Shenango Inc v. Comm Social Security , 307 F.3d 174 ( 2002 )

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
9-24-2002
Shenango Inc v. Comm Social Security
Precedential or Non-Precedential: Precedential
Docket No. 00-2525
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PRECEDENTIAL
Filed September 24, 2002
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 00-2525
SHENANGO INCORPORATED; STELCO USA, INC.;
STELCO COAL COMPANY; MUELLER INDUSTRIES, INC.,
Appellants
v.
KENNETH S. APFEL, COMMISSIONER OF SOCIAL
SECURITY; MICHAEL H. HOLLAND; WILLIAM P.
HOBGOOD; MARTY D. HUDSON; THOMAS O.S. RAND;
ELLIOT A. SEGAL; CARL E. VANHORN; GAIL R.
WILENSKY, Trustees of the United Mine Worker of
America Combined Benefit Fund
On Appeal from the United States District Court
for the Western District of Pennsylvania
(Civil Action No. 99-1035)
District Judge: Hon. Robert J. Cindrich
Argued: September 19, 2001
Before: SLOVITER, NYGAARD and McKEE, Circuit Judges.
(Filed: September 24, 2002)
DAVID J. LAURENT, ESQ.
(Argued)
Babst, Calland, Clemens and
Zomnir, P.C.
Two Gateway Center
Pittsburgh, PA 15222
Attorney for Appellants
PETER BUSCEMI, ESQ.
(Argued)
Morgan, Lewis & Bockius LLP
1111 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
JOHN R. MOONEY, ESQ.
ELIZABETH A. SAINDON, ESQ.
Mooney, Green, Gleason,
Baker, Gibson & Saindon, P.C.
1920 L. Street, N.W., Suite 400
Washington, D.C. 20036
DAVID W. ALLEN, ESQ.
Office of the General Counsel
UMWA Health and Retirement
Funds
2121 K. Street, N.W.
Washington, D.C. 20037
Attorneys for Appellees, Trustees
of the UMWA Combined Benefit
Funds
DAVID W. OGDEN, ESQ.
Assistant Attorney General
HARRY LITMAN, ESQ.
United States Attorney
MARK B. STERN, ESQ.
JEFFREY CLAIR, ESQ. (Argued)
Attorneys, Civil Division
Room 9536, Department of Justice
601 "D" Street, NW
Washington, D.C. 20530
Attorneys for the Federal Appellee,
Commissioner of Social Security
OPINION OF THE COURT
McKEE, Circuit Judge.
Shenango, Inc., Stelco USA, Inc., Stelco Coal Co. and
Mueller Industries (hereinafter collectively referred to as the
"Companies") challenge the Commissioner of Social
Security’s assignment of responsibility for health care
2
premiums of approximately 70 retired miners and their
qualified dependents pursuant to the Coal Industry Retiree
Health Benefit Act of 1992 (the "Coal Act"), 26 U.S.C.
SS 9701-9722. The Companies argue that the Act is
unconstitutional as applied to them pursuant to Eastern
Enterprises v. Apfel, 524 U.S. 498 (1988). For the reasons
that follow, we conclude that the assignments are not
unconstitutional as applied, and that the district court did
not err in dismissing the Companies’ challenge to the
assignments. However, before we explain our reason, it will
be helpful to explain the historical background and context
of this dispute.
I. THE COAL ACT
The Coal Act was enacted in 1992 "to ensure that retired
coal miners and their dependents would continue to receive
the health and death benefits they had been receiving since
the 1940s pursuant to a series of collective bargaining
agreements." Anker Energy Corp. v. Consolidation Coal Co.,
177 F.3d 161, 163-64 (3d Cir. 1999). Because the origins
and history of the Coal Act are set forth in great detail in
the Supreme Court’s opinion in Eastern Enterprises, as well
as in our opinions in Unity Real Estate v. Hudson, 178 F.3d
649 (3d. Cir. 1999), and Anker Energy, we need not repeat
it here. Rather, we offer the following narrative from our
opinion in Anker Energy as background for our analysis:
In 1947, the United Mine Workers of America
("UMWA") and the Bituminous Coal Operators’
Association ("BCOA") agreed upon the first of a series of
National Bituminous Coal Wage Agreements ("NBCWA"
or "wage agreement"), which specified the terms and
conditions of employment and provided health and
pension benefits for miners. The 1947 NBCWA
established the United Mine Workers of America
Welfare and Retirement Fund [W&R Fund], which used
the proceeds of a royalty on coal production to provide
pension and medical benefits for miners and their
families. The 1947 NBCWA did not specify the benefits
to which miners and their families were entitled,
instead leaving this task to three trustees in charge of
the Fund. In 1950 the union and the industry
3
association agreed upon a new NBCWA that created a
new Fund financed by a per ton levy on coal mined by
signatory operators. Like the 1947 Fund, the 1950
version did not promise specific benefits, and the
benefits were always subject to cancellation or change.
This system did not change significantly until 1974
when, to comply with the newly enacted [Employee
Retirement Income Security Act], the UMWA and the
BCOA negotiated a new wage agreement that created
four trusts funded by royalties on coal production and
premiums based on hours worked by miners. Under
the new agreement, the 1950 Benefit Plan covered
miners who retired before January 1, 1976, and their
dependents, while the 1974 Benefit Plan covered
miners who retired after 1975 and their dependents.
Both Plans provided nonpension benefits, including
medical benefits.
The 1974 NBCWA explained that it was amending the
previous system to provide health benefits for retired
miners "for life," and to their widows until death or
remarriage. Because of this broadened coverage the
number of eligible benefit recipients increased
dramatically, and the Plans began losing money.
In response, the 1978 NBCWA assigned responsibility
to signatory employers for the health care of their own
active and retired employees. The 1978 agreement also
restricted the 1974 Plan so that it would provide health
benefits only for "orphaned" retirees, those whose last
employer had gone out of business or otherwise ceased
contributing to the Plans. To ensure the Plans’
solvency, the 1978 NBCWA included a "guarantee"
clause that obligated signatories to make sufficient
contributions to maintain benefits during that
agreement, and the union and operators amended the
Plans to include "evergreen clauses" that required
signatories to contribute to the Plans if they remained
in the coal business even if they never signed another
wage agreement.
Despite the 1978 NBCWA and subsequent attempts
to improve the Plans, they continued to lose money
4
because of the increase in beneficiaries, the escalating
costs of health care, and the flood of signatory
companies abandoning the Plans. In 1992 Congress
responded by passing the Coal Act.
177 F.3d at 164-165.
In enacting the Coal Act, Congress declared that the Act
was intended to remedy problems with funding retiree
health benefits in the coal industry, to allow for sufficient
operating assets for the health benefit plans, and to provide
for the continuation of a privately funded and self-sufficient
program for the delivery of health care benefits to retired
miners and their dependents. Pub.L. No. 102-486,
S 19142(b), 106 Stat. 3036, 3037 (1992), 26 U.S.C. S 9701
note. Accordingly, the Act required certain benefit plans
previously established under the UMWA collective
bargaining agreements to be merged into a new plan-- the
United Mine Workers of America Combined Benefit Fund.1
26 U.S.C. S 9702(a). The Combined Fund provides health
and death benefits to retired coal miners and dependents
who, as of July 20, 1992, were eligible to receive, and were
receiving, benefits under the UMWA 1950 or 1974 benefit
plans. 26 U.S.C. SS 9703(a), (b)(1), (c), (e) & (f). Benefits paid
through the Combined Fund are funded in part by
premiums imposed on "signatory coal operators," i.e.,
certain coal operators that employed an eligible beneficiary
and had signed a collective bargaining agreement between
the UMWA and BCOA, a multiemployer group of coal
producers, or other "related persons" connected to the
_________________________________________________________________
1. The Combined Fund is one of three components formulated by
Congress to achieve the purposes of the Coal Act. The second component
is the mandated continuation of individual employer health plans
maintained by signatories to the 1978 and later NBCWAs. 26 U.S.C.
S 9711. The third component is the 1992 Plan which provides benefits
for persons who, but for the enactment of the Coal Act, would have been
eligible to receive benefits from the UMWA 1950 or 1974 benefit plans,
but who are not eligible for benefits from the Combined Fund. It also
provides benefits for persons who are entitled to receive benefits directly
from their former employers but who do not in fact receive such benefits.
