The opinion of the court was delivered by: SULLIVAN
EMMET G. SULLIVAN, United States District Judge.
Plaintiffs, Bellaire Corporation ("Bellaire"), Allied-Signal, Inc. ("Allied"), Associated Electric Cooperative, Inc. ("AECI"), and Association of Bituminous Contractors, Inc. ("ABC"), commenced these separate lawsuits against the United States Department of Health and Human Services ("federal defendant") and the United Mine Workers of America Combined Benefit Fund and its Trustees ("Trustees") to challenge the constitutionality of the Coal Industry Retiree Health Benefit Act of 1992, 26 U.S.C. §§ 9701-9721 ("Coal Act"). The Court has consolidated these cases for the sole purpose of resolving in one Opinion the related issues raised by the parties.
Plaintiffs seek both declaratory and injunctive relief from enforcement of the Coal Act. They contend that the Coal Act violates both the substantive component of the Due Process and Takings Clauses of the Fifth Amendment,
because it imposes on them the financial responsibility for health benefits for retired coal miners -- many of whom were never employed by plaintiffs -- and dependents of those miners. Defendants, on the other hand, maintain that the Coal Act represents a rational Congressional response to address an escalating health-care crisis in the coal industry.
Upon consideration of the parties' cross-motions for summary judgment, the points and authorities in support of and in opposition thereto, the arguments of counsel, and for the reasons set forth herein, the Court concludes that the Coal Act, as applied to each of the plaintiffs, does not violate either the Due Process or the Takings Clauses of the Fifth Amendment. The Court also concludes that the Secretary did not abuse her discretion in applying the Coal Act to ABC. Accordingly, defendants' motions for summary judgment shall be GRANTED, and plaintiffs' motions for summary judgment shall be DENIED.
The history of the Coal Act has been well chronicled. See, e.g., Davon, Inc. v. Shalala, 75 F.3d 1114, 1127 (7th Cir. 1996), certs. denied, 117 S. Ct. 50, 136 L. Ed. 2d 14 (U.S. 1996) and 117 S. Ct. 50, 136 L. Ed. 2d 14 (U.S. 1996) (holding that the Coal Act does not violate substantive due process); Lindsey Coal Mining Co. v. Chater, 90 F.3d 688 (3d Cir. 1996)(same); In re Blue Diamond Coal Co., 79 F.3d 516, 523 (6th Cir. 1996)(same); Barrick Gold Exploration, Inc. v. Hudson, 47 F.3d 832 (6th Cir.), cert. denied, 516 U.S. 813, 133 L. Ed. 2d 26, 116 S. Ct. 64 (1995)(same); In re Chateaugay Corp., 53 F.3d 478, 491 (2d Cir. 1995), cert. denied, 516 U.S. 913, 116 S. Ct. 298 (1995) (same); Unity Real Estate Co. v. Hudson, 889 F. Supp. 818, 825 (W.D. Pa. 1995)(same). Nevertheless, for the purposes of this Opinion, the Court will provide a brief summary.
Congress enacted the Coal Act to remedy a crisis in the funding of the two multiemployer health benefit plans, the United Mine Workers of America 1950 Benefit Plan and Trust ("1950 Trust") and the United Mine Workers of America 1974 Benefit Plan and Trust ("1974 Trust"), which threatened to deprive over 100,000 retired coal miners and their dependents of their promised health benefits. The 1950 and 1974 Trusts were created and funded through a series of collective bargaining agreements between the United Mine Workers of America ("UMWA") and bituminous coal operators that were represented in multiemployer collective bargaining with the UMWA by the Bituminous Coal Operators Association ("BCOA").
A. Establishment of 1950 and 1974 Benefit Plan and Trusts
Since the 1940s, the agreements between the UMWA and BCOA have been known as National Bituminous Coal Wage Agreements ("NBCWAS"). These agreements governed the terms and conditions of employment in bituminous coal mines operated by BCOA members, as well as "me, too" operators.
Each NBCWA contained provisions requiring signatory coal operators to provide health benefits for both active and retired miners and their dependents. The 1978 NBCWA established the current contractual framework for providing health benefits to UMWA retirees. This agreement also introduced a provision, commonly referred to as the "evergreen clause,"
which specifically obligated signatory coal operators to continue making benefits contributions for as long as the NBCWA and successive NBCWAs required such contributions, regardless of whether the operators actually signed subsequent NBCWAs. See United Mine Workers of America 1974 Pension v. Pittston Coal Co., 299 U.S. App. D.C. 339, 984 F.2d 469 (D.C. Cir. 1993)(enforcing "evergreen" provision contained in the NBCWA).
