Source: https://law.justia.com/cases/federal/appellate-courts/F3/102/736/637500/
Timestamp: 2019-07-24 06:19:53
Document Index: 543565857

Matched Legal Cases: ['§ 9701', '§ 9701', '§ 9701', '§ 9701', '§ 9712', '§ 9712', '§ 9712', '§ 9701', '§ 1381', '§ 9701', '§ 52', '§ 1563', '§ 1563', '§ 1563', '§ 1563', '§ 1563', '§ 9712']

Michael H. Holland; Marty D. Hudson; Thomas F. Connors;robert T. Wallace, As Trustees of the Plaintiff United Mineworkers of America 1992 Benefit Plan; United Mine Workersof America 1992 Benefit Plan, Plaintiffs-appellees,united States of America, Intervenor, v. Keenan Trucking Company, a Corporation; Eastern Energyinvestments, a Corporation; Cedar Truckingcompany, a Corporation; Darrell Keenan,individually, Defendants-appellants, 102 F.3d 736 (4th Cir. 1996) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Fourth Circuit › 1996 › Michael H. Holland; Marty D. Hudson; Thomas F. Connors;robert T. Wallace, As Trustees of the Plainti...
Michael H. Holland; Marty D. Hudson; Thomas F. Connors;robert T. Wallace, As Trustees of the Plaintiff United Mineworkers of America 1992 Benefit Plan; United Mine Workersof America 1992 Benefit Plan, Plaintiffs-appellees,united States of America, Intervenor, v. Keenan Trucking Company, a Corporation; Eastern Energyinvestments, a Corporation; Cedar Truckingcompany, a Corporation; Darrell Keenan,individually, Defendants-appellants, 102 F.3d 736 (4th Cir. 1996)
US Court of Appeals for the Fourth Circuit - 102 F.3d 736 (4th Cir. 1996)
Argued Oct. 29, 1996. Decided Dec. 17, 1996
Appellants, Darrell Keenan and various businesses owned by him and his wife Janet, appeal the district court's grant of summary judgment to the Trustees of the United Mine Workers of America Combined Benefit Fund ("1992 Plan") in a suit brought to collect unpaid premiums. Appellants contest their liability to the 1992 Plan on several grounds. Initially, appellants argue that the Coal Industry Retiree Health Benefit Act of 1992, 26 U.S.C. §§ 9701-22 ("Coal Act"), violates their right to due process under the Fifth Amendment. Appellants Keenan Trucking and Darrell Keenan also argue that the Trustees of the 1992 Plan are estopped from bringing suit against them due to a prior settlement. Lastly, appellants Keenan Trucking and Cedar Trucking contend that they are not proper parties to this suit because they are not "related parties" to the coal operator who originally owed premiums to the 1992 Plan. See 26 U.S.C. § 9701(c) (2). We hold that the Coal Act is constitutional and find appellants' other contentions to be meritless. We thus affirm the judgment of the district court.
Davon, Inc. v. Shalala, 75 F.3d 1114, 1118 (7th Cir. 1996). After holding hearings to consider the Coal Commission's recommendations, Congress enacted the Coal Industry Retiree Health Benefit Act of 1992, Pub. L. No. 102-486, 106 Stat. 3036 (1992) (codified at 26 U.S.C. §§ 9701-9722).
Benefits paid by the 1992 Plan are funded through premiums paid by "1988 last signatory operators." A "1988 last signatory operator" is a coal operator who signed the 1988 NBCWA and was the most recent coal industry employer of an eligible beneficiary. 26 U.S.C. §§ 9701(c) (1), (3), (4); 26 U.S.C. § 9712(d) (6). Each affected coal operator is required to pay annual and monthly premiums to the Plan and to provide security for the projected cost of covering eligible beneficiaries. See 26 U.S.C. § 9712(d) (1) (A)-(C).
