In re Westmoreland Coal Co.
| Decision Date | 05 September 1997 |
| Docket Number | Adversary No. 97-1058 MSK.,Bankruptcy No. 96-26092 MSK |
| Citation | 213 BR 1 |
| Parties | In re WESTMORELAND COAL COMPANY, EIN XX-XXXXXXX, et al., Debtors. Michael BUCKNER, Elliott Segal, and Frank Dunham, as Trustees of the United Mine Workers of America 1992 Benefit Plan, Plaintiffs, v. WESTMORELAND COAL COMPANY, Westmoreland Coal Sales Company, Inc., Westmoreland Energy, Inc., Westmoreland Resources, Inc., Westmoreland Terminal Company, Defendants. |
| Court | U.S. Bankruptcy Court — District of Colorado |
COPYRIGHT MATERIAL OMITTED
Craig A. Christensen, Thomas C. Seawell, Denver, CO, Thomas P. Gies, Washington, DC, for Debtors.
Jami Wintz McKeon, Morgan, Lewis & Bockius, L.L.P., Philadelphia, PA, for Frank
Dunham and Elliot as Trustees of United Mine Workers of America 1992 Benefit Plan.
Joan B. Burleson, Denver, CO, for UMWA 1992 Benefit Plan.
THIS MATTER comes before the Court on the Motion for Summary Judgment (Motion) brought by the Trustees of the United Mine Workers of America 1992 Benefit Plan (the Trustees) against Debtor Westmoreland Coal Company and its subsidiaries. All Defendants responded. Having reviewed the file, Motion, responses, replies and affidavits and other documents submitted in accordance with Fed. R. Bankr.P.7056 (), the Court finds and concludes as follows:
I. JURISDICTION
This Court has jurisdiction in this matter pursuant to 28 U.S.C. § 1334(b) and 28 U.S.C. § 157(a). This is a core proceeding. 28 U.S.C. § 157(b)(2)(A) and (O). Venue is proper in this Court pursuant to 28 U.S.C. § 1409.
II. PROCEDURAL HISTORY
Westmoreland Coal Company (Westmoreland) and four of its subsidiaries, Westmoreland Resources, Inc., Westmoreland Energy, Inc., Westmoreland Coal Sales Company and Westmoreland Terminal Company (the subsidiaries) filed voluntary petitions under Chapter 11 of the Bankruptcy Code on December 23, 1996. By Order of January 13, 1997, the cases are being jointly administered. On January 17, 1997, the Trustees filed a motion in the underlying cases to compel Westmoreland to reinstate its Individual Employer Plan (IEP) in accordance with § 9711 of the Coal Industry Retiree Health Benefit Act of 1992, 26 U.S.C. § 9701, et seq. (Coal Act) and to compel postpetition payment of premiums pursuant to § 9712 of the Coal Act as administrative expenses. On the same day the Trustees also initiated this adversary proceeding in which essentially the same relief is requested. The Motion and the adversary proceeding were therefore consolidated and, by agreement of the parties, the Motion is now treated as one for summary judgment.
III. SUMMARY JUDGMENT
The purpose of Rule 56, which allows for entry of summary judgment, is to pierce pleadings and allow for summary disposition of legal issues where there is no factual dispute. Summary judgment is appropriate when there is no genuine dispute as to material fact, and the moving party is entitled to judgment as a matter of law. Fed. R. Bankr.P. 7056. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Russillo v. Scarborough, 935 F.2d 1167, 1170 (10th Cir.1991). In considering a motion for summary judgment, the factual record must be considered in the light most favorable to the party opposing the motion. Cone v. Longmont United Hospital Ass'n, 14 F.3d 526, 528 (10th Cir.1994). If all material facts are undisputed, summary judgment may be rendered in favor of the opposing party even though no formal cross-motion has been made. Dickeson v. Quarberg, 844 F.2d 1435, 1444 n. 8 (10th Cir.1988); Pueblo of Santa Ana v. Mountain States Tel. & Tel. Co., 734 F.2d 1402, 1408 (10th Cir. 1984), rev'd on other grounds, 472 U.S. 237, 105 S.Ct. 2587, 86 L.Ed.2d 168 (1985), both quoting 10A C. Wright, A. Miller & M. Kane, FEDERAL PRACTICE & PROCEDURE: CIVIL 2d § 2720.
Although lengthy factual recitations have been offered and volumes of documents supplied in support of and in opposition to the Motion, the material, undisputed facts are relatively few. Plaintiffs are Trustees of the United Mine Workers 1992 Benefit Plan (1992 Plan), an irrevocable trust created by the Coal Act. Defendant Westmoreland is a "last signatory operator" subject to § 9711 of the Coal Act. Section 9711 requires provision of medical benefits to retirees and their families through the collectively-bargained IEP of a last signatory operator. Westmoreland is also subject to § 9712 of the Coal Act which requires payment of monthly per beneficiary premiums to the 1992 Plan for its coverage of retirees and their dependents previously covered but no longer receiving benefits through an IEP and annual prefunding premiums to the 1992 Plan for "orphaned" beneficiaries, i.e., those whose employers have gone out of business. By agreement dated August 21, 1996 (Pledge Agreement), Westmoreland secured performance of these obligations by pledging its shares in Westmoreland Energy, Inc., Westmoreland Coal Sales Co. and Westmoreland Resources, Inc. to the 1992 Plan and Combined Benefit Fund (Combined Fund).
