operating in a highly regulated, national industry would be able to forever insulate itself from future Congressional regulation by settling a contract dispute in federal court.
Defendants rely heavily on the D.C. Circuit Court's opinion in Daylo v. Administrator of Veterans' Affairs, 163 U.S. App. D.C. 251, 501 F.2d 811 (D.C. Cir. 1974), to support their argument that the Coal Act is inapplicable to them. The dispute in Daylo centered around a final judgment which was based on a Congressional statute. That statute was later amended. One of the parties advocated a retroactive application of the amended statute to the judgment, which would have nullified that judgment. The Daylo court determined that neither the statute's language nor its legislative history evinced Congressional intent to reopen final judgments entered pursuant to passage of the original statute.
Daylo resolved two suits involving (1) a single cause of action; (2) involving the same parties; (3) under a single statute. The facts and legal issues in Daylo are distinguishable from the instant case. First, the instant case does not involve a single cause of action. Instead, the Kentucky suit involved a contractual dispute, while the current action involves a statutory obligation. Second, here there is no total overlap of parties. The 1993 Benefit Plan is a separate and distinct entity from UMWA. Finally, this action arises under a statute, the 1992 Coal Act, while the Kentucky suit arose under common-law contract principles.
This Court thus finds that application of the Coal Act to Robert Coal does not operate to reopen or disturb the Kentucky suit judgment.
B. Constitutionality of the Coal Act
1. Separation of Powers Challenge
Defendants claim that the Coal Act is unconstitutional because it impermissibly directs the reopening of a final judgment of an Article III court in violation of the Separation of Powers Doctrine. Defendants rely on Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 115 S. Ct. 1447, 131 L. Ed. 2d 328 (1995), to support their argument.
As discussed, application of the Coal Act to Robert Coal does not disturb the final judgment entered in the Kentucky suit. The Court thus need not address Defendant's argument at great length but will discuss it briefly.
Plaut, like Daylo, is distinguishable from the instant case in both its facts and the applicable law. In Plaut, the Supreme Court invalidated a Congressional enactment that permitted cases already dismissed to be reinstated. The Court found the amendment unconstitutional because, "having achieved finality . . . a judicial decision becomes the last word of the judicial department with regard to a particular case or controversy. . ." Plaut, 115 S. Ct. at 1457 (emphasis added). That amendment, like the statute in Daylo, retroactively changed the law which the trial court had applied at the time of its earlier decision.
Defendants argue that the rulings of federal courts in private contractual disputes bar Congress from imposing subsequent regulations that affect those parties. The Supreme Court has addressed this argument and has unambiguously held that "contracts, however express, cannot fetter the constitutional authority of Congress." Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 223, 89 L. Ed. 2d 166, 106 S. Ct. 1018 (1986) (quoting Norman v. Baltimore & Ohio R. Co., 294 U.S. 240, 307-07, 79 L. Ed. 885, 55 S. Ct. 407); see also, Fleming v. Rhodes, 331 U.S. 100, 107, 91 L. Ed. 1368, 67 S. Ct. 1140 (1947).
This Court thus finds that application of the Coal Act to Robert Coal does not violate the Separation of Powers Doctrine.
2. Due Process Challenge
Defendants assert that the Coal Act violates the Due Process Clause of the Fifth Amendment, which protects persons from being "deprived of life, liberty, or property, without due process of law." U.S. Const. amend. V.
In general, economic legislation satisfies the requirements of due process so long as it is rationally related to a legitimate government 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).
Statutes that regulate commercial burdens and benefits are accorded a formidable presumption of constitutionality. See, e.g, Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15, 49 L. Ed. 2d 752, 96 S. Ct. 2882 (1976).
The presumption is even weightier when Congress enacts legislation under its Commerce Clause power, for such legislation is entitled to the most deferential level of judicial scrutiny. In this instance, a challenger must show that the legislature acted "in an arbitrary and irrational way." Id.. A court must uphold the law if there is any rational reason for its enactment; regardless of whether Congress had that particular justification in mind when it enacted the legislation. See, e.g., FCC v. Beach Communications, Inc., 508 U.S. 307, 315, 124 L. Ed. 2d 211, 113 S. Ct. 2096 (1993).
