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Nedd v. United Mine Workers of America

argued: February 24, 1977.

CHARLES NEDD, DOMINIC IERO, MAX DYNOSKI AND ANTHONY GANLY, MEMBERS OF THE PENSIONED ANTHRACITE COAL MINERS PROTEST EXECUTIVE COMMITTEE, SUING ON BEHALF OF THEMSELVES AND ALL OTHER MEMBERS OF THE CLASS OF PENSIONED ANTHRACITE COAL MINERS AND WIDOWS OF DECEASED PENSIONED ANTHRACITE COAL MINERS, APPELLANTS AND EMMETT THOMAS, MART F. BRENNAN, AND JOHN JILLSON, TRUSTEES OF THE ANTHRACITE HEALTH AND WELFARE FUND
v.
UNITED MINE WORKERS OF AMERICA, AN UNINCORPORATED TRADE UNION ASSOCIATION; EMMETT THOMAS, NICHOLAS J. HAYDOCK AND JOHN D. JILLSON, TRUSTEES OF THE ANTHRACITE HEALTH AND WELFARE FUND, JOSEPH FAUZIO; FRANK J. GALGAY, (ADDED AS TRUSTEES OF ANTHRACITE HEALTH AND WELFARE FUND, PER D.C. ORDER OF 7/3/74)



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA (D.C. Civil Action No. 8796).

Forman, Gibbons and Rosenn, Circuit Judges.

Author: Gibbons

Opinion OF THE COURT

GIBBONS, Circuit Judge.

This appeal concerns the right of pensioned coal miners to obtain relief for the failure of their pension fund trustees and their union to enforce anthracite coal mine operators' contractual obligations to pay a tonnage royalty to the Anthracite Health and Welfare Fund ("The Fund"). It has been litigated in the federal courts for fourteen years. There has been other, related litigation, seeking the same object: payment of earned sums for the benefit of the Fund's lawful cestuis.*fn1

The Fund was created by the terms of the Anthracite Wage Agreement of 1946, when anthracite production was at its modern peak. Its purpose was to provide miners with retirement pensions. A sharp and prolonged decline in the anthracite mining industry, the result of competition from other energy sources, resulted in reduced income to the fund. In addition to the decline in production substantial delinquencies also accrued. By 1962, 120 mine operators owed almost $12 million to the Fund.

The gravaman of the pensioners' complaint, whether predicated on federal or on state law, is that the Trustees and the Union favored the interests of working miners over those of retirees and therefore failed to take prudent action to collect delinquencies from mine operators, who provided job opportunities. The district court rejected the contention that any harm resulted to the Fund from its relationship with the Union, and held that neither the Union nor the Trustees are liable to the Fund on account of the delinquencies.

On March 11, 1963 the pensioners filed a diversity action against the United Mine Workers, which was dismissed for lack of complete diversity.*fn2 Since under § 301(b) of the National Labor Relations Act, 29 U.S.C. § 185(b), the Union is suable as an entity, the pensioners filed a new complaint alleging a breach of contract. On an appeal certified to this court pursuant to 28 U.S.C. § 1292(b) we held that nothing in the labor agreement between the Union and the coal operators obligated the Union to enforce the operators' promise to pay royalties to the Fund. Thus we concluded that the complaint, as then drafted, did not state a claim upon which relief could be granted under § 301(a) of the National Labor Relations Act.*fn3 Although we did not agree that the complaint stated a cause of action for breach of a labor agreement, we recognized that the allegations of failure to enforce the operators' promise might state a claim for a breach of the Union's equitable duty as a fiduciary to act in the interest of the pensioners and its employed members without unreasonable discrimination. 400 F.2d at 105. We remanded with instructions to allow plaintiffs a reasonable time to amend their complaint to state such a claim, and to join the Fund Trustees as necessary parties. We recognized that the district court would have jurisdiction over such a claim under 28 U.S.C. § 1337.*fn4 Nedd v. United Mine Workers, supra, 400 F.2d at 106. On remand, an amended complaint joined the Fund Trustees as defendants, and alleged jurisdiction under 28 U.S.C. § 1337 and under 29 U.S.C. §§ 157, 158(b), 159(a), 185, 186, 301 et seq. and 501. The amended complaint alleged violations of federal law, but also included a pendent state law claim for breach of fiduciary duty. Plaintiffs demanded a jury trial. By an order dated June 30, 1970 the district court struck this demand. After protracted discovery, a non jury trial was held in June of 1974. The district court's opinion was filed on April 13, 1976.*fn5 It concludes:

the following are this Court's holdings in this case:

