Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-06-07041/USCOURTS-caDC-06-07041-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 16, 2007 Decided July 31, 2007

No. 06-7041

MICHAEL H. HOLLAND, AS TRUSTEE OF THE UNITED MINE

WORKERS 1992 BENEFIT PLAN, ET AL.,

APPELLANTS

v.

WILLIAMS MOUNTAIN COAL COMPANY, D/B/A NAOMA COAL

COMPANY, A CORPORATION, ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 96cv01405)

Peter Buscemi argued the cause for appellants. With him

on the briefs were Stanley F. Lechner, Charles P. Groppe, John

R. Mooney, and David W. Allen. Larry D. Newsome entered an

appearance.

Gregory B. Robertson argued the cause for appellees. With

him on the brief were Susan F. Wiltsie, Mary Lou Smith, and

Charles L. Woody.

Before: ROGERS, GARLAND, and BROWN, Circuit Judges.

Opinion for the Court filed by Circuit Judge GARLAND.

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GARLAND, Circuit Judge: The trustees of the 1992 United

Mine Workers of America Benefit Plan appeal from an order

directing them to pay attorney’s fees to two coal companies,

Williams Mountain Coal Company and Augusta Processing, Inc.

The companies incurred the fees in the course of defending

themselves against a suit by the trustees to compel them to

provide health benefits coverage for six retired miners. In that

underlying suit, the district court granted summary judgment in

favor of the companies, and we affirmed. See Holland v.

Williams Mountain Coal Co., 256 F.3d 819 (D.C. Cir. 2001).

For the reasons set forth below, however, we reverse the award

of attorney’s fees and remand for further proceedings.

I

Congress established the 1992 United Mine Workers of

America Benefit Plan (the “1992 Plan”) in the Coal Industry

Retiree Health Benefit Act of 1992 (the “Coal Act”), 26 U.S.C.

§ 9701 et seq. See id. § 9712. The 1992 Plan was part of

Congress’ response to the failure of certain coal companies to

pay the health benefits they had promised their miners. See

Williams Mountain, 256 F.3d at 821. 

The primary responsibility for financing health benefits for

a retired miner who is entitled to benefits under the Act falls

upon the “last signatory operator,” defined as “the most recent

coal industry employer of such retiree,” 26 U.S.C. § 9701(c)(4),

as well as upon “related persons,” defined to include (among

other things) “a trade or business which is under common

control” with the signatory operator, id. § 9701(c)(2)(A)(ii). See

id. § 9711(a), (c). The Coal Act further provides that “[t]he term

‘last signatory operator’ shall include a successor in interest of

such operator.” Id. § 9711(g)(1) (emphasis added); see also id.

§ 9701(c)(2)(A) (defining a “related person” to “also include a

successor in interest of” a related person). Having allocated this

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1

On December 20, 2006, Congress enacted an amendment to 26

U.S.C. § 9701 that provides a specified “safe harbor” from “successor

in interest” status. Pub. L. No. 109-432, § 211(d), 120 Stat. 2922,

3023 (2006) (codified at 26 U.S.C. § 9701(c)(8)). As the amendment

applies only “to transactions after the date” of enactment, id. § 211(e),

120 Stat. at 3023, it has no bearing on the instant case.

responsibility, the statute leaves the term “successor in interest”

undefined.1

In 1996, the trustees brought this action against Williams

Mountain and Augusta Processing on behalf of six retired

miners. See 29 U.S.C. § 1451(a)(1) (authorizing a plan fiduciary

who is adversely affected “by the act or omission of any party”

to bring an action for appropriate legal or equitable relief); see

also 26 U.S.C. § 9721(1) (making § 1451 applicable to any

claim arising out of an obligation under the Coal Act). The

trustees contended that the defendant coal companies were liable

for providing health benefits coverage as “successors in interest”

of the last signatory operator, Toney’s Branch Coal Company,

which had employed the miners but had since gone bankrupt.

