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Sept. 6 — A group of retired coal miners is moving forward with a lawsuit accusing their former employer and its owner of draining the company’s assets to avoid paying for their health benefits ( Mine Workers v. Mystic, LLC , 2016 BL 288866, S.D. W.Va., No. 5:16-cv-02030, 9/2/16 ).
On Sept. 2, a West Virginia federal judge found that the retirees’ state law claims against defunct coal mine operator Mystic LLC and its majority owner were best categorized as fiduciary breach claims under the Employee Retirement Income Security Act. The judge then denied Mystic’s motion to dismiss, finding the lawsuit timely under ERISA and declining to hold that a settlement agreement barred the retirees’ claims.
The lawsuit stems in part from the unusual legal history surrounding health benefits for retired coal miners. Under the 1992 Coal Industry Retiree Health Benefit Act, mine operators like Mystic must provide lifetime health benefits for retired miners and their eligible spouses. When a mine operator is no longer in business and no longer financially capable of providing benefits, a multiemployer plan for “orphaned retirees” steps in to provide coverage.
In this case, a group of retirees accused Mystic and its majority owner of purposefully draining the company of assets before it ceased operations in 2006. According to the retirees, this was done to avoid the company’s ongoing obligation to provide health benefits to retired mineworkers.
Weighing these state law claims for breach of contract and unlawful distribution, Judge Irene C. Berger of the U.S. District Court for the Southern District of West Virginia found the lawsuit to be preempted by ERISA. That’s because the lawsuit alleged improper conduct—the siphoning of company assets—undertaken with the goal of avoiding obligations under an ERISA-governed benefit plan, Berger explained.
After finding the case to sound in ERISA, Berger rejected Mystic’s attempt to have the lawsuit dismissed as untimely. The challenged conduct occurred between 2005 and 2010, making the retirees’ 2015 lawsuit timely under ERISA’s six-year statute of limitations, Berger said.
Finally, Berger declined to hold that the retirees’ claims were barred by a 2013 settlement agreement between Mystic and the multiemployer health fund. According to Berger, it was too early in the litigation to consider the effects of this agreement.
The retirees were represented by Carbone & Blaydes and United Mineworkers of America. Bailey & Glasser represented Mystic.
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Text of the decision is at http://www.bloomberglaw.com/public/document/Mine_Workers_v_Mystic_LLC_No_516cv02030_2016_BL_288866_SD_W_Va_Se.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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