Int'l Union v. Mystic, LLC
| Decision Date | 02 September 2016 |
| Docket Number | CIVIL ACTION NO. 5:16-cv-02030 |
| Parties | INTERNATIONAL UNION, UNITED MINE WORKERS OF AMERICA, et al., Plaintiffs, v. MYSTIC, LLC, et al., Defendants. |
| Court | U.S. District Court — Southern District of West Virginia |
The Court has reviewed the Defendants' Motion to Dismiss (Document 5) , the Defendants' Opening Memorandum of Law in Support of Their Motion to Dismiss (Document 6), the Defendants' Notice of Withdrawal of Their Motion to Dismiss with Respect to Personal Jurisdiction (Document 11), the Plaintiffs' Opposition to Defendants' Motion to Dismiss Amended Complaint (Document 14), the Defendants' Reply Memorandum of Law in Further Support of Their Motion to Dismiss (Document 21), the Plaintiffs' Amended Complaint (Amended Complaint, att'd as Ex. B to Def. Notice of Removal) (Document 1-5) and all attachments. For the reasons stated herein, the Court finds that the Defendants' motion to dismiss should be denied.
The subject matter of this case is complex, and a concise summary of the allegations and the factual background underlying those allegations is helpful to the resolution of this motion. The Court will adopt the following facts as true for purpose of this motion. The Plaintiffs are retired coal miners represented by their union, the International Union, United Mine Workers of America (UMWA), and the Defendant, Mystic, LLC, is a former mine operator registered in Delaware, with a principal place of business in Beckley, West Virginia. The Plaintiffs also named Timothy Elliott, the majority owner of Mystic, LLC, as a Defendant.
For more than sixty years, the coal industry has provided health care benefits to former coal miners and spouses, pursuant to multiemployer arrangements negotiated by the UMWA. Originally, these benefits were provided by a single plan, the UMWA Welfare and Retirement Fund of 1950. Subsequent agreements between the UMWA and an association of mine operators, the Bituminous Coal Operators Association (BCOA), known as National Bituminous Coal Wage Agreements (NBCWA), preserved this structure. After the enactment of the Employee Retirement and Income Security Act (ERISA), the single plan structure for benefits was replaced by two jointly administered benefit plans, colloquially known as the 1950 Benefit Plan and the 1974 Benefit Plan. The 1974 Benefit Plan was modified by a new NBCWA in 1978, and primary responsibility for providing health benefits to retired miners and spouses was shifted from a collective structure to each individual mine operator. Each operator was required to establish a separate plan for providing retirement health benefits. However, the 1974 Benefit Plan was retained for one specific group: retired miners and their spouses whose final employer was "no longer in business." (Pl. Amended Compl., at 11.)
Subsequent court decisions, handed down after the 1978 NBCWA, established that retirees were entitled to lifelong benefits, but that a particular operator's obligation was limited to the term of an NBCWA, and that the purpose of the 1974 Benefit Plan was to provide benefits for "orphan" miners, whose final employer was no longer a signatory. See District 29, UMWA v. Royal CoalCompany ("Royal 1"), 768 F.2d 588 (4th Cir. 1985); District 29, UMWA v. UMWA 1974 Benefit Plan ("Royal II"), 826 F.2d 280 (4th Cir. 1987); United Mine Workers of America v. Nobel, 720 F. Supp. 1169 (W.D.Pa.1989), aff'd, 902 F.2d 1558 (3rd Cir. 1990). In the aftermath of these decisions, many operators ceased operations, and their obligation to provide health benefits to retirees and spouses shifted to the 1974 Benefit Plan.
In 1992, Congress passed the Coal Industry Retiree Health Benefit Act, 26 U.S.C. §9701-9722 (2006). This statute merged the 1950 Benefit Plan and the 1974 Benefit Plan, and closed these plans to future retirees. As a result, the 1993 NBCWA created a new multiemployer plan for orphaned retirees (the "1993 Plan"). The terms of the 1993 Plan stipulated that each operator was responsible for the benefits of retired miners and spouses, and that the plan would only provide benefits if the miner's last employer was both (1) no longer in business, and (2) no longer financially capable of providing benefits. An operator was "no longer in business" under the 1993 Plan if the following circumstances were present:
(I) The Employer has ceased all mining operations and has ceased employing persons under [the 1993 Plan], with no reasonable expectation that such operations will start up again; and (II) The Employer is financially unable (through either the business entity that has ceased operations ... including any of such company's successors and 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 its retired miners and surviving spouses ....
(1993 NBCWA, at 148, att'd to as Ex. 1 to Pl. Amended Compl., at ¶19, att'd as Ex. 4 to Def. Not. of Removal). The Plan explicitly stated that: "...language references to "for life" and "until death" ... are intended to mean that each employer will provide, for life, only the benefits of its own eligible retirees who retired between February 1, 1993 and the Effective Date, or who retireduring the term of this agreement."1 (1993 NBCWA, at 163, att'd as Ex. 1 to Pl. Amended Compl., at ¶44, att'd as Ex. C to Def. Not. of Removal.) The 1993 Plan, in effect, created a lifetime obligation for a miner's last signatory employer to provide retirement health insurance coverage. See District 17, UMWA v. Brunty Trucking Co., 269 F.Supp. 2d 702, 708-09 (S.D.W.Va. 2003). Every subsequent NBCWA, including the 1998, 2002, 2007, and 2011 agreements, have continued this permanent obligation.
The corporate Defendant in this case, Mystic, LLC is the successor-in-interest to Mystic Energy, Inc., a West Virginia corporation incorporated on November 26, 1985. Mystic Energy, Inc., was a signatory to the 1993, 1998, and 2002 NBCWA. Mystic, LLC was organized as a limited liability company in the state of West Virginia on June 12, 2003. Mystic, LLC and Mystic Energy, Inc., merged on July 2, 2003, and Mystic, LLC was the surviving entity. Mystic, LLC was a signatory to the 2002 NBCWA, which became effective on January 1, 2003. The Defendant, Timothy Elliot (Elliott), was the majority owner of Mystic, LLC.
On July 2, 2003, Rainbow Trout Coal, LLC (Rainbow Trout), acquired Mystic, LLC. Rainbow Trout was organized in West Virginia on July 1, 2003, and was owned by Trout Coal Holdings II, LLC. Rainbow Trout was managed by Defendant Elliott, who was also a minority owner of Trout Coal Holdings II (TCHII). In March of 2005, Rainbow Trout transferred Mystic, LLC to Trout Coal Holdings III (TCHIII). Defendant Elliott was also a minority owner of TCHIII.
Mystic, LLC ceased operations in 2006. At the time, Mystic, LLC and TCHIII held over $12 million in cash assets. Mystic's liabilities at the time it ceased operations were limited to withdrawal liability from the UMWA 1974 Pension Plan, and Mystic, LLC's contractual obligation to provide retirement health care benefits to retired miners under the 2002 NBCWA. Before ceasing operations, Mystic, LLC sold a significant amount of mining equipment. The proceeds from this sale were purportedly distributed to Defendant Elliot, among others. Mystic, LLC also allegedly paid a substantial sum for a "property option" in 2005, and subsequently omitted the transaction from its books. (Pl. Amended Compl., at ¶31.) TCHIII also purportedly distributed "millions of dollars" to its owners, including Defendant Elliott, between 2005 and 2007. (Id. at ¶32.)
After ceasing operation, Mystic, LLC continued to provide retirement benefits to its own retirees, in compliance with its obligations under the 2002 NBCWA. On July 3, 2012, however, Mystic, LLC sent retirees, including the Plaintiffs named in this case, a letter stating that it no longer had sufficient resources to provide health care benefits. (See July 3, 2012 letter, att'd as Ex. 8 to Pl. Amended Compl., att'd as Ex. B to Def. Not. of Removal.) Mystic, LLC terminated retiree health care benefits on July 31, 2012. Subsequently, the United Mine Workers Association Selective Strike Fund provided limited health care coverage to Mystic, LLC retirees.
On July 31, 2012, a significant number of Mystic, LLC retirees filed applications for orphan health care benefits from the 1993 Plan. Determination of their eligibility was submitted to the Trustees of the 1993 Plan, in compliance with the governing documents. On April 24, 2013, the Trustees indicated that they were unable to reach agreement on whether the retirees were eligible for orphan benefits. Under the terms of the 1993 Plan, a deadlocked vote of theTrustees requires submission of the issue to binding arbitration. During the pendency of the arbitration, the Selective Strike Fund continued to provide limited health care benefits to Mystic, LLC retirees.
On March 26, 2013, the Trustees of the United Mine Workers Health and Retirement Funds (Trustees), acting on behalf of the 1993 Plan, entered into a settlement agreement (the "Settlement Agreement") with Mystic, LLC and TCHIII.2 (See Settlement Agreement, attached as Ex. B to Def. Mot. to Dismiss.) The settlement addressed litigation brought in 2011 by the 1993 Plan against Mystic, LLC in the Southern District of West Virginia. The terms of the settlement provided that Mystic, LLC and TCHIII would make an initial payment of $1,060,000 to the UMWA 1974 Pension Trust within thirty days of the execution of the settlement. Mystic, LLC and TCHIII would then make a second payment within six months of the execution of the settlement, consisting of the balance of the liquid assets of each entity, less "reasonable expenses" necessary to wind up Mystic, LLC's legal...
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