Nell Jean Industries, Inc. v. Barnhart

• Decision Date: 10 September 2002
• Docket Number: No. CIV.A.01-2006 (ESH).,CIV.A.01-2006 (ESH).
• Citation: 224 F.Supp.2d 10
• Parties: NELL JEAN INDUSTRIES, INC., Plaintiff, v. Jo Anne BARNHART, Commissioner of Social Security, Defendant, and Michael Holland, et al., Trustees of the UMWA Combined Benefit Fund, Defendants-Intervenors
• Court: U.S. District Court — District of Columbia

224 F.Supp.2d 10

NELL JEAN INDUSTRIES, INC., Plaintiff, v. Jo Anne BARNHART, Commissioner of Social Security, Defendant, and Michael Holland, et al., Trustees of the UMWA Combined Benefit Fund, Defendants-Intervenors

No. CIV.A.01-2006 (ESH).

United States District Court, District of Columbia.

September 10, 2002.

COPYRIGHT MATERIAL OMITTED

John R. Woodrum, W. Gregory Mott, Heenan, Althen & Roles, Washington, DC, for Plaintiff.

Anne M. Joseph, U.S. Dept. of Justice, Federal Prorams Branch, Washington, DC, Brian G. Kennedy, U.S. Dept. of Justice Civil Div., Washington, DC, for Larry G. Massanari, Jo Anne Barnhart.

Peter Buscemi, Morgan, Lewis & Bockius, L.L.P., Washington, DC, Elizabeth A. Saindon, Mooney, Green, Gleason, Baker, Gibson & Saindon, Washington, DC, for Trustees of United Mine Workers of America Combined Benefit Fund.

MEMORANDUM OPINION

HUVELLE, District Judge.

At issue here is the Commissioner of Social Security's decision requiring plaintiff to pay the health insurance premiums of retired coal miners and their dependents. Plaintiff was assigned this liability pursuant to the Coal Industry Retiree Health Benefit Act of 1992 ("Coal Act"), 26 U.S.C. §§ 9701-9722. The Trustees of the United Mine Workers of America Combined Fund (the "Trustees") were granted leave to intervene as defendants, for the Combined Fund has the statutory responsibility to collect health care premiums from assigned coal operators and to use the premiums to provide health coverage to its beneficiaries.¹ At the parties' request, the Court directed them to file briefs addressing only Counts I and III of the First Amended Complaint.²

In Count I plaintiff seeks an order directing the Commissioner of the Social Security Administration (the "Commissioner" or "SSA") to void plaintiff's assignment of liability for health insurance premiums as violative of the Takings and Due Process Clauses of the Fifth Amendment under the Supreme Court's decision in Eastern Enterprises v. Apfel, 524 U.S. 498, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998), and section 706(2)(A) of the Administrative Procedure Act ("APA"), 5 U.S.C. § 706(2)(A). Plaintiff claims that the Coal Act, as applied to it, is unconstitutional because plaintiff is substantially identical to the plaintiff in Eastern Enterprises. As a result of these factual similarities, plaintiff also claims that the Commissioner's refusal to void plaintiff's Combined Fund beneficiary assignments, after voiding assignments made to other companies similarly situated to Eastern, is arbitrary and capricious.

In Count III, plaintiff challenges the Commissioner's September 1999 assignment of Tuness Tiller and his dependents to plaintiff after the Commissioner voided his initial assignment in response to the Supreme Court's decision in Eastern Enterprises. Plaintiff seeks an order requiring the Commissioner to vacate this assignment of a former "Eastern beneficiary"³ as a violation of the assignment criteria in section 9706 of the Coal Act and an abuse of discretion under sections 702 and 706 of the APA.⁴

All parties have moved for partial summary judgment, and the only questions to be resolved are issues of law. As explained more fully below, the Court concludes that plaintiff is not substantially similar to Eastern, and thus, its challenge to Count I must fail. The Court also finds that Commissioner's assignment of an additional beneficiary to plaintiff following the Supreme Court's decision in Eastern Enterprises was both consistent with the Coal Act and a reasonable exercise of discretion under the APA. Therefore, summary judgment is appropriate as to Counts I and III.

BACKGROUND

The coal industry's attempts over the last century to provide benefits to coal miners, culminating in the passage in 1992 of the Coal Act, are well documented in numerous court decisions, including the Supreme Court's decision in Eastern Enterprises v. Apfel, 524 U.S. 498, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998), and therefore, only a short summary of the background and statutory provisions relevant to this case will be presented here.

