Unity Real Estate Co v. Hudson , 178 F.3d 649 ( 1999 )

Opinions of the United
1999 Decisions States Court of Appeals
for the Third Circuit
3-29-1999
Unity Real Estate Co v. Hudson
Precedential or Non-Precedential:
Docket 97-3234,97-3236
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"Unity Real Estate Co v. Hudson" (1999). 1999 Decisions. Paper 80.
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Volume 1 of 2
Filed March 29, 1999
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
NOS. 97-3234 and 97-3236
UNITY REAL ESTATE COMPANY,
Appellant No. 97-3234
v.
MARTY D. HUDSON; MICHAEL H. HOLLAND; THOMAS
O. S. RAND; ELLIOTT A. SEGAL; CARLTON R. SICKLES;
GAIL R. WILENSKY; WILLIAM P. HOPGOOD; TRUSTEES
OF THE UNITED MINE WORKERS OF AMERICA
COMBINED BENEFIT FUND; THOMAS F. CONNORS;
ROBERTS WALLACE; TRUSTEES OF THE 1992 UNITED
MINE WORKERS OF AMERICA BENEFIT PLAN; UNITED
STATES OF AMERICA (Intervenor in District Court)
LTV Corporation (LTV), NACCO Industries,
Inc. (NACCO); Amicus Curiae
BARNES AND TUCKER COMPANY,
Appellant No. 97-3236
v.
MARTY D. HUDSON, Trustee of the United Mine Workers
of America Combined Benefit Fund and Trustee of the
1992 United Mine Workers of America Benefit Plan;
MICHAEL H. HOLLAND, Trustee of the United Mine
Workers of America Combined Benefit Fund and Trustee
of the 1992 United Mine Workers of America Benefit Plan;
THOMAS O. S. RAND, Trustee of the United Mine
Workers of America Combined Benefit Fund; ELLIOTT A.
SEGAL, Trustee of the United Mine Workers of America
Combined Benefit Fund; CARLTON R. SICKLES, Trustee
of the United Mine Workers of America Combined Benefit
Fund; GAIL R. WILENSKY, Trustee of the United Mine
Workers of America Combined Benefit Fund; WILLIAM P.
HOPGOOD, Trustee of the United Mine Workers of
America Combined Benefit Fund; THOMAS F. CONNORS,
Trustee of the 1992 United Mine Workers of America
Benefit Plan; ROBERT G. WALLACE, Trustee of the 1992
United Mine Workers of America Benefit Plan; UNITED
STATES OF AMERICA (Intervenor in the District Court)
LTV Corporation (LTV), NACCO Industries,
Inc. (NACCO); Amicus Curiae
On Appeal From the United States District Court
For the Western District of Pennsylvania
(D.C. Civ. No. 93-cv-01802)
District Judge: Honorable D. Brooks Smith
Argued: November 20, 1998
Before: BECKER, Chief Judge, ALDISERT and WEIS,
Circuit Judges.
(Filed March 29, 1999)
DAVID J. LAURENT, ESQUIRE
MICHAEL D. GLASS, ESQUIRE
Polito & Smock, P.C.
Suite 400 - Four Gateway Center
Pittsburgh, PA 15222-1207
ROBERT H. BORK, ESQUIRE
(ARGUED)
1150 17th Street, N.W.
Washington, DC 20036
Attorneys for Unity Real Estate Co.
2
FRANK W. HUNGER, ESQUIRE
Assistant Attorney General
LINDA L. KELLY, ESQUIRE
United States Attorney
DOUGLAS N. LETTER, ESQUIRE
EDWARD R. COHEN, ESQUIRE
(ARGUED)
SUSHMA SONI, ESQUIRE
Attorneys, Appellate Staff
Civil Division, Room 9014
United States Department of Justice
601 D Street, NW
Washington, DC 20530-0001
Counsel for the United States of
America
PETER BUSCEMI, ESQUIRE
(ARGUED)
JOHN MILLS BARR, ESQUIRE
MARGARET S. IZZO, ESQUIRE
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036
DAVID W. ALLEN, ESQUIRE
Office of the General Counsel
UMWA Health and Retirement
Funds
4455 Connecticut Avenue, NW
Washington, DC 20008
JOHN R. MOONEY, ESQUIRE
MARILYN L. BAKER, ESQUIRE
Mooney, Green, Baker, Gibson &
Saindon, P.C.
1341 G Street, NW, Suite 700
Washington, DC 20005
3
RALPH A. FINIZIO, ESQUIRE
Houston, Harbaugh
Two Chatham Center, 12th Floor
Pittsburgh, PA 15219
Attorneys for UMWA Combined
Benefit Fund and Its Trustees and
UMWA 1992 Benefit Plan and its
Trustees
DONALD B. AYER, ESQUIRE
GREGORY B. KATSAS, ESQUIRE
(ARGUED)
Jones, Day, Reavis & Pogue
Metropolitan Square
1450 G Street, NW
Washington, DC 20005
Attorneys for Amici Curiae
The LTV Corporation and NACCO
Industries, Inc.
OPINION OF THE COURT
BECKER, Chief Judge.
In Eastern Enterprises v. Apfel, 118 S. Ct. 2131 (1998),
the Supreme Court held unconstitutional the portion of the
1992 Coal Industry Retiree Health Benefit Act (Coal Act), 26
U.S.C. SS 9701-9722 (1994 & Supp. II), that required
former coal mine operators to pay for health benefits for
retired miners and their dependents, as applied to a former
operator who last signed a coal industry benefit agreement
in 1964. In this case, we are asked to apply Eastern to
former coal mine operators who were signatories to coal
industry agreements in 1978 and thereafter. Eastern was
decided by a sharply divided Court, and the parties
disagree as to what, if any, principles commanded a
majority.
The plaintiffs, Unity Real Estate ("Unity") and Barnes &
Tucker Co. ("B&T"), challenge the Coal Act as applied to
them as both a violation of substantive due process and an
4
unconstitutional uncompensated taking. Although it is an
exceedingly close question, and we are highly sympathetic
to plaintiffs' unfortunate situation, in which retroactively
imposed liability operates to bind them to commitments
they had thought satisfied when they left the coal industry,
we conclude that the Act is constitutional as applied to
these plaintiffs. Accordingly, their recourse must be to
Congress rather than to the courts.
First, we conclude, albeit with substantial hesitation,
that the Coal Act does not violate due process. Our due
process inquiry proceeds in two parts. We acknowledge at
the outset that there is a gap between what the contracts
between the union and the mining companies required and
what the Coal Act now mandates from those former mining
companies. Because this is a substantive due process
challenge, we accord deference to Congress's judgments,
based on the report and recommendations of the Coal
Commission. While reasonable minds could differ on the
point, we are satisfied that the agreements signed by the
plaintiffs in 1978 and thereafter promised that miners and
their dependents would receive lifetime benefits from the
benefit funds, and that, at all events, these agreements
informed reasonable expectations that the benefits would
continue for life. Similarly, we conclude that it was
reasonable for Congress to conclude that the plaintiffs'
withdrawal from the funds contributed to the funds'
financial instability, though the agreements themselves
permitted withdrawal. The history of coal mining in this
country also supports Congress's decision to step in when
the funds that provided health benefits to retired miners
began to falter.
The question we must then answer is whether those
congressional judgments provide enough of a rationale for
closing the gap between the contracts and the needs of the
benefit funds through the mechanism of the Coal Act.
Consistent with our due process jurisprudence, we ask
whether the Coal Act was a rational response to the
problems Congress identified, taking into account the Act's
retroactivity, which is highly disfavored in our legal culture.
In light of Congress's findings and in the context of
extensive government regulation of the coal industry, we
5
hold that it was not fundamentally unfair or unjust for
Congress to conclude that the former coal companies
should be responsible for paying for such benefits, even if
they were no longer contractually obligated to pay into the
benefit funds. The retroactive scope of this enactment,
especially as applied to plaintiff Unity (eleven years),
approaches the edge of permissible legislative action, but
we cannot say that the law is beyond the legislative power.
We also decline to find a compensable taking on the
ground that the Coal Act will put the plaintiffs out of
business, because it is contrary to the reasoning of a
majority of the Supreme Court in Eastern. Moreover,
granting relief whenever a plaintiff could credibly argue that
it would be driven out of business by a regulation would
create major difficulties in evaluating the constitutionality
of much modern legislation. We therefore decline to
construe this regulatory burden as a "categorical taking"
analogous to the total destruction of the value of a specific
piece of real property.
I. Facts and Procedural History
A. History of the Coal Act
1. Early Agreements in the Coal Industry
The history behind the Coal Act has often been discussed
in the pages of the federal reporters. See, e.g. , Eastern, 118
S. Ct. at 2137-42 (plurality). Briefly, the relevant facts are
as follows: The coal industry has witnessed a series of
particularly vitriolic labor disputes over the past half-
century. In 1946, motivated principally by miners' demands
for decent health and retirement benefits, the United Mine
Workers of America ("UMWA") called a nationwide strike. To
forestall industrial paralysis, President Truman nationalized
the coal mines. Following the execution of what came to be
known as the Krug-Lewis Agreement, the government
relinquished control of the mines. The UMWA and the
Bituminous Coal Operators' Association ("BCOA"), a
multiemployer group of coal producers, then executed the
first National Bituminous Coal Wage Agreement ("NBCWA").
The 1947 NBCWA specified terms and conditions of
employment in the mines and, among other things,
6
extended the Krug-Lewis Agreement by providing health
and pension benefits to miners.
