D.C. Circuit Notes Split Re Definition of "Successors in Interest" Under Internal Revenue Service Regulations
Per Holland v. Williams Mountain Coal Co., --- F.3d ----, 2007 WL 2176106 (D.C.Cir. Jul 31, 2007) (NO. 06-7041):
We begin with the defendants' claim that the trustees "pursued an action ... on a legal theory at odds with prevailing law." Appellees' Br. 13. The district court did not rely on this argument-and correctly so. When this lawsuit was initiated in 1996, there was no "prevailing law" regarding the meaning of "successor in interest" as it appears in the Coal Act. At that time, neither this circuit nor any circuit had ruled on the question.
It is true, as the defendants note, that a West Virginia district court, reviewing a bankruptcy court proceeding, had ruled on the issue. See UMWA 1992 Benefit Plan v. Leckie Smokeless Coal Co., 201 B.R. 163 (S.D.W.Va.1996). The West Virginia court, applying a definition of "successors in interest" found in Internal Revenue Service regulations, held that "purchasers of assets in bankruptcy cannot be 'successors in interest' because ... they do not inherit the tax attributes of their predecessors." Id. at 171. That ruling was on appeal when the trustees filed their complaint, and was later affirmed on grounds unrelated to the definition of "successor in interest." See In re Leckie Smokeless Coal Co., 99 F.3d 573 (4th Cir.1996). FN4
FN4. The Fourth Circuit stated: "The courts below determined that the purchasers of Appellees' assets would not be Appellees' successors in interest within the meaning of the [Coal] Act. We need not and do not now resolve the matter, having conclued that, even if [the purchasers were] successor[s] in interest, the Bankruptcy Court may extinguish Coal Act successor liability." Leckie Smokeless Coal Co., 99 F.3d at 585.
It is also true that, after our own district court issued its judgment, and while the case was pending on appeal to this court, the United States Court of Appeals for the Sixth Circuit reached a decision in accord with that of the West Virginia district court. See Holland v. New Era Coal Co., 179 F.3d 397, 403 (6th Cir.1999). On appeal, we cited the Sixth Circuit's conclusion in reaching our own. See Williams Mountain, 256 F.3d at 822.
But these cases cannot alone support a charge that the trustees acted in bad faith. Decisions of the Southern District of West Virginia and of the Sixth Circuit do not bind this court. Such decisions may, of course, influence our own decisions because of their persuasive force--as indeed happened here--but the fact that another jurisdiction has rejected a legal theory does not render it so devoid of merit as to make reliance on it an exercise in bad faith. It is hardly unusual for courts of appeals, including this court of appeals, to disagree with their sister circuits. To the contrary, such circuit splits are an important font of the Supreme Court's workload.