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Nature of Suit Code: 790
Nature of Suit: Other Labor Litigation
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 28, 1999 Decided April 9, 1999

Nos. 98-5109 & 98-5127

R.G. Johnson Company, Inc.,

Appellee

v.

Kenneth S. Apfel, Commissioner of Social Security

and Michael H. Holland, et al.,

Appellants

Appeals from the United States District Court

for the District of Columbia

(No. 97cv00003)

Peter Buscemi, with whom John R. Mooney, David W.

Allen, and Carolyn O'Meara Dutrow were on the briefs,

argued the cause for appellants UMWA Combined Benefit

Fund and its Trustees.

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Alexander D. Shoaibi, Assistant U.S. Attorney, with whom

Wilma A. Lewis, United States Attorney, Mark E. Nagle,

and R. Craig Lawrence, Assistant U.S. Attorneys, and Donna

J. Fuchsluger, Counsel, Social Security Administration, were

on the briefs, argued the cause for federal appellant.

Mary Lou Smith, with whom William H. Howe and Richard A. Steyer were on the brief, argued the cause for appellee

R. G. Johnson Company, Inc.

Before Williams and Randolph, Circuit Judges, and

Buckley, Senior Circuit Judge.

Opinion for the court filed by Senior Judge Buckley.

Dissenting opinion filed by Circuit Judge Randolph.

Buckley, Senior Judge: The Coal Industry Retiree Health

Benefit Act of 1992 directs the Commissioner of Social Security to assign financial responsibility for coal industry retirees

covered by certain United Mine Workers of America collective bargaining agreements either to a "signatory operator"

that formerly employed the retiree or to a "related person" to

the signatory operator. Appellee R. G. Johnson Company,

Inc. protests the assignment to it of the retired employees of

a signatory operator whose assets and remaining business it

had purchased seven years earlier. The district court granted the company's motion for summary judgment on the

ground that the unambiguous language of the statutory definition of "related person" did not apply to successors or

successors in interest to a signatory.

Although we cannot fault the district court's literal reading

of the definition, we conclude that because such an interpretation would frustrate the clear intent of Congress in enacting

the Coal Act, the phrase "related person" must be construed

to include a successor in interest to a signatory operator. We

therefore set aside the grant of summary judgment in favor

of R. G. Johnson Company, Inc. and remand the case to the

district court.

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I. Background

A.The Coal Act

The factors that led to the passage of the Coal Industry

Retiree Health Benefit Act of 1992, Pub. L. No. 102-486, 106

Stat. 3036 (codified at 26 U.S.C. ss 9701-22 (1994)) ("Coal

Act" or "Act"), are well documented in prior litigation. See,

e.g., Eastern Enters. v. Apfel, 524 U.S. ----, 118 S. Ct. 2131,

2137-42 (1998). We recount only those that are necessary to

place the present litigation in context.

In 1974, the Bituminous Coal Operators' Association ("Association"), a multi-employer bargaining organization and the

primary representative of coal mine operators in negotiations

with the United Mine Workers of America ("UMWA"), entered into a collective bargaining agreement that created four

trusts to provide pension and medical benefits to miners and

their families. The coal operators, who as members of the

Association were signatories to the agreement, undertook to

fund the trusts through the payment of annual assessments

that were based on the amount of coal they produced and on

the number of hours their miners worked. One of the trusts,

the 1950 UMWA Benefit Plan ("1950 Benefit Plan"), provided

health benefits to miners who retired before 1976 while

another, the 1974 UMWA Benefit Plan ("1974 Benefit Plan"),

covered the health benefits of active miners and those who

retired in 1976 or thereafter.

In 1978, the Association and the union executed a new

agreement that restructured the 1974 Benefit Plan to make

signatory operators primarily responsible for the health care

of their own active employees and those who retired during or

after 1976. Thus, while the 1950 Benefit Plan continued to

cover all pre-1976 retirees, the 1974 Benefit Plan, as restructured, remained in effect only to cover employees who had

retired after 1975 and whose last employer was no longer in

business. The Association of Bituminous Contractors, Inc.,

which represented contractors to the coal mining industry,

entered into similar agreements with the UMWA. These

entitled its member companies' retired employees to participate in the 1950 and 1974 Benefit Plans established for

retired miners.

In the 1980's, the benefit plans began to suffer increasing

financial difficulties because of the growing number of signatories to the 1978 agreement that had subsequently either

gone out of business or otherwise ceased to meet their

continuing obligations under the agreement. As a result, the

remaining signatories were forced to absorb the increasing

cost of providing medical benefits for the retirees of the

operators who no longer contributed to the plans.