A new NBCWA signed in 1950 provided that, in exchange
for union concessions, the BCOA would create a welfare
and retirement fund financed by a per ton levy on coal
mined by signatory coal producers. The 1950 Fund was
designed to receive employer contributions and to use the
funds to provide health benefits to current and retired
miners (and, in certain cases, to family members). Several
more NBCWAs were signed over the next two decades. None
of them altered this basic benefits format, although
beginning in 1971 the UMWA and the BCOA were given
power over the levels of benefits provided under the 1950
Fund, removing discretion formerly vested in the Trustees
of the Fund. See In re Chateaugay Corp., 53 F.3d 478, 482
(2d Cir. 1995).
2. The 1974 Agreement
In 1974, demographic changes that had increased the
cost of benefits, along with the passage of the Employee
Retirement Income Security Act ("ERISA"), 29 U.S.C. S 1001
et seq., led to a restructuring of the 1950 Fund. In its
place, the 1974 NBCWA established four separate
multiemployer plans, two covering pension benefits and two
dealing with nonpension benefits. The nonpension entities
were the 1950 Benefit Plan, which provided health benefits
to coal workers who retired before 1976, and the 1974
Benefit Plan, which covered those who retired on or after
January 1, 1976. The 1974 NBCWA explicitly guaranteed
that miners and their dependents would retain their health
services cards--which gave them access to Plan health
benefits--"for life." No such express warranty had appeared
in any earlier agreement. We will discuss these changes in
more detail below. See infra Part III.
3. The 1978 Agreement
In response to continued labor unrest and unresolved
concerns over benefits, the 1978 NBCWA incorporated a
new provision assuring health care for "orphaned" miners
(that is, miners whose employers had abandoned either the
coal industry or the UMWA), together with complementary
"guarantee" and "evergreen" provisions. The "guarantee"
7
clause obligated signatories to make sufficient
contributions to maintain benefits at the negotiated levels
during the period of agreement, whereas before there had
been no promise to maintain any particular benefit level.
The "evergreen" clause required signatories who continued
to mine coal to continue making benefit contributions for as
long as such contributions were required by future
NBCWAs, regardless of whether a particular operator
actually signed those subsequent NBCWAs. Additionally,
the 1978 NBCWA for the first time defined specific health
benefits that would be covered, a practice that continued in
later agreements. Finally, for miners leaving covered service
on or after January 1, 1976, primary responsibility for
retiree health care coverage was shifted from the UMWA
multiemployer system to individual coal companies, with
the 1974 Plan retained as an "orphan" plan for retirees
whose former employers went out of business.
4. The Coal Commission
The economic problems that prompted the remedial
measures in the 1974 and 1978 NBCWAs continued to
plague the industry. In particular, the cost of health care
rose steeply throughout the 1980s, the number of orphaned
miners increased dramatically as more and more employers
left the industry, and an aging population swelled the
retired miners' ranks. By 1990, contributions from a
shrinking number of coal producers proved insufficient to
fund the four benefit plans, and those plans were awash in
red ink.
The UMWA struck the Pittston Coal Company for nearly
11 months in 1989-90. The Secretary of Labor intervened,
brokered a rapprochement, and, as part of the negotiated
settlement, set up a commission to study the industry's
problems and recommend ways of rejuvenating the benefit
plans. The Coal Commission issued its report in late 1990.
Congress's response to the commission's suggestions took
the form of the Coal Act. The Act folded the 1950 and 1974
Plans into a single UMWA-sponsored entity (the Combined
Fund) and wove an elaborate tapestry designed to ensure
that all retirees who were eligible to receive health benefits
from the preexisting Plans would obtain them from the
Combined Fund. The Act also created the 1992 Plan, which
8
was designed to provide benefits to eligible retirees and
their dependents who were not beneficiaries of the
Combined Fund and who were not receiving health care
coverage directly from former employers.
The linchpin of the statutory scheme is contained in
section 9706 of the Coal Act, which directs the assignment
by the Social Security Commissioner of every eligible
beneficiary to a "signatory operator" who is still "in
business." The signatory operator ("SO") must have signed
at least one NBCWA and must pay premiums to the
Combined Fund sufficient to defray the estimated
annualized health care costs for its assigned beneficiaries.
See 26 U.S.C. S 9704.1 A retired miner is assigned first, if
possible, to the SO that both signed the 1978 (or any
subsequent) NBCWA and also employed him for at least two
years more recently than any other SO. See id. S 9706(a)(1).
If no SO fits that description, the retired miner is assigned
to the 1978 (or any subsequent) SO that employed him
most recently for any length of time. See id. S 9706(a)(2). If
the retired miner never worked for a 1978 or subsequent
SO that is still in business, he is assigned to the SO that
employed him for the longest period of time. See id.S 9706(a)(3).
B. The Parties
1. Unity
Unity is a corporation owned by members of the Jamison
family. Unity is covered by the Coal Act as a "related
person" to several companies--formed by members of the
Jamison family--that were ultimately absorbed into Unity.
One, South Union-PA, had been mining coal since 1923
and signed the 1947 NBCWA and amendments thereto
through 1961. South Union-WVA, which took up mining
when South Union-PA left off, signed the 1974, 1978, and
1981 NBCWAs, although a bankruptcy court granted it
_________________________________________________________________
1. The law also provides that SOs must pay an additional amount,
proportional to the number of initial assignments, to provide coverage for
orphaned retirees. However, it has apparently not proven necessary to
assign SOs responsibility for orphaned retirees because of the
availability
of other funding sources. See Eastern, 118 S. Ct. at 2142 n.3 (plurality).
9
leave to reject the 1981 NBCWA in 1981. Yet another
Jamison company, Stewart Coal & Coke Co., paid into the
UMWA benefit funds from 1949 to 1958; when it ceased
operations, it stopped paying into the benefit funds, but its
former employees continued to receive benefits from the
Funds. Other related companies signed NBCWAs and paid
into UMWA benefit funds at various times from the 1960s
through the 1970s.2
Unity currently owns a small commercial building and
parking lot in Greensburg, Pennsylvania and employs two
individuals, a corporate officer who earns $7,000 per year
and a janitor. Its annual gross revenues are approximately
$50,000 and its net worth is approximately $85,000. Unity
was assigned 74 beneficiaries of the Combined Fund and
owed the Fund, as of September 30, 1995, over $440,000
in unpaid premiums. In addition, Unity was assigned 2
beneficiaries of the 1992 Plan and, as of January 31, 1996,
owed that Fund over $18,000. The assignment was based
upon Unity's prior employment of 63 miners, who had
worked for Unity and its related companies, on average, for
ten years.3 Unity represents that its Coal Act liabilities are
over six times its total assets and that, if forced to pay, it
will be bankrupted. These representations are not disputed
by the Trustees.
2. B&T
B&T was assigned 1544 Combined Fund beneficiaries
and some twenty 1992 Plan beneficiaries. B&T had been,
_________________________________________________________________
2. While attempting to distance itself from liability, Unity and its
owners
have not ignored the benefits of close corporate relationships. Although
we do not suggest that it acted with bad faith, we note that Unity repaid
the Jamison family over $230,000 from promissory notes given by
Stewart Coal & Coke, which merged with Unity in 1969 (over $150,000
on those notes was paid in 1992 and 1993), and that Unity sheltered
$288,000 in income from federal income tax because of net operating
loss carryover from South Union-WVA's bankruptcy. At all events, Unity
has never presented any legal challenge to the "related persons"
provision of the Act, and hence its obligations must stand or fall
regardless of how Unity was assigned the beneficiaries.
3. Thirty miners had worked for the companies for more than ten years
and thirteen for more than fifteen years.
10
from 1905 on, engaged in large scale coal production until
closing its last mining operation in 1986. It terminated an
agreement to manage a mine effective January 1, 1987. At
the peak of its coal mining operations from the 1970s to the
1980s, B&T employed approximately 1100 UMWA-
represented miners. B&T was a party to the 1971, 1974,
1978, and 1981 NBCWAs through its membership in the
coal operators' association. Although it withdrew from the
association prior to the 1984 NBCWA, it later agreed to be
bound by that NBCWA on a "me-too" basis, adhering to the
Agreement's requirements. Its participation in the NBCWA
terminated in 1988. At that time, B&T discontinued its
individual employer plan and its retirees were left to be
covered by the 1974 Benefit Plan (the "orphan" plan).
B&T's activities are currently confined to leasing its coal
reserves, paying workers' compensation and black lung
claims, and treating acid mine drainage from its closed
mines. B&T claims that if it is forced to continue paying its
Coal Act liabilities, all of its assets will be consumed in less
than two years, and this is not in dispute.
C. Procedural History
The plaintiffs challenge the constitutionality of the Coal
Act as it applies to them (S 9706(a)(1) & (2)). Both moved for
preliminary injunctions to prevent the Trustees of the funds
to which the plaintiffs are required to pay under the Coal
Act from enforcing the Coal Act against them during the
pendency of these cases. B&T withdrew its motion for a
preliminary injunction, and the District Court granted
Unity's motion for a preliminary injunction. The court
rejected Unity's Due Process Clause argument but granted
the requested interim relief on Takings Clause grounds. See
Unity Real Estate Co. v. Hudson, 889 F. Supp. 818 (W.D.
Pa. 1995). All parties moved for summary judgment. The
District Court, reconsidering its views of the merits, granted
the defendants' motions for summary judgment and denied
Unity's and B&T's motions for summary judgment. Unity
and B&T appeal.
11
II. The Eastern Decision
A. The Rationales
Eastern Enterprises was involved in coal mining until
1965, and signed every NBCWA from 1947 until 1964. It
was assigned liability for over 1000 miners, based on
Eastern's status as the pre-1978 signatory 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 sued, claiming that the Coal Act was
unconsititutional.
Four Justices concluded that the Act was a compensable
taking as to Eastern. In practical terms, this meant that the
Act was unconstitutional: Compensation for the taking
would be the return of sums required to be paid by the Act.
