Holland v. Williams Mountain Coal Co.

• Decision Date: 31 July 2007
• Docket Number: No. 06-7041.,06-7041.
• Citation: 496 F.3d 670
• Parties: Michael H. HOLLAND, as Trustee of the United Mine Workers 1992 Benefit Plan, et al., Appellants v. WILLIAMS MOUNTAIN COAL COMPANY, d/b/a Naoma Coal Company, a Corporation, et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

496 F.3d 670

Michael H. HOLLAND, as Trustee of the United Mine Workers 1992 Benefit Plan, et al., Appellants v. WILLIAMS MOUNTAIN COAL COMPANY, d/b/a Naoma Coal Company, a Corporation, et al., Appellees.

No. 06-7041.

United States Court of Appeals, District of Columbia Circuit.

Argued January 16, 2007.

Decided July 31, 2007.

Appeal from the United States District Court for the District of Columbia (No. 96cv01405).

Peter Buscemi argued the cause for appellants. With him on the briefs were Stanley F. Lechner, Charles P. Groppe, John R. Mooney, and David W. Allen. Larry D. Newsome entered an appearance.

Gregory B. Robertson argued the cause for appellees. With him on the brief were Susan F. Wiltsie, Mary Lou Smith, and Charles L. Woody.

Before: ROGERS, GARLAND, and BROWN, Circuit Judges.

Opinion for the Court filed by Circuit Judge GARLAND.

GARLAND, Circuit Judge:

The trustees of the 1992 United Mine Workers of America Benefit Plan appeal from an order directing them to pay attorney's fees to two coal companies, Williams Mountain Coal Company and Augusta Processing, Inc. The companies incurred the fees in the course of defending themselves against a suit by the trustees to compel them to provide health benefits coverage for six retired miners. In that underlying suit, the district court granted summary judgment in favor of the companies, and we affirmed. See Holland v. Williams Mountain Coal Co., 256 F.3d 819 (D.C.Cir. 2001). For the reasons set forth below, however, we reverse the award of attorney's fees and remand for further proceedings.

I

Congress established the 1992 United Mine Workers of America Benefit Plan (the "1992 Plan") in the Coal Industry Retiree Health Benefit Act of 1992 (the "Coal Act"), 26 U.S.C. § 9701 et seq. See id. § 9712. The 1992 Plan was part of Congress' response to the failure of certain coal companies to pay the health benefits they had promised their miners. See Williams Mountain, 256 F.3d at 821.

The primary responsibility for financing health benefits for a retired miner who is entitled to benefits under the Act falls upon the "last signatory operator," defined as "the most recent coal industry employer of such retiree," 26 U.S.C. § 9701(c)(4), as well as upon "related persons," defined to include (among other things) "a trade or business which is under common control" with the signatory operator, id. § 9701(c)(2)(A)(ii). See id. § 9711(a), (c). The Coal Act further provides that "[t]he term `last signatory operator' shall include a successor in interest of such operator." Id. § 9711(g)(1) (emphasis added); see also id. § 9701(c)(2)(A) (defining a "related person" to "also include a successor in interest of" a related person). Having allocated this responsibility, the statute leaves the term "successor in interest" undefined.¹

In 1996, the trustees brought this action against Williams Mountain and Augusta Processing on behalf of six retired miners. See 29 U.S.C. § 1451(a)(1) (authorizing a plan fiduciary who is adversely affected "by the act or omission of any party" to bring an action for appropriate legal or equitable relief); see also 26 U.S.C. § 9721(1) (making § 1451 applicable to any claim arising out of an obligation under the Coal Act). The trustees contended that the defendant coal companies were liable for providing health benefits coverage as "successors in interest" of the last signatory operator, Toney's Branch Coal Company, which had employed the miners but had since gone bankrupt. Although the defendant companies never employed any of the six miners, after Toney's Branch withdrew from mining, the defendants successively operated the same mine where the six had worked for Toney's Branch. In operating the mine, the defendants employed other miners who had worked at the mine for Toney's Branch, as well as equipment purchased from a Toney's Branch affiliate that Toney's Branch had previously used at the mine.

