R G Johnson Co Inc v. Holland, Michael H.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 28, 1999 Decided April 9, 1999

Nos. 98-5109 & 98-5127

R.G. Johnson Company, Inc.,

Appellee

v.

Kenneth S. Apfel, Commissioner of Social Security

and Michael H. Holland, et al.,

Appellants

Appeals from the United States District Court

for the District of Columbia

(No. 97cv00003)

Peter Buscemi, with whom John R. Mooney, David W.
Allen, and Carolyn O'Meara Dutrow were on the briefs,
argued the cause for appellants UMWA Combined Benefit
Fund and its Trustees.

Alexander D. Shoaibi, Assistant U.S. Attorney, with whom
Wilma A. Lewis, United States Attorney, Mark E. Nagle,
and R. Craig Lawrence, Assistant U.S. Attorneys, and Donna
J. Fuchsluger, Counsel, Social Security Administration, were
on the briefs, argued the cause for federal appellant.

Mary Lou Smith, with whom William H. Howe and Rich-
ard A. Steyer were on the brief, argued the cause for appellee
R. G. Johnson Company, Inc.

Before Williams and Randolph, Circuit Judges, and
Buckley, Senior Circuit Judge.

Opinion for the court filed by Senior Judge Buckley.

Dissenting opinion filed by Circuit Judge Randolph.

Buckley, Senior Judge: The Coal Industry Retiree Health
Benefit Act of 1992 directs the Commissioner of Social Securi-
ty to assign financial responsibility for coal industry retirees
covered by certain United Mine Workers of America collec-
tive bargaining agreements either to a "signatory operator"
that formerly employed the retiree or to a "related person" to
the signatory operator. Appellee R. G. Johnson Company,
Inc. protests the assignment to it of the retired employees of
a signatory operator whose assets and remaining business it
had purchased seven years earlier. The district court grant-
ed the company's motion for summary judgment on the
ground that the unambiguous language of the statutory defi-
nition of "related person" did not apply to successors or
successors in interest to a signatory.

Although we cannot fault the district court's literal reading
of the definition, we conclude that because such an interpreta-
tion would frustrate the clear intent of Congress in enacting
the Coal Act, the phrase "related person" must be construed
to include a successor in interest to a signatory operator. We
therefore set aside the grant of summary judgment in favor
of R. G. Johnson Company, Inc. and remand the case to the
district court.

I. Background

A.The Coal Act

The factors that led to the passage of the Coal Industry
Retiree Health Benefit Act of 1992, Pub. L. No. 102-486, 106
Stat. 3036 (codified at 26 U.S.C. ss 9701-22 (1994)) ("Coal
Act" or "Act"), are well documented in prior litigation. See,
e.g., Eastern Enters. v. Apfel, 524 U.S. ----, 118 S. Ct. 2131,
2137-42 (1998). We recount only those that are necessary to
place the present litigation in context.

In 1974, the Bituminous Coal Operators' Association ("As-
sociation"), a multi-employer bargaining organization and the
primary representative of coal mine operators in negotiations
with the United Mine Workers of America ("UMWA"), en-
tered into a collective bargaining agreement that created four
trusts to provide pension and medical benefits to miners and
their families. The coal operators, who as members of the
Association were signatories to the agreement, undertook to
fund the trusts through the payment of annual assessments
that were based on the amount of coal they produced and on
the number of hours their miners worked. One of the trusts,
the 1950 UMWA Benefit Plan ("1950 Benefit Plan"), provided
health benefits to miners who retired before 1976 while
another, the 1974 UMWA Benefit Plan ("1974 Benefit Plan"),
covered the health benefits of active miners and those who
retired in 1976 or thereafter.

In 1978, the Association and the union executed a new
agreement that restructured the 1974 Benefit Plan to make
signatory operators primarily responsible for the health care
of their own active employees and those who retired during or
after 1976. Thus, while the 1950 Benefit Plan continued to
cover all pre-1976 retirees, the 1974 Benefit Plan, as restruc-
tured, remained in effect only to cover employees who had
retired after 1975 and whose last employer was no longer in
business. The Association of Bituminous Contractors, Inc.,
which represented contractors to the coal mining industry,
entered into similar agreements with the UMWA. These
entitled its member companies' retired employees to partici-

pate in the 1950 and 1974 Benefit Plans established for
retired miners.

In the 1980's, the benefit plans began to suffer increasing
financial difficulties because of the growing number of signa-
tories to the 1978 agreement that had subsequently either
gone out of business or otherwise ceased to meet their
continuing obligations under the agreement. As a result, the
remaining signatories were forced to absorb the increasing
cost of providing medical benefits for the retirees of the
operators who no longer contributed to the plans.

