Anker Energy Corp. v. Consolidation Coal Co., 98-3451

Citation177 F.3d 161
Decision Date14 May 1999
Docket NumberNo. 98-3451,98-3451
PartiesANKER ENERGY CORPORATION, and King Knob Coal Company, Inc., Appellants, v. CONSOLIDATION COAL COMPANY; United Mine Workers of America Combined Benefit Fund; Marty D. Hudson, Trustee; Michael H. Holland, Trustee; Thomas O.S. Rand, Trustee; Elliott A. Segal, Trustee; Carlton R. Sickles, Trustee; Gail R. Wilensky, Trustee; William P. Hobgood, Trustee; Kenneth S. Apfel, Commissioner of the Social Security Administration * .
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Paul A. Manion (argued), Robert D. Finkel, Manion McDonough & Lucas, Pittsburgh, PA, Charles L. Woody, Paula Durst Gillis, Spilman Thomas & Battle, Charleston, WV, James A. Walls, General Counsel, Anker Energy Corporation, Morgantown, WV, for Appellants.

Edwin J. Strassburger (argued), David A. Strassburger, Strassburger McKenna Gutnick & Potter, Pittsburgh, PA, Robert M. Vukas, General Counsel Consol, Inc., Pittsburgh, PA, for Appellee Consolidation Coal Company.

Peter Buscemi (argued), Morgan, Lewis & Bockius, Washington, DC, John R. Mooney, Elizabeth A. Saindon, Mark J. Murphy, Mooney, Green, Baker, Gibson, and Saindon, Washington, DC, David W. Allen, Christopher Clarke, Office of the General Counsel, UMWA Health and Retirement Funds, Washington, DC, for Appellees UMWA Combined Benefit Fund and Its Trustees.

Frank W. Hunger, Assistant Attorney General, Harry Litman, U.S. Attorney, Douglas N. Letter, Edward R. Cohen (argued), Attorneys, Appellate Staff Civil Division, U.S. Department of Justice, Washington, DC, Frieda S. Colfelt, Department of Health and Human Services, Office of General Counsel, Baltimore, MD, for Appellee Commissioner of Social Security.

Before: GREENBERG, ROTH, and ROSENN, Circuit Judges

OPINION OF THE COURT

GREENBERG, Circuit Judge.

I. INTRODUCTION

In 1992, Congress enacted the Coal Industry Retiree Health Benefit Act ("Coal Act"), 26 U.S.C. §§ 9701-9722, to ensure that retired coal miners and their dependents would continue to receive the health and death benefits they had been receiving since the 1940s pursuant to a series of collective bargaining agreements. By the late 1980s, problems had arisen that caused serious under-funding to the two benefit plans funding the miners' benefits. Fearing that the miners and their families would be left with no health or death benefits, Congress stepped in and passed the Coal Act, which provided a new funding mechanism under which the Commissioner of Social Security ("Commissioner") would assign miners to a coal industry employer based on the recency and longevity of a miner's employment. That employer then would be responsible for providing the funds for those miners' benefits.

The Coal Act has led to a flood of litigation challenging the Commissioner's assignments of liability under the Act, as well as Takings and Due Process challenges to the constitutional validity of the Act's imposition of retroactive liability. Following this legal trend, Anker Energy Corp. ("Anker") filed this action in the United States District Court for the Western District of Pennsylvania seeking declaratory and injunctive relief that the Commissioner improperly assigned it responsibility for funding certain miners' benefits and that these assignments violated the Takings and Due Process Clauses of the Fifth Amendment to the United States Constitution. Anker also asserted that appellee Consolidation Coal Co. ("Consol") had agreed to assume liability for any payments due for miners' benefits and to reimburse Anker for any such payments Anker made, and thus was liable to it for the monies attributable to the assignments.

The district court dismissed all of these claims at the pleadings and summary judgment stages of litigation. First, the court granted Consol's motion for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c) on Anker's claims that the Commissioner should have assigned the miners to Consol, and that Consol had agreed to indemnify Anker for any liability it incurred for the payment of miners' benefits. See Anker Energy Corp. v. Consolidation Coal Co., Civ. No. 96-1938 (W.D.Pa. July 25, 1997) (Anker I). Subsequently, the district court upheld the constitutionality of the application of the Coal Act to Anker on a motion for summary judgment. See Anker Energy Corp. v. Consolidation Coal Co., Civ. No. 96-1938 (W.D.Pa. Mar. 11, 1998) (Anker II). Finally, inasmuch as it had affirmed the imposition of liability against Anker and had determined that Anker was delinquent in its payments under the Act, the district court entered a judgment of $1,180,489.06 against Anker for annual premiums, interest, liquidated damages, attorney's fees, and costs. See Anker Energy Corp. v. Consolidation Coal Co., Civ. No. 96-1938 (W.D.Pa. July 21, 1998) (Anker III). This appeal followed.

