Holland v. Westmoreland Coal Co. (In re Westmoreland Coal Co.)

• Decision Date: 04 August 2020
• Docket Number: No. 19-20066,19-20066
• Citation: 968 F.3d 526
• Parties: In the MATTER OF: WESTMORELAND COAL COMPANY, et al, Debtors, Michael H. Holland, as trustee for the United Mine Workers of America Combined Benefit Fund and United Mine Workers of America 1992 Benefit Plan ; William P. Hobgood, as trustee for the United Mine Workers of America Combined Benefit Fund ; Michael W. Buckner, as trustee for the United Mine Workers of America Combined Benefit Fund ; Michael O. McKown, as trustee for the United Mine Workers of America Combined Benefit Fund and United Mine Workers of America 1992 Benefit Plan ; Joseph R. Reschini, as trustee for the United Mine Workers of America Combined Benefit Fund and United Mine Workers of America 1992 Benefit Plan ; Carlo Tarley, as trustee for the United Mine Workers of America 1992 Benefit Plan ; Carl E. Van Horn, as trustee for the United Mine Workers of America Combined Benefit Fund ; Gail R. Wilensky, as trustee for the United Mine Workers of America Combined Benefit Fund, Appellants, v. Westmoreland Coal Company; Absaloka Coal, L.L.C.; Buckingham Coal Company, L.L.C.; Dakota Westmoreland Corporation; Daron Coal Company; et al, Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

968 F.3d 526

In the MATTER OF: WESTMORELAND COAL COMPANY, et al, Debtors,

Michael H. Holland, as trustee for the United Mine Workers of America Combined Benefit Fund and United Mine Workers of America 1992 Benefit Plan ; William P. Hobgood, as trustee for the United Mine Workers of America Combined Benefit Fund ; Michael W. Buckner, as trustee for the United Mine Workers of America Combined Benefit Fund ; Michael O. McKown, as trustee for the United Mine Workers of America Combined Benefit Fund and United Mine Workers of America 1992 Benefit Plan ; Joseph R. Reschini, as trustee for the United Mine Workers of America Combined Benefit Fund and United Mine Workers of America 1992 Benefit Plan ; Carlo Tarley, as trustee for the United Mine Workers of America 1992 Benefit Plan ; Carl E. Van Horn, as trustee for the United Mine Workers of America Combined Benefit Fund ; Gail R. Wilensky, as trustee for the United Mine Workers of America Combined Benefit Fund, Appellants,

v.Westmoreland Coal Company; Absaloka Coal, L.L.C.; Buckingham Coal Company, L.L.C.; Dakota Westmoreland Corporation; Daron Coal Company; et al, Appellees.

No. 19-20066

United States Court of Appeals, Fifth Circuit.

FILED August 4, 2020

Bryan Michael Killian, John C. Goodchild, III, Rachel J. Mauceri, John R. Mooney, Stephanie Beth Schuster, Esq., Morgan, Lewis & Bockius, L.L.P., Washington, DC, Matthew C. Ziegler, Morgan, Lewis & Bockius, L.L.P., Washington, DC, for Appellants.

George W. Hicks, Jr., Michael Francus, Kirkland & Ellis, L.L.P., Washington, DC, Stephen E. Hessler, Kirkland & Ellis, L.L.P., New York, NY, Anna Rotman, Kirkland & Ellis, L.L.P., Houston, TX, Michael Brian Slade, Gregory F. Pesce, James Sprayregen, Kirkland & Ellis, L.L.P., Chicago, IL, Matthew D. Cavenaugh, Jackson Walker, L.L.P., Houston, TX, Patricia B. Tomasco, Quinn Emanuel Urquhart & Sullivan, L.L.P., Houston, TX, for Appellees.

Before Davis, Smith, and Costa, Circuit Judges.

Gregg Costa, Circuit Judge:

This case involves the interaction of two laws that protect retirees’ health care benefits. Passed in 1992, the Coal Act culminated decades of efforts to guarantee benefits for retired coal miners. It requires coal companies to pay premiums that fund retirees’ benefits and limits interference with those obligations. Enacted four years earlier, section 1114 of the Bankruptcy Code followed a number of high-profile Chapter 11 cases in which debtors—among them, a coal company—unilaterally terminated their retirees’ benefits. It requires a debtor to keep paying benefits unless those benefits are modified through either an agreement between the debtor and the retirees’ representative or a court order. This appeal asks whether section 1114 allows for the modification of Coal Act obligations. In line with every other court that has answered the question, we conclude that it does.

I.

A.

The history of the Coal Act is detailed elsewhere, so we review it only briefly. See generally E. Enterprises v. Apfel , 524 U.S. 498, 504–15, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998) ; In re Walter Energy, Inc. , 911 F.3d 1121, 1126–32 (11th Cir. 2018).

Before the Coal Act, a series of National Bituminous Coal Wage Agreements between the United Mine Workers of America (UMWA) and coal companies had resulted in two multiemployer trusts that provided health care benefits to retired miners: the 1950 Benefit Plan and the 1974 Benefit Plan and Trust. These trusts guaranteed lifetime benefits, but they quickly encountered financial difficulties due to rising health care costs, increases in the number of covered beneficiaries, and decline in the coal industry. In response, the union and coal companies agreed in 1978 to move away from multiemployer plans. Each coal company became responsible for financing its own individual employer plan (IEP). But the 1950 and 1974 Plans remained in effect for limited purposes. The 1950 Plan covered retirees who were already enrolled, and the 1974 Plan covered "orphaned" retirees whose employers had gone out of business. Despite these reforms, the Plans’ financial woes continued to deepen as some coal companies refused to sign on to the wage agreements and others exited the industry.

