Usx Corporation and U.S. Steel Mining Company, Inc. v. Jo Anne B. Barnhart, Commissioner of Social Security

Citations: 395 F.3d 161; 60 Fed. R. Serv. 3d 360; 2004 U.S. App. LEXIS 26868; 2004 WL 2966273Docket: 04-1247

Court: Court of Appeals for the Third Circuit; December 22, 2004; Federal Appellate Court

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USX Corporation and U.S. Steel Mining Company, Inc. (Appellants) appealed a District Court decision that granted summary judgment in favor of Jo Anne B. Barnhart, Commissioner of Social Security (Appellee), on most of their claims. The case arose from the assignment of health benefit premium responsibilities for sixty-seven retired miners, which the Social Security Administration (SSA) assigned to USX under the Coal Industry Retiree Health Benefit Act of 1992. 

USX had acquired the Grapevine No. 8 Mine in 1970 and later sold it to Old Ben Coal Company. In 1995, the SSA assigned additional miners to USX, citing its relation to the original operator. USX requested the miners' earnings records and bases for their assignments, but the SSA deemed this request untimely, although it provided some records. Subsequent requests for information and appeals were also denied by the SSA on grounds of untimeliness and improper assignments.

The appellants filed their complaint in July 1999, claiming improper assignment of health benefit responsibilities and failure to provide required earnings records. Their Second Amended Complaint included thirteen counts, which the District Court resolved in favor of the Commissioner through summary judgment, culminating in a final judgment on November 5, 2003. The appellants' motion to amend the judgment was denied, leading to the appeal. The Court of Appeals affirmed the District Court's decision.

Review of a District Court's summary judgment is conducted with a plenary standard, assessing the record using the same criteria as the district courts. The moving party must prove that no genuine issue of material fact exists and that they are entitled to judgment as a matter of law. Under the Coal Act, the Commissioner has the authority to assign health benefit premium responsibilities to a "related person" when the signatory operator is no longer in business. Initially, the Commissioner interpreted this to allow assignments to the direct successor of the signatory operator. However, appellants contended that this interpretation exceeded the Commissioner's statutory authority. The District Court granted partial summary judgment to the Commissioner, but following the Supreme Court's ruling in Barnhart v. Sigmon Coal Co., which held that the Commissioner lacked such authority for direct successors, appellants requested reconsideration and sought to amend their complaint to include additional challenges to miner assignments based on the rejected successorship theory.

The District Court subsequently reversed its prior ruling, granting summary judgment to the appellants concerning the identified successorship-based assignments but denied their request to amend the complaint for unaddressed assignments. Appellants argued that the District Court violated Federal Rule of Civil Procedure 54(c) by not rescinding all assignments made under the invalidated successorship theory. The court found this argument meritless, clarifying that Rule 54(c) mandates that a court must grant relief to the prevailing party as entitled, regardless of whether the specific relief was requested in the pleadings, as long as a claim for relief was stated.

Appellants misunderstand the purpose of Rule 54(c), which is designed to protect plaintiffs from losing recovery due to technical pleading errors, particularly when the award amount differs from the relief demanded. The rule allows recovery for attorney's fees or interest even if not explicitly requested, emphasizing that judgments should reflect the relief to which a party is entitled, regardless of its legal or equitable nature. However, Rule 54(c) does not permit plaintiffs to recover on claims that were not originally alleged. In the current case, appellants are attempting to introduce new claims regarding improper beneficiary assignments, confusing the demand for relief with the basis of their claims. The court cannot issue a remedy if the plaintiff has not adequately set forth a claim for relief, and Rule 54(c) only applies if the party demonstrates entitlement to relief.

Moreover, granting judgment against the Commissioner for additional, unspecified assignments would prejudice the Social Security Administration (SSA) by preventing it from contesting those claims. The District Court correctly ruled that Rule 54(c) cannot be used to bypass the Commissioner’s ability to raise defenses to unlitigated claims. 