In 1992, in response to the problems created by the plans'

growing deficits, Congress passed the Coal Act in order "to

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sufficient program for the delivery of health care benefits to

the beneficiaries of [multi-employer benefit] plans." Coal

Act, Pub. L. No. 102-486, s 19142(b)(3), 106 Stat. 3037 (1992)

(codified as note following 26 U.S.C. s 9701 (1994)). To that

end, Congress found it necessary "to identify persons most

responsible for plan liabilities in order to stabilize plan funding and allow for the provision of health care benefits to such

retirees." Id. s 19142(a)(2).

The Coal Act merged the 1950 and 1974 Benefit Plans into

a new multi-employer plan called the UMWA Combined

Benefit Fund ("Fund"). 26 U.S.C. s 9702(a)(2). The Fund

provides retirees and their dependents with "substantially the

same" health benefits that they were entitled to receive under

the 1950 and 1974 Plans. Id. s 9703(b)(1), (f).

Section 9706 of the Act requires the Commissioner of Social

Security ("Commissioner") to assign each eligible beneficiary

of the Fund to a "signatory operator which (or any related

person with respect to which) remains in business," such

assignments to be made in accordance with the instructions

contained in that section. Id. s 9706. Such operator or

person must then pay an annual premium to the Fund based

on the number of beneficiaries for which it is responsible. Id.

s 9704. Beneficiaries for whom the Commissioner is unable

to locate an appropriate assignee become the collective responsibility of all companies to which beneficiaries have been

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assigned. Id. s 9704(a)(3) ("unassigned beneficiaries premium").

B.Factual Background

In 1988, a group of investors organized appellee R. G.

Johnson Company, Inc. ("New Johnson") for the purpose of

acquiring the operating assets, certain real estate, and the

right to use a virtually identical corporate name from The

R. G. Johnson Company ("Old Johnson"). New Johnson

employed, without interruption, much of Old Johnson's work

force; rented space in the same building previously occupied

by Old Johnson; and assumed the older company's only

remaining contract. Following the sale to New Johnson, Old

Johnson continued to exist essentially as a personal holding

company for its owners. New Johnson, for its part, performed the same kind of coal mine shaft and slope construction work that Old Johnson had been engaged in since 1917.

In 1995, the Commissioner notified New Johnson, in a

series of letters, of the assignment to it of a number of

beneficiaries who had been former employees of Old Johnson.

Each of the letters contained the following statement:

Our records and UMWA records indicate that you are

related to [Old Johnson] who is no longer in business.

This operator would have been responsible under the law

for the miner named below under the rules for how we

assigned responsibility.... Therefore, as a related company you must assume responsibility.

See, e.g., List of Assigned Miners and Other Beneficiaries,

reprinted in Joint Appendix 729 (emphasis added). New

Johnson requested review of these assignments based on its

claim that it was not related to Old Johnson. The Commissioner conducted the review and upheld the assignments,

explaining that "[u]nder current SSA policy, successors are

considered another type of related person and are treated as

a related person for purposes of making assignments under

the Coal Act." Thereafter, the Fund notified New Johnson of

its premium obligations in annual assessment letters. The

company paid the premiums under protest and commenced

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this lawsuit seeking a declaration that it is not liable for

beneficiaries under the Coal Act.

New Johnson's complaint contains five counts, each of

which presents a distinct legal argument. The company

moved for summary judgment based on the first two of these

counts; namely, that it was not a related person to Old

Johnson as defined in the Coal Act, and that the Act did not

provide for the assignment of beneficiaries to a successor or

successor in interest to a signatory operator. The Commissioner filed a cross-motion for summary judgment. After

considering the two motions, the district court granted summary judgment in favor of New Johnson. It concluded that

the plain language of the provisions of the Act defining

"related person" did not include a successor to a signatory

operator and that the legislative history cited by the defendants "could not determine legislative intent so conclusively

that it would overcome the plain meaning of the statute."

R. G. Johnson Co. v. Apfel, 994 F. Supp. 10, 14, 18 (D.D.C.

1998).

II. Discussion

As noted above, the Coal Act directs the Commissioner to

assign a Fund beneficiary to a signatory operator or "any

related person." 26 U.S.C. s 9706(a). The Act defines related person as follows:

(A) In general

A person shall be considered to be a related person to

a signatory operator if that person is--

(i) a member of the controlled group of corporations

(within the meaning section 52(a) [of the Internal

Revenue Code]) which includes such signatory operator;

(ii) a trade or business which is under common

control (as determined under section 52(b) [of the

Internal Revenue Code]) with such signatory operator;

or

(iii) any other person who is identified as having a

partnership interest or joint venture with a signatory

operator in a business within the coal industry, but

only if such business employed eligible beneficiaries,

except that this clause shall not apply to a person

whose only interest is as a limited partner.