That agreement, and every agreement thereafter, required each signatory to provide for health benefits to retired UMWA miners, their spouses and dependents in three ways: (1) by contributing to the 1950 Trust, which provided benefits to miners who had retired before January 1, 1976, and their spouses and dependents; (2) by establishing a single employer to provide benefits to its own post-1975 retirees, their spouses and dependents; and (3) by contributing to the 1974 Trust, which provided benefits to post-1975 retirees, their spouses and dependents whose former employer was either "no longer in business," or no longer a signatory to an NBCWA. The most recent NBCWA was executed on February 1, 1988.
B. Crisis in 1950 and 1974 Benefit Plan and Trusts
By 1990, the 1950 and 1974 Trusts had incurred a debt of over $ 100 million and their funding bases were declining faster than the beneficiary population. The Trusts' ability to continue to provide health care benefits was severely jeopardized, and the issue of the provision of health care benefits had contributed to a protracted strike at the Pittston Coal Company. The resulting uncertainty and significant labor disputes and unrest threatened to disrupt coal production and the economies of several coal-producing states. Against this background, Congress enacted the Coal Act.
A mediator, appointed by the Secretary of Labor, ultimately resolved the Pittson dispute. One of the negotiated terms of the settlement provided for the creation of the Secretary of Labor's Advisory Commission on United Mine Workers of America Retiree Health Benefits (the "Coal Commission" or the "Commission"), an industry-wide commission authorized to analyze the retiree health care crisis. The Coal Commission submitted its findings to the Secretary of Labor on November 5, 1990. See Coal Commission Report: A Report to the Secretary of Labor and the American People (Nov. 1990) ("Commission Report"). In its report, the Commission found that: (1) the number of coal companies making contributions to the Trusts have declined significantly; (2) the costs of health care between 1950 and 1990 had dramatically increased; and (3) the number of "orphaned"
retirees had grown. Committee Report, at 2. Critically, the Commission also found that:
Retired coal miners have legitimate expectations of health care benefits for life; that was the promise they received during their working lives and that is how they planned their retirement years. That commitment should be honored.
As a means of resolving the health care crisis, the Commission recommended that the entire coal industry pay the cost of providing for the orphan retirees by the imposition of an industry-wide tax; or alternatively, that only current and former signatories to the NBCWAs be required to finance the orphans' health costs. Following the issuance of the Commission's report, Congress held hearings to consider that report. Congress ultimately enacted the Coal Act based on the alternative recommendation of the Coal Commission that current and past signatories to the NBCWAs should bear the cost of providing health benefits to orphan retirees.
In enacting the Coal Act, Congress found that:
(1) the production, transportation, and use of coal substantially affects interstate and foreign commerce and the national public interest; and
(2) 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.
Coal Act of 1992, Pub. L. No. 102-486, § 19142(a)(1), (2), 106 Stat. 2776, 3037.
The Coal Act required the settlors of the 1950 and 1974 Trusts to merge the Trusts, on February 1, 1993, into the United Mine Workers of America Combined Benefit Fund ("Combined Fund"), a new statutorily created private trust fund that provides health benefits to people who were receiving (and were eligible to receive) benefits from the 1950 or 1974 Benefit Trusts as of July 20, 1992. 26 U.S.C. §§ 9702(a), 9703(f). The Coal Act directs the Secretary of Health and Human Services to match the Combined Fund beneficiaries with the operators who formerly employed them.
The 1988 NBCWA signatories are required by the Coal Act to make contributions to the Combined Fund to pay off, by September 30, 1994, the deficits incurred in the 1950 and 1974 Trusts as of February 1, 1993, the day the trusts were merged into the Combined Fund. Id. § 9704(i)(B), (E).
