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December 7, 1994


The opinion of the court was delivered by: KEITH A. PESTO

Report and Recommendation

 Pending before the Court is plaintiff Unity Real Estate Company's motion for a preliminary injunction restraining the enforcement of the Coal Industry Retiree Health Benefit Act of 1992, Pub.L. 102-486, 106 Stat. 3036-56, 26 U.S.C.§ 9701 et seq., by the defendants, the Boards of Trustees of the UMWA Combined Benefit Fund and the 1992 UMWA Benefit Plan *fn1" The matter was referred to me pursuant to the Magistrates Act, 28 U.S.C.§ 636(b) (1), and subsections 3 and 4 of Local Rule 72.1 for Magistrate Judges. I recommend that an injunction issue.

 In order to obtain a preliminary injunction, Unity must show a likelihood of success on the merits and a probability that irreparable harm will occur if the injunction is not granted. I must also consider the effect of the injunction on other interested persons, and the public interest. See Bradley v. Pittsburgh Board of Education, 910 F.2d 1172, 1175 (3d Cir.1990).

 Probability of irreparable harm

 Ordinarily, financial injury does not constitute irreparable harm as matter of law. It is not so much that money cannot be the subject of an injunction as that injuries that can be remedied by an award of damages do not warrant injunctive relief. See In re Arthur Treacher's Franchisee Litigation, 689 F.2d 1137, 1145 (3d Cir. 1982). Where the evidence shows the probability that the movant will suffer bankruptcy as a result of the challenged conduct, however, injunctive relief may be necessary to prevent irreparable harm. See Doran v. Salem Inn, Inc., 422 U.S. 922, 932, 45 L. Ed. 2d 648, 95 S. Ct. 2561 (1975).

 The public interest and effect on third parties

 These factors weigh neither in favor of or against issuance of an injunction. There is no evidence that the public at large or those third parties who are most directly affected by the Coal Act, the "orphan" retirees, liability for whom has have been assigned to Unity, will be affected adversely by the grant of preliminary injunctive relief.

 Likelihood of success on the merits

 Unity challenges the constitutionality of a statute regulating economic activity in an area committed to Congress by the Commerce Clause. Legislation such as the Coal Act therefore carries a strong presumption of constitutionality, and as the Supreme Court has repeatedly stated, must be upheld unless it is shown to be either contrary to a restraint placed on government by the Constitution or arbitrary and irrational, that is, not a rational means of furthering a legitimate legislative purpose. United States v. Carlton, 129 L. Ed. 2d 22, 114 S. Ct. 2018 (1994). Four district courts that have considered challenges to the Coal Act have found in favor of its constitutionality, although not without reservations. See Blue Diamond Coal Co., Inc. v. Shalala, Civ. No. 3-93-473 (E.D. Tenn. November 9, 1994); LTV Steel Co. v. Shalala, 163 Bankr. 955 (S.D.N.Y. 1993); Templeton Coal Co. v. Shalala, 855 F. Supp. 990 (S.D.Ind. 1993); Barrick Gold Exploration, Inc. v. Hudson, 823 F. Supp. 1395 (S.D.Ohio 1993). Finally, the Supreme Court has not held an act of Congress which regulates the economic affairs of nongovernmental entities unconstitutional since the New Deal. Notwithstanding all this, the Coal Act as applied to Unity is so palpably unconstitutional that a preliminary injunction should issue against the enforcement of the Act against it.


 Based on the evidentiary hearing in this matter, the following facts are taken as proved for purposes of the plaintiff's motion:

 Unity is a corporation owned by members of the Jamison family which owns a small commercial building and parking lot in Greensburg, Pennsylvania. Unity employs two individuals, an officer at a salary of $ 7,200 per year, and a janitor. Its annual gross revenues are approximately $ 50,000 and its net worth is approximately $ 85,000.