26 U.S.C. S 9712. The second and third components are not implicated
in this appeal. We are only concerned with the Combined Fund.
5
signatory operator by common ownership or control. See 26
U.S.C. SS 9701(c)(1) & (c)(2), 9704, 9706.
The Act directs the Commissioner of Social Security 2 to
assign each individual beneficiary to one of these signatory
coal operators or its "related person." The assignment is
determined by the length of the beneficiary’s service, the
date of service, and whether the employer signed national
collective bargaining agreements with the UMWA in 1978 or
later. 26 U.S.C. S 9706(a). The Act establishes a three tier
mechanism for making assignments that we have described
as the "linchpin" of the Coal Act’s statutory scheme. Unity
Real Estate Co. v. Hudson, 178 F.3d at 654. The Act
provides in relevant part:
(a) In general.--For purposes of this chapter, the
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
employ 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
_________________________________________________________________
2. Originally, the Coal Act provided that the Secretary of Health and
Human Services would be responsible for the assignment of Combined
Fund beneficiaries. The Secretary delegated this task to the
Commissioner of Social Security. In 1994, Congress transferred the
statutory responsibility directly to the Commissioner. See Social Security
Independence and Program Improvements Act of 1994, Pub.L.No. 10-3-
296, SS 105(a)(2)(A), 108(h)(9)(A), 108 Stat. 1472, 1487-88 (1994).
6
(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.
26 U.S.C. S 9706(a)(1), (2) & (3). Once the Commissioner
makes the assignment under S 9706, the assignee must
then pay the annual premiums to the Combined Fund
based on the amounts required to provide health and death
benefits for the assigned beneficiaries.
If a miner or his3 dependents cannot be assigned under
this scheme, his benefits are funded by either asset
transfers from one of the Combined Fund’s predecessor
benefit plans, see 26 U.S.C. S 9705(a)), transfers from the
U.S. Treasury’s Abandoned Mine Land Reclamation Fund,
see 26 U.S.C. S 9705(b), 30 U.S.C. S 1232(h); or, if those
sources are insufficient or unavailable, an additional
unassigned -- or "orphaned" -- retiree premium that the
Act imposed on all signatory operators. See 26 U.S.C.
SS 9704(d), 9705(a)(3)(B), 9705(b)(2).
The Coal Act also contains several provisions that, taken
together, treat a commonly controlled group of related
corporations as a single employer for purposes of liability
under the statute. Pursuant to those provisions, the
original employer and a wide range of affiliated companies
or successors are potentially liable for premiums on miners’
benefits under the Act. The Commissioner can assign
responsibility for paying premiums for a miner’s benefits
either to a mine operator that actually employed an eligible
beneficiary and signed a collective bargaining agreement
between the UMWA and the BCOA ("signatory operator"), or
to any "related person." 26 U.S.C. S 9706(a). The Act defines
_________________________________________________________________
3. Inasmuch as it is highly unlikely that any women were employed as
miners during the relevant period, we will use the masculine pronouns
in referring to all miners.
7
"related person" to include all members of a commonly
controlled group of corporations including the signatory,
other businesses under common control with the signatory,
and subsequent successors in interest to any of those
affiliated entities. 26 U.S.C. S 9701(c)(2)(A)). A "controlled
group" is in turn defined as a group of companies in which
a common parent or concentration of individual economic
interests owns or controls more than 50% of each of the
affiliated companies. See 26 U.S.C. S 9701(c)(2)(A),
incorporating by reference 26 U.S.C. S 52(a) & (b), which in
turn incorporates by reference 26 U.S.C. S 15563(a). The
determination of which entities are "related persons" under
the Coal Act turns on an entity’s status with regard to the
miner or the miner’s employer as of July 20, 1992. 26
U.S.C. S 9701(c)(2)(B).
"Related persons" have broad and shared responsibility
for premiums. Under the Act, any company within the
commonly controlled group may be treated as having
employed a related signatory’s miners. 26 U.S.C.S 9706(b).
In addition, related persons are "jointly and severally liable
for any premium required to be paid" by its affiliated
signatory operator. 26 U.S.C. S 9704(a). Congress
instructed the Commissioner to promptly assign miners to
various companies according to this three tiered scheme
promptly after the Coat Act’s 1992 enactment. The statute
states: "For purposes of this chapter, the Commissioner of
Social Security shall, before October 1, 1993, assign each
coal industry retiree who is an eligible beneficiary to a
signatory operator . . . ." 26 U.S.C. S 9706(a).
II. THE COMMISSIONER’S ORIGINAL ASSIGNMENTS
The Companies were collectively assigned responsibility
for premiums for approximately 70 miners and qualifying
dependents pursuant to the third tier of the assignment
scheme. 26 U.S.C. S 9706(a)(3). The Companies did not
employ any of the miners thus assigned. Rather, the
Commissioner assigned the miners based upon the
Companies’ relationships to other entities that had
employed the miners.4
_________________________________________________________________
4. The exact relationship between each plaintiff and its related entities is
as follows:
8
The Commissioner originally assigned liability on the
grounds that the Companies were "related" to a now-
defunct employer that had signed a pre-1974 NBCWA.
Specifically, Mueller was assigned liability with respect to
employees of Joanne Coal because Joanne Coal signed a
1964 wage agreement. Then, Joanne Coal merged with
Sharon Steel which subsequently merged with Mueller.
Shenango received assignments with respect to employees
of Lucerne Coke, an employer that signed a 1971 wage
agreement and later merged with Shenango. Stelco USA
and Stelco Coal received assignments with respect to
employees of Mather Colliers because Mather signed a 1959
wage agreement. Stelco Coal mined coal under the name of
"Mather". Stelco USA and Stelco Coal are commonly owned.
The Commissioner’s assignments to Stelco Coal and
Shenango were made before October 1, 1993. The
assignments to Mueller Industries, Inc., were made
sometime after that date.
The Companies concede that they are "related persons"
as defined in the Act, 26 U.S.C. S 9701(c)(2)(A). They
_________________________________________________________________
Shenango merged with Lucerne Coke Co. sometime after 1971.
Lucerne last signed an NBCWA in 1971. That agreement expired in
November, 1974. Lucerne employed the miners assigned to Shenango,
but Lucerne is no longer in business. However, as of July 20, 1992,
Shenango was related, via its parent company, to Aloe Coal Co. which
signed NBCWAs in 1974 and later.
Stelco Coal Co. mined coal under the name of Mather Collieries, which
permanently ceased operating sometime before 1964. Stelco USA, Inc., is
commonly owned with Stelco Coal Co. Mather signed several NBCWAs.
It signed the last one in 1959. Mather employed the miners assigned to
Stelco Coal and Stelco USA. As of July 20, 1992, Stelco Coal and Stelco
USA were related to Pikeville Coal Company, which signed the 1974 and
subsequent NBCWAs.
In December, 1980, Mueller Industries, Inc., merged with Sharon Steel
Corp., Sharon had previously merged with Joanne Coal Co., and Joanne
Coal continued mining until approximately 1969. Joanne Coal last
signed a NBCWA in 1964. Joanne Coal employed the miners assigned to
Mueller. As of July 20, 1992, Mueller was related to Carpentertown Coal
& Coke Co., and to United States Fuel Co. Carpentertown Coal signed
the 1978 NBCWA and later NBCWAs.
9
concede that they are related to the coal companies that
actually employed the miners assigned to the Companies,
signed pre-1974 NBCWAs and that are now out of
business. They also concede that they are related to the
coal companies that employed an entirely different set of
miners and that signed post-1974 NBCWAs. The
Companies differentiate between these two groups by
referring to them as "Pre-1974 Signatories" and "Post-1974
Signatories."
III. EASTERN ENTERPRISES AND THE
COMMISSIONER’S RESPONSE
As is often the case under the Coal Act, the challenge to
the Commissioner’s assignments here rests in large part
upon our interpretation of Eastern Enterprises . The Court
there considered the constitutionality of the Coal Act as
applied to Eastern. That company had mined coal until
1965, and signed every NBCWA from 1947 until 1964. The
Commissioner assigned Eastern liability for over 1000
miners pursuant to 26 U.S.C. S 9706(a)(3), based upon
Eastern’s status as the pre-1978 signatory operator for
whom the miners had worked the longest. The total liability
for those assignments was estimated to be between $50
and $100 million. Eastern sued claiming that S 9706(a)(3)
was unconstitutional as applied to it because the Act’s
imposition of liability violated the Due Process and Takings
Clauses of the Fifth Amendment.
