Barnhart, Social Security Comm. v. Sigmon Coal Co., Inc., et al. (02/19/2002)

Questions presented: Whether a company that succeeds another company that went out of business must provide health care benefits under the Coal Industry Retiree Health Benefit Act, which provides that a benefit fund be financed by employers or by "related persons."

BY HUA-HSIN CHOU, MEDILL NEWS SERVICE

During the three decades following President Truman's pledge to provide lifelong health benefits to retired coal miners and their families in 1946, a series of coal wage agreements produced several multi-employer benefit plans, where signatory coal operators were required to contribute to joint funds for their retirees.

In 1978, in a bid to decentralize the healthcare benefit system, the coal industry moved toward an individual employer-sponsored plan for miners. Two earlier plans that were funded jointly by operators were nonetheless retained for "orphaned" retirees whose last employers had left the industry.

But the system was faltering. Faced with rising medical expenses and a slowdown in coal demand, more and more operators sold out their businesses, leaving a fast shrinking pool of funds to support the orphaned employees they left behind. In early '90s, the number of coal operators who contributed to the funds dropped to a paltry 300 from 2,000 a decade earlier, eroding a funding base already running at a $140-million deficit a year.

In view of an almost defunct system and tens of thousands of retired miners and their families at stake, Congress intervened in 1992, passing the Coal Industry Retiree Health Benefit Act. Under the act, the Commissioner of Social Securities assigned each eligible benefit-receiving retiree to a former employer, or if the employer were out of business, to "related persons."

Related persons included partners or a business under common control with the coal operator - even if that business was unrelated to coal mining, such as a trucking company - as well as firms that took over these related companies.

Jericol Mining Inc., a company that bought a Kentucky mine operator called Shackleford in 1973, soon found itself thrown into an unwanted relationship with its acquired assets. From 1993 to 1997, the commissioner assigned eighty-six former Shackleford miners who had never worked for Jericol, claiming that the company, a successor in interest to Shackleford, satisfied the criteria for a "related person."

Refusing to pick up the additional tab of $237,000 a year, Jericol and its affiliated company, Sigmon Coal Co., filed suit in the U.S. District Court in Virginia. Basing his ruling on a literal reading of the federal statute, Judge Glen Williams held that Jericol cannot be held accountable under the Coal Act because the company did not succeed to any person described as "related person" and thus did not qualify as a related person to Shackleford.

On appeal, the commissioner contended that regardless of the language of the statute, a literal application of the text would lead to the exemption of a direct descendant of the coal operator, a strange result that frustrated the Congress intent of "identifying persons most responsible for plan liabilities to stabilize plan funding."

On Aug. 29, 2000, a split 4th Circuit Court of Appeals affirmed, indicating its reluctance to interpret to the statutes more than they said and to stretch what it deemed to be a clear, plausible congressional intent.

Judge William Traxler, who wrote the majority opinion, first disposed of the commissioner's argument that a related person should include a signatory operator itself and its successor, noting that Shackleford did not resemble any of the related-person categories. Therefore, Jericol couldn't be a related company, either.

"Because the persons described in those clauses are described in terms of their relationship to the signatory operator, it would seem evident that they cannot include the signatory itself," Traxler wrote. "To suggest otherwise is tantamount to saying, 'I am related to me.'"

In applying the clear terms of the statute, the majority said its inquiry ended and would not consider evidence of "inconclusive legislative history" submitted by the commissioner, which included two Congress members' statements that defined the successor to an operator as a related person.

The majority asserted that Congress had good reason to allow direct-successors to escape healthcare benefits responsibilities. It may not want to impede the buying and selling in the industry by imposing liabilities upon purchasers of liquidated assets under the Coal Act, the majority reasoned.

In dissent, Judge Francis Murnaghan conceded his colleagues' cautious reference to the statutory text, but argued that this case was one of the rare ones where the plain language of the statute is not a reliable indicator of Congress' intent and thus merits a broader interpretation.

"A literal interpretation of the definition of 'related persons' ... would turn Congress's stated purpose on its head: entities with only a tenuous connection to the retired coal miners would be jointly and severally liable for Fund benefits while direct successors to the signatory operators who employed the miners are excluded form liability," he wrote. "Congress could not have intended such an anomalous result."

Murnaghan also questioned if Congress had ever wanted to promote sales of coal mines - a way for remaining operators to unload their growing burden of retiree benefits that eventually caused the demise of the fund plan - while their buyers could easily avoid the liabilities under the Coal Act.

There was no logic to conclude that "Congress intended to promote the exact practice that necessitated legislative action in the first place," Murnaghan wrote.

On April 23, 2001, the U.S. Supreme Court granted certiorari in the case, and on Oct. 1, 2001, the Court granted permission for the United Mine Workers of America Combined Fund to participate in the case and split the time for oral argument.

On Feb. 19, 2002, the Court, by a vote of 6-3, held that the Coal Act does not permit the Commissioner to assign retired miners to the successors in the interest of out-of-business signatory operators.

Justice Clarence Thomas wrote the opinion for the majority, and Justice John Paul Stevens filed a dissent, in which Justices Sandra Day O'Connor and Stephen Breyer joined.