Eastern Enterprises v. Chater

Citation110 F.3d 150
Decision Date04 February 1997
Docket NumberNo. 96-1947,96-1947
Parties21 Employee Benefits Cas. 2010 EASTERN ENTERPRISES, Plaintiff, Appellant, v. Shirley S. CHATER, Commissioner of Social Security, et al., Defendants, Appellees. . Heard
CourtU.S. Court of Appeals — First Circuit

John T. Montgomery, with whom David C. Kravitz and Ropes & Gray were on brief, Boston, MA, for appellant.

Sushma Soni, with whom Frank W. Hunger, Assistant Attorney General, Washington, DC, Donald K. Stern, United States Attorney, Boston, MA, and Douglas N. Letter, Attorney, Appellate Staff, Civil Division, Dep't of Justice, were on brief, Washington, DC, for federal appellee.

Peter Buscemi, with whom David Lubitz, Morgan, Lewis & Bockius LLP, John R. Mooney, Elizabeth A. Saindon, Mooney, Green, Baker, Gibson & Saindon, P.C., and David W. Allen, Office of General Counsel, UMWA Health and Retirement Funds, were on brief, Washington, DC, for appellees UMWA Combined Benefit Fund and its Trustees.

Kenneth A. Sweder, with whom Howard M. Brown, Thomas M. Looney, and Stroock & Stroock & Lavan were on brief, Boston, MA, for appellees Peabody Holding Co., Eastern Associated Coal Co., and Coal Properties Corp.

Before SELYA, Circuit Judge, CYR, Senior Circuit Judge, and STAHL, Circuit Judge.

SELYA, Circuit Judge.

In this high-stakes appeal, plaintiff-appellant Eastern Enterprises (Eastern) challenges both the Coal Industry Retiree Health Benefit Act, 26 U.S.C. §§ 9701-22 (1994) (the Coal Act), and the interpretation placed upon it by the Social Security Administration (SSA). Eastern claims that the statute, as synthesized by the agency, distorts Congress' intent, offends principles of substantive due process and equal protection, and works an uncompensated taking of a kind proscribed by the Fifth Amendment.

The administrative law argument is new but lacking in merit. The constitutional arguments are retreads which have taken their lumps from courts of appeals in five other circuits. See Holland v. Keenan Trucking Co., 102 F.3d 736 (4th Cir.1996); Lindsey Coal Mining Co. v. Chater, 90 F.3d 688 (3d Cir.1996); Blue Diamond Coal Co. v. Secretary of HHS (In re Blue Diamond Coal Co.), 79 F.3d 516 (6th Cir.1996), cert. denied, --- U.S. ----, 117 S.Ct. 682, 136 L.Ed.2d 608 (1997); Davon, Inc. v. Shalala, 75 F.3d 1114 (7th Cir.), cert. denied, --- U.S. ----, 117 S.Ct. 50, 136 L.Ed.2d 14 (1996); LTV Steel Co. v. Shalala (In re Chateaugay Corp.), 53 F.3d 478 (2d Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 298, 133 L.Ed.2d 204 (1995). Although these decisions are not binding upon us, we find them convincing. Consequently, we affirm the district court's entry of summary judgment adverse to Eastern.

I. DIGGING THE TUNNEL

While coal may or may not be "a portable climate," Ralph Waldo Emerson, The Conduct of Life (1860), the industry has witnessed a series of particularly vitriolic labor disputes over the past half-century. We do not chronicle these disputes in their entirety, but confine ourselves to excavating a few nuggets that are important to a resolution of this appeal.

In 1946, motivated principally by miners' demands for decent health and retirement benefits, the United Mine Workers of America (UMW) called a nationwide strike. To forestall industrial paralysis, President Truman nationalized the coal mines. Following the execution of what came to be known as the Krug-Lewis Agreement, the government relinquished control of the mines. The UMW 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 a modicum of health and pension benefits to miners.