Although the defendant companies never employed any of the

six miners, after Toney’s Branch withdrew from mining, the

defendants successively operated the same mine where the six

had worked for Toney’s Branch. In operating the mine, the

defendants employed other miners who had worked at the mine

for Toney’s Branch, as well as equipment purchased from a

Toney’s Branch affiliate that Toney’s Branch had previously

used at the mine.

In arguing that the defendant companies were liable for the

retirees’ health benefits coverage, the “trustees urge[d] a broad

definition of successors in interest, namely the ‘substantial

continuity of operations test.’” Williams Mountain, 256 F.3d at

821. That test, which the trustees borrowed from labor and

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Under “the standard corporate law definition[,] [i]n order to be

a ‘successor in interest,’ a party must continue to retain the same rights

as [the] original owner[,] . . . and [a] transferee is not a ‘successor in

interest.’” Williams Mountain, 256 F.3d at 821-22 (quoting BLACK’S

LAW DICTIONARY 1431-32 (6th ed. 1990)). The tax law definition

“shares with the corporate law definition the element of commingled

ownership.” Id. at 822 (citing 26 U.S.C. § 381; 26 C.F.R. § 1.1503-

2A(c)(3)(vii)(B)). 

employment law, is “a multi-factor inquiry that examines,

among other things, the ability of the predecessor to provide

relief; whether the new employer had notice of potential

liability; whether he uses the same plant, equipment and

workforce; and whether he produces the same product.” Id.

(citing Secretary of Labor v. Mullins, 888 F.2d 1448, 1453-54

(D.C. Cir. 1989)). In opposition, Williams Mountain and

Augusta Processing “urge[d] narrower definitions, drawn both

from general corporate law and from federal tax law.” Id.

Under those definitions, a “party simply acquiring property of

a firm in an arm’s length transaction, and taking up its business

activity, does not become the selling firm’s ‘successor in

interest.’” Id. at 822.2

The district court rejected the trustees’ broad construction

of “successor in interest,” found that the defendant coal

companies did not qualify as successors in interest of Toney’s

Branch under the narrower definition, and granted summary

judgment for the defendants. We affirmed. See Williams

Mountain, 256 F.3d at 825. Although we acknowledged that

“the companies may well be successors in interest to Toney’s

Branch” under the substantial continuity of operations standard

because they “seamlessly took over operations” at the mine, id.

at 821, we concluded that this standard should not apply to

successorship under the Coal Act. The “text and structure of the

[Coal Act] point firmly against successor liability based on

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3

As the trustees correctly point out, we have never expressly ruled

that the Eddy factors apply to § 1451(e). In Grand Union Co. v. Food

substantial continuity of operations,” we said, which

distinguished the Act from the labor and employment statutes to

which the standard had been applied. Id. at 825. Instead, we

turned to corporate and tax law, and found that the defendants

were “plainly not successors in interest of Toney’s Branch”

under either authority. Id. at 822.

Following our decision in their favor, the defendants filed

motions in the district court requesting attorney’s fees from the

trustees. The court referred the matter to a magistrate judge,

who recommended an award of fees. The district court ruled in

accord with that recommendation, and this appeal followed.

II

Section 9721 of the Coal Act incorporates one of the feeshifting provisions of the Employee Retirement Income Security

Act (ERISA), section 4301(e), codified at 29 U.S.C. § 1451(e).

See 26 U.S.C. § 9721. That provision states that “the court may

award all or a portion of the costs and expenses [of litigation],

including reasonable attorney’s fees, to the prevailing party.” 29

U.S.C. § 1451(e). We review for abuse of discretion a district

court’s decision to award such fees. See Board of Trs. of the

Hotel & Rest. Employees Local 25 v. JPR, Inc., 136 F.3d 794,

798 (D.C. Cir. 1998).

