Unity Real Estate Co. v. Hudson

• Decision Date: 07 June 1995
• Docket Number: Civ. A. No. 93-1802.
• Citation: 889 F. Supp. 818
• Parties: UNITY REAL ESTATE CO., Plaintiff, v. Marty D. HUDSON, et al., Trustees of the UMWA Combined Benefit Fund, and Marty D. Hudson, et al., Trustees of the 1992 UMWA Benefit Plan, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

889 F. Supp. 818

UNITY REAL ESTATE CO., Plaintiff, v. Marty D. HUDSON, et al., Trustees of the UMWA Combined Benefit Fund, and Marty D. Hudson, et al., Trustees of the 1992 UMWA Benefit Plan, Defendants.

Civ. A. No. 93-1802.

United States District Court, W.D. Pennsylvania.

June 7, 1995.

Robert L. Eberhardt, Asst. U.S. Atty., Pittsburgh, PA.

Thomas A. Smock, David J. Laurent, Polito & Smock, Pittsburgh, PA.

Peter Buscemi, Dean C. Berry, Morgan Lewis & Bockius, Washington, DC.

David W. Allen, UMWA Health and Retirement Funds, Washington, DC.

John R. Mooney, Beins Axelrod Osborne, Washington, DC.

Ralph Finizio, Houston Harbaugh, Pittsburgh, PA.

Brian G. Kennedy, Dept. of Justice, Washington, DC.

OPINION AND ORDER

D. BROOKS SMITH, District Judge.

I. Introduction

This matter currently is before the Court on the motion of plaintiff Unity Real Estate Co. ("Unity") for a preliminary injunction (Docket No. 4). Unity seeks to restrain enforcement of the Coal Industry Retiree Health Benefit Act of 1992, Pub.L. 102-486, 106 Stat. 2776, 3036-56 (codified at 26 U.S.C. §§ 9701-9722) (the "Coal Act"), by the defendants, the Boards of Trustees of the UMWA Combined Benefit Fund and the 1992 UMWA Benefit Plan. Unity claims that the Coal Act, as applied, violates the Substantive Due Process and Takings Clauses of the Fifth Amendment.¹ In addition, Unity argues that the liabilities imposed upon it pursuant to the Act were done without procedural due process. Because Unity's challenges to the Coal Act are based on claims that the Act is unconstitutional, the United States has intervened in support of the Act's constitutionality.

Unity's motion was referred to Magistrate Judge Keith A. Pesto, pursuant to the Magistrates Act, 28 U.S.C. § 636(b)(1), and subsections 3 and 4 of Local Rule 72.1 for Magistrate Judges. On December 7, 1994, Magistrate Judge Pesto issued his Report and Recommendation, in which he rejected Unity's due process arguments, but recommended that an injunction issue based on his conclusion that the Coal Act, as applied to Unity, "effects an uncompensated taking, and is therefore unconstitutional." Docket No. 26, at 840.

Pursuant to 28 U.S.C. § 636(b)(1), all parties filed written objections to the Report and Recommendation. Unity objected to the conclusion that the Coal Act did not violate the substantive component of the Due Process Clause. The United States and the defendant Trustees objected to the Magistrate Judge's Takings Clause analysis, and also contended that he had improperly found irreparable harm based on financial injury alone. No party objected to the Magistrate Judge's conclusion that the procedural due process challenge to the Coal Act would not support the issuance of a preliminary injunction.² All of the parties filed supplemental evidentiary materials as well as extensive briefs in support of their objections to the Report and Recommendation.

On January 11, 1995, the Magistrate Judge issued an Amended Report and Recommendation. Docket No. 42. In the Amended Report and Recommendation, the Magistrate Judge considered the additional factual and legal submissions, and adhered to his original recommendation that "the Coal Act as applied to Unity is so palpably unconstitutional that a preliminary injunction should issue against the enforcement of the Act against it." Docket No. 42, at 841.

In response to the Amended Report and Recommendation, the parties again filed lengthy briefs.³ For the reasons set forth below, I agree with the Magistrate Judge's conclusions that the Coal Act, as applied to Unity, does not violate the Substantive Due Process Clause, but that the Act does effect an uncompensated taking in violation of the Fifth Amendment. Unity's request for a preliminary injunction shall be granted.

II. Findings of Fact

This Court, in large part, adopts the unchallenged findings of fact as set forth by the Magistrate Judge in his Report and Recommendation. Docket No. 26, at 836-837. Although the United States argues that it objects to certain of the Magistrate Judge's findings of fact (see Docket No. 46, at 2-3), those objections are more properly characterized as challenges to legal conclusions (e.g., whether certain beneficiaries should be considered "orphan retirees"; whether there exists any "employment connectedness" between Unity and the assigned beneficiaries).

Unity is a corporation owned by members of the Jamison family, and it owns a small commercial building and parking lot in Greensburg, Pennsylvania. Unity employs two individuals, an officer at a salary of $7,200 per year, and a janitor. Its annual gross revenues are approximately $50,000 and its net worth is approximately $85,000.

