Wheeling-Pittsburgh Steel Corp. v. Barnhart, CIV.A.5:99-CV-60.

• Decision Date: 29 March 2002
• Docket Number: No. CIV.A.5:99-CV-60.,CIV.A.5:99-CV-60.
• Parties: WHEELING-PITTSBURGH STEEL CORPORATION and W-P Coal, Plaintiffs, v. Jo Anne B. BARNHART, Commissioner, Social Security Administration, Defendant.
• Court: U.S. District Court — Northern District of West Virginia

Page 539

229 F.Supp.2d 539

WHEELING-PITTSBURGH STEEL CORPORATION and W-P Coal, Plaintiffs, v. Jo Anne B. BARNHART, Commissioner, Social Security Administration, Defendant.

No. CIV.A.5:99-CV-60.

United States District Court, N.D. West Virginia.

March 29, 2002.

COPYRIGHT MATERIAL OMITTED

Forest H. Roles, Mark E. Heath, Heenan, Althen & Roles, Charleston, WV, John R. Woodrum. Margaret S. Lopez, Heenan, Althen & Roles, Washington, DC, for plaintiffs.

Patrick M. Flatley, AUSA, U.S. Atty., Wheeling, WV, Richard G. Lepley, David W. Ogden, Youngje Lee, Joshua Z. Rabinovitz, Dept. of Justice, Civ. Div., Fed. Programs Branch, Washington, DC, for defendant.

MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFFS' MOTIONS FOR SUMMARY JUDGMENT AS TO COUNTS V AND VII, DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AS TO COUNTS V AND VII, GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AS TO COUNTS I, II, III AND XXI AND DENYING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT AS TO COUNTS I, II, III AND XXI

STAMP, District Judge.

I. Procedural History

Plaintiffs filed their complaint with this Court on May 20, 1999. On March 6, 2001, this Court granted plaintiffs' motion to amend the complaint and the first amended complaint was filed. On May 16, 2001, this Court issued an order granting the parties' joint motion for partial stay and briefing on Count VIII and Counts X through XX of the first amended complaint. On May 25, 2001, plaintiff filed a motion for partial summary judgment as to Counts I through V, VII and XXI. Defendant responded to plaintiffs' motion and filed its own cross-motion for summary judgment as to those counts. The cross-motions for summary judgment have been fully briefed by both parties.¹

After considering the parties' briefs and legal authorities on these issues, this Court finds that as to Counts I, II, III and XXI, plaintiffs' motion for summary judgment must be denied and summary judgment is granted in favor of the defendant as to those counts. As to Counts V and VII, defendant's motion for summary judgment must be denied and summary judgment is granted in favor of the plaintiffs as to those counts.

II. Facts

1. The Coal Act

The Coal Act is a detailed and complex act which has been analyzed by the United States Supreme Court and by the United States Court of Appeals for the Fourth Circuit. This Court will offer a brief history of the Act in this opinion but incorporates by reference the comprehensive analysis of the Act set forth by the Supreme Court in Eastern Enterprises v. Apfel, 524 U.S. 498, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998), and by the United States Court of Appeals for the Fourth Circuit in A.T. Massey Coal Co., Inc. v. Massanari, 153 F.Supp.2d 813 (E.D.Va.2001).

The United Mine Workers of America ("UMWA") and coal operators entered into a labor agreement in 1946 which created benefit funds to cover medical expenses for miners and their dependents. At that time, the proceeds from royalties on coal production funded the benefits. In 1950, the National Bituminous Coal Wage Agreement ("NBCWA") created a new fund. This new fund established a set amount of royalties to be used for the benefits. Subsequently, the Employee Retirement Income Security Act of 1974 ("ERISA") was enacted and, to comply with the Act, the UMWA and the Bituminous Coal Operators Association entered into a 1974 NBCWA. That agreement continued the coal operators' obligation to contribute fixed amounts of royalties for retiree benefits but the employers' liability did not extend beyond the term of the agreement.

This increase in benefits along with other factors created financial problems for the 1950 and 1974 plans. In response to the difficulty, the 1978 wage agreement obligated signatories to make sufficient contributions to maintain benefits as long as they were in the coal business. The plans continued to suffer financially and employers began to withdraw from the plans. This left those coal operators who remained to absorb the cost of covering retirees who were "orphaned."

