United Mine Works of Am. Combined Benefit Fund v. Andre M. Toffel, for Walter Energy, Inc. (In re Walter Energy, Inc.)

911 F.3d 1121

IN RE: WALTER ENERGY, INC. et al., Debtor.

United Mine Works of America Combined Benefit Fund, United Mine Works of America 1992 Benefit Plan, Plaintiff-Appellants,

v.Andre M. Toffel, as Chapter 7 Trustee for Walter Energy, Inc., Steering Committee of First Lien Holders, Warrior Met Coal, Inc., Defendant-Appellees.

No. 16-13483

United States Court of Appeals, Eleventh Circuit.

December 27, 2018

John C. Goodchild, III, Philadelphia, PA, Stephanie Schuster, Washington, DC, Morgan Lewis & Bockius, LLP, for Plaintiffs-Appellants.

Raechel K. Anglin, Washington, DC, Julia Frost-Davies, Amelia C. Joiner, Boston, MA, Rachel Jaffe Mauceri, Philadelphia, PA, Morgan Lewis & Bockius, LLP, Glen M. Connor, Quinn Connor Weaver Davies & Rouco, LLP, Birmingham, AL, for Plaintiff-Appellant UMWA 1974 Pension Plan and Trust.

George Nicholas Davies, Quinn Connor Weaver Davies & Rouco, LLP, Birmingham, AL, for Plaintiffs-Appellants UMWA 1974 Pension Plan and Trust, United Mine Workers of America 1992 Benefit Plan.

Bryan Michael Killian, Morgan Lewis & Bockius, LLP, Washington, DC, for Plaintiffs-Appellants UMWA 1974 Pension Plan and Trust, United Mine Workers of America Combined Benefit Fund.

Paul A. Green, John Robert Mooney, Mooney Green Saindon Murphy & Welch, David Bruce Salmons, Morgan Lewis & Bockius, LLP, Washington, DC, for Plaintiffs-Appellants United Mine Workers of America Combined Benefit Fund, United Mine Workers of America 1992 Benefit Plan.

Scott Burnett Smith, Huntsville, AL, James B. Bailey, Jay Robert Bender, Cathleen Curran Moore, John DeForest Watson, III, Bradley Arant Boult Cummings, LLP, Jayna Partain Lamar, Robert K. Ozols, Maynard Cooper & Gale, PC, Birmingham, AL, Kelley A. Cornish, Robert N. Kravitz, Diane Meyers, Michael S. Rudnick, Stephen Shimshak, Claudia R. Tobler, Ann K. Young, Paul Weiss Rifkind Wharton & Garrison, LLP, New York, NY, for Defendant-Appellee Andre' M. Toffel.

Maurice L. Brimmage, Jr., Dallas, TX, Ira S. Dizengoff, Lisa G. Beckerman, New York, NY, James R. Savin, Washington, DC, Akin Gump Strauss Hauer & Feld, LLP, Donald Christopher Carson, Michael Leo Hall, Birmingham, AL, Forrest Stephen Latta, Mobile, AL, Burr & Forman, LLP, for Defendants-Appellees Steering Committee of First Lien Holders, Warrior Met Coal, Inc.

Before MARTIN, JILL PRYOR and ANDERSON, Circuit Judges.

JILL PRYOR, Circuit Judge:

Coal companies in the United States long ago promised in wage agreements to provide their employees with health care benefits at no cost to the employees and to continue to provide these benefits even after the employees’ retirement. A quarter century ago, Congress turned this contractual obligation into a statutory one. See Coal Industry Retiree Health Benefit Act of 1992 ("Coal Act"), Pub. L. No. 102-486, 106 Stat. 2776, 3036-56 (1992). Even before the Coal Act, coal companies struggled to pay the cost of these benefits. Unfortunately, this problem has grown more severe as coal revenues have declined and health care costs have skyrocketed.

In this case we confront the question of what happens to a coal company’s statutory obligation to fund retiree health care benefits when the company files bankruptcy and pursues liquidation under Chapter 11. To answer this question, we must consider the interplay of two federal statutes, the Coal Act and the Retiree Benefits Bankruptcy Protection Act of 1988 ("RBBPA"), Pub. L. No. 100-334, 102 Stat. 610 (1988). The Coal Act requires coal companies to provide certain retirees with health care benefits for life; it created two multiemployer plans—the UMWA Combined Benefit Fund and the UMWA 1992 Benefit Plan (collectively, the "Funds")—to provide such benefits. These plans are funded by premiums paid by the coal companies and their related entities and by the federal government. The RBBPA prohibits a debtor who files bankruptcy from unilaterally terminating payments for retiree health care benefits. The RBBPA nonetheless permits a bankruptcy court to terminate a debtor’s obligation to fund retiree health care benefits when it finds that the termination is necessary for the debtor’s reorganization.