In arguing that the defendant companies were liable for the retirees' health benefits coverage, the "trustees urge[d] a broad definition of successors in interest, namely the `substantial continuity of operations test.'" Williams Mountain, 256 F.3d at 821. That test, which the trustees borrowed from labor and employment law, is "a multi-factor inquiry that examines, among other things, the ability of the predecessor to provide relief; whether the new employer had notice of potential liability; whether he uses the same plant, equipment and workforce; and whether he produces the same product." Id. (citing Secretary of Labor v. Mullins, 888 F.2d 1448, 1453-54 (D.C.Cir.1989)). In opposition, Williams Mountain and Augusta Processing "urge[d] narrower definitions, drawn both from general corporate law and from federal tax law." Id. Under those definitions, a "party simply acquiring property of a firm in an arm's length transaction, and taking up its business activity, does not become the selling firm's `successor in interest.'" Id. at 822.²

The district court rejected the trustees' broad construction of "successor in interest," found that the defendant coal companies did not qualify as successors in interest of Toney's Branch under the narrower definition, and granted summary judgment for the defendants. We affirmed. See Williams Mountain, 256 F.3d at 825. Although we acknowledged that "the companies may well be successors in interest to Toney's Branch" under the substantial continuity of operations standard because they "seamlessly took over operations" at the mine, id. at 821, we concluded that this standard should not apply to successorship under the Coal Act. The "text and structure of the [Coal Act] point firmly against successor liability based on substantial continuity of operations," we said, which distinguished the Act from the labor and employment statutes to which the standard had been applied. Id. at 825. Instead, we turned to corporate and tax law, and found that the defendants were "plainly not successors in interest of Toney's Branch" under either authority. Id. at 822.

Following our decision in their favor, the defendants filed motions in the district court requesting attorney's fees from the trustees. The court referred the matter to a magistrate judge, who recommended an award of fees. The district court ruled in accord with that recommendation, and this appeal followed.

II

Section 9721 of the Coal Act incorporates one of the fee-shifting provisions of the Employee Retirement Income Security Act (ERISA), section 4301(e), codified at 29 U.S.C. § 1451(e). See 26 U.S.C. § 9721. That provision states that "the court may award all or a portion of the costs and expenses [of litigation], including reasonable attorney's fees, to the prevailing party." 29 U.S.C. § 1451(e). We review for abuse of discretion a district court's decision to award such fees. See Board of Trs. of the Hotel & Rest. Employees Local 25 v. JPR, Inc., 136 F.3d 794, 798 (D.C.Cir.1998).

In considering the defendants' request for attorney's fees, the district court began with the five-factor test that we employed in Eddy v. Colonial Life Ins. Co. of Am., 59 F.3d 201 (D.C.Cir.1995), to determine whether to award attorney's fees under another fee-shifting provision of ERISA, 29 U.S.C. § 1132(g)(1).³ The Eddy factors are:

(1) the losing party's culpability or bad faith; (2) the losing party's ability to satisfy a fee award; (3) the deterrent effect of such an award; (4) the value of the victory to plan participants and beneficiaries, and the significance of the legal issue involved; and (5) the relative merits of the parties' positions.

Eddy, 59 F.3d at 206; see id. (noting that the factors are "neither exclusive nor quantitative, thereby affording leeway to the district courts to evaluate and augment them on a case-by-case basis"). In the end, however, the district court determined that the "only question . . . is whether Plaintiffs' position, and their decision to press on with their arguments in support of that position, were so devoid of merit as to rise to the level of bad faith." Holland v. Williams Mountain Coal Co., No. 96-1405, Mem. Op. at 6 (D.D.C. May 24, 2004) (emphasis added). Finding "this to be the case," the court pretermitted examination of any other factors and awarded the defendants attorney's fees. Id. at 10. Accordingly, we turn to an examination of the four reasons the court and the defendants offer for finding the trustees' position "so devoid of merit as to rise to the level of bad faith." Id. at 6.

1. We begin with the defendants' claim that the trustees "pursued an action . . . on a legal theory at odds with prevailing law." Appellees' Br. 13. The district court did not rely on this argument — and correctly so. When this lawsuit was initiated in 1996, there was no "prevailing law" regarding the meaning of "successor in interest" as it appears in the Coal Act. At that time, neither this circuit nor any circuit had ruled on the question.

It is true, as the defendants note, that a West Virginia district court, reviewing a bankruptcy court proceeding, had ruled on the issue. See UMWA 1992 Benefit Plan v. Leckie Smokeless Coal Co., 201 B.R. 163 (S.D.W.Va.1996). The West Virginia court, applying a definition of "successors in interest" found in Internal Revenue Service regulations, held that "purchasers of assets in bankruptcy cannot be `successors in interest' because . . . they do not inherit the tax attributes of their predecessors." Id. at 171. That ruling was on appeal when the trustees filed their complaint, and was later affirmed on grounds unrelated to the definition of "successor in interest." See In re Leckie Smokeless Coal Co., 99 F.3d 573 (4th Cir.1996).⁴

It is also true that, after our own district court issued its judgment, and while the case was pending on appeal to this court, the United States Court of Appeals for the Sixth Circuit reached a decision in accord with that of the West Virginia district court. See Holland v. New Era...