Opinion ID: 3011992
Heading Depth: 1
Heading Rank: 3

Heading: eastern enterprises and the

Text: COMMISSIONER’S RESPONSE As is often the case under the Coal Act, the challenge to the Commissioner’s assignments here rests in large part upon our interpretation of Eastern Enterprises . The Court there considered the constitutionality of the Coal Act as applied to Eastern. That company had mined coal until 1965, and signed every NBCWA from 1947 until 1964. The Commissioner assigned Eastern liability for over 1000 miners pursuant to 26 U.S.C. S 9706(a)(3), based upon Eastern’s status as the pre-1978 signatory operator for whom the miners had worked the longest. The total liability for those assignments was estimated to be between $50 and $100 million. Eastern sued claiming that S 9706(a)(3) was unconstitutional as applied to it because the Act’s imposition of liability violated the Due Process and Takings Clauses of the Fifth Amendment. A four-justice plurality of the Supreme Court agreed that the Act violated the Takings Clause as applied to Eastern Enterprises. Eastern Enterprises, 524 U.S. at 537. While recognizing that a takings analysis is essentially ad hoc and fact intensive, the plurality nonetheless identified three factors that are usually significant to assessing a Takings challenge under the Fifth Amendment: the economic impact of the regulation, its interference with investment backed expectations, and the character of the governmental action. Id. at 523-524 (quoting Kaiser Aetna v. United States, 444 U.S. 164, 175 (1979)). The plurality then reviewed cases involving legislative schemes similar to the Coal Act; viz., the Black Lung Benefits Act and the Multiemployer Pension Plan Amendments Act (MPPAA) 10 which was enacted to supplement the Employee Retirement Income Security Act (ERISA). The justices concluded that those cases established: 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. Id. at 528-529 (citation and internal quotations omitted) (emphasis added). Applying these principles to Eastern Enterprises, the plurality first focused on the economic impact of the Act and found that it placed a considerable financial burden on that company. Id. at 529. The financial burden was not a permanent physical occupation of Eastern’s property of the kind [usually] viewed as a per se taking[.] However, the plurality noted that the Court’s 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 (citation and internal quotations omitted). The plurality concluded that this proportionality was lacking insofar as the Coal Act was applied to Eastern. Eastern had contributed to the 1947 and 1950 W&R Funds, butit [had] ceased it 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. This was significant because those latter 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 had neither contemplated liability for lifetime benefits to miners nor contributed to the miners’ expectations of lifetime benefits, the plurality found that 11 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 (citation and internal quotations omitted). The assignments to Eastern faired no better when the plurality considered the second and third factors it had culled from the Court’s Takings Clause jurisprudence. The Act’s substantial and particularly far reaching retroactivity5 interfered with Eastern’s reasonable investment backed expectations. Id. at 534. The plurality reasoned that a coal industry employer could not have contemplated liability for lifetime benefits to miners until those provisions were included in the 1974 NBCWA. Therefore, the Coal Act’s scheme for allocation of Combined Fund premiums[was] not calibrated either to Eastern’s past actions or to any agreement -- implicit or otherwise -- by the company. Id. at 536. Finally, the plurality found that the nature of governmental action . . . is quite unusual, andimplicates 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. Inasmuch as each of the three factors weighed against sustaining the taking, the plurality concluded that the assignment to Eastern under the Act was unconstitutional. Justice Kennedy, who provided the fifth vote striking down the application of the Act as to Eastern, disagreed with the plurality’s analysis, but found that the Act’s retroactivity violated due process. Id. at 539-50. He applied an arbitrary and irrational standard of review, Id. at 547, _________________________________________________________________ 5. Coal Act assignments operate retroactively because they require an assignee to use current funds to provide benefits for miners after the assignee believed its liability to the miners had been settled. See Eastern Enterprises, at 534 (O’Connor, J.) ([T]he Coal Act operates retroactively, divesting Eastern of property long after the company believed its liabilities under the 1950 W&R Fund to have been settled.). 12 and focused on the fact that Eastern Enterprises had not signed a 1974 or later NBCWA. He concluded: 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. Id. at 550 (emphasis added). 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 due process. Id. at 556-67. We have previously noted the splintered nature of the Court’s decision, and remarked that it is 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 fact which each considered significant. The 1974, 1978 and subsequent NBCWAs were the first wage agreements containing a commitment to fund lifetime health benefits for retired miners and their dependents. Eastern Enterprises had not signed either the 1974 or the 1978 NBCWAs. Therefore, it could not have contemplated 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 13 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)). After Eastern Enterprises, the Commissioner undertook a comprehensive review of all assignments that had previously been made under S 9706(a)(3), including those made to the Companies. The Commissioner reasoned that, under Eastern Enterprises, if neither the original employer nor related persons had signed the 1974 or later NBCWAs, the assignment could not be distinguished from Eastern Enterprises. Accordingly, the Commissioner, on his own initiative, voided hundreds of assignments that were based solely on an employer or related person’s participation in a pre-1974 NBCWA. However, the Commissioner also concluded that Eastern Enterprises allowed miners to be assigned to coal companies that where part of a controlled group of corporations that included entities that had signed post1974 NBCWAs. These assignments were deemed to be materially different from the assignments in Eastern Enterprises. The plaintiff in Eastern was not statutorily related to another company that had signed 1974 and later NBCWAs. The Commissioner therefore concluded that Eastern did not address circumstances in which the assignee is related to both the original employer and another, affiliated company that signed collective bargaining agreements promising lifetime care. Accordingly, the Commissioner rejected the Companies’ requests to vacate their assignments of the miners employed by the Pre-1974 Signatories.