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Holland v. Arch Coal, Inc.

United States District Court, District of Columbia

September 28, 2018

MICHAEL H. HOLLAND, as Trustee of the United Mine Workers of America 1992 Benefit Plan, et al., Plaintiffs,
ARCH COAL, INC., Defendant.



         The Trustees of the United Mine Workers of America 1992 Benefit Plan (1992 Plan) bring this action under the Employee Retirement Income Security Act of 1974 (ERISA), as amended, 29 U.S.C. §§ 1001 et seq., to compel defendant Arch Coal, Inc. to post security pursuant to the Coal Industry Retiree Health Benefit Act of 1992 (Coal Act), as amended, 26 U.S.C. §§ 9701 et seq. The defendant argues that the Coal Act does not require it to post security and that, in any event, the 1992 Plan already has security from another source in excess of what the Coal Act permits. The defendant counterclaims to recover that excess. Before the Court are the parties' cross-motions for summary judgment on both claims.

         I. BACKGROUND

         A. Relevant Statutory Provisions

         “The Coal Act was Congress's solution to decades of contentious negotiations between employers in the coal industry and the United Mine Workers of America (‘UMWA') regarding the provision of employee benefits to coal miners.” Holland v. Williams Mountain Coal Co., No. CIV. A. 96-1405CKKJMF, 2000 WL 284298, at *1 (D.D.C. Feb. 24, 2000), aff'd, 256 F.3d 819 (D.C. Cir. 2001).[1] Before the Coal Act, a collection of union agreements called “NBCWAs” required coal operators to provide benefits to their own retirees through Individual Employer Plans and to make contributions to a multiemployer fund that provided benefits to “orphaned” workers whose employers had gone out of business. Dist. 29, United Mine Workers of Am. v. United Mine Workers of Am. 1992 Ben. Plan, 179 F.3d 141, 143 (4th Cir. 1999). But when coal operators began exiting the industry-or, in some cases, shifting to non-union workforces-“the number of orphaned retirees rose rapidly, ” id., and the NBCWAs faced a “serious financial crisis, ” Barnhart v. Sigmon Coal Co., 534 U.S. 438, 444 (2002).

         In 1992, Congress intervened and passed the Coal Act “amidst a maelstrom of contract negotiations, litigation, strike threats, a Presidential veto[, ] . . . threats of a second veto, . . . high pressure lobbying, [and] wide disagreements among Members of Congress.” Id. at 445-46 (footnotes omitted). The Coal Act “replace[d] the [previous] contract-based system with a comprehensive statutory system.” Holland, 2000 WL 284298, at *1. And it established “three vehicles for financing retirees' health benefits.” Dist. 29, United Mine Workers of Am., 179 F.3d at 143.

         First, it created a “Combined Fund” that covers all workers receiving retirement benefits under existing NBCWAs as of July 20, 1992. Id. (citing 26 U.S.C. § 9703(f)). Second, it required operators with individual employer plans in place as of February 1, 1993 to continue maintaining those plans until they go out of business. Id. (citing § 9711(a)-(b)). Third, it established the “1992 UMWA Benefit Plan” as a “backstop” for anyone not covered by the Combined Fund or an individual employer plan-that is, “those who would have been eligible under the Combined Fund but for its cut-off date and those whose employers orphan them by going out of business.” Id. (citing § 9712(b)); see also Bellaire Corp. v. Shalala, 995 F.Supp. 125, 130 (D.D.C. 1997) (describing the 1992 Plan as “a safety net to provide health benefits to people who should receive coverage under an individual employer plan but do not”).

         This third vehicle-the 1992 Plan-is the subject of this lawsuit, and its Trustees are the plaintiffs in this case. Section 9712(d) of the Coal Act places responsibility “for financing the benefits” of the 1992 Plan on entities called “1988 last signatory operators.” § 9712(d). Specifically, these entities must satisfy three “requirements”:

• “(A) The payment of a monthly per beneficiary premium[;]
• (B) The provision of a security (in the form of a bond, letter of credit, or cash escrow)[; and]
• (C) [T]he payment of an additional backstop premium [in certain circumstances].” § 9712(d)(1)(A)-(C).

         Further-and of relevance here-§ 9712 also makes “any related person” to a 1988 last signatory operator “jointly and severally liable with such operator for any amount required to be paid by such operator under this section.” § 9712(d)(4).

         The first question in this case is whether the joint and several liability imposed on “related person[s]” by § 9712(d)(4) extends to all three of the financing requirements set forth in § 9712(d)(1)-including the “provision of security” in subsection (B)-or whether it is limited to the “payment[s]” mentioned in subsections (A) and (C).

         The second question is whether the obligation to provide security-assuming such an obligation exists-is satisfied by a letter of credit even after that letter of credit has been drawn down and converted into cash by the 1992 Plan's Trustees.

         A final, related question is whether the Coal Act requires the 1992 Plan to use proceeds from a called security for a particular purpose-namely, to provide the benefits secured by that security-or whether the 1992 Plan may treat the proceeds as a general asset subject only to the terms ...

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