In considering the defendants’ request for attorney’s fees,

the district court began with the five-factor test that we

employed in Eddy v. Colonial Life Ins. Co. of Am., 59 F.3d 201

(D.C. Cir. 1995), to determine whether to award attorney’s fees

under another fee-shifting provision of ERISA, 29 U.S.C. §

1132(g)(1).3

 The Eddy factors are:

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Employers Labor Relations Ass’n, 808 F.2d 66, 71-72 (D.C. Cir.

1987), the court assumed without deciding that factors like those

identified in Eddy applied to § 1451(e). We need go no further than

that to resolve their appeal.

(1) the losing party’s culpability or bad faith; (2) the

losing party’s ability to satisfy a fee award; (3) the

deterrent effect of such an award; (4) the value of the

victory to plan participants and beneficiaries, and the

significance of the legal issue involved; and (5) the

relative merits of the parties’ positions.

Eddy, 59 F.3d at 206; see id. (noting that the factors are “neither

exclusive nor quantitative, thereby affording leeway to the

district courts to evaluate and augment them on a case-by-case

basis”). In the end, however, the district court determined that

the “only question . . . is whether Plaintiffs’ position, and their

decision to press on with their arguments in support of that

position, were so devoid of merit as to rise to the level of bad

faith.” Holland v. Williams Mountain Coal Co., No. 96-1405,

Mem. Op. at 6 (D.D.C. May 24, 2004) (emphasis added).

Finding “this to be the case,” the court pretermitted examination

of any other factors and awarded the defendants attorney’s fees.

Id. at 10. Accordingly, we turn to an examination of the four

reasons the court and the defendants offer for finding the

trustees’ position “so devoid of merit as to rise to the level of

bad faith.” Id. at 6.

1. We begin with the defendants’ claim that the trustees

“pursued an action . . . on a legal theory at odds with prevailing

law.” Appellees’ Br. 13. The district court did not rely on this

argument -- and correctly so. When this lawsuit was initiated in

1996, there was no “prevailing law” regarding the meaning of

“successor in interest” as it appears in the Coal Act. At that

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4

The Fourth Circuit stated: “The courts below determined that

the purchasers of Appellees’ assets would not be Appellees’

successors in interest within the meaning of the [Coal] Act. We need

not and do not now resolve the matter, having concluded that, even if

[the purchasers were] successor[s] in interest, the Bankruptcy Court

may extinguish Coal Act successor liability.” Leckie Smokeless Coal

Co., 99 F.3d at 585.

time, neither this circuit nor any circuit had ruled on the

question. 

It is true, as the defendants note, that a West Virginia

district court, reviewing a bankruptcy court proceeding, had

ruled on the issue. See UMWA 1992 Benefit Plan v. Leckie

Smokeless Coal Co., 201 B.R. 163 (S.D. W. Va. 1996). The

West Virginia court, applying a definition of “successors in

interest” found in Internal Revenue Service regulations, held

that “purchasers of assets in bankruptcy cannot be ‘successors

in interest’ because . . . they do not inherit the tax attributes of

their predecessors.” Id. at 171. That ruling was on appeal when

the trustees filed their complaint, and was later affirmed on

grounds unrelated to the definition of “successor in interest.”

See In re Leckie Smokeless Coal Co., 99 F.3d 573 (4th Cir.

1996).4

It is also true that, after our own district court issued its

judgment, and while the case was pending on appeal to this

court, the United States Court of Appeals for the Sixth Circuit

reached a decision in accord with that of the West Virginia

district court. See Holland v. New Era Coal Co., 179 F.3d 397,

403 (6th Cir. 1999). On appeal, we cited the Sixth Circuit’s

conclusion in reaching our own. See Williams Mountain, 256

F.3d at 822.

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But these cases cannot alone support a charge that the

trustees acted in bad faith. Decisions of the Southern District of

West Virginia and of the Sixth Circuit do not bind this court.

