National Min. Ass'n v. Apfel

Decision Date10 February 1999
Docket NumberNo. CV-96-J-1385-S.,CV-96-J-1385-S.
Citation97 F.Supp.2d 1070
PartiesNATIONAL MINING ASSOCIATION, Plaintiff, v. Kenneth APFEL, et al., Defendants.
CourtU.S. District Court — Northern District of Alabama

David M. Smith, Maynard Cooper & Gale, Birmingham, AL, John R. Woodrum, Margaret Lopez, Heenan Althen & Roles, Washington, DC, for National Mining Association, Alabama Land and Mineral Corp., AlliedSignal, Inc., Berwind Corp., Bethlehem Steel Corp., Costain Coal, Inc., LTV Steel Co., plaintiffs.

John D. Clements, Burr & Forman LLP, Birmingham, AL, for Consolidated Coal Company, Quarto Mining Company, Island Creek Coal Company, Laurel Run Mining Company, Beatrice Pocahontas Coal Company, Freeman United Coal Mining Co., plaintiffs.

Frank W. Hunger, Brian G. Kennedy, Civil Division, Gretchen E. Jacobs, United States Department of JusticeCivil Division, Washington, DC, for Social Security

Administration, Shirley Chater, Commissioner, defendant.

Stephen J. Pollak, Wendy S. White, Howard R. Rubin, Julie M. Edmond, Shea & Gardner, Washington, DC, Patrick K. Nakamura, Nakamura Quinn & Walls LLP, Birmingham, AL, for Michael H. Holland, Elliot A. Segal, William P Hobgood, Marty D. Hudson, Thomas OS Rand, Carlton R. Sickles, defendants.

Robert H. Stropp, Jr., Mooney Green Baker Gibson & Saindon PC, Washington, DC, for United Mine Workers of America, International Union, amicus.


JOHNSON, District Judge.

This court considered the following pending motions at its January 12, 1999 motion docket: Motion of Defendant Trustees of United Mine Workers of America ("UMWA") Combined Benefit Fund to Dismiss for Lack of Subject Matter Jurisdiction (doc. 70); Plaintiffs' and Plaintiff-Interveners' Motion for Summary Judgment (doc. 58); Motion of Defendant Trustees of UMWA Combined Benefit Fund to Dismiss Counts I and II of the Third Amended Complaint (doc. 56); and Federal Defendant's Motion to Dismiss (doc. 54). The court heard oral arguments at said docket. The court also had the benefit of voluminous materials filed by the various parties including Memorandum in Support of Plaintiffs' and Plaintiff-Interveners' Motion for Summary Judgment ("plaintiffs' memo (May 2, 1997)"); Defendant Trustees Opposition to Plaintiffs' Motion for Summary Judgment and Reply in Support of Trustees Motion to Dismiss Counts I and II of the Third Amended Complaint (doc. 61) ("Trustees' opposition (June 27, 1997)"); Federal Defendant's Combined Reply Memorandum in Support of Motion to Dismiss and Opposition to Motion for Summary Judgment (doc. 60) ("federal defendant's memo (June 27, 1997)"); Plaintiffs' and Plaintiff-Interveners' Reply to Defendants' Oppositions to Motion for Summary Judgment (doc. 64) ("plaintiffs' reply (July 21, 1997)"); Federal Defendant's Opposition to Motion of Defendant Trustees of UMWA Combined Benefit Fund to Dismiss for Lack of Subject Matter Jurisdiction (doc. 72) ("federal defendant's opposition (July 28, 1998)"); the Memorandum Opinion of the District Court in The Pittston Company, et al., v. United States of America; Civil Action Number 3:97CV294 (E.D.Va.1997); the Hon. Judge Hancock's decision in National Coal Association v. Donna E. Shalala, CV-94-H-780-S, (N.D.Al.1996); as well as other documents and memoranda of law.


The plaintiffs are a number of coal companies suing for a refund or offset of overpayments of health benefit premiums paid to the defendant UMWA Combined Benefit Fund (the "Combined Fund"); pursuant to 26 U.S.C. §§ 9701-9722. A historical perspective of the case is essential to understand the Court's purpose in its ruling to follow.

The Coal Act is the culmination of a long history of federal involvement in coal industry labor issues. That involvement began in 1946, when a prolonged coal strike occurred. The federal government took over operations of the nation's coal mines and entered into an agreement with the United Mine Workers of America ("UMWA"). That agreement ... included provisions that required coal producers to provide health and pension benefits to their workers.... Health benefits were not vested or guaranteed in these early agreements, and the coal producers were not obligated to the UMWA fund beyond payment of their assigned royalties. However, the UMWA paid health benefits to miners for more than 30 years.