1. This Court does not have subject-matter jurisdiction of plaintiffs' claims;

2. However, assuming that there is jurisdiction,

A. the statute of limitations was tolled by the trustees' actions and does not bar this suit;

B. the trustees are not liable either for violation of Section 302 of the Labor Management Relations Act of 1947, 29 U.S.C. § 186, or for breach of the common law duty of undivided loyalty of a trustee;

C. although past trustees were guilty of a breach of a trustee's duty to enforce claims by virtue of their negligent handling of the problem of operator delinquencies, none of the trustees who are defendants in this case may be held liable for that breach;

D. the Union is not liable under any of the theories advanced by plaintiffs; and

E. if the Union is liable, it is entitled to have deducted from any recovery against it an amount equal to the total sum it has loaned the Fund since its inception.

In accordance with the above, judgment will be entered for the defendants.

Joint Appendix at 152a.

While at first blush it would seem that the district court should have stopped after concluding it lacked subject matter jurisdiction, the actual holding appears to be a rejection of the federal claims as a matter of law after a full trial, and a rejection of the pendent state law claim on the merits as well. On appeal the pensioner plaintiffs advance several contentions. They contend that the court erred in rejecting all federal claims; that their federal claims were sufficiently substantial to support pendent jurisdiction over their state law claims; that the court erred in striking their demand for a jury trial; and that it erred in entering judgment for the defendants. The defendant Union and the defendant Fund Trustees urge that the federal claims are so insubstantial that the district court was correct in holding that it lacked subject matter jurisdiction, but that its findings that there were no breaches of fiduciary duties are not clearly erroneous and should be affirmed if there was jurisdiction.

I. FEDERAL QUESTION JURISDICTION

The amended complaint alleges three federal law theories: (1) failure to enforce a collective bargaining contract, a federal common law action implied from the jurisdictional grant over such claims in § 301 of the Labor Management Relations Act of 1947, 29 U.S.C. § 185(a); (2) breach of the federal common law duty of fair representation; and (3) breach of fiduciary duties implied from the prohibitions of § 302 of the Labor Management Relations Act of 1947, 29 U.S.C. § 186. The district court, after an extended analysis, concluded that none of these theories would support federal jurisdiction and that since there was no federal question jurisdiction, it could not exercise pendent jurisdiction.*fn6 We conclude that in the circumstances of this case federal law causes of action of sufficient substance to support federal question jurisdiction were pleaded. Moreover, we conclude that the court could properly, as ultimately it did, try the pendent state law cause of action.

A. The § 301 Contract Claim

The § 301 claim against the Union must be considered separately from that against the Trustees. Although our prior decision in Nedd v. United Mine Workers, supra discussed a § 301 claim against the Union, that opinion did not reach the issues presently before us.*fn7

The § 301 claim against the Trustees is based on a provision in the 1952 interim Agreement between the Union and the operators:

The Trustees of the Fund shall use due diligence and all reasonable means to collect and prevent delinquent obligations to the Fund.

Plaintiffs' exhibits, Vol. A, p. 67. This provision was incorporated by reference in all subsequent Anthracite Wage Agreements. The district court points out that the trustees were not parties to the contract, and therefore undertook no duties under it. It urges, moreover, that the clause is merely a statement of the trustees' fiduciary duties, and does not render those duties contractual in nature. Granted these premises, the conclusion which the district court drew, that it lacked § 301 jurisdiction, does not follow.

