Pension Plan Amendments Act (the "MPPAA"), which the Supreme Court unanimously held did not effect a taking. See Connolly, 475 U.S. at 211. "Like the Coal Act, the MPPAA does not permit the government to 'physically invade or permanently appropriate any of the employer's assets for its own use." Davon, 75 F.3d at 1129 quoting Connolly, 475 U.S. at 225. Instead, the "interference with the property rights of an employer arises from a public program that adjusts the benefits and burdens of economic life to promote the common good and...does not constitute a taking requiring Government compensation." Connolly, 475 U.S. at 225.
At the preliminary injunction stage, this Court stated that "the nature of the governmental action often 'blends' into its analysis of the economic impact of the governmental action on the claimant." Unity, 889 F. Supp. at 826. Legislation that goes too far may "be properly characterized as action by the government in which it 'permanently appropriates...the employer's assets for its own use." Id. at 827 quoting Connolly, 475 U.S. at 225; see also Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415, 67 L. Ed. 322, 43 S. Ct. 158 (1922). Thus, a full examination of the nature of the government action turns on an evaluation of the economic impact prong.
2. Economic Impact of the Government Regulation
In the employee benefits realm, the Supreme Court has broken down this prong into three more factors: (1) "mere diminution in the value of property" is insufficient to establish a taking; (2) the employer's liability must not be "out of proportion to [the employer's] experience" with the benefit plan; and (3) the legislation should contain provisions "that moderate and mitigate the economic impact of an individual employer's liability." Concrete Pipe and Prods., Inc. v. Construction Laborers Pension Trust, 508 U.S. 602, 645, 124 L. Ed. 2d 539, 113 S. Ct. 2264 (1993); Connolly, 475 U.S. at 225-26 & n. 8.
The Davon Court explained that the economic impact factor "turns on the question of proportionality." 75 F.3d at 1127. In that case, a consolidated appeal was taken by plaintiff coal companies that had signed the 1950 NBCWA, the reach-back date of the Coal Act. Because the Davon plaintiffs had an even more attenuated connection to the benefit plans than Unity, it is worth describing these companies in some detail.
. Templeton, closed its last mine in 1954 and was no longer engaged in any coal-related enterprise. A signatory to the 1950, 1951 and 1952, NBCWAs, it was assigned thirty-nine beneficiaries.
. Sherwood, sold its last mine in 1960 and was currently operating a business unrelated to coal. Sherwood signed the 1950, 1951, 1952, 1955, and 1958 NBCWAs. It was assigned four beneficiaries.
. Princeton stopped mining in 1966 and was also currently engaged in non-coal activities. Princeton was a signatory to the 1950 NBCWA, as well as the 1951, 1952, 1955, 1956 and 1958 agreements. Princeton was assigned 117 beneficiaries.
. Berwind signed the 1950, 1951, 1952, 1955, 1956, and 1958 NBCWAs. It closed its last mine in 1960; however, in 1963, the company merged with another coal company and its successor entity signed the 1968, 1971, 1974, 1978, and 1981 NBCWAs. Berwind was currently the parent to several coal companies. It was assigned 914 beneficiaries.
. Davon was the successor to the New York Coal Company, which mined from 1933 to 1954. New York was a signatory to the 1950, 1951 and 1952 NBCWAs. In 1954, New York sold its coal mining business to another company and agreed not to engage in coal-related operations. In 1957, New York became Davon, Inc. The Secretary assigned Davon ninety-eight beneficiaries.
The plaintiffs further pointed out that many of the beneficiaries assigned to them had only the weakest connections -- some beneficiaries worked for less than a day at the assigned company. Davon, 75 F.3d at 1120. Thus, the companies contended that applying the Coal Act to them was an unconstitutional taking, given their relative inexperience with the benefit plans.
The Seventh Circuit first explained that the "important question" was "whether the basis for regulating plaintiffs under the Coal Act -- their participation in prior NBCWAs -- is proportional to the economic impact caused by the Act." Id. at 1128. Rejecting the plaintiffs' argument that their experience was with earlier NBCWAs, not the ones that promised lifetime benefits, the Court reasoned:
Each consecutive NBCWA, including those after 1974, accomplished the same end -- to provide benefits to miners until the next NBCWA -- using the same means -- funding on a multi-employer basis. Nothing radical happened in 1974. As we stated in the due process context, the promise of lifetime benefits was not an unforeseeable inclusion in an NBCWA; every coal operator that participated in the multi-employer plans contributed directly to the retirees' legitimate expectations of lifetime benefits. Plaintiffs' 'experience with the plans' that eventually became the Combined Fund is easily deduced on the facts of this case.
Davon, 75 F.3d at 1128.
In Blue Diamond, the coal company was in Chapter 11 bankruptcy and had ceased employing union miners in 1964. The company had terminated its obligations to the UMWA Fund that same year. The Secretary assigned 1400 beneficiaries to Blue Diamond. Although all 1400 had worked for the company at some point, they had retired from other operators. Blue Diamond, 79 F.3d at 520.
After rejecting a due process challenge, the Sixth Circuit addressed the company's takings claim, stating that the "proper inquiry under the economic impact prong of the takings inquiry in a multiemployer benefit plan context is whether the plaintiff's liability is proportionate to the plaintiff's experience with the fund at issue." Id. at 525. Applying this standard to Blue Diamond, the Court concluded that the company's
liability under the Coal Act is at least roughly proportional to Blue Diamond's experience with the UMWA Fund. Nearly all of the approximately 1400 living beneficiaries assigned to Blue Diamond either worked for Blue Diamond or were related to someone who worked for Blue Diamond, and Blue Diamond provided service credits to those employees. The beneficiaries assigned to Blue Diamond were assigned to Blue Diamond only after they could not be assigned to a signatory to a more recent NBCWA.