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LINDSEY COAL MINING CO. v. SHALALA

September 25, 1995

LINDSEY COAL MINING COMPANY, LIQUIDATING TRUST, by its Liquidating Trustees, H. Robert Lasday and Elaine K. Light, Plaintiffs, -vs- DONNA E. SHALALA, Secretary, United States Department of Health and Human Services, and UNITED MINE WORKERS OF AMERICA COMBINED BENEFIT FUND, and its Trustees, Marty D. Hudson, Michael Holland, Elliot A. Segal, Thomas O.S. Rand, Carlton R. Sickles, Gail R. Willensky and William P. Hobgood, Defendants.


The opinion of the court was delivered by: AMBROSE

 and

 ORDER OF COURT

 This action for declaratory and injunctive relief challenges the constitutionality of the Coal Industry Retiree Health Benefit Act of 1992, 26 U.S.C.A. §§ 9701-9722 (Supp. 1995) and 30 U.S.C. § 402(h) (Supp. 1995) (the "Coal Act"), as applied to Plaintiff Lindsey Coal Mining Company Liquidating Trust, also known as Lindsey Coal Mining Company, in Liquidation ("Lindsey Coal Trust"). Defendants are Donna Shalala, Secretary of the United States Department of Health and Human Services (the "Secretary"), and the United Mine Workers of America Combined Benefit Fund and its Trustees ("Trustees"). Pending before the Court are cross-motions for summary judgment filed by each of the parties. Plaintiff claims that it is not liable for any benefits due retired coalminers and their dependants pursuant to the Coal Act because it is not a "signatory operator" nor is it "in business" as required by the terms of the Coal Act. Plaintiff further contends that even if the Coal Act does apply, it violates the Procedural Due Process, Substantive Due Process, and Takings Clauses of the Fifth Amendment. Defendants contend that the Coal Act does apply because Plaintiff is the noncorporate continuation of Lindsey Coal Mining Company and that the Coal Act as applied here is not unconstitutional. After carefully considering all of the briefs and materials submitted by the parties in support of their motions and for the reasons set forth below, the Court concludes that the Lindsey Coal Mining Company continues to exist through Plaintiff for purposes of Coal Act liability, that the statutory requirements of the Act have been met, and that the Act, as applied here, does not violate the Procedural Due Process, Substantive Due Process, or Takings Clauses of the Fifth Amendment. Defendants' Motions for Summary Judgment will be granted and Plaintiff's Motion for Summary Judgment will be denied.

 I. Legal Standard.

 Summary judgment may only be granted where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. Proc. 56(c). The parties contend, and the Court finds, that there are no genuine issues of material fact and that this case is appropriate for disposition via summary judgment.

 II. Factual Background.

 A. The Coal Act.

 The social and political underpinnings leading to the passage of the Coal Act have been set forth in great detail in the Coal Commission Report: A Report to the Secretary of Labor and the American People (November 1990), see Doc. # 21, Exh. 2, as well as by a number of courts that have considered the constitutionality of the Act. See, e.g., In re Chateaugay Corp., 53 F.3d 478 (2d Cir. 1995); Barrick Gold Exploration, Inc. v. Hudson, 823 F. Supp. 1395 (S.D. Ohio 1993), aff'd, 47 F.3d 832 (6th Cir. 1995); Templeton Coal Co. v. Shalala, 882 F. Supp. 799 (S.D. Ind. 1995); In re Blue Diamond Coal Company, 174 Bankr. 722 (E.D. Tenn. 1994); see also Unity Real Estate Co. v. Hudson et al., 889 F. Supp. 818 (W.D. Pa.). The Coal Commission Report, together with the excellent discussion of the history of the Coal Act presented by Judge Healey in In re Chateaugay Corp., 53 F.3d at 481-486, provide a thorough background to the legal issues presented in the instant action and need not be reiterated at length here. Briefly, the Coal Act was enacted by Congress in October of 1992 as a vehicle to combat a perceived crisis in the funding of UMWA health and pension benefit plans for thousands of retired UMWA coal miners and their dependents. The Coal Act created a new private trust fund, the UMWA Combined Benefit Fund (the "Combined Fund"), and places the burden of providing funding for the Combined Fund on those employers who have in the past voluntarily participated in collectively bargained multiemployer benefit plans established and funded by a series of National Bituminous Coal Wage Agreements ("NBCWAs") beginning in 1950. Congress determined that liability for the lifetime health (and other) benefits of the retired UMWA workers should fall on those "persons most responsible" for the "plan liabilities":

 
In allocating financial responsibility for costs of the Combined Fund, Congress determined that "those companies which employed the retirees in question, and thereby benefitted from their services, will be assigned responsibility for providing the health care benefits promised in their various collective bargaining agreements." 138 Cong. Rec. S17,603 (daily ed. Oct. 8 1992) (reproducing proposed conference committee report). Accordingly, Congress directed the Secretary of Health and Human Services to levy annual health insurance and death benefit insurance premiums on each "assigned operator." 26 U.S.C. §§ 9704, 9705. An "assigned operator" was defined as a signatory to any NBCWA since 1950. Id., § 9701(c)(5). The Secretary of Health and Human Services "assigned" each beneficiary to the signatory operator that longest employed the beneficiary. Id. Where the signatory operator is no longer in business, the liability for its beneficiaries passes to "related persons," such as successors in interest. Id., §§ 9704(a), 9701(c)(2). The costs of providing health care benefits to the remaining unassigned operators were divided in proportion to their share of the assigned beneficiaries. Id., § 9704.
 