Although the law did not work a physical invasion, the
plurality noted that economic regulation can constitute a
taking. See Eastern, 118 S. Ct. at 2146 (plurality). The
plurality looked to three factors of particular significance in
determining whether a taking had occurred: the economic
impact of the regulation, its interference with reasonable
investment-backed expectations, and the retroactive
character of the government action. See id. (plurality).
The plurality examined several previous cases to set the
stage for its analysis. It looked to Usery v. Turner Elkhorn
Mining Co., 428 U.S. 1 (1976), where the Court upheld
provisions of the Black Lung Benefits Act, which required
coal operators to compensate miners and their survivors for
death or disability due to mining-related black lung
disease. The Eastern plurality explained that Usery upheld
that law because, even though "stricter limits may apply to
Congress' authority when legislation operates in a
retroactive manner," holding the companies liable for black
lung benefits was justified as a rational measure to spread
the costs of black lung to companies that profited from the
miners' labor. Eastern, 118 S. Ct. at 2147 (plurality).
Next, the plurality considered Pension Benefit Guaranty
Corp. v. R.A. Gray & Co., 467 U.S. 717 (1984), where the
Court upheld the Multiemployer Pension Plan Amendments
Act (MPPAA), which was enacted to supplement ERISA.
ERISA had created the Pension Benefit Guaranty
12
Corporation to exercise discretionary authority to pay
benefits when a multiemployer pension plan terminated.
The Corporation also had authority to require employers
who had contributed to the plan during the five years
before its termination to pay for an amount proportional to
their share of contributions to the plan during thatfive-
year period. As ERISA's effective date approached, many
multiemployer pension plans were in a precarious position,
and so Congress enacted the MPPAA, which imposed a
payment obligation upon any employer withdrawing from
such plans. The obligation depended on the employer's
share of the plan's unfunded vested benefits.
The MPPAA applied retroactively to withdrawals within
the five months preceding its enactment. The Eastern
plurality explained that the Court upheld the MPPAA
because retroactive liability prevented employers from
taking advantage of a lengthy legislative process by
withdrawing before Congress revised the law. The
retroactivity in Gray, the Eastern plurality emphasized, was
short, and limited to the needs generated by the delays
inherent in the legislative process. See Eastern, 118 S. Ct.
at 2147 (plurality).
The plurality then reviewed Connolly v. Pension Benefit
Guaranty Corp., 475 U.S. 211 (1986), where the MPPAA
was again at issue, this time as the subject of a takings
challenge. The Eastern Court explained that Connolly
upheld the law despite the employers' expectations that
they would not have to pay, because "legislation is not
unlawful solely because it upsets otherwise settled
expectations." Eastern, 118 S. Ct. at 2148 (plurality). Even
though the employers in Connolly had contractual
agreements expressly limiting their contributions to the
pension plan, the Court held that their express contracts
could not impair Congress's authority. See Connolly, 475
U.S. at 223-24. The Connolly Court noted that the MPPAA
did not work a physical invasion. Although the economic
impact of the law was substantial, the amount was directly
related to the previous relationship between the employer
and its pension plan, and therefore the economic impact
factor did not establish that a taking had occurred. See id.
at 225. Moreover, there was no interference with reasonable
13
investment-backed expectations, because at the time the
MPPAA was enacted, prudent employers had notice that
pension plans were regulated and that withdrawal might
trigger additional financial obligations. See id. at 227.
The third time was not the charm for the MPPAA's
challengers in Concrete Pipe & Products, Inc. v. Construction
Laborers Pension Trust, 508 U.S. 602 (1993). In that case,
the employer focused on the fact that its contractual
commitment to its pension plan did not impose withdrawal
liability. The Court rejected the claim that the contract
made a difference and reiterated its holding that there was
no taking as long as an employer's liability would generally
not be " `out of proportion to its experience with the plan.' "
Id. at 645 (quoting Connolly, 475 U.S. at 226). Although the
employer's liability under the MPPAA exceeded ERISA's
original cap on withdrawal liability, the Court found "no
reasonable basis to expect that [ERISA's] legal ceiling would
never be lifted." Id. at 646. The employer voluntarily
negotiated a plan within ERISA's scope, making its burden
under the MPPAA neither unfair nor unjust. See id. at 646-
47.
The Eastern plurality summarized this line of cases as
follows:
Our opinions in Turner Elkhorn, Connolly, and Concrete
Pipe[ ] make clear that Congress has considerable
leeway to fashion economic legislation, including the
power to affect contractual commitments between
private parties. Congress also may 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.
Eastern, 118 S. Ct. at 2149 (plurality) (citation omitted).
The plurality held that the Coal Act, as applied to Eastern,
presented such an extreme case.
14
On the economic impact factor of the takings test, the
plurality found "no doubt that the Coal Act has forced a
considerable financial burden upon Eastern," between $50
and $100 million. Id. (plurality). The plurality referred to
previous cases requiring that liability be proportional to a
party's experience with the object of the challenged
legislation. In the pension plan cases, the parties had
voluntarily negotiated and maintained pension plans, at
least for a while, and consequently their statutorily imposed
liability was linked to their own conduct. See id. at 2149-50(plurality). Eastern did not participate in the negotiations
for the 1974 or subsequent NBCWAs, nor did it agree to
make contributions thereunder. "[The 1974, 1978, and
subsequent agreements] first suggest an industry
commitment to the funding of lifetime health benefits for
both retirees and their family members." Id. at 2150(plurality).
The plurality then concluded that the Coal Act
substantially interfered with Eastern's reasonable
investment-backed expectations. See id. at 2151 (plurality).
It reasoned that retroactivity is generally disfavored in the
law, and that the length of the period of retroactivity and
the extent of Eastern's liability raised substantial questions
of fairness. See id. at 2152 (plurality). Finally, the plurality
found the nature of the government action to be quite
unusual, because the liability imposed was substantial,
based on conduct thirty to fifty years in the past, and
unrelated to any commitment Eastern made or injury it
caused. See id. at 2153 (plurality).
The plurality declined to reach Eastern's substantive due
process argument, although it noted that takings and due
process analyses are often correlated. See id. (plurality); see
also Connolly, 475 U.S. at 223. The plurality reiterated the
Court's past concerns about using the "vague contours" of
the due process clause to nullify laws. Eastern, 118 S. Ct.
at 2153 (plurality) (citation omitted). Justice Thomas agreed
with the plurality's Takings Clause analysis but wrote
separately to reaffirm his belief that the Ex Post Facto
Clause would also apply to Eastern's predicament. See id.
at 2154 (Thomas, J., concurring).
15
Justice Kennedy concurred in the judgment, providing
the critical fifth vote to strike the law down as applied to
Eastern. He found takings analysis inapplicable: "The Coal
Act imposes a staggering financial burden on the petitioner
. . . but it regulates the former mine owner without regard
to property. It does not operate upon or alter an identified
property interest, and it is not applicable to or measured by
a property interest." Id. at 2154 (Kennedy, J., concurring).
Instead, he emphasized the law's distaste for retroactivity
and found that the Coal Act's extreme retroactivity violated
due process as applied to Eastern. See id. at 2158-59(Kennedy, J., concurring). When the Court upheld
retroactive legislation in the past, he noted, the statutes at
issue were "remedial, designed to impose an actual,
measurable cost of [the employer's] business which the
employer had been able to avoid in the past." Id. at 2159(Kennedy, J., concurring) (citation and internal quotation
marks omitted) (alteration in original). Justice Kennedy
concluded that "[s]tatutes may be invalidated on due
process grounds only under the most egregious of
circumstances. This case represents one of the rare
instances in which even such a permissive standard has
been violated." Id. (Kennedy, J., concurring).
Four Justices dissented, finding neither a taking nor a
due process violation.
B. Drawing Instruction from Eastern: Does It Control This
Case?
The splintered nature of the Court makes it difficult to
distill a guiding principle from Eastern. There are five votes
against the plurality's Takings Clause analysis. However,
Justice Kennedy's substantive due process reasoning is not
a "narrower" ground that we might take to constitute the
controlling holding. There is a fundamental conceptual
difference between a takings claim and a substantive due
process claim. If the government pays just compensation, it
may take property for public use under the Takings Clause.
Due process protections, by contrast, define what the
government may not require of a private party at all. It is
the difference between a liability rule and a property rule.
See Guido Calabresi & A. Douglas Melamed, Property Rules,
Liability Rules, and Inalienability: One View of the
16
Cathedral, 85 Harv. L. Rev. 1089 (1972); Thomas W.
Merrill, The Economics of Public Use, 72 Cornell L. Rev. 61,
66 (1986). To be sure, in this case the result of the two
claims would be the same because the only potential taking
is the imposition of a monetary obligation, but neither
constitutional ground is a more limited version of the other.
Amici, other former coal companies, submit that the
holding of Eastern is that employee benefits funding
legislation is unconstitutional if it imposes substantial
retroactive liability on selected employers, and if that
liability is unrelated to injuries caused or promises made by
those employers. While this may be reasonably accurate in
a general sense, it does not provide guidance for
determining how substantial is too substantial or how tight
the fit between parties' past acts and the liability imposed
on them must be. Nor does it help define an intersection
between substantive due process and takings law, as the
word "unconstitutional" is here being used to cover, if not
a multitude of sins, at least two.
Eastern, therefore, mandates judgment for the plaintiffs
only if they stand in a substantially identical position to
Eastern Enterprises with respect to both the plurality and
Justice Kennedy's concurrence. See Association of
Bituminous Contractors, Inc. v. Apfel, 156 F.3d 1246, 1254-
55 (D.C. Cir. 1998) [ABC, Inc.] (reaching the same
conclusion about Eastern). In addition, we are bound to
follow the five-four vote against the takings claim in
Eastern, although we will consider plaintiffs'"categorical
takings" claim, not presented in Eastern, in greater detail
infra Part IV.