Moreover, the Coal Act authorizes the transfer of $ 70 million per year for each of the first three Combined Fund years from the 1950 UMWA Pension Plan. Id. § 9705(a). The second and third year transfers may be used only to reduce the operators' unassigned beneficiary premiums and death benefit premiums, and none of the transfers can be used to offset the deficit reduction contributions owed by the 1988 operators. Id. § 9705(a)(3). To prevent further "dumping" into the Combined Fund, the Act also requires NBCWA signatory operators that were providing health benefits to their own retirees on February 1, 1993, to continue to provide benefits to those retirees under an individual employer plan. Id. § 9711. The Coal Act also establishes another multiemployer plan -- the 1992 UMWA Benefit Plan -- as a safety net to provide health benefits to people who should receive coverage under an individual employer plan but do not. Id. § 9712(b)(2)(B). The premiums paid by the 1988 NBCWA signatories, id. § 9712(d)(1)(A),(C), and NBCWA signatories whose former employees receive benefits from the 1992 Plan, id. § 9712(d)(1)(B),(d)(3), will provide the financing for the 1992 Plan.
II. SUMMARY JUDGMENT STANDARD OF REVIEW
Summary judgment should be granted pursuant to Fed. R. Civ. P. 56, only if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Likewise, in ruling on cross-motions for summary judgment, the court shall grant summary judgment, only if one of the moving parties is entitled to judgment as a matter of law upon material facts that are not genuinely disputed. Rhoads v. McFerran, 517 F.2d 66, 67 (2d Cir. 1975). In the opinion of the Court, the pending cross-motions for summary judgment present no genuinely disputed material facts that would preclude summary judgment for any party.
III. CONSTITUTIONALITY OF THE COAL ACT
Each plaintiff argues, with varying degrees of vigor, that the Coal Act violates the Due Process Clause of the Fifth Amendment of the United States Constitution. Bellaire and Allied also argue that the Coal Act violates the Takings Clause of the Fifth Amendment of the United States Constitution.
Bellaire was a signatory to the 1974, 1978, 1981, and 1984 NBCWAs. During the terms of the 1974 and 1978 NBCWAs, Bellaire was a member of the BCOA. The federal defendant and Trustees argue that Bellaire's membership in the BCOA expressly authorized the BCOA to negotiate on its behalf the terms and conditions of those NBCWAs, including the eligibility and benefit levels of the 1950 and 1974 Trusts. Although Bellaire withdrew from the BCOA in December 1980, it was a "me, too" signatory to the 1981 and 1984 NBCWAs and signed two extension agreements that obligated it to provide health benefits to its own retirees until January 20, 1990.
Allied was a signatory to the 1974 and 1978 NBCWAs. During the terms of those agreements, Allied was a member of the BCOA. Again, the federal defendant and Trustees argue that membership in the BCOA expressly allowed the BCOA to negotiate on Allied's behalf. In 1980, Allied disposed of its last two remaining coal mining operations. Although the 1978 NBCWA expired on March 27, 1981, Allied continued to provide for retiree health benefits until September 1982. During ensuing litigation against the UMWA, Allied obtained a judgment from the United States Court of Appeals for the Fourth Circuit, sitting en banc, which concluded that Allied's funding obligations continued "only for the life of the 1978 contract." See District 17 v. Allied Corp., 765 F.2d 412, 417 (4th Cir.) (en banc), cert. denied, 473 U.S. 905, 87 L. Ed. 2d 652, 105 S. Ct. 3527 (1985).
On December 21, 1988, Allied entered into a consent judgment in the United States District Court for the Southern District of West Virginia with the UMWA, the 1974 Trust, and a class of UMWA retirees receiving health benefits from the 1974 Trust. Pursuant to the consent judgment, Allied agreed to provide health benefits only to certain retirees who had retired from the Harewood Mine in West Virginia. The consent judgment also declared that Allied "shall have no further obligation to provide health and non pension benefits" to retirees from another mine, Shannon Branch Mine in West Virginia. Allied argues that this judgment enjoined the 1974 Trust, the UMWA, or the beneficiary class from taking any action designed to transfer the Shannon Branch liabilities to Allied. As of February 1, 1993, Allied was responsible for providing health coverage for its retirees who retired from its Harewood Mine in West Virginia. The Coal Act assigned Allied 1540 beneficiaries. Of this number, 670 were formerly employed by Allied and retired before January 1, 1976. Another 100 of this figure are also former employees, but retired from the Shannon Branch Mine after January 1, 1976. The other 770 beneficiaries were never employed by Allied. Allied estimates that the provision of these benefits will cost Allied $ 1.5 million during Allied's first full year of its contributions to the Combined Fund, and a total of approximately $ 50 million.
