In re Ltv Steel Company, Inc.
| Decision Date | 28 August 2003 |
| Docket Number | No. 00-43866.,00-43866. |
| Citation | 299 B.R. 863 |
| Parties | In re LTV STEEL COMPANY, INC., et al., Debtors. |
| Court | U.S. Bankruptcy Court — Northern District of Ohio |
Marilyn L. Baker, Mooney, Green, Baker & Saindon, P.C., Washington, DC, Joyce Goldstein, Goldstein & O'Connor, A Legal Professional Association, Cleveland, OH, for UMWA Combined Fund.
Jeffrey B. Ellman, Jones Day, Columbus, OH, John Woodrum, Washington, DC, for LTV Steel Co., Inc.
Michael VanNiel, Baker & Hostettler, Cleveland, OH, for Administrative Claimants' Committee.
This matter is before the court on the objection of LTV Steel Company, Inc., Debtor and Debtor-in-Possession (hereafter "Debtor"), to the nontrade administrative claim and related prepetition proofs of claim of United Mine Workers of America Combined Benefit Fund (hereafter "Combined Fund"). Combined Fund responded to Debtor's objection on June 6, 2003, and Debtor filed a reply on June 20, 2003.
A hearing on the matter was held on June 24, 2003. Jeffrey Ellman and John Woodrum appeared on behalf of Debtor, and Marilyn Baker appeared on behalf of Combined Fund. Also present at the hearing were Michael VanNiel on behalf of the Administrative Claimants' Committee and Joyce Goldstein on behalf of Combined Fund. Debtor, Combined Fund and the Administrative Claimants' Committee filed supplemental briefs on July 22, 2003.
The court has jurisdiction of this matter pursuant to 28 U.S.C. § 1334(b) and the General Order of Reference entered in this district on July 16, 1984. This is a core proceeding over which the court has jurisdiction pursuant to 28 U.S.C. § 157(b)(2)(A), (B) and (O). The following constitute the court's findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052.
Through its corporate predecessors, Debtor was a signatory to a series of National Bituminous Coal Wage Agreements. Pursuant to the wage agreements, signatories were required to maintain an employee benefit plan during the term of the wage agreements providing health benefits to active employees and former employees who retired on or after January 1, 1975. If an employer ceased to be a signatory under the wage agreements, its obligation to provide retiree health care shifted to the United Mine Workers of America 1974 Benefit Plan (hereafter "1974 Benefit Plan"), which is a contractually created multi-employer retiree health plan funded by signatories to the wage agreements.
The Seventh Circuit Court of Appeals, in In re Chateaugay Corp., 945 F.2d 1205 (2d Cir.1991), held that Debtor did not have a contractual or legal obligation to continue to provide benefits to its United Mine Workers of America (hereafter "UMWA") retirees after the expiration of the 1984 wage agreement because Debtor did not sign a successor wage agreement. Id. at 1208-09. Therefore, the trust established under the 1974 Benefit Plan covered Debtor's UMWA retirees.
In response to the impending financial doom of the UMWA multi-employer retiree health care plans, the Coal Industry Retiree Health Benefit Act of 1992 (the "Coal Act"), 26 U.S.C. § 9701 et seq., was enacted. The Coal Act imposed a statutory obligation on former signatories, like Debtor, to pay certain health and death benefit premiums for thousands of UMWA retirees. The Social Security Administration assigned Combined Fund beneficiaries to Debtor.1 As a result of these assignments, pursuant to § 9704 of the Coal Act, Debtor, and its "related persons,"2 have been responsible for the payment of premiums to Combined Fund for each plan year since Combined Fund's inception. Debtor and its related persons are liable for the premiums while they are "in business" as defined in § 9701(c)(7). The parties have stipulated that Debtor was in business until December 31, 2002. See Stip., p. 5-6.
Several courts have held that the premium obligations under the Coal Act are taxes for the purposes of bankruptcy. See United Mine Workers of Am. 1992 Benefit Plan v. Rushton (In re Sunnyside Coal Co.), 146 F.3d 1273, 1278 (10th Cir.1998); Adventure Resources, Inc. v. Holland, 137 F.3d 786, 795 (4th Cir.1998); United Mine Workers of Am. v. Leckie Smokeless Coal Co. (In re Leckie Smokeless Coal Co.), 99 F.3d 573, 583 (4th Cir.1996); LTV Steel Co. v. Shalala (In re Chateaugay Corp.), 53 F.3d 478, 498 (2d Cir.1995). Taxes are entitled to administrative priority under 11 U.S.C. §§ 503(b)(1)(B) and 507.