Because the plaintiffs signed NBCWAs in 1974 and
thereafter, they are factually distinguishable from Eastern
Enterprises. Language in the plurality and the concurrence
suggesting that expectations fundamentally changed after
1974 supports our conclusion. See Eastern, 118 S. Ct. at
2150 (plurality) ([The 1974, 1978, and subsequent
agreements] first suggest an industry commitment to the
funding of lifetime health benefits for both retirees and
their family members."); id. at 2159 (Kennedy, J.,
concurring); see also id. at 2161 (Stevens, J., dissenting)
(stating that the miners' and operators' "implicit agreement
17
was made explicit in 1974"). Although we recognize that the
Court was not presented with argument focused on post-
1978 signatories and thus may not have had before it all
the available evidence about later contracts, that very
distinction compels the conclusion that Eastern is not on
all fours with the case before us.
To the extent that Eastern embodies principles capable of
broader application, we believe that due process analysis
encompasses the relevant concerns. We must identify a set
of calipers with which to evaluate the challenged provisions
of the Coal Act, and we believe that the relevant
measurement is the extent of the gap between the coal
companies' contractual promises to the Funds and the
requirements of the Coal Act. In making our decision, we
first give deference to Congress's determination of the
problem to be addressed, and then ask whether Congress's
solution comports with fundamental principles of due
process.
III. Retroactivity and Due Process
A. The Standard of Review
The standard of review when a substantive due process
violation is alleged is forgiving; it bars only arbitrary and
irrational congressional action. At the same time, our legal
system has a long-standing and well-justified distaste for
retroactive laws, because of their heightened potential for
unfairness. See, e.g., Eastern, 118 S. Ct. at 2158 (Kennedy,
J., concurring) (discussing our "singular distrust of
retroactive statutes"); Bowen v. Georgetown Univ. Hosp.,
488 U.S. 204, 208 (1988).
The situation is not unlike that faced in Turner
Broadcasting System, Inc. v. Federal Communications
Commission, 117 S. Ct. 1174 (1997). In Turner, a case
involving a First Amendment challenge to Congress's
regulation of cable systems, the Court applied intermediate
scrutiny and required substantial evidence justifying
Congress's conclusion that regulation was necessary, but
nonetheless emphasized the importance of deference to
Congress:
18
Our sole obligation is "to assure that, in formulating its
judgments, Congress has drawn reasonable inferences
based on substantial evidence." . . . [S]ubstantiality is
to be measured in this context by a standard more
deferential than we accord to judgments of an
administrative agency. We owe Congress' findings
deference in part because the institution "is far better
equipped than the judiciary to `amass and evaluate the
vast amounts of data' bearing upon" legislative
questions. This principle has special significance in
cases, like this one, involving congressional judgments
concerning regulatory schemes of inherent complexity
and assessments about the likely interaction of
industries undergoing rapid economic and
technological change. Though different in degree, the
deference to Congress is in one respect akin to
deference owed to administrative agencies because of
their expertise. This is not the sum of the matter,
however. We owe Congress' findings an additional
measure of deference out of respect for its authority to
exercise the legislative power. Even in the realm of
First Amendment questions where Congress must base
its conclusions upon substantial evidence, deference
must be accorded to its findings as to the harm to be
avoided and to the remedial measures adopted for that
end, lest we infringe on traditional legislative authority
to make predictive judgments when enacting
nationwide regulatory policy.
Id. at 1189 (citations omitted).
While we are not applying a First Amendment test to this
due process claim, we consider Turner instructive in a
situation such as this, where both careful scrutiny of the
retroactivity involved and deference to the legislature's
judgments about cognizable harms and appropriate
remedies are in order. We must decide whether sufficient
evidence exists to support Congress's judgment that post-
1978 signatories of NBCWAs could justly be charged with
responsibility for retirees' health benefits, based on the
promises they made to coal miners and on the effects of
their departure from the industry on the Funds. See also
Concrete Pipe, 508 U.S. at 639 (Congress's judgment
19
receives deference even when its retroactive solution to a
problem has some weaknesses). We will then evaluate
whether it was rational for Congress to legislate to close the
gap between the coal companies' promises and their
contractual obligations, taking into account the retroactivity
of the law.
B. Does the Evidence Support Congress's Conclusion that
the Coal Companies Should Be Held Responsible?
1. The Relationship Between Benefits and Work
Performed by Miners
Before we address the problems occasioned by the mass
departure of coal companies from the industry in the 1980s
and the expectations created by the NBCWAs, we mustfirst
dispose of the plaintiffs' argument that the Coal Act is
unjustified because it charges them with financial
responsibility for non-coal-mining-related health problems.4
The plaintiffs submit that their liability is
disproportionate to their actual responsibility because they
are required to pay for miners' dependents and for all
health conditions, however unrelated to mining work. Thus,
they conclude, their liability does not depend in any
rational way on benefits they received from the miners'
work in the mines. That the company may be responsible
_________________________________________________________________
4. The plaintiffs further argue that there is no reasonable relationship
between their potential liability and the former employment
relationships; they are responsible for the miners' dependents even if the
miners only worked for them a day. This argument is skewed. In fact,
the miners for which the plaintiffs are responsible worked for the
plaintiffs, on average, for many years. There is no evidence in the record
to suggest that the plaintiffs' hypothetical ever occurred; instead, the
evidence indicates that Congress correctly found that many beneficiaries
were entitled to benefits based on miners' long years of service with
particular companies. Furthermore, one day of work would not qualify a
miner for benefits under the statute, since a miner must work for twenty
years in the industry or be disabled in the course of employment to
qualify for benefits. See 26 U.S.C. S 9703(f); In re Chateaugay, 53 F.3d
at 489. In combination with the statutory scheme of assigning
beneficiaries to the SO for whom a covered miner worked longest, this
initial eligibility requirement guards against the disquieting result
posited by the plaintiffs.
20
for a miner's entire family does not make the burden
unrelated to past benefits, however. While it is true that a
miner's virility may have little to do with his productivity,
the post-1978 agreements clearly provided for family
coverage; when those agreements were signed, the
companies could predict, with some actuarial reliability,
their responsibilities for family benefits. Coverage for
dependents was the price of labor peace, and the
companies received a benefit from the promise of that
coverage. See Nobel, 720 F. Supp. at 1178.
Proportionality does not require that the burdened
parties have physically injured the beneficiaries of a
retroactive law. The Eastern plurality relied on a
concatenation of circumstances to find a lack of
proportionality: First, the benefits were not related to work-
related injuries, and, second, the benefits were not related
to anything Eastern Enterprises ever promised. In Usery,
the black lung benefit case, only the first factor was present
and the law was upheld as proportional, while in Connolly
only the second factor was present and the law was also
upheld. Those cases demonstrate that the necessary
proportionality may be of either type, and there is no need
for both to be present. The argument to the contrary limits
the coal companies' responsibility for their past actions to
physical events. It makes more sense to recognize the
relevance of the companies' promises and negotiations with
the miners, especially since the NBCWAs were just as
necessary to the companies' continued operations as
blasting or digging.
2. Responsibility for the Funds' Instability
The defendants argue that B&T's and Unity's liability to
the Funds is proportional to their general experience in the
coal industry. The companies have only been assessed
liability based on the miners they actually employed, and
those miners' dependents. The Eastern plurality considered
the former employment relationship alone insufficient
because the employers had not promised lifetime benefits,
at least until 1974, years after Eastern left the industry.
See Eastern, 118 S. Ct. at 2150 (plurality). Unlike Eastern,
however, Unity and B&T, as BCOA members, at some
points in time negotiated for and adhered to the very
21
agreements that established the benefit funds at issue. Like
the employers in Concrete Pipe and Connolly, their liability
is linked to their voluntary negotiation of a benefit plan,
even though Congress retroactively increased the costs of
that negotiation. See Eastern, 118 S. Ct. at 2149-50(plurality).
Moreover, it can credibly be contended that the departure
of companies such as Unity's subsidiaries and B&T helped
to create the financial crisis in the plans that ultimately led
to the Coal Act. When B&T, along with several other
employers, left the industry, litigation ensued. See United
Mine Workers v. Nobel, 720 F. Supp. 1169 (W.D. Pa. 1989),
aff 'd, 902 F.2d 1558 (3d Cir. 1990). As a consequence, the
B&T retirees' benefits became funded by the 1974 Plan for
orphaned miners. After these events, the Plan had to
borrow funds and remaining employers were required to
increase their contribution rates to make up the shortfall.
Similarly, when South Union-WVA declared bankruptcy, it
informed the Funds that it was no longer in business and
would no longer provide health benefits for its retirees. As
Mr. Jamison contemplated when he notified the Trustees
that South Union-WVA had shut down, see J.A. at 170, the
1974 Fund was forced to take responsibility for those
retirees. See Schifano v. United Mine Workers 1974 Benefit
Plan & Trust, 655 F. Supp. 200 (N.D. W. Va. 1987)
(litigation arising out of South Union-WVA's bankruptcy).
Thus, the plaintiffs' acts increased the burden on the Fund,
contributing to its overstressed state, at least to some
degree.
Although the Fund may, as plaintiffs argue, have been
financially stable when the plaintiffs left the industry, it
was surely foreseeable that departures would lead to
instability, given the benefit funding structure under the
NBCWAs. While the plaintiffs contend that the benefit
funds only became unstable after the plaintiffs left the
industry and there were changes in the contribution levels
required from coal operators who remained in the industry,
it was also foreseeable that those contribution levels could
change, and it was the NBCWAs to which the plaintiffs
adhered that initially created a system vulnerable to such
changes. It was thus rational to conclude that operators in
22
this position should bear some responsibility for the costs
of the corrective legislation. "It is surely proper for Congress
to legislate retrospectively to ensure that costs of a program
are borne by the entire class of persons that Congress
rationally believes should bear them." United States v.