A four-justice plurality of the Supreme Court agreed that
the Act violated the Takings Clause as applied to Eastern
Enterprises. Eastern Enterprises, 524 U.S. at 537. While
recognizing that a takings analysis is "essentially ad hoc
and fact intensive," the plurality nonetheless identified
three factors that are usually significant to assessing a
Takings challenge under the Fifth Amendment: "the
economic impact of the regulation, its interference with
investment backed expectations, and the character of the
governmental action." Id. at 523-524 (quoting Kaiser Aetna
v. United States, 444 U.S. 164, 175 (1979)). The plurality
then reviewed cases involving legislative schemes similar to
the Coal Act; viz., the Black Lung Benefits Act and the
Multiemployer Pension Plan Amendments Act ("MPPAA")
10
which was enacted to supplement the Employee Retirement
Income Security Act ("ERISA"). The justices concluded that
those cases established:
Congress has considerable leeway to fashion economic
legislation, including the power to affect contractual
commitments between private parties. Congress may
also impose retroactive liability to some degree,
particularly where it is confined to short and limited
periods required by the practicalities of producing
national legislation. Our decisions, however, have left
open the possibility that legislation might be
unconstitutional if it imposes severe retroactive liability
on a limited class of parties that could not have
anticipated the liability, and the extent of that liability is
substantially disproportionate to the parties’ experience.
Id. at 528-529 (citation and internal quotations omitted)
(emphasis added).
Applying these principles to Eastern Enterprises, the
plurality first focused on the economic impact of the Act
and found that it placed a "considerable financial burden"
on that company. Id. at 529. The financial burden was not
a "permanent physical occupation of Eastern’s property of
the kind [usually] viewed as a per se taking[.]" However, the
plurality noted that the Court’s decisions upholding the
MPPAA "suggest that an employer’s statutory liability for
multiemployer pension plans should reflect some
proportionality to its experience with the plan." Id. at 530
(citation and internal quotations omitted). The plurality
concluded that this proportionality was lacking insofar as
the Coal Act was applied to Eastern. Eastern had
contributed to the 1947 and 1950 W&R Funds, but"it [had]
ceased it coal mining operations in 1965 and neither
participated in negotiations nor agreed to make
contributions in connection with the 1974, 1978, or
subsequent NBCWAs." Id. This was significant because
those latter agreements were the "first [to] suggest an
industry commitment to funding lifetime health benefits for
both retirees and their family members." Id . Thus, because
Eastern had neither contemplated liability for lifetime
benefits to miners nor contributed to the miners’
expectations of lifetime benefits, the plurality found that
11
"the correlation between Eastern and its liability to the
Combined Fund is tenuous, and the amount assessed
against Eastern resembles a calculation made in a
vacuum." Id. at 531 (citation and internal quotations
omitted).
The assignments to Eastern faired no better when the
plurality considered the second and third factors it had
culled from the Court’s Takings Clause jurisprudence. The
Act’s "substantial and particularly far reaching" retroactivity5
interfered with Eastern’s reasonable investment backed
expectations. Id. at 534. The plurality reasoned that a coal
industry employer could not have contemplated liability for
lifetime benefits to miners until those provisions were
included in the 1974 NBCWA. Therefore, "the Coal Act’s
scheme for allocation of Combined Fund premiums[was]
not calibrated either to Eastern’s past actions or to any
agreement -- implicit or otherwise -- by the company." Id.
at 536. Finally, the plurality found that the "nature of
governmental action . . . is quite unusual," and"implicates
fundamental principles of fairness underlying the Takings
Clause," because it "singles out certain employers to bear a
burden that is substantial in amount, based on the
employers’ conduct far in the past, and unrelated to any
commitment that the employers made or to any injury they
caused." Id. at 537.
Inasmuch as each of the three factors weighed against
sustaining the "taking," the plurality concluded that the
assignment to Eastern under the Act was unconstitutional.
Justice Kennedy, who provided the fifth vote striking
down the application of the Act as to Eastern, disagreed
with the plurality’s analysis, but found that the Act’s
retroactivity violated due process. Id. at 539-50. He applied
an "arbitrary and irrational" standard of review, Id. at 547,
_________________________________________________________________
5. Coal Act assignments operate retroactively because they require an
assignee to use current funds to provide benefits for miners after the
assignee believed its liability to the miners had been settled. See Eastern
Enterprises, at 534 (O’Connor, J.) ("[T]he Coal Act operates retroactively,
divesting Eastern of property long after the company believed its
liabilities under the 1950 W&R Fund to have been settled.").
12
and focused on the fact that Eastern Enterprises had not
signed a 1974 or later NBCWA. He concluded:
Eastern was once in the coal business and employed
many of the beneficiaries, but it was not responsible
for their expectation of lifetime benefits or for the
perilous condition of the 1950 and 1974 plans which
put the benefits in jeopardy. As the plurality discusses
in detail, the expectation was created by promises and
agreements made long after Eastern left the coal
business. Eastern was not responsible for the resulting
chaos in the funding mechanism caused by other coal
companies leaving the framework of the National
Bituminous Coal Wage Agreement. This case is far
outside the bounds of retroactivity permissible under our
law.
Id. at 550 (emphasis added).
The four dissenting justices agreed with Justice Kennedy
that the application of the Act did not violate the Takings
Clause, but disagreed with his view that the Act violated
due process. Id. at 556-67.
We have previously noted the "splintered nature" of the
Court’s decision, and remarked that it is "difficult to distill
a guiding principle from Eastern." Unity Real Estate Co.,
178 F.3d at 658. However, as recited above, both the
plurality and Justice Kennedy focused on one fact which
each considered significant. The 1974, 1978 and
subsequent NBCWAs were the first wage agreements
containing a commitment to fund lifetime health benefits
for retired miners and their dependents. Eastern
Enterprises had not signed either the 1974 or the 1978
NBCWAs. Therefore, it could not have contemplated
contributing to the miners’ expectation of lifetime health
benefits. See Anker Energy Corp. v. Consolidation Coal Co.,
177 F.3d at 172 ("[A]nalysis of the decisions in Eastern
Enterprises leads us to the conclusion that a majority of the
Court would find the Act unconstitutional when applied to
an employer that did not agree to the 1974 or subsequent
NBCWAs, while application of the Act to a signatory to the
1974 or subsequent wage agreement would be an entirely
different matter."); see also, Association of Bituminous
13
Contractors, Inc. v. Apfel, 156 F.3d 1246, 1257 (D. C. Cir.
1998)("The clear implication of each opinion in Eastern
Enterprises is that employer participation in the 1974 and
1978 agreements represents a sufficient amount of past
conduct to justify the retroactive imposition of Coal Act
liability (for the dissenting justices, of course, such
participation is not even necessary")).
After Eastern Enterprises, the Commissioner undertook a
comprehensive review of all assignments that had
previously been made under S 9706(a)(3), including those
made to the Companies. The Commissioner reasoned that,
under Eastern Enterprises, if neither the original employer
nor related persons had signed the 1974 or later NBCWAs,
the assignment could not be distinguished from Eastern
Enterprises. Accordingly, the Commissioner, on his own
initiative, voided hundreds of assignments that were based
solely on an employer or related person’s participation in a
pre-1974 NBCWA.
However, the Commissioner also concluded that Eastern
Enterprises allowed miners to be assigned to coal
companies that where part of a controlled group of
corporations that included entities that had signed post-
1974 NBCWAs. These assignments were deemed to be
materially different from the assignments in Eastern
Enterprises. The plaintiff in Eastern was not statutorily
related to another company that had signed 1974 and later
NBCWAs. The Commissioner therefore concluded that
Eastern did not address circumstances in which the
assignee is related to both the original employer and
another, affiliated company that signed collective
bargaining agreements promising lifetime care. Accordingly,
the Commissioner rejected the Companies’ requests to
vacate their assignments of the miners employed by the
Pre-1974 Signatories.
