Opinion ID: 779444
Heading Depth: 1
Heading Rank: 5

Heading: eastern enterprises and the commissioner's response

Text: 32 In Eastern Enterprises, the Court considered the constitutionality of the Coal Act as applied to Eastern Enterprises, a company that had been involved in coal mining until 1965, and had signed every NBCWA from 1947 until 1964. Pursuant to 26 U.S.C. § 9706(a)(3), the Commissioner assigned Coal Act liability to Eastern for over 1000 miners, based on Eastern's status as the pre-1978 signatory operator for whom the miners had worked for the longest period of time. Its total liability was estimated to be between $50 and $100 million. Eastern claimed that § 9706(a)(3) was unconstitutional as applied to it because the enactment violated both the Due Process and Takings Clauses of the Fifth Amendment. 33 Although a majority of the justices agreed § 9706(a)(3) was unconstitutional as applied to Eastern Enterprises, they could not agree on a rationale. A four-justice plurality concluded that the Act violated the Fifth Amendment as applied to Eastern as it was an unconstitutional taking. Eastern Enterprises, 524 U.S. at 537, 118 S.Ct. 2131. The plurality recognized that a Takings analysis is essentially an ad hoc and fact intensive inquiry. Nonetheless, the justices were able to identify three factors that were generally of particular significance: the economic impact of the regulation, its interference with investment backed expectations, and the character of the governmental action. Id. at 523-524, 118 S.Ct. 2131 (quoting Kaiser Aetna v. United States, 444 U.S. 164, 175, 100 S.Ct. 383, 62 L.Ed.2d 332 (1979)). The plurality then reviewed its Takings Clause analysis in cases involving legislative schemes similar to the Coal Act. This included suits under the Black Lung Benefits Act, and the Multiemployer Pension Plan Amendments Act (MPPAA) which was enacted to supplement the Employee Retirement Income Security Act (ERISA). The Court concluded: 34 Congress has considerable leeway to fashion economic legislation, including the power to affect contractual commitments between private parties. Congress may also impose retroactive liability to some degree, particularly where it is confined to short and limited periods required by the practicalities of producing national legislation. Our decisions, however, have left open the possibility that legislation might be unconstitutional if it imposes severe retroactive liability on a limited class of parties that could not have anticipated the liability, and the extent of that liability is substantially disproportionate to the parties' experience. 35 Id. at 528-529, 118 S.Ct. 2131 (citation and internal quotations omitted) (emphasis added). 36 The plurality, applied this Takings Clause jurisprudence to Eastern Enterprises by first focusing on the economic impact of the Coal Act, and concluded that the Act placed a considerable financial burden on Eastern Enterprises. Id. at 529, 118 S.Ct. 2131. Although the plurality conceded that this financial burden was not a permanent physical occupation of Eastern's property of the kind [usually] viewed as a per se taking, it reasoned that decisions upholding the MPPAA suggest that an employer's statutory liability for multiemployer pension plans should reflect some proportionality to its experience with the plan. Id. at 530, 118 S.Ct. 2131 (citation and internal quotations omitted). The assignments to Eastern lacked such proportionality. Although Eastern did contribute to the 1947 and 1950 W & R Funds, it ceased its coal mining operations in 1965 and neither participated in negotiations nor agreed to make contributions in connection with the 1974, 1978, or subsequent NBCWAs. Id. The absence of any nexus to the 1974 and later NBCWAs was significant because those agreements were the first [to] suggest an industry commitment to funding lifetime health benefits for both retirees and their family members. Id. Thus, because Eastern Enterprises had neither contemplated liability for the provision of lifetime benefits to miners nor contributed to the miners' expectations of such benefits, the plurality concluded that, even though Eastern had employed the assigned miners at some point, the correlation between Eastern and its liability to the Combined Fund is tenuous, and the amount assessed against Eastern resembles a calculation made in a vacuum. Id. at 531, 118 S.Ct. 2131 (citation and internal quotations omitted). 