Sperry Corp., 493 U.S. 52, 65 (1989).
The plaintiffs argue that holding them responsible for the
benefit funds' financial instability because they left the coal
industry would obligate every operator to remain in the
industry no matter how unprofitable mining became, which
amounts to an "erosion taking." We disagree, since this is
simply a variant of the total takings claim that we reject
below. The law does not require the plaintiffs to stay in any
business, which was a necessary element of all the prior
"erosion taking" cases. See, e.g., Brooks-Scanlon Co. v.
Railroad Comm'n, 251 U.S. 396, 399 (1920) (legislature
cannot require a company to continue doing business,
though it may require the company to fulfill its legal
obligations if it chooses to continue operations). Instead,
the Coal Act merely recognizes that all acts have
consequences, and that sometimes it is not permissible for
a company simply to walk away, leaving its former
employees in the lurch.
In ABC, Inc., the Court of Appeals for the D.C. Circuit
relied heavily on the distinction between pre-1974
participation in the coal industry and post-1974
participation. The court found the distinction relevant for
two reasons: the post-1974 agreements began the explicit
promises of lifetime benefits, a matter we take up below,
and also created a funding structure that allowed (or even
induced) companies to leave the industry and slough off the
burden of their retirees' benefits on the remaining
companies. Before 1974, a company that left the industry
did not create any obligations on the part of other
companies to increase contributions to the benefit funds,
but after 1974 that changed. Judge Silberman reasoned
persuasively:
[I]t is surely rational for the Congress to expect that the
member companies' failure to contribute while their
retirees received benefits contributed to the underlying
crisis that the plans faced in the late 1980s. Although
23
the coal contractors may not have been the dominant
cause of that underfunding, legislation need not
burden the most responsible party to survive rational
basis review.
ABC, Inc., 156 F.3d at 1255-56.
ABC, Inc. also found that Justice Kennedy's additional
concern that liability imposed based on a past employment
relationship should be "remedial" was satisfied for
employers who, unlike Eastern, withdrew from the industry
after the 1974 agreements. Such employers "withdrew from
their prior commitment to contribute to the funds at
precisely the point in time . . . at which the benefit
obligation dramatically expanded, and therefore
`contributed to the perilous financial condition of the 1950
and 1974 plans which put the benefits in jeopardy.' " Id. at
1257 (quoting Eastern, 118 S. Ct. at 2159 (Kennedy, J.,
concurring)).
Unlike Eastern, Unity and B&T, as BCOA members,
participated in the negotiations that created the post-1978
funding structure. They benefited from the NBCWAs by
obtaining labor peace. Although the contract allowed the
companies to unload their obligations to the retirees onto
the Trustees, they should reasonably have anticipated that
such a strategy would threaten the Funds and might well
prompt a congressional response. We cannot say that it
was irrational for Congress to charge the miners' former
employers with the costs of their benefits, when the miners
qualified for lifetime benefits from the Trustees because of
their former employment (we expand on this point infra)
and the employers' departure from the industry contributed
to the problem confronting the Trustees.
B&T and Unity urge that they are not responsible for
most of the burden on the Funds. However, B&T was a
large employer, whose departure from the industry added
over a thousand beneficiaries to the Funds' "orphans," and
its individual impact was therefore significant. In addition,
Unity may be held partially responsible because, though its
individual contribution to the problem was small, the
aggregate effects of its actions and parallel actions by other
companies contributed to the problem. Congress may
24
reasonably include all of the parties whose acts, taken
together, gave rise to a problem, even if the individual
contributions of each are small. Cf. Wickard v. Filburn, 317
U.S. 111, 127-28 (1942) (applying the same reasoning to
Congress's Commerce Clause power).
3. The Background of Government Regulation
We consider the background of government regulation
significant as well. The coal industry has been heavily
regulated for decades, including the government-imposed
1948 Krug-Lewis Agreement, which created the basic health
benefits structure. The companies had no reasonable
expectation that the government would not expand its
regulation of health benefits in the coal industry, given the
history of labor unrest and government intervention. See
136 Cong. Rec. S17814 (daily ed. Oct. 27, 1990) (statement
of Sen. Glenn) (containing Congressional Research Service
report on the extensive history of federal intervention into
the health status and benefits of coal workers and into
labor relations in the coal industry more generally).5
The coal operators were also aware of the growing
number of government requirements that vested benefits be
paid, whether or not an employer was contractually
obligated to pay for them, as the industry's response to
ERISA indicated. The situation is thus analogous to those
in Connolly and Concrete Pipe, in which the Court found
that, in light of the history of federal pension regulation,
employers could not reasonably assume after 1978 that
their obligations to pension funds would never exceed the
specific terms of their contracts, see Connolly, 475 U.S. at
227, nor could they reasonably assume that Congress
would not increase the statutory cap on ERISA withdrawal
liability, see Concrete Pipe, 508 U.S. at 646. The parties
were well aware that pension plans could subject employers
to retroactive liability in cases of underfunding, and could
_________________________________________________________________
5. Indeed, amicus LTV was the specific target of at least one bill to
mandate that it continue to fund health benefits for its retired miners as
early as 1986. See 132 Cong. Rec. S9879 (daily ed. July 30, 1986) (bill
discussed by Sens. Byrd, Dole, Durenberger, Glenn, Heinz, & Specter);
id. at E2714 (daily ed. Aug. 1, 1986) (statement of Rep. Rahall).
25
have foreseen that Congress might act similarly with
respect to health benefits.
4. The Contractual Language
Turning to the expectations created by the contracts, the
threshold question is whether we need to distinguish
between explicit and implicit promises of lifetime benefits.
Although the plaintiffs concentrate on explicit promises, an
issue on which their position is strong, we think that
explicit promises are not necessary in order to justify
congressional action. The question is what reasonable
expectations the coal companies' actions created. While an
expectation cannot be reasonable without some foundation
in the real world, an explicit representation that the
companies would provide lifetime benefits is not required,
since reasonable expectations may arise from a consistent
course of conduct as well.
Plaintiffs and amici argue that the coal companies never
made any promises, implicit or explicit, or raised any
expectations of lifetime benefits. They first point to the text
of the NBCWAs, which did not themselves require the coal
companies to provide lifetime benefits under all
circumstances. They dissect the various contractual
provisions and characterize their import as follows: (1) the
health card that miners received for benefits"for life" did
not guarantee any specific benefits; (2) the"evergreen"
clauses only referred to an employer commitment to
continue funding benefits, but did not promise anything
about the scope of those benefits; (3) the "evergreen"
clauses only applied to operators who stayed in the coal
business; (4) the contracts allowed benefits to be
suspended or reduced; and (5) the guarantee of benefits
lasted only through the term of the agreement. Additionally,
an UMWA negotiatior testified in the course of other
litigation that everything was up for renegotiation at the
end of a contract and that the parties could have agreed to
eliminate benefits entirely. See District 17, UMWA v. Allied
Corp., 735 F.2d 121, 126 (4th Cir. 1984), vacated, 765 F.2d
412 (4th Cir. 1985).
It is true that the funding contribution requirements were
limited to the life of the agreement, "ending when this
26
Agreement is terminated," in 1978 and subsequent
NBCWAs. Yet all of these arguments have the same
fundamental weakness, which is that they go to the
contract and not to the reasonable expectations that might
have been created by the contract. The UMWA negotiator's
testimony is a particularly strong example of this: the
parties could have agreed to eliminate benefits in any given
negotiation, but there was no realistic chance that they
would. The defendants do not dispute that the contracts
did not provide for the payments mandated by the Coal Act.
If the contracts had so provided, the Coal Act would have
been unnecessary. The plaintiffs' dissection of the contracts
is a brilliant exercise, and were we deciding a case on labor
and contract law principles the outcome would be clear in
their favor.6 But this is not an action brought for
contractual violations. We focus our attention instead on
what conclusions Congress might rationally draw about the
parties' relations and expectations, and what it might fairly
do to close the gap between the contractual obligations of
the coal companies and the Funds' actual liabilities.
The NBCWAs did not in themselves guarantee that the
coal companies would pay for lifetime benefits for retirees
and their dependents. There thus is a tenable argument
that the NBCWAs did not obligate the Trustees of the
Funds to pay lifetime benefits, because the evolution of the
benefit structure did not indisputably culminate in a
lifetime guarantee. Indeed, the former coal companies have
a number of strong arguments, and reasonable people
could well disagree about Congress's choice to impose
liability on them. Nonetheless, we conclude that Congress
could reasonably have reached the conclusions it did about
the expectation of lifetime benefits and about the coal
companies' responsibility for the situation in which the
Funds found themselves after the changes of the 1970s and
1980s.
_________________________________________________________________
6. However, not all of these arguments are persuasive even as a matter
of contractual interpretation. As we discuss below, after 1978 health
benefits were specified in the contract, and that the evergreen clause and
the health card sections of the agreement did not rescribe the other
sections of the contract does not mean that those specifications were
without effect.
27
a. Contractual Clarity
The plaintiffs submit that Eastern turned on the fact that
the relevant NBCWA provisions clearly did not provide for
lifetime benefits. We believe that this is a subtle but
significant "spin" on the plurality's view, which found that
the obligations imposed on Eastern were unrelated to its
contractual obligations. The plurality noted that, during
Eastern's participation in the industry, retirement and
health benefits were far less extensive than they later
became; the benefits were also not vested. Furthermore,
benefits were subject to alteration or termination with far
fewer constraints than those later imposed by the shift of
control from the Trustees to the BCOA and the UMWA. In
fact, entire categories of beneficiaries provided for under the
Coal Act were not part of the older NBCWAs, and"Eastern
could not have contemplated liability for the provision of
lifetime benefits to the widows of deceased miners."
