Dixie Fuel Co. v. Commissioner of Social Sec.

• Decision Date: 25 March 1999
• Docket Number: No. 97-6099,97-6099
• Parties: 23 Employee Benefits Cas. 1096 DIXIE FUEL COMPANY, Plaintiff-Appellant, v. COMMISSIONER OF SOCIAL SECURITY; Darrell Blevins, Social Security Freedom of Information Act Officer; Kenneth S. Apfel, Commissioner, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1052

171 F.3d 1052

23 Employee Benefits Cas. 1096

DIXIE FUEL COMPANY, Plaintiff-Appellant, v. COMMISSIONER OF SOCIAL SECURITY; Darrell Blevins, Social

Security Freedom of Information Act Officer;

Kenneth S. Apfel, Commissioner,

Defendants-Appellees.

No. 97-6099.

United States Court of Appeals, Sixth Circuit.

Argued Sept. 22, 1998.

Decided March 25, 1999.

H. Kent Hendrickson (argued and briefed), Rice & Hendrickson, Harlan, KY, for Plaintiff-Appellant.

David E. Middleton, Asst. U.S. Attorney (argued and briefed), Office of U.S. Attorney, Lexington, KY, for Defendants-Appellees.

Before: WELLFORD, NORRIS, and BATCHELDER, Circuit Judges.

BATCHELDER, Circuit Judge.

Plaintiff Dixie Fuel Company ("Dixie Fuel") appeals from the order of the district court denying its motion for a temporary restraining order, and preliminary and permanent injunctive relief to prevent the Social Security Administration ("SSA") from assigning beneficiaries under the Coal Industry Retirement Health Benefit Act ("Coal Act"), 26 U.S.C.A. §§ 9701-9722 (West Supp.1998), to Dixie Fuel. For the reasons enumerated below, we find that the district court erred in denying Dixie Fuel's motion for injunctive relief and thus, we reverse.

I. THE COAL ACT

In 1992, Congress enacted the Coal Act in an attempt to create additional financing for the health benefits fund of the United Mine Workers of America ("UMWA"). Under the Coal Act, the Social Security Administration was responsible for "assigning" eligible UMWA retirees and their dependants to current and former signatory coal operators ¹ (or "related persons" ²) in accordance with the criteria set forth at 26 U.S.C. § 9706. ³ The statute specifies that "the Commissioner of Social Security shall, before October 1, 1993," make these assignments. 26 U.S.C. § 9706(a).

Those companies which have been assigned beneficiaries by the SSA ("assigned operators") are required to pay premiums for these beneficiaries directly to the UMWA Combined Benefit Fund. 26 U.S.C. § 9704. Beneficiaries not assigned to a signatory operator or related company go into the "unassigned pool." 26 U.S.C. § 9704(d). After exhaustion of specifically designated funds, ⁴ the premiums for the miners in the unassigned pool will be assessed proportionally against all assigned operators. 26 U.S.C. § 9704(d).

Under the Coal Act, if an assigned operator believes that it has been assigned beneficiaries in error, it may obtain information about the beneficiaries from the SSA and seek review of the assignment. 26 U.S.C. § 9706(f); see also 20 C.F.R. §§ 422.601-607. The burden is on the assigned operator to make out a prima facie case that the assignments were in error. See 20 C.F.R. § 422.605. The Commissioner then reviews the assignments; if he determines that the assignments were in error, he has the authority to declare them void and to reassign the beneficiaries to the appropriate signatory operator or related entity. 26 U.S.C. § 9706(f)(3)(A). If he determines that the assignments are not in error, he must notify the assigned operator. The Commissioner's determination is final. 26 U.S.C. § 9706(f)(3)(B), (f)(4).

II. DIXIE FUEL COMPANY & PROCEDURAL HISTORY

Plaintiff-Appellant Dixie Fuel was never a signatory to the UMWA labor agreements referenced in the Act. However, the SSA has deemed Dixie Fuel to be a related company to the V & C Coal Company ("V & C"), a signatory which is no longer in existence. Since September 1995, the SSA has assigned Dixie Fuel more than fifty beneficiaries who were former employees of V & C and maintains that Dixie Fuel is responsible for these beneficiaries. Dixie Fuel has estimated its current liability based on these assignments at approximately $500,000.00, exclusive of interest and penalties. Almost all of the beneficiaries assigned to Dixie Fuel came from the "unassigned pool." ⁵

Dixie Fuel sought SSA review of the assignments, and has made requests under the Freedom of Information Act ("FOIA") to gain information in support of its request. In order to submit further information in support of its challenge to these assignments, Dixie Fuel has requested extensions of time in the review process.

On July 30, 1997, Dixie Fuel filed a Verified Claim in the district court for the Eastern District of Kentucky seeking declaratory and injunctive relief voiding these assignments. Contemporaneously, Dixie Fuel filed a motion for a temporary restraining order enjoining the SSA from assigning it any more beneficiaries, requiring the SSA to notify the Combined Fund that assignments to Dixie Fuel are void, and enjoining the SSA from withholding information requested by Dixie Fuel in its FOIA requests. The district court denied all injunctive relief to Dixie Fuel, ⁶ ruling solely that the agency's interpretation of § 9706(a) as allowing the SSA to assign beneficiaries from the unassigned pool after October 1, 1993, is reasonable and entitled to deference. Dixie Fuel now brings this interlocutory appeal pursuant to 28 U.S.C. § 1292(a)(1) from the district court's denial of its motion for injunctive relief.

