UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


R G JOHNSON CO INC

v.

HOLLAND, MICHAEL H.


98-5109a

D.C. Cir. 1999


*	*	*


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


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


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


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


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


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


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


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


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


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