A related person shall also include a successor in interest

of any person described in clause (i), (ii), or (iii).

Id. s 9701(c)(2)(A). The statute thus creates four categories

of related persons: those described in clauses (i), (ii), and (iii),

and those who are "successors in interest" to any person

described in those clauses.

On appeal, the parties pose two questions: Does the Coal

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Act impose liability for a Fund beneficiary on a successor in

interest of a signatory operator; and if it does, is New

Johnson a successor in interest of the kind contemplated by

the statutory definition of "related person"? As always, when

asked to rule on an agency's interpretation of a statute it is

charged with administering, we undertake the two-step Chevron analysis. See Chevron U.S.A. Inc. v. NRDC, Inc., et al.,

467 U.S. 837, 842-45 (1984). In the first instance, we must

determine whether the intent of Congress is clear. If it is,

"that is the end of the matter; for the court, as well as the

agency, must give effect to the unambiguously expressed

intent of Congress." Id. at 842-43. If, however, we find that

the statute is silent or ambiguous with respect to the matter

at issue, the court must defer to the agency's construction of

the statute if it is "permissible." Id. at 843.

In support of its contention that the definition of related

person applies to a signatory operator's successor in interest,

the Commissioner argues that a signatory operator is a

"person described" in clauses (i), (ii), and (iii) because the

words "signatory operator" appear in each of them. With all

respect, we find that explanation difficult to follow. Because

the persons described in those clauses are described in terms

of their relationship to the signatory operator, it would seem

evident that they cannot include the signatory itself. To

suggest otherwise is tantamount to saying "I am related to

me." The Commissioner also points to the words "In general" at the beginning of the definition of related person as

permitting it to view the statutory language as less than

exhaustive. But even if we were to accept the argument that

the catalog of related persons in clauses (i), (ii), and (iii) is not

exclusive, the Commissioner cannot overcome the fact that in

order to be deemed a related person, a successor in interest

must be one to a person described in those clauses. Under

the circumstances, we are unable to quarrel with the district

court's conclusion that the agency's construction of the related person definition is "tortured." R. G. Johnson Co., 994

F. Supp. at 14. We agree with the Commissioner, however,

that Congress could not have intended this result; and we

say this without any reliance on the inconclusive legislative

history cited by the Commissioner.

Congress declared that one of its purposes in enacting the

Coal Act was "to identify persons most responsible for plan

liabilities in order to stabilize plan funding and allow for the

provision of health care benefits to such retirees." Pub. L.

No. 102-486, s 19142(a)(2), 106 Stat. 3037 (codified at note

following 26 U.S.C. s 9701 (1994)). In light of this objective

and the broad reach of the provisions imposing liability on

related persons, we can think of no reason why Congress

would have intended to impose liability for the beneficiaries

on, for example, a successor in interest to a Coca-Cola

bottling company under common control with a signatory coal

mine operator while exempting a coal-mining successor in

interest to that operator. When we asked counsel for New

Johnson if she could provide any plausible reason why Congress should have intended such an exemption, the only

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explanation she was able to suggest was that coal mining

operators had more effective lobbyists in Washington than

did their non-mining affiliates. We find this explanation less

than compelling. Nor are we impressed by our dissenting

colleague's suggestion (see dis. op. at 1-2) that Congress

could have intended to benefit coal miners by eliminating the

impediment to the sale of a coal company posed by the

potential liabilities created by the Coal Act. The problem

with this explanation is that it assumes that Congress was not

equally concerned for the jobs of employees of persons related to a signatory operator, who would face the same difficulties in disposing of a business. But if Congress was in fact

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solely concerned with the protection of miners from that

contingency, it would have also exempted from liability successors in interest to any related person who was engaged in

the mining of coal.

We are faced, then, with one of those "rare cases in which

the literal application of a statute will produce a result

demonstrably at odds with the intentions of its drafters."

