stating that “proportionality is the proper test of eco-

nomic impact” to determine whether the retroactive

application of a law is permissible, id. at 42a, the court

found the “necessary proportionality” between the bur-

den imposed on petitioners, on one hand, and, on the

other hand, the former coal companies’ “conduct that

create[d] reasonable expectations about the object of

the legislation [and] conduct that create[d] the pro-

14

blems that impelled the legislature to act.” Jd. at 42a-

43a. In particular, the “expectation of lifetime benefits

created by contractual language combined with the

parties’ consistent practices” and “the instability of the

pre-Coal Act benefit funding structure to which the

former coal companies contributed” provided a suffi-

cient basis for the imposition of liability on petitioners.

Id. at 43a.

In sum, the court held:

Congress could reasonably determine that [peti-

tioners], 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 liabil-

ity upon [petitioners], because the burden is propor-

tional to their contribution to the problem and the

retroactivity is not too excessive.

Pet. App. 54a.

ARGUMENT

1. Petitioners contend (Pet. 14-23) that the obliga-

tions imposed on them under the Coal Act to finance

the health-care benefits of their former employees (and

those employees’ dependents) violate the Due Process

and Just Compensation Clauses of the Fifth Amend-

ment. They contend, in particular, that the court of

appeals’ decision conflicts with Eastern Enterprises v.

Apfel, 524 U.S. 498 (1998), which held the Coal Act

unconstitutional as applied to the coal mine operator

who challenged the Act in that case. Those contentions

are without merit. Petitioners’ situation is fundamen-

tally different from the position of the coal operator

15

before the Court in Eastern, because, unlike that opera-

tor, petitioners signed collective bargaining agreements

in 1974, 1978, and beyond that promised their em-

ployees health-care benefits for life. The decision below

therefore creates no inconsistency with Eastern.

The result reached by the court of appeals is also

correct under well-settled taking and substantive due

process principles, and it does not conflict with any

decision of any other court of appeals. To the contrary,

the only other court of appeals that has considered a

constitutional challenge to the Coal Act since Eastern

by companies that were bound by the 1974 and 1978

NBCWAs rejected that challenge, see Association of

Bituminous Contractors, Inc. v. Apfel, 156 F.3d 1246,

1253-1258 (D.C. Cir. 1998), and it did so based on a

reading of the plurality and concurring opinions in

Eastern that largely parallels that of the Third Circuit

in this case. Further, this Court recently denied review

in another case from the District of Columbia Circuit

presenting the same challenges to the Coal Act. See

Holland v. Robert Coal Co., No. 97-5352, 1998 WL

794832 (D.C. Cir. Oct. 16, 1998), cert. denied, 119 S. Ct.

1803 (1999). There is no basis in this case for a different

result. Further review is therefore not warranted.

a. Although the Court in Eastern did not arrive at a

single rationale for finding the Coal Act unconsti-

tutional as applied to Eastern, both opinions supporting

the judgment in that case emphasized the fact that

Eastern left the coal industry before any collective bar-

gaining agreement gave miners an expectation of life-

time health-care benefits. See 524 U.S. at 530-531, 532,

535-536 (plurality opinion); id. at 549-550 (opinion of

Kennedy, J.).

This case, by contrast, presents a factual situation in

which the coal operators signed NBCWAs promising

16

their employees lifetime benefits; thus, as the court of

appeals concluded, “Eastern is not on all fours with

[this] case.” Pet. App. 17a. The result reached by the

Court in Eastern therefore does not govern here. To

the contrary, as the court of appeals observed, “[b]e-

cause [petitioners] signed NBCWAs in 1974 and there-

after, they are factually distinguishable from Eastern

Enterprises. Language in the plurality and the concur-

rence suggesting that expectations fundamentally

changed after 1974 supports [that] conclusion.” Jbid.;

see also Association of Bituminous Contractors v.

Apfel, 156 F.3d 1246, 1257 (D.C. Cir. 1998) (“the clear

implication of each opinion in Eastern Enterprises is

that employer participation in the 1974 and 1978 agree-

ments represents a sufficient amount of past conduct to

justify the retroactive imposition of Coal Act liabil-

ity.”).°

b. Petitioners’ further contention (Pet. 14-17) that

the court of appeals failed to apply the “retroactivity

principles” supposedly endorsed by five Justices in

Eastern is without merit. Petitioners submit (Pet. 14)

that those principles are that “retroactive employee

benefits funding legislation is unconstitutional if it im-

poses on employers a ‘substantial’ economic burden,

based on conduct ‘far in the past,’ that is ‘unrelated to

any commitment that the employers made or to any

injury they caused.’” Contrary to petitioners’ conten-

6 Moreover, while the Coal Act required Eastern to begin

paying premiums to the Combined Fund in 1993, even though the

company had not contributed to the United Mine Workers Benefit

Plans since 1965, the Coal Act requires petitioners to finance the

health benefits of retirees who were covered by Unity’s related

companies until 1981 and by Barnes until the end of 1988. See pp.