 Unity was incorporated in 1947, and in 1969 was the surviving entity after a merger with three inactive coal companies, Stewart Coal & Coke, Penn View Coal, and South Union Coal Company. Like Unity, South Union was a Jamison family-owned company, which had incorporated in Pennsylvania in 1922. From 1922 through 1960 South Union had operated at various times two coal mines in southwestern Pennsylvania and one in northern West Virginia. From 1961 until 1969, South Union mined no coal. In 1974, Unity incorporated a wholly owned subsidiary in West Virginia, also named South Union Coal Company, to reopen the mine formerly operated by the Pennsylvania incorporated South Union. South Union (West Virginia) operated the mine in West Virginia formerly operated by South Union (Pennsylvania) from 1974 until 1981, when it went bankrupt. South Union (Pennsylvania) was a member of the Northern West Virginia Coal Association which was a signatory to the 1950, 1951, 1952, 1955, 1956, and 1959 National Bituminous Coal Wage Agreements through its membership in the Bituminous Coal Operators Association. South Union (West Virginia) was a member of the Western Pennsylvania Coal Operators Association, a member of the BCOA, and thereby a signatory of the 1974, 1978, and 1981 NBCWAs. When South Union (West Virginia) went into bankruptcy in 1981, it petitioned for leave and was granted leave by the bankruptcy court to reject its obligations under the 1981 NBCWA.

 In October 1993, Unity received a letter from the defendant Trustees of the Combined Fund informing Unity that it had been assigned 78 beneficiaries under the Coal Act for which it was obligated to pay a premium of $ 96,158.84 for the first partial year of operation of the Combined Fund, from February 1, 1993 to October 1, 1993. Unity was advised that for the second year, from October 1, 1993 to September 30, 1994, it was assigned 76 beneficiaries at a premium of $ 170,681.08. Payment of the premiums was to be made in monthly installments; failure to pay premiums on a timely basis subjects Unity to fines of up to $ 100/day per beneficiary. Unity does not have the cash on hand to pay even the first month's premium, and its net worth is less than its first year obligation. Unity was assigned beneficiaries on the basis that the beneficiaries, or their deceased parents or spouses in the case of survivor beneficiaries, had last worked for South Union (Pennsylvania) or South Union (West Virginia) pursuant to a NBCWA. Unity had no records of former employees of South Union (Pennsylvania), having turned those over to the trustees of the UMWA 1950 Welfare and Retirement Fund after it left the coal business in 1961. Unity did have some records of former employees of South Union (West Virginia), but Mr. Jamison, the president of Unity since 1962, who was personally involved in the mining operations of both South Union companies, could recognize only about eight beneficiaries as former employees.

 The Coal Act

 The political and social history which led to the passage of the Coal Act are ably described in the Coal Commission Report (November 1990), docket no. 10, Exhibit A, Blue Diamond Coal Co., Barrick Gold Exploration, Templeton Coal Co., and LTV Steel Co., which, together with the opinion of now Chief Judge Ziegler in United Mine Workers Int'l Union v. Nobel, 720 F. Supp. 1169 (W.D.Pa. 1989), aff'd w/o op., 902 F.2d 1558, cert. denied, 499 U.S. 904 (1991), provide a background to the legal issues in the instant matter. Congress passed the Coal Act to spread the costs of UMWA benefit plans established and funded by the NBCWAs since 1950. Congress did this by imposing liability for the lifetime health (and other) benefits promised in the NBCWAs to members of the UMWA on entities that had previously signed NBCWAs but which were no longer currently operating under a NBCWA.

 Due Process Clause

 The Due Process Clause challenge to the substantive validity of the Coal Act is without merit. Congress' purpose in enacting the Coal Act, to shore up the benefits plans to UMWA miners, was neither illegitimate nor arbitrary. The means chosen, whether one characterizes it as the imposition of liability for past acts *fn2" , as plaintiffs do, or the imposition of a tax on the coal industry, as defendants do, is a rational means of achieving that end.