In 1992, in response to the problems created by the plans'
growing deficits, Congress passed the Coal Act in order "to
provide for the continuation of a privately financed self-
sufficient program for the delivery of health care benefits to
the beneficiaries of [multi-employer benefit] plans." Coal
Act, Pub. L. No. 102-486, s 19142(b)(3), 106 Stat. 3037 (1992)
(codified as note following 26 U.S.C. s 9701 (1994)). To that
end, Congress found it necessary "to identify persons most
responsible for plan liabilities in order to stabilize plan fund-
ing and allow for the provision of health care benefits to such
retirees." Id. s 19142(a)(2).

The Coal Act merged the 1950 and 1974 Benefit Plans into
a new multi-employer plan called the UMWA Combined
Benefit Fund ("Fund"). 26 U.S.C. s 9702(a)(2). The Fund
provides retirees and their dependents with "substantially the
same" health benefits that they were entitled to receive under
the 1950 and 1974 Plans. Id. s 9703(b)(1), (f).

Section 9706 of the Act requires the Commissioner of Social
Security ("Commissioner") to assign each eligible beneficiary
of the Fund to a "signatory operator which (or any related
person with respect to which) remains in business," such
assignments to be made in accordance with the instructions
contained in that section. Id. s 9706. Such operator or
person must then pay an annual premium to the Fund based
on the number of beneficiaries for which it is responsible. Id.
s 9704. Beneficiaries for whom the Commissioner is unable
to locate an appropriate assignee become the collective re-
sponsibility of all companies to which beneficiaries have been

assigned. Id. s 9704(a)(3) ("unassigned beneficiaries premi-
um").

B.Factual Background

In 1988, a group of investors organized appellee R. G.
Johnson Company, Inc. ("New Johnson") for the purpose of
acquiring the operating assets, certain real estate, and the
right to use a virtually identical corporate name from The
R. G. Johnson Company ("Old Johnson"). New Johnson
employed, without interruption, much of Old Johnson's work
force; rented space in the same building previously occupied
by Old Johnson; and assumed the older company's only
remaining contract. Following the sale to New Johnson, Old
Johnson continued to exist essentially as a personal holding
company for its owners. New Johnson, for its part, per-
formed the same kind of coal mine shaft and slope construc-
tion work that Old Johnson had been engaged in since 1917.

In 1995, the Commissioner notified New Johnson, in a
series of letters, of the assignment to it of a number of
beneficiaries who had been former employees of Old Johnson.
Each of the letters contained the following statement:

Our records and UMWA records indicate that you are
related to [Old Johnson] who is no longer in business.
This operator would have been responsible under the law
for the miner named below under the rules for how we
assigned responsibility.... Therefore, as a related com-
pany you must assume responsibility.

See, e.g., List of Assigned Miners and Other Beneficiaries,
reprinted in Joint Appendix 729 (emphasis added). New
Johnson requested review of these assignments based on its
claim that it was not related to Old Johnson. The Commis-
sioner conducted the review and upheld the assignments,
explaining that "[u]nder current SSA policy, successors are
considered another type of related person and are treated as
a related person for purposes of making assignments under
the Coal Act." Thereafter, the Fund notified New Johnson of
its premium obligations in annual assessment letters. The
company paid the premiums under protest and commenced

this lawsuit seeking a declaration that it is not liable for
beneficiaries under the Coal Act.

New Johnson's complaint contains five counts, each of
which presents a distinct legal argument. The company
moved for summary judgment based on the first two of these
counts; namely, that it was not a related person to Old
Johnson as defined in the Coal Act, and that the Act did not
provide for the assignment of beneficiaries to a successor or
successor in interest to a signatory operator. The Commis-
sioner filed a cross-motion for summary judgment. After
considering the two motions, the district court granted sum-
mary judgment in favor of New Johnson. It concluded that
the plain language of the provisions of the Act defining
"related person" did not include a successor to a signatory
operator and that the legislative history cited by the defen-
dants "could not determine legislative intent so conclusively
that it would overcome the plain meaning of the statute."
R. G. Johnson Co. v. Apfel, 994 F. Supp. 10, 14, 18 (D.D.C.
1998).

