Barrick Gold Exploration, Inc. v. Hudson

• Decision Date: 16 June 1993
• Docket Number: No. C2-93-0104.,C2-93-0104.
• Parties: BARRICK GOLD EXPLORATION, INC., et al., Plaintiffs, v. Marty D. HUDSON, et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

823 F. Supp. 1395

BARRICK GOLD EXPLORATION, INC., et al., Plaintiffs, v. Marty D. HUDSON, et al., Defendants.

No. C2-93-0104.

United States District Court, S.D. Ohio, E.D.

June 16, 1993.

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COPYRIGHT MATERIAL OMITTED

Alvin J. McKenna, Poerter, Wright, Morris & Arthur, Columbus, OH, (Peter Buscemi and Anthony C. Roth, Morgan, Lewis & Bockius, Washington, DC, of counsel), and Paul A. Green and John R. Mooney, Beins, Alexrod, Osborne, Mooney & Green, P.C., Washington, DC, for trustees.

James Rattan, Asst. U.S. Atty., Columbus, OH, and Brian G. Kennedy and Kathleen E. Moriarty, U.S. Dept. of Justice, Civ. Div., Washington, DC, for intervenor U.S.

MEMORANDUM OPINION AND ORDER

GRAHAM, District Judge.

Plaintiffs Barrick Gold Exploration, Inc. ("Barrick"), Gateway Coal Company, ("Gateway"), Maxus Energy Corporation ("Maxus"), and Creighton Hills Coal Co. Inc. ("Creighton") challenge the constitutionality of the Coal Industry Retiree Health Benefit Act of 1992, Pub.L. No. 102-486, § 9701 et seq., 106 Stat. 2776, 3036-3056 ("the Act"), codified at 26 U.S.C. § 9701 et seq., which was passed on October 24, 1992 as part of the Energy Policy Act of 1992. Barrick, Gateway and Creighton have ceased their coal mining operations but are subject to liability under the Act. Maxus is liable under the Act by virtue of Gateway's status as its subsidiary. Defendants are the trustees of two employee welfare benefit plans established pursuant to the Act. These plans are the intended recipients of payments plaintiffs are required to make under the Act. Plaintiffs request a declaratory judgment to the effect that the Act is unconstitutional as applied to them, and ask the Court to preliminarily and permanently enjoin the defendants from enforcing the Act against them.

Subsequent to the filing of the complaint, the United States of America sought leave to intervene pursuant to 28 U.S.C. § 2403. Leave to intervene was granted on March 26, 1993. The Court conducted an oral hearing on plaintiffs' motion for a preliminary injunction on March 26, 1993. On April 21, 1993, the Court issued an order in which it proposed to consolidate the hearing on the motion for a preliminary injunction with the trial on the merits, and offered the parties the opportunity to present additional evidence. Supplemental stipulations were filed on May 11, 1993. No other evidence being offered, the Court will view the record as complete.

Since at least 1950, the National Bituminous Coal Wage Agreements ("NBCWAs") between the United Mine Workers of America ("UMWA") and the Bituminous Coal Operators Association, Inc. ("BCOA"), a multi-employer association of coal producers, have contained provisions for health care benefits for active and retired coal miners. Coal producers who were not members of the BCOA, like the present plaintiffs, have bound themselves to identical terms by signing so-called "me too" agreements. All producers who were parties to such agreements were required to make contributions to one or more UMWA trust funds in order to fund the pension and health benefits promised to the miners under the agreements. From 1950 to 1974, health and pension benefits were provided through a single fund. In 1974, in response to the Employee Retirement Income Security Act of 1974 ("ERISA"), the fund was divided into four separate trusts, two for pensions and two for health benefits. The two health benefit trusts were the United Mine Workers of America 1950 Benefit Plan ("1950 Plan") and the United Mine Workers of America 1974 Benefit Plan ("1974 Plan"). The 1950 Plan provided coverage for miners who retired before December 6, 1974 or who retired between December 6, 1974 and January 1, 1976 and elected to be covered by the 1950 Plan. The 1974 Plan provided coverage for miners who retired after January 1, 1976 or who retired between December 6, 1974 and January 1, 1976 and elected to be covered by the 1974 Plan.

During the decade of the 1970's, a combination of demographic and economic factors adversely impacted the UMWA health benefit plans. These factors included a significant reduction in the amount of coal produced under the NBCWA's, the retirement of a whole generation of miners and the rapid escalation of the cost of medical care. These problems led to the restructuring of the 1974 Plan in 1978. Under the 1978 NBCWA, each employer was given the responsibility for providing health benefits under the 1974 Plan for its own post-1974 retirees through individual employer plans established and financed by the employer. Each signatory was also obligated to make contributions to the 1974 Plan to finance benefits for post-1974 retirees whose last employer had gone out of business. The 1950 Plan continued to provide coverage for miners who retired prior to the implementation of the 1974 Plan. All signatory operators agreed to continue to fund both the 1950 and 1974 Plans and to establish individual plans as required by the 1978 agreement. The structure of the 1978 NBCWA was maintained, with minor changes, in all subsequent NBCWA's, including the 1988 NBCWA.