Appellants also sought to file a third amended complaint to include additional miners allegedly subjected to improper assignments, which the District Court denied on the grounds of futility due to statute of limitations and unreasonable delay. The court's decision to deny amendment is upheld based on the unreasonable delay, as Federal Rule of Civil Procedure 15(a) allows amendments only with court permission or consent of the opposing party, and denial must be based on substantial prejudice, bad faith, undue delay, or futility.

A six-year statute of limitations applies to civil actions against the United States for administrative agency decisions, as per 28 U.S.C. § 2401(a). Although appellants acknowledge that their proposed amendment falls outside this limitations period, they contend it is not futile because it would relate back to the original complaint date, which is timely under Federal Rule of Civil Procedure 15(c)(2). This rule allows for amendments to relate back if the claims arise from the same conduct or transaction described in the original complaint. 

Amendments that provide greater detail or amplify the facts of the original claim can fall within this rule, focusing on whether the opposing party had fair notice of the relevant facts and legal theories. Appellants argue that the original complaint's broad language encompasses the addition of more miners, referencing FDIC v. Conner, where the Fifth Circuit permitted amendment for additional loans tied to the same negligent conduct.

The Commissioner counters that appellants overlook essential factual and procedural issues regarding the validity of each assignment, such as the basis for the assignments and whether administrative remedies were exhausted. While these points are valid for defending against the claims, they do not prevent the amendment itself. Each miner's assignment is considered a separate transaction; however, the Commissioner’s reliance on a now-invalidated doctrine was common across all assignments, indicating she had notice of potential issues. The Commissioner retains the right to contest which assignments relate back and to utilize various defenses. Permitting the relation back aligns with the general presumption favoring amendments to pleadings, as established in Boileau v. Bethlehem Steel Corp.

The District Court did not abuse its discretion in denying the appellants' request to amend their complaint due to "undue delay." While mere passage of time does not justify denying a motion to amend, delay can become "undue" when it burdens the court or prejudices the opposing party, particularly when the movant has previously had opportunities to amend. The appellants argued their delay was due to a lack of notice regarding assignment letters sent by SSA in 1993 and 1995, relying on the affidavit of a vice president who claimed ignorance of the assignments until 2001. However, the District Court determined that the appellants had received adequate notice through the assignment letters, rendering the vice president's lack of personal knowledge irrelevant. The appellants did not provide any other justification for their delay in including the assignments in their original complaint. They claimed that they believed amending their complaint would have been futile until the Supreme Court's decision in Sigmon Coal, but this reasoning was undermined by the timeline of events; specifically, they had previously filed an amended complaint in November 1999 and had almost a year before the court's summary judgment to include the assignments. Their assertion that they lacked confidence in being allowed to amend after September 29, 2000, was similar to an argument rejected in a prior case, where misplaced confidence in their original theory was deemed insufficient.

Denial of leave to amend in Cureton was upheld due to a three-year delay in filing the motion, knowledge of the facts for two-and-a-half years prior, potential judicial inefficiency, and compromised finality. Similarly, in Lorenz, leave to amend was denied after three years, despite no prejudice to defendants, as the plaintiff had ample opportunity to amend based on known facts. This case aligns with Cureton and Lorenz, as appellants waited over three years to challenge assignments and had prior notice before filing their original and first amended complaints, making the District Court's denial of leave not an abuse of discretion.

The District Court granted summary judgment for the Commissioner regarding appellants' claim on the untimeliness of reviewing June 30, 1995 assignments. Appellants acknowledged requesting miners' earning records late but argued that the subsequent request for review was timely since it was made within thirty days of receiving those records. They also contended that the Commissioner violated regulations and procedures, labeling the refusal as arbitrary and capricious; however, these claims were found to lack merit.