To remedy the Plans’ financial troubles, Congress enacted the Coal Industry Retiree Health Benefit Act of 1992 (Coal Act). Pub. L. No. 102-486, 106 Stat. 2776. The Act requires coal companies that had entered into any National Bituminous Coal Wage Agreements from 1978 on—the statute calls such companies "signatory operator[s]"—to provide retirees’ health care benefits through IEPs.¹ 26 U.S.C. § 9711(a). That obligation continues as long as the company or a "related person" remains in business. Id. ; see also id. § 9701(c)(2) (defining "related persons"). The Act also created two new multiemployer plans. The Combined Fund merged the 1950 and 1974 Plans. Id. § 9702(a)(2). The 1992 Benefit Plan covers retirees who could have received benefits under the 1950 or 1974 Plans but had not retired when the Coal Act was passed as well as orphaned retirees who are entitled to IEP coverage but are not yet receiving those benefits. Id. § 9712(b)(2). Each plan's funding consists primarily of "premiums" levied on signatory operators² and money from the federal government. Id. §§ 9704(a), 9705(b)(1); 9712(a)(3), (d)(1). A signatory operator's premium obligations extend to "related person[s]" such that, when it "sells substantially all of its assets, the purchaser inherits the obligation to pay" the premiums. Walter Energy , 911 F.3d at 1131–32 ; see also 26 U.S.C. §§ 9706(a), 9712(d)(4).

Also included in the Coal Act are several provisions that protect its benefit scheme. Two are relevant to this case. One annuls "any transaction" with "a principal purpose" of "evad[ing] or avoid[ing] liability" under the Act. Id. § 9722. The other is specific to the Combined Fund and states that "[a]ll liability for contributions to" that fund "shall be determined exclusively under" the Act. Id. § 9708. Even though the Coal Act contains these and other safeguards, it does not expressly address the fate of an operator's premium obligations when the operator enters bankruptcy.

The Bankruptcy Code does address a debtor's health care obligations to its retirees. Four years before Congress passed the Coal Act, it added section 1114 to the Code. It responded to a series of Chapter 11 debtors—most famously, the coal company LTV—that unilaterally terminated their retirees’ health care benefits. 7 COLLIER ON BANKRUPTCY ¶ 1114.01[2], at 1114-10 (Alan N. Resnick & Henry J. Sommer, eds., 16th ed. 2019). Section 1114 requires a debtor to continue paying promised "retiree benefits" unless the debtor and the retirees’ representative agree to modify those benefits or a bankruptcy court orders modification. 11 U.S.C. § 1114(e)(1). A debtor can move for court-ordered modification if it first proposes modifications to the retirees’ representative and negotiates in good faith, only to have the representative refuse the proposal "without good cause." Id. § 1114(f), (g)(1)–(2). In that case, the court "shall" order modification if it "is necessary to permit the reorganization of the debtor and assures that all creditors, the debtor, and all of the affected parties are treated fairly and equitably, and is clearly favored by the balance of the equities." Id. § 1114(g)(3).

B.

In October 2018, Westmoreland Coal Company and its affiliates³ filed Chapter 11 petitions. As part of its reorganization, Westmoreland negotiated an agreement with creditors to sell the bulk of its assets through an auction. Every bidder conditioned its purchase of Westmoreland's assets on the termination of successor liability for Westmoreland's Coal Act obligations.

Consequently, Westmoreland proposed modifying those obligations under section 1114. The Trustees of the Combined Plan and the 1992 Plan responded by filing a complaint for a declaratory judgment that Coal Act obligations are not "retiree benefits" and thus cannot be modified under section 1114. Westmoreland moved for a Rule 12(c) judgment on the pleadings.

Before the bankruptcy court ruled, the Eleventh Circuit decided the same issue. See In re Walter Energy, Inc. , 911 F.3d 1121 (11th Cir. 2018). Walter Energy —in which the Trustees were a party—determined that Coal Act obligations were "retiree benefits" subject to modification under section 1114. Id. at 1126.⁴ Two days later, the bankruptcy court issued an opinion arriving at the same conclusion. It then certified its judgment for direct appeal to our court. See 28 U.S.C. § 158(d)(2)(A)(i), (iii).⁵

II.

"When directly reviewing an order from a bankruptcy court, findings of fact are reviewed for clear error and conclusions of law are reviewed de novo ." In re OCA, Inc. , 552 F.3d 413, 419 (5th Cir. 2008). This appeal involves the latter. But Westmoreland says we should engage in no review at all because the Trustees lost on these same issues in the Eleventh Circuit.

It contends Walter Energy precludes relitigating the issues in the different bankruptcy in this circuit.

Issue preclusion, or collateral estoppel, prevents the same party from relitigating an issue when "(1) the identical issue was previously adjudicated; (2) the issue was actually litigated; and (3) the previous determination was necessary to the decision." Pace v. Bogalusa City Sch. Bd. , 403 F.3d 272, 290 (5th Cir. 2005) (en banc).⁶ This suit checks all three boxes: Walter Energy rejected the same outcome-determinative claim the Trustees press again here.

But something seems amiss. If one circuit's resolution of a legal issue is binding when the losing litigant has a case in another circuit, how would circuit splits develop with repeat litigants (like the Trustees here or, perhaps most often, the federal government)? Sure enough, there is an exception to nonmutual issue preclusion for pure issues of law. Preclusion does not apply if "[t]he issue is one of law and treating it as conclusively determined...