In 1974, the UMWA Fund was restructured in the wake of the passage of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461.... For the first time, the 1974 NBCWA contained an explicit promise of lifetime health benefits. The 1974 Funds soon became financially unstable, however.... In 1989, the UMWA initiated a 10-month strike against the Pittston Coal company over retiree benefits, which was settled only with federal intervention. After the Pittston strike was settled, the Secretary of Labor appointed the Advisory Commission on United Mine Workers of America Retiree Health Benefits ... to study the problems and to propose solutions. ....

In re Blue Diamond Coal, 79 F.3d 516, 518-519 (6th Cir.1996), cert. denied, 519 U.S. 1055, 117 S.Ct. 682 (1997). To solve the 1974 Funds' problems, in 1992, Congress created the Coal Industry Retiree Health Benefit Act of 1992, 26 U.S.C. § 9701 et seq.(the "Act" or the "Coal Act"), as an amendment to the Internal Revenue Code. This Act creates health care entitlements for UMWA retirees and their dependants. The Combined Fund was created by consolidation of the 1974 Funds as a means to provide these benefits. 26 U.S.C. §§ 9701(a)(5), 9702(a), 9703(f), 9704, 9705. Administration of the Combined Fund is vested in a seven member Board of Trustees. 26 U.S.C. § 9702(b).

The Act requires the Secretary of Health and Human Services1 to calculate a yearly per beneficiary payment pursuant to a mathematical formula and then to assess "operators" premiums based on the number of beneficiaries "assigned" to that operator. See 26 U.S.C. §§ 9704(b)(2), 9706. The operator must pay this money into the Combined Fund, which is then overseen by the trustees of that fund ("the Trustees"). This Fund is specifically stated to be a "multi-employer plan" within the terms of ERISA (26 U.S.C. § 9702(a)(3)). Penalties, in the nature of a tax, are provided for the failure of an operator to pay the premium on time and as assessed by the Commissioner.

In 1994, in National Coal Association v. Chater, CV94-H-780-S, aff'd 81 F.3d 1077 (11th Cir.1996), the District Court ruled that the Commissioner of Social Security was improperly interpreting the term "reimbursement" and hence improperly calculating the premiums owed to the Combined Fund by the operators (plaintiffs here).2 The court directed the Commissioner to recompute the premiums in accordance with the criteria set forth in 26 U.S.C. § 9704(b)(2). Using the corrected figures, the plaintiffs now assert that, having overpaid the Fund by approximately $35,000,000.00, they are entitled to either a refund or a credit against their future obligations to the Fund.3 These overpayments were the result of the Commissioner's improper calculations for February 1993 and October 1993 premium payments.4

This litigation was stayed pending the outcome of the trustees decision on whether the Combined Fund would refund the overpayment. On January 10, 1997, the trustees issued a memorandum opinion that they were not going to refund the plaintiffs' overpayments, on the basis that the return of the money would have an adverse financial effect on the Combined Fund assets. That memorandum was from the Executive Director of the Combined Fund and addressed to assigned operators of the UMWA Combined Benefit Fund (plaintiffs here). After stating its decision not to refund the overpayments, the memorandum continues, "Please be advised that the trustees' decision to retain the differential means that assigned operators remain obligated to pay in full the monthly premiums assessed. The Trustees will treat an assigned operator that takes a credit for the amount of its premium differential as delinquent in payment of premiums due." Exhibit 5 to plaintiffs' memo (May 2, 1997).

As the complaint reads in its third amended form, the plaintiffs' have four theories for the return of these payments:

Count I: Claim against the Commissioner for a refund of overpayments under 26 U.S.C. § 9706(f)(3). The plaintiffs argue that the Commissioner is in violation of this section of the Coal Act by either not ordering the Combined Fund to refund the overpayments or by not applying the overpayment to the plaintiffs' respective future premiums.

Count II: Claim for restitution under the federal common law of ERISA (although plaintiffs' alternately represent this count as being pursuant to an implied cause of action under ERISA § 403(c)(2)(A)(ii) (29 U.S.C. § 1103(c)) and a claim for return of overpayment in accordance with § 403(c)(2)(A)(ii) of ERISA). See third amended complaint, Count II, filed February 10, 1997.

Count III: Equitable claim for relief; a claim for common law restitution under the Coal Act. See plaintiffs' reply, July 21, 1997, at 11-12.

Count IV: Claim under 26 U.S.C. § 9721 that the Combined Fund has to return the premiums or credit the overpayments against future premiums.

See plaintiffs' memo (May 2, 1997) at 2; federal defendant's memo (March 21, 1997) at 16.5


In reliance on the Virginia case, Pittston v. United States, the trustees state that this court does not have subject matter jurisdiction. Pittston was originally a plaintiff in this case pending before this court, but dismissed its claims here to bring the Virginia action. Pittston sued the United States under the Internal Revenue Code, which resulted in an award of $1.9 million against the United States. In that case, the United States sued the trustees as a third party. That court held that the premiums...

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