Palermo met with Mr. Brennan and Mr. Shea and were given a list of the companies which had paid royalties to the Fund in 1961, together with the amounts paid, but were not provided with a list of the delinquent operators. By letter dated October 11, 1962, to Brennan, with copies to the other trustees, Shea, John L. Lewis, President Emeritus, W. A. Boyle, Vice President, and John Owens, Secretary-Treasurer, of the United Mine Workers, Palermo and Bruno, as counsel for the Committee, requested that they be provided with information regarding the identity of the delinquent coal operators and the amount of delinquencies. Subsequent telephone inquiries of Brennan, Kennedy and Lewis were unsuccessful. By letter dated November 1, 1962, Bruno and Palermo again wrote to the trustees, with copies to Messrs. Shea, Lewis, Boyle and Owens, requesting the items sought in the letter of October 11 and advising that non-compliance would result in legal action. On November 9, 1962, Shea responded by letter to Palermo and agreed to make available for inspection and copying the annual audits of the Fund but stated that the other requests could not be granted pending a meeting of the trustees after which Palermo would be notified of their decision. While the employment of the two checkers continued through 1962, no audits were conducted and $2,154 was paid for legal services. No legal actions were commenced by the trustees in 1962 although there were one hundred twenty-five (125) delinquent operators (82 non-operating and 43 of 49 operating companies) and outstanding delinquencies of close to $12,000,000. In the latter part of 1962 and early 1963, Bruno and Palermo reviewed the production records of anthracite operators on file in the Department of Mines and Mineral Industries in Harrisburg, the Pennsylvania Department of Internal Affairs, the Corporation Bureau of the Pennsylvania Department of State, as well as State Court records and reports filed by the Union and the Fund with the United States Department of Labor and, satisfied that large amounts of royalty delinquencies existed, filed a complaint against the Union in the United States District Court for the Eastern District of Pennsylvania on March 11, 1963, in which it was averred that in excess of ten million dollars was owed the Fund and that the Union had failed to carry out the terms of the Anthracite Wage Agreement in that it had failed to collect all the royalty payments due. By letter dated July 30, 1963, Bruno and Palermo again wrote to the trustees, with copies to counsel for the Fund and counsel for the Union, in which they formally demanded that the trustees ". . . institute suits or otherwise recover on behalf of the beneficiaries the proper amount of royalty funds which are now delinquent" and stated that they had already brought one suit against the Union concerning this matter and may bring additional actions.
The Eastern District action was based on diversity of citizenship jurisdiction and on December 11, 1963, the District Court granted the Union's motion to dismiss for lack of diversity and an appeal was filed in the United States Court of Appeals for the Third Circuit. In the latter part of 1963 and early in 1964 results of the audits of certain coal companies, viz., Reading Anthracite Company, Trevorton Coal Company, Grant Anthracite Co., and Gap Anthracite Co., attempted by Lybrand, Ross Bros. & Montgomery were made known to the Trustees and revealed that these companies were not properly reporting or paying on their current production. At the end of 1963 there were approximately eight-five (85) non-operating companies which owed delinquencies to the Fund of approximately $6,700,000.00 and forty-three (43) operating companies, of which thirty-five (35) were delinquent in an amount estimated at $5,033,093.74. In 1963, the employment of the two checkers continued and $24,319.97 was paid for audits and $22,950 for legal fees. At a meeting of the trustees held on April 8, 1964, it was reported that Honeybrook Mines, Inc., was not cooperating with the Fund's auditors
and the trustees decided to commence a Federal action against Honeybrook and against all other delinquent operators. On April 20, 1964, a resolution was adopted by the trustees incorporating new rules and regulations with respect to the operation of the Fund in order to bring it into conformity with the Labor-Management Relations Act of 1947. On May 18, 1964, the complaint against Honeybrook seeking delinquencies going back to 1959 was filed in this Court; this being the first litigation commenced by the trustees against an operator since August 29, 1958. On May 29, 1964, Bruno and Palermo again wrote to the trustees and their counsel inquiring, inter alia, (a) whether the trustees would bring suit against the delinquent operators; (b) whether the trustees would join the pensioners and/or active workers in a lawsuit against either or both the Union and delinquent coal operators; and (c) whether the trustees would furnish the pensioners' committee with a list of delinquent operators and the amounts owed by each. On September 1, 1964, the Welfare provisions of the Anthracite Wage Agreement were amended to specifically vest title in the trustees to monies owed the Fund and to otherwise conform to the provisions of the Labor-Management Relations Act of 1947. Brennan, however, was retained and designated "neutral" trustee. On December 9, 1964, the trustees filed a second action for delinquent royalties against Northwest Mining Company. In 1964, the Fund expended $10,684.15 for audits, $28,816.89 for legal services, and $670.00 for legal investigations.
On January 21, 1965, Bruno and Palermo commenced another action against the United Mine Workers Union in the United States District Court for the Middle District of Pennsylvania, asserting the same claim which had previously been asserted in the Eastern District and joining the trustees as involuntary plaintiffs. On March 30, 1965, this Court rendered its decision dismissing defense challenges in Honeybrook and sustaining jurisdiction under Section 301 of the Act. Commencing May 21, 1965, the trustees commenced eleven additional actions against delinquent operators during 1965, eighteen actions in 1966, four actions in 1967, and two additional actions in 1968. Among the 37 delinquent coal operators against whom actions were commenced by the trustees from 1964 through 1968, inclusive, 11 had been continually delinquent since 1954, 8 since 1959, and 11 became delinquent during the period 1960 through 1963, inclusive.
Beginning on September 2, 1965, members of the Committee, by their counsel, were permitted to intervene in 24 District Court actions which the trustees had instituted against delinquent operators. In these actions the trustees received cash payments of $1,370,913.76 in delinquent royalties and $6,031,524.66
in the form of settlements, agreements, stipulations or judgments entered. In all the actions commenced since 1964, the trustees have recovered cash, as of July, 1970, in the amount of $1,535,160.22 and settlements and judgments totaling $7,335,257.18.
In my prior decision, I concluded that an award of counsel fees was justified only in exceptional cases where the applicant had created a common fund for the benefit of others. I reasoned further that even if the lawsuits against the delinquent operators would not have been started had not the pensioned miners group brought their actions against the Union in the Eastern District and Middle District Federal Courts, this would still fall far short of the findings necessary to support a conclusion that the amounts recovered by the trustees were created by the efforts of Committee counsel. It was my judgment that the Fund realized herein was the result of the efforts of the trustees and their counsel who filed, pursued and, at least in the cases where funds were produced, successfully recovered the damages sought. The Court of Appeals, in a two to one decision disagreed. The majority held that this was a far too narrow view of the applicable rule. The issue, according to the majority, was whether the activities of the Committee and its counsel "helped to create a fund for the class for which it acted." The dissenting member disagreed with this definition of the issue and contended that any opinion that the Committee is "entitled to counsel fees simply for having 'helped' to create the recoveries for the Fund" would be a departure from existing case law and a wide expansion of the fund cases doctrine.
While describing the issue as aforesaid, viz., whether such activities "helped" to create a fund,
the majority opinion stated further:
"We hold that committee activities forced the Fund trustees to commence the delinquency lawsuits, that these lawsuits produced the Fund and that the Committee's counsel fees and expenses incurred in bringing about the delinquency lawsuits are properly payable out of the Fund." (emphasis supplied)