The question before us is whether the RBBPA authorizes a bankruptcy court to terminate a debtor’s statutory obligation under the Coal Act to pay premiums to the Funds when the bankruptcy court finds that such termination is necessary for the coal company to sell its assets as a going concern and avoid a piecemeal liquidation. This difficult question requires a nuanced analysis of both bankruptcy law and the unique system that Congress created to fund health care benefits for coal retirees.

Debtor Walter Energy¹ petitioned for Chapter 11 bankruptcy and sought to sell substantially all of its assets as a going concern. But the sole potential purchaser would acquire the assets only if they were transferred free and clear of Walter Energy’s Coal Act obligation to provide retiree health care benefits or pay premiums to the Funds. The bankruptcy court, exercising its authority under the RBBPA, terminated Walter Energy’s obligation to pay premiums, which in effect shifted the cost of these benefits to the federal government. The Funds appealed to the district court, which affirmed the bankruptcy court.

On appeal to our Court, the Funds advance three reasons why the bankruptcy court lacked the authority to terminate Walter Energy’s obligation to pay premiums. First, they argue that the Anti-Injunction Act, 26 U.S.C. § 7421(a), barred the bankruptcy court from modifying the premiums because the premiums qualify as taxes for purposes of that statute, meaning they may be challenged only after the taxes are collected. Second, they contend that because the premiums paid to the Funds are imposed by a statute and not undertaken as a voluntary contractual obligation, they do not qualify as retiree benefits under the RBBPA and thus the bankruptcy court had no authority to terminate them. Third, they assert that because Walter Energy sought to sell substantially all of its assets and liquidate under Chapter 11 of the Bankruptcy Code, instead of engaging in a classic Chapter 11 reorganization, the bankruptcy court had no authority under the RBBPA to terminate the payment obligation. We reject the Funds’ arguments and hold that the bankruptcy court had the authority to modify the premiums that Walter Energy owed the Funds. Accordingly, we affirm the district court.

* * *

To address the very important and complex issues in this case, our opinion today necessarily is lengthy. In Part I, we provide a history of retiree health care benefits in the coal industry to explain how Congress came to transform coal companies’ contractual obligation to provide retiree health care benefits into a statutory mandate. In Part II, we discuss the factual background and procedural history of this case. In Part III, we identify the applicable standard of review. In Part IV, we explain that we have jurisdiction to hear this appeal because the Anti-Injunction Act did not bar the bankruptcy court from terminating Walter Energy’s obligation to pay premiums owed under the Coal Act. In Part V, we hold that the RBBPA authorized the bankruptcy court to terminate Walter Energy’s obligation to pay premiums, even though the premiums were imposed by statute and Walter Energy was pursuing liquidation under Chapter 11, not a classic reorganization.

I. RETIREE HEALTH CARE BENEFITS IN THE COAL INDUSTRY

Working in a coal mine is extremely dangerous. There is the risk of fire, flood, explosion, or mine collapse. There is also the unseen risk that the dust in the coal mine may cause long-term health problems including respiratory diseases. Given the dangers inherent in their work, coal miners sought and secured lifetime health care benefits from their employers. The coal industry struggled with how to pay for these benefits, with some coal companies filing bankruptcy in an attempt to shed this obligation. In response to the bankruptcy filings, Congress passed the RBBPA to limit when companies could rid themselves of the obligation to fund retiree health care benefits. Congress also passed the Coal Act, guaranteeing certain coal retirees health care benefits for life.

A. Coal Employees, Including Retirees, Initially Secure Health Care Benefits in Wage Agreements.

In the early twentieth century, coal workers paid their own health care costs. Some coal companies used a prepayment system in which workers paid for health care through payroll deductions. But the quality of this employer-provided health care was poor and led to worker unrest. After miners organized nationwide strikes to demand health care benefits, President Harry Truman directed the federal government to take possession of all coal mines and to negotiate an agreement with the United Mine Workers of America ("UMWA"). The Secretary of Interior and the UMWA ultimately agreed that miners would be provided health care benefits.

With an agreement about benefits in place, the government returned the mines to private control. The coal companies agreed to a collective bargaining agreement with the UMWA, the National Bituminous Coal Wage Agreement of 1947 ("1947 NBCWA"), which established a multiemployer fund to provide pension and medical benefits to coal workers and their families. The coal companies funded these benefits using a pay-as-you-go system in which they paid a royalty on each ton of coal produced. The 1947 NBCWA agreement did not explicitly grant retirees health care benefits. Instead, the trustees of the multiemployer fund, who were selected by the UMWA and coal companies, were responsible for setting the level of benefits, including deciding whether retirees received benefits. Over time, the trustees added or removed benefits depending on the amount of coal that was produced and the royalties received.

About 30 years later, the coal companies and the UMWA agreed in the National Bituminous Coal Wage Agreement of 1974 ("1974 NBCWA") to expand the scope of these...