Such decisions may, of course, influence our own decisions

because of their persuasive force -- as indeed happened here --

but the fact that another jurisdiction has rejected a legal theory

does not render it so devoid of merit as to make reliance on it an

exercise in bad faith. It is hardly unusual for courts of appeals,

including this court of appeals, to disagree with their sister

circuits. To the contrary, such circuit splits are an important

font of the Supreme Court’s workload. 

2. In the view of the district court, the trustees’ suit was

devoid of merit because it was without “factual predicate.”

Mem. Op. at 7. According to the court, there was no factual

basis for the trustees’ contention that the defendants were

successors in interest to Toney’s Branch, because the defendants

had no corporate ties to the latter. Moreover, the trustees

assertedly knew that was so, as their own investigation had

“turned up no information at all indicating [a] special

relationship” between the companies. Id. at 7. Instead, the

“only thread tying Defendants to Toney’s Branch turned out to

be Defendants’ purchase of mining equipment from Toney’s

Branch, their hiring of some of Toney’s Branch’s former

employees, and their operation of the same mine.” Id. at 7-8.

This, the court said, was insufficient.

The problem with this analysis is that it assumes the narrow

corporate and tax law definitions of successors in interest. But

as our opinion on the merits recognized, the very factual thread

the district court discounted -- the purchase of equipment, the

hiring of employees, and the operation of the same mine --

might well have made the defendants successors in interest of

Toney’s Branch under the broader, substantial continuity of

operations test. See Williams Mountain, 256 F.3d at 821.

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Although we ultimately rejected that test, we have emphasized

that “a loss on the merits does not mean that legal arguments

advanced in the context of our adversary system were

unreasonable.” Taucher v. Brown-Hruska, 396 F.3d 1168, 1174

(D.C. Cir. 2005) (reversing an award of attorney’s fees under the

Equal Access to Justice Act (EAJA)); see Christiansburg

Garment Co. v. EEOC, 434 U.S. 412, 421-22 (1978) (warning

that courts must “resist the understandable temptation to engage

in post hoc reasoning by concluding that, because a plaintiff did

not ultimately prevail, his action must have been unreasonable

or without foundation”). Hence, whether there was a reasonable

factual predicate for the trustees’ suit depends entirely upon

whether there was a reasonable legal theory to which that

predicate could be tied.

3. The district court found the trustees’ legal theory

meritless because it thought their broad definition of “successor

in interest” was at odds with the statutory text, which appeared

to assign separate meanings to “successor in interest” and

“successor.” Under the Coal Act, “successors in interest” are

required to share liability with last signatory operators, see 26

U.S.C. § 9711(g)(1), while “successors” are permitted “to

assume[,] by contract[,] liability for health benefits owed to

retirees,” Williams Mountain, 256 F.3d at 822; see 26 U.S.C. §

9711(g)(2). In its decision in the underlying lawsuit, the district

court concluded that the trustees’ broad definition would render

the two interchangeable, and hence redundant, and therefore

rejected the trustees’ definition.

On appeal, we agreed. We acknowledged the trustees’

argument that Coal Act § 9711(g)(1), which defines “last

signatory operator” to include “successor in interest,” is simply

headed “Successor.” Williams Mountain, 256 F.3d at 822. But

we rejected the use of “a heading, which normally is a kind of

shorthand, to justify stripping the actual text of two words, ‘in

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interest,’” which we thought were “obviously included

deliberately.” Id. We concluded that “[t]he natural reading is

that Congress intended ‘successors’ in subsection (g)(2) to

include a broad[er] class of persons, e.g., firms that take over

mining operations from others, and are not liable as a matter of

law, but assume liability by contract with the seller to suit the

mutual convenience . . . of the contracting firms.” Id.

