Holland v. Big River Minerals

Decision Date07 April 1999
Docket NumberNo. 98-2353,98-2353
Citation181 F.3d 597
Parties(4th Cir. 1999) MICHAEL H. HOLLAND; MARTY D. HUDSON; ELLIOT A. SEGAL; A. FRANK DUNHAM, as Trustees of the UNITED MINE WORKERS OF AMERICA 1992 BENEFIT PLAN, Plaintiffs-Appellees, v. BIG RIVER MINERALS CORPORATION; BIG RIVER COAL CORPORATION; PEA RIDGE IRON ORE COMPANY, INCORPORATED; OXIDE SERVICES CORPORATION; CASTLE ROCK MINING COMPANY; CASTLE ROCK COAL CORPORATION; LONG BRANCH ENERGY CORPORATION; PINNACLE ROCK COAL CORPORATION; PANTHER BRANCH COAL COMPANY, d/b/a Long Branch Energy; BIRCHFIELD MINING, INCORPORATED; DAVIDSON MINING, INCORPORATED; M.A.E.-WEST, INCORPORATED, Defendants-Appellants, v. MICHAEL H. HOLLAND; MICHAEL O. MCKOWN; DONALD E. PIERCE, JR.; ELLIOT A. SEGAL, Trustees of the United Mine Workers of America 1993 Benefit Plan, Third Party DefendantsAppellees
CourtU.S. Court of Appeals — Fourth Circuit

ARGUED: Charles Leslie Woody, SPILMAN, THOMAS & BATTLE, P.L.L.C., Charleston, West Virginia; David J. Laurent, POLITO & SMOCK, P.C., Pittsburgh, Pennsylvania, for Appellants. Marilyn Louise Baker, MOONEY, GREEN, BAKER, GIBSON & SAINDON, P.C., Washington, D.C., for Appellees. ON BRIEF: Elizabeth A. Saindon, Joseph R. House, MOONEY, GREEN, BAKER, GIBSON & SAINDON, P.C., Washington, D.C.; Peter Buscemi, MORGAN, LEWIS & BOCKIUS, L.L.P., Washington, D.C.; David W. Allen, Brian H. Benjet, Office of the General Counsel, UMWA HEALTH AND RETIREMENT FUNDS, Washington, D.C., for Appellees.

Before WIDENER, MURNAGHAN, and WILKINS, Circuit Judges.

Affirmed in part and reversed in part by published opinion. Judge Wilkins wrote the opinion, in which Judge Widener and Judge Murnaghan joined.

OPINION

WILKINS, Circuit Judge:

The Trustees of the United Mine Workers of America 1992 Benefit Plan (the "Trustees") brought this action against Coal Companies1 under the Coal Industry Retiree Health Benefit Act of 1992 (the Coal Act), see 26 U.S.C.A. 9701-22 (West Supp. 1999), claiming that they were liable for the health benefits of 11 former miners who retired due to disabilities as well as the health benefits of their dependents. The district court granted summary judgment in favor of the Trustees. The court subsequently entered a judgment directing Coal Companies to fund the health benefits in the future and to reimburse the Trustees for health benefits previously provided by the 1992 UMWA Benefit Plan, awarding attorney's fees to the Trustees, and imposing an increased prefunding requirement on Coal Companies. Thereafter, the district court denied a motion by Defendants Pea Ridge Iron Ore Company, Inc. (Pea Ridge) and Oxide Services Corporation (Oxide) for reconsideration, see Fed. R. Civ. P. 59, which relied on Eastern Enterprises v. Apfel, 524 U.S. 498, 118 S. Ct. 2131, 141 L. Ed. 2d 451 (1998), to argue that 26 U.S.C.A. 9712(d)(4) of the Coal Act was unconstitutional under the Fifth Amendment as applied to them. Because we conclude that the district court correctly determined that the disabled retirees are eligible beneficiaries under the Coal Act, that Pea Ridge and Oxide waived their constitutional challenge to the Coal Act, and that the award of attorney's fees was appropriate, we affirm the rulings of the district court on these issues. However, we hold that the district court erred in imposing the increased prefunding requirement. We therefore vacate that portion of the judgment.

I.