On February 12, 2003, Judge Bodoh issued a Wind Down Order, which effectively created a new paradigm. Debtor remained in Chapter 11, but its demise and liquidation was formalized. The order granted superpriority status to certain creditors under 11 U.S.C. § 364(d) to allow for the liquidation of Debtor's assets, similar to the priority granted to Chapter 7 administrative expenses over Chapter 11 administrative expenses. This order allows Debtor to liquidate without officially converting the case to one under Chapter 7. It was generally agreed that this would be quicker and cheaper than Chapter 7, while a traditional Chapter 11 was pointless or even impossible at this point in time.
The issues in this case were narrowed from those initially presented on brief. The parties entered into a stipulation of facts leaving only the following issues to be determined by the court.
If the premium was incurred annually on October 1, 2002 while Debtor was still in business, Debtor owes the premium payments for the months of January 2003 through September 2003. If it was incurred on a monthly basis, Debtor does not owe the premium payments for those months because the parties have stipulated that Debtor was no longer in business as of December 31, 2002.
Assuming that Debtor incurred the premium on an annual basis and owes payments for January 2003 through September 2003, the court must determine whether the claim is entitled to superpriority status pursuant to the Wind Down Order.
Combined Fund seeks interest on postpetition payments that have not been made. Combined Fund argues that the premium is a tax and postpetition taxes are entitled to be paid interest.
On November 25, 2002, Combined Fund filed its proof of claim for prepetition debt incurred by Debtor.3 On January 17, 2003, Combined Fund filed its nontrade administrative claims for amounts incurred postpetition. Debtor objected to both claims in an objection filed on May 15, 2003.
Debtor's objection to Combined Fund's Nontrade Administrative Claim rests on the determination that it was no longer "in business" pursuant to the terms of the Coal Act as of December 31, 2002.4 Debtor argues that its obligation to pay any premiums terminated when it sold LTV Tubular on December 31, 2002 and its status changed to no longer being "in business." Debtor challenges its obligation to pay the premiums for the 2003 Plan Year5 that came-due during the months from January 2003 through September 2003. Debtor argues that the premiums were incurred on a monthly, not annual, basis and its obligation to pay the monthly premiums terminated when it ceased to be "in business."
Combined Fund argues that the premiums are incurred on an annual basis. Combined Fund argues that Debtor incurred the entire 2003 Plan Year premium on October 1, 2002 and was permitted, pursuant to the statute, to pay the premium in twelve monthly installments. Combined Fund argues that because the entire 2002 Plan Year premium was incurred on October 1, 2002, when Debtor was still "in business," Debtor owes the payments for the months of January 2003 through September 2003 even though Debtor was no longer "in business" during those months.
Debtor asserts that if the court determines that Combined Fund is due the premium payments for the months of January 2003 through September 2003, Combined Fund's administrative claim for these amounts is not entitled to superpriority status pursuant to the Wind Down Order. Combined Fund counters that the premium is a tax coming due during the Wind Down period and therefore is entitled to superpriority status. Combined Fund argues that Debtor is paying other taxes through the Wind Down Budget, and Combined Fund's claim is indistinguishable from those being paid.
Finally, Debtor challenges Combined Fund's demand for interest on all unpaid postpetition premiums. While Debtor recognizes a general rule that permits postpetition interest to accrue on taxes, it argues that this rule is not absolute and that the equities in this case should not allow for the payment of interest on Combined Fund's postpetition claim.
Debtor and Combined Fund made compelling arguments for mutually exclusive interpretations. The logic of these interpretations impels the conclusion that the court must simply read the statute as written. The statute says there is an annual premium.6
The Coal Act provides for the payment of an annual premium. Section 9704, "Liability of assigned operators," states in pertinent part:
(a) Annual premiums. Each assigned operator shall pay to the Combined Fund for each plan year beginning on or after February 1, 1993, an annual premium equal to the sum of the following three premiums —
(1) the health benefit premium determined under subsection (b) for such plan year, plus
(2) the death benefit premium determined under subsection (c) for such plan year, plus
(3) the unassigned beneficiaries premium determined under subsection (d) for such plan year.
Any related person with respect to an assigned operator shall be jointly and severally liable...
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