346 F. Supp. 3d 99
D.C. Cir.2018Background
- The 1992 Coal Act created the 1992 UMWA Benefit Plan (the 1992 Plan) and required certain "1988 last signatory operators" to finance that Plan by (A) paying monthly premiums, (B) providing security (bond, letter of credit, or cash escrow), and (C) paying an additional backstop premium in some circumstances; "related persons" are made jointly and severally liable for "any amount required to be paid" under § 9712(d).
- Arch Coal was a "related person" in 1992 because it owned subsidiaries that were 1988 last signatory operators. Arch arranged a bond originally, and later the subsidiaries’ obligations were secured by a letter of credit issued for Patriot Coal (the subsidiaries’ later parent). Arch was not a party to that letter of credit.
- In 2015 Patriot and the subsidiaries filed bankruptcy, the subsidiaries’ Coal Act obligations terminated, and Arch Coal assumed responsibility for providing benefits and began paying monthly premiums.
- The 1992 Plan drew on Patriot’s $8,608,392 letter of credit in December 2015 and received cash; the Plan treated those proceeds as general plan assets and did not segregate them by operator.
- The Plan demanded Arch post statutorily compliant security; Arch refused, contending the drawn letter of credit proceeds satisfied its security obligation and claiming the Plan was over-secured, so Arch counterclaimed for return of the alleged excess. The parties filed cross-motions for summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does § 9712(d)(4)’s joint-and-several liability for "any amount required to be paid" make related persons liable to provide the § 9712(d)(1)(B) security? | Related persons are jointly and severally liable for all financing obligations in § 9712(d), including the security requirement. | The phrase refers to "payments" (premiums) only; security was intended for standalone operators and need not be posted by related persons. | Court: Text and structure show "any amount" includes security; related persons must provide § 9712(d)(1)(B) security. |
| Does conversion of a required letter of credit into cash (plan proceeds) satisfy the statutory requirement to provide security in a bond, letter of credit, or cash escrow? | The Plan’s draw produced cash that functionally secures obligations, but statutory forms are exclusive. | Proceeds from the drawn letter of credit should count as security; Arch is thereby relieved of posting additional security. | Court: § 9712(d)(1)(B) requires one of the three statutorily specified forms; the drawn letter of credit no longer exists and was not replaced by an acceptable form, so Arch has not satisfied the statutory security obligation. |
| Are proceeds from a called security limited by the Coal Act to be used only to fund benefits attributable to the operator whose security was called (or to be held in escrow/constructive trust)? | The called funds must be used either to secure Arch going forward, to pay Arch’s assumed benefits, or to reimburse Arch. | The Plan may treat proceeds as general plan assets within ERISA fiduciary constraints; Coal Act sets amount/purpose but not post-draw restrictions. | Court: Coal Act does not restrict Plan’s post-draw use beyond the security document and ERISA fiduciary duties; Plan may treat proceeds as general assets subject to ERISA. |
Key Cases Cited
- Dist. 29, United Mine Workers of Am. v. United Mine Workers of Am. 1992 Ben. Plan, 179 F.3d 141 (4th Cir.) (describing Coal Act financing scheme)
- Barnhart v. Sigmon Coal Co., 534 U.S. 438 (2002) (discussing Coal Act enactment, compromise context, and statutory interpretation principles)
- Taniguchi v. Kan Pac. Saipan, Ltd., 566 U.S. 560 (2012) (undefined statutory terms given ordinary meaning)
- Burlington N. & Santa Fe Ry. v. White, 548 U.S. 53 (2006) (different word choices in statute are purposeful)
- Mertens v. Hewitt Assocs., 508 U.S. 248 (1993) (text controls over vague notions of statutory purpose)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment standard)