256 F.3d 819 (D.C. Cir. 2001), 00-7072, Holland v. Williams Mountain Coal Co.

Docket Nº:00-7072
Citation:256 F.3d 819
Party Name:Michael H. Holland, et al., Appellants v. Williams Mountain Coal Company, d/b/a Naoma Coal Company, and Augusta Processing, Inc., Appellees
Case Date:July 31, 2001
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit

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256 F.3d 819 (D.C. Cir. 2001)

Michael H. Holland, et al., Appellants


Williams Mountain Coal Company, d/b/a Naoma Coal Company, and Augusta Processing, Inc., Appellees

No. 00-7072

United States Court of Appeals, District of Columbia Circuit

July 31, 2001

Argued April 6, 2001

Page 820

Appeal from the United States District Court for the District of Columbia (No. 96cv01405)

Peter Buscemi argued the cause for appellants. With him on the briefs were Stanley F. Lechner, David W. Allen and John R. Mooney. Charles P. Groppe entered an appearance.

Gregory B. Robertson argued the cause for appellees. With him on the brief were Susan F. Wiltsie, Mary Lou Smith and Charles L. Woody.

Before: Williams, Sentelle and Henderson, Circuit Judges.

Opinion for the Court filed by Circuit Judge Williams.

Concurring opinion filed by Circuit Judge Sentelle.

Williams, Circuit Judge:

Under the Coal Industry Retiree Health Benefit Act of 1992 (the "Coal Act" or "Act"), 26 U.S.C. §§ 9701-9722 (1994), the duty of paying premiums for the health benefits of certain retired miners falls on the "last signatory operator." Id. § 9711(a). For the six miners whose benefits are involved here, it is undisputed that Toney's Branch Coal Company was that operator. But Toney's Branch is bankrupt. The Act also imposes the duty on any "successor in interest" of the last signatory operator. Id. § 9711(g)(1). Defendant firms Augusta Processing and Williams Mountain never employed any of the six miners, but right after the withdrawal of Toney's Branch they successively operated Shumate Eagle mine (where Toney's Branch had employed the six miners), using other miners who had worked at Shumate Eagle for Toney's Branch, and equipment previously used by Toney's Branch at the mine. The sole issue before us is whether Augusta and Williams Mountain can on that account be held liable as "successors in interest" of Toney's Branch.

* * *

From 1991 until September 1994 Toney's Branch, a "contract mining" firm, mined coal from Shumate Eagle under contract with the mine's owner. In September 1994 the mine owner terminated the contract with Toney's Branch and sold the mine. The new owner contracted with Augusta to operate the mine, which it did until October 1995. Augusta used equipment that it had purchased, in an arm's length transaction, from an affiliate of Toney's

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Branch. In October 1995 Williams Mountain bought the mining equipment from Augusta and took up the mining operation. Neither Augusta nor Williams Mountain ever held an ownership interest in Toney's Branch, or vice versa. Meanwhile, Toney's Branch continued mining operations elsewhere, until its demise in bankruptcy.

Plaintiffs are trustees of the 1992 United Mine Workers of America ("UMWA") Benefit Plan ("1992 Plan"). The Plan was established under the Act, as part of Congress's response to the failure of certain coal companies to pay the health benefits they promised their miners. Under successive National Bituminous Coal Wage Agreements ("NBCWAs") between the coal operators and the UMWA, companies had agreed to pay benefits not only for their workers but also for workers whose employers had failed to meet their obligations under the agreement, so-called orphaned workers. R.G. Johnson Co. v. Apfel, 172 F.3d 890, 892 (D.C. Cir. 1999). A considerable number of operators responded by withdrawing from the Agreement, either to continue mining with nonunion employees or to leave the coal business altogether. See Eastern Enters. v. Apfel, 524 U.S. 498, 511 (1998). The result was a spiral of increasing obligations for the remaining signatories, and increasing withdrawal. Id. In response, Congress sought to assign health care liability in a form that would be free from such unraveling. Id. at 513-14.

The plaintiff trustees are obligated to provide benefits for retirees who are entitled to benefits under § 9711 (including the six involved here) but who are not receiving them. 26 U.S.C. § 9712(b)(2)(B). If they cannot compel payment by the last signatory operator, a related person, or a "successor in interest," they can adjust the premiums they charge employers obliged to contribute to the 1992 Plan. Id. § 9712(d)(2)(B). Thus there is no chance of the miners being denied their benefits. The only issue is whether the expenses will be borne by defendants or by the broad class of coal operators obliged to fund the 1992 Plan. The trustees contend that defendants Augusta and Williams Mountain are "successors in interest" within the meaning of § 9711(g)(1) and therefore responsible for the charges. The district court disagreed and granted summary judgment for defendants. We affirm.