This deferential standard applies even if the enactment readjusts benefits and burdens or "upsets otherwise settled expectations... [or] impose[s] a new duty or liability based on past acts." Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 16, 49 L. Ed. 2d 752, 96 S. Ct. 2882 (1976). So long as the statute can be supported "by a legitimate legislative purpose furthered by rational means, judgments about the wisdom of such legislation remain within the exclusive province of the legislative and executive branches." Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 729, 81 L. Ed. 2d 601, 104 S. Ct. 2709 (1984).
Many courts have recently considered due process challenges to the Coal Act. These courts have uniformly rejected the challenges. As a recent opinion noted, "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." Bellaire Corp. v. Shalala, 1997 U.S. Dist. LEXIS 14280, Civ. Act. No. 93-183, slip. op. at 17 (D.D.C. April 21, 1997) (emphasis in original) (citing Davon, supra, 75 F.3d 1114 at 1127; Lindsey Coal, supra, 90 F.3d 688; In re Blue Diamond Coal Co., 79 F.3d 516, 523 (6th Cir. 1996); Barrick Gold Exploration, Inc. v. Hudson, 47 F.3d 832 (6th Cir.), cert. denied, 116 S. Ct. 298 (1995); In re Chateaugay Corp., 53 F.3d 478, 491 (2d Cir. 1995), cert. denied, 116 S. Ct. 298 (1995)).
Enactment of the Coal Act rested on a Congressional determination that "the production, transportation, and use of coal substantially affects interstate and foreign commerce and the national public interest". Pub. L. No. 102-486, § 19142(a)(1), 106 Stat. 2776, 3037 (1992). Congress determined that modification of the private health care benefit plan structure for coal industry retirees was necessary to ensure the stability of interstate commerce. Pub. L. No. 102-486 § 19142(a)(2), 106 Stat. 28776, 3037 (1992).
This Court, like all other courts that have considered the issue, concludes that Congress's stated objective in enacting the Coal Act constitutes a legitimate governmental purpose.
The means chosen by Congress to achieve its stated purpose involved identifying those "persons most responsible for plan liabilities in order to stabilize plan funding and allow for the provision of health care benefits to such retirees." Pub. L. No. 102-486 § 19142(a)(2), 106 Stat. 28776, 3037 (1992).
This Court (again, like all other courts that have considered the issue) concludes that Congress's chosen method of achieving its purpose is reasonable and thus survives rational basis review.
Defendants claim that "no rational basis exists for concluding that any expectation by Robert's retirees of receiving lifetime health benefits was Robert's responsibility". (Defs.' Mem. Summ. J. at 38). Several courts have recently rejected this argument, and this Court must do the same.
In Blue Diamond Coal Co., et al, v. Shalala, 79 F.3d 516 (6th Cir. 1996), the coal company argued, as does Robert Coal, that it had created no explicit promises or expectations of lifetime health benefits for its employees. The Court held it irrelevant that the company created no specific expectations in its employees; Congress could still impose Coal Act liability. Id. at 522-23. The Court reasoned that, as a signatory to the NBCWAs and contributor to the benefit funds, the company "contributed to a reasonable expectation of lifetime health benefits". Id., (citing Davon v. Shalala, 75 F.3d 1114, 1124-25 (7th Cir. 1996)).
Defendants' claim that the court's order dismissing with prejudice the Kentucky lawsuit makes their situation unique does not change this outcome. See Chateaugay, 53 F.3d 478 (bankruptcy protections did not operate to relieve company of its obligations under the Coal Act); Bellaire, slip op. at 13-41 (application of Coal Act to companies that had never employed plaintiff miners did not violate due process); Templeton Coal Co., Inc. v. Shalala, 882 F. Supp. 799, 815 (S.D. Ind. 1995) (application of Coal Act to company who had previously satisfied its contractual obligation to pay premiums did not violate due process).
Finally, Defendants argue that the Coal Act, as applied to them, violates the so-called "Vested Rights Doctrine". Defendants contend that a final judgment creates an absolute, inviolable right that is immune from Congressional regulation. (Defs.' Mem. Summ. J. at 22-23) (citing McCullough v. Virginia, 172 U.S. 102, 43 L. Ed. 382, 19 S. Ct. 134 (1898).
"Vested Rights", however, deserve and receive no more protection than other property rights; alleged violations of those rights must also submit to the traditional due process analysis discussed earlier. See, e.g., Johnston v. Cigna Corp., 14 F.3d 486, 490 (10th Cir. 1993). As also discussed earlier, the Coal Act easily survives such analysis.
3. Takings Clause Challenge
Defendants contend that any application of the 1992 Coal Act "that serves to annul, nullify or take away the right obtained by Robert through the Final Judgment constitutes an unlawful taking of property in violation of the Fifth Amendment, as applied to Robert". (Defs.' Mem. Summ. J. at 27.)
The Takings Clause prohibits the taking of private property "for public use, without just compensation." U.S. Const. amend. V. The Supreme Court has repeatedly stated that the Takings Clause is "designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." Penn Central Transp. Co. v. New York, 438 U.S. 104, 123, 57 L. Ed. 2d 631, 98 S. Ct. 2646 (1978) (citation omitted).
Courts have decided Takings Clause challenges to the Coal Act in much the same way they decided substantive due process challenges--they have overwhelmingly rejected them and concluded that the Coal Act does not violate the Takings Clause. See, e.g., Bellaire, slip. op. at 46 (citing cases that upheld the Coal Act in the face of takings clause challenges, including Davon, Inc., 75 F.3d at 1127; Lindsey Coal, 90 F.3d 688; In re Blue Diamond Coal Co., 79 F.3d 516, 523 (6th Cir. 1996); Barrick Gold, 47 F.3d at 832; and Chateaugay, 53 F.3d at 491).
The Supreme Court has articulated three factors to be used in ascertaining the existence of a compensable taking. These are "(1) the economic impact of the regulation on the claimant, (2) the extent to which the regulation interferes with the claimant's reasonable investment-backed expectations, and (3) the nature of the governmental action." Connolly, 475 U.S. at 224 (citing Penn Central Transportation Co. v. New York City, 438 U.S. 104, 124, 57 L. Ed. 2d 631, 98 S. Ct. 2646 (1978)). See also, Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 112 S. Ct. 2886, 2922, 120 L. Ed. 2d 798 (1992); Eastern Enterprises v. Chater, 110 F.3d 150, 160 (1st Cir. 1997) (citing Concrete Pipe & Prods. of Cal., Inc. v. Construction Laborers Pension Trust, 508 U.S. 602, 643-44, 124 L. Ed. 2d 539, 113 S. Ct. 2264 (1993)).
In determining whether application of the Coal Act to Robert Coal constitutes a compensable taking, the Court turns first to economic impact.
Defendants estimate the premiums assessed against Robert Coal at a minimum of $ 8.6 million.
While there may be some dispute as to the exact amount of the premiums, absolute precision on this point is not necessary. The Supreme Court has stated that "Mere diminution in the value of property, however serious, is insufficient to demonstrate a taking." Concrete Pipe, 508 U.S. at 645. In the multiemployer benefit plan context, the proper inquiry is whether the employer's liability is proportionate to the employer's experience with the fund at issue. Connolly, 475 U.S. at 225.
Here, Robert Coal's liability to the 1992 Plan is based solely on the number of its former employees who are receiving benefits from the Plan. (U.S. Opp'n to Defs.'s Mot. Summ. J. at 35) (citing 26 U.S.C. § 9712(d)(3)). Thus it is clear that Robert Coal's obligations to the Plan are reasonable and directly proportionate to its liability under the previous funds.
The second factor to be considered is the extent to which the regulation interferes with the claimant's reasonable investment-backed expectations. Robert Coal claims that it reasonably held an investment-backed expectation that it would be completely free of any future liability for retiree health benefits when it signed the settlement agreement. Since the Coal Act was enacted after Robert Coal entered into the settlement agreement, this issue presents a closer question than did the analysis under the "economic impact" prong of the test. Nevertheless, Robert Coal fails to meet its burden.
First, Robert Coal signed several NBCWAs which required signatory operators to continue making contributions to the Benefit Trusts, regardless of whether the operator did or did not sign any subsequent NBCWA. In United Mine Workers of Am. v. Nobel, 720 F. Supp. 1169, 1178 (W.D. Pa. 1989), aff'd without opinion, 902 F.2d 1558 (3d Cir. 1990). cert. denied, 499 U.S. 904 (1991), the Court held that:
The language of the plan benefits contained in the past five collective bargaining agreements between the UMWA and the BCOA, providing that a pensioner 'will be entitled to a health services card for life,' together with the 25-year history of lifetime benefits prior to 1974,... establish that the parties intended to provide health benefits to the individual plaintiffs for life. We find that the language confers a right to benefits for the lifetime of the pensioner.
(emphasis added). See also District 29, United Mine Workers of Am. v. United Mine Workers of Am. 1974 Benefit Plan & Trust, 826 F.2d 280, 283 (4th Cir. 1987), cert denied, 485 U.S. 935 (1988). Thus, Robert Coal's participation in the agreements weighs heavily against the "reasonableness" of its alleged investment-backed expectations of being free from all future obligations to provide health benefits.
Second, the Supreme Court has stated that companies who conduct business in historically regulated fields "cannot object if the legislative scheme is buttressed by subsequent amendments to achieve the legislative end." Concrete Pipe, 508 U.S. at 645. Indeed, courts have repeatedly asserted that government involvement in the coal industry put coal operators on notice that the government might intervene in the management of benefit funds. As the Sixth Circuit noted in Blue Diamond Coal, 79 F.3d at 525 (citing Davon, 75 F.3d 1114 at 1128-29):
"The federal government pervasively regulates the coal mining industry, the UMWA Fund originated from a federal takeover of the nation's coal mines, and federal intervention has been required to settle strikes over benefits issues. Given these circumstances, Blue Diamond cannot argue that it was reasonable for [it] to believe that Congress would never intervene in the management of the UMWA Fund or its successor funds."
The third and final factor to be considered in determining whether the application of the 1992 Coal Act to Robert Coal constitutes an impermissible taking is the nature of the governmental action itself. Courts have much more readily found a taking when the government "physically invade[s] or permanently appropriate[s]" assets for its own use, as opposed to when the deprivation merely "arises from a public program that adjusts the benefits and burdens of economic life to promote the common good." Connolly, 475 U.S. at 225; accord Keystone Bitum. Coal Ass'n v. DeBenedictis, 480 U.S. 470, 488 n. 18, 94 L. Ed. 2d 472, 107 S. Ct. 1232 (1987). As stated in Chater, "to present this dichotomy is to resolve it. The Coal Act... is merely a public program that readjusts economic burdens, and the funds collected are paid to a private benefit fund, not to a government entity." Chater, 110 F.3d at 161.
Finally, the Supreme Court's decision in Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 89 L. Ed. 2d 166, 106 S. Ct. 1018 (1986), where it decided the constitutionality of certain provisions of the Multiemployer Pension Plan Amendments Act of 1980
("MPPAA"), is instructive. Like the Coal Act, the MPPAA was enacted to protect participants in multiemployer benefit plans. Among its provisions is a requirement that an employer withdrawing from a multiemployer pension plan pay a fixed amount to that plan. Trustees who administered a multiemployer pension plan under a collective bargaining agreement contested the constitutionality of those withdrawal liability provisions. The trustees argued that the provisions imposed a new obligation on employers and plan participants that exceeded the obligations imposed by earlier contractual agreements. According to the trustees, the new statutory obligation destroyed the existing contractual rights and thus constituted an unconstitutional taking.
The Connolly Court upheld the MPPAA, even though the Act explicitly nullified the previous contractual provisions limiting employers' liability and imposed an additional statutory obligation on employers. The Court held that the MPPAA did not violate the Takings Clause of the Fifth Amendment, stating that "the United States has taken nothing for its own use, and only has nullified a contractual provision limiting liability by imposing an additional obligation that is otherwise within the power of Congress to impose." Id. at 224.
The Court's decision in this case is not as far-reaching as the Supreme Court's decision in Connolly. As discussed above, the Coal Act does not nullify the contractual agreement between Robert Coal and UMWA. It does, however, impose "an additional [statutory] obligation that is otherwise within the power of Congress to impose." Id.
This Court thus finds that the Coal Act, like the MPPAA, works no unconstitutional Taking.
4. Appointments Clause Challenge
Defendants claim that the 1992 Coal Act violates the Appointments Clause of the Constitution, which states in relevant part that, "[The President,] shall nominate, and by and with the Advice and Consent of the Senate, shall appoint... all Officers of the United States..." U.S. Const. Art. II, § 2, cl. 2.
The Court finds Defendants' argument to be without merit. The definition of an "officer" requires (1) a continuing and formalized relationship of employment with the United States government; and (2) the exercise of significant authority. See Buckley v. Valeo, 424 U.S. 1, 125-26, 46 L. Ed. 2d 659, 96 S. Ct. 612 (1976).
The Trustees of the 1992 Plan are not "officers" under the Buckley standard. First, they hold no "office" or continuing employment relationship with the United States government; the Plan acts as a private entity. (U.S. Opp'n to Defs.' Mot. Summ. J. at 42) (citing Defs.' Mot. Summ. J. at 40-51). Not only are the Trustees of the Plan and the UMWA private parties, but the Coal Act itself expressly provides that the 1992 Plan is a "private plan". 26 U.S.C. § 9712(a)(1). The 1992 Plan operates like any other private multiemployer benefit plan, differing only in that the obligation imposed on signatory operators to contribute stems from a statutory as opposed to contractual obligation. The 1992 Plan and its Trustees act only to further the private interests of the Plan beneficiaries, not the public interest or the federal government.
Second, while it is true as Defendants argue, that the Trustees do exercise "significant authority", what is relevant is that they do not exercise significant governmental authority. The Trustees exercise no governmental authority of any kind. Instead, they are charged with operating a private multiemployer plan. The Trustees exercise their authority to serve only the interests of the Plan beneficiaries, not the federal government or even the public-at-large. See, e.g., Melcher v. Federal Open Market Committee, 644 F. Supp. 510, 521 (D.D.C. 1986) (selection of members of Federal Reserve Board's federal open market committee by private individuals did not violate Appointments Clause), aff'd in part and vacated in part on other grounds, 266 U.S. App. D.C. 397, 836 F.2d 561 (D.C. Cir. 1987), cert. denied, 486 U.S. 1042 (1988).
Since the Trustees of the 1992 Plan possess none of the attributes of "officers" pursuant to the Appointments Clause, this Court holds that they need not be appointed in conformity with the requirements of that Clause.
C. Credit for Robert Coal's Payments under Kentucky Settlement Agreement
In its Answer to Plaintiff's Complaint, Defendants assert that Robert Coal should receive a "credit or set off for the costs that it voluntarily assumed and paid in providing health and other benefits from May of 1988 through... January 31, 1993". (Defs.' Answer P52.) As discussed above, Robert Coal's payments pursuant to the Kentucky agreement stemmed from a contractual obligation. That obligation is separate and distinct from the statutory obligation imposed upon Robert Coal by the Coal Act. The Court thus rejects Robert Coal's argument and finds that a set off is not warranted in this case.
For the reasons discussed above, Defendants' Motion for Summary Judgment [ # 38] is hereby denied, and Plaintiffs' Motion for Summary Judgment [ # 36] is hereby granted.
An Order will issue with this Opinion.
Nov. 17, 1997
UNITED STATES DISTRICT JUDGE
This matter is before the Court on Plaintiffs' Motion for Summary Judgment [ # 36] and Defendants' Motion for Summary Judgment [ # 38].
Plaintiffs, the Trustees of the United Mine Workers of America 1992 Benefit Plan ("1992 Plan"), bring this action under the Coal Industry Retiree Health Benefits Act of 1992 to recover premium payments owed by Defendants, former coal operators, to the 1992 Plan.
Upon consideration of the Motions, Oppositions (including the Opposition of Intervenor United States), Replies, Additional Authority, and Supplemental Memoranda, and the entire record herein, for the reasons set forth in the accompanying Memorandum Opinion, it is this 17th day of November, 1997, hereby:
ORDERED, that Plaintiffs' Motion for Summary Judgment [ # 36] must be and is hereby granted, and Defendants' Motion for Summary Judgment [ # 38] must be and is hereby denied.
Nov. 17, 1997
United States District Judge