IV. DISTRICT COURT PROCEEDINGS
On June 30, 1999, the Companies filed a five Count
complaint against the Commissioner and the Trustees of
the Combined Fund. In Count I, the Companies alleged that
the Commissioner’s refusal to vacate the Coal Act
14
assignments of liability for miners employed by the Pre-
1974 Signatories was unlawful under Eastern Enterprises.
In Counts II and III, the Companies alleged that the Coal
Act violates the Takings and Due Process Clauses of the
Fifth Amendment as it applies to them. In Count IV, the
Companies challenged the Commissioner’s authority to
make any assignments after September 30, 1993. In Count
V, the Companies argued that because the Commissioner’s
assignments should be vacated for the reasons stated in
the preceding four Counts, the Combined Fund is obligated
to return all premium payments together with interest.
After engaging in an excellent and well-reasoned analysis,
the district court granted the Commissioner’s motion to
dismiss Counts I through IV. Thereafter, the parties
submitted their Joint Statement of Position informing the
district court that the parties agreed that, given its
dismissal of Counts I through IV, Count V was moot.
Accordingly, the district court dismissed Count V as moot,
and this appeal followed.6
V. DISCUSSION
The Companies assert two basic arguments. First, they
argue that their position is essentially identical to the
position of the plaintiff in Eastern Enterprises insofar as the
Pre-1974 Signatories are concerned. The Companies claim
that the Commissioner therefore violated the Due Process
Clause in assigning them miners employed by the Pre-1974
Signatories. Second, they argue that the Commissioner
exceeded his authority under S 9706(a) because he made
some assignments after October 1,1993; the "cutoff" that
Congress mandated in the Act. We will address each
argument separately.
_________________________________________________________________
6. We review de novo the district court’s decision as to the
constitutionality of the Coal Act as applied to the Companies. Anker
Energy Co. v. Consolidation Coal Co., 177 F.3d at 169. Although the
district court granted the Commissioner’s motion to dismiss under Fed.
R. Civ. P. 12(b)(6), the parties apparently submitted documents outside
the pleadings themselves; therefore the appropriate standard of review is
the same as that for a motion for summary judgment, i.e., plenary
review. Smith v. Johns-Manville Corp., 795 F.2d 301, 306 (3d Cir. 1986).
15
A. Are the Companies in a Substantially Identical
Position to Eastern Enterprises?
As noted earlier, no single rationale emerges from the
decision in Eastern Enterprises. Accordingly, " ‘the holding
of the Court may be viewed as that position taken by those
Members who concurred in the judgment on the narrowest
grounds.’ " Marks v. United States, 430 U.S. 188, 193
(1977)(quoting Gregg v. Georgia, 428 U.S. 153, 169 n.15
(1976)). The Marks rule is only applicable where "one
opinion can be meaningfully regarded as ‘narrower’ than
another" and can "represent a common denominator of the
Court’s reasoning." Rappa v. New Castle County, 18 F.3d
1043, 1057 (3d Cir. 1994)(quoting King v. Palmer , 950 F.2d
771, 781 (D.C. Cir. 1991)(en banc). "[W]here approaches
differ, no particular standard is binding on an inferior court
because none has received the support of a majority of the
Supreme Court." Anker Energy Corp., at 170 (citing Rappa
v. New Castle County, 18 F.3d at 1058).
In Unity Real Estate, we stated that "Justice Kennedy’s
substantive due process reasoning is not a ‘narrower’
ground that we might take to constitute the controlling
holding." 178 F.3d at 658. Consequently, the only binding
aspect of the fragmented decision in Eastern Enterprises is
its "specific result," i.e., the Act is unconstitutional as
applied to Eastern Enterprises. Anker Energy Corp., at 170
(citing Association of Bituminous Contractors, Inc. v. Apfel,
156 F.3d 1246, 1255 (D.C. Cir. 1998)). Or, as we said in
Unity Real Estate: "Eastern . . . mandates judgment for the
plaintiffs only if they stand in a substantially identical
position to Eastern Enterprises with respect to both the
plurality and Justice Kennedy’s concurrence." 7 178 F.3d at
659.
Earlier, we noted that the Companies concede that under
the Coal Act, they are "related persons" to two sets of
entities, which they call the "Pre-1974 Signatories" and the
"Post-1974 Signatories." Because of their"related person"
_________________________________________________________________
7. We also held in Unity Real Estate that because of the concurrence and
dissent in Eastern Enterprises, "we are bound to follow the five-four vote
against the takings claim. . . ." 178 F.3d at 659; see also Anker Energy
Corp., at 170 n.3.
16
status to the Post-1974 Signatories, the Companies were
assigned premium liability for miners employed by the Pre-
1974 Signatories.
The Companies concede that any assignments of Coal Act
liability based on their status of being related persons to
Post-1974 Signatories are constitutionally valid. Companies’
Br. at 8. However, the Companies argue that they"stand in
a substantially identical position to Eastern [regarding the
pre-1974 Signatories] because, as in Eastern , all of the
disputed miners worked for signatory operators who last
signed [NBCWAs] before 1974." Id. at 9. In the Companies’
view, the Pre-1974 Signatories and the Post-1974
Signatories are two discrete sets of entities that must be
viewed differently under Eastern Enterprises. Therefore,
according to the Companies, the constitutionality of the
Coal Act as applied to any particular member of a
controlled group of corporations depends upon whether the
particular member signed a 1974 or later NBCWA, not
upon whether any other member of the group did so. The
Companies rely upon our decision in Unity Real Estate in
claiming that their substantial identity to the Pre-1974
Signatories places them (the Companies) in the shoes of
Eastern Enterprises, and the Commissioner’s assignments
of the miners employed by the Pre-1974 Signatories was
therefore unconstitutional as to them.
The Companies make no other constitutional challenge to
the assignments regarding the Pre-1974 Signatories.
Therefore, their "as applied" constitutional challenge turns
on whether they are in a "substantially identical position to
Eastern Enterprises" with regard to assignments of the Pre-
1974 Signatories. We hold that the circumstances here are
not substantially equivalent to the circumstances in
Eastern Enterprises, and the Commissioner’s assignment of
the Pre-1974 Signatories was therefore not a violation of the
Fifth Amendment. A closer examination of Eastern
Enterprises shows why.
Eastern Enterprises began operations in 1929 and it
mined coal in West Virginia and Pennsylvania until 1965.
Eastern, 524 U.S. at 516. In that capacity, it was a
signatory to each NBCWA executed between 1947 and 1964
and made contributions of over $60 million to the 1947 and
17
1950 welfare and retirement funds. Id. In 1963, Eastern
decided to spin-off its coal operations to a subsidiary,
Eastern Associated Coal Corp. ("EACC"). Id. The spin-off
was completed by 1965, but Eastern retained its stock
interest in EACC through a subsidiary corporation, Coal
Properties Corp. ("CPC") until 1987, and it received
dividends of more than $100 million from EACC during
that period. Id.
After 1965, Eastern ceased coal mining operations and
was not a signatory to the 1974 NBCWA, (which, as noted,
was the first wage agreement to suggest an industry-wide
commitment to funding lifetime health benefits to miners
and their dependents), or to any subsequent NBCWAs. Id.
at 530. EACC signed the 1974 NBCWA as well as
subsequent ones. However, in 1987, Eastern sold its
interest in CPC to Peabody Holding Co., Inc. Id . at 516. As
a consequence of that sale to that unrelated, third party,
Eastern had divested itself of all of its interests in its EACC
subsidiary five years before the enactment of the Coal Act.
After the enactment of the Coal Act, the Commissioner
assigned Eastern the obligation for Combined Fund
premiums for over 1,000 retired miners who had worked for
Eastern before 1966, based on Eastern’s status as the pre-
1978 signatory operator for whom the miners had worked
the longest as prescribed by S 9706(a)(3). Id. at 517.
Eastern was not assigned responsibility for any miners who
had been employed by EACC. Id. at 530.
From this recitation of the facts in Eastern, it is obvious
that the Companies are not in a "substantially identical
position to Eastern." Eastern was assigned premium
liability under the Coal Act solely because it employed the
assigned miners. Inasmuch as Eastern never signed a wage
agreement committing to lifetime health benefits, it could
not be charged with the cost of furnishing those benefits.