The issue of health care benefits for retired coal industry workers and their dependents has a protracted history. See generally Eastern Enters., 118 S. Ct. at 2137-42 (plurality opinion) (discussing history leading to the enactment of the Coal Act); id. at 2165-66 (Breyer, J., dissenting) (same); Holland v. Keenan Trucking Co., 102 F.3d 736, 738-39 (4th Cir. 1996) (same). Disputes concerning health care for miners date back to the time early in this century when such care was funded with a prepayment plan through payroll deductions and was supplied by company doctors. In the 1930s and 1940s the United Mine Workers of America (UMWA) and coal industry employers sought changes in the method of providing essential services to miners, and from the late 1940s through the early 1970s pension and medical benefits were provided by several UMWA funds created under a series of National Bituminous Coal Wage Agreements (NBCWAs), including a 1950 and a 1974 UMWA Benefit Plan. The funding for these benefits was supplied in part by a royalty on each ton of coal mined and by payroll deductions. As benefits improved under UMWA plans and the number of beneficiaries increased, other factors such as a decrease in the amount of coal produced and a rapid increase in health care costs conspired to produce financial problems for the funds. In response to these financial pressures, the 1978 NBCWA allocated to signatory employers responsibility for the health care costs of their active and retired miners. The 1974 UMWA Benefit Plan remained in place, but was responsible for providing benefits only to "orphaned" retired miners--those whose former employers were no longer in business. Additionally, signatory operators under the 1978 NBCWA became liable for defined benefits to miners rather than merely for specified contributions of royalties.

Despite this restructuring, the benefit plans continued to suffer financially, and by the late 1980s they were facing insolvency. Unrest concerning this situation led to an 11-month strike beginning in 1989 by mine workers against the Pittston Coal Company, which ended only after the Secretary of Labor intervened and negotiated a settlement. Thereafter, the Secretary established the Advisory Commission on United Mine Workers of America Retiree Health Benefits (the "Coal Commission"), a bipartisan commission formed to assess the financial outlook of the UMWA health benefit plans and to devise possible plans to guarantee their long-term viability. The Coal Commission concluded that retired miners were entitled to the health benefits that had been promised them and that such commitments must be honored; that a statutory obligation to fund the benefits should be imposed on current and former signatories to NBCWAs; and that some means of funding benefits for orphaned miners must be developed. After conducting hearings on the Coal Commission's recommendations, Congress enacted the Coal Act. Congress found:

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 per sons most responsible for plan liabilities in order to stabilize plan funding and allow for the provision of health care benefits to such retirees.

26 U.S.C.A. 9701 note.

Toward these goals, the Coal Act legislated three significant changes in health benefits for retired coal workers. First, it consolidated the 1950 and 1974 UMWA Benefit Plans into the United Mine Workers of America Combined Benefit Fund (the "Combined Fund"). See 26 U.S.C.A. 9702(a)(2). The Combined Fund provides health and death benefits to coal industry retirees who, as of July 20, 1992, were eligible to receive and were receiving benefits from the 1950 or 1974 UMWA Benefit Plans and to those receiving or eligible to receive such benefits as of such date by virtue of a relationship to such a retiree. See 26 U.S.C.A. 9703. Second, the Coal Act mandated the continuance of individual employer plans maintained by signatories to the 1978 (and subsequent) NBCWAs; these plans provide health coverage for retirees who were receiving or were eligible to receive retiree benefits as of February 1, 1993 and retired on or before September 30, 1994 and their survivors and dependents. See 26 U.S.C.A. 9711(a)-(b). Third, the Coal Act established the 1992 UMWA Benefit Plan to provide health benefits to retirees who were eligible for but not receiving benefits under the 1950 or 1974 UMWA Benefit Plans and to retirees who, although eligible for coverage under 9711(b), are not receiving benefits from an individual employer plan. See 26 U.S.C.A. 9712. Benefits paid by the 1992 UMWA Benefit Plan are funded through premiums paid by the "1988 last signatory operators." Id. 9712(d)(1). The term "1988 last signatory operator," generally speaking, refers to a coal operator who signed the 1988 NBCWA and was the most recent coal industry employer of a coal industry retiree. 26 U.S.C.A. 9701(c)(1), (3), (4), 9712(d)(6). Each affected coal operator is required to pay annual and monthly premiums to the 1992 UMWA Benefit Plan and to provide security for the projected cost of covering eligible beneficiaries. See 26 U.S.C.A. 9712(d)(1).

In order to ensure that coal operators would not be able to avoid their obligations to the 1992 UMWA Benefit Plan, Congress provided that "any related person" to an operator obligated to make payments to the 1992 UMWA Benefit Plan would be jointly and severally liable for those obligations. 26 U.S.C.A. 9712(d)(4). The term "related person" is defined broadly to include a coal operator's individual partners and corporate affiliates and other trades or businesses controlled by a coal operator's principal shareholder or corporate parent. 26 U.S.C.A. 9701(c)(2); see also 26 U.S.C.A. 52, 1563(a) (West Supp. 1999).

Section 9712(b) establishes the coverage requirements for the 1992 UMWA Benefit Plan. It provides in pertinent part:

Eligible beneficiary.--For purposes of this section, the term "eligible beneficiary" means an individual who -

(A) but for the enactment of this chapter, would be eligible to receive benefits from the 1950 UMWA Benefit Plan or the 1974 UMWA Benefit Plan, based upon age and service earned as of February 1, 1993; or

(B) with respect to whom coverage is required to be provided under section 9711, but who does not receive such coverage from the applicable last signatory operator or any related person,

and any...

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