Both Allied and Bellaire admit that after the expiration of the 1974 and 1978 NBCWAs, both companies ceased contributing to the 1950 and 1974 Trusts and discontinued their individual employer plans, leaving their post-1975 retirees to receive health coverage from the 1974 Benefit Trust.
Bellaire and Allied advance two principal arguments in support of their position that the Coal Act, as applied to them, violates their Fifth Amendment substantive due process rights. First, they argue that the Coal Act requires them to pay health benefits for UMWA retirees solely because of pre-enactment obligations made, and long since discharged, by these employers. Bellaire and Allied contend that the Coal Act arbitrarily imposes retroactive liabilities upon them in favor of not only their former employees, but many others who were never employed by either company. Second, Bellaire and Allied argue that the Due Process Clause imposes greater restrictions when Congress attempts to impose liabilities retroactively than when it legislates prospectively. See General Motors Corp. v. Romein, 503 U.S. 181, 191, 117 L. Ed. 2d 328, 112 S. Ct. 1105 (1992) ("Retroactive legislation presents problems of unfairness that are more serious than those posed by prospective legislation, because it can deprive citizens of legitimate expectations and upset settled transactions.").
Bellaire and Allied's challenges to the constitutionality of the Coal Act are not novel. Indeed, every federal court that has addressed the substantive due process issue has concluded that the Coal Act does not violate the substantive component of the Fifth Amendment's Due Process Clause. See, e.g., Davon, Inc. v. Shalala, 75 F.3d 1114, 1127 (7th Cir. 1996), certs. denied, 117 S. Ct. 50, 136 L. Ed. 2d 14 (U.S. 1996) and 117 S. Ct. 50, 136 L. Ed. 2d 14 (U.S. 1996) (holding that the Coal Act does not violate substantive due process); Lindsey Coal Mining Co. v. Chater, 90 F.3d 688 (3d Cir. 1996)(same); In re Blue Diamond Coal Co., 79 F.3d 516, 523 (6th Cir. 1996)(same); Barrick Gold Exploration, Inc. v. Hudson, 47 F.3d 832 (6th Cir.), cert. denied, 516 U.S. 813, 133 L. Ed. 2d 26, 116 S. Ct. 64 (1995)(same); In re Chateaugay Corp., 53 F.3d 478, 491 (2d Cir. 1995), cert. denied, 516 U.S. 913, 116 S. Ct. 298 (1995)(same); Unity Real Estate Co. v. Hudson, 889 F. Supp. 818, 825 (W.D. Pa. 1995)(same).
In considering due process challenges to economic legislation such as the Coal Act, the Supreme Court has repeatedly held that such legislation must be sustained, unless Congress has acted arbitrarily or irrationally. In Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 49 L. Ed. 2d 752, 96 S. Ct. 2882 (1976), the Court stated that:
It is by now well established that legislative Acts adjusting the burdens and benefits of economic life come to the Court with a presumption of constitutionality, and that the burden is on the one complaining of a due process violation to establish that the legislature has acted in an arbitrary and irrational way.
Id. at 15 (citing Ferguson v. Skrupa, 372 U.S. 726, 10 L. Ed. 2d 93, 83 S. Ct. 1028 (1963)); see also Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 729, 81 L. Ed. 2d 601, 104 S. Ct. 2709 (1984); Williamson v. Lee Optical of Okl., 348 U.S. 483, 99 L. Ed. 563, 75 S. Ct. 461 (1955).
Economic legislation comports with due process if it bears a rational relation to a legitimate governmental purpose. Regan v. Taxation With Representation, 461 U.S. 540, 547, 76 L. Ed. 2d 129, 103 S. Ct. 1997 (1983); Duke Power Co. v. Carolina Envtl. Study Group, Inc., 438 U.S. 59, 83-84, 57 L. Ed. 2d 595, 98 S. Ct. 2620 (1978); Colorado Springs Production Credit Ass'n v. Farm Credit Admin., 758 F. Supp. 6, 9 (D.D.C. 1991), aff'd, 296 U.S. App. D.C. 281, 967 F.2d 648 (D.C. Cir. 1992). Moreover, when considering how to finance economic legislation, Congress has "absolutely no obligation to select the scheme that a court [will later] find to be the fairest, but simply one that [is] rational and not arbitrary." National R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S. 451, 477, 84 L. Ed. 2d 432, 105 S. Ct. 1441 (1985); see also Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 124, 57 L. Ed. 2d 91, 98 S. Ct. 2207 (1978)("The Due Process Clause does not empower the judiciary to sit as a superlegislature to weigh the wisdom of legislation."). This deferential standard of review applies even if the economic legislation "upsets settled expectations," or "imposes a new duty or liability based on past acts." Turner Elkhorn, 428 U.S. at 16.
