RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 1999 FED App. 0205P (6th Cir.)
File Name: 99a0205p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
Michael H. Holland; Marty D. Hudson; Thomas
F. Connors; Robert T. Wallace, as Trustees
of the United Mine Workers of America 1992
Benefit Plan,
Plaintiffs-Appellants,
No. 97-6332
v.
New Era Coal Company, Inc.,
Defendant,
Mate Creek Development, Inc.; Sidney Coal
Company, Inc., doing business as Clean
Energy Company, Inc.,
Defendants-Appellees.
Appeal from the United States District Court
for the Eastern District of Kentucky at Ashland.
No. 94-00182 Henry R. Wilhoit, Jr., Chief District Judge.
Argued: February 5, 1999
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Holland, et al. v. New Era Coal Co., et al.
No. 97-6332
Decided and Filed: June 4, 1999
Before: JONES and SUHRHEINRICH, Circuit Judges; ECONOMUS, District Judge.{*}
_________________
COUNSEL
ARGUED: Jonathan Sokolow, UMWA HEALTH & RETIREMENT FUNDS, OFFICE OF THE GENERAL
COUNSEL, Washington, D.C., for Appellants. Ellen S. Cappellanti, JACKSON &
KELLY, Charleston, West Virginia, Gregory B. Robertson, HUNTON & WILLIAMS,
Richmond, Virginia, for Appellees. ON BRIEF: Jonathan Sokolow, Larry D.
Newsome, UMWA HEALTH & RETIREMENT FUNDS, OFFICE OF THE GENERAL COUNSEL,
Washington, D.C., Linda J. Wallbaum, SEGAL, SALES, STEWART, CUTLER & TILLMAN,
Louisville, Kentucky, for Appellants. W. Henry Jernigan, Jr., JACKSON & KELLY,
Charleston, West Virginia, Gregory B. Robertson, HUNTON & WILLIAMS, Richmond,
Virginia, Donald P. Wagner, STOLL, KEENON & PARK, Lexington, Kentucky, for
Appellees.
_________________
OPINION
_________________
SUHRHEINRICH, Circuit Judge. Plaintiff trustees of a coal worker benefit
plan appeal from the grant of summary judgment to two Defendant coal-mine
operator employers on Plaintiffs' claim to collect payments for employee benefits
_________________
{*} The Honorable Peter C. Economus, United States District Judge for the
Northern District of Ohio, sitting by designation.
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Holland, et al. v. New Era Coal Co., et al.
No. 97-6332
from three Defendant employers under the Coal Industry Retiree Health Benefit
Act of 1992, 26 U.S.C. 9701-9722 ("Coal Act") (West Supp. 1998).
The district court found that primary liability for the employee benefit
plan contributions rested on New Era Coal Company, Inc. ("New Era"), a coal
operator that signed the 1988 National Bituminous Coal Wage Agreement
("NBCWA") and employed the coal workers for whom Plaintiffs are requesting
benefit plan contributions. The district court found that two subsequent
coal-operators of the mine, Mate Creek Development, Inc. ("Mate Creek"), and
Sidney Coal Company, Inc. ("Sidney Creek"), doing business as Clean Energy
Mining Company ("Clean Energy"), were not liable to Plaintiffs for benefits
under the Coal Act because they had not signed the NBCWA, were not successors-
in-interest to New Era, and had not assumed any liability for New Era's
contribution to the benefit plan. We AFFIRM the judgment of the district
court.
Plaintiffs raise three issues on appeal: (1) whether a transfer of stock
or assets is necessary to be a successor-in-interest or whether merely a
substantial continuity under the totality of circumstances is sufficient; (2)
whether a successor and a successor-in-interest as that term is used in the
Coal Act are equally liable for retiree health benefits; and (3) whether the
district court failed to consider the NLRB determination that Mate Creek was a
successor-in-interest.