In order to ensure that coal operators would not be able to avoid their obligations to the 1992 Plan, Congress provided that "any related person" to an operator obligated to make payments to the Plan would be jointly and severally liable for those obligations. 26 U.S.C. § 9712(d) (4). The term "related persons" is broadly defined to include a coal operator's individual partners and corporate affiliates, or other trades or businesses controlled by a coal operator's principal shareholder or corporate parent. 26 U.S.C. § 9701(c) (2).
We turn first to appellants' contention that the Coal Act violates the Fifth Amendment. It is difficult to exaggerate the burden that appellants must overcome to carry the day on this argument. Congress enacted the Coal Act in response to a history of labor disputes which had significant effects on interstate commerce. Recognizing the vital importance of stable coal production to the national economy, Congress acted to head off further disputes by guaranteeing the stability of retired coal workers' benefits. Thus, the Coal Act emerges as "a classic example of an economic regulation--a legislative effort to structure and accommodate 'the burdens and benefits of economic life.' " Duke Power Co. v. Carolina Envtl. Study Group, Inc., 438 U.S. 59, 83, 98 S. Ct. 2620, 2636, 57 L. Ed. 2d 595 (1978) (citation omitted).
When, as with the Coal Act, Congress legislates within the core of its commerce power to regulate economic matters, such legislation carries a heavy presumption of validity. As the Supreme Court has stated, "It is by now well established that legislative Acts adjusting the burdens and benefits of economic life come to the Court with a presumption of constitutionality...." Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15, 96 S. Ct. 2882, 2892, 49 L. Ed. 2d 752 (1976). In fact, there have been no cases since Railroad Retirement Board v. Alton Railroad Co., 295 U.S. 330, 55 S. Ct. 758, 79 L. Ed. 1468 (1935), in which the Supreme Court has struck down purely economic legislation on substantive due process grounds. See In re Chateaugay Corp., 53 F.3d 478, 487 (2d Cir. 1995). In the modern era, the Court has deferred to the greater fact-finding abilities and expertise of the other branches in the economic arena. If a piece of economic legislation "is supported by a legitimate legislative purpose furthered by a rational means, judgments about the wisdom of such legislation remain within the exclusive province of the legislative and executive branches." Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 729, 104 S. Ct. 2709, 2717-18, 81 L. Ed. 2d 601 (1984).
Appellants argue, however, that because the Coal Act imposes a new liability for actions taken in the past it is "harsh and oppressive" and therefore violates the Fifth Amendment. This argument fails on two grounds. First, the Supreme Court has explained on more than one occasion that the "harsh and oppressive" rubric is simply shorthand for "the [general] prohibition against arbitrary and irrational" legislation. Id. at 733, 104 S. Ct. at 2719-20; see also United States v. Carlton, 512 U.S. 26, ----, 114 S. Ct. 2018, 2022, 129 L. Ed. 2d 22 (1994).
In addition, while the Coal Act does impose a new obligation on a coal operator to pay premiums to the 1992 Plan based on its past act of signing an NBCWA, the Supreme Court has ruled that it is permissible to impose new duties or liabilities based on past acts. In Concrete Pipe & Products of California, Inc. v. Construction Laborers Pension Trust for Southern California, 508 U.S. 602, 113 S. Ct. 2264, 124 L. Ed. 2d 539 (1993), the Court addressed a similar challenge to the Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. §§ 1381-1461, on the ground that the law imposed liability upon an employer wishing to withdraw from a pension plan even though the employer's contributions to that plan came prior to the enactment of the statute. In response the Supreme Court stated:
Id. at 637, 113 S. Ct. at 2287 (citations omitted). While the Court has cautioned that " [t]he retrospective aspects of legislation, as well as the prospective aspects, must meet the test of due process," Turner Elkhorn, 428 U.S. at 17, 96 S. Ct. at 2893, it has likewise made clear that the "strong deference accorded legislation in the field of national economic policy is no less applicable when that legislation is applied retroactively." Gray, 467 U.S. at 729, 104 S. Ct. at 2717. Thus, the basic test remains the same regardless of the "retroactive" nature of a statute: whether the statute is rationally related to a legitimate legislative purpose. Id. at 729-30, 104 S. Ct. at 2717-18.