Unity was incorporated in 1947, and in 1969 was the surviving entity after a merger with three inactive coal companies: Stewart Coal & Coke, Penn View Coal, and South Union Coal Company. Like Unity, South Union was a Jamison family-owned company, which had incorporated in Pennsylvania in 1922. From 1922 through 1960, South Union operated at various times two coal mines in southwestern Pennsylvania and one mine in northern West Virginia. From 1961 until 1969 (when it merged with the other companies and became Unity), South Union mined no coal.

The parties appear to agree that Unity also is the statutory successor to two additional coal producers: Jamison Coal Company and Moremet Coal Company.

In 1974, Unity incorporated a wholly-owned subsidiary in West Virginia, also named South Union Coal Company, to reopen the mine formerly operated by the Pennsylvania-incorporated South Union. South Union (West Virginia) operated the mine in West Virginia formerly operated by South Union (Pennsylvania) from 1974 until 1981, when it went bankrupt.

South Union (Pennsylvania) was a member of the Northern West Virginia Coal Association, which was a signatory to the 1950, 1951, 1952, 1955, 1956, and 1959 National Bituminous Coal Wage Agreements ("NBCWA") through its membership in the Bituminous Coal Operators Association ("BCOA"). South Union (West Virginia) was a member of the Western Pennsylvania Coal Operators Association, a member of the BCOA, and thereby a signatory of the 1974, 1978, and 1981 NBCWAs. When South Union (West Virginia) went into bankruptcy in 1981, it petitioned for leave and was granted leave by the bankruptcy court to reject its obligations under the 1981 NBCWA.

In October 1993, Unity received a letter from the defendant Trustees of the Combined Fund informing Unity that it had been assigned 78 beneficiaries under the Coal Act for which it was obligated to pay a premium of $96,158.84 for the first partial year of operation of the Combined Fund — from February 1, 1993 to October 1, 1993. Unity was advised that for the second year, from October 1, 1993 to September 30, 1994, it was assigned 76 beneficiaries at a premium of $170,681.08. Payment of the premiums was to be made in monthly installments; failure to pay premiums on a timely basis subjects Unity to fines of up to $100/day per beneficiary. Unity does not have the cash on hand to pay even the first month's premium, and its net worth is less than its first year obligations.

Unity was assigned beneficiaries on the basis that the beneficiaries, or their deceased parents or spouses in the case of survivor beneficiaries, had last worked for South Union (Pennsylvania) or South Union (West Virginia) pursuant to a NBCWA.

III. The Coal Act

The constitutionality of the Coal Act has been carefully considered — and upheld — by a number of courts. See, e.g., In re Chateaugay Corp., 53 F.3d 478 (2d Cir.1995) (affirming district court's decisions upholding the constitutionality of the Coal Act and holding that LTV Steel's Chapter 11 bankruptcy protections did not operate to relieve it of its Coal Act obligations); Barrick Gold Exploration, Inc. v. Hudson, 47 F.3d 832 (6th Cir. 1995) (Coal Act does not violate Substantive Due Process Clause or Takings Clause to the extent that it fails to grant former operators refund, credit or offset for their contractual withdrawal liability payments and their transition rule payments); Templeton Coal Co. v. Shalala, 882 F.Supp. 799 (S.D.Ind.1995) (rejecting plaintiffs' constitutional challenges to the Coal Act and granting defendant's cross-motion for summary judgment); In re Blue Diamond Coal Co., 174 B.R. 722 (E.D.Tenn. 1994) ("super-reachback" provision of Coal Act not violative of Substantive Due Process or Takings Clauses).

"In passing the Coal Act, Congress removed the subject of health benefits for current UMW retirees from the collective bargaining process and dealt with it legislatively instead." Barrick, 47 F.3d at 834. The extensive political and social history which led to the passage of the Coal Act, set forth in detail in In re Chateaugay Corp., 53 F.3d at 480-86, is quite lengthy and will not be reiterated here. As Magistrate Judge Pesto succinctly put it: "Congress passed the Coal Act to spread the costs of UMWA benefit plans established and funded by the NBCWAs since 1950. Congress did this by imposing liability for the lifetime health (and other) benefits promised in the NBCWAs to members of the UMWA on entities that had previously signed NBCWAs but which were no longer currently operating under a NBCWA." Docket No. 26, at 837.

The "essential thrust of the Coal Act" was an attempt by Congress to address the financial crisis facing the health benefit plans for UMWA retirees — by identifying "persons most responsible" for "plan liabilities." In re Chateaugay, 53 F.3d at 485.

The Coal Act merged the existing 1950 and 1974 Benefit Trusts into a new private trust fund, the UMWA Combined Benefit Fund ("Combined Fund"). 26 U.S.C. § 9702. Only those retirees actually receiving benefits from the Benefit Trusts as of July 20, 1992, were declared eligible to receive benefits from the Combined Fund. Id., § 9703(f). In allocating financial responsibility for costs of the Combined Fund, C

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