Free Reply to Response to Motion - District Court of Colorado - Colorado

Case 1:01-cv-02199-MSK-MEH

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Filed 08/22/2005

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IN THE UNITED STATES DISTRICT COURT FOR THE D ISTRICT O F COLORADO Civil Action No. 01-cv-02199-MSK-OES MICHAEL E. CLAWSON and JARED L. DILLON, Plaintiffs, vs. MOUNTAIN COAL COMPANY, L.L.C., ARCH WESTERN RESOURCES, L.L.C., and ARCH COAL, INC. Defendants.

REPLY IN SUPPORT OF DEFENDANTS' MOTION FOR PARTIAL RECONSIDERATION OF THE COURT'S ORDER REGARDING COLLATERAL SOURCES

Defendants hereby submit their reply in support of their Motion for Partial Reconsideration of the Court's Order Regarding Collateral Sources, filed July 18, 2005 (Docket No. 355) to the extent the Order excluded presentation of evidence of short-term disability ("STD") benefits to the jury at the trial of this matter. I. The Court's Order of May 3, 2005, Providing that the Jury Will Give an Advisory Verdict on Back Pay, Is a Proper Basis for Defendants' Motion The basis for Defendants' Motion is essentially the same basis set forth by Plaintiffs in their Motion for Clarification or Partial Reconsideration of the May 3, 2005 Order on Docket No. 293 Regarding Collateral Sources ("Plaintiffs' Motion"), i.e., that the Court's Order stating that the jury will provide an advisory verdict on back pay was not previously anticipated by the

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parties and gives rise to additional factual arguments and concerns on certain of the purported collateral source issues. II. The Undisputed Evidence Shows that STD Benefits Are Not Paid by a Collateral Source Despite the fact that they have conducted full discovery in this matter, Plaintiffs profess a lack of knowledge and continue to engage in sheer speculation regarding the source and payment of STD benefits, in disregard of the undisputed evidence previously provided to Plaintiffs and/or filed with this Court. For example, Plaintiffs speculate that STD benefits might be paid out of a separate fund, Response at 3, yet present no evidence of any such fund (since one does not exist). In fact, the STD plan itself makes clear that the benefits come directly from the company. See Summary Plan Description at 1, Exhibit A to Defendants' Motion. A. The Undisputed Evidence Shows that Mountain Coal Bore the Cost of STD Payments

Although Plaintiffs have pled in the Sixth Amended Complaint and consistently argued that the three defendants are an integrated enterprise, for purposes of their response to this motion, Plaintiffs posit that payment may have come from one of the parent companies and, as a result, might be from a collateral source. Response at 3. Plaintiffs then claim that Defendants have not provided sufficient information regarding how STD benefits work and that an evidentiary hearing with subpoenas to the relevant company officials will be essential after any verdict. Id. In fact, as set forth in more detail below, Defendants, through submission of company documents, affidavits, and proposed stipulations, have provided full information to Plaintiffs regarding how STD benefits are paid and by whom ­ including, most significantly, that the cost of such benefits is ultimately borne by Mountain Coal. Thus, such payments are not

