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GALGAY v. GIL-PRE CORPORATION FRANK J. GALGAY (08/16/88)

argued: August 16, 1988.

GALGAY, FRANK J. AND FRANCIS P., BONNER, TRUSTEES OF THE ANTHRACITE HEALTH AND WELFARE FUND, AND THE ANTHRACITE HEALTH AND WELFARE FUND, APPELLANT,
v.
GIL-PRE CORPORATION; FRANK J. GALGAY, AND FRANCIS P., BONNER, TRUSTEES OF THE ANTHRACITE HEALTH AND WELFARE FUND, APPELLANTS V. GILBERTON ENERGY CORPORATION



On Appeal from the United States District Court For the Middle District of Pennsylvania Scranton, D.C. Civil Action Nos. 86-1363, 86-1364

Stapleton and Mansmann, Circuit Judges, and Fisher, District Judge*fn*

Author: Stapleton

Opinion OF THE COURT

STAPLETON, Circuit Judge:

These consolidated appeals concern the pension-fund provisions of a collective bargaining agreement between the United Mine Workers of America (UMWA) and the Anthracite Coal Operators. Appellants, Frank J. Galgay and Francis P. Bonner, are trustees of the pension fund, created for workers in the anthracite coal industry. Appellees, Gil-Pre Corp. and Gilberton Energy Corp., are signatories to the collective-bargaining agreement that created the pension fund. The agreement provides that royalties must be paid on anthracite coal "produced for use or for sale." The appellees' liability for royalties on their products depends on what that language means.

The district court had jurisdiction under section 301 of the Labor Management Relations Act of 1947 (Taft-Hartley Act), 61 Stat. 156, 29 U.S.C. § 185 (1982). In granting the summary-judgment motion of Gil-Pre and Gilberton, the court acknowledged that where there exist competing, reasonable interpretations of a contract, the choice is for the trier of fact; in such cases, summary judgment is therefore inappropriate. The court found, however, that only one reasonable interpretation of the disputed language was possible: For coal to be "produced for use or for sale," it must be processed by a signatory through a coal breaker, also known as a preparation plant. Since neither Gil-Pre nor Gilberton Energy processed coal through a breaker during the relevant period, the court granted the appellees' summary-judgment motion. Galgay v. Gil-Pre, No. 86-1363, Galgay v. Gilberton Energy Corp., No. 86-1364 (M.D. Pa. Sept. 30, 1987) (memorandum and order).

We have appellate jurisdiction under 28 U.S.C. 1291. Our review of the district court's application of Rule 56 is plenary. Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir. 1976). We must decide whether, viewing the Rule 56 materials in the light most favorable to appellants, a reasonable jury could find for appellants. Fed. R. Civ. P. 56(c), (e); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986); Matsushita Elec. Industrial Co. v. Zenith Radio, 475 U.S. 574, 587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). Our inquiry here is whether the pension-fund provisions of the agreement are reasonably susceptible to an interpretation that would require appellees to pay royalties on their output. See Scott v. Anchor Motor Freight, Inc., 496 F.2d 276, 280 (6th Cir. 1974) (where meaning of contract is uncertain or ambiguous, question of its meaning is for the jury; applied in section 301 suit); Restatement (Second) of Contracts § 212(2) (1981) (jury decides among competing, reasonable inferences from extrinsic evidence used to show meaning of contract).

I.

In 1946, the UMWA and the Anthracite Coal Operators negotiated and signed the Anthracite Wage Agreement of 1946. The agreement established, among other things, a pension fund for miners financed by royalties to be paid by each operator signatory*fn1 "on each ton of anthracite produced for use or for sale." The agreement has been renegotiated seventeen times, most recently in 1981. The 1981 version of the agreement, which expired in 1984, is at issue in these appeals.

Since the 1940s, the structure of the anthracite coal industry has undergone fundamental changes, some of which have adversely affected the financing of the pension fund. In the 1940s, marketable coal was always processed after mining by a breaker, which is used to separate impurities