Under the Coal Act, an assigned operator must request detailed information within 30 days of receiving notice to subsequently request a review within 30 days of that information. Appellants’ late request for information under subsection (1) precluded them from the additional review period in subsection (2). Furthermore, appellants argued that the Commissioner did not follow her internal procedures, specifically the Supplemental Coal Act Instruction No. 3, which outlines review protocols for late requests. However, the instruction specifies that if a review affirms the assignment, the assignee should be notified of the denial due to untimeliness.

Appellants’ arguments are unsuccessful for two primary reasons. First, the internal guidelines of the Commissioner regarding the Coal Act lack legal authority, meaning the agency is not obligated to adhere to them, nor can coal operators rely on them, as established in Lindsey Coal Mining Co. v. Chater. The cited cases by appellants merely indicate that an agency must justify deviations from established precedent, not that internal guidelines are binding. 

Second, the procedures in question were not in effect during the 1997 denial of appellants' appeals; the relevant procedures at that time indicated that untimely requests would not be reviewed, aligning the Commissioner's decision with the applicable rules. 

Additionally, the Commissioner applies a rebuttable presumption that a miner is considered "employed in the coal industry" under specific conditions related to the employer's participation in a national coal wage agreement. Appellants argue some beneficiaries were employed in the steel industry, claiming the presumption is arbitrary and capricious. However, this claim is both time-barred and without merit. The District Court ruled that appellants did not seek timely administrative review, and their request for tolling the thirty-day period due to misleading statements by the Commissioner is unfounded.

To succeed in tolling, a plaintiff must demonstrate active misleading and reasonable diligence in uncovering facts. Appellants referenced communications from the SSA as misleading, but the SSA clearly stated it reviewed earnings records of miners under UMWA agreements and did not assert it examined the specific industry of employment. Furthermore, the SSA's public guidelines clarify that earnings from signatory operators are assumed to be from coal industry work. As large businesses, appellants had ample access to information about their employees' industries, and a lack of due diligence on their part resulted in their claims being deemed time-barred.

The Commissioner’s use of a rebuttable presumption is deemed neither arbitrary nor capricious, as presumptions must be founded on a rational connection between established facts and inferred ones, supported by case law. The review of the presumption considers its alignment with the Coal Act and rationality, but does not allow for substituting the judgment with a preferred one. Appellants carry a significant burden to prove a lack of connection between the proven and presumed facts. Presumptions are valid when there is a logical link between facts and when one fact makes another sufficiently probable, unless a plausible alternative explanation exists, which would render the presumption irrational.

Appellants challenge the presumption by citing 26 U.S.C. 9706, interpreting it as a requirement for the Commissioner to utilize UMWA Benefit Plans' employment records and refrain from making the presumption. However, the statute primarily mandates that benefit plans and federal agencies assist the Commissioner in identifying beneficiaries, without imposing direct obligations on the Commissioner or prohibiting the use of the rebuttable presumption.

The rebuttable presumption is justified, particularly given the challenges in accessing beneficiaries' personnel files, which can be decades old. This presumption serves as a practical solution to difficulties in obtaining direct proof, aligning with the rationale that earnings recorded from signatory operators can reasonably be inferred as related to work in the coal industry, as recognized by the District Court.

Appellants, who are linked to signatory operators under collective bargaining agreements for UMWA workers in the coal industry, are in a position to address any misunderstandings regarding their business operations. The rebuttable presumption established by the Commissioner is deemed reasonable and avoids arbitrary enforcement. Consequently, the District Court's judgment is affirmed. The excerpt notes that USSM is a subsidiary of USX and references the Coal Act's purpose and history as outlined in relevant case law. The appellants' claims against the Commissioner, including alleged violations of regulations and timeliness defenses, are found to lack merit, as the Commissioner mistakenly sent the earnings records. Additionally, the request for further records by USSM's Human Resources Manager did not specify assignments for both USSM and USX, leading the court to refrain from addressing potential statute of limitations issues. The Commissioner’s refusal to reconsider her denial of four specific review requests is also affirmed based on the District Court's reasoning.