See Id. at 531 ("The company’s obligations under the Act
depend solely on its roster of employees some 30 to 50
years before the statute’s enactment, without any regard to
responsibilities that Eastern accepted under any benefit
plan the company itself adopted."). Eastern did not involve
liability under the Coal Act’s "related person" provisions. In
contrast, the Companies’ liability here arises from their
18
relationship to "related person" subsidiaries that signed a
NBCWA in 1974 or thereafter. The Commissioner concluded
that the nexus between the Companies and those related
parties was sufficient to assign liability for miners’ lifetime
benefits even though none of the Companies signed a wage
agreement obligating them to do so.
The Companies attempt to find shelter under the
umbrella of Eastern Enterprises by stressing that Eastern
also had a subsidiary, EACC, that signed a post-1974
NBCWA, and arguing that Eastern’s relationship with EACC
was not sufficient to sustain the Commissioner’s
assignments of Coal Act liability to Eastern. Companies’ Br.
at 15-16. However, that argument ignores a critical
distinction. Eastern divested itself of EACC in 1987, five
years before the enactment of the Coal Act. The Coal Act
provides that where ostensibly related companies remain in
business, the question of whether they are "related
persons" within the meaning of the statute is determined
with respect to their relationship as of a date shortly before
the Act’s enactment -- July 20, 1992. 26 U.S.C.
S 9701(c)(2)(B). Because Eastern sold EACC before that
date, EACC was not a "related person" to Eastern under the
Act. Therefore, premium liability could not have been
imposed on Eastern as a related person to EACC.
We have twice before held that liability based upon the
Act’s related person provisions removes an assignee from
the shelter of Eastern Enterprises. In Unity, we upheld the
constitutionality of the Coal Act as applied to a company
that was a related person to both a pre-1974 NBCWA
signatory and a post-1974 signatory. At the time the
Commissioner made the premium assignments, Unity Real
Estate Company was a small corporation closely-held by
members of the Jamison family. Unity owned only a small
commercial building and a parking lot. It never mined coal
and never signed a coal wage agreement. Nonetheless, the
assignments to it were valid under the Coal Act because it
was a related person to several, defunct coal mining
companies that ultimately merged into Unity. Among those
companies were South Union-PA and South Union-WVA.
South Union-PA had mined coal since 1923 and signed
NBCWAs from 1947 through 1961. South Union-WVA
19
began mining coal when South Union-PA stopped and it
signed the 1974, 1978 and 1981 NBCWAs.8
The Commissioner assigned Combined Fund premium
liability to Unity for the miners formerly employed by all of
Unity’s related person entities pursuant to SS 9706(a)(1) &
(2), and Unity challenged the assignment relying on
Eastern. After a comprehensive analysis of the various
opinions in Eastern, we upheld the Coal Act as applied to
Unity and sustained all of the assignments, including
assignments of those miners who had worked for South
Union-PA. As noted earlier, South Union-PA had not signed
a NBCWA in 1974 or thereafter. The critical distinction
between Unity/the Jamison family and Eastern Enterprises
was that Eastern never signed a 1974 or subsequent
NBCWA and was not a related person to any entity that
had. Unity, however was tethered to the commitment of
lifetime benefits through South Union-WVA, its related
person. That coal company had made such a commitment
in the 1974, 1978 and 1981 NBCWAs. In affirming Unity’s
liability we stated:
[b]ecause the plaintiffs signed NBCWAs in 1974 and
thereafter, they are factually distinguishable
from Eastern Enterprises. Language in the plurality
and the concurrence suggesting that expectations
fundamentally changed after 1974 support our
conclusions.
178 F.3d at 659. That distinction "compell[ed] the
conclusion that Eastern is not on all fours with the case
before us." Id.
Similarly, in Anker we upheld the Act’s application to
Anker coal via a related person that was a post-1974
signatory operator. We held that Anker’s related person had
agreed to the terms of the 1974, 1978, 1981 and 1984
NBCWAs and that "factually distinguish[ed] Anker’s
situation from that of Eastern Enterprises and compell[ed]
a finding that the Act [was] constitutional[as applied to
Anker]." 177 F.3d at 172. There, from 1967 until 1982,
Consolidation Coal had contracted with King Knob Coal for
_________________________________________________________________
8. A bankruptcy court granted it leave to reject the 1981 NBCWA.
20
King Knob to mine coal on Consolidation’s property. As part
of this arrangement, King Knob agreed that its employees
would be UMWA members and that it would be a signatory
to the then current NBCWAs. To achieve that end, King
Knob signed "me too" agreements in 1974, 1978, 1981 and
1984.9
An affiliate of Anker acquired King Knob in 1975 and the
relationship between Consolidation and King Knob
continued until Consolidation canceled its contract with
King Knob in 1982. In 1994 and 1995, the Commissioner
informed Anker that it was a related person to King Knob
and assigned premium liability to Anker for King Knob’s
retired miners. Anker sued alleging that under Eastern
Enterprises the Commissioner’s assignments were
unconstitutional as applied to it.
Relying on Unity, we upheld the assignment. We
concluded that Anker’s related person had agreed to be
bound by the terms of the post-1974 NBCWA’s.
Accordingly, Anker’s situation "[fell] outside the specific
holding of Eastern Enterprises." Id . at 172.
Here, not to be deterred by the wealth of precedent
(seemingly on point) against them, the Companies press on
and argue that Unity imposes a limitation on related person
liability that precludes consideration of the bargaining
history of any company other than the assigned miners’
actual employer. They argue that because the assignments
in Unity were made pursuant to SS 9706(a)(1) and (2), Unity
was treated as if it stood in the shoes of the signatory
operators who employed the miners and who had signed all
of the NBCWAs through 1978. Therefore, the Companies
claim that Unity requires that we treat them as if they too
_________________________________________________________________
9. A "me too" agreement is an agreement between an employer who is
not a member of the BCOA but who agrees with the UMWA to be bound
by the terms of the NBCWA. Anker, 177 F.3d at 166-7. A "me too"
agreement has terms identical to the terms of the respective NBCWA.
There is no legal distinction between the NBCWA itself, and the
corresponding "me too" agreement insofar as the employer’s rights and
obligations are concerned. Id. at 172 n.4. Thus, the "distinction" between
a NBCWA signatory and a "me too" signatory is not a difference for
purposes of our Coal Act analysis. Id.
21
stand in the shoes of the signatory operators who employed
the assigned miners. Based upon their insistence that they
stand in the shoes of the Pre-1974 Signatories who actually
employed the assigned miners, the Companies claim that
premium liability assignments are unconstitutional as
applied under Eastern Enterprises because the Pre-1974
Signatories neither committed to paying lifetime benefits,
nor contributed to any such expectation on the part of the
assigned miners.
However, this argument is based upon a misreading of
Unity. Unity was not treated as if it stood in the shoes of a
signatory operator who signed a post-1974 NBCWA. Unity
was treated as a "related person" to pre-1974 signatories
and at least one post-1974 signatory and it was assigned
liability for miners who had worked for pre-1974 signatories
because of that "related person" status. The Companies are
in exactly the same position here.
The Companies also argue that because the assignments
were made pursuant to 9706(a)(3), the fact that they have
related persons who signed 1974 and later NBCWAs is
irrelevant because only the bargaining history of the Pre-
1974 Signatories can be considered in determining the
constitutionality of the assignments. This argument also
allows them to again claim to stand in the shoes of Eastern
Enterprises. It is based upon a document in the record
signed by a man named "Ray Worley." Worley writes:
The Coal Act does not permit us to impute a related
company’s signatory status to that of a signatory
operator; that is, a pre-1978 signatory cannot be
treated as a 1978 (or later) signatory simply because its
parent or "sister" company is a 1978 (or later)
signatory.
App. at 178. In the Companies’ view, the Commissioner and
the Combined Fund Trustees have violated this "policy"
because they claim that the Commissioner’s and the
Combined Fund Trustees’ theory that they are liable for the
premiums of the miners employed by the Pre-1974
Signatories effectively treats the Pre-1974 Signatories as if
they were Post-1974 Signatories. That is, they have
imputed the signatory status of the Post-1974 Signatories
22
to the Pre-1974 Signatories. Moreover, the Companies
argue this "imputation of signatory status" theory suggests
that the assignments originally made were improper. In the
Companies’ view, all miners who have been assigned under
S 9706(a)(3), should have been assigned, or should be
reassigned, under either SS 9706(a)(1) or (2) if the pre-1978
operator who employed them had a related person who
signed a 1978 or later NBCWA.