At oral argument, the SSA conceded that the particular assignments at issue are void under the Supreme Court's decision in Eastern Enterprises v. Apfel, 524 U.S. 498, 118 S.Ct. 2131, 141 L.Ed.2d 451 (June 25, 1998). The SSA argued that this concession moots the issue before this Court.

III. DISCUSSION

We will first address whether the SSA's concession at oral argument moots this appeal. Second, we will address the district court's jurisdiction over the issues below. Finally, we will consider the denial of injunctive relief.

A. MOOTNESS

The SSA's concession at oral argument did not render this appeal moot. A party's voluntary cessation of an allegedly illegal activity does not moot the issue of whether prospective injunctive or declaratory relief is proper. City of Mesquite v. Aladdin's Castle, Inc., 455 U.S. 283, 289, 102 S.Ct. 1070, 71 L.Ed.2d 152 (1982); Atlantic Richfield Co. v. United States, 774 F.2d 1193, 1198 (D.C.Cir.1985) (holding that even when an administrative agency ceases illegal conduct, the case is not moot); Blinder, Robinson & Co. v. United States Sec. & Exch. Comm'n, 692 F.2d 102, 106-07 (10th Cir.1982) (same); Hooker Chem. Co., Ruco Div. v. United States EPA, 642 F.2d 48, 52 (3d Cir.1981). However, "[s]uch abandonment is an important factor bearing on the question whether a court should exercise its power to enjoin the defendant from renewing the practice, but that is a matter relating to the exercise rather than the existence of judicial power." City of Mesquite, 455 U.S. at 289, 102 S.Ct. 1070.

Equally importantly, Eastern Enterprises did not address the issue that Dixie Fuel asks us to decide here. Eastern Enterprises held that the Coal Act's retroactive allocation of beneficiaries, as applied to Eastern, violates the Takings Clause of the Fifth Amendment. Eastern Enterprises, 118 S.Ct. at 2153. Dixie Fuel seeks not only to void the assignments already made to it, but to enjoin the SSA from making any new assignments, not because such assignments might violate the Fifth Amendment, but because the Coal Act does not permit the SSA to make any assignments at all after October 1, 1993. ⁷ The defendant who seeks to have a case dismissed as moot must demonstrate that "there is no reasonable expectation that the alleged wrongs will be repeated," Blinder, Robinson & Co., 692 F.2d at 106-07 (citing United States v. W.T. Grant Co., 345 U.S. 629, 73 S.Ct. 894, 97 L.Ed. 1303 (1953)). Although the SSA conceded that these particular assignments to Dixie Fuel were void under Eastern Enterprises, it did not concede that it may not or would not again assign beneficiaries to Dixie Fuel. Therefore, the case is not moot and we may reach the merits of the appeal.

B. DISTRICT COURT'S JURISDICTION

Dixie Fuel asserts that the district court had jurisdiction under 28 U.S.C. § 1331 (federal question jurisdiction) and 5 U.S.C. §§ 552 & 702 (the Administrative Procedure Act). The SSA contends that the lower court lacked subject matter jurisdiction because Dixie Fuel has not sought a final decision by the SSA and has therefore failed to exhaust its administrative remedies. The court below did not address the challenge to its jurisdiction.

1. Jurisdictional Bases

The district court has jurisdiction under 28 U.S.C. § 1331 to review agency actions, subject only to statutes precluding such review, see Califano v. Sanders, 430 U.S. 99, 105, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977). The Administrative Procedure Act (APA), is not an independent grant of jurisdiction, see id. at 107, 97 S.Ct. 980; rather, it provides the framework for judicial review of agency actions. ⁸ Indeed, the Supreme Court has explained that the APA " 'embodies the basic presumption of judicial review' " available to those aggrieved by agency action. Reno v. Catholic Social Servs., Inc., 509 U.S. 43, 56-57, 113 S.Ct. 2485, 125 L.Ed.2d 38 (1993) (quoting Abbott Lab. v. Gardner, 387 U.S. 136, 140, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967)).

Although 28 U.S.C. § 1331 provides the statutory basis for jurisdiction, Dixie Fuel still must demonstrate that its claims are ripe for adjudication and, if appropriate, that it has exhausted its administrative remedies.

2. Ripeness

The district court is limited by Article III, § 2 of the U.S. Constitution to the adjudication of actual cases or controversies. Thus, the exercise of jurisdiction requires that the case be ripe for review. The ripeness doctrine exists to ensure that courts decide "only existing, substantial controversies, not hypothetical questions or possibilities." City Communications, Inc. v. City of Detroit, 888 F.2d 1081, 1089 (6th Cir.1989).

Under the APA, "[a]gency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review." 5 U.S.C. § 704. Even in the absence of final agency action, a case may be...