Mary Helen Coal Corp v. Hudson

• Decision Date: 31 October 2000
• Docket Number: No. 99-2181,99-2181
• Citation: 235 F.3d 207
• Parties: (4th Cir. 2000) MARY HELEN COAL CORPORATION, a Virginia Corporation, Plaintiff-Appellant, v. MARTY D. HUDSON; MICHAEL H. HOLLAND, Trustees of the United Mine Workers of America Combined Benefit Fund and Trustees of the 1992 United Mine Workers of America Benefit Fund; THOMAS O. S. RAND, Trustees of the United Mine Workers of America Combined Benefit Fund; ELLIOTT A. SEGAL, Trustees of the United Mine Workers of America Combined Benefit Fund; CARLTON R. SICKLES, Trustees of the United Mine Workers of America Combined Benefit Fund; GAIL R. WILENSKY, Trustees of the United Mine Workers of America Combined Benefit Fund; THOMAS F. CONNORS, Trustees of the 1992 United Mine Workers of America Benefit Plan; ROBERT WALLACE, Trustees of the 1992 United Mine Workers of America Benefit Plan; WILLLIAM P. HOBGOOD, Trustees of the United Mine Workers of America Combined Benefit Fund, Defendants-Appellees. PARDEE & CURTIN LUMBER COMPANY; THE STEARNS COMPANY LTD., Amici Curiae. . Argued:
• Court: U.S. Court of Appeals — Fourth Circuit

Page 207

235 F.3d 207 (4th Cir. 2000)

MARY HELEN COAL CORPORATION, a Virginia Corporation, Plaintiff-Appellant, v. MARTY D. HUDSON; MICHAEL H. HOLLAND, Trustees of the United Mine Workers of America Combined Benefit Fund and Trustees of the 1992 United Mine Workers of America Benefit Fund; THOMAS O. S. RAND, Trustees of the United Mine Workers of America Combined Benefit Fund; ELLIOTT A. SEGAL, Trustees of the United Mine Workers of America Combined Benefit Fund; CARLTON R. SICKLES, Trustees of the United Mine Workers of America Combined Benefit Fund; GAIL R. WILENSKY, Trustees of the United Mine Workers of America Combined Benefit Fund; THOMAS F. CONNORS, Trustees of the 1992 United Mine Workers of America Benefit Plan; ROBERT WALLACE, Trustees of the 1992 United Mine Workers of America Benefit Plan; WILLLIAM P. HOBGOOD, Trustees of the United Mine Workers of America Combined Benefit Fund, Defendants-Appellees.

PARDEE & CURTIN LUMBER COMPANY; THE STEARNS COMPANY LTD., Amici Curiae.

No. 99-2181.

UNITED STATES COURT OF APPEALS, FOR THE FOURTH CIRCUIT.

Argued: October 31, 2000.

Decided: December 19, 2000.

Appeal from the United States District Court for the Eastern District of Virginia, at Richmond.

Richard L. Williams, Senior District Judge. (CA-97-71-3) COUNSEL ARGUED: Patrick Michael McSweeney, MCSWEENEY, BURTCH & CRUMP, P.C., Richmond, Virginia, for Appellant. Peter Buscemi, MORGAN, LEWIS & BOCKIUS, L.L.P., Washington, D.C., for Appellees. ON BRIEF: John L. Marshall, Jr., MCSWEENEY, BURTCH & CRUMP, P.C., Richmond, Virginia, for Appellant. David W. Allen, Office of the General Counsel, UMWA HEALTH AND RETIREMENT FUNDS, Washington, D.C.; John R. Mooney, MOONEY, GREEN, BAKER, GIBSON & SAINDON, P.C., Washington, D.C.; Samuel M. Brock, III, MAYS & VALENTINE, L.L.P., Richmond, Virginia, for Appellees. John T. Montgomery, Robert Daniel O'Connor, Scott D. Pomfrett, ROPES & GRAY, Boston, Massachusetts, for Amici Curiae.

Before WILKINSON, Chief Judge, and NIEMEYER and MOTZ, Circuit Judges.

Reversed and remanded by published opinion. Chief Judge Wilkinson wrote the opinion, in which Judge Niemeyer and Judge Motz joined. Judge Niemeyer wrote a concurring opinion.

OPINION

WILKINSON, Chief Judge:

This case arises in the wake of the Supreme Court's decision in Eastern Enterprises v. Apfel, 524 U.S. 498 (1998). In Eastern, the Court held that Coal Act premiums assessed against companies such as Mary Helen Coal violated the Fifth Amendment. Although the defendants returned the unconstitutionally collected premiums, they refused to compensate Mary Helen for lost interest. Mary Helen is entitled to an award of prejudgment interest because of the general rule that interest follows principal. Neither the absence of an authorizing statute nor ERISA's anti-inurement provision bars such an award. Accordingly, the judgment of the district court is reversed and remanded with instructions to calculate the amount of prejudgment interest owed to Mary Helen.

I.

Mary Helen Coal Corporation mined coal from 1921 until 1963. During this time, the United Mine Workers of America (UMWA), a labor union representing coal miners, negotiated a series of collective bargaining agreements with the Bituminous Coal Operators' Association (BCOA). The agreements are collectively referred to as the National Bituminous Coal Wage Agreements (NBCWAs). Mary Helen was a signatory to at least two of these agreements: the 1946 Welfare and Retirement Fund and the 1950 NBCWA. The agreements were revised in 1974 and 1978, though by this time Mary Helen was no longer actively mining coal and thus was not a party to either agreement.