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from a collateral source, even should Mountain Coal be found solely liable. Plaintiffs have no evidence to the contrary. In support of the Motion for Summary Judgment by Defendants Arch Western Resources, L.L.C., and Arch Coal, Inc. (Integrated Enterprise), filed April 14, 2003, Defendants submitted the affidavit of John Lorson, Controller for Arch Coal, Inc. ("Arch Coal"). See Exhibit A, attached hereto. In that Affidavit, Mr. Lorson explained that Arch Coal handles the payroll for all of its subsidiaries, including Mountain Coal. Exhibit A at ¶ 2. Cf. Admission No. 21, Defendants' Admissions to Sixth Amended Complaint, Exhibit A to Stipulation Resolving Plaintiffs' Motion to Deem Admissions in Answer and Responses to Requests for Admissions as Incontrovertible, filed August 4, 2005 (Docket No. 360) ("Stipulation Re: Admissions") (Arch Coal processes payroll taxes for Mountain Coal employees). However, the expense of the payroll is charged directly to Mountain Coal; Arch Coal does not assume any of the expense. Exhibit A at ¶ 4. Mr. Lorson further explained that STD benefits are handled similarly, with Mountain Coal being charged directly for the expense of providing such benefits to its employees. Id. at ¶ 5. Plaintiffs never deposed Mr. Lorson or any other officer of Arch Coal regarding these matters, nor do Plaintiffs have any facts or evidence to dispute or contradict Mr. Lorson's affidavit. In order to present the information regarding the workings and financings of various plans and policies relevant to the integrated enterprise determination at trial, Defendants took the undisputed facts previously filed in affidavit form with the original summary judgment motion on the issue, expanded upon or further explained such facts, and, on July 8, 2005, tendered them to Plaintiffs in the form of a proposed stipulation. See Exhibit B attached hereto. Despite having

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no facts to the contrary, Plaintiffs have refused to agree to the stipulation, or even provide comments on it. Notwithstanding the Court's admonition, at the June 15 Final Trial Preparation Conference, to do so. Such proposed stipulation reflects the facts noted above from Mr. Lorson's affidavit regarding how payroll is processed and who bears the expense of the payroll. See Proposed Stipulation at ¶¶ 9-11. The proposed stipulation also explains that amounts paid were reported to the federal and state taxing authorities under Arch Western Resources, L.L.C.'s ("AWR") name, using AWR's federal employer identification number and that Arch Coal performed such reporting in connection with the payroll function. Id. at 12. Such explains why the W-2 forms reflect AWR's name as the "employer." Cf. Admission No. 22, Exhibit A to Stipulation Re: Admissions (for income earned since January 1999, AWR has been listed as the employer on Mountain Coal employees' W-2 forms). As also noted in Mr. Lorson's affidavit, the proposed stipulation explains that Mountain Coal bore the cost of STD payments, and further expands on how the STD payments are made. Id. at ¶¶ 20-21. B. STD Benefits Are Not "Earned" Compensation

Plaintiffs again argue that Plaintiffs "earned" the STD benefits as part of their compensation and, thus, they are collateral sources. Response at 3-4. Plaintiffs' contention that STD benefits were somehow "earned" by Plaintiffs is contradicted by the fact that, under the terms of the SPD, employees are covered starting their first day of employment. SPD at 1, Exhibit A to Motion. Thus, in contrast to, for example, pension or vacation benefits earned and vested over time, Plaintiffs did not "earn" STD through their work at Mountain Coal. For this reason, Plaintiffs' attempted comparison of their STD payments to the vacation allowances in

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EEOC v. Sandia Corp., 639 F.2d 600, 626 (10th Cir. 1980), Response at 4, falls flat. Moreover, Plaintiffs' continued reliance on Van Waters & Rogers, Inc. v. Keelan, 840 P.2d 1070, 1081 (Colo. 1992), is misplaced. As a threshold matter, that case relies on and interprets state statutory law, not federal common law addressing this issue, and was a personal injury action that did not involve an employer and employee. Finally, in that case, the disability payments received by the plaintiff were from a source wholly unrelated to the defendant tortfeasor and the court found that the plaintiff there had negotiated for and received the disability insurance in exchange for a lower salary. C. Plaintiffs Ignore that the Forms W-2 and Payroll Records Show Payment of STD Like Wages

Finally, in their argument concerning issues of reportable income under the tax code, Response at 4-5, Plaintiffs completely miss the point of the evidence of the W-2 forms from Defendants and the payroll records. The fact that earned wages and STD payments are reported by Defendants as one total, under the wages heading, on the same W-2 clearly demonstrates that the payments all come directly from Defendants and are not from a collateral source. The payroll records clearly demonstrate that the STD payments are paid in the same way as wages earned through hours worked, with the only difference being the category of pay in the record. III. Plaintiffs Offer No Solution to the Noted Difficulties in Segregating Evidence of STD Benefits In order to illustrate their point that STD benefits are not from a collateral source, Defendants noted in their Motion that such payments are inextricably intertwined with other wage payments from Defendants and discussed the ways in which Plaintiffs' expert, Ron Brennan, had erroneously excluded certain wage payments assuming that such were made as part