I. BACKGROUND
A. Factual
Sidney Creek is a subsidiary of the Massey Coal Company ("Massey"). On
October 1, 1984, Sidney Creek purchased coal mines in eastern Kentucky from
Carolina Power & Light Co. ("CPL"), and two of CPL's mining subsidiaries,
Leslie Coal Mining Co., Inc. ("Leslie") and Mclnnis Coal Mining Company, Inc.
("Mclnnis"). The mines owned by Leslie and Mclnnis were operated under
collective bargaining
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Holland, et al. v. New Era Coal Co., et al.
No. 97-6332
agreements with the United Mine Workers of America ("UMWA"). However, after
Sidney Creek acquired the mines, neither Sidney Creek nor any other Massey
company signed a collective bargaining agreement with the UMWA. The UMWA then
struck Sidney Creek and the other non-signatory Massey companies and sued them
for violating the existing NBCWA. The UMWA also sued Sidney Creek, Leslie,
and McInnis for violating Article I of the NBCWA. During the strike, the
Mclnnis mine was idle. To settle the strike in 1988, Sidney Creek paid
$4,470,000.00 to the UMWA as benefits for the strikers. Sidney Creek also
agreed for five years to select a contractor to operate the McInnis mine who
would sign the 1988 NBCWA and hire from the strikers collectively referred to
as the "Roberts panel."
On June 10, 1988, Sidney Creek contracted with New Era to mine coal at
the former Mclnnis mine for a fee based on production. New Era was
incorporated in 1988, was capitalized at $500, and had no other assets. New
Era signed the 1988 NBCWA and hired from the Roberts panel. New Era then
operated the Mclnnis mine from June 1988 until October 1991, using Sidney
Creek's machinery, maps, and engineering services. Sidney Creek also paid the
black lung excise tax for black lung benefits on behalf of New Era and some of
New Era's legal fees.
In October 1991, New Era ceased operations and notified its employees
that it was terminating their medical benefits. Sidney Creek and New Era
executed an agreement for the "orderly transition" of the operation of the
McInnis mine from New Era to Mate Creek. Mate Creek began mining in November
1991, less than a month after New Era stopped. As with New Era, Sidney Creek
supplied the equipment used by Mate Creek. Mate Creek also hired from the
Roberts panel; in fact, all of the hourly employees that Mate Creek hired had
previously worked for New Era. New Era even provided Mate Creek with its
personnel files. Further, Mate Creek operated the McInnis mine in the same
manner as New Era had operated it.
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Holland, et al. v. New Era Coal Co., et al.
No. 97-6332
However, even though the 1988 Settlement Agreement required Sidney Creek
to require an operator to sign an NBCWA, Mate Creek did not sign an NBCWA or
any other agreement with the UMWA before it began mining. Mate Creek then
unilaterally changed the terms and conditions of employment at the McInnis
mine. The UMWA consequently filed unfair labor practice charges against Mate
Creek with the National Labor Relations Board ("NLRB"). The NLRB found that
Mate Creek was a successor to New Era, ordered Mate Creek to restore the
previous terms and conditions of employment, and to pay its obligations to the
employee benefit funds. After the NLRB determined that Mate Creek was a
successor to New Era, Sidney Creek joined in a Settlement Agreement with the
UMWA and Mate Creek to resolve the unfair labor practice claims. This
Settlement Agreement did not alter the NLRB's determination that Mate Creek
was New Era's successor. Under the Settlement Agreement, Mate Creek agreed to
pay $1,000,000.00 to the UMWA and an additional amount to the UMWA 1974
Pension Trust. Mate Creek borrowed the money from a bank, and Sidney Creek
guaranteed the loan. Further, Sidney Creek and Mate Creek contracted for Mate
Creek to operate the Halfway Branch Mine, which Sidney Creek also owned, and
to hire its former employees at the Mclnnis mine for the Halfway Branch mine.
Mate Creek began mining at the Halfway Branch mine in September 1994 and
stopped in January 1996.