II. Discussion

As noted above, the Coal Act directs the Commissioner to
assign a Fund beneficiary to a signatory operator or "any
related person." 26 U.S.C. s 9706(a). The Act defines relat-
ed person as follows:

(A) In general

A person shall be considered to be a related person to
a signatory operator if that person is--

(i) a member of the controlled group of corporations
(within the meaning section 52(a) [of the Internal
Revenue Code]) which includes such signatory opera-
tor;

(ii) a trade or business which is under common
control (as determined under section 52(b) [of the
Internal Revenue Code]) with such signatory operator;
or

(iii) any other person who is identified as having a
partnership interest or joint venture with a signatory

operator in a business within the coal industry, but
only if such business employed eligible beneficiaries,
except that this clause shall not apply to a person
whose only interest is as a limited partner.

A related person shall also include a successor in interest
of any person described in clause (i), (ii), or (iii).

Id. s 9701(c)(2)(A). The statute thus creates four categories
of related persons: those described in clauses (i), (ii), and (iii),
and those who are "successors in interest" to any person
described in those clauses.

On appeal, the parties pose two questions: Does the Coal
Act impose liability for a Fund beneficiary on a successor in
interest of a signatory operator; and if it does, is New
Johnson a successor in interest of the kind contemplated by
the statutory definition of "related person"? As always, when
asked to rule on an agency's interpretation of a statute it is
charged with administering, we undertake the two-step Chev-
ron analysis. See Chevron U.S.A. Inc. v. NRDC, Inc., et al.,
467 U.S. 837, 842-45 (1984). In the first instance, we must
determine whether the intent of Congress is clear. If it is,
"that is the end of the matter; for the court, as well as the
agency, must give effect to the unambiguously expressed
intent of Congress." Id. at 842-43. If, however, we find that
the statute is silent or ambiguous with respect to the matter
at issue, the court must defer to the agency's construction of
the statute if it is "permissible." Id. at 843.

In support of its contention that the definition of related
person applies to a signatory operator's successor in interest,
the Commissioner argues that a signatory operator is a
"person described" in clauses (i), (ii), and (iii) because the
words "signatory operator" appear in each of them. With all
respect, we find that explanation difficult to follow. 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. To
suggest otherwise is tantamount to saying "I am related to
me." The Commissioner also points to the words "In gener-
al" at the beginning of the definition of related person as

permitting it to view the statutory language as less than
exhaustive. But even if we were to accept the argument that
the catalog of related persons in clauses (i), (ii), and (iii) is not
exclusive, the Commissioner cannot overcome the fact that in
order to be deemed a related person, a successor in interest
must be one to a person described in those clauses. Under
the circumstances, we are unable to quarrel with the district
court's conclusion that the agency's construction of the relat-
ed person definition is "tortured." R. G. Johnson Co., 994
F. Supp. at 14. We agree with the Commissioner, however,
that Congress could not have intended this result; and we
say this without any reliance on the inconclusive legislative
history cited by the Commissioner.

Congress declared that one of its purposes in enacting the
Coal Act was "to identify persons most responsible for plan
liabilities in order to stabilize plan funding and allow for the
provision of health care benefits to such retirees." Pub. L.
No. 102-486, s 19142(a)(2), 106 Stat. 3037 (codified at note
following 26 U.S.C. s 9701 (1994)). In light of this objective
and the broad reach of the provisions imposing liability on
related persons, we can think of no reason why Congress
would have intended to impose liability for the beneficiaries
on, for example, a successor in interest to a Coca-Cola
bottling company under common control with a signatory coal
mine operator while exempting a coal-mining successor in
interest to that operator. When we asked counsel for New
Johnson if she could provide any plausible reason why Con-
gress should have intended such an exemption, the only
explanation she was able to suggest was that coal mining
operators had more effective lobbyists in Washington than
did their non-mining affiliates. We find this explanation less
than compelling. Nor are we impressed by our dissenting
colleague's suggestion (see dis. op. at 1-2) that Congress
could have intended to benefit coal miners by eliminating the
impediment to the sale of a coal company posed by the
potential liabilities created by the Coal Act. The problem
with this explanation is that it assumes that Congress was not
equally concerned for the jobs of employees of persons relat-
ed to a signatory operator, who would face the same difficul-
ties in disposing of a business. But if Congress was in fact

solely concerned with the protection of miners from that
contingency, it would have also exempted from liability suc-
cessors in interest to any related person who was engaged in
the mining of coal.

We are faced, then, with one of those "rare cases in which
the literal application of a statute will produce a result
demonstrably at odds with the intentions of its drafters."
United States v. Ron Pair Enters., 489 U.S. 235, 242 (1989)
(internal quotation marks and brackets omitted). In such a
circumstance, "the intention of the drafters, rather than the
strict language, controls." Id. Accordingly, in order to "give
effect" to Congress's intent in this case, Chevron, 467 U.S. at
843, we hold that section 9701(c)(2)(A) must be construed to
permit the assignment of a Fund beneficiary to the successor
in interest of a signatory operator. See Citibank v. Emery
(In re Emery), 132 F.3d 892, 896 (2d Cir. 1998) (because "the
literal application of s 727(d) here [could not] have been
intended by Congress," court held that the section did not
preclude a particular suit).