A new NBCWA, signed in 1950, provided that in exchange for union concessions relative to mechanization of the mines, the BCOA would create a welfare and retirement fund financed by a perton levy on coal mined by signatory coal producers. The 1950 Fund was designed to receive employer contributions and use the funds to provide health benefits to current and retired miners (and, in certain cases, to family members). 1 Several subsequent NBCWAs were signed during the next two decades. None of them altered this basic benefits format.

In 1974, demographic changes and the passage of the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et 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 allied 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 lifetime health benefits for enrolled miners. No such express warranty had appeared in any earlier 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 UMW), together with complementary "guaranty" and "evergreen" provisions. The net effect of these changes was to obligate signatory coal producers to redeem the promise of lifetime health benefits even after the current pact expired.

Treating the symptoms rather than the cause has never been a very effective method of curing systemic ills. So here: the very economic factors which prompted the remedial measures inserted into 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 jumped ship, and superannuation swelled the retired miners' ranks. By 1990, contributions from a shrinking number of coal producers proved insufficient to fund the four benefit plans, and those plans were awash in red ink.

The UMW struck the Pittston Coal Company for nearly 11 months in 1989-90. This work stoppage proved to be the straw that broke the dromedary's back. 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' response to the commission's suggestions took the form of the Coal Act. The Act folded the 1950 and 1974 Plans into a single UMW-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 linchpin of the statutory scheme is contained in section 9706 of the Coal Act, which directs the assignment of every eligible beneficiary to a "signatory operator" who is still "in business." 2 The signatory operator (SO) must then pay premiums to the Combined Fund sufficient to defray the estimated annualized health care costs for that beneficiary, as well as an additional amount (proportionate to the number of initial assignments) earmarked to provide coverage for orphaned retirees. See 26 U.S.C. § 9704. The assignment hierarchy is administered under the aegis of the SSA. See id. at § 9706(a). The hierarchy is structured along the following lines: a retired miner is assigned first, if possible, to an SO which both signed the 1978 (or any subsequent) NBCWA and also employed him for at least two years more recently than any other SO; if no SO fits that description, the retired miner is assigned to the 1978 (or any subsequent) SO which employed him most recently for any length of time; and if there are still no takers (that is, if the retired miner never worked for a 1978 or subsequent SO which is still in business), he is assigned to that SO of any earlier agreement(s) which employed him for the longest period of time. See id. at § 9706(a)(1-3). The assignment formula has a safety valve in that the Act preserves the right of any SO which is assigned a miner to seek contribution from other persons in a separate civil action. See id. at § 9706(f)(6).

II. MINING THE ORE

The appellant mined coal from 1946 through 1965, and, although it thereafter left the industry, it remains in business as defined by the Act. It is a signatory operator, having executed the 1950 NBCWA and some later pacts (but not the 1974, 1978, or any subsequent NBCWA).

Samuel East dug coal for Eastern from 1946 to 1960 and for two other companies from 1960 to 1967. East (who had retired and was eligible to receive benefits under earlier Plans) was never employed by a signatory to the 1978 (or any more recent) NBCWA. Thus, because Eastern was the SO which had employed East for the longest period of time, the SSA assigned him and his wife to Eastern pursuant to Coal Act § 9706(a)(3).

Displeased by the assignment, Eastern filed suit against the Commissioner of Social Security, the Combined Fund, and the Fund's Trustees. Eastern argued that the Coal Act, as applied to it, crossed the constitutional line at several points. After the denial of Eastern's parallel administrative appeal, in which it argued that Eastern Associated Coal Company (EACC), the wholly-owned subsidiary which took over Eastern's coal operations in 1966 and which was sold to Peabody Holding Company (Peabody) in 1987, should have been assigned responsibility for the Easts, Eastern amended its complaint to allege a violation of the Administrative Procedure Act, 5 U.S.C. § 706 (1994). Eastern also filed an action against Peabody and EACC seeking indemnification for the liability resulting from the East assignment. 3 Ruling on cross-motions for summary judgment in the principal...

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