Supreme Court Denied ‘Cert.’ on Termination of Retiree Benefits

In late December, the Eleventh Circuit handed down an important decision holding that any company, including a coal producer, can terminate retiree health benefits, even if the company sells its assets under Section 363 and converts from chapter 11 to chapter 7.

The mine workers’ union filed a petition for certiorari, which the Supreme Court tersely denied on June 24. However, the union was not challenging the appeals court’s interpretation of Section 1114, authorizing the termination of retiree health benefits. Instead, the union claimed there was a split of circuits regarding the tax Anti-Injunction Act (26 U.S.C. § 7421(a)). 

To the union’s way of thinking, assessments imposed on coal producers to fund health benefits are taxes under the 1992 federal Coal Act. The Coal Act made successors and purchasers liable to fund retiree health benefits.

In the petition for certiorari, the union argued that the Anti-Injunction Act deprived the bankruptcy court of jurisdiction because insulating the purchaser from payments under the Coal Act amounted to an injunction preventing the collection of a tax.

After extensive analysis, the Eleventh Circuit held that the obligation to pay retiree health benefits was not a tax, thus giving the bankruptcy court jurisdiction to invoke Section 1114.

Even though the union’s petition for certiorari was unopposed, the Supreme Court denied the petition following the justices’ first conference on the case.

For ABI’s report on the appeals court decision, United Mine Workers of America Combined Benefit Fund v. Toffel (In re Walter Energy Inc.), 911 F.3d 1121 (11th Cir. Dec. 27, 2018), click here.