Eastern, 118 S. Ct. at 2150 (plurality). All these facts meant
that there was no rational relationship between Eastern's
past acts and its Coal Act-imposed obligations.
If Connolly retains any force, as we think it does, the
clarity of contractual provisions is far from dispositive.
Connolly itself involved a contract whose limits were at least
as clear as those in the contracts at issue here. Even
crystalline contractual provisions, accompanied by well-
established practice and understandings, can create
reasonable expectations extending beyond the four corners
of a contract. Though courts may be unable to enforce
those expectations, Congress is not so constrained. We
believe that our position is bolstered by a careful reading of
the Eastern plurality opinion, which did not suggest that an
implicit promise (that is, one not clearly found in the
contract) would be insufficient to sustain the Coal Act if
that promise had a reasonable basis in actual practice or in
the penumbra created by contractual promises. Instead, the
plurality found no evidence of any implied lifetime promise.
See Eastern, 118 S. Ct. at 2152 (plurality). Justice
Kennedy, likewise, focused not on the clarity of the contract
but on the lack of a connection between pre-1978 coal
operators and retired miners' reasonable expectations and
instability in the benefit structure. See id. at 2159(Kennedy, J., concurring).
28
b. Lifetime Benefits
The plaintiffs argue that the NBCWAs never promised
"lifetime benefits," and that the miners' only reasonable
expectation based on the NBCWAs would have been that
any operators who remained in the coal industry and
continued to sign agreements would pay for their benefits
indefinitely. From that perspective, the Coal Act
retroactively transformed a series of three- or four-year
commitments into an open-ended, decades-long obligation.
The plaintiffs' reading of the agreements is too crabbed.
The 1974 NBCWA has thirteen separate references to
health service cards "for life" or "until death." Plaintiffs
submit that this simply referred to a health card that no
one would ever take away but that could be reduced to a
worthless piece of paper at any time. However, not only did
the 1978 NBCWA have sixteen separate references to
coverage "for life" or "until death," it also refers to an
"entitle[ment] to receive health benefits until death" in at
least one section. 1978 NBCWA, Art. XX, at 116. The
plaintiffs submit that this reference was inextricably linked
to the references to health service cards. We agree, but
think that the slippage between lifetime health cards and
lifetime health benefits counsels against the plaintiffs'
position: The lifetime health card may just as easily be seen
as a shorthand reference to lifetime benefits, which may be
why the parties did not correct (in this carefully negotiated
contract) the reference to "benefits until death."7 This
language, synonymous with the health card language,
appears to reflect the bargaining parties' understanding
that the lifetime provision of health benefits was an
absolute requirement for any contract. See Nobel, 720 F.
Supp. at 1175 (finding that the coal operators understood
that lifetime benefit language was crucial to the ratification
of any contract and that the BCOA therefore abandoned its
attempt to remove such language).
_________________________________________________________________
7. The plaintiffs also note that the "benefits until death" language
appears in a provision discussing restrictions on benefits whenever the
beneficiary exceeded the earnings limit. However, the point of the
provision was that the beneficiaries were entitled to benefits during any
period that they did not exceed the earnings limits until death.
29
We do not rest our decision on the reference to "benefits
until death"; rather, it is a datum supporting the overall
conclusion that the health card was expected to guarantee
benefits for life. The 1981 and 1984 NBCWAs continue in
the same vein with sixteen references to coverage "for life"
or "until death." While we appreciate the force of the
plaintiffs' arguments to the contrary, we are persuaded that
it would have been reasonable for miners to expect that the
"lifetime" health card actually meant that lifetime benefits
would be provided to anyone in possession of a health card.
Plaintiffs nonetheless argue that the appearance of the
phrases "for life" and "until death" in the 1974 and
subsequent agreements does not imply any commitment to
provide lifetime benefits. According to them, we should
understand the lifetime health card as doing no more than
serving the valuable administrative function of ensuring
portability. At most, the plaintiffs argue, the possession of
a health card merely entitles a retiree to whatever benefits,
if any, were available under the NBCWA then in effect. The
plaintiffs interpret "lifetime" to mean simply that, if an
NBCWA were in place, miners could not lose their benefits
after a fixed period of time (a problem that had arisen in
the past when the Trustees cut off retired miners after five
years or some other fixed period).
This is a strained reading of the terms "for life" and "until
death," which refer to persons (the miners and their
dependents) and not to the continued existence of an
NBCWA. Furthermore, this argument does not aid the
plaintiffs much, as NBCWAs were in effect through the
passage of the Coal Act and even to this day, although the
plaintiffs are no longer signatories to them. There is no
real-world difference between a lifetime guarantee and a
guarantee that lasts while NBCWAs continue to exist,
especially as the guarantee did not depend on any
particular employer's continued adherence to the NBCWAs.
The fact that NBCWAs continue is evidence that it was
reasonable to expect them to continue, and thus that it was
reasonable to expect that a "lifetime" guarantee, even one
that could theoretically expire if the entire NBCWA system
collapsed, was in reality a lifetime guarantee. Cf. D'Amico v.
City of New York, 132 F.3d 145, 151 (2d Cir. 1998)
30
(reasoning that the occurrence of an event is evidence that
a decisionmaker was justified in predicting that event).
The plaintiffs further point out that the 1950 and 1974
Plans contained language stating that, if assets became
insufficient, benefits could be suspended or reduced. The
Plans were incorporated into the 1974, 1978, 1981, and
1984 NBCWAs by reference. Moreover, the plaintiffs note
that the Plans were subject to modification or amendment,
and there were provisions that would take effect"[i]n the
event of the termination of the 1950 Plan." The plaintiffs
also contend that when miners received health cards, they
were specifically told that their benefits were subject to
amendment or termination "at any time." 1958 Annual
Report. Of course, later NBCWAs were designed to limit the
Trustees' authority to do so, by defining the benefits to be
provided, by establishing lifetime eligibility for a health
card, and by eliminating the Trustees' ability to alter
benefits without the consent of the union and the BCOA
after 1971.
But the NBCWAs always clearly stated that they were in
effect for limited terms. The individual employer plans for
health benefits that were established under the 1978
NBCWA, like the 1950 and 1974 Plans, had the stated
purpose of providing benefits "during the term of this
Agreement." The plaintiffs conflate the issue of whether the
coal companies' contribution requirements were "lifetime,"
which they clearly were not under the contract, with the
issue of whether the contracts provided for lifetime health
benefits. The lifetime health card was intended to put an
end to the Trustees' pre-1974 practices of cutting
beneficiaries off if their former employers were delinquent
in paying into the Funds or if they had received benefits for
a set period of time. Thus, the Trustees could reasonably be
seen as required to pay lifetime benefits to all retirees and
their dependents in possession of a health card; the
contractual terms had the effect of binding the Trustees to
a lifetime commitment, although they did not of themselves
bind the coal companies to the same commitment. 8
_________________________________________________________________
8. The plaintiffs also argue that the Trustees understood that benefits
were limited to the term of the agreement. When the 1974 NBCWA
31
Despite the plaintiffs' contention that the numerous
cases holding that "for life" means lifetime benefits were
wrongly decided, we are unpersuaded that those cases
lacked support for their conclusion. See, e.g., In re
Chateaugay Corp., 945 F.2d 1205, 1210 (2d Cir. 1991);
District 29, UMWA v. UMWA 1974 Benefit Plan & Trust, 826
F.2d 280, 282-83 (4th Cir. 1987); Grubbs v. UMWA, 723 F.
Supp. 123, 128 (W.D. Ark. 1989); Nobel, 720 F. Supp. at
1178.9 The plaintiffs assert that, at all events, Eastern
throws these cases into doubt. We disagree, because the
Supreme Court said nothing about the Trustees'
obligations, nor did the Court take up the post-1978
contracts at all.
Furthermore, contrary to the submission of the plaintiffs,
these lower court cases did analyze the provisions of the
contract, recognizing that the Trustees were obligated to
provide benefits only "during the term of this agreement,"
just as the companies were only required to contribute
during the term of the contract. Rather than ignoring this
temporal language, the decisions found that other language
in the contract, combined with testimony from the
_________________________________________________________________
expired on December 6, 1977, the Trustees stopped providing health
benefits to retired miners, and the subsequently negotiated 1978 NBCWA
prohibited retroactive funding of such benefits. This is significant, but,
given that the benefit funds were fundamentally reconfigured at the
same time to focus on individual employers, it would have been difficult
to deal with those few months retroactively during the transition to the
new regime. The short gap necessitated by the delay in negotiating a new
contract during bitter labor strife does not disprove the general promise
of lifetime benefits in the future.
9. UMWA Health & Retirement Funds v. Robinson, 455 U.S. 562 (1982),
also refers to "lifetime" benefits. See id. at 565-66. The plaintiffs
argue
that NBCWAs were in place at all times relevant to Robinson, and so that
case provides no basis for suggesting that benefits would be available in
the absence of an NBCWA. However, this argument actually favors the
defendants. We reiterate that we are not construing the contract but
deciding what reasonable expectations it might generate. In that
analysis, the fact that NBCWAs persisted for decades, although it was
always possible that they would expire, favors the defendants, since the
long history of NBCWA renegotiation makes the expectation that benefits
would continue more reasonable.
32
negotiators, obligated the Trustees to provide lifetime
benefits. See District 29, UMWA, 826 F.2d at 282. That the
contracts may contain contradictory language does not, as
plaintiffs and amici contend, make any construction
requiring lifetime benefits unreasonable; instead, there was
evidence pointing in both directions. Just as it was not
unreasonable for courts to conclude that the contracts
provided lifetime benefits, it was not unreasonable for
Congress to rely on similar evidence, even though Congress
could also reasonably have disagreed. In fact, we could
even consider such judicial decisions, the earliest of which
were referenced in the Coal Commission Report, as data
justifying Congress's conclusion that lifetime benefits were
promised, since Congress may reasonably look to the
findings of a coordinate branch. See Coal Comm'n Report at
3, 28, 47, 55-56.