United States v. Ron Pair Enters., 489 U.S. 235, 242 (1989)

(internal quotation marks and brackets omitted). In such a

circumstance, "the intention of the drafters, rather than the

strict language, controls." Id. Accordingly, in order to "give

effect" to Congress's intent in this case, Chevron, 467 U.S. at

843, we hold that section 9701(c)(2)(A) must be construed to

permit the assignment of a Fund beneficiary to the successor

in interest of a signatory operator. See Citibank v. Emery

(In re Emery), 132 F.3d 892, 896 (2d Cir. 1998) (because "the

literal application of s 727(d) here [could not] have been

intended by Congress," court held that the section did not

preclude a particular suit).

Although we hold that the term "related person" does

encompass a successor in interest to a signatory operator, we

do not address New Johnson's alternative argument that it is

not a successor in interest to Old Johnson within the meaning

of the Act because that question was not before the district

court. It is our normal practice to "refuse[ ] to hear any

claim upon which the district court has not had an opportunity to rule." Boehner v. Anderson, 30 F.3d 156, 162 (D.C. Cir.

1994). See also Singleton v. Wulff, 428 U.S. 106, 120 (1976)

("It is the general rule ... that a federal appellate court does

not consider an issue not passed upon below."). We have no

reason to depart from that practice in this case. New

Johnson may, however, present this argument to the district

court on remand. See Peralta v. U.S. Attorney's Office, 136

F.3d 169, 173 (D.C. Cir. 1998) (on remand, party free to

reassert argument raised for first time on appeal).

III. Conclusion

In light of the foregoing, we set aside the district court's

grant of summary judgment in favor of New Johnson and

remand the case so that the court may consider New Johnson's argument that it is not a successor in interest to Old

Johnson as well as the others set forth in the counts of the

complaint that were not placed before the court in New

Johnson's motion for summary judgment.

So ordered.

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Randolph, Circuit Judge, dissenting: The definition of

"related persons" in the Coal Industry Retiree Health Benefit

Act excludes successors in interest to signatory operators,

and thereby exempts them from liability for the signatory

operator's Fund beneficiaries. See 26 U.S.C.

ss 9701(c)(2)(A), 9706(a). My colleagues recognize as much.

But they believe exempting successors in interest such as

appellee would frustrate Congress's "clear intent." And so

they treat the words "related persons" as if they covered

successors although they do not. Given the nature of the

judicial process, this mode of judicial analysis embodies some

severe theoretical difficulties. My problem with the majority

decision is more practical. In detecting the "real" intent of

Congress, my colleagues first eye the Act's general purpose

"to identify [those] persons most responsible for plan liabilities." Maj. op. at 8. With this firmly in mind, they find it

implausible for Congress "to impose liability for the beneficiaries on, for example, a successor in interest to a Coca-Cola

bottling company under common control with a signatory coal

mine operator while exempting a coal-mining successor in

interest to that operator." Id. I find this not in the least bit

implausible. Exempting successors in interest to signatory

operators from liability for the signatory operator's Fund

beneficiaries benefits miners because it facilitates the sale of

coal companies. Without the exemption, prospective purchasers can never be sure of their risks. Their liability would

depend on whether, sometime in the future, the seller--that

is, the signatory operator--ceases to "remain[ ] in business,"

a matter wholly outside their control. See 26 U.S.C.

s 9706(a). (A person is in "business" within the meaning of

the statute "if such person conducts or derives revenue from

any business activity, whether or not in the coal industry."

See 26 U.S.C. s 9701(c)(7).) My colleagues say, in response,

that Congress could have gone further and exempted successors in interest to related coal mining companies from liability, thus facilitating the sale of these companies as well.

Perhaps so, but Congress rarely has to go as far as its logic

would take it. The point remains that construing the statute

as it was written does not render it inscrutable.

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One further observation is in order. The quandary my

colleagues confront here is of the Social Security Commissioner's own making. The problem stems from the Commissioner's version of what constitutes "business activity." See id.

Borrowing from an inapposite IRS regulation, the Commissioner determined that the signatory operator--"Old Johnson"--no longer engaged in "business activity" after the sale

because it now derived its income from securities and real

estate. See 26 C.F.R. s 1.355-3(b)(2)(iv). Old Johnson was,

according to the Commissioner, therefore out of business.

Even though Old Johnson still existed, having merely exchanged its physical assets for cash, the Commissioner no

longer held it financially responsible for its Fund beneficiaries. See 26 U.S.C. ss 9706(a), 9701(c)(7). The Commissioner was thus left groping for a "related person" to whom Old

Johnson's liabilities could be assigned. See 26 U.S.C.

s 9701(c)(2)(A). Had the Commissioner adopted a definition

of "business activity" which permitted assignment to signatory operators still in existence and earning income, the entire

problem would have disappeared and I presume my colleagues would have read the Act as it was written.

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