 Because the substantive component of the Due Process Clause thus guarantees nothing but this slightest of checks on federal legislation affecting economic activity, no further analysis is required. See also United States v. Carlton, 129 L. Ed. 2d at 34-35 (Scalia, J., concurring in the judgment, stating that the Due Process Clause guarantees no substantive rights).

 Takings Clause

 The Takings C1ause *fn3" states that private property shall not "be taken for public use, without just compensation." See Dolan v. City of Tigard, 129 L. Ed. 2d 304, 315, 114 S. Ct. 2309 (1994). The Coal Act by its terms benefits only those coal miners and their beneficiaries who have been held to be already entitled to lifetime benefits under the NBCWAs. The UMWA and current members of the BCOA are therefore the real beneficiaries of the Coal Act, since the cost of benefits to the benefit plans established by the UMWA and BCOA is transferred in part to entities like Unity that have long since ceased to have any contractual obligation under or receive any contractual benefit from a NBCWA. That Congress has legislated for the benefit of a favored few is no constitutional infirmity, since Hawaii Housing Authority v. Midkiff, 467 U.S. 229, 81 L. Ed. 2d 186, 104 S. Ct. 2321 (1984), essentially renders the question of what is a public use a nonjusticiable political question.

 What is constitutionally significant is the manner in which burdens are assigned, because a principal purpose of the Takings Clause is "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." Dolan v. City of Tigard, 129 L. Ed. 2d at 316, quoting Armstrong v. United States, 364 U.S. 40, 49, 4 L. Ed. 2d 1554, 80 S. Ct. 1563 (1960). Determining whether a particular statutory scheme results in a taking depends on an ad hoc assessment of (1) the economic impact of the statute on the burdened party; (2) the extent of the statute's interference with distinct investment-backed expectations; and (3) the character of the governmental action. See Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 224-25, 89 L. Ed. 2d 166, 106 S. Ct. 1018 (1986).

 Economic Impact

 The Blue Diamond court analyzed the economic impact factor in terms of the gross effect of the Coal Act on the company's balance sheet. As seen from the factual recitation in this case, Unity Real Estate will be utterly liquidated within the first several months of payments under the Act. That is not dispositive, however, since Connolly counsels an examination of the "relationship between the employer and the plan to which it had made contributions," i.e., an examination of the economic nexus between the burden and the party burdened by the statute. 475 U.S. at 225-26 *fn4" Even this finer analysis weighs against the Coal Act, however, since liability is being imposed on Unity (without the benefit of any predeprivation process) for as little as an allegation of one day's employment of an employee covered by the Act, even if that employment took place, and the company ceased to do any business in the coal industry, more than ten years before the Coal Act.

 Character of the government action

 Whatever the congressional motive in spreading liability from the sector of the mining industry already best able to protect itself -- the UMWA and the current members of the BCOA -- to a small unsophisticated former coal operator like Unity, the legislation itself is a social welfare measure within Congress' responsibility for interstate commerce and receives the strongest presumption of constitutionality.

 Effect on investment-backed expectations

 The best analysis of this factor was provided by Judge Hull in Blue Diamond:


It was reasonably foreseeable that Congress would take action to ensure that the UMWA benefit trust would remain solvent... . But it was a good deal less foreseeable that the legislation chosen to solve the problem would reach back to conduct which occurred almost 30 years ago to enforce a "promise" Blue Diamond never actually made. slip. op. at 12.

 The argument in favor of the Coal Act is roughly this: those operators who withdrew from the unionized coal industry before the NBCWAs were interpreted in cases such as UMWA v. Nobel and UMWA 1974 Pension v. Pittston Co., 299 U.S. App. D.C. 339, 984 F.2d 469 (D.C.Cir. 1993) to impose perpetual obligations to contribute to the 1950 Pension Plan and the 1974 Pension Plan did not incur the same costs as the coal industry currently does. This disparity results from the incorporation (by judicial decisions) into the cost of doing business of the externality of the social cost of health benefits to miners and their beneficiaries. The Coal Act merely extends that incorporation of externalities to operators who left the industry.