We disagree. In the first place, the Companies have never
claimed that the original assignments of the miners
employed by the Pre-1974 Signatories were incorrect under
the S 9706(a) statutory assignment scheme. 10 Second, we
reject the Companies’ claim that Worley’s memo is an
admission by the Commissioner that the signatory status of
one related person cannot be imputed to another. Reply Br.
at 10. The Companies do not identify Worley’s position with
the Social Security Administration, they do not claim that
Worley was speaking for the Commissioner and they do not
tell us the purpose of Worley’s memo. Third, and perhaps
most importantly, Worley’s memo appears to speak to the
original assignment of beneficiaries procedures under
S 9706(a). It does not appear to have anything to do with
the related person provisions of the Act.11 Accordingly, the
Companies’ "obligations must stand or fall regardless of
how [it] was assigned the beneficiaries." Unity, at 655 n.2.
Our rejection of the Companies’ attempt to analogize
their circumstances to the facts in Eastern Enterprises does
_________________________________________________________________
10. The Coal Act provides that if an assigned operator believes that
beneficiaries have erroneously been assigned to it, the operator can
obtain information about the beneficiaries from the Commissioner and
seek review of the assignments. 20 C.F.R. S 9706(f); see also 20 C.F.R.
SS 422.601-607. The burden is on the assigned operator to make out a
prima facie case that the assignments were in error. See 20 C.F.R.
S 422.605. If the Commissioner finds that the assignments were in error,
he or she can declare them void and reassign the beneficiaries to the
appropriate signatory operator or related person. 26 U.S.C.
S 9706(f)(3)(A). If the Commissioner finds that the assignments are not in
error, he or she must notify the assigned operator. The Commissioner’s
determination is final. 26 U.S.C. S 9706(f)(3)(B).
11. As we noted at the outset, the Companies are not challenging the
constitutionality of the related person provisions.
23
not end our inquiry. In Eastern, the plurality also noted
that the Court’s prior decisions
have left open the possibility that legislation might be
unconstitutional if it imposes severe retroactive liability
on a limited class of parties that could not have
anticipated the liability, and the extent of that liability
is substantially disproportionate to the parties’
experience.
Eastern, at 528-529 (O’Connor, J.). In recognition of that
possibility, and the possibility that "Eastern embodies
principles capable of broader application," we required an
additional level of substantive due process analysis to
determine if the assignments to the Companies are
constitutional as applied in Unity.12 178 F.3d at 659. That
additional level of analysis measures "the extent of the gap
between the coal companies’ contractual promises to the
Funds and the requirements of the Coal Act." Id.
In Unity, we stated that the standard of review when a
due process violation is alleged "is forgiving; it bars only
arbitrary and irrational congressional action." Id. In Unity
we began our analysis with an extensive review of the
available evidence. We noted that Congress’ findings in
enacting the Coal Act that the coal industry had created a
reasonable expectation that miners would have lifetime
benefits, and that the coal companies were responsible for
the deterioration of miners’ Benefit Plans, were"reasonable
evaluations of the problem." Id. at 670.
We next concluded that the Act’s retroactivity did not
mean that the legislation was irrational or a violation of due
process. Id. In reaching that conclusion we recognized that
"[t]he heart of retroactivity analysis is an evaluation of the
extent of the burden imposed by a retroactive law in
_________________________________________________________________
12. While the Eastern Enterprise plurality’s cautionary note that
legislation might be unconstitutional if it is severely retroactive and
substantially disproportionate was made in the course of its Taking
Clause analysis, the admonition is applicable to a substantive due
process analysis because, as the plurality noted,"[o]ur analysis of
legislation under the Takings and Due Process Clauses is correlated to
some extent." 524 U.S. at 537 (plurality) (citing Connolly v. Pension
Benefit Guaranty Corp., 475 U.S. 211, 223 (1986)).
24
relation to the burdened parties’ prior acts[.]" We held that
"[w]here Congress acts reasonably to redress an injury
caused or to enforce an expectation created by a party, it
can do so retroactively." Id. at 670, 671. In Unity, the
period between the coal company’s contractual undertaking
to pay for benefits to the date of the passing of the Coal Act
was eleven years. Id. at 670.13 Although that period was
"quite long," we concluded that it was "not so extensive as
to violate Justice Kennedy’s standard, although Unity offers
a close case." Id.14 Even though we concluded that the time
frame was not unreasonably long, we were nonetheless
aware of the considerable financial burden that can result
from an assignment of liability under the Act.15
Finally, we addressed the proportionality issue and found
sufficient proportionality to sustain the constitutionality of
the Act.16 That conclusion was, in large part, driven by the
underlying conclusion that the burdens imposed under the
Act are justified by the industry’s past conduct and the
reasonable expectations of lifetime benefits it created. We
further concluded that the industry’s conduct in creating a
_________________________________________________________________
13. The Coal Act was passed in 1992 and South Union-WVA, Unity’s
related person, last signed a NBCWA in 1981.
14. In Unity, we relied on Justice Kennedy’s "explication of the relevant
due process principles because the plurality did not reach Eastern’s due
process claim." 178 F.3d at 670 n.13.
15. Eastern Enterprises’ estimated liability was between $50 and $100
million. 524 U.S. at 529. Unity alleged that its estimated Coal Act
liabilities were over six times its total assets and that if the assignments
were upheld, it would be bankrupted. 178 F.3d at 655. At the time
Unity’s appeal was before us, Unity’s total payments were under $1
million. Id. at 671. Significantly, the Companies do not contend that the
assignments will force them into bankruptcy. In fact, they have not
bothered to supply us with an estimate of their total potential liability.
16. A statute will not violate substantive due process where the burden
imposed is "proportional to the harm legitimately addressed by the
legislature." Unity, at 671. A statute is not unconstitutional "if the
liability actually imposed is not out of proportion to the claimant’s prior
experience with the object of the legislation." Id. at 672. "Prior experience
can consist of conduct that creates reasonable expectations about the
object of the legislation or conduct that creates the problems that
impelled the legislature to act." Id.
25
benefit fund obligated to pay out more monies than the
operators were required to provide, and the industry’s
conduct in creating the problem of underfunding, was
exacerbated by coal companies fleeing the coal industry to
avoid further contributions to the fund. Id. at 673.
Essentially, then, we reasoned that the Act was"Congress’
attempt to do equity." Id. at 672. Accordingly, we concluded
that the Coal Act did not violate substantive due process.
Congress was, after all, entitled to remedy the problems
caused by the companies’ conduct. Given the importance of
the coal industry, Congress could certainly respond to a
benefits funding structure "vulnerable to ‘dumping’ retirees
when companies left the industry." Id. at 673. The Coal Act
"is targeted to address the problem of insufficient resources
in the benefit funds and . . . it puts the burden on those
who, in Congress’s reasonable judgment, should bear it."
Id. at 674.
At oral argument, counsel for the Companies stated that
the Companies’ "related person" Post-1974 Signatories last
signed NBCWAs in 1988. That is only four years from the
time the Post-1974 Signatories’ contractual obligations to
the Funds ceased as the effective date of the Act was 1992.
That is significantly less time than the eleven years we
found acceptable in Unity.17 Accordingly, we reject the
Companies’ proportionality attack on the Commissioner’s
assignments.18
B. Can the Commissioner Make Original Assignments
After October 1, 1993?19
_________________________________________________________________
17. We also applied Unity’s due process analysis in Anker and found no
retroactivity problems in the eight years between the time when Anker’s
"related person," King Knob, last agreed in a"me too" agreement to be
bound by an NBCWA and the passage of the Coal Act. Anker, 177 F.3d
at 173.
18. After this case was argued, the Supreme Court decided Barnhart v.
Sigmon Coal Co., 534 U.S. 438 (2002). The issue for adjudication in
Sigmon was a question of statutory construction centering on whether
the Coal Act permits the Commissioner to assign retired miners to
successors in interest of out-of-business signatory operators. It has no
bearing on the issues presented here.
