Holland v. Arch Coal, Inc., Civil Action No. 17-cv-300 (DLF)
| Decision Date | 28 September 2018 |
| Docket Number | Civil Action No. 17-cv-300 (DLF) |
| Citation | 346 F.Supp.3d 99 |
| Parties | Michael H. HOLLAND, AS TRUSTEE OF the UNITED MINE WORKERS OF AMERICA 1992 BENEFIT PLAN, et al., Plaintiffs, v. ARCH COAL, INC., Defendant. |
| Court | U.S. District Court — District of Columbia |
Barbara E. Locklin, Larry D. Newsome, Umwa Health & Retirement Funds, Charles Peter Groppe, Stanley F. Lechner, Morgan, Lewis & Bockius LLP, John R. Mooney, Olga Metelitsa Thall, Paul Andrew Green, Mooney, Green, Saindon, Murphy & Welch, P.C., Washington, DC, John C. III Goodchild, Morgan, Lewis & Bockius LLP, Philadelphia, PA, for Plaintiffs.
John R. Woodrum, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Washington, DC, for Defendant.
The Trustees of the United Mine Workers of America 1992 Benefit Plan (1992 Plan) bring this action under the Employee Retirement Income Security Act of 1974 (ERISA), as amended , 29 U.S.C. §§ 1001 et seq. , to compel defendant Arch Coal, Inc. to post security pursuant to the Coal Industry Retiree Health Benefit Act of 1992 (Coal Act), as amended , 26 U.S.C. §§ 9701 et seq. The defendant argues that the Coal Act does not require it to post security and that, in any event, the 1992 Plan already has security from another source in excess of what the Coal Act permits. The defendant counterclaims to recover that excess. Before the Court are the parties' cross-motions for summary judgment on both claims.
"The Coal Act was Congress's solution to decades of contentious negotiations between employers in the coal industry and the United Mine Workers of America (‘UMWA’) regarding the provision of employee benefits to coal miners." Holland v. Williams Mountain Coal Co. , No. CIV. A. 96-1405CKKJMF, 2000 WL 284298, at *1 (D.D.C. Feb. 24, 2000), aff'd , 256 F.3d 819 (D.C. Cir. 2001).1 Before the Coal Act, a collection of union agreements called "NBCWAs" required coal operators to provide benefits to their own retirees through Individual Employer Plans and to make contributions to a multiemployer fund that provided benefits to "orphaned" workers whose employers had gone out of business. Dist. 29, United Mine Workers of Am. v. United Mine Workers of Am. 1992 Ben. Plan , 179 F.3d 141, 143 (4th Cir. 1999). But when coal operators began exiting the industry—or, in some cases, shifting to non-union workforces—"the number of orphaned retirees rose rapidly," id. , and the NBCWAs faced a "serious financial crisis," Barnhart v. Sigmon Coal Co. , 534 U.S. 438, 444, 122 S.Ct. 941, 151 L.Ed.2d 908 (2002).
In 1992, Congress intervened and passed the Coal Act "amidst a maelstrom of contract negotiations, litigation, strike threats, a Presidential veto[,] ... threats of a second veto, ... high pressure lobbying, [and] wide disagreements among Members of Congress." Id. at 445–46, 122 S.Ct. 941 (footnotes omitted). The Coal Act "replace[d] the [previous] contract-based system with a comprehensive statutory system." Holland , 2000 WL 284298, at *1. And it established "three vehicles for financing retirees' health benefits." Dist. 29, United Mine Workers of Am. , 179 F.3d at 143.
First, it created a "Combined Fund" that covers all workers receiving retirement benefits under existing NBCWAs as of July 20, 1992. Id. (citing 26 U.S.C. § 9703(f) ). Second, it required operators with individual employer plans in place as of February 1, 1993 to continue maintaining those plans until they go out of business. Id. (citing § 9711(a)–(b) ). Third, it established the "1992 UMWA Benefit Plan" as a "backstop" for anyone not covered by the Combined Fund or an individual employer plan—that is, "those who would have been eligible under the Combined Fund but for its cut-off date and those whose employers orphan them by going out of business." Id. (citing § 9712(b) ); see also Bellaire Corp. v. Shalala , 995 F.Supp. 125, 130 (D.D.C. 1997) ().
This third vehicle—the 1992 Plan—is the subject of this lawsuit, and its Trustees are the plaintiffs in this case. Section 9712(d) of the Coal Act places responsibility "for financing the benefits" of the 1992 Plan on entities called "1988 last signatory operators." § 9712(d). Specifically, these entities must satisfy three "requirements":
Further—and of relevance here—§ 9712 also makes "any related person" to a 1988 last signatory operator "jointly and severally liable with such operator for any amount required to be paid by such operator under this section." § 9712(d)(4).