After Mate Creek stopped mining at the Mclnnis mine, Sidney Creek doing
business as Clean Energy, began mining at the McInnis mine. Sidney Creek as
Clean Energy operated the McInnis mine as New Era and Mate Creek had operated
it, using the same type of equipment, producing the same product, and selling
it to the same customers. Clean Energy even hired six supervisors previously
employed at the mine by Mate Creek and New Era. However, Clean Energy did not
hire Mate Creek's other employees because Mate Creek had retained them to work
at the Halfway Branch mine.
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Holland, et al. v. New Era Coal Co., et al.
No. 97-6332
B. Statutory
The Coal Act is the result of federal involvement in the coal industry
that began in 1946. See generally Blue Diamond Coal Co. v. Shalala (In re
Blue diamond Coal Co.), 79 F.3d 516, 518-20 (6th Cir. 1996). The federal
government assumed operation of the nation's coal mines during a prolonged
strike by the UMWA against coal producers. The Krug-Lewis Agreement settled
the strike and required coal producers to provide health and pension benefits
to their workers. After the strike in 1947, the Bituminous Coal Operators
Association, Inc. ("BCOA") and the UMWA collectively bargained for the first
NBCWA which required the coal producers to contribute a production royalty to
the UMWA Fund, a health benefit and pension fund. Health benefits were
neither vested nor guaranteed. Coal producers were liable to the UMWA Fund
only for their assigned royalties.
In 1974, benefits and funding changed. In light of the Employee
Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001-1461 (1994),
the UMWA Fund was divided into the 1950 UMWA Benefit Plan for older employees
and the 1974 UMWA Benefit Plan for new employees (collectively the "1974
Funds"). Under this new funding scheme, the 1974 NBCWA provided increased
benefits, including lifetime health benefits. Later, however, the 1974 Funds
became increasingly financially unstable because many coal producers went out
of business or became non-union; many miners retired; and health care costs
increased.
In 1989, the UMWA struck the Pittston Coal Company for ten months over
retiree benefits. After the Pittston strike was settled, Congress enacted the
Coal Act in 1992 to identify the payors most responsible for retirement health
care benefits. The Coal Act consolidates the 1974 Funds into the Combined
Fund and requires all coal operators that sign a NBCWA to contribute to the
Combined Fund. See 26 U.S.C.
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Holland, et al. v. New Era Coal Co., et al.
No. 97-6332
9701(a)(5), 9702, 9704, and 9705. Under the Coal Act, beneficiaries under
the 1974 Funds are assigned to current NBCWA-signatory coal operators based on
the operators' obligations under their respective NBCWAs. See 26 U.S.C.
9703(f), 9706. Eligible beneficiaries are first assigned to coal mine
operators that (1) most recently employed the beneficiary for at least two
years; and (2) signed a NBCWA in 1978 or later. See 26 U.S.C. 9706(a)(1).
If there is no such operator, a beneficiary is assigned to the operator that:
(1) most recently employed the beneficiary; and (2) was a signatory to the
1978 or later NBCWAs. See 26 U.S.C. 9706(a)(2). If there is no such
operator, the beneficiary is assigned to the beneficiaries' longest pre-1978
signatory employer. See 26 U.S.C. 9706(a)(3). For each beneficiary
assigned to it, an operator pays a premium to the Combined Fund. See 26
U.S.C. 9704(a). Each NBCWA signatory operator is also assessed for its
proportional share of unassigned or "orphan" retirees. See 26 U.S.C.
9704(d). Orphan retirees are eligible beneficiaries who are not assignable
under 26 U.S.C. 9706(a) because their former employers are defunct. See 26
U.S.C. 9703(f), 9704(d). An operator's assigned share of orphan retirees,
for assessing premiums, is proportional to its number of beneficiaries
assigned under 26 U.S.C. 9706(a) to the total number of beneficiaries
assigned to all operators under 26 U.S.C. 9704(d), 9704(f)(1).
The Coal Act requires the 1992 Plan to provide certain minimal benefits.