37 The plurality also concluded that proportionality was lacking with regard to the two other Takings Clause factors. The Coal Act's substantial and particularly far reaching retroactivity 11 interfered with Eastern's reasonable investment backed expectations. Id. at 534, 118 S.Ct. 2131. The plurality reasoned that because a coal industry employer could not have contemplated liability for lifetime benefits to miners until the 1974 NBCWA, the Coal Act's scheme for allocation of Combined Fund premiums is not calibrated either to Eastern's past actions or to any agreement — implicit or otherwise — by the company. Id. at 536, 118 S.Ct. 2131. Finally, the plurality concluded that the nature of governmental action ... is quite unusual, and implicates fundamental principles of fairness underlying the Takings Clause, because it singles out certain employers to bear a burden that is substantial in amount, based on the employers' conduct far in the past, and unrelated to any commitment that the employers' made or to any injury they caused. Id. at 537, 118 S.Ct. 2131. 38 Therefore, because each of the significant factors in a Takings analysis was implicated, the plurality found that the Act was an unconstitutional taking as applied to Eastern Enterprises. 39 Justice Kennedy, provided the fifth vote striking down the Act as unconstitutional as applied, but he disagreed with the plurality's Takings Clause analysis. Rather, he concluded that the Act's retroactivity violated due process. Id. at 539-50, 118 S.Ct. 2131. He applied an arbitrary and irrational standard of review, Id. at 547, 118 S.Ct. 2131, and focused on the fact that Eastern Enterprises had not signed a 1974 or later NBCWA. He reasoned: 40 Eastern was once in the coal business and employed many of the beneficiaries, but it was not responsible for their expectation of lifetime benefits or for the perilous condition of the 1950 and 1974 plans which put the benefits in jeopardy. As the plurality discusses in detail, the expectation was created by promises and agreements made long after Eastern left the coal business. Eastern was not responsible for the resulting chaos in the funding mechanism caused by other coal companies leaving the framework of the National Bituminous Coal Wage Agreement. This case is far outside the bounds of retroactivity permissible under our law. 41 Id. at 550, 118 S.Ct. 2131 (emphasis added). 42 The four dissenting justices agreed with Justice Kennedy that the application of the Act did not violate the Takings Clause, but disagreed with his view that the Act violated the Due Process Clause. Id. at 556-67, 118 S.Ct. 2131. 43 In subsequent cases discussing the decision in Eastern Enterprises, we have noted that the splintered nature of the Court's decision made it difficult to distill a guiding principle from Eastern.  Unity Real Estate Co., 178 F.3d at 658. However, as recited above, both the plurality and Justice Kennedy focused on one significant fact. The 1974, 1978 and subsequent NBCWAs were the first wage agreements that included a commitment to funding lifetime health benefits for retired miners and their dependents. No such commitment was contained in any earlier wage agreement. Because Eastern Enterprises was not a signatory to either the 1974 or the 1978 NBCWAs, it could not have contemplated that it would be responsible for contributing to the miners' expectation of lifetime health benefits. See Anker Energy Corp. v. Consolidation Coal Co., 177 F.3d at 172 ([A]nalysis of the decisions in Eastern Enterprises leads us to the conclusion that a majority of the Court would find the Act unconstitutional when applied to an employer that did not agree to the 1974 or subsequent NBCWAs, while application of the Act to a signatory to the 1974 or subsequent wage agreement would be an entirely different matter.); see also, Association of Bituminous Contractors, Inc. v. Apfel, 156 F.3d 1246, 1257 (D.C.Cir. 1998) (The clear implication of each opinion in Eastern Enterprises is that employer participation in the 1974 and 1978 agreements represents a sufficient amount of past conduct to justify the retroactive imposition of Coal Act liability (for the dissenting justices, of course, such participation is not even necessary.)) 44 On September 24, 1998, the Commissioner voided the Coal Act beneficiary assignments of 113 companies that he concluded were similarly situated to Eastern Enterprises. He also decided that no beneficiaries would be assigned to another 11 similarly situated companies that had not yet received assignments. The group whose assignments were voided by the Commissioner included Berwind's three co-plaintiffs in Berwind I. 12 Berwind also ceased making premium payments (after June 1998) and requested that the Commissioner void Berwind's assignment as well. The Commissioner refused, and this lawsuit followed.