19. The district court rejected the Companies’ argument that certain
assignments should be voided because they were made after October 1,
26
The Companies argue in the alternative that, even if the
Commissioner’s assignments are constitutional, some of the
assignments are nevertheless invalid because they were
made on or after October 1, 1993.20,21 This argument is
grounded upon 26 U.S.C. S 9706(a) which states that the
Commissioner "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. . . ." (emphasis
added). The Companies contend that "shall" means "shall."
Accordingly, argue the Companies, since Congress explicitly
mandated the Commissioner to make all Coal Act
assignments by a date certain, any initial assignments
made after that October 1, 1993 are invalid.22
The Companies’ position is supported by Dixie Fuel Co. v.
Commissioner of Social Security, 171 F.3d 1052 (6th Cir.
1999). There, the Court of Appeals for the Sixth Circuit held
that the plain language of the statute, the statutory scheme
for assigning beneficiaries and the legislative history all
demonstrate that "the intent of Congress is clearly
expressed in the statute. The October 1, 1993 date is a
deadline." Id. at 1064.
_________________________________________________________________
1993. The standard of review in cases of statutory construction is
plenary. Pfeiffer v. Marion Center Area School District, 917 F.2d 779, 781
(3d Cir. 1990).
20. The Companies’ complaint acknowledges that the assignments to
Stelco Coal and Shenango were made before October 1, 1993. App. at
29, 31. Therefore, this portion of our analysis does not apply to either of
those entities.
21. The Supreme Court has granted certiorari in two cases on this same
issue. Peabody Coal Co. v. Massanari, ___ F.3d ___, 2001 WL 857197
(6th Cir. 2001), cert. granted by Barnhart v. Peabody Coal Co., ___ U.S.
___, 122 S. Ct. 918 (2002)( No. 01-705), and Bellaire Corp. v. Massanari,
___ F.3d ___, 2001 WL 856962 (6th Cir. 2001), cert. granted by Holland
v. Bellaire Corp., ___ U.S. ___, 122 S. Ct. 918 (2002)(No. 01-715).
22. The Companies "do not challenge the Commissioner’s authority to
reassign miners after September 30, 1993, i.e., to take miners who were
assigned incorrectly before September 30, 1993, and correctly reassign
them after September 30, 1993 as provided for in Section 9706(f)(3)."
Companies Br. at 23 n.4.
27
Nevertheless, we disagree. We are persuaded by the
analysis of the Court of Appeals for the Fourth Circuit in
Holland v. Pardee Coal Co., 269 F.3d 424 (4th Cir. 2001).
That is the only other case that has addressed the effect of
the October 1, 1993 deadline, and we believe it is better
reasoned than Dixie Fuel. In Pardee Coal , the Commissioner
determined that Pardee was a signatory operator and
assigned it premium liability for a number of retired miners
and their spouses. Because several of the retired miners
were assigned to Pardee after October 1, 1993, Pardee
denied that it was liable to the Combined Fund for those
premiums because they were made after the supposed
statutory cut-off date. The district court agreed with Pardee
and held that the post-October 1, 1993 assignments were
void as a matter of law. However, applying "well-settled
principles of statutory construction," the court of appeals
examined the text of the Act, the context in which it was
enacted, its structure and its legislative history, and found
no indication of congressional intent to establish October 1,
1993 as a "jurisdictional deadline, rendering void all
beneficiary assignments made by the [Commissioner] after
that date." 269 F.3d 437. Our inquiry leads us to the same
result.
Admittedly, "shall" is generally mandatory when used in
a statute. See, e.g., United States v. Monsanto , 491 U.S.
600, 607 (1989) ("Congress could not have chosen stronger
words [than ‘shall order forfeiture’] to express its intent that
forfeiture is mandatory. . . ."). However, a statutory
deadline does not, by itself, establish that Congress
intended to strip an agency’s authority to act after the
deadline has passed. In Brock v. Pierce County , 476 U.S.
253 (1986), the Court had to decide if Congress intended to
prevent the Secretary of Labor from recovering misused
funds under the Comprehensive Employment and Training
Act ("CETA") after the expiration of a statutory deadline in
that Act. The relevant provision of CETA stated that the
Secretary "shall" issue a final determination regarding
misuse of CETA funds within 120 days after receiving a
complaint alleging misuse. Id. at 254-55. The Secretary
disallowed Pierce County’s expenditure of approximately
$500,000 of CETA funds after an investigation disclosed
that the funds had not been used appropriately. The county
28
challenged the Secretary’s determination in court alleging
that the Secretary had no authority because his
determination had been made after the 120 day period had
expired.
A unanimous Supreme Court disagreed. The Court held
that "the mere use of the word ‘shall’ . . ., standing alone,
is not enough to remove the Secretary’s power to act after
120 days." Id. at 262. The Court was"most reluctant to
conclude that every failure of an agency to observe a
procedural requirement voids subsequent agency action,
especially when important public rights are at stake." Id. at
260. Rather, the Court concluded that "the normal indicia
of congressional intent" should be used to determine
whether an agency has authority to act despite the
expiration of a statutory deadline. Therefore, we can not
satisfactorily resolve that question by focusing upon a
single word in a statute, even when that word appears to be
as conclusive of congressional intent as "shall" appears to
be. Id. at 262 n.9.
We find the Court’s reasoning in United States v. James
Daniel Good Real Property, 510 U.S. 43 (1993), dispositive
here. There, the Court addressed, inter alia, the issue of
whether a civil forfeiture action, filed within the statute of
limitations, but without complying with other statutory
timing directives, must be dismissed. In finding that the
timing did not compel dismissal so long as the action was
filed within the statute of limitations, the Court noted that
"many statutory requisitions intended for the guide of
officers in the conduct of business devolved upon them . . .
do not limit their power or render its exercise in disregard
of the requisitions ineffectual." Id. at 63 (quoting French v.
Edwards, 80 U. S. (13 Wall.) 506, 511 (1872)).
Consequently, "if a statute does not specify a consequence
for noncompliance with statutory timing provisions, the
federal courts will not in the ordinary course impose their
own coercive sanction." 510 U.S. at 63 (citations omitted)
(emphasis added). No such consequence is included in the
Coal Act.
Moreover, we addressed this issue of statutory
interpretation in Southwestern Pennsylvania Growth
Alliance v. Browner, 121 F.3d 106, 113-115 (3d Cir. 1997).
29
We were there concerned with whether the Environmental
Protection Agency’s failure to act on a Clean Air petition
within the statutory time frame deprived the agency of
authority to take action on the petition. Relying heavily on
Brock v. Pierce County, we held that a statute stating that
an agency "shall" complete action by a certain time does
not divest the agency of jurisdiction to act unless there is
some additional indication in the statute of a congressional
intent to bar further agency action.
Our review of the Coal Act discloses no further indication
of congressional intent to deprive the Commissioner of the
authority to make original assignments after October 1,
1993. Congress’ failure to specify any consequences if the
Secretary does not make assignments by the purported
drop dead date is quite telling.23 Moreover, Brock v. Pierce
County was decided six years before Congress passed the
Coal Act. Accordingly, we must presume that Congress
knew that its instruction that the Commissioner"shall"
make assignments before October 1, 1993, would not by
itself divest the Commissioner of jurisdiction to act after
that date. See United States v. Wells, 519 U.S. 482, 485
(1997) ("[W]e presume that Congress expects its statutes to
be read in conformity with this Court’s precedents[.]").
Congress would have specified consequences for failing to
assign by a drop dead date or explicitly stated that the
Secretary’s authority to assign terminated after that date if
Congress had intended to abruptly end the Secretary’s
authority to make original assignments after October 1,
1993.
Congress has been this explicit in a number of other
statutes. See, e.g., 42 U.S.C. S 1396n(h) (application for
waiver of Medicaid requirements must be deemed approved
if Secretary of Health and Human Services does not issue
a decision within 90 days); 49 U.S.C. S 15910(c) (providing
that Surface Transportation Board investigative proceeding
is dismissed automatically if not concluded within three
years).
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23. See In re TWA, 96 F.3d 687, 690 (3d Cir. 1996), referring to a
statutory time bar in the Bankruptcy Code as a "drop dead date."