We also have no difficulty in concluding that the Coal Act employs rational means to achieve its purpose. The group Congress identified to fund the 1992 Plan consists of the employers who profited from the labor of the beneficiaries of the Plan. "When viewed in this light, it would have been irrational to draw the line anywhere other than" NBCWA signatories. Davon, 75 F.3d at 1124. In upholding the statute requiring coal operators to fund benefits for miners suffering from Black Lung Disease, the Supreme Court specifically recognized that Congress rationally "spread the costs of the employees' disabilities to those who have profited from the fruits of their labor...." Turner Elkhorn, 428 U.S. at 18, 96 S. Ct. at 2893.
Further, it was rational for Congress to assign the costs of funding the 1992 Plan to NBCWA signatories because those agreements guaranteed lifetime benefits to coal miners. See District 29, UMWA v. UMWA 1974 Benefit Plan and Trust, 826 F.2d 280, 282 (4th Cir. 1987) (" [The] intentions of the parties in providing for retirement health benefits was to guarantee their provision for life."). In fact, "Congress found that all employers who were signatories to wage coal agreements ... created an expectation of lifetime benefits, and it determined that the fairest means to fund these liabilities was through premiums allocated among these operators." Lindsey Coal Mining Co. v. Chater, 90 F.3d 688, 694 (3d Cir. 1996) (citing 138 Cong. Rec. S17603 (daily ed. Oct. 8, 1992) (conference committee report)); see also Blue Diamond Coal Co. v. Shalala, 79 F.3d 516, 522 (6th Cir. 1996). Coal operators benefited directly from their promises because those promises helped secure the availability of quality labor for their business operations. The coal industry was also able to use the promise of benefits to secure concessions from labor on other fronts. For example, the 1950 UMWA Plan was instituted in exchange for the UMWA's acquiescence in the mechanization of the mines. We cannot accept appellants' suggestion that it would be irrational for Congress to require the parties who benefited from promises of secure benefits to live up to those promises. See Chateaugay, 53 F.3d at 491.
Thus, legislation need not place remedial burdens on the "most responsible" party to survive rational basis scrutiny. The legislative means need only be reasonably related to some legitimate governmental end. For the reasons outlined above, we hold that the Coal Act meets that standard. In upholding the constitutionality of the Coal Act, we join the unanimous opinion of the circuits which have considered this issue. See Lindsey Coal Mining Co. v. Chater, 90 F.3d 688 (3d Cir. 1996); Blue Diamond Coal Co. v. Shalala, 79 F.3d 516 (6th Cir. 1996); Davon, Inc. v. Shalala, 75 F.3d 1114 (7th Cir. 1996); In re Chateaugay Corp., 53 F.3d 478 (2d Cir. 1995).
Concrete Pipe, 508 U.S. at 642, 113 S. Ct. at 2290 (quoting Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 223-24, 106 S. Ct. 1018, 1025, 89 L. Ed. 2d 166 (1986)); see also Davon, 75 F.3d at 1125.
Lastly, two of the appellants, Keenan Trucking and Cedar Trucking, argue that they are not proper parties to this suit because they are not "related persons" with regard to First Big Mountain. Under section 9712(d) (4) of the Coal Act, a person who is "related" to a coal operator who owes premiums to the 1992 Plan is jointly and severally liable for those premiums. Thus, Congress acted to secure stable funding for the Plan by ensuring that coal operators would be unable to evade their responsibilities to the Plan by going out of business or declaring bankruptcy.
