ON APPEAL FROM UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA (Civ. No. 77-269, W.D. Pa.)
Before Seitz, Chief Judge, and Adams and Rosenn, Circuit Judges.
Defendant Long's Hauling Company (Long) appeals from a preliminary injunction granted to the trustees of the United Mine Workers of America Health and Retirement Funds. See Huge v. Long's Hauling Co., 442 F. Supp. 1041 (W.D.Pa.1977). The trustees brought this suit under section 301 of the Labor-Management Relations Act (LMRA), 29 U.S.C. § 185, to enforce an alleged contractual obligation to make payments to the Health and Retirement Funds. Counterclaims filed by Long remain pending in the district court.
For several years prior to 1975, Long, an independent hauler of coal, had collective bargaining agreements with the United Mine Workers of America (UMW). The parties usually patterned their agreements on the national contracts between the UMW and the Bituminous Coal Operators Association (BCOA). Traditionally, however, the UMW's agreement with Long allowed Long to make payments to private health and pension funds rather than the national funds maintained by the UMW.
In 1974, Long and the UMW entered into a contract that was to extend into 1976. As under prior agreements, Long was to pay into its private funds. The contract also called for 60-days notice prior to cancellation by either party. In the same year that Long signed this agreement, the UMW and the BCOA consummated the National Bituminous Coal Wage Agreement of 1974. Article II of the national agreement dealt with contracts for transportation:
The transportation of coal as defined in paragraph (a) may be contracted out only to a contractor employing members of the UMWA under this Agreement . . . .
In early 1975 UMW organizers began to stop Long's trucks as they attempted to enter mines operating under the national agreement. The drivers were told that Long had no agreement with the UMW. Upon contacting union officials, Long learned that the UMW would continue to stop Long's trucks until Long signed an agreement identical in all respects to the national contract. Succumbing to this pressure, Long signed such an agreement on February 4, 1975.
The new contract did not exempt Long from making payments to the national funds. Nevertheless, Long continued to pay into its private funds, and made no payments into the UMW's funds. On March 14, 1977, the trustees of the UMW funds filed this suit to collect back payments and to compel future payments. Long filed counterclaims for damages against the trustees for alleged violations of the labor and antitrust laws. These counterclaims remain pending in the district court.
On appeal Long argues that the district court erred in entering a preliminary injunction in favor of the trustees. Long first asserts that Article II of the national agreement violates the Sherman Act and renders the entire contract unenforceable. Second, Long disclaims liability to the trustees because the UMW's tactics and Article II itself allegedly violate section 8 of the National Labor Relations Act (NLRA), 29 U.S.C. § 158.
Long would interpose the UMW's alleged violation of the Sherman Act as a defense against its promise to pay into the UMW funds. At common law a promisor could assert against a third-party beneficiary any defense he could assert against the original promisee. See Restatement of the Law of Contracts § 140 (1932). Nevertheless, courts have been extremely reluctant to recognize any defense to an employer's promise to pay into a pension fund. The trustees of the fund, although technically third-party beneficiaries, often can avoid contractual defenses that could be asserted against the union itself. See Lewis v. Benedict Coal Corp., 361 U.S. 459, 80 S. Ct. 489, 4 L. Ed. 2d 442 (1960).
Drawing on Benedict Coal, courts have denied employers a variety of defenses whenever the royalties sought by the trustees were payable for coal already mined. See, e. g., Pennington v. United Mine Workers of America, 325 F.2d 804 (6th Cir. 1963), Rev'd as to other portions, 381 U.S. 657, 85 S. Ct. 1585, 14 L. Ed. 2d 626 (1965); Boyle v. North Atlantic Coal Corp., 331 F. Supp. 1107 (W.D.Pa.1971). As this court has noted, such payments "have the characteristics of compensation to the employees for services they have already rendered." Lewis v. Seanor Coal Co., 382 F.2d 437, 441 (3d Cir. 1967), Cert. denied, 390 U.S. 947, 88 S. Ct. 1035, 19 L. Ed. 2d 1137 (1968). In this case, however, the trustees seek to enforce Long's promise prospectively as well as retrospectively. Courts have not explored the boundaries of Benedict Coal Where the trustees wish to compel future payment of royalties as yet unearned. Nor do the facts before us raise this issue, since Long's antitrust defense is insufficient under established precedent.
In declining to consider Long's antitrust defense to the trustees' request for a preliminary injunction the district court relied exclusively on this court's opinion in Lewis v. Seanor Coal Co., supra. Seanor "s facts are strikingly similar to those presented by the instant case. Additionally, its analysis of the antitrust issue would seem to dispose of Long's appeal. Nevertheless, because some of Seanor "s broad statements may be dicta, Long's arguments merit a fresh analysis of the rules and policies at stake.
The Supreme Court has not favored antitrust-based defenses to otherwise valid contracts. In Kelly v. Kosuga, 358 U.S. 516, 79 S. Ct. 429, 3 L. Ed. 2d 475 (1959), the Court laid out the policies underlying close circumscription of such defenses. Most importantly, the Sherman Act already provides for a powerful private remedy: an action for three times the damages caused by a violation. Because of this express remedy, "the federal courts should not be quick to create a policy of nonenforcement of contracts beyond that which is clearly the requirement of the Sherman Act." Id. at 519, 79 S. Ct. at 431.
Furthermore, by allowing one party to avoid its obligations under a contract, the courts may create more inequities than they remedy. In the words of Mr. Justice Holmes, courts must be wary to prevent people "from getting other people's property for nothing when they purport to be buying it." Continental Wall Paper Co. v. Louis Voight & Sons Co., 212 U.S. 227, 29 S. Ct. 280, 53 L. Ed. 486 (1909) (dissenting opinion), Quoted in Kelly v. Kosuga, supra, at 520-21, 79 S. Ct. at 432.
Here, these two policies militate against allowing Long an antitrust defense at this point. Most significantly, the district court expressly preserved Long's right to press its counterclaim and to seek treble damages against the offending parties, including the UMW. See 442 F. Supp. at 1044. Given the posture of this action, an antitrust defense would be both misdirected and statutorily unjustifiable in light of Kosuga "s first admonition. Additionally, allowing such a defense against the trustees may create unforeseeable inequities. Although Long has paid into private funds, health and pension plans are not fungible. It is impossible to gauge the effect of substituting one plan for another. Were such a defense granted here, this court would be hard-pressed to deny it to any employer who had signed an agreement containing Article II, especially if that employer offered some semblance of an alternative plan. Such a result would be totally inconsistent with Kosuga.
Long asserts that Kosuga, while refusing to grant an antitrust defense on its facts, approved such a defense whenever a judgment in favor of liability would enforce "the precise conduct made unlawful by the (Sherman) Act . . . ." Kelly v. Kosuga, supra, at 520, 79 S. Ct. at 432. But by removing this statement from its context Long disserves the need for restraint stressed by the Supreme Court throughout the opinion. Were a court to recognize an antitrust defense whenever failure to grant such a defense would ratify the contract, the exception would swallow Kosuga "s rule. Seanor rejected such an interpretation of Kosuga ; it should be rejected again in this case.
Kelly v. Kosuga will not support an antitrust defense where trustees seek a preliminary injunction enforcing a contractual obligation to make payments into welfare and pension funds. As already noted, Long's counterclaim challenging the legality of Article II is still pending against the trustees. Should this claim succeed, the trustees' right to prospective payments under the contract could depend upon a number of factors, including the severability of Article II from the rest of the contract. This appeal, of course, does not present ...