In re Chateaugay Corp., Bankruptcy No. 86 B 11270-86 B 11334 (BRL)

• Decision Date: 06 March 1990
• Docket Number: No. 88 Civ. 8695 (SWK).,Bankruptcy No. 86 B 11270-86 B 11334 (BRL),86 B 11402 and 86 B 11464 (BRL),Adv. No. 88-5502A,88 Civ. 8695 (SWK).
• Citation: 111 BR 399
• Parties: In re CHATEAUGAY CORPORATION, Reomar, Inc., The LTV Corporation, et al., Debtors. LTV STEEL COMPANY, INC., BCNR Mining Corporation, Nemacolin Mines Corporation, and Tuscaloosa Energy Corporation, Plaintiffs-Appellees, v. Joseph P. CONNORS, Jr., Donald E. Pierce, Jr., William Miller, William B. Jordan and Paul R. Dean, as Trustees of the United Mine Workers of America 1974 Benefit Plan and Trust, the United Mine Workers of America 1974 Benefit Plan and Trust, Defendants-Appellants, and The United Mine Workers of America, Defendant-Appellee.
• Court: U.S. District Court — Southern District of New York

111 B.R. 399 (1990)

In re CHATEAUGAY CORPORATION, Reomar, Inc., The LTV Corporation, et al., Debtors LTV STEEL COMPANY, INC., BCNR Mining Corporation, Nemacolin Mines Corporation, and Tuscaloosa Energy Corporation, Plaintiffs-Appellees, v. Joseph P. CONNORS, Jr., Donald E. Pierce, Jr., William Miller, William B. Jordan and Paul R. Dean, as Trustees of the United Mine Workers of America 1974 Benefit Plan and Trust, the United Mine Workers of America 1974 Benefit Plan and Trust, Defendants-Appellants and The United Mine Workers of America, Defendant-Appellee.

Bankruptcy Nos. 86 B 11270-86 B 11334 (BRL), 86 B 11402 and 86 B 11464 (BRL), Adv. No. 88-5502A, No. 88 Civ. 8695 (SWK).

United States District Court, S.D. New York.

March 6, 1990.

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Doar Devorkin & Rieck by John J. Rieck, Jr., New York City (Groom & Nordberg, Chartered by William F. Hanrahan, Arent, Fox, Kintner, Plotkin & Kahn by William B. Sullivan, Washington, D.C., of counsel), for defendants-appellants.

Davis Polk & Wardwell by Karen E. Wagner, Sharon Katz, Yael Spitzer, New York City, for plaintiffs-appellees.

Cornfield & Feldman by Barbara J. Hillman, Michael H. Holland, Chicago, Ill. (Crandall, Pyles & Crandall by Bradley J. Pyles, Grant Crandall, Logan, W. Va., of counsel), for defendant-appellee.

KRAM, District Judge.

This is an appeal of two final orders issued by Chief Judge Burton R. Lifland of the United States Bankruptcy Court for the Southern District of New York. The orders were issued in an adversary proceeding involving BCNR Mining Corporation, Nemacolin Mines Corporation, Tuscaloosa Energy Corporation (collectively "the Mining Companies"), their parent company LTV Steel Corporation ("LTV"), the United Mine Workers of America ("the UMWA"), and the United Mine Workers of America 1974 Benefit Plan and Trust ("the Plan & Trust"). The first order was issued from the bench on August 1, 1988, and so ordered on August 3, 1988 ("the August 1 Order"). This order granted partial summary judgment to the Mining Companies and LTV on count one of their complaint, holding that the Mining Companies were not legally obligated to pay the health benefits of its retirees. Transcript of Aug. 1, 1988 Hearing at 41, 49. The second order was issued orally on August 4, 1988 and was so ordered on August 12, 1988 ("the August 4 Order"). This order granted UMWA's cross-motion for summary judgment, holding that the Plan & Trust is liable to pay the retirees' benefits. Transcript of Aug. 4, 1988 Hearing at 19-20. Pursuant to 28 U.S.C. § 158, the Plan & Trust appeals both of these orders, which this Court considers de novo. Bankr.R. 8013; Brunner v. New York State Higher Educ. Serv. Corp., 831 F.2d 395, 396 (2d Cir.1987).

Background

The Mining Companies are debtors-in-possession reorganizing under Chapter 11 of the United States Bankruptcy Code. 11 U.S.C. § 1101 et seq. The Plan & Trust is a collectively bargained, multi-employer welfare benefit plan that provides health benefits to certain retirees of the UMWA and their surviving spouses.¹ The Plan & Trust was established by the National Bituminous Coal Wage Agreement ("Wage Agreement") of 1974 and has continued pursuant to the 1978, 1981, 1984, and 1988 Wage Agreements. The UMWA is a labor organization which represents and has historically represented the employees and retired employees of the Mining Companies in collective bargaining.

The Mining Companies were signatories to the 1984 Wage Agreement, requiring employers to provide health benefits to their retirees through health benefit plans to be obtained from insurance companies. Pursuant to this agreement, the LTV Companies established and maintained health benefit plans for the retirees of each of the Mining Companies. The 1984 Wage Agreement also provided that the Plan & Trust would pay the health benefits of retirees who would not otherwise receive benefits because their last signatory employers are "no longer in business." Under the 1984 Wage Agreement an employer would be considered "no longer in business" only if it:

(a) has ceased all mining operations and has ceased employing persons under this Wage Agreement, with no reasonable expectation that such operations will start up again; and

(b) is financially unable (through either the business entity that has ceased operations as described in subparagraph (a) above, including such company\'s successors or assigns, if any, or any other related division, subsidiary, or parent corporation, regardless of whether covered by this Wage Agreement or not) to provide health and other non-pension benefits to retired miners and surviving spouses.

