99 F.3d 573 (4th Cir. 1996), 96-1708, In re Leckie Smokeless Coal Co.

Docket Nº:96-1708, 96-1849, 96-1739 and 96-1850.
Citation:99 F.3d 573
Party Name:36 Collier Bankr.Cas.2d 1693, In re LECKIE SMOKELESS COAL COMPANY; New River Mineral Resources Company; Gould Resources, Incorporated, Debtors (Two Cases). UNITED MINE WORKERS OF AMERICA 1992 BENEFIT PLAN, and its Trustees; United Mine Workers of America Combined Benefit Fund, and its Trustees, Movants-Appellants, v. LECKIE SMOKELESS COAL COMPANY;
Case Date:October 29, 1996
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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Page 573

99 F.3d 573 (4th Cir. 1996)

36 Collier Bankr.Cas.2d 1693,

In re LECKIE SMOKELESS COAL COMPANY; New River Mineral

Resources Company; Gould Resources, Incorporated,

Debtors (Two Cases).

UNITED MINE WORKERS OF AMERICA 1992 BENEFIT PLAN, and its

Trustees; United Mine Workers of America Combined

Benefit Fund, and its Trustees, Movants-Appellants,

v.

LECKIE SMOKELESS COAL COMPANY; New River Mineral Resources

Company; Gould Resources, Incorporated; Royal

Scot Minerals, Incorporated, Defendants-Appellees,

and

Unsecured Creditors Committee; Office of the United States

Trustee, Parties-in-Interest.

UNITED MINE WORKERS OF AMERICA 1992 BENEFIT PLAN, and its

Trustees; United Mine Workers of America Combined

Benefit Fund, and its Trustees, Movants-Appellants,

v.

LECKIE SMOKELESS COAL COMPANY; New River Mineral Resources

Company; Gould Resources, Incorporated; Royal

Scot Minerals, Incorporated, Defendants-Appellees,

and

Unsecured Creditors Committee; United States Trustee,

Parties-in-Interest.

In re LADY H COAL COMPANY, INCORPORATED; Consolidated

Sewell, Incorporated; Sewell Coal Company;

Leivasy Mining Corporation; Eastwood

Construction, Incorporated,

Debtors (Two Cases).

LADY H COAL COMPANY, INCORPORATED; Consolidated Sewell,

Incorporated; Sewell Coal Company; Leivasy

Mining Corporation; Eastwood

Construction, Incorporated,

Debtors-Appellees,

v.

UNITED MINE WORKERS OF AMERICA 1992 BENEFIT PLAN, and its

Trustees, Movant-Appellant,

and

United Mine Workers of America Combined Benefit Fund, and

its Trustees, Movant,

and

International Union, United Mine Workers of America;

District 17, United Mine Workers of America,

Parties-in-Interest.

LADY H COAL COMPANY, INCORPORATED; Consolidated Sewell,

Incorporated; Leivasy Mining Corporation;

Eastwood Construction, Incorporated,

Debtors-Appellees,

v.

UNITED MINE WORKERS OF AMERICA 1992 BENEFIT PLAN, and its

Trustees, Movant-Appellant,

and

International Union, United Mine Workers of America;

District 17, United Mine Workers of America,

Parties-in-Interest.

Nos. 96-1708, 96-1849, 96-1739 and 96-1850.

United States Court of Appeals, Fourth Circuit

October 29, 1996

Argued July 18, 1996.

Page 574

[Copyrighted Material Omitted]

Page 575

ARGUED: Jami Wintz McKeon, Morgan, Lewis & Bockius, Philadelphia, PA, for Movants-Appellants. Ellen S. Cappellanti, Jackson & Kelly, Charleston, WV; John Allen Rollins, Lewis, Friedberg, Glasser, Casey & Rollins, Charleston, WV, for Defendants-Appellees. ON BRIEF: Marilyn L. Baker, Mooney, Green, Baker, Gibson & Saindon, P.C., Washington, D.C.; Larry D. Newsome, Barbara Locklin-George, Office of the General Counsel, UMWA Health & Retirement Funds, Washington, D.C., for Movants-Appellants. Ethan D. Fogel, Joseph A. O'Connor, Dechert, Price & Rhoads, Philadelphia, PA; Stephen L. Thompson, Barth, Thompson & George, Charleston, WV, for Defendants-Appellees.

Before MURNAGHAN and ERVIN, Circuit Judges, and PHILLIPS, Senior Circuit Judge.

Affirmed by published opinion. Judge MURNAGHAN wrote the opinion, in which Judge ERVIN and Senior Judge PHILLIPS joined.

OPINION

MURNAGHAN, Circuit Judge:

Appellants in these consolidated cases are the 1992 UMWA Benefit Plan and the UMWA Combined Benefit Fund, both of which were established pursuant to the Coal Industry Retiree Health Benefit Act of 1992, 26 U.S.C. §§ 9701-9722. Appellees are coal operators that have filed voluntary petitions for bankruptcy relief and that have asked the Bankruptcy Court to declare that the purchasers

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of their assets will not be jointly and severally liable, as their successors in interest, for their financial obligations to the Plan and the Fund. The district courts held that the purchasers of Appellees' assets would not be Appellees' successors in interest within the meaning of the Coal Act and therefore authorized the Bankruptcy Court to permit the sales free and clear of Appellees' Coal Act liabilities. In the second of the two cases before us, the District Court held, in the alternative, that, even if the purchasers of the debtors' assets would be the debtors' successors in interest, the Bankruptcy Court could extinguish all successor liabilities arising under the Coal Act by entering a free and clear order pursuant to 11 U.S.C. § 363(f)(5). On the strength of the latter line of reasoning, and without reaching the question of whether the purchasers would be Appellees' successors in interest, we affirm the judgments of the district courts.