The first question in this case is whether the joint and several liability imposed on "related person[s]" by § 9712(d)(4) extends to all three of the financing requirements set forth in § 9712(d)(1)—including the "provision of security" in subsection (B)—or whether it is limited to the "payment[s]" mentioned in subsections (A) and (C).
The second question is whether the obligation to provide security—assuming such an obligation exists—is satisfied by a letter of credit even after that letter of credit has been drawn down and converted into cash by the 1992 Plan's Trustees.
A final, related question is whether the Coal Act requires the 1992 Plan to use proceeds from a called security for a particular purpose—namely, to provide the benefits secured by that security—or whether the 1992 Plan may treat the proceeds as a general asset subject only to the terms of the security and the general fiduciary duties imposed on Trustees by ERISA.
Arch Coal is a "related person" under the Coal Act because, in 1992 (the relevant time period under the Act), it owned several subsidiaries that qualified as "1988 last signatory operators." Def.'s Statement of Facts ¶ 5, Dkt. 20-2. Initially, Arch Coal posted a bond that satisfied § 9712(d)(1)(B)'s security requirement with respect to those subsidiaries. Id. ¶ 6.3 But in 2005, Arch Coal sold the subsidiaries to Magnum Coal Company, and Magnum contractually agreed to replace Arch Coal's security with its own. Id. ¶¶ 7–8. In July 2008, Patriot Coal Corporation acquired Magnum's stock and became the subsidiaries' new corporate parent. Id. ¶ 9. These transactions did not alter Arch Coal's status as a "related person"—which remained fixed by the Coal Act based on a snapshot of 1992—but they did leave Patriot primarily responsible for securing the subsidiaries' Coal Act obligations, which Patriot did by amending a letter of credit with Fifth Third Bank. Id. ¶ 9–10. The resulting letter of credit was issued "in favor of" the 1992 Plan, as sole beneficiary, and "for the account of Patriot Coal Corporation." Pls.' Statement of Facts ¶¶ 26–27, Dkt. 19 . Arch Coal was not a party to the letter of credit at any time. Id. ¶¶ 28–29. The terms of the letter of credit allowed the 1992 Plan to draw on the letter of credit upon either Patriot's "failure, refusal or cessation to provide benefits" or "the 1992 Plan's enrollment" of retirees "attributable to" Patriot. Id. ¶ 35 .
On May 12, 2015, Patriot and the subsidiaries it had acquired from Magnum (and ultimately from Arch Coal) filed for bankruptcy. Def.'s Statement of Facts ¶ 11. As a result of that bankruptcy, the subsidiaries' Coal Act obligations were terminated in October 2015. Id. ¶ 12.4 Shortly thereafter, Arch Coal notified the 1992 Plan that, as a "related person," it would begin providing benefits to its former subsidiaries' qualifying retirees. Id. ¶ 13. Arch Coal implemented a benefit plan as promised on November 1, 2015. Id. ¶ 14. Since then, Arch Coal has paid the monthly premiums that § 9612(d)(1)(A) requires and that were previously paid by the subsidiaries. Id. ¶ 18.
The 1992 Plan drew down Patriot's $8,608,392 letter of credit on December 10, 2015 and received a $8,608,392 wire transfer from Fifth Third Bank on December 18, 2015. Id. ¶¶ 19–20; see also Pls.' Statement of Facts ¶¶ 39–40. The 1992 Plan considers those proceeds a general asset and has "not segregated" the funds "into separate accounts for separate beneficiaries or for groups of beneficiaries attributable to particular operators." Pls.' Resp. to Def.'s Statement of Facts ¶ 23.
On March 16, 2016, the 1992 Plan informed Arch Coal that it had not provided security and asked it to do so. Pls.' Statement of Facts ¶ 46. Almost a year later, in February 2017, the 1992 Plan wrote Arch Coal again, asserting that Arch Coal had a "statutory obligation" to provide security and requesting that Arch Coal provide security immediately. Id. ¶ 47 . Arch Coal declined to provide the demanded security and took the position that Patriot's letter of credit satisfied any security obligation on the part of Arch Coal. Id. ¶ ¶ 49–52. Arch Coal acknowledged that "Arch [Coal] and its related persons are required to provide the 1992 Plan with security in the amount of $8,160,720" but argued that the $8,608,392 drawn from Patriot's letter of credit served as a "cash escrow" that rendered Arch Coal "over-secured in the amount of $447,672." Id. ¶ 51 .
The Trustees filed this suit on February 16, 2017 seeking to compel Arch Coal to post security. Dkt. 1. Arch Coal answered and counterclaimed on March 21, 2017 seeking the return of what it characterizes as excess security. Dkt. 4. The Trustees answered the counterclaim on April 10, 2017. Dkt. 7. This case was reassigned to the undersigned on December 5, 2017. Before the Court are the...
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