II. FACTUAL AND PROCEDURAL HISTORY
A. Factual History

The courts have well-chronicled the history of the coal industry's struggles to provide retirement and health benefits to miners. See, e.g., Unity Real Estate Co. v. Hudson, --- F.3d ----, 1999 WL 167765, at * 2-* 4 (3d Cir. Mar. 29, 1999); Eastern Enters. v. Apfel, 524 U.S. 498, ---- - ----, 118 S.Ct. 2131, 2137-42, 141 L.Ed.2d 451 (1998) (plurality opinion). Therefore, we only briefly will summarize this chronology and outline the parties' roles within that larger story.

In 1947, the United Mine Workers of America ("UMWA") and the Bituminous Coal Operators' Association ("BCOA") agreed upon the first of a series of National Bituminous Coal Wage Agreements ("NBCWA" or "wage agreement"), which specified the terms and conditions of employment and provided health and pension benefits for miners. The 1947 NBCWA established the United Mine Workers of America Welfare and Retirement Fund, which used the proceeds of a royalty on coal production to provide pension and medical benefits for miners and their families. The 1947 NBCWA did not specify the benefits to which miners and their families were entitled, instead leaving this task to three trustees in charge of the Fund. In 1950 the union and the industry association agreed upon a new NBCWA that created a new Fund financed by a per ton levy on coal mined by signatory operators. Like the 1947 Fund, the 1950 version did not promise specific benefits, and the benefits were always subject to cancellation or change.

This system did not change significantly until 1974 when, to comply with the newly enacted ERISA, the UMWA and the BCOA negotiated a new wage agreement that created four trusts funded by royalties on coal production and premiums based on hours worked by miners. Under the new agreement, the 1950 Benefit Plan covered miners who retired before January 1, 1976, and their dependents, while the 1974 Benefit Plan covered miners who retired after 1975 and their dependents. Both Plans provided nonpension benefits, including medical benefits.

The 1974 NBCWA explained that it was amending the previous system to provide health benefits for retired miners "for life," and to their widows until death or remarriage. Because of this broadened coverage the number of eligible benefit recipients increased dramatically, and the Plans began losing money.

In response, the 1978 NBCWA assigned responsibility to signatory employers for the health care of their own active and retired employees. The 1978 agreement also restricted the 1974 Plan so that it would provide health benefits only for "orphaned" retirees, those whose last employer had gone out of business or otherwise ceased contributing to the Plans. To ensure the Plans' solvency, the 1978 NBCWA included a "guarantee" clause that obligated signatories to make sufficient contributions to maintain benefits during that agreement, and the union and operators amended the Plans to include "evergreen clauses" that required signatories to contribute to the Plans if they remained in the coal business even if they never signed another wage agreement.

Despite the 1978 NBCWA and subsequent attempts to improve the Plans, they continued to lose money because of the increase in beneficiaries, the escalating costs of health care, and the flood of signatory companies abandoning the Plans. In 1992 Congress responded by passing the Coal Act. The Act merged the 1950 and 1974 Benefit Plans into a new multi-employer plan called the United Mine Workers of America Combined Benefit Fund ("Combined Fund"). The Combined Fund provides "substantially the same" health benefits to retirees and their dependents that the 1950 and 1974 Plans provided. 26 U.S.C. § 9703(b)(1), (f). However, Congress altered the funding mechanism, an action that has led to the overflow of litigation.

The Act finances the Combined Fund with annual premiums assessed against signatory operators, which are companies that were or are signatories to a "coal wage agreement." 26 U.S.C. § 9701(c)(1). The Act defines a "coal wage agreement" as an NBCWA, or "any other agreement entered into between an employer in the coal industry and the United Mine Workers of America that required" the provision of health benefits to its retirees or contributions to the 1950, 1974 or any prior Benefit Plan. 26 U.S.C. § 9701(b)(1)(A), (B). Any signatory operator who "conducts or derives revenue from any business activity, whether or not in the coal industry," may be required to contribute to the Combined Fund. 26 U.S.C. §§ 9701(c)(7), 9706(a). Where a signatory operator is no longer involved in any business activity, premiums may be assessed against "related person[s]" including "successors in interest and businesses or corporations under common control." Eastern Enters., 524 U.S. at ----, 118 S.Ct. at 2142 (discussing 26 U.S.C. §§ 9701(c)(2)(A), 9706(a)).

The Commissioner of Social Security assigns retirees to particular signatory operators, and calculates premiums according to these assignments based on the following formula:

(a) In general.--For purposes of this chapter,...

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