The Coal Industry Retiree Health Benefits Act of 1992, 26 U.S.C. § 9701, et seq., requires all present or former signatories to a National Bituminous Coal Wage Agreement ("NBCWA") to provide employees with lifetime health benefits. In this case, a sharply divided Supreme Court held that the Coal Act as applied to petitioner Eastern Enterprises is unconstitutional.
Eastern had signed various NBCWAs between 1946 and 1965 and had satisfied all of its contractual obligations under those agreements. It then transferred its mining operations to a subsidiary, later sold, and left the coal mining industry entirely. The Coal Act, however, retroactively required Eastern to provide lifetime health benefits to miners who had worked for it in the past, for as little as several months. The district court and the Court of Appeals for the First Circuit rejected Eastern’s constitutional challenges to the Coal Act under substantive due process principles and the Takings Clause.
A divided Court reversed and remanded. Justice O’Connor, writing for a plurality of herself, Chief Justice Rehnquist, and Justices Scalia and Thomas, held that the Coal Act as applied to Eastern constituted an unconstitutional "taking" of Eastern’s property, using the same type of analysis traditionally applied to regulatory takings. The plurality explained first that Eastern faced substantial liability which, though not a permanent physical occupation of Eastern’s property, was nonetheless out of proportion with Eastern’s experience in the benefit plans. The plurality also emphasized that the Coal Act substantially interfered with Eastern’s reasonable investment-backed expectations by imposing liability based on Eastern’s activities decades in the past, and long after Eastern believed its liabilities under the benefit plans had been settled. The plurality rejected respondents’ argument that the retroactivity was justified by an implicit promise to pay lifetime benefits. It determined that no agreement signed by Eastern had promised such benefits.
Justice Kennedy disagreed that the Takings Clause was applicable, but concurred in the judgment on the ground that the Coal Act violated the Due Process Clause. He reasoned that the Coal Act bore no legitimate relation to the Government’s interest, based largely on its unprecedented degree of retroactivity, the fact that any promises of lifetime benefits were made long after Eastern left the coal industry, and the fact that Eastern was not responsible for the financial problems that jeopardized the benefits.
Justice Stevens, joined by Justices Souter, Ginsburg and Breyer, and Justice Breyer, joined by Justices Stevens, Souter, and Ginsburg, filed dissenting opinions.