* * *

The trustees urge a broad definition of successors in interest, namely the "substantial continuity of operations test." This is a multi-factor inquiry that examines, among other things, the ability of the predecessor to provide relief; whether the new employer had notice of potential liability; whether he uses the same plant, equipment and workforce; and whether he produces the same product. See, e.g., Secretary of Labor v. Mullins, 888 F.2d 1448, 1453-54 (D.C. Cir. 1989). Under this standard, the companies may well be successors in interest to Toney's Branch: Toney's Branch is now bankrupt, the Act is familiar to all coal operators, and the companies seamlessly took over operations at Shumate Eagle.

Against this the companies urge narrower definitions, drawn both from general corporate law and from federal tax law (noting that the Act is in fact embedded in Title 26, the Internal Revenue Code ("I.R.C.")). Black's Law Dictionary (6th ed. 1990), for example, provides the standard corporate law definition:

In order to be a "successor in interest", a party must continue to retain the same rights as original owner without change in ownership and there must be change

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in form only and not in substance, and transferee is not a "successor in interest." ... In case of corporations, the term ordinarily indicates statutory succession as, for instance, when corporation changes its name but retains same property.

Id. at 1283-84 (citations omitted). In the alternative, the companies suggest a definition from the I.R.C. that shares with the corporate law definition the element of commingled ownership. See 26 CFR § 1.1503-2A(c)(3)(vii)(B); 26 U.S.C. § 381. Under both of these definitions the "successor in interest" is a successor to the wealth of the predecessor, typically through a corporate reorganization. A party simply acquiring property of a firm in an arm's length transaction, and taking up its business activity, does not become the selling firm's "successor in interest." Under both definitions the companies are plainly not successors in interest of Toney's Branch, and we need not here wrestle with which of them is to be preferred in the event of a clash.

Because both sides assume that federal law controls the meaning of "successor in interest," we do the same. See generally Atchison Topeka & Santa Fe Ry. v. Brown & Bryant, Inc., 159 F.3d 358, 362-64 (9th Cir. 1998).

At the outset the trustees' proposed reading of § 9711(g)(1) encounters difficulty from the adjacent statutory language. While § 9711(g)(1) mandates that "successors in interest" share liability with last signatory operators, § 9711(g)(2) permits "successors" to assume by contract liability for health benefits owed to retirees. The natural reading is that Congress intended "successors" in subsection (g)(2) to include a broad class of persons, e.g., firms that take over mining operations from others, and are not liable as a matter of law, but assume liability by contract with the seller to suit the mutual convenience and risk-allocation preferences of the contracting firms. If § 9711(g)(1) imposed liability by law on virtually all potential candidates for the (g)(2) transaction, the latter would, for the most part, be surplusage. See Holland v. New Era Coal Co., 179 F.3d 397, 403 (6th Cir. 1999).

The trustees respond that, because the section heading for § 9711(g)(1) is "Successor," Congress intended the terms "successor" and "successor in interest" to be used interchangeably. For them the only role of § 9711(g)(2), as against subsection (g)(1), is to allow successors to contract for primary responsibility. But, quite apart from the customary reluctance to give great weight to statutory headings, see, e.g., Bhd. of R.R. Trainmen v. Baltimore & Ohio R.R. Co., 331 U.S. 519, 528-29 (1947), it seems very odd to use a heading, which normally is a kind of shorthand, to justify stripping the actual text of two words, "in interest," that were obviously included deliberately.

This conclusion accords with the structure of the Act. Section 9711 specifies two groups that share liability with last signatory operators: related parties and successors in interest. Related persons, defined in § 9701(c)(2)(A), encompass members of a controlled group of corporations including the signatory operator in question, a business under common control with the signatory operator, and a person in a partnership or joint venture with the signatory operator in the coal business. A common feature of all such entities is that they share ownership or comparable economic interests with the signatory operator. Understanding successor in interest as embodying the standard corporate concept gives it a closely congruent meaning.

We note that the Internal Revenue Service has promulgated definitions of "successor

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in interest" for various specific purposes. See, e.g., 26 CFR § 1.1503-2A(c)(3)(vii)(B); id. § 301.6110-2(l); id. § 302.1-1(e). See also In re Leckie Smokeless Coal Co., 99 F.3d 573, 585 n.14 (4th Cir. 1996). Because of the variety of definitions we question whether the term can be said to have received the sort of consistent treatment that led the Supreme Court in Commissioner v. Keystone Consolidated...

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