In 1992, Congress passed the Coal Industry Retiree Health Benefits Act ("Coal Act"). That Act was aimed at identifying coal operators who were most responsible for the benefits of retirees and assigning the obligation of funding such benefits. The Coal Act merged the 1950 and 1974 plans into a new plan known as the United Mine Workers of America Combined Benefit Fund ("Combined Fund"). The Combined Fund is financed by premiums assessed against coal operators that signed any NBCWA or any other agreement requiring contributions to the 1950 or 1974 benefit plans. A signatory operator who is still in business is liable for the premiums but where a signatory is no longer in business, premiums may be assessed against persons related to the signatory. See 26 U.S.C. §§ 9706(a), 9701(c)(2)(A) and (7). It is the duty of the Commissioner of the Social Security Administration ("SSA") to calculate the premiums owed by each signatory operator based on the following formula:

[T]he Commissioner of Social Security shall, 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 employee 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.

Section 9704(a) requires that each assigned operator pay to the Combined Fund an annual premium for each assigned retiree and their dependents. It further provides that "[a]ny related person with respect to an assigned operator shall be jointly and severally liable for any premium required to be paid by such operator." 26 U.S.C. § 9704(a).

As noted, if the first priority signatory operator was not "in business" at the time of the assignment, the SSA is to determine if any person "related" to the signatory operator remained in business, provided, however, that the person must have been related to the signatory operator "as of July 20, 1992, except that if, on July 20, 1992, a signatory operator is no longer in business, the relationships shall be determined as of the time immediately before such operator ceased to be in business." 26 U.S.C. § 9701(c)(2)(B). "Related persons" is defined as follows:

(2) Related persons. (A) In general. A person shall be considered to be a related person to a signatory operator if that person is —

(i) a member of the controlled group of corporations (within the meaning of section 52(a)) which includes such signatory operator;

(ii) a trade or business which is under common control (as determined under section 52(b)) with such signatory operator; or

(iii) any other person who is identified as having a partnership interest or joint venture with a signatory operator in a business within the coal industry, but only if such business employed eligible beneficiaries, except that this clause shall not apply to a person whose only interest is as a limited partner.

A related person shall also include a successor in interest of any person described in clause (i), (ii), or (iii).

26 U.S.C. § 9701(c)(2)(A). A person is "in business" for purposes of the Coal Act "if such person conducts or derives revenue from any business activity, whether or not in the coal industry." 26 U.S.C. § 9701(c)(7).

If, in the final analysis, the SSA could not identify a signatory operator or related person still in business under the criteria in § 9706(a)(i)-(iii), the miner remained unassigned. To cover the cost of benefits for unassigned miners, Congress authorized annual transfer payments to be made from the Abandoned Mine Land Reclamation ("AML") Fund to the Combined Fund. See 26 U.S.C. § 9705(b); 30 U.S.C. § 1232(h). Should the AML Fund prove insufficient to cover these costs, the Coal Act provides that assigned operators will make up the difference on a pro rata basis. See 26 U.S.C. § 9704(d).

2. Eastern Enterprises v. Apfel

The Supreme Court of the United States was presented with the question of the constitutionality of the Coal Act in Eastern Enterprises v. Apfel, 524 U.S. 498, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998). The case produced a plurality opinion in which five justices agreed that the Coal Act, as applied to Eastern Enterprises, was unconstitutional, though they did so for different reasons. Four justices found that the Coal Act, as applied to Eastern Enterprises, was constitutional.

In that case, the plaintiffs were assigned retirees for whose benefits they were responsible. Eastern Enterprises, 524 U.S. 498, 118 S.Ct. 2131. Eastern Enterprises was involved in coal mining operations until 1965 and was a signatory to each NBCWA executed between 1947 and 1964. See id. at 516, 118 S.Ct. 2131. In 1963, Eastern Enterprises transferred all coal-related operations to Eastern Associated Coal Company ("EACC"), a subsidiary. See id. Eastern Enterprises retained its stock in EACC and received dividends through a subsidiary, Coal Properties Corporation ("CPC"), until 1987. See id. At that point, Eastern Enterprises sold all of its interests in CPC to Peabody Holding Company, Inc. ("Peabody"). See id. Under the transfer agreement, Peabody, CPC and EACC all assumed responsibility for payments to...