This did not, however, end our analysis. While we

concluded that “the text and structure of § 9711 point powerfully

toward the [defendants’] position,” id. at 823, we credited the

trustees’ argument “that courts have often used the substantial

continuity test to determine successor liability in federal statutes

(particularly those adopted for the protection of employees),

even when those statutes include no language directly

supporting liability for successors of any kind,” id. at 824. And

as we further noted, “statutory interpretation proceeds on the

assumption that Congress’s choice of words reflects a familiarity

with judicial treatment of comparable language.” Id. (citing

Traynor v. Turnage, 485 U.S. 535, 545-46 (1988)). Because we

could “[]not say, without some consideration of the cases using

substantial continuity, that the trustees’ claim [was] a priori

wrong,” we proceeded to a review of the origins of that test. Id.

at 824. In short, before we could determine whether there was

merit to the trustees’ reliance on the substantial continuity test,

we thought it necessary to examine the circumstances in which

the test had previously been applied. We must do the same here.

Our previous opinion’s review of the “origins of the

substantial continuity test” began by noting that, under “the

traditional rule on corporate successorship liability, a

corporation that acquires manufacturing assets from another

corporation does not thereby assume the liabilities of the seller.”

Id. We observed, however, that in tort cases, although the

majority of courts still follow the traditional rule, “some courts

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See Howard Johnson Co. v. Detroit Local Joint Executive Bd.,

Hotel & Rest. Employees & Bartenders Int’l Union, 417 U.S. 249

(1974); Golden State Bottling Co. v. NLRB, 414 U.S. 168 (1973);

NLRB v. Burns Int’l Sec. Servs., Inc., 406 U.S. 272 (1972); John Wiley

& Sons, Inc. v. Livingston, 376 U.S. 543 (1964).

6

See Williams Mountain, 256 F.3d at 825-26 (citing cases from

numerous circuits finding broad successor liability under the Vietnam

Era Veterans’ Readjustment Assistance Act, the Family Medical

Leave Act, Title VII, the Civil Rights Act of 1866, and the Age

Discrimination in Employment Act).

have” employed “the substantial continuity of operations test

advocated by the trustees” in order to protect plaintiffs. Id. at

825 (emphasis added). Moreover, we further noted that, in “the

context of federal statutes whose primary beneficiaries are

employees,” it “appears that most courts invoke the substantial

continuity test.” Id. at 825 (emphasis added). 

“This departure from the traditional rule,” we said, “was

sparked by four Supreme Court cases, two involving disputes

under the National Labor Relations Act (‘NLRA’) and two the

Labor Management Relations Act (‘LMRA’).” Id. (citations

omitted).5 This circuit, we recognized, has followed those cases

in applying the substantial continuity test to the NLRA. See id.

at 826 (citing Harter Tomato Prods. Co. v. NLRB, 133 F.3d 934,

936-37 (D.C. Cir. 1998)). In addition, “[a]lthough the four cases

concerned the core labor relations statutes,” we found that “the

reasoning has been used to find broad successor liability under

other statutes that govern employees’ rights whether they

explicitly address successor liability or not.” Id. at 825.6 This

circuit has followed that path as well. See id. at 821 (citing

Secretary of Labor v. Mullins, 888 F.2d 1448, 1453-54 (D.C.

Cir. 1989), in which we applied the substantial continuity test to

the Mine Safety and Health Act).

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In the final analysis, we concluded that the large number of

cases that have employed the substantial continuity test were

distinguishable because “the text and structure” of the statutes

at issue in those cases did not “point firmly against successor

liability based on substantial continuity” as they did in the Coal

Act. Id. at 825. But given how often that test has been applied

to analogous statutes in both this and other circuits, we cannot

say that it was an act of bad faith for the trustees to urge its

application to the Coal Act. We certainly cannot say so in a case

of first impression not only in this circuit, but in virtually every

other jurisdiction as well.

4. Finally, the district court’s determination relied in part

on the fact that, while the trustees sued Williams Mountain and

Augusta Processing, they failed to sue Imperial Leasing

Company -- another coal company that, unlike the defendants,

was owned by the same individuals who owned Toney’s Branch.

This common ownership, the district court held, made Imperial

Leasing “a far more appropriate defendant” and the suit against

Williams Mountain and Augusta Processing “untenable.” Mem.