I.

The events spurring the enactment of the Coal Act have been described elsewhere, see, e.g., Blue Diamond Coal Co. v. Shalala (In re Blue Diamond Coal Co.), 79 F.3d 516, 518-20 (6th Cir.1996); Davon, Inc. v. Shalala, 75 F.3d 1114, 1117-19 (7th Cir.1996), 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, 481-86 (2d Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 298, 133 L.Ed.2d 204 (1995), and need not be thoroughly recounted here. In short, the pertinent facts are these. Beginning in 1946, coal miners received pension and health benefits pursuant to a series of employer-funded plans negotiated by their union, the United Mine Workers of America ("UMWA"), and the Bituminous Coal Operators Association ("BCOA"). LTV Steel Co., 53 F.3d at 481-85. From 1974 until 1978, non-pension benefits were provided under two plans--the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan--with the former providing benefits to miners who retired prior to January 1, 1976, and the latter providing benefits to miners who retired after that date. Id. at 482. In 1978, the UMWA and BCOA agreed partially to decentralize the scheme: they agreed that each miner retiring after January 1, 1976, would receive health benefits pursuant to a plan created and funded by his or her last employer, and that the 1974 UMWA Benefit Plan would provide health benefits only to those retirees who had been "orphaned"--that is, those retirees whose last employer had gone out of business. Id. at 482-83.

In the 1980s, the 1950 and 1974 plans began to face serious financial difficulties: the number of employers contributing to the plans declined, the number of orphaned miners increased, and the costs of health care soared. Id. at 483-84. Congress responded in 1992 by enacting the Coal Industry Retiree Health Benefit Act of 1992, Pub.L. No. 102-486, 106 Stat. 2776, 3036-56 (codified at 26 U.S.C. §§ 9701-9722). The overarching purpose of the Act was to establish a system whereby each current and former signatory operator--that is, each operator that "is or was a signatory to a coal wage agreement," as such agreements are defined in section 9701(b)(1) of the Act, see § 9701(c)(1)--is required to pay for the benefits provided to its own retirees and to share in the cost of providing benefits to orphaned retirees. 1 LTV Steel Co., 53 F.3d at 485. Toward that end, Congress created two new benefit plans.

First, it established the UMWA Combined Benefit Fund ("the Fund") by merging the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan. See 26 U.S.C. § 9702(a). The Fund provides health and death benefits to coal industry retirees who, as of July 20, 1992, were eligible for, and receiving, benefits under either the 1950 or the 1974 plan. Id. § 9703(a), (f). The Fund is financed by annual per-beneficiary premiums paid in monthly installments by "assigned operators." Id. §§ 9704, 9706;see id. § 9701(c)(5) (defining "assigned operator");

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id. § 9706(a) (describing the manner in which beneficiaries are assigned to operators). An assigned operator's "related persons" are jointly and severally liable for the operator's premiums. Id. §§ 9704(a). An entity is deemed a person related to an operator if it is

(i) a member of the controlled group of corporations ... which includes such signatory operator;

(ii) a trade or business which is under common control ... with such signatory operator; or

(iii) any other person who is identified as having a partnership interest or joint venture with a signatory operator in a business within the coal industry, but only if such business employed eligible beneficiaries....

Id. § 9701(c)(2). An entity is also an operator's "related person" if it is a "successor in interest of any person described in clause (i), (ii), or (iii)." Id. The Act does not define the phrase "successor in interest."

Second, Congress established the 1992 UMWA Benefit Plan ("the Plan"). Id. § 9712(a). The Plan provides health benefits to retirees who retired prior to September 30, 1994, and who, among other things, are not eligible to receive benefits from the Combined Benefit Fund. Id. § 9712(b). The Plan is financed by annual and monthly premiums paid by the beneficiaries' "last signatory operators." 2 Id. § 9712(d)(1), (3). An operator's "successor in interest" and "related persons" are jointly and severally liable for the operator's premiums. Id. §§ 9711(g)(1), 9712(d)(4).

II.

The instant appeals concern two separate cases arising from the Southern District of West Virginia. The pertinent facts concerning those cases are as follows.

  1. UMWA 1992 Benefit Plan v. Leckie Smokeless Coal Co.

    Appellees in the first of the two cases before us are Leckie Smokeless Coal Company, the New River Mineral Resources Company, and Gould Resources, Inc. Until January 1994, Leckie conducted coal mine operations in West Virginia. New River and Gould are affiliates of Leckie that own leases of coal lands located adjacent to Leckie's property. Together, the three companies have been assigned 140 beneficiaries for purposes of Combined Benefit Fund liability and, with respect to the 1992 UMWA Benefit Plan, are the last signatory employers of 87 retirees....

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