In attempting to characterize the "nature of the governmental action" with respect to the MPPAA, the Concrete Pipe and Connolly Courts spoke of the government adjusting "the benefits and burdens of economic life." 475 U.S. at 225. Significantly, in those cases, the Supreme Court was not confronted with a situation in which the "adjustment" of the "burdens of economic life" would result in the certain bankruptcy of the claimant, leaving it without any economic viability. Neither Concrete Pipe, Connolly, or the four cases cited in Connolly, stand for the radical proposition that any public program adjusting "the benefits and burdens of economic life" -- irrespective of the effect on the claimant -- will withstand constitutional scrutiny under the Takings Clause.
Accordingly, although the Coal Act, at first blush, may be characterized merely as an "interference with the property rights of an employer [arising] from a public program that adjusts the benefits and burdens of economic life to promote the common good" (a conclusion that subjects the government's actions to a less rigorous constitutional scrutiny and lends support to a finding that no "taking" has occurred), the true nature of the governmental action can only be evaluated in conjunction with an examination of the severity of the economic effect of the governmental action on the claimant -- the second prong of the Supreme Court's Takings analysis.
2. The Economic Impact On Unity
In evaluating the severity of the economic impact of the governmental action in Concrete Pipe and Connolly, the Court found three factors significant in support of its finding that no "taking" had occurred by application of the MPPAA: 1) "mere diminution in the value of property" is insufficient to demonstrate a taking ( Concrete Pipe, 113 S. Ct. at 2291); 2) the employer's liability under the MPPAA was not "'out of proportion to [the employer's] experience'" with the benefits plan (Id. (quoting Connolly, 475 U.S. at 226)); and 3) the MPPAA contained "a significant number of provisions . . . that moderate and mitigate the economic impact of an individual employer's liability" -- including limiting withdrawal liability for an employer that liquidates its business ( Connolly, 475 U.S. at 225-26 & n.8).
In Concrete Pipe, the petitioner argued that the economic impact of the MPPAA supported a finding of an unconstitutional taking because the petitioner would be required to "pay out 46% of shareholder equity" in order to satisfy its obligations under the Act. 113 S. Ct. at 2291. In rejecting this contention, the Court cited Euclid v. Ambler Realty Co., 272 U.S. 365, 71 L. Ed. 303, 47 S. Ct. 114 (1926), and Hadacheck v. Sebastian, 239 U.S. 394, 60 L. Ed. 348, 36 S. Ct. 143 (1915), for the proposition that "mere diminution in the value of property, however serious, is insufficient to demonstrate a taking." 113 S. Ct. at 2291. Euclid and Hadacheck involved challenges to land use restrictions which resulted in the diminution in value of the claimant's property of 75% and 92.5%, respectively. Significantly, the claimants in Euclid and Hadacheck retained at least some economic viability in the property at issue.
The impact of the Coal Act on Unity Real Estate stands in marked contrast to the situation in Concrete Pipe and Connolly. It is undisputed that application of the Coal Act to Unity will result in its liquidation within the first several months of payments under the Act. This factor, while not dispositive, distinguishes the Coal Act's application to Unity from the situations in Concrete Pipe, Connolly, and the cases relied upon by the defendant Trustees and by the United States in this action. The other "Coal Act cases" in which courts have ruled upon the constitutionality of the Act also are distinguishable in this respect. See In re Chateaugay Corp., 53 F.3d 478, 1995 WL 226252, at *16 ("At its bankruptcy confirmation hearing, LTV's chief financial officer conceded that the Coal Act obligations will not interfere with LTV's ability to emerge from bankruptcy and return to profitability.").
In evaluating this prong of the Takings analysis, however, the Supreme Court in Connolly was less concerned with the magnitude of the economic diminution, and instead focused on the conduct of the claimant in relation to the statute at issue:
As to the severity of the economic impact of the MPPAA, there is no doubt that the Act completely deprives an employer of whatever amount of money it is obligated to pay to fulfill its statutory liability. The assessment of withdrawal liability is not made in a vacuum, however, but directly depends on the relationship between the employer and the plan to which it had made contributions. . . . There is nothing to show that the withdrawal liability actually imposed on an employer will always be out of proportion to its experience with the plan, and the mere fact that the employer must pay money to comply with the Act is but a necessary consequence of the MPPAA's regulatory scheme.
Connolly, 475 U.S. at 225-26. Since the withdrawal liability imposed on an employer by the MPPAA "'is the employer's proportionate share of the plan's "unfunded vested benefits,"'" ( id., at 217 (citations omitted)), the Court in Connolly found that the impact of the MPPAA was not so severe as to support a finding of an unconstitutional taking.
Thus, as Magistrate Judge Pesto noted in his initial Report and Recommendation, in analyzing the economic impact of the Coal Act on Unity, the primary consideration is "the economic nexus between the burden and the party burdened by the statute." Docket No. 26, at 8. See In re Chateaugay Corp., 53 F.3d 478, 1995 WL 226252, at *15 ("Where a regulation mandates contributions to a benefit fund, the proper yardstick of economic impact is that of proportionality. Our assessment of economic impact 'is not made in a vacuum . . . but directly depends on the relationship between the employer and the plan to which it had made contributions.'" (quoting Connolly, 425 U.S. at 225)).
In making this determination with respect to the Coal Act and the specific facts before it, the Second Circuit in In re Chateaugay held that LTV Steel, which had exited the coal mining industry in 1986, "has failed to show that its Coal Act liability will be 'out of proportion to its experience' with the 1950 and 1974 Benefit Trusts." 1995 WL 226252, at *15 (quoting Connolly, 425 U.S. at 226). The court explained:
LTV's obligation to contribute to the Combined Fund derives from Congress's rational decision to require the entire class of signatory coal mine operators to fulfill their promises of lifetime health benefits for retirees. As a leading member of the BCOA, LTV participated in the collective bargaining that created the 1950 and 1974 Benefit Trusts and in their operation for nearly four decades. Moreover, the employment relationship supplies the rational link by which LTV's Coal Act premiums are tied to its past experience with the benefit plans. As with the other signatory operators, the size of LTV's annual contributions depends entirely on the number of its former employees receiving benefits from the Combined Fund. By thus mooring a given company's funding obligations to a legitimate measure of its prior benefit from the UMWA health care system, the Coal Act rationally apportions future financial responsibility according to past participation. Consequently, we are not confronted with a case of Congress 'forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.'"