Peabody Coal Co., LLC v. Barnhart

Decision Date11 January 2007
Docket NumberNo. CIV 05-671-SLR.,CIV 05-671-SLR.
Citation469 F.Supp.2d 240
PartiesPEABODY COAL CO., LLC, and Eastern Associated Coal Corp., Plaintiffs, v. Jo Anne B. BARNHART, Defendant, and Trustees of the United Mine Workers of America Combined Benefit Fund, Intervenor Defendant.
CourtU.S. District Court — District of Delaware

Morris, Nichols, Arsht & Tunnell, Wilmington, DE (Jason A. Cincilla, of counsel), John R. Woodham, W. Gregory Mott, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Washington, D.C., for plaintiffs.

United States Attorney's Office, Wilmington, DE (Patricia C. Hannigan, of counsel), Eric R. Womack, Esquire, United States Department of Justice, Washington, D.C., for defendant.

Ashby & Geddes, Wilmington, DE (Carolyn Shelly Hake, of counsel), Christopher F. Clarke, Office of the General Counsel, UMWA Health & Retirement Funds, Washington, D.C., for intervenor defendant.


SUE L. ROBINSON, Chief Judge.


On September 14, 2005, Peabody Coal Company, LLC ("Peabody") and Eastern Associated Coal Corporation ("EACC") (collectively, "plaintiffs") filed suit against defendant Jo Anne B. Barnhart ("Barnhart"), the Commissioner of the Social Security Administration ("SSA"). (D.I.1) Plaintiffs' complaint alleges that Barnhart's decision1 to assign them responsibility for funding health and death benefits for certain retired coal industry employees violated both § 9706 of the Coal Industry Retiree Health Benefit Act of 1992 ("Coal Act"), 26 U.S.C. §§ 9701 et seq., and §§ 702 and 706 of the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 551-559, 701-706. (D.I.1, passim) On March 10, 2006, the Trustees of the United Mine Workers of America Combined Benefit Fund ("Trustees") filed an unopposed motion to join the instant litigation as an intervenor defendant (D.I.6), which the court granted.

Presently before the court are defendant Barnhart's motion to dismiss the complaint for failure to state a claim (D.I.9), and defendant Trustees' and plaintiffs' respective motions for summary judgment. (D.I.13, 15) The court has jurisdiction over this matter pursuant to 28 U.S.C. § 1331; 5 U.S.C. §§ 701 et seq.; 28 U.S.C. § 2201; and 26 U.S.C. § 9721. Venue is proper under 28 U.S.C. § 1391(e).

A. History of Benefits Plans for American Coal Workers3

"For a good part of this century, employers in the coal industry have been involved in negotiations with the United Mine Workers of America [(`UMWA')] regarding the provision of employee benefits to coal miners." Eastern Enters. v. Apfel, 524 U.S. 498, 504, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998) (plurality opinion). In 1946, after almost a decade of lobbying by the UMWA which culminated in a nation-wide strike by mine workers, the federal government intervened in the coal industry. Id. at 504-05, 118 S.Ct. 2131. The resulting Krug-Lewis Agreement of 1946 "led to the creation of benefit funds [for mine workers], financed by royalties on coal produced and payroll deductions. The funds compensated miners and their dependents and survivors for wages lost due to disability, death, or retirement .... [and] provided for the medical expenses of miners and their dependents ...." Id. at 505, 118 S.Ct. 2131.

Soon thereafter, "the UMWA and several coal operators entered into the National Bituminous Coal Wage Agreement of 1947 [(`1947 Agreement')], which established the United Mine Workers of America Welfare and Retirement Fund" ("1947 Fund"). Id. Due to disagreements over which kinds of benefits were owed to miners under the 1947 Agreement, "a new multiemployer trust [called] the United Mine Workers of America Welfare and Retirement Fund of 1950" ("1950 Fund") was established. Id. at 506.

As with the 1947[] Fund, the 1950[] Fund was governed by three trustees chosen by the parties and vested with responsibility to determine the level of benefits.... Between 1950 and 1974, the 1950 [Agreement] was amended on occasion, and new [agreements] were adopted in 1968 and 1971. Except for the increases in the amount of royalty payments, however, the terms and structure of the 1950[] Fund remained essentially unchanged.

Id. The 1950 Agreement established a "pay-as-you-go" system, and miners were not promised any specific benefits, See id. at 506-07. According to the Supreme Court, "it is clear that the 1950[] Fund did not, by its terms, guarantee lifetime health benefits for retirees and their dependents," id. at 508; in fact, "[s]ubsequent annual reports of the 1950[] Fund reiterated that benefits were subject to change," id. at 507.

