SPRING BRANCH MIN. v. UMW 1950 PEN. TR. & PL.

• Decision Date: 30 September 1987
• Docket Number: Civ. A. No. 2:86-0149.
• Court: U.S. District Court — Southern District of West Virginia
• Parties: SPRING BRANCH MINING COMPANY, INC., a corporation; Laramie Mining Company, Inc., a corporation; Korchler Coal Company, a corporation; and Rich Creek Mining Company, Inc., a corporation, Plaintiffs, v. UNITED MINE WORKERS OF AMERICA 1950 PENSION TRUST AND 1950 PENSION PLAN; and Joseph P. Connors, Donald E. Pierce, Jr., William Miller, William P. Jordan, and Paul R. Dean, in their capacities as Trustees of the UMWA 1950 Pension Trust and 1950 Pension Plan, Defendants.

691 F. Supp. 973

SPRING BRANCH MINING COMPANY, INC., a corporation; Laramie Mining Company, Inc., a corporation; Korchler Coal Company, a corporation; and Rich Creek Mining Company, Inc., a corporation, Plaintiffs, v. UNITED MINE WORKERS OF AMERICA 1950 PENSION TRUST AND 1950 PENSION PLAN; and Joseph P. Connors, Donald E. Pierce, Jr., William Miller, William P. Jordan, and Paul R. Dean, in their capacities as Trustees of the UMWA 1950 Pension Trust and 1950 Pension Plan, Defendants.

Civ. A. No. 2:86-0149.

United States District Court, S.D. West Virginia, Charleston Division.

September 30, 1987.

Michael D. Foster, Patricia A. Calore, Jackson & Kelly, Charleston, W. Va., for plaintiffs.

Gary M. Ford, Terrence M. Deneen, Groom and Nordberg, Washington, D.C., Susan Cannon-Ryan, Charleston, W. Va., for defendants.

MEMORANDUM ORDER

COPENHAVER, District Judge.

This matter is before the court on the cross-motions of the parties for summary judgment.

This action arises under the withdrawal liability provisions of the Multiemployer Pension Plan Amendment Act of 1980 (hereinafter MPPAA). Specifically, the plaintiffs contend that they may not be held liable to the defendants for alleged withdrawal liability in the amount of $1,072,378.79. An arbitrator has held that the plaintiffs are liable in that amount pursuant to the withdrawal liability provisions of the MPPAA. The plaintiffs maintain that the arbitrator has misapplied the statute. In addition, the plaintiffs posit that the withdrawal liability provisions are unconstitutional as applied to the facts of this case. They request that the court vacate the award or, in the alternative, declare the MPPAA unconstitutional as applied to this case. According to the defendants, the arbitrator accurately construed pertinent portions of the MPPAA. The defendants argue that the statute is not unconstitutional as applied to this case.

I. Factual Background

The plaintiffs were engaged in the business of contract mining on behalf of Chafin Coal Company at various times from May, 1976, through November 5, 1982. Employees affiliated with the United Mine Workers of America (hereinafter UMWA) were utilized at each of the mining sites of the plaintiffs. Consequently, each of the plaintiffs was signatory to a collective bargaining agreement with the UMWA during the period when operations were conducted. Rich Creek Mining Company, Inc., which was incorporated on May 12, 1976, was signatory to the 1974 collective bargaining agreement which expired in December of 1977. All of the plaintiffs were signatory to the 1978 collective bargaining agreement which expired in March, 1981. Rich Creek, Spring Branch Mining Company, Inc., and Laramie Mining Company, Inc., but not Korchler Coal Company, were signatory to the 1981 collective bargaining agreement which terminated in September of 1984.

Under the terms of the various collective bargaining agreements, signatory employers were obligated to contribute to the UMWA 1974 Pension Plan. Contributions to the 1974 Plan were based upon hours worked by employees, as well as tons of coal produced by the employer. In addition, signatory employers were required to make contributions, based solely upon tons of coal produced, to the UMWA 1950 Pension Plan. The 1950 Plan covers only miners who retired prior to January 1, 1976, and widows of miners who retired prior to January 1, 1976.

Pursuant to the terms of the contracts between Chafin and the plaintiffs, Chafin agreed to pay the plaintiffs' required tonnage contributions to the UMWA Pension and Benefit Plans. Accordingly, the plaintiffs filed remittance advice forms by which they advised the Pension Plans that their required tonnage payments to the 1950 and 1974 Plans were paid by Chafin. Likewise, Chafin filed remittance advice forms with the Plans. Chafin, by use of the forms, differentiated contributions for tonnage mined by Chafin employees from contributions made on behalf of the plaintiffs. Inasmuch as the plaintiffs directly paid contributions to the 1974 Plan based upon hours of work performed by their employees, they submitted remittance advice forms monthly in connection with these contributions.

