Trs. of the United Mine Workers of Am. 1992 Benefit Plan v. Westmoreland Coal Co. (In re Westmoreland Coal Co.), CASE NO: 18-35672
| Decision Date | 28 December 2018 |
| Docket Number | CASE NO: 18-35672,ADVERSARY NO. 18-3300 |
| Parties | IN RE: WESTMORELAND COAL COMPANY, et al., Debtors. TRUSTEES OF THE UNITED MINE WORKERS OF AMERICA 1992 BENEFIT PLAN, et al., Plaintiffs, v. WESTMORELAND COAL COMPANY, et al., Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of Texas |
(Jointly Administered)
Before the Court is the question of whether the Debtors' obligations under the Coal Industry Retiree Health Benefits Act of 1992 (the "Coal Act") are subject to the provisions of 11 U.S.C. § 1114. As set forth below, the Court answers the question1 in the affirmative. Accordingly, the Court will grant the Debtor-Defendants' Motion for Judgment on the Pleadings [Docket No. 22] and deny the Plan Trustees' Cross-Motion for Judgment on the Pleadings under Rules 12(c) and 56 [Docket No. 25]. A separate judgment will issue consistent with this memorandum opinion.
1. On October 9, 2018, Westmoreland Coal Company and 36 affiliates2 filed voluntary petitions under chapter 11 of the Bankruptcy Code. By Order entered the same day, the Court approved the joint administration of the cases pursuant to FED. R. BANKR. P. 1015(b) and LOC. R. BANKR. P. 1015-1 [Docket No. 71, Case No. 18-35672].
2. On October 23, 2018, Michael H. Holland, Michael O. McKown, Joseph R. Reschini, Marty D. Hudson, William P. Hobgood, Carl E. Van Horn, and Gail R. Wilensky, as trustees of the United Mine Workers of America Combined Benefit Fund and Michael H. Holland, Michael O. McKown, Joseph R. Reschini, and Carlo Tarley as trustees of the United Mine Workers of America 1992 Benefit Plan (collectively, the "Plan Trustees") filed their complaint in this adversary proceeding against the Debtors seeking a declaratory judgment that the Debtors' obligations under the Coal Act are not "retiree benefits" subject to 11 U.S.C. § 1114 [Docket No. 1]. In addition, the Plan Trustees seek an award of attorney's fees and costs under 29 U.S.C. § 1132(g)(2) [Docket No. 1].
3. On November 12, 2018, the Debtors filed their Motion for Judgment on the Pleadings on the Coal Act Funds' Complaint for Declaratory Relief pursuant to Federal Rule of Civil Procedure 12(c) [Docket No. 22]. In the motion, the Debtors request (i) a finding that § 1114 is applicable to their obligations under the Coal Act; and (ii) the dismissal of this adversary proceeding [Docket No. 22].
4. The Plan Trustees filed their response on November 27, 2018 [Docket No. 25]. Included in the response is a cross-motion for judgment on the pleadings pursuant to Federal Rules of Civil Procedure 12(c) and 56 [Docket No. 25].
5. The Court conducted a hearing on the motions on November 29, 2018. After hearing arguments, the Court requested that the parties jointly submit the briefs filed before the Eleventh Circuit in a pending appeal on the identical issue involving Walter Energy, Inc.3 The joint submission of the parties is filed at Docket No. 47. In addition, and in recognition of theimportance of the issue presented, the Court, sua sponte, raised the issue of a direct appeal of this ruling to the Fifth Circuit Court of Appeals. By joint notice filed at Docket No. 49, the parties indicated a preference that the Court certify its ruling for direct appeal pursuant to 28 U.S.C. 158(d)(2).
6. The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 1334(a). This proceeding is a core proceeding arising under title 11 pursuant to 28 U.S.C. §§ 157(b)(2)(A) and (O). The Court has constitutional authority to enter a final judgment in this proceeding under the Supreme Court's holding in Stern v. Marshall, 131 S.Ct. 2594 (2011). No party asserts that the Court lacks the requisite jurisdiction or authority to issue a final judgment.
7. Rule 12(c) of the Federal Rules of Civil Procedure, as made applicable in this adversary proceeding by FED. R. BANKR. P. 7012(b), provides that "[a]fter pleadings are closed - but early enough not to delay trial - a party may move for judgment on the pleadings." FED. R. CIV. P. 12(c). Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 312 (5th Cir. 2002) (citing Herbert Abstract Co., v. Touchstone Props., Ltd., 914 F.2d 74,76 (5th Cir. 1990)). In deciding a motion under Rule 12(c), the Court Brittan Communications Intern. Corp. v. Southwestern Bell Tel. Co., 313 F.3d. 899, 904 (5th Cir. 2002) (citations omitted). In addition to the pleadings, the Court "may take into account documents incorporated into the complaint by reference or integral to the claim, items subject to judicial notice, matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint whose authenticity is unquestioned." Myeres v. Trexton, Inc., 540 FED. APPX. 408, 409 (5th Cir. 2013) (citations omitted).