6-8, supra; 26 U.S.C. 9712(b)(2) and (d)(3); ef. Eastern, 524 U.S. at

516 (plurality opinion).

17

tion, the court of appeals examined each of those factors

in the context of the facts of this case and concluded

that the retroactive scope of the Act, as applied here, is

not beyond Congress’s legislative power. Pet. App. 4a.

Thus, the court of appeals, expressly following this

Court’s decisions in Eastern and in Connolly v. Pen-

sion Benefit Guaranty Corp., 475 U.S. 211 (1986),

examined the proportionality of the burden imposed by

the Coal Act on petitioners and sustained that burden

as permissible, noting that even “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.” Pet. App. 42a; see

also Connolly, 475 U.S. at 226. The court of appeals

ruled that petitioners’ participation in the creation of

miners’ reasonable expectations of lifetime benefits

under NBCWAs beginning in 1974, and in the establis-

ment of a funding structure vulnerable to the excessive

creation of “orphaned” retirees when companies left the

industry, provided the requisite proportionality of

burden to experience sufficient to sustain application of

the Coal Act to these operators. Pet. App. 46a. The im-

position of liability on petitioners, therefore, can hardly

be considered “unrelated to any commitment that the

employers made” (Pet. 14).

The court of appeals also correctly concluded that the

extent of retroactivity present in this case is not so

extreme as to contravene substantive due process. Pet.

App. 39a. The court observed that, whereas the appli-

cation of the Coal Act to Eastern resulted in at least 27

years’ retroactive operation—from passage of the Coal

Act in 1992 back to Eastern’s exit from the coal indus-

try in 1965-the extent of retroactivity at issue in this

case is much less, only four years in the case of Barnes.

Ibid. The court of appeals further noted that this Court

18

has held that “Congress may retroactively bar em-

ployers from giving their employees vested pensions in

multiemployer plans and then leaving those plans to

collapse.” Jd. at 40a. In contrast to Eastern, peti-

tioners »ore participated in the creation of a reasonable

expectation of lifetime benefits and left the benefit

plans in a condition vulnerable to collapse. Accordingly,

the periods of retroactivity applicable to the conduct of

petitioners survive constitutional scrutiny.

Finally, the court of appeals properly found that the

Coal Act was ai appropriate congressional response to

commitments participated in by petitioners, and was

designed to remedy injuries caused by petitioners and

similarly acting companies, which withdrew from the

coal industry Jeaving “orphaned” miners and depen-

dents without provision for adequate funding to meet

the expectation of lifetime benefits. Petitioners’ reli-

ance upon Eastern to counter the court of appeals’

conclusions in this regard is wholly misplaced. Pet. 17.

The injuries that the Coal Act is intended to remedy

are not physical harms su*fered in “employment in coal

mines,” ibid.; rather, as the court of appeals observed,

they are the harms caused by “dumping” retirees on

the Benefit Funds, whose funding structures were vul-

nerable to such behavior. Pet. App. 46a.

2. Petitioners contend (Pet. 24-27) that the court of

appeals incorrectly applied Marks v. United States, 430

U.S. 188 (1977), by failing to give controlling effect to

the points of agreement between the plurality opinion

and Justice Kennedy’s opinion in Eastern, and by giv-

ing controlling effect to the points of agreement be-

tween Justice Kennedy and the dissenting Justices in

that case. That contention is without merit.

Marks addresses the situation where a concurring

opinion in this Court reaches the same result as that

19

reached by a plurality of the Justices, but on narrower

grounds. In that situation, a lower court should follow

the reasoning of the concurring opinion, because the

lower court may conclude that a majority of this Court

agrees with the narrower position reached by the con-

currence. 430 U.S. at 193. To the extent that Marks

provides any guidance here, it supports the court of

appeals’ rejection of petitioners’ due process challenge.

Even though the plurality and concurrence in Eastern

analyzed that case under different legal frameworks,

those opinions agreed on the constitutional significance

of a particular fact, namely, that Eastern left the coal

industry before 1974, when the NBCWAs began ex-

pressly stating that retired miners would receive health

benefits for life. As we have explained, both the plural-

ity and Justice Kennedy concluded that the crucial

constitutional problem in Eastern was the Coal Act’s

application to an operator that had never signed a wage

agreement promising lifetime benefits, and both found

that situation distinguishable from the one where an

operator had signed such an agreement. See pp. 9-10,

supra. The court of appeals properly focused on that

point of agreement between the plurality and Justice

Kennedy in Eastern to reject petitioners’ due process

claim.