The above quoted clause is a contractual recognition that the trustees have standing to sue to enforce the royalty provisions.*fn8 It is settled law that a suit by non-party trustees to enforce those provisions may be entertained in federal district court by virtue of § 301.*fn9 It is also settled law that employees, although not formally parties to a collective bargaining agreement, can bring a § 301 suit to enforce its terms. Smith v. Evening News Ass'n., 371 U.S. 195, 9 L. Ed. 2d 246, 83 S. Ct. 267 (1962). Where the trustee may sue and wrongfully fails to do so, the beneficiary may sue the trustee as well as the party or parties the trustee failed to sue.*fn10 Thus, the complaint states a non-frivolous cause of action under 29 U.S.C. § 301, which provides for suits in federal court for violation of such contracts.

In Chemical Workers v. Pittsburgh Glass, 404 U.S. 157, 181 n.20, 30 L. Ed. 2d 341, 92 S. Ct. 383 (1971), while holding that an employer had no statutory duty to bargain collectively with a union representing its employees over benefits for retirees, the Court observed:

this does not mean that when a union bargains for retirees - which nothing in this opinion precludes if the employer agrees - the retirees are without protection. Under established contract principles, vested retirement rights may not be altered without the pensioner's consent. See generally Note, 70 Col. L. Rev. 909, 916-20 (1970). The retiree, moreover, would have a federal remedy under § 301 of the Labor Management Relations Act for breach of contract if his benefits were unilaterally changed. See Smith v. Evening News Assn., 371 U.S. 195, 200-201, 9 L. Ed. 2d 246, 83 S. Ct. 267 (1962); Lewis v. Benedict Coal Corp., 361 U.S. 459, 470, 4 L. Ed. 2d 442, 80 S. Ct. 489 (1960).

The federal common law of collective bargaining agreements, which grows out of 29 U.S.C. § 185(a), would permit pension trust fund beneficiaries to sue, derivatively, to enforce the mine operators' payment obligations when the trustees did not. It is but a small step further to suggest that the same federal common law of collective bargaining agreements permits a suit against the Fund Trustees, and the Union which allegedly acted in concert with them for the destruction of the value of the bargained-for and vested contract rights.*fn11

The district court held that the entire matter was referable to the state law of trusts. We think, however, that the same policy considerations which favored recognizing a uniform federal law of collective bargaining agreements apply with equal force to support the application of federal common law to the instant claim against § 302 pension fund trustees.*fn12 The Anthracite Wage Agreement was a national contract. The royalty obligations, which are the sole source of Fund corpus, are entirely a creature of the federal law of labor contracts. It would advance no sound public policy to hold that liability for the destruction of those obligations by purposeful or careless nonenforcement should vary from state to state, depending upon the vagaries of the state law of trusts. We therefore disagree with the district court's conclusion that jurisdiction under § 301 was lacking.*fn13

Since the district court did not consider § 301 as we have done, it had no occasion to decide whether a federal court would apply Pennsylvania legal precepts to the § 301 claim against the trustees or fashion its own rule. We will address that question later in our discussion of the merits of the claim. For our immediate purpose we merely note that judged by the standards for determining whether a federal jurisdictional allegation supports pendent jurisdiction, the § 301 claim against the trustees was sufficient.*fn14 The contention that there is a § 301 federal common law cause of action for the destruction of a collectively bargained-for contract obligation is not foreclosed by prior case law and is not frivolous. Cf. Crawford v. Cianciulli, 357 F. Supp. 357, 367 (E.D. Pa. 1973).

B. Duty of Fair Representation

The district court has jurisdiction under §§ 1331 and 1337 over a claimed breach of the duty of fair representation.*fn15 In Nedd v. United Mine Workers of America, supra, 400 F.2d at 105, this Court noted that the conduct attributed to the union

may well constitute a breach of the union's equitable duty as a fiduciary representative of employees to act in their interest, fairly and in good faith, and without discrimination throughout the area in which it has been impowered to function.

Since we remanded for the purpose of considering the claim that the Union may have breached its duty of fair representation, it would be difficult to say that such a federal claim was so patently groundless that it would not support pendent jurisdiction, ...


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