I. History of the Coal Act

Since 1942, health benefits for retired coal miners have been provided through a series of multiemployer health plans established under collective bargaining agreements known as National Bituminous Coal Wage Agreements ("NBCWAs" or "coal wage agreements"). From 1950 through 1974, health benefits provided under the coal wage agreements were financed by the United Mine Workers of American ("UMWA") 1950 Welfare and Retirement Fund, a multiemployer trust fund. Coal operators paid royalties into this fund on the basis of the amount of coal mined or the number of covered hours worked under a particular collective bargaining agreement. The agreements did not specify benefits to which miners and their families were entitled. Instead, benefits were determined by trustees of the fund based on their discretion and the financial soundness of the fund.

Then, to comply with the funding and vesting requirements of the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001, the UMWA entered into the 1974 coal wage agreement with the Bituminous Coal Operators Association ("BCOA"), a multiemployer bargaining association created in 1951 to be the primary representative of coal operators in their negotiations with the UMWA. Eastern Enterprises, 524 U.S. at 509, 118 S.Ct. 2131. The 1974 coal wage agreement divided the UMWA 1950 Welfare and Retirement Fund into four plans. Two of these plans covered retiree health benefits: the 1950 Benefit Plan provided health benefits to coal workers who retired before 1976, and the 1974 Benefit Plan covered those who retired on or after January 1, 1976. The 1974 coal wage agreement expressly provided lifetime health benefits to retirees and their dependents for the first time. Id. at 509, 118 S.Ct. 2131.

The 1950 and 1974 Benefit Plans experienced financial difficulties due to the liberalization of benefits under the 1974 coal wage agreement, demographic and economic changes that included a decline in coal production (and the resulting decline in contributions to the funds), the retirement of a generation of miners, and escalating health care costs. In response to the financial problems faced by the multiemployer plans, the 1978 coal wage agreement required signatory employers to establish individual employer health plans to provide benefits to their active employees and retirees. Under the 1978 agreement, the 1974 Benefit Plan, a multiemployer plan, was restricted to cover only those "orphaned" miners who retired on or after January 1, 1976 and whose former employer had gone out of business. The 1950 Benefit Plan continued to provide health benefits to miners who retired before 1976.

Despite the changes imposed by the 1978 coal wage agreement, increasing costs and the withdrawal of employers from the 1978 coal wage agreement led to a continuing decline in the financial situation of the plans. In response, the Secretary of Labor's Advisory Commission on United Mine Workers of America Retiree Health Benefits (the "Coal Commission") was created in 1989 to address the funding problems of the retiree health benefits plans. Two years after the Commission released their report and recommendations, Congress enacted the Coal Act.

II. The Coal Act

In the Coal Act, Congress aimed to "stabilize health plan funding" and provide health care benefits to retirees by identifying those most responsible for the liabilities of the 1950 and 1974 Benefit Plans. Eastern Enterprises, 524 U.S. at 514, 118 S.Ct. 2131. The Act combined the two plans to create a new multiemployer plan called the United Mine Workers of America Combined Benefit Fund ("Combined Fund"). "The Combined Fund provides substantially the same health benefits to retirees and their dependants" as the 1950 and 1974 Benefit Plans. Id. at 514, 118 S.Ct. 2131. It is financed by annual premiums assessed against coal operators that signed any coal wage or other agreement requiring the operator to contribute to the 1950 or 1974 Benefit Plans. These operators are "signatory operators" under the Act. 26 U.S.C. § 9701(b)(1), (b)(3), (c)(1). Any signatory operator who "conducts or derives revenue from any business activity, whether or not in the coal industry," may be liable for the premiums. §§ 9701(c)(7), 9706(a). Liability for health care premiums for eligible coal miners is assigned to a signatory operator or its related person according to statutory criteria. § 9706(a).

The Coal Act directs the SSA Commissioner to "before October 1, 1993, assign each coal industry retiree who is an eligible beneficiary to a signatory operator which (or any related person with respect to which) remains in business" in the following order:

(1) First, to the signatory operator which —

(A) was a signatory to the 1978 coal wage agreement or any subsequent coal wage agreement, and

(B) was the most recent signatory operator to employ the coal industry retiree in the coal industry for at least 2 years.

(2) Second, if the retiree is not assigned under paragraph (1), to the signatory operator which —

(A) was a signatory to the 1978 coal wage agreement or any subsequent coal wage agreement, and

(B) was the most recent signatory operator to employ the coal industry retiree in the coal industry.

(3) Third, if the retiree is not assigned under paragraph (1) or (2), to the signatory operator which employed the coal industry retiree in the coal industry for a longer period of time than any other signatory operator prior to the effective date of the 1978 coal wage agreement.

§ 9706(a)(1)-(3).

Assigned signatory operators pay a health care premium to the Combined Fund for each of their assigned beneficiaries. § 9407(a). Where a signatory operator is no longer involved in any business activity, premiums may be assessed against a "related person," including members of the same controlled group of...