Westmoreland provided benefits in compliance with § 9711 until November 26, 1996 when it terminated its IEP. Five days later, the Trustees filed suit against Westmoreland in the United States District Court for the Western District of Virginia seeking to compel Westmoreland to reestablish its IEP. Upon consideration of the Trustees' motion for a preliminary mandatory injunction, the court found that following termination of Westmoreland's IEP all of the covered beneficiaries had been absorbed into the 1992 Plan. As a consequence, there was no immediate or irreparable harm to the beneficiaries. The Court was concerned, however, that Westmoreland, suffering from uncontradicted financial difficulties, might become insolvent through dissipation of its assets and therefore unable to fulfill its payment obligations under the Coal Act. In order to preserve Westmoreland's ability to respond to an ultimate judgment in the case, the court enjoined Westmoreland from taking any action not in its ordinary course of business and required it to pay the 1992 Plan $200,000 per week pending a final resolution of the dispute.1
Westmoreland made one payment, then filed for bankruptcy protection under Chapter 11. Westmoreland admits that the precipitating cause and primary focus of its bankruptcy are its Coal Act liabilities. Since its bankruptcy filing, Westmoreland has not reinstituted its IEP, has not paid any monthly per beneficiary premiums to the 1992 Plan for beneficiaries previously covered by its IEP, and has not paid the 1997 annual prefunding premium assessed by the 1992 Plan for orphan beneficiaries.
The Trustees seek a mandatory injunction requiring Westmoreland to reestablish its IEP and a declaration that Westmoreland's Coal Act payment obligations under § 9712 are entitled to priority as administrative expenses under § 503(b)(1)(A) or (B) of the Bankruptcy Code. The undisputed facts are sufficient for resolution of these claims as a matter of law. Both parties agree that Westmoreland has statutory obligations under the Coal Act. The issue before this Court is how claims arising from these statutory obligations will be treated in the bankruptcy process. The undisputed facts are not sufficient, however, to determine either the Trustees' claims against the subsidiaries or the Defendants' counterclaims and defenses. These matters are reserved for trial scheduled for December 2 through 4, 1997.
IV. ANALYSIS
The Trustees argue that Westmoreland should not be allowed to escape its Coal Act obligations by reorganizing in bankruptcy because the Coal Act anticipates that a coal operator will continue to provide for industry retirees and their families whether or not the operator remains in business. Holland v. Double G. Coal Co., 898 F.Supp. 351, 354-55 (S.D.W.Va.1995). ("Congress must have intended § 9712 of the Coal Act to apply to all 1988 last signatory operators, whether or not they remain in business.") Since Westmoreland is operating as a debtor-in-possession under Chapter 11, the Trustees argue that the Coal Act's underlying social policy requires Westmoreland to reinstitute its IEP. The Trustees contend that if Westmoreland is not compelled to perform such obligations postpetition, other coal operators will resort to bankruptcy as a tool to avoid the effect of the Coal Act. The Trustees also assert that claims arising under § 9712 should be given administrative expense priority. Westmoreland responds that its Coal Act obligations are prepetition debts, not entitled to administrative expense priority under §§ 503(b)(1)(A) or (B), and not subject to enforcement by mandatory injunction.
The Trustees' argument has obvious emotional appeal. Few would disagree with the desirability of providing medical care benefits for retired coal miners and their families. The Trustees' position also embodies the lament of every creditor in every bankruptcy case — that the bankruptcy system is unfair because it allows debtors to avoid their lawful obligations. The Trustees, however, have presented no evidence establishing that coal industry retirees or their families are in jeopardy of losing medical benefits or that failure to accord Coal Act claims administrative priority status will trigger a stampede of coal operators into bankruptcy. Indeed, the District Court for the Western District of Virginia found that the beneficiaries of Westmoreland's IEP are receiving benefits paid by the 1992 Plan under § 9712. Apparently the 1992 Plan is currently assessing, and presumably collecting, the cost of the benefits for Westmoreland retirees and orphaned beneficiaries from operating coal producers other than Westmoreland.
It is also important to remember that the objectives and purposes of the Bankruptcy Code frequently differ from social policy which gives rise to legi...
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Trs. of the United Mine Workers of Am. 1992 Benefit Plan v. Westmoreland Coal Co. (In re Westmoreland Coal Co.), CASE NO: 18-35672
...When the terms of the statute are clear, the statutory language is controlling, absent exceptional circumstances." In re Westmoreland Coal Co., 213 B.R. 1, 18 (1997); see also Fidelity Savings & Inv. Co. v. New Hope Baptist, 880 F.2d. 1172, 1175 (10th Cir. 1989). Moreover, "[i]t is a basic ......