Under section 9701(c) (2) (A) (i) of the Coal Act, an entity is a "related person" to a signatory operator if both are members of a controlled group of corporations as defined in section 52(a) of the Internal Revenue Code ("I.R.C."). 26 U.S.C. § 9701(c) (2) (A) (i). In turn, section 52(a) provides that "the term 'controlled group of corporations' has the meaning given to such term by section 1563(a)...." 26 U.S.C. § 52(a). I.R.C. section 1563(a) sets out three different types of controlled groups. The only category of controlled group relevant to this case is the "brother-sister controlled group" which is defined as follows:
(2) Brother-sister controlled group.--Two or more corporations if 5 or fewer persons who are individuals, estates, or trusts own (within the meaning of subsection (d) (2)) stock possessing(A) at least 80 percent of the total combined voting power of all classes of stock entitled to vote or at least 80 percent of the total value of shares of all classes of the stock of each corporation, and
26 U.S.C. § 1563(a) (2) (emphasis added).
This argument might prevail, were it not for the spousal attribution rule regarding stock ownership found at section 1563(e) (5) of the I.R.C. Under this rule, " [a]n individual shall be considered as owning stock in a corporation owned, directly or indirectly, by or for his spouse...." 26 U.S.C. § 1563(e) (5). If this rule applies, Darrell Keenan is effectively the 100 percent owner of Keenan Trucking and Cedar Trucking, and, accordingly, those corporations clearly would be part of a brother-sister controlled group with First Big Mountain under section 1563(a) (2) and related parties under the Coal Act.
Appellants' contention that the spousal attribution rule does not apply to the Coal Act is groundless. The Coal Act specifically refers to section 1563(a) of the I.R.C., and section 1563(a) (2) in turn states that ownership must be determined with reference to section 1563(d) (2). Section 1563(d) (2) (B) instructs that " [f]or purposes of determining whether a corporation is a member of a brother-sister controlled group of corporations ... stock owned by a person who is an individual, estate, or trust means stock owned with the application of subsection (e)." 26 U.S.C. § 1563(d) (2) (B). Appellants have made no argument as to why this clear cross-reference to the spousal attribution rule in subsection (e) should not apply, and we find no basis for ignoring the language of the statute.
Appellants suggest that even if the spousal attribution rule does apply, they fall within the exception to the rule set forth at 26 U.S.C. §§ 1563(e) (5) (A)-(D). In order to come within the exception, a spouse must meet four separate requirements. Darrell Keenan does not qualify for the exception as to Keenan Trucking because he runs afoul of the first requirement that " [t]he individual does not, at any time during such taxable year, own directly any stock in such corporation." 26 U.S.C. § 1563(e) (5) (A). It is undisputed that Darrell Keenan owns 50 percent of Keenan Trucking, and, given Janet's 50 percent share, he therefore must be considered the 100 percent owner of Keenan Trucking under the spousal attribution rule.
The spousal attribution rule must also apply with regard to Cedar Trucking because Darrell Keenan cannot satisfy the requirement of section 1563(e) (5) (B), which mandates that the "individual ... does not participate in the management of such corporation at any time during such taxable year." The record indicates that Darrell Keenan has been a major participant in the management of Cedar Trucking since its incorporation. Keenan testified in his deposition that since May 1991 he has used Cedar Trucking's trucks for coal hauling and other enterprises in conjunction with his operation of Keenan Trucking. Keenan also testified that Keenan Trucking made the monthly payments owed by Cedar Trucking to various financing companies and that he has negotiated truck and contract hauling agreements on behalf of Cedar Trucking. Based on this record, we find that the district court did not err when it determined that Keenan could not satisfy the exception to the spousal attribution rule.
Since Darrell Keenan must be considered the constructive owner of both Keenan Trucking and Cedar Trucking under the spousal attribution rule, and because Darrell Keenan was also the 100 percent owner of First Big Mountain, we hold that the district court properly found these entities to be part of a brother-sister controlled group and therefore related persons under the Coal Act. Accordingly, both Keenan Trucking and Cedar Trucking are jointly and severally liable under 26 U.S.C. § 9712(d) (4) for First Big Mountain's liabilities to the 1992 Plan.