The question, then, is not whether the health benefits are
truly "for life" but whether the former coal companies can
justly be associated with the promises of lifetime benefits
that by contract run only against the Trustees. The
argument is that it was acceptable, by virtue of the
contractual limitations, for companies to walk away and
leave the Trustees and the companies remaining in the coal
industry to pay the tab. And it is this underlying claim that
we think Congress could rationally reject. In this regard, we
reiterate that our obligation is to determine what Congress
could reasonably have found.
Congress certainly possessed credible evidence that
miners expected those benefits. The Coal Commission, for
example, reported to Congress in 1990 that
Retired coal miners have legitimate expectations of
health care benefits for life; that was the promise they
received during their working lives and that is how
they planned their retirement years. That commitment
should be honored.
Id. at vii. The Commission based its conclusions on
substantial evidence, including testimony from many
industry participants on both sides of the issue. Even a
dissenting member of the Commission, who was the
president of a coal company, acknowledged that the post-
33
1978 agreements created a promise of lifetime benefits. See
id. at 81 (statement of Commissioner Holsten). 10 Although
the Coal Act's statutory scheme was proposed nine and two
years, respectively, after Unity and B&T ceased to be bound
by an NBCWA, and that is certainly a significant period of
time, we cannot say that it is beyond the pale in light of the
lifetime nature of the commitment at issue.
c. Other Contractual Provisions
The negotiations of the 1970s took place in a changing
legal context, as the Coal Commission's report to Congress
recognized. ERISA made clear that employers who promised
pension benefits were going to have to give them, and when
the parties negotiated the 1974 and later agreements, that
idea was certainly in mind. Moreover, starting in 1974, the
new agreements removed the Trustees' discretion to set
benefit levels and eligibility standards. See Coal Comm'n
Report at 24.
By 1977, anxiety had intensified, and the miners struck
for nearly four months over, among other things, health
benefit issues. The federal government intervened to settle
the strike. The 1978 agreement introduced the "evergreen"
_________________________________________________________________
10. The conclusions of the Coal Commission Report are not rendered
suspect by Eastern; although the plurality and Justice Kennedy
concluded that Congress could not reasonably decide that pre-1978
signatories were responsible for creating expectations of lifetime
benefits,
it is notable that the Coal Commission never proposed the "super
reachback" provision challenged in Eastern. See Eastern, 118 S. Ct. at
2141 (plurality); Coal Comm'n Report at 61, 63, Supp. App. at 420, 422.
The Commission's proposal provided for liability under what became
S 9706(a)(1) and S 9706(a)(2), which only apply to post-1978 signatories,
while S 9706(a)(3) was added late in the legislative process. See J.
Atwood Ives, Federal Document Clearing House Congressional
Testimony, House Ways & Means Oversight, Coal Workers Retirement
Benefits, June 22, 1995. The Coal Commission'sfindings remain
persuasive evidence from which Congress could conclude that signatory
operators remaining in the coal industry after 1978 created a reasonable
expectation of lifetime benefits among miners and their families. See also
138 Cong. Rec. S5081, S5082 (daily ed. Apr. 8, 1992) (statement of Sen.
Boren) (referring to the expectations created by the 1978 agreement); id.(statement of Sen. Dole) (same).
34
and "guarantee" clauses and rearranged the benefit funds
in major ways. See id. at 26. The evergreen clause only
applied to companies that stayed in the coal mining
industry. As such, it has no bearing on these plaintiffs
except insofar as it expresses an intent by the negotiators
to keep health benefits funded, as the miners expected
them to be, in the context of growing burdens on NBCWA
coal operators.
Under the guarantee clause, signatory employers
committed to make the contributions necessary to maintain
the contractually specified benefits throughout the term of
the agreement, even if that required an increase in the
contribution rates specified at the outset of the contract
term. This was essentially a shift "from a defined
contribution obligation, under which employers were
responsible only for a predetermined amount of royalties, to
a form of defined benefit obligation, under which employers
were to fund specific benefits." Eastern, 118 S. Ct. at 2140(plurality). The evergreen clause represented a similar effort
by the bargaining parties to protect the funding base for
ongoing health coverage.
The coal companies contend that everyone recognized
that, when the contract ended, the benefits would end. The
1978 guarantee clause guaranteed benefits and provided
for increased contribution if necessary only "during the
term of this Agreement." The defendants respond that the
"end of contract/end of benefits" equation is not the end of
the story. They argue that it was reasonable for the miners
to expect that the contract would be replaced by another
contract, and then another, and then another, with at least
comparable benefits, even if the industry and its
participants changed. After all, that is what had taken
place for the past fifty years: the slow but steady expansion
of benefits. The NBCWAs, they argue, were negotiated in a
context where the miners believed that, in return for wage
and employment concessions, they would be able to
guarantee their futures. In fact, as noted above, the
NBCWAs have endured for decades after the changes of the
1970s, evidencing the reasonableness of a belief that the
agreements would continue.
35
We do not ignore the plaintiffs' history in the industry,
which extended for many decades and ended over thirty
years after Eastern Enterprises left the coal industry. Unity
mined coal for 58 years and B&T for 80. Coal companies
such as Unity and B&T received benefits from the steady
expansion of health and retirement benefits, including wage
concessions and union agreement to mechanization, during
that period. Their long-term participation made it
particularly understandable that miners would expect that
the companies' adherence to promises of lifetime benefits in
the NBCWAs would be honored.
5. Conclusion
Our review of the evidence suggests that there are several
plausible interpretations of the events leading up to the
Coal Act. It could well be the case that former coal
companies are not the most responsible parties in the
deterioration of the health of the benefit funds, but
Congress could also rationally find that they bore
significant responsibility in setting up a structure that
invited operators to abandon mining and shunt the burden
of caring for retirees on other parties. Similarly, it could be
that the contracts did not create a lifetime benefit obligation
on the part of the Trustees, yet Congress had substantial
evidence to the contrary. We will defer to Congress's
judgments on the nature of the problem before it, including
judgments about causation and reasonable expectations.
The next question, therefore, is whether Congress's
reasonable evaluations of the problem justified the
corrective measures it mandated in the Coal Act.
C. Is the Coal Act a Rational Response to the Problem
Congress Identified?
Given that evidence exists to support Congress's
interpretation of the history of the coal industry and the
NBCWAs, we must ask whether that evidence is enough to
justify a retroactive law of this scope. For the following
reasons, we conclude that the Coal Act's retroactivity does
not render it irrational in violation of due process.
1. The Length of the Retroactivity
The heart of retroactivity analysis is an evaluation of the
36
extent of the burden imposed by a retroactive law in
relation to the burdened parties' prior acts. We note as an
initial matter that the length of the retroactivity alone is not
dispositive in this case. The retroactivity is significantly less
extensive than that in Eastern. We evaluate retroactivity not
from the time the plaintiffs first signed an industry
agreement, nor from the time the miners' right to benefits
accrued, but rather from the end of the plaintiffs'
contractual obligations to pay for such benefits. 11 For Unity,
that period is eleven years, and for B&T four years, because
B&T was bound by the 1984 NBCWA until 1988. This is
substantially less time than the gap between Eastern's exit
from the coal business and the enactment of the Coal Act,
although, at least for Unity, it is still quite long.12 We
conclude that this degree of retroactivity is not so extensive
as to violate Justice Kennedy's standard, although Unity
offers a close case.13
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11. We choose the expiration of NBCWA obligations because, although
covered retirees may have stopped working for the plaintiffs before those
dates, the contracts obligated the plaintiffs to continue paying for
benefits until those contracts expired and, after 1978's evergreen clause,
until the plaintiffs left the industry. This was not true of the relevant
contracts in Eastern. Thus, the retroactivity extends not from the date of
the miners' retirement but from the period during which the plaintiffs
were free of any contractual obligation to pay for benefits.
12. The retroactivity approved in Usery was actually much greater in
some circumstances. The black lung law was enacted in 1969 and began
imposing liability on employers in 1973. Yet benefits were given to
miners who left mine work as early as 1923. See Usery, 428 U.S. at 40
n.4 (Powell, J., concurring in part). In addition, the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA), 42
U.S.C. SS 9601-9657, has an unlimited retrospective temporal reach,
which has yet to be invalidated by any court to consider the issue. See,
e.g., United States v. Monsanto Co., 858 F.2d 160, 173-74 (4th Cir.
1988).
13. We focus on Justice Kennedy's explication of the relevant due
process principles because the plurality did not reach Eastern's due
process claim. See Rappa v. New Castle County , 18 F.3d 1043, 1058-61
(3d Cir. 1994) (where "no single approach can be said to have the
support of a majority of the Court," then "no particular standard
constitutes the law of the land" and lower courts are bound by the result
as applied to "substantially identical" cases).
37
Instead of relying solely on the length of the retroactivity,
we assess the relationship of the retroactively imposed
liability to the governmental interests asserted in its
defense. See Eastern, 118 S. Ct. at 2159 (Kennedy, J.,
concurring) (retroactive remedies must bear "a legitimate
relation to the interest which the Government asserts
supports the statute"); id. at 2163 (Breyer, J., dissenting)
("[A] law that is fundamentally unfair because of its
retroactivity is a law which is basically arbitrary.").