1984 Wage Agreement, Article XX(c)(3)(ii), at 112.

The Mining Companies ceased operations in 1986. LTV and its subsidiaries, including the Mining Companies, filed a Chapter 11 petition on July 17, 1986. LTV then unilaterally terminated the health benefits of 78,000 of its retirees and the retirees of its subsidiaries. LTV asserted that it was not permitted to pay such benefits without authorization of the Bankruptcy Court. Immediately thereafter, members of Congress introduced three bills, H.R. 5276, H.R. 5283, and S. 2690, that would have required LTV to reinstate the retiree health benefits that it had unilaterally terminated. The Senate passed its version of July 30, 1986. At the same time, the UMWA began a strike. On July 30, 1986, LTV requested that the Bankruptcy Court authorize it to pay the benefits retroactive to July 17, 1986. LTV resumed paying these benefits and continued until August 1, 1988.

When the 1984 Wage Agreement expired on January 31, 1988, the Mining Companies did not enter into the successor agreement. The Mining Companies asserted that they were no longer contractually or legally obligated to provide retiree health benefits. The Mining Companies, however, continued to do so pending judicial resolution of this question.

On June 23, 1988, LTV and the Mining Companies (collectively "the Debtors") commenced an adversary proceeding against the Plan & Trust and the UMWA seeking relief on two counts. In count one, the Debtors sought declaratory relief on two issues. First, they sought a declaration that the Mining Companies' obligation to pay the retirees' benefits terminated upon the expiration of the 1984 Wage Agreement. Second, the Debtors sought a declaration that if the Mining Companies' retirees were entitled to the benefits, the Plan & Trust was obligated to provide such benefits. In count two the Debtors sought to recover from the Plan & Trust the amounts paid by LTV to the retirees subsequent to the expiration of the 1984 Wage Agreement on January 31, 1988.

On July 18, 1988, the Debtors moved for partial summary judgment on count one of their complaint. The Debtors sought summary judgment on the issue of whether LTV was obligated to pay the retirees' health benefits following the expiration of the 1984 Wage Agreement. The UMWA, on behalf of its retirees, answered and cross-claimed seeking to compel the Plan & Trust to provide the retirees' benefits. On July 29, 1988, the UMWA moved for summary judgment on its cross-claim.

On August 1, 1988, following oral argument, the Bankruptcy Court granted the Mining Companies' motion for partial summary judgment from the bench. Transcript of Aug. 1, 1988 Hearing at 40-41. The Bankruptcy Court found that the Mining Companies' obligation to pay benefits ceased on January 31, 1988.²

At the hearing, the UMWA expressed concern that the retirees would have no source of payment of their benefits. The UMWA was concerned because the Bankruptcy Court found that LTV was not required to pay the benefits and the Plan & Trust asserted that it was not obligated to do so. Id. at 23-25, 43. Given these circumstances, Chief Judge Lifland decided to shorten the time for response to UMWA's summary judgment motion, making the motion returnable at 2:00 p.m. on Thursday, August 4, 1988.³ Id. at 42, 46, 48. The Plan & Trust petitioned this Court seeking a stay of the August 4, 1988 Hearing. The motion for a stay was denied. Order of Judge Louis L. Stanton dated August 4, 1988.

At the hearing on August 4, 1988, the Bankruptcy Court granted the UMWA's summary judgment motion in its entirety. Transcript of Aug. 4, 1988 Hearing at 19-20, 23. The Bankruptcy Court also granted the Mining Companies' second request for declaratory relief, i.e., that the Plan & Trust was obligated to provide the health benefits for the retirees. Id. On August 12, 1988 Chief Judge Lifland so ordered his prior ruling.

The Plan & Trust has complied with this Order and has been paying the retirees' benefits since August 4, 1988. The Plan & Trust stipulated a withdrawal of a counterclaim it had filed, in order to meet the finality requirement of 28 U.S.C. § 158.⁴ This Court subsequently entered an order finding that the August 1 and August 4 Orders are final orders within the meaning of § 158. Order of Judge Whitman Knapp at 2, dated October 12, 1988. The Plan & Trust appeals both orders of the Bankruptcy Court pursuant to § 158.

Discussion

The Plan & Trust presents four arguments in favor of reversing the August 1 and August 4 Orders of the Bankruptcy Court. The Plan & Trust first asserts that the August 1 Order violates the Retiree Benefits Bankruptcy Protection Act of 1988 (the "Retiree Protection Act" or the "Act").⁵ Second, the Plan & Trust argues that the Bankruptcy Court did not have subject matter jurisdiction to issue its August 4 order because it was not a core proceeding. The Plan & Trust also claims that it was denied a full and fair opportunity to litigate the issue of the August 4 Order because the Bankruptcy Court shortened the time for response to the UMWA's summary judgment motion. Finally, the Plan & Trust argues that it is not liable to pay the retirees' benefits because the Mining Companies do not meet the Wage Agreement's definition of "no longer in business."

The UMWA, on behalf of its...