30
The Companies argue that the Act does provide a
consequence for not assigning a miner before October 1,
1993 because after that date the miner becomes an
"unassigned miner" and is placed in the orphan retiree
pool. However, that is not enough to conclude that the
Secretary no longer has authority to assign after October 1,
1993. It is simply a safety net insuring that miners who are
not assigned will not thereby be denied the benefits they
are entitled to. We see no language in the Act, and the
Companies direct us to none, that would forge a link
between unassigned status and the Commissioner’s failure
to complete the assignment process by October 1, 1993.
In addition, the Act’s administrative review provisions
suggest that Congress did not intend to limit the
Commissioner’s authority to make assignments after
October 1, 1993. The Coal Act gives coal companies the
right to an administrative review of an assignment decision
and further provides that if the Commissioner concludes
that an initial decision was erroneous, the Commissioner
must review the beneficiary’s record and reassign the miner
accordingly. 26 U.S.C. S 9706(f)(3). Although a coal
operator’s request for a review must be submitted to the
Commissioner within a specified time frame, the Act does
not impose any time limitations on the Commissioner’s
review process.24 This strongly suggests that Congress
expected that beneficiary reassignments would be made
after October 1, 1993. However, if October 1, 1993 is the
drop dead date the Companies claim, the Commissioner
would have no authority to make a new assignment even
though the initial assignment resulted from factual error, a
misreading of the statute, or administrative misfeasance.
Although it can be argued that the October 1, 1993 cutoff
only applies to original assignments, not those made as a
result of the administrative review process, nothing in the
text of the Act allows us to draw such a distinction.
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24. An assigned operator may, within 30 days of receiving notice with
respect to a particular beneficiary, request information as to his work
history. See 26 U.S.C. S 9706(f)(1). After receiving the information, the
assigned operator has an additional 30 days in which to request review
of the assignment. See 26 U.S.C. S 9706(f)(2).
31
In addition, we can infer no congressional intent to bar
agency action after October 1, 1993, from the purpose and
structure of the Coal Act. As we noted earlier, the Coal Act
was enacted in 1992 "to ensure that retired coal miners
and their dependents would continue to receive the health
and death benefits they had been receiving since the 1940s
pursuant to a series of collective bargaining agreements."
Anker, at 163-64. The Act was bottomed on Congress’
explicit finding that
in order to secure the stability of interstate commerce,
it is necessary to modify the current private health care
benefit plan structure for retirees in the coal industry
to identify persons most responsible for plan liabilities
in order to stabilize plan funding and allow for the
provision of health care benefits to such retirees.
26 U.S.C. S 9701 note (emphasis added). Congress was
attempting to "insure that every reasonable effort is made
to locate a responsible party to provide the benefits before
the costs are passed to other signatory companies which
have never had any connection to the individual[.]" 138
Cong. Rec. S17604 (daily ed. Oct. 8, 1992). Thus, the
Conference Committee Report declared that the Act’s
"overriding purpose is to find and designate a specific
obligor for as many beneficiaries in the [Benefit] Plans as
possible." Id. The conferees further stated their "inten[tion]
that the largest possible number of beneficiaries in the
[Benefit] Plans be assigned to a specific or designated
company[,]" and "that the number of unassigned
beneficiaries is kept to an absolute minimum." Id. at
S17605.
In short, the Coal Act’s key objective is to ensure that the
costs of providing retirement benefits will, so far as
possible, be borne by the private parties most responsible
for creating retired miners’ expectations of lifetime health
benefits. Consequently, the Act broadly imposes liability on
original signatories and a broad class of related business
entities. Cutting off the Commissioner’s authority to make
assignments after October 1, 1993, would surely frustrate
that objective. If the Commissioner cannot make
assignments beyond that date, otherwise assignable
beneficiaries would be retained in the orphan retiree pool
32
and benefits would paid from federal funds. 30 U.S.C.
S 1232(h) and 26 U.S.C. S 9705(b). Moreover, if those
transfers are inadequate, orphan retiree costs will be
imposed on other private parties through the imposition of
the unassigned beneficiary premium. See 26 U.S.C.
S 9704(d).25 Those other private parties would have no
substantive connection or nexus to the unassigned
beneficiary, and would certainly not be responsible for
creating any expectation of lifetime benefits.
Thus, reading "shall" to invalidate post-October 1, 1993
assignments would eviscerate a program intended to
impose funding burdens on the most responsible parties
and shift funding burdens to the government or to other
companies with no connection to the beneficiaries assigned
to those companies. We are thus reminded of the situation
in Brock v. Pierce County, where the Court was reluctant to
find that a statutory deadline barred agency action because
"public rights [were] at stake" and the"public fisc" was
implicated. 476 U.S. at 260, 262. Such a result here would
also result in a financial windfall to some operators at the
expense of those operators whose assignments were
completed before October 1, 1993 because the former
would be relieved of paying for miners’ expectations that
they or their related entities helped create.
Finally, putting aside the intricacies of statutory
interpretation and legislative history, we reach the same
result by employing that all too often overlooked tool:
practical common sense. Interpreting the October 1, 1993
date as a cutoff results in a time frame that would make
the action Congress required of the Commissioner
impossible. It would thereby frustrate the very
congressional purpose the Act sought to further. The Coal
Act became law in October of 1992. The Commissioner
therefore had to review the records of, and assign premium
responsibility for, roughly 65,000 miners by October 1,
1993. Holland v. Pardee Coal Co., 269 F.3d at 432 n.9. "To
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25. The government submits that these costs could amount to millions
of dollars in additional liability. According to the government, nearly
10,000 beneficiary assignments were made after October 1, 1993.
Government’s Br. at 48.
33
assign those miners, the agency had to search each miner’s
records, and reconstruct his employment history, and then
match that history against the lists of signatory coal
operators." Id. This Gordian knot was significantly
tightened by Congress’ failure to appropriate funds until
July 2, 1993 -- less than 80 days before the statutory date
of October 1, 1993. It would therefore have been as close to
impossible as any administrative task can get for the
Commissioner to complete the 65,000 by October 1, 1993.
Accordingly, we cannot agree that the Commissioner was
powerless to make original assignments after October 1,
1993.26 Thus, as the Court stated in Regions Hosp. v.
Shalala, 522 U.S. 448, 459 n.3 (1998), "The Secretary’s
failure to meet the deadline, a not uncommon occurrence
when heavy loads are thrust on administrators, does not
mean that the official lacked power to act beyond it."
_________________________________________________________________
26. The House Committee on Ways and Means, in a Committee Print
issued on September 3, 1993, only four weeks before the effective date
of the Coal Act reinforces this point. The Committee Print reads:
SSA anticipated that checking the [employment] records would be
very-time consuming. Most beneficiaries are associated with the
1950 Benefit Fund, and therefore with miners who retired before
1976. Social Security records are not computerized for work history
prior to 1978. Linking an individual’s work history to a specific
employer will thus require searching through microfilm records and
entering the information by hand into the computer system.
Preliminary estimates by the SSA suggest that it would take
approximately 150 work years just to retrieve the microfilm records.
This does not include the additional work involved in determining the
assignment to an employer. On a routine basis, SSA has 140
technicians specially trained to work with the microfilm records,
which are difficult to decipher. Extra resources would be needed to
complete the assignments by the October 1, 1993 target date.
Financing UMWA Coal Miner "Orphan Retiree" Health Benefits, House
Committee of Ways and Means (Sept. 3, 1993), at 64-65 (emphasis
added). However, Congress did not appropriate any"extra resources" to
the Commissioner between September 3, 1993 and October 1, 1993.
Therefore, Congress could not possibly have intended that the
Commissioner would complete the entire assignment process by October
1, 1993.
34
VI.
Accordingly, for all of the above reasons, we will affirm
the judgment of the district court.27
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
_________________________________________________________________
27. Because we have found that the Coal Act is constitutional as applied
to the Companies, we need not address the Companies’ argument that
the Commissioner’s refusal to revoke their assignments in the wake of
Eastern Enterprises was arbitrary, capricious, an abuse of discretion or
otherwise not in accordance with law in violation of the Administrative
Procedure Act, 5 U.S.C. S 705(2)(A). In addition, because we have found
that the Commissioner has the authority to make original assignments
after October 1, 1993, we need not address the Companies’ argument
that they are entitled to a refund of premiums they are paid.
35