Petitioners’ contention (Pet. 26) that the court of

appeals improperly created a Marks majority out of

Justice Kennedy’s concurrence and the dissent in East-

ern to reject their taking claim is also incorrect. That

argument overlooks the reliance of both the plurality in

Eastern and the court of appeals in this case on Con-

nolly (including the three-part taking analysis of

Connolly) in evaluating the constitutionality of the Coal

Act as applied to petitioners. See Eastern, 524 U.S. at

529-532; Pet. App. 12a-14a, 22a, 26a, 29a, 40a, 42a-43a,

20

44a, 53a. Moreover, although the court of appeals ana-

lyzed this case principally under the rubric of substan-

tive due process, it observed that “[t]o the extent that

Eastern embodies principles capable of broader applica-

tion, * * * due process analysis encompasses the

relevant concerns.” Jd. at 17a. Thus, rather than

fashioning the Eastern dissent into “the law of the

land,” as petitioners contend, Pet. 26, the court of ap-

peals effectively applied the analytical scheme of the

plurality in Eastern to the facts of this case. For the

reasons given above, petitioners’ claims fail even under

the reasoning of the plurality opinion in Eastern, which

emphasized that Eastern—unlike petitioners herein

and other coal companies that signed the 1974 and later

NBCWAs--never contributed towards any reason-

able expectation of lifetime health benefits on the

part of coal miners. The plurality opinion and Justice

Kennedy’s concurrence therefore form a majority

rationale sufficient to reject petitioners’ taking claim,

and it is not necessary to rely on the dissenting opinion

in Eastern (although it is also at least doubtful that

Marks even addresses a situation such as the explicit

agreement of the four dissenting Justices in Eastern

with a concurring Justice’s rejection of a particular

constitutional claim).

3. Finally, petitioners contend that lower courts are

divided about the elements of a taking claim outside the

context of the Coal Act, Pet. 27-28, and that the

“parameters for due process challenges” to regulatory

legislation are uncertain, Pet. 28-29. Those contentions

provide no basis for review in this case. The plurality

and concurring opinions in Eastern identified the same

critical characteristics that distinguished the operators

that signed NBCWAs in 1974 and afterwards from

those that did not, and both opinions found the connec-

21

tion of the latter group of operators to miners’ expecta-

tion of lifetime benefits and the financial instability of

the funds too attenuated to sustain the Act as applied

to those operators. In view of that articulation of gen-

eral agreement on the principles governing the con-

stitutionality of the Coal Act in particular—principles

that were followed by the court of appeals in this case

and in the D.C. Circuit’s decision in Association of Bitu-

minous Contractors, supra—-there is no basis for

further review in a Coal Act case in order to address

issues that might arise in other contexts in the future.

Petitioners’ contentions about the other cases they

cite are in any event without merit. Petitioners argue

that the First Circuit, in Parella v. Retirement Board

of the Rhode Island Employees’ Retirement System,

173 F.3d 46 (1999), improperly relied on the concur-

rence and dissent in Eastern to conclude that a taking

challenge will lie only when a “specific” property inter-

est has been taken. In Parella, the court considered

whether the plaintiff had any property right at all

before conducting a taking analysis, and concluded on

the facts of that case that the plaintiffs had a mere

“expectancy interest” not protected as “property”

under the Just Compensation Clause. See id. at 58-59.

The Parella court did not conclude (as Justice Kennedy

and the dissenting Justices would have held in Eastern)

that the imposition of financial liability under a

regulatory statute like the Coal Act, which imposes

liability among private parties, is necessarily not a

“taking.” The Parelia decision is therefore remote

from this case. In Central States, Southeast & South-

west Areas Pension Fund v. Midwest Motor Express,

Inc., 181 F.3d 799 (7th Cir. 1999), petition for cert.

pending, No. 99-420 (filed Sept. 7, 1999), the court of

appeals followed the path of the plurality opinion in

22

Eastern and examined legislation challenged as a

taking under the well-settled three-factor test set forth

in Connolly, and observed that “Eastern Enterprises

does not modify this traditional approach or suggest a

different test.” Jd. at 808. In Vermont Assembly of

Home Health Agencies, Inc. v. Shalala, 18 F. Supp. 2d

355 (D. Vt. 1998), the court assumed the existence of a

property interest at stake, see id. at 369. None of those

decisions reflects any confusion regarding the elements

of a takings claim.

As for the “parameters for due process challenges”

(Pet. 28), petitioners incorrectly suggest that the

Court’s emphasis in Eastern on the fact that retro-

activity is “generally disfavored” (Pet. 29) constitutes a

significant departure from the Court’s previous sub-

stantive due process decisions according a heavy pre-

sumption of constitutionality to legislation (including

retroactive legislation) that adjusts the burdens and

benefits of economic life. To the contrary, the plurality

opinion in Eastern emphasized the Court’s long-

standing “concerns about using the Due Process Clause

to invalidate economic legislation,” 524 U.S. at 537, and

avoided resting its decision on the Due Process Clause.

Justice Kennedy’s concurrence did rely on due process

principles, but that opinion did not discard the well-

settled presumption of constitutionality for regulatory

statutes; rather, Justice Kennedy found that presump-

ion rebutted on the particular facts of the case in

Eastern, which he considered to be a “rare instance[]”

of “egregious circumstances.” Jd. at 550. For the rea-

sons we have given, this case presents no comparable

circumstances.

23

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

SETH P. WAXMAN

Solicitor General

DAVID W. OGDEN

Acting Assistant Attorney

General

DOUGLAS N, LETTER

Attorney

SEPTEMBER 1999