The plaintiffs argue that retroactivity has only been
upheld in three situations: (1) where the employer
continues to operate in the regulated industry after the
enactment of a retroactive law; (2) when employers would
otherwise be able to take advantage of the delays inherent
in the legislative process; and (3) where a worker's injury or
illness is related to his or her work. This categorization is
unsatisfactory. The first category lacks adequate analytical
foundation. If a law is truly retroactive, applying to conduct
completed before the law was enacted, it would seem only
marginally relevant that an employer kept doing what it
had been doing before, for the liability would be based on
past acts, not post-enactment acts; the continuation in the
old business would not seem to justify the retroactivity. If
it would be fundamentally unfair to make a business pay
for its long-past acts, it would seem equally unfair to put
that business to the choice of leaving its established
business or paying for its long-past acts.
We posit a different standard: Where Congress acts
reasonably to redress an injury caused or to enforce an
expectation created by a party, it can do so retroactively.
The ERISA and MPPAA cases establish that Congress may
retroactively bar employers from giving their employees
vested pensions in multiemployer plans and then leaving
those plans to collapse. Those cases did not examine
whether the employers continued to operate the same kind
of business as they did when their former employees'
pensions became vested. Our categorization also recognizes
that workers can be harmed not just by late-appearing
physical consequences of their jobs but also by an
employer's failure to live up to a long-term promise that
formed part of the worker's reasonable expectations on the
38
job. Both a promise of benefits and a job-related illness
have a nexus to the worker's employment, as we discussed
supra Subsection III.B.1.
2. The Size of the Burden
The amici (other former coal operators) call our attention
to the size of the burden imposed, arguing that, because
the Eastern plurality found that paying lifetime benefits
imposed a "considerable" burden on Eastern Enterprises,
by definition the same is true for all other entities required
to pay benefits under the Coal Act, since the amount of the
payment per beneficiary is the same under every part of the
law. In Eastern, however, the total amount at issue was
between $50 and $100 million, whereas here the total cost
is well under $1 million to date for Unity and around $2.5
million per year for B&T, an amount that will continue to
decrease as beneficiaries die. Therefore, the plaintiffs are
not in the same situation as Eastern Enterprises.
We will not find a due process violation if the regulation
is proportional to the harm legitimately addressed by the
legislature. Yet the proportionality requirement will only be
applied when the harm inflicted by the government is
substantial enough to raise an issue as to whether a
violation of due process has occurred. As the total absolute
burden imposed by a statute increases, it becomes simpler
for a court to determine that the legislature has exceeded
the bounds of rationality, whereas a smaller burden means
that Congress's error, if any, is less likely to justify the
extreme sanction of invalidation on due process grounds.
If, for example, Congress imposed a one-dollar burden on
each member of some industry, and we concluded thatfive
cents was the only amount that could be linked to
Congress's asserted justification for the burden, we would
still be disinclined to strike down the statute; the fact that
the burden imposed was twenty times the actual cost would
not be determinative. As the actual amount of the burden
decreases, errors in its calculation increase in relative
magnitude, but the leeway given to Congress in enacting
social and economic legislation mandates that we look to
absolute rather than relative magnitudes, so that our
review is limited to those laws that work the most severe
disruptions of settled expectations.
39
For similar reasons, we doubt that a former coal
company would have a credible claim of "considerable"
burden if it were only responsible for a small number of
beneficiaries under the Act, even if the company was in
such dire financial straits that the liability would push it
over the economic edge. It is the aggregate cost--the total
size of the burden imposed--and not the per-beneficiary
cost that is significant under our due process
jurisprudence. While the burden in this case is certainly
substantial, and thus we will carefully scrutinize the Coal
Act, the burden is not dispositive in itself. We acknowledge
that the Coal Act will put these particular plaintiffs out of
business, but that fact is again a matter of relative burden,
not absolute burden and, because it does not determine the
due process issue, we reserve our discussion of this
consideration for our analysis of the plaintiffs' takings
challenge infra Part IV.
3. Proportionality and Congress's Ability To Go Beyond
Private Contracts
As we stated above, proportionality is the proper test of
economic impact. The burden imposed on regulated parties
may be heavy, but the Connolly Court found that a large
burden is not unconstitutional if the liability actually
imposed is not out of proportion to the claimant's prior
experience with the object of the legislation. See Connolly,
475 U.S. at 226; see also Eastern, 118 S. Ct. at 2150-51(plurality) (discussing the justifications for imposing liability
as part of the analysis of the economic impact factor). Prior
experience can consist of conduct that creates reasonable
expectations about the object of the legislation or conduct
that creates the problems that impelled the legislature to
act. Given that the situation that impelled Congress to
enact the Coal Act contained elements of both, we believe
that the necessary proportionality exists.
The Coal Act bridges a gap between the contractual
promises of coal companies and the full extent of the
funding required to provide retired miners with lifetime
health benefits. The Trustees and the government argue
that the companies' extracontractual acts, signalled by
contractual language but going beyond that language,
justify Congress's decision to bridge that gap. The
40
extracontractual acts fall into two general categories: the
instability of the pre-Coal Act benefit funding structure to
which the former coal companies contributed, and the
expectation of lifetime benefits created by contractual
language combined with the parties' consistent practices.
As we have explained, we consider these reasons sufficient
justification for the liability imposed by the Coal Act.
As the defendants put it, the NBCWAs made a long-term
commitment to provide health-care benefits but only a
short-term contractual commitment for funding.14 They
argue persuasively that this arrangement would be silly,
even suicidal, for the miners and the funds were it not
made in the context of a belief that the industry would
continue on pretty much as it had been for the past few
decades. Given this, we think that Congress could
reasonably conclude that it would be fair to hold the coal
companies to the implicit part of their promise, because
when they left the industry the explicit part lost its
meaning. See ABC, Inc., 156 F.3d at 1255-57.
The Eastern plurality did not reject the Connolly principle
that government may do more than require private parties
to live up to their contracts:
[C]ontracts, however express, cannot fetter the
constitutional authority of Congress. Contracts may
create rights of property, but when contracts deal with
a subject matter which lies within the control of
Congress, they have a congenital infirmity. Parties
cannot remove their transactions from the reach of
dominant constitutional power by making contracts
about them.
If the regulatory statute is otherwise within the
powers of Congress, therefore, its application may not
be defeated by private contractual provisions. For the
same reason, the fact that legislation disregards or
_________________________________________________________________
14. This disposes of plaintiffs' contention that the guarantee clause of
1978 would have been superfluous if there were already a lifetime
guarantee of benefits. The guarantee clause was an attempt to insure
that the Trustees could live up to their obligations, an attempt that
ultimately failed.
41
destroys existing contractual rights does not always
transform the regulation into an illegal taking. . ..
[H]ere, the United States has taken nothing for its own
use, and only has nullified a contractual provision
limiting liability by imposing an additional obligation
that is otherwise within the power of Congress to
impose.
Connolly, 475 U.S. at 223-24 (citation omitted); see also
Eastern, 118 S. Ct. at 2148 (plurality).
In Connolly, a contract limited the employers' obligations
even if contributions proved insufficient to provide the
promised benefits. The challenged legislation converted that
defined contribution obligation to a broader defined benefit
obligation. Congress enacted the law so that retirees could
receive the vested benefits they had been promised and that
they legitimately expected. The Court found a reasonable
relation between the employers' acts and ERISA-imposed
liability, even though the employers could not have foreseen
a defined benefit obligation from the face of the contract.
Here, the signatory operators created a benefit fund with a
legal obligation to pay out more than the operators were
required to pay in, just as in Connolly, and the Coal Act
was Congress's attempt to close that funding gap.
The plaintiffs distinguish Connolly by arguing that the
problem in that case was that companies had made broad
promises that the pension funds to which they contributed
would pay pensions, but only obligated themselves
contractually to pay a much smaller amount to those
pension funds. The plaintiffs claim that, in this case, the
promises that the Funds would pay benefits were narrow,
because those benefits could be reduced or eliminated at
any time, and the contractual obligations were broad
during the period of their existence. As we have discussed
above, however, Congress decided that even though the
coal companies' contractual obligations were not broad
enough to sustain the Funds, their promises that the
Funds would pay benefits--made as part of the BCOA-
union negotiations--were broad. This is a reasonable
reading of the NBCWAs, particularly given that the 1974
NBCWA removed the Trustees' discretion to change benefit
levels without the bargaining parties' permission and that
42
the 1978 NBCWA began the practice of enumerating the
exact health benefits to be provided. Cf. Nobel, 720 F.
Supp. at 1180 (holding that benefits could not be reduced
or discontinued by the Trustees despite the financial
burden on the Trust).
The Coal Act extended the operators' contractual
obligations to include responsibility for the expectations
generated and invited by the contracts. Essentially, the Act
is Congress's attempt to do equity. We agree with the court
in ABC, Inc., which wrote:
The constitutionally significant feature about these
later agreements is that they made it reasonable for
employers to expect a similar state-imposed duty, and
thus rendered such a duty, when eventually imposed,
not unfairly retroactive. That appellants could have
successfully defended a breach of contract suit seeking
lifetime benefits under the 1974 agreement is of no
consequence.
ABC, Inc., 156 F.3d at 1258.
The plaintiffs argue that it is implausible that operators
in an industry with "very high turnover of employers,"
Connors v. Link Coal Co., 970 F.2d 902, 903 (D.C. Cir.
1992), would have agreed to a perpetual funding obligation
enforceable even against operators who left the coal
industry entirely, whether for economic reasons (high labor
costs, competition from other fuels, and the like) as B&T
did or because they were out of coal. We agree that it is
unlikely that the coal companies intended to create this
exact funding structure, although modern employment
relations often include post-retirement promises that may
prove burdensome when conditions change for an
employer. The crucial question, however, is whether the
companies' actions, through the BCOA through which
negotiations with the unions were conducted, created
reasonable expectations about benefits and established a
funding structure vulnerable to "dumping" retirees when
companies left the industry. If so, Congress is not
precluded from acting to redress the harms caused by this
situation.
43