8. When presented with a motion under Rule 12(c), the parties may offer matters outside the pleadings. FED. R. CIV. P. 12(d). If these matters are not excluded, the Court is required to treat the motion as a motion for summary judgment under Rule 56. Id. Under these circumstances, the Court is required to give all parties "a reasonable opportunity to present all the material that is pertinent to the motion." Id. The Court declines to treat the parties' competing Rule 12(c) motions as motions under FED. R. CIV. P. 56. The Court has limited its analysis to the pleadings and other permitted matters in accordance with the standard defined by the Fifth Circuit.
9. The Coal Act was the byproduct of a "a lengthy strike that followed Pittson Coal Company's refusal to sign the 1988 NBCWA4." Eastern Enterprises v. Apfel, 524 U.S. 498, 511 (1998). The strike led to the creation of the Advisory Commission on United Mine Workers of America Retiree Health Benefits (the "Coal Commission"). Id. The Coal Commission was charged with making a recommendation regarding medical benefits for retirees that were originally covered under benefit trusts which preceded the Coal Act. Id.
10. After legislation incorporating the Coal Commission's recommendations was vetoed by President Bush, Congress passed the Coal Act. Id. at 513. (citations omitted). As the Supreme Court explained:
The Coal Act merged the 1950 and 1974 Benefit Plans into a new multiemployer plan called the United Mine Workers of America Combined Benefit Fund (Combined Fund). See 26 U.S.C. §§ 9702(a)(1), (2). The Combined Fund provides 'substantially the same' health benefits to retirees and their dependents that they were receiving under the 1950 and 1974 Benefit Plans. See §§ 9703(b)(1), (f). It is financed by annual premiums assessed against 'signatory coal operators,' i.e., coal operators that signed any NBCWA or any other agreement requiring contributions to the 1950 or 1974 Benefit Plans. See §§ 9701(b)(1), (3); 9701(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 those premiums. §§ 9706(a), 9701(c)(7). Where a signatory is no longer involved in any business activity, premiums may be levied against 'related person[s],' including successors in interest and businesses or corporations under common control. §§ 9706(a), 9701(c)(2)(A).
Id. at 514. The stated purpose of the Coal Act was "to identify persons most responsible for [1950 and 1974 Benefit Plan] liabilities in order to stabilize plan funding and allow for the provision of health care benefits to ... retirees." Id. (citations omitted).
11. In 1988 Congress passed the Retiree Benefits Bankruptcy Protection Act of 1988 (the "Retiree Benefits Act") which added § 1114 to the Bankruptcy Code. See generally, 7 COLLIER ON BANKRUPTCY ¶ 1114.01 [1], at 1114-7 (Alan N. Resnick & Henry J. Sommer eds., 16th ed.). The Retiree Benefits Act was a legislative reaction to a growing number of bankruptcy cases that drew a distinction between collective bargaining agreements covered by § 1113 of the Bankruptcy Code and "retiree benefits" which resulted in the unilateral rejection those retiree benefits. 7 COLLIER ON BANKRUPTCY ¶ 1114.10[2][a], [b], at 1114-39-43 (Alan N. Resnick & Henry J. Sommer eds., 16th ed.); see also In re Certified Air Technologies, Inc., 300 B.R. 355, 370 (Bankr. C.D. Ca. 2003). The most often cited example as the impetus for § 1114 was thesuspension of medical benefits to approximately 78,000 former employees by LTV Corporation after filing bankruptcy.5
12. Section 1114 was meant to be a protective mechanism for retiree benefits when an employer enters bankruptcy. Specifically, § 1114 provides an organized framework for the negotiation of retiree benefits between a debtor-employer and an authorized representative of the retirees. See 11 U.S.C. § 1114(f). If the debtor makes a proposal in accordance with § 1114(f) and that proposal is not accepted without good cause, the Court shall enter an order that provides for the modification of retiree benefits under certain limited circumstances. 11 U.S.C. § 1114(g) (emphasis added).
13. As previously mentioned, the sole issue before the Court is whether the Debtors' Coal Act obligations are "retiree benefits" subject to § 1114. The issues of whether (i) the Debtors can satisfy their obligations under § 1114(f); and (ii) modification of "retiree benefits"...
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