 The foregoing analysis is completely within the constitutional mainstream when applied to externalities actually generated by the nature of the coal industry itself, or even to conditions rationally related to the coal industry. The classic example is Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 16-17, 49 L. Ed. 2d 752, 96 S. Ct. 2882 (1976), where the imposition of liability for black lung disease on coal operators even though they had long since left the industry was held to be constitutional. At the opposite pole is the pension plan held unconstitutional in Railroad Retirement Board v. Alton R. Co., 295 U.S. 330, 79 L. Ed. 1468, 55 S. Ct. 758 (1935), because it imposed responsibility for a pension for former railroad employees on employers solely on the basis that they happened to be in the same industry. The continuing vitality of Railroad Retirement Board has been questioned, see Templeton Coal Co., 855 F. Supp. at 1001, and it is clear that the Supreme Court has become much more deferential in tone and in result to congressional legislation since that decision. Nonetheless, Turner Elkhorn Mining Co. itself relied on the fact that imposing liability for black lung disease satisfied a "specific need created by the dangerous conditions under which the former employee labored," 428 U.S. at 19, and did "not simply [] increase or supplement a former employee's salary." Id. At least one member of the Supreme Court expressly continues to "leave open the possibility that the imposition of retroactive liability on employers for the benefit of employees may be arbitrary and irrational in the absence of any connection between the employer's conduct and some detriment to the employee." Connolly 475 U.S. at 229 (concurring opinion of O'Connor, J.).

 The opinion of the Court in Carlton on the constitutionality of a retroactive tax increase also indicates some continuing limitation on the scope of Congress' powers. The retrospective elimination of a lucrative tax deduction was upheld by the Court on the basis that it was corrective legislation amending an existing tax, "and its period of retroactive effect is limited " 129 L. Ed. 2d at 31, to the year prior to the year of the enactment of the statute. See also id. at 33 ("A period of retroactivity longer than the year preceding the legislative session in which the law was enacted would raise, in my view, serious constitutional questions.") (opinion of O'Connor, J., concurring in the judgment). Dolan v. City of Tigard also sheds some light on the degree of connection required between the assignment of burdens and externalities. Applying the Takings Clause to a municipal attempt to require dedication of a floodplain easement and bicycle path as a condition of expanding a store, the Court held that there must be a "rough proportionality" between the required dedication and the proposed expansion if the municipal action were not to constitute a taking. 129 L. Ed. 2d at 320. See also Connolly, 475 U.S. 211 at 225, 89 L. Ed. 2d 166, 106 S. Ct. 1018 ("The assessment of liability... directly depends on the relationship between the employer and the plan... .")

 The Coal Act, as applied to Unity Real Estate, is far closer to the general and unconnected imposition of liability questioned in Connolly by Justice O'Connor and condemned by both the conservative and liberal justices in Railroad Retirement Board than to the imposition of either limited employment-connected liability upheld in Turner Elkhorn Mining Co. or to the temporally limited retroactive increases in tax liability upheld in Carlton, and in pension liability upheld in Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 81 L. Ed. 2d 601, 104 S. Ct. 2709 (1984) and Connolly. The Coal Act's imposition of liability for general health benefits for miners and their beneficiaries, although it undoubtedly is a good thing that retired miners and their beneficiaries have such benefits, lacks any employment connectedness, and is practically unlimited in time. It is obvious that there can be no "rough proportionality" between the burdens it assigns to Unity and the benefit that Unity receives from the employment relationship. As applied to Unity Real Estate Co., it effects an uncompensated taking, and is therefore unconstitutional *fn5"

 Pursuant to 28 U.S.C.§ 636(b)(1), the parties are given notice that they have ten days to serve and file written objections to this Report and Recommendation.

 DATE: 7 December 1994

 Keith A. Pesto

 United States Magistrate Judge

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