If a liable signatory operator does not pay its proportional beneficiary
premiums, the liability is shifted, jointly and severally, to any related
person to the operator. See 26 U.S.C. 9712(d)(4). A related party includes
a successor-in-interest. See 26 U.S.C. 9701(c)(2)(A), 9711(g).
II. DISCUSSION
Plaintiffs argue that Mate Creek and Sidney Creek/Clean Energy are
successors-in-interest to New Era and therefore
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Holland, et al. v. New Era Coal Co., et al.
No. 97-6332
liable for retiree health benefits for New Era's former employees. Plaintiffs
claim that the district court erred in holding that liability for retiree
health care premiums as a successor-in-interest under the Coal Act requires
the successor-in-interest to acquire the predecessor's assets or stocks.
The Coal Act imposes responsibility for funding multi-employer retiree
health benefits on the parties most responsible for plan liabilities, i.e.,
the signatory coal operators that employed the coal worker, their related
companies, and successors-in-interest. The Coal Act does not define the term
"successor-in-interest." However, the term is used variously in the Internal
Revenue Code ("I.R.C."), in which the Coal Act is codified, and in corporate
common law. The case law construing successor-in-interest under the Coal Act
is meager. A West Virginia district court held that the phrase "successor-in-
interest" in the Coal Act has the same meaning as successor-in-interest in
Treas. Reg. 1-1503-2(c)(12)(date), which deals with an acquiring corporation
in a tax-free exchange that succeeds to the tax attributes of the selling
corporation under I.R.C. 381.{1} See UMWA 1992 Benefit Plan v. Leckie
Smokeless Coal Co., 201 B.R. 163, 179 (S.D. W. Va. 1996), aff'd, 99 F.3d 573
(4th Cir. 1996); accord, In re Lady H Coal Co., Inc. 199 B.R. 595 (S.D. W. Va.
1996). Based on this analysis, with which we agree, the term "successor-in-
interest" requires some substantial or substantive transfer of ownership of
assets or stock.
_________________
{1} Section 381 applies to transfer of assets (I.R.C. 368(a)(1)(D)),
liquidations of 80% owned subsidiaries (I.R.C. 332), statutory mergers and
consolidations (I.R.C. 368(a)(1)(A)), nominal changes in corporate
organization (I.R.C. 368(a)(1)(F)), exchange of assets for voting stock
(I.R.C. 368(a)(1)(C)), transfer of substantially all assets between companies
under common control, transfers of assets for stock of acquiring corporation
related corporations in a bankruptcy reorganization (I.R.C. 368(a)(1)(G)).
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Holland, et al. v. New Era Coal Co., et al.
No. 97-6332
In contrast, Plaintiffs argue for a broad construction of "successor-in-
interest" that does not necessarily require a transfer of stocks or assets but
can rest on a substantial continuity of business operations. They assert that
this approach is "consistent with the drafters' view that it is more
appropriate to assign the cost of providing these benefits to ongoing business
entities which have or had a relationship with the signatory employer than to
tax totally unrelated entities to fund the contractually promised benefits."
138 Cong. Rec. S17566-01, 17603 (dailey ed. Oct. 8, 1992)(Conference Report).
Plaintiffs contend that a common-law, multi-factor definition of "successor-
in-interest" should be used, as it is used to interpret statutes with purposes
similar to the Coal Act. Plaintiffs rely on EEOC v. MacMillan Bloedel
Containers, Inc., 503 F.2d 1086 (6th Cir. 1974), which adopted a nine-factor
test in determining successorship under the National Labor Relations Act:
Courts that have considered the successorship question in a labor
context have found a multiplicity of factors to be relevant. These
include: 1) whether the successor company had notice of the
charge, 2) the ability of the predecessor to provide relief, 3)
whether there has been a substantial continuity of business
operations, 4) whether the new employer uses the same plant, 5)
whether he uses the same or substantially the same work force, 6)
whether he uses the same or substantially the same supervisory
personnel, 7) whether the same jobs exist under substantially the
same working conditions, 8) whether he uses the same machinery,
equipment and methods of production and 9) whether he produces the
same product.