In sum, the annual premium for an assigned operator equals the sum of the cost of providing health benefits to the company's assigned beneficiaries, and its pro rata share of the cost of health benefits for "orphaned" beneficiaries. The Coal Act restricts liability for medical benefit premiums to companies that (1) signed one or more Wage Agreements [NBCWAs] between 1950 and 1988, (2) continue to "conduct[] or derive[] revenue from any business activity, whether or not in the coal industry," and (3) actually employed at least one retiree currently receiving benefits. Id. § 9701(c).

 In re Chateaugay, 53 F.3d at 485-86.

 B. Lindsey Coal Mining Co. and the Liquidating Trust.

 Lindsey Coal Mining Company was incorporated in Pennsylvania in 1910 and engaged in numerous active coal mining operations in Pennsylvania during the next forty-two years. Lindsey Coal Mining Company employed UMWA-represented mine workers in its coal mining operations and generated profits from its business.

 Lindsey Coal Mining Company, through its membership in the Central Pennsylvania Coal Producers Association ("CPCPA"), became a signatory to the 1947 NBCWA, the 1950 NBCWA and the February 1, 1951 amendment to the 1950 NBCWA. See Doc. # 21, Exh. 11, Lasday Dep. at 17-18. *fn1" It contributed approximately $ 230,000.00 to the multiemployer benefit fund established by these NBCWAs until 1952, when the Company ceased its active coal mining operations and began leasing its properties to various coal and gas operators. Although it was no longer receiving revenue from active coal mining, it did collect royalties derived from coal and gas rights from the properties it had leased to other operators, as well as revenues from the sale of real estate and scrap metal. For the next twenty-two years, from 1952 until 1974, Lindsey Coal Mining Company acquired no additional assets and confined its activities to the sale and leasing of its previously held properties. The Company had no employees during this time except for a part-time secretary.

 In 1974, the shareholders of Lindsey Coal Mining Company decided that it was no longer "desirable" to continue its leasing activities as a corporation in large part because of tax reasons and so resolved to liquidate the corporation "as promptly as possible." See Doc. # 15, Exh. H, Minutes and Resolution of Joint Meeting of Shareholders and Board of Directors of Lindsey Coal Mining Company. The dissolution of the Company was to be completed by Friday, April 11, 1975.

 In March 1975, the shareholders of Lindsey Coal Mining Company entered into a trust agreement in order to "wind up the affairs" of the corporation as quickly as possible, and the agreement noted that "time [was] of the essence" regarding liquidation of the corporation's assets. See Doc. # 15, Exh. I, Deed of Trust at 1-2. The trust agreement provided for the transfer of all of the remaining corporate assets to a Liquidating Trustee, and granted the Trustee full corporate powers in the premises, including the power to, inter alia: retain any real or personal property; invest in all forms of property; purchase investments; repair, alter, improve or lease property; sell, exchange, or partition property; to borrow money; to allocate receipts to income or principal; to compromise claims, and to make distributions in kind. See Doc. # 15, Exh. I, Deed of Trust at 2. The corporate assets transferred to the Liquidating Trustee included Lindsey Coal Mining Company's real estate and mineral reserves.

 Twenty years have passed since the Lindsey Coal Mining Company began liquidating its assets and winding up its corporate affairs, and to date the liquidation process has yet to be completed. In fact, liquidation is not expected to be completed for at least another two to four years, when all mineral resources and timber resources have been depleted or extracted. See Doc. # 21, Exh. 11, Lasday Dep. at 92. During the past twenty years, the Lindsey Coal Mining Company, through Plaintiff, derived revenue from coal and gas royalties, from the sale of several parcels of land, and from rental property. These activities generate an income of approximately $ 10,200 per month, which is collected by Plaintiff and distributed to the beneficiaries of the trust, the current shareholders of Lindsey Coal Mining Company. In addition, new coal and gas leases have been entered into by co-trustees of Plaintiff in the name of Lindsey Coal Mining Company as lessor.

 In September of 1993, the Lindsey Coal Mining Company, through Plaintiff, was notified that it had been assigned liability for twenty-three of its former miners, their dependents or beneficiaries pursuant to the Coal Act. The first year's monthly premium was assessed in the amount of $ 6,667.34. Although Plaintiff vehemently disputes that it can be liable for Lindsey Coal Mining Company's obligations under the Coal Act, it has made timely payments to the Combined Fund to avoid the heavy penalties established by ...


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