Although we hold that the term "related person" does
encompass a successor in interest to a signatory operator, we
do not address New Johnson's alternative argument that it is
not a successor in interest to Old Johnson within the meaning
of the Act because that question was not before the district
court. It is our normal practice to "refuse[ ] to hear any
claim upon which the district court has not had an opportuni-
ty to rule." Boehner v. Anderson, 30 F.3d 156, 162 (D.C. Cir.
1994). See also Singleton v. Wulff, 428 U.S. 106, 120 (1976)
("It is the general rule ... that a federal appellate court does
not consider an issue not passed upon below."). We have no
reason to depart from that practice in this case. New
Johnson may, however, present this argument to the district
court on remand. See Peralta v. U.S. Attorney's Office, 136
F.3d 169, 173 (D.C. Cir. 1998) (on remand, party free to
reassert argument raised for first time on appeal).

III. Conclusion

In light of the foregoing, we set aside the district court's
grant of summary judgment in favor of New Johnson and

remand the case so that the court may consider New John-
son's argument that it is not a successor in interest to Old
Johnson as well as the others set forth in the counts of the
complaint that were not placed before the court in New
Johnson's motion for summary judgment.

So ordered.

 Randolph, Circuit Judge, dissenting: The definition of
"related persons" in the Coal Industry Retiree Health Benefit
Act excludes successors in interest to signatory operators,
and thereby exempts them from liability for the signatory
operator's Fund beneficiaries. See 26 U.S.C.
ss 9701(c)(2)(A), 9706(a). My colleagues recognize as much.
But they believe exempting successors in interest such as
appellee would frustrate Congress's "clear intent." And so
they treat the words "related persons" as if they covered
successors although they do not. Given the nature of the
judicial process, this mode of judicial analysis embodies some
severe theoretical difficulties. My problem with the majority
decision is more practical. In detecting the "real" intent of
Congress, my colleagues first eye the Act's general purpose
"to identify [those] persons most responsible for plan liabili-
ties." Maj. op. at 8. With this firmly in mind, they find it
implausible for Congress "to impose liability for the beneficia-
ries on, for example, a successor in interest to a Coca-Cola
bottling company under common control with a signatory coal
mine operator while exempting a coal-mining successor in
interest to that operator." Id. I find this not in the least bit
implausible. Exempting successors in interest to signatory
operators from liability for the signatory operator's Fund
beneficiaries benefits miners because it facilitates the sale of
coal companies. Without the exemption, prospective purchas-
ers can never be sure of their risks. Their liability would
depend on whether, sometime in the future, the seller--that
is, the signatory operator--ceases to "remain[ ] in business,"
a matter wholly outside their control. See 26 U.S.C.
s 9706(a). (A person is in "business" within the meaning of
the statute "if such person conducts or derives revenue from
any business activity, whether or not in the coal industry."
See 26 U.S.C. s 9701(c)(7).) My colleagues say, in response,
that Congress could have gone further and exempted succes-
sors in interest to related coal mining companies from liabili-
ty, thus facilitating the sale of these companies as well.
Perhaps so, but Congress rarely has to go as far as its logic
would take it. The point remains that construing the statute
as it was written does not render it inscrutable.

One further observation is in order. The quandary my
colleagues confront here is of the Social Security Commission-
er's own making. The problem stems from the Commission-
er's version of what constitutes "business activity." See id.
Borrowing from an inapposite IRS regulation, the Commis-
sioner determined that the signatory operator--"Old John-
son"--no longer engaged in "business activity" after the sale
because it now derived its income from securities and real
estate. See 26 C.F.R. s 1.355-3(b)(2)(iv). Old Johnson was,
according to the Commissioner, therefore out of business.
Even though Old Johnson still existed, having merely ex-
changed its physical assets for cash, the Commissioner no
longer held it financially responsible for its Fund beneficia-
ries. See 26 U.S.C. ss 9706(a), 9701(c)(7). The Commission-
er was thus left groping for a "related person" to whom Old
Johnson's liabilities could be assigned. See 26 U.S.C.
s 9701(c)(2)(A). Had the Commissioner adopted a definition
of "business activity" which permitted assignment to signato-
ry operators still in existence and earning income, the entire
problem would have disappeared and I presume my col-
leagues would have read the Act as it was written.