Op. at 7.

But the Coal Act does not limit a plaintiff to a suit against

the “more appropriate defendant.” It is true, as the defendants

point out, that the purpose of the Act was “to assign the duty of

paying premiums ‘to persons most responsible for plan

liabilities.’” Williams Mountain, 256 F.3d at 823 (emphasis

added) (quoting 26 U.S.C. § 9701 note). But as the statutory

text indicates, Congress determined that “the persons most

responsible” were the last signatory operators, related persons,

and successors in interest, and it made them all “jointly and

severally liable.” See 26 U.S.C. § 9711(c), (g)(1). This means

that the trustees were free to sue any party who reasonably fell

within those categories, and that they were likewise free to sue

some potential defendants and to settle with others. (In fact, the

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trustees ultimately did settle with Imperial Leasing. See

Appellants’ Br. 30.) Because we have concluded that it was

reasonable for the trustees to regard Williams Mountain and

Augusta Processing as successors in interest, their decision not

to sue Imperial Leasing cannot be taken as an indicator of bad

faith.

III

The district court’s conclusion that the trustees’ legal theory

was completely without merit was no doubt due in part to the

language of our own prior decision. Like other judges, we too

aspire to write opinions like those that Judge Friendly said

Justice Brandeis wrote: opinions in which “‘the right doctrine

emerges in heavenly glory and the wrong view is consigned to

the lower circle of hell.’” Taucher, 396 F.3d at 1173-74 (citing

HENRY J. FRIENDLY, Mr. Justice Brandeis -- The Quest for

Reason, in BENCHMARKS 291, 294 (1967)). But as we have

previously cautioned, although one panel may characterize a

litigant’s position as “patently erroneous,” another panel equally

unpersuaded by the same argument may use words like

“unsupported,” “unconvincing,” or “without merit.” Halverson

v. Slater, 206 F.3d 1205, 1212 (D.C. Cir. 2000) (internal

quotation marks omitted). And yet, neither may intend to

suggest that the argument in question was not “substantially

justified.” Id. (applying a provision of the EAJA that denies

attorney’s fees to a prevailing party if the position of the United

States was “substantially justified”).

In our previous opinion in this case, we did say that there is

“‘no warrant whatever for broad successor liability’” under the

Coal Act. Mem. Op. at 10 (quoting Williams Mountain, 256

F.3d at 826). But as noted above, before reaching that

conclusion, we also declared that “we cannot say, without some

consideration of the cases using substantial continuity, that the

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trustees’ claim is a priori wrong.” Williams Mountain, 256 F.3d

at 824. That is not the language we typically use to mark a

claim as devoid of merit. 

Nor could we have done so here. As we have discussed,

this was a case of first impression, in which the trustees urged

upon us a test that “most courts invoke” in “the context of

federal statutes whose primary beneficiaries are employees.” Id.

at 825. The Coal Act is such a statute. Hence, this was not a

case the plaintiffs “lost because [they] vainly pressed a position

flatly at odds with the controlling case law,” but rather one they

“lost because an unsettled question” as to which they had a

reasonable position “was resolved unfavorably.” Taucher, 396

F.3d at 1174 (internal quotation marks and citation omitted).

Because the district court made clear that it rested its

decision to award attorney’s fees solely upon its determination

that the trustees brought their underlying suit in bad faith, we

need not belabor our discussion with an examination of the other

Eddy factors. As both parties agreed at oral argument, a

determination that the court erred in finding the suit so meritless

as to have been brought in bad faith requires us to reverse the

award as an abuse of discretion. See Oral Arg. Recording at

11:50, 29:59. Moreover, where as here the issuance of an award

requires the exercise of a district court’s discretion, and where

we disagree with the ground upon which the district court relied,

our usual course is to reverse and to remand the case to that

court for further proceedings. Accordingly, the judgment of the

district court is

Reversed and remanded.

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