The enactment of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq., necessitated the abandonment of the 1950 Fund's "pay-as-you-go" process in favor of "specific funding and vesting requirements for pension plans." Eastern, 524 U.S. at 509, 118 S.Ct. 2131. Compliance with ERISA was achieved through creation of the National Bituminous Coal Wage Agreement of 1974 ("1974 Agreement"),

which created four trusts, funded by royalties on coal production and premiums based on hours worked by miners, to replace the 1950[] Fund. Two of the new trusts, the UMWA 1950 Benefit Plan and Trust [("1950 Plan")] and the UMWA 1974 Benefit Plan and Trust [("1974 Plan")], provided nonpension benefits, including medical benefits. Miners who retired before January 1, 1976, and their dependents were covered by the 1950[] Plan, while active miners and those who retired after 1975 were covered by the 1974[] Plan.

The 1974 [Agreement] thus was the first agreement between the UMWA and the [Bituminous Coal Operators' Association ("BCOA")] to expressly reference health benefits for retirees; prior agreements did not specifically mention retirees, and the scope of their benefits was left to the discretion of fund' trustees. ... Despite the expanded benefits, the 1974 [Agreement] did not alter the employers' obligation to contribute only a fixed amount of royalties, nor did it extend employers' liability beyond the life of the agreement.


The 1950 and 1974 Plans soon began running into funding problems, leading to the formation of yet another agreement ("1978 Agreement") which "assigned responsibility to signatory employers for the health care of their own active and retired employees. The 1974[] Plan remained in effect, but only to cover retirees whose former employers were no longer in business."4 Id. at 510, 118 S.Ct. 2131. Furthermore,

[t]o ensure the [] Plans' solvency, the 1978 [Agreement] included a "guarantee" clause obligating signatories to make sufficient contributions to maintain benefits during that agreement, and "evergreen" clauses were incorporated into the [] Plans so that signatories would be required to contribute as long as they remained in the coal business, regardless of whether they signed a subsequent agreement.

Id. Only at this point in time did "the coal operators' liability to the [] Plans shift[] from a defined contribution obligation, under which employers were responsible only for a predetermined amount of royalties, to a form of defined benefit obligation, under which employers were to fund specific benefits." Id. at 510-11, 118 S.Ct. 2131.

Even after implementing these changes in 1978, financial troubles continued to plague the Funds as costs rose and an increasing number of signatories withdrew from the 1978 Agreement. See id. at 511, 118 S.Ct. 2131. "In 1988, the UMWA and BCOA attempted to relieve the situation by imposing withdrawal liability on ... signatories who seceded from the [] Plans." Id. The ameliorative measures employed by the 1988 Agreement failed to alleviate the 1950 and 1974 Plans' funding problems. See id.

In 1992, galvanized in part by concerns "that retired miners might not receive the benefits promised to them," id. at 513, 118 S.Ct. 2131, Congress passed the Coal Act, 26 U.S.C. §§ 9701 et seq., which, as of February 1, 1993, "merged the 1950 and 1974[] Plans into a new[,] [private] multiemployer plan called the United Mine Workers of America Combined Benefit Fund (`Combined Fund')" and guaranteed that retirees and their dependents would continue to receive "`substantially the same" benefits as they had under the prior plans, Eastern, 524 U.S. at 514, 118 S.Ct. 2131; see also 26 U.S.C. § 9702(a)(1).

B. The Coal Act

The Coal Act, which qualifies as an employee benefit plan under ERISA, see 26 U.S.C. § 9702(a)(3)(B), secures health and death benefits for (1) coal industry retirees "who, on July 20, 1992, [were] eligible to receive, and [were] receiving, benefits from the [1950 Plan] or the [1974 Plan], or (2) on such date [were] eligible to receive, and [were] receiving, benefits in either such plan by reason of a relationship to such retiree," id. § 9703(f). Assigned operators (or "[a]ny related person with respect to such an assigned operator"5) were made liable for underwriting the Combined Fund through payment of annual premiums. See id. § 9704(a). The 1950 and 1974 Plans were charged with covering costs the Combined Fund had incurred before February 1, 1993. See id. § 9704(i)(3).

Section 9706 of the Coal Act set a deadline of October 1, 1993, by which date the Commissioner of the SSA was required

[to] assign each coal industry retiree who [was] an eligible beneficiary to a signatory operator which (or any related person with respect to which) remain[ed] in business in the following order:

(1) First, to a signatory operator which —

(A) was a signatory to the 1978 [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 [was] not assigned under paragraph (1), to the signatory operator which —

(A) was a signatory to the 1978 [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...

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