As support for their position, Bellaire and Allied primarily rely upon Railroad Retirement Bd. v. Alton R.R. Co., 295 U.S. 330, 79 L. Ed. 1468, 55 S. Ct. 758 (1935).
Alton involved a due process challenge to the Railroad Retirement Act, a statute that required railroad carriers to provide industry retirees with lifetime pension benefits. The statute established a fund to provide the benefits, and it required carriers to contribute to the fund at rates determined with reference to current payrolls. The statute extended to all railroad employees who had retired within one year prior to its enactment. Alton, 295 U.S. at 344-45.
Plainly this requirement alters contractual rights; plainly it imposes for the future a burden never contemplated by either party when the earlier relation existed or when it was terminated. The statute would take from the railroads' future earnings amounts to be paid for services fully compensated when rendered in accordance with contract, with no thought on the part of either employer or employee that further sums must be provided by the carrier. The provision is not only retroactive in that it resurrects for new burdens transactions long since past and closed; but as to some of the railroad companies it constitutes a naked appropriation of private property upon the basis of transactions with which the owners of the property were never connected. Thus the act denies due process of law by taking the property of one and bestowing it upon another.
The daunting challenge plaintiffs face, however, is that Alton represents the last case in which the Supreme Court invalidated an economic regulation pursuant to a substantive due process challenge. As the Second Circuit aptly observed, "the doctrinal landscape which confronts [plaintiff's] due process challenge encompasses unusually inhospitable legal terrain." In re Chateaugay Corp., 53 F.3d at 487. Furthermore, the post-Alton cases decided by the Supreme Court have shown a distinctly more deferential standard for reviewing economic legislation. See, e.g., Concrete Pipe & Prods. v. Construction Laborers Pension Trust, 508 U.S. 602, 124 L. Ed. 2d 539, 113 S. Ct. 2264 (1993)(holding that retroactive Multiemployer Pension Plan Amendments Act's (MPPAA) withdrawal liability provisions "suffices for substantive due process scrutiny"); Pension Benefit Guaranty Corp. v. R.A. Gray Co., 467 U.S. 717, 81 L. Ed. 2d 601, 104 S. Ct. 2709 (1984)(holding that application of withdrawal liability provisions of MPPAA to employers withdrawing from pension plans does not violate Fifth Amendment's Due Process Clause); Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 49 L. Ed. 2d 752, 96 S. Ct. 2882 (1976)(upholding retroactive federal law which required coal operators to compensate certain employees for disabilities caused by black lung disease).
Plaintiffs also contest the Coal Act's apportionment of contribution obligations based on the number of former employees, where the Railroad Act in Alton was based on the current payroll. The Coal Act's use of the number of former employees as the apportionment criterion is especially arbitrary, plaintiffs contend, because mining operators always had apportioned their NBCWA contractual obligations under two entirely different criteria -- tons of coal mined and hours of labor worked -- that vary with current economic activity. Also, the Coal Act's scheme does not allow Bellaire and Allied to pass its new obligations onto its customers.
Finally, plaintiffs argue that the Coal Act's retrospective employment criterion is singularly arbitrary as applied to former operators like Bellaire and Allied because these companies no longer mine bituminous coal. Thus, they do not have current bituminous coal mining revenues against which to offset their current contribution obligations and do not have current bituminous coal customers among whom to spread the cost of those obligations.
The Court is not persuaded by the arguments advanced by Bellaire and Allied. In the Court's view, Bellaire and Allied have been unable to meet the heavy burden of demonstrating that Congress acted in an arbitrary or irrational way in enacting the Coal Act. Having determined that only NBCWA operators would be accountable for the stabilization of the Trusts, Congress established a specific funding mechanism for spreading the necessary costs. The Coal Act is supported by a legitimate governmental purpose and was enacted after finding that:
(2) 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 ...