Opinion ID: 3010175
Heading Depth: 1
Heading Rank: 2

Heading: application of the coal act

Text: Lindsey's first contention is that it is not subject to the provisions of the Coal Act. The Coal Act authorizes the Commissioner to assign premiums to any signatory operator (or related party) that remains in business. 26 U.S.C.A. 9706(a). Lindsey is exempt from the Coal Act, it argues, because it is neither a signatory operator nor in business within the meaning of the Act. The Commissioner found otherwise. Our review is deferential. In reviewing the district court's order, we examine the agency's action under the same standard of review properly applied by the district court, seeFlorida Power & Light Co. v. Lorion, 470 U.S. 729, 744 (1985), granting favorable inferences from disputed facts to Lindsey since this is a summary judgment, see Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986). Although Lindsey sought review under the declaratory judgment act, see 28 U.S.C.A. 2201, the determination that plaintiff Lindsey is a signatory coal operator that remains in business -- and thus liable for Coal Act premiums -- was a final administrative decision made by the Commissioner of Social Security. See 26 U.S.C.A. 9706(f). We review the Commissioner's decision as a final agency action brought under the Administrative Procedure Act. See 5 U.S.C.A. 704 (Agency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review.). Thus, the question before us, as before the district court, is whether the administrative determination challenged by Lindsey satisfies the applicable standard of review set forth in the Administrative Procedure Act: whether the agency action is arbitrary, capricious, an abuse of discretion, or not in accordance with law. 5 U.S.C.A. 706(2)(A).
We first take up Lindsey's contention that it is not covered by the Coal Act because it is not a signatory operator. A signatory operator is a person which is or was a signatory to a coal wage agreement. 26 U.S.C.A. 9701(c)(1). It is undisputed that the Lindsey Coal Mining Corporation was a signatory to two coal wage agreements, one in 1947 and one in 1950. The only question, then, is whether the current Lindsey Liquidating Trust is the same person as the Lindsey Coal Mining Company that became a signatory to those agreements. Lindsey contends that it is not a signatory operator that can lawfully be assigned premium liability under the statute because it is not the same entity as the Lindsey Coal Mining Company. Because, in 1975, the Lindsey Coal Corporation became the Lindsey Liquidating Trust, the Lindsey Coal Mining Company has not existed for over twenty years, Lindsey argues. The government responds, and the Commissioner and the district court held, that Lindsey Coal is a signatory operator because the current trust is essentially the same entity -- and thus the same person under the Coal Act -- as the Coal Mining Company. We cannot say that the Commissioner abused her discretion in determining that Lindsey, in its current form as Lindsey Liquidating Trust, is the same person that was a signatory to the coal agreements. The former shareholders of the corporation are now the beneficiaries of the trust, and the trust engages in the same activities -- primarily leasing its property for coal, gas, mineral, and lumber extraction -- that the corporation did for over twenty years before it changed form. And, as Lindsey appears to concede, its mere cessation of active mining activities in 1952 -- while it continued to operate as the Lindsey Coal Mining Company -- could not transform it into a different entity. The Coal Act makes clear that a person can be liable for premiums even if it is no longer in the coal industry at all. See 26 U.S.C.A. 9701(c)(7) ([A] person shall be considered to be in business if such person conducts or derives revenue from any business activity, whether or not in the coal industry.) (emphasis added). Thus, Lindsey is a signatory operator for purposes of the Coal Act.
Lindsey also contends that is not covered by the Coal Act because it is no longer in business under the statute. The Coal Act provides that a signatory operator is in business if such person [1] conducts or [2] derives revenue from any business activity, whether or not in the coal industry. 29 U.S.C. 9701(c)(7). Lindsey concedes, as it must, that the trust derives substantial revenues from the former assets of Lindsey Coal Mining Company. It maintains, however, that it is not in business because its activities are insufficient to rise to the level of business activity. We hold that the Commissioner did not abuse her discretion in determining that Lindsey remained in business for purposes of the Coal Act. The Commission relied on a record which shows that Lindsey, as a liquidating trust, has generated substantial income from leasing and sales ventures, the same activities it conducted for its last twenty-two years as a corporation. Since beginning its liquidation, Lindsey has (1) negotiated the lease of land to a shopping center complex; (2) entered into four coal leases permitting other companies to mine coal on trust property in exchange for royalties; (3) signed at least 13 agreements for the harvesting of timber on trust property; (4) derived royalties from six natural gas leases; (5) sold scrap metal; and (6) employed a part-time secretary at approximately $20,000 per year. These activities generated almost $300,000 in income and capital gains for Lindsey in 1992 alone. This list of for-profit business endeavors could support a decision by the Commissioner that Lindsey was itself conduct[ing] business activity. Lindsey's own conduct is not necessary, however, to sustain the Commissioner's determination that it is in business for purposes of the Coal Act. The statutory definition of in business is broad, including within its scope not only (1) an entity that conducts business activity, but also (2) one who derives revenue from business activity. See 26 U.S.C.A. 9701(c)(7). Because the conducts prong is provided for separately, the derives revenue prong does not require the party liable under the Coal Act to itself conduct a business activity. Otherwise, the derives revenue option would be surplusage, which cannot have been Congress's intent. By the statute's own terms, then, someone other than the signatory operator may be the one engaging in the business activity. In Lindsey's case, the companies conducting the mining and harvesting operations pursuant to its leases with Lindsey are certainly engaging in business activities. And Lindsey cannot contest that it is deriving revenue from these business activities. Thus, Lindsey is covered by the plain terms of the statute. This interpretation is buttressed by the legislative history, which indicates that the statute was designed to cover just this sort of situation -- one entity deriving revenue from other entities' extraction of coal and other minerals from leased property. See 138 Cong. Rec. S17635 (daily ed. Oct. 8, 1992). Indeed, without this definition of in business, signatory operators could escape responsibility simply by divesting their actual mining operations and hiring outside contractors to extract the minerals. Lindsey relies on two faulty premises for its argument that it is no longer in business. First, it cites to cases and other sources defining carrying on a business and liquidating trust under the Internal Revenue Code. But definitions embodied in a different statute do not control as to whether Lindsey is an extant signatory operator for purposes of the Coal Act. The Coal Act supplies its own definitions and serves a distinct purpose -- defraying benefit costs for retired miners, not defining the organization's income tax status. Second, Lindsey claims that the Social Security Administration's internal guidelines demonstrate its status as a liquidating trust, exempt from the in business definition. This argument is also misplaced. To begin with, the regulations that Lindsey cites are internal interpretative guidelines that lack the force of law. See Matter of Seidman, 37 F.3d 911, 93031 (3d Cir. 1994). Therefore, the agency is not bound to follow them and Lindsey is not entitled to rely on them. Moreover, even on the guidelines' own terms, Lindsey cannot establish that it is not in business. Although the guidelines exempt liquidating trusts from the in business definition, Lindsey does not appear to qualify as a liquidating trust. The most relevant instruction appears to state that an entity will lose its status as a liquidating trust if the liquidation is unreasonably prolonged. Review Instructions, Section N.7.b. The Lindsey Trust has been in the process of liquidating for over twenty years. By its own testimony, this process will not be complete for several more years when its resources will finally be exhausted from harvesting and mining operations. Thus, the Commissioner did not abuse her discretion in concluding that plaintiffs remained in business and liable for Coal Act premiums.