In the 1980's, the problems which plagued the Plans became more severe. As each successive NBCWA expired, numerous employers left the coal business. Some employers successfully contended in the courts that their obligation to provide health benefits ceased with the expiration of the last NBCWA they signed, and that the 1974 Plan became responsible for their retirees' medical benefits. See e.g., In Re Chateaugay Corp., 945 F.2d 1205 (2d Cir.1991), cert. denied, ___ U.S. ___, 112 S.Ct. 1167, 117 L.Ed.2d 413 (1992); District 29, United Mine Workers v. Royal Coal Co., 768 F.2d 588 (4th Cir.1985); United Mine Workers Int'l Union v. Nobel, 720 F.Supp. 1169 (W.D.Pa.1989) aff'd without op., 902 F.2d 1558 (3rd Cir.1990), cert. denied, ___ U.S. ___, 111 S.Ct. 1102, 113 L.Ed.2d 212 (1991). The responsibility for an increasing number of "orphan" retirees fell on a dwindling number of NBCWA operators. Meanwhile the cost of health care continued to escalate. By the late 1980's, these problems resulted in the inability of the 1950 and 1974 Plans to continue to provide health care benefits to UMWA retirees. This precipitated labor disputes and unrest in the nation's coal fields.

When collective bargaining failed to resolve an eleven month strike by the UMWA against the Pittston Coal Company, the Secretary of Labor intervened and facilitated a settlement which included provisions for the creation of the Secretary's Advisory Commission on United Mine Workers of America Retiree Health Benefits (the "Commission") which was authorized to analyze the retiree health care crisis. The Commission submitted its findings and recommendations to the Secretary in November, 1990. See "Coal Commission Report: a Report to the Secretary of Labor and the American People" (Nov.1990), Ex. A to Defendants' Memorandum Contra Plaintiffs' Motion For Preliminary Injunction, Doc. 11 (hereinafter "Report"). The Commission concluded that delivering and financing health care in the coal industry would require

the imposition of a statutory obligation to contribute on current and past signatories, mechanisms to prevent future dumping of retiree health care obligations, authority to utilize excess pension assets and the implementation of state-of-the-art managed care and cost containment techniques.

Report at 60. Following the Report, Congress undertook its own study of the subject, and after two years of deliberations passed the Act. In so doing, Congress found:

(1) the production, transportation, and use of coal substantially affects interstate and foreign commerce and the national public interest; and

(2) in order to secure the stability of interstate commerce, it is necessary to modify the current private health care benefit plan structure for retirees in the coal industry to identify persons most responsible for plan liabilities in order to stabilize plan funding and allow for the provision of health care benefits to such retirees.

Act, § 19142(a)(1), (2), 106 Stat. at 3037. Congress further stated that the policy of the Act is:

(1) to remedy problems with the provision and funding of health care benefits with respect to the beneficiaries of multiemployer benefit plans that provide health care benefits to retirees in the coal industry;

(2) to allow for sufficient operating assets for such plans; and

(3) to provide for the continuation of a privately financed self-sufficient program for the delivery of health care benefits to the beneficiaries of such plans.

Act, § 19142(b)(1)-(3), 106 Stat. at 3037.

The Act implements three methods of providing health care benefits to retirees beginning February 1, 1993. First, the Act provides for the merger of the 1950 Plan and the 1974 Plan into a fund known as the UMWA Combined Benefit Fund (the "Combined Fund"). 29 U.S.C. § 9702. The class of beneficiaries entitled to receive benefits from this fund is limited to retirees who, as of July 20, 1992, were actually receiving benefits from the 1950 Plan or the 1974 Plan. 26 U.S.C. § 9703(f).

All 1988 agreement operators are required to make contributions to the Combined Fund during the first eight months, commencing February 1, 1993, in an amount sufficient to pay benefits and administrative costs incurred by the Combined Fund during those eight months. 26 U.S.C. § 9704(i)(1)(A). The amount of this contribution is reduced by the transfer of seventy million dollars from the 1950 Pension Plan pursuant to 26 U.S.C. § 9705(a). All 1988 agreement operators are also obligated to make contributions to the Combined Fund from February 1, 1993 to September 30, 1994 in an amount sufficient to pay expenses of the 1950 Plan and the 1974 Plan which had accrued and remained unpaid by February 1, 1993, reduced by the assets of the Plans as of that date. 26 U.S.C. § 9704(i)(1)(B). An additional obligation to pay annual premiums to the Combined Fund is...