Id. at 1094.
However, even under Bloedel's common-law, multi-factor analysis, it is
not clear that Mate Creek and Sidney Creek as Clean Energy are successors-in-
interest to New Era. New Era, Mate Creek, and Clean Energy are simply
independent
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Holland, et al. v. New Era Coal Co., et al.
No. 97-6332
coal operators who successively operated the McInnis mine under contract with
Sidney Creek, the owner of the McInnis mine. New Era, Mate Creek, and Clean
Energy did not contract with the previous contract coal operator for the right
to operate the mine or to use the coal mining equipment. Mate Creek did not
acquire any stock or assets, merge with New Era, nor assume any obligations of
New Era. Mate Creek hired many of New Era's former employees because Mate
Creek hired them from the same union labor pool. Mate Creek also did not know
of New Era's liability for retiree health benefits because Mate Creek started
operating before the Coal Act was passed in 1992. Clean Energy is not a
successor-in-interest to Mate Creek for similar reasons.
Plaintiffs also claim that the Coal Act uses successor and successor-in-
interest interchangeably. However, the Coal Act actually distinguishes
between successor and successor-in-interest in assigning liability for retiree
health benefits. The Coal Act imposes liability for retiree health benefits
on: signatory operators, related persons, 1988 agreement operators, last
signatory operators, and assigned operators. See 26 U.S.C. 9701(c)(1). A
"related person" includes a successor-in-interest to any of the members of the
controlled group of corporations or other legal entities. See 26 U.S.C.
9701(c)(2)(A). Similarly, 26 U.S.C. 9711(g)(1) provides: "The term 'last
signatory operator' shall include a successor in interest of such operator."
Therefore, a successor-in-interest is liable for retiree health benefits
insofar as a related person or last signatory operator is liable.
However, the Coal Act treats the term successor quite differently.
Section 26 U.S.C. 9711(g)(2) specifies that a last signatory operator "may
transfer liability" for the benefits to a successor, but that the last
signatory operator remains liable as a guarantor of the benefits. If a
successor and successor-in-interest were synonymous, then 26 U.S.C.
9711(g)(2) would be surplusage because a successor-in-interest already would
be statutorily liable for retiree health benefits under 26 U.S.C.
9711(g)(1), which includes
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No. 97-6332
successor-in-interest within the term last signatory operator. However, if
successor and successor-in-interest are not synonymous, then 26 U.S.C.
9711(g)(2) would not be surplusage. Under a plain reading, a successor's
liability for retiree health benefits would depend on whether the last
signatory operator transferred its liability to the successor.
Thus, even without defining the terms successor and successor-in-
interest, the Coal Act clearly treats successors and successors-in-interest
differently. The Coal Act imposes liability for employee-benefit
contributions on successors-in-interest, but does not similarly impose
liability on successors. At most, New Era, Mate Creek, and Clean Energy are
successive operators of the McInnis mine. Mate Creek and Clean Energy are not
successors-in-interest to New Era because they have no substantial or
substantive connection with each other as would be evidenced by a transfer of
stocks or assets.
Plaintiffs also claim that the district court erred in not deferring to
the determination of the NLRB that Mate Creek was a successor to New Era. The
district court did not err in not deferring to the NLRB's determination
because the NLRB determined successorship for purposes of collective
bargaining, not for determining liability of retiree health benefits. See
NLRB v. Burns Intern. Sec. Services, 406 U.S. 272 (1972) (holding that
although successor-in-interest became liable for none of predecessor's
obligations, successor-in-interest nevertheless had duty to bargain with union
under the NLRA). Similarly here, there was no purchase of assets and stocks
or assumption of any obligations among New Era, Mate Creek, and Clean Energy.
They were merely successive operators of the same mine, with no other
substantial connection among them.
III. CONCLUSION
We hold that liability for contributions to an employee benefit fund as
a successor-in-interest requires a transfer of
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No. 97-6332
the predecessor's assets or stocks. Accordingly, we AFFIRM the judgment of
the district court.