During or prior to 1982, Chafin terminated its contract mining agreements with the plaintiffs. Consequently, the plaintiffs ceased to be engaged in the coal mining business. The MPPAA provides for withdrawal liability where the "employer" ceases all covered operations or permanently ceases to have an obligation to contribute to a multiemployer plan. In 1983, the trustees of the 1950 and 1974 Pension Plans advised the plaintiffs that they would be assessed withdrawal liability. In total, the plaintiffs were assessed $330,389.01 of withdrawal liability respecting the 1974 Pension Plan and $1,250,142.63 withdrawal liability respecting the 1950 Pension Plan. By agreements dated March 30, 1984, the 1974 Pension Plan accepted a lump sum of $290,612.21 as full payment of the withdrawal liability and the 1950 Pension Plan accepted a lump sum of $1,072,387.79 as full payment of the withdrawal liability. Under those agreements, the plaintiffs reserved the right to further contest the propriety of the assessments.

Subsequently, the plaintiffs did contest the propriety of the assessment and the dispute was presented to an arbitrator. The independent arbitrator ruled that the Pension Plans had properly assessed withdrawal liability pursuant to the Employees Retirement Income Security Act of 1974 (hereinafter ERISA), as amended by the MPPAA, 29 U.S.C. §§ 1301-1461. Soon thereafter, the plaintiffs filed the present action. The plaintiffs do not presently contest the assessment made by the 1974 Plan, but continue to argue that the 1950 Plan is not entitled to withdrawal liability.¹

II. History of Private Pension Regulation

The Employee Retirement Income Security Act, 29 U.S.C. §§ 1001-1381, was enacted by Congress in 1974 to provide comprehensive regulation for private pension plans. ERISA prescribes standards for the funding, management and benefit provisions of these plans. In addition, ERISA establishes a system of pension benefit insurance. Specifically, the Pension Benefit Guaranty Corporation (hereinafter PBGC) was created to administer an insurance program for participants in both single-employer and multi-employer pension plans. For single-employer plans that were in default, ERISA immediately obligated the PBGC to make payments to plan beneficiaries. Id. § 1381. With respect to multi-employer plans, ERISA delayed automatic payment of guaranteed benefits until January 1, 1978. Until that date, the PBGC was granted discretion to pay benefits upon the termination of multi-employer plans. Id. If the PBGC exercised its discretion and made payments, the contributors to covered multi-employer plans were held liable for their proportional share based upon their contributions to the plan over the previous five years. Id. § 1362(b)(2).

Prior to 1978, the PBGC extended coverage to numerous plans. Consequently, "Congress became concerned that a significant number of plans were experiencing extreme financial hardship ..., and that implementation of mandatory guarantees for multi-employer plans might induce several large plans to terminate, thus subjecting the insurance system to liability beyond its means." Connolly v. Pension Benefit Guaranty Corporation, 475 U.S. 211, 106 S.Ct. 1018, 1021, 89 L.Ed.2d 166 (1986). Hence, Congress delayed the effective date for mandatory guarantees by eighteen months and commissioned the PBGC to prepare a report. Id.

The PBGC's report found, inter alia, "that ERISA did not adequately protect plans from the adverse consequences that resulted when individual employers terminate their participation in, or withdraw from, multiemployer plans." Id. The report noted that employer withdrawals reduce the contribution base of a plan, and suggested that withdrawing employers be required to pay whatever share of the plan's unfunded liabilities were attributable to that employer's participation. Id. 106 S.Ct. at 1021-22. The PBGC executive director explained, "we think that such withdrawal liability would, first of all, discourage voluntary withdrawals and curtail the current incentives to flee the plan. Where such withdrawals nonetheless occur, we think that withdrawal liability would cushion the financial impact on the plan." Id. at 1022 (citing Pension Plan Termination Insurance Issues: Hearings Before the Subcommittee on Oversight of the House Committee on Ways and Means, 95th Cong., 2d Sess., 23 (1978)).

After extensive discussion, Congress heeded the advice of the PBGC and enacted the MPPAA. The Act requires that an employer withdrawing from a multi-employer pension plan pay a fixed debt to the pension plan calculated as the proportionate share of the plan's unfunded vested benefits. Id.; see 29 U.S.C. §§ 1381, 1391.

III. Summary of Arguments

The plaintiffs' claim is divided into two counts. In Count I, the plaintiffs contend that the arbitrator twice misapplied the statute. First, he allegedly erred in classifying the plaintiffs as employers within the meaning of the MPPAA. Second, the plaintiffs purportedly had no obligation to contribute to the 1950 Fund and thus no withdrawal liability was incurred.

In Count II of their complaint, the plaintiffs aver that the withdrawal liability provisions as applied to this case constitute an unconstitutional taking of private property without just compensation and an unconstitutional denial of substantive due process. The arbitrator did not consider the constitutional issues in rendering his award.

The standard of review of an arbitration award under MPPAA is governed by 29 U.S.C. § 1401, which provides that there is a presumption, rebuttable only by a clear preponderance of the evidence, that the factual findings of the arbitrator are correct. Id. However, the conclusions of law of the arbitrator are reviewable de novo by the...