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of STD. Plaintiffs dismiss such argument yet fail to offer any explanation as to how amounts paid through STD should be excluded from presentation to the jury or any proposed calculation. Instead, Plaintiffs assert that "the risk associated with the alleged difficulty in segregating STD benefits is on the plaintiffs." Response at 6. In fact, the burden of segregation falls on both parties since, if the Court orders that evidence of STD benefits be excluded from presentation to the jury, both parties will be restricted in what evidence they can present to the jury with respect to damages and payments made by Defendants, a number of exhibits will have to be redacted (such as those attached to the motion), and expert calculations revised. IV. If STD Benefits Are Not from a Collateral Source, There Is No Danger of Unfair Prejudice Plaintiffs' final argument against admission of evidence of STD payments is entirely without merit. In circular fashion, Plaintiffs argue that, even if the Court determines that STD benefits are not from a collateral source, evidence of STD benefits should be excluded because of the danger of unfair prejudice to Plaintiffs from evidence of payments from collateral sources. Response at 6-8. Plaintiffs rely entirely on case law holding that the admission of collateral source evidence may be reversible error. If STD benefits are not from a collateral source, then such case law and the argument that the jury will misuse such information is inapplicable. Excluding evidence of STD payments, which are wage continuation and were paid prior to the termination of either Plaintiff's employment, would be no different than excluding evidence of the wages they earned while they actually were at work. Clearly, evidence of earned wages during the back pay period is relevant to a determination of damages, even an advisory determination. There is no reason that evidence of such wage payments, which notably were made prior to termination, should be excluded. The same is true with respect to STD payments

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since they are not from a collateral source. Plaintiffs contend that the probative value of such evidence is "miniscule" as compared with the potential undue prejudice and it should be excluded under Rule 403. Response at 8. 1 However, Plaintiffs fail to acknowledge that, to the extent the payments are not from a collateral source, they are no different than wages paid by Defendants and are properly considered in a determination of back pay. V. Conclusion Thus, for the reasons stated in Defendants' Motion and above, Defendants respectfully request that this Court enter an order finding that STD benefits are not from a collateral source and allowing evidence relating to the STD policy and the amounts received by Plaintiffs from STD to be presented to the jury at the trial of this matter. Dated: August 22, 2005. Respectfully submitted, s/Monique A. Tuttle Jeffrey T. Johnson Monique A. Tuttle HOLLAND & HART LLP 555 Seventeenth Street, Ste. 3200 Denver, Colorado 80201 Telephone: (303) 295-8000 Facsimile: (303) 295-8261 E- mail: [email protected] [email protected] ATTORNEYS FOR DEFENDANTS
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Plaintiffs also state that "[e]ven if STD is found to not be a collateral source, the determination will be based on a technical legal rule, which may not be explained to the jury ­ See F.R.E. 103(c) ­ and one the jury is unlikely to understand or appreciate." Response at 7. Defendants fail to see how F.R.E. 103(c) has any bearing on the admission of the evidence since the rule addresses exclusion of evidence. Moreover, it would seem to be more confusing for the jury if various wage-related documents are redacted, without explanation, because any STD paymentrelated information has been excluded.

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CERTIFICATE OF SERVICE (CM/ECF)

I hereby certify that on August 22, 2005, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following email addresses: [email protected] [email protected] I am not aware of any non CM/ECF participants in this matter requiring service by other means.

s/Monique A. Tuttle Monique A. Tuttle Attorneys for Defendants HOLLAND & HART LLP 555 Seventeenth Street, Ste. 3200 Post Office Box 8749 Denver, Colorado 80201 Telephone: (303) 295-8000 Facsimile: (303) 295-8261 E- mail: [email protected]

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