By the late 1980s, escalating health care costs threatened the solvency of the most recent benefit plan. In response, Congress enacted the Coal Industry Retiree Benefit Act of 1992 (Coal Act). The Act created two new funds, including the Combined Fund. The Combined Fund provides benefits to coal industry retirees previously receiving benefits under the 1950 or 1974 NBCWAs. To fund this new program, the Coal Act required coal operators who had previously participated in any of the NBCWAs to pay annual premiums. The premium requirement thus applied to companies like Eastern Enterprises and Mary Helen even though they had not mined coal for many years.

Mary Helen filed suit against Marty Hudson and the other Trustees of the Combined Fund (Trustees). In its complaint, Mary Helen alleged that the Coal Act premiums violated the Due Process and Takings provisions of the Fifth Amendment. See Mary Helen Coal Corp. v. Hudson, 976 F. Supp. 366 (E.D. Va. 1997) (Mary Helen I). Following then binding precedent, the district court rejected Mary Helen's claims and ordered it to pay all outstanding premiums plus interest. See id. at 368. Mary Helen appealed.

This court held Mary Helen's appeal in abeyance pending the Supreme Court's decision in Eastern. See Mary Helen Coal Corp. v. Hudson, No. 97-2331, 1998 WL 708687 (4th Cir. Sept. 24, 1998). Eastern Enterprises, like Mary Helen, stopped mining coal in the mid-1960s. In Eastern, the Supreme Court held that the Coal Act was unconstitutional as applied to Eastern Enterprises. See 524 U.S. at 504. No single opinion in Eastern garnered five votes. The four Justice plurality held that the Coal Act violated the Takings Clause. See id. at 538. According to the plurality, the Coal Act imposed severe, unanticipated retroactive liability upon Eastern Enterprises in amounts substantially disproportionate to the company's prior experience with miner benefits. See id. at 529-31, 118 S.Ct. 2131. Justice Kennedy, who concurred only in the judgment, concluded that the Coal Act premiums were not amenable to a Takings analysis. See id. at 547, 118 S.Ct. 2131. According to Justice Kennedy, however, the Coal Act violated the Due Process Clause because it bore no legitimate relation to the government's asserted interests and the degree of retroactive effect was severe. See id. at 549, 118 S.Ct. 2131. The four dissenting Justices agreed with Justice Kennedy that the Due Process Clause provided the relevant frame-work, but disagreed with his conclusion about the existence of a constitutional violation. See id. at 558-59 (Breyer, J., dissenting).

Once that decision was announced, we granted Mary Helen's motion for summary reversal on the grounds that its case was materially indistinguishable from Eastern. See Mary Helen Coal, 1998 WL 708687 at *1. The Trustees subsequently refunded the premiums paid by Mary Helen, but refused to compensate Mary Helen for the interest lost.

Mary Helen returned to district court seeking, among other things, $341,727.74 in prejudgment interest. The district court denied this request. See Mary Helen Coal Corp. v. Hudson, 57 F. Supp.2d 318 (E.D. Va. 1999) (Mary Helen II). According to the district court, the absence of a statute allowing an award of prejudgment interest meant that such an award was not required. See id. at 319. The district court also noted that any award of interest would be paid from the assets of the Combined Fund. According to the court, this meant prejudgment interest was barred by ERISA's anti-inurement provision, which states that "the assets of a plan shall never inure to the benefit of any employer." Id. (quoting 29 U.S.C. § 1103(c)(1)). Mary Helen now appeals.

II.

We have already determined that the Coal Act's premium requirement, as applied to Mary Helen, violated the Fifth Amendment of the Constitution. See Mary Helen Coal, 1998 WL 708687 at *1. Awarding prejudgment interest to Mary Helen, therefore, would simply give full effect to the Supreme Court's decision in Eastern and this court's holding in Mary Helen I, by providing full compensation for the harms suffered.

The usual rule that "interest follows principal" is long and well established. See Phillips v. Washington Legal Foundation, 524 U.S. 156 (1998). See also Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 162 (1980) ("The usual and general rule is that any interest . . . follows the principal and is to be allocated to those who are ultimately to be the owners of that principal."). The Phillips Court noted that this rule has existed "under English common law since at least the mid-1700's" and that it "has become firmly embedded in the common law of the various States." 524 U.S. at 165. Read together, therefore, Eastern and Phillips indicate that Mary Helen receive prejudgment interest on the premiums it paid. It is undisputed that after Eastern the Trustees had to refund the principal amounts paid by Mary Helen. Since the principal belonged to Mary Helen, so too did the interest earned. That the Trustees collected the premiums in good faith does not change the fact that doing so violated Mary Helen's constitutional rights. Thus, to deny an award of prejudgment interest would undercut the Supreme Court's jurisprudence.

Prejudgment interest is simply "an element of" Mary Helen's "complete compensation." Osterneck v. Ernst & Whinney, 489 U.S. 169, 175 (1989). See also West Virginia v. United States, 479 U.S. 305, 310 (1987); General Motors Corp. v. Devex Corp., 461 U.S. 648, 655-56 (1983). One factor to consider in deciding whether to award prejudgment interest is whether such an award"is necessary to compensate the plaintiff fully for his injuries." Osterneck, 489 U.S. at 176. In this case, Mary Helen paid over $540,000 in premiums to the Combined Fund from 1993 to 1996. Mary Helen was deprived of the use of those funds until at least September 1998, when we granted its motion for summary reversal. It is undisputed that the inability to make use of these funds from 1993 to 1998 imposed a measure of harm upon Mary Helen. Thus, an award of prejudgment interest is a critical component of Mary Helen's recovery.

III.

Mary Helen is thus presumptively entitled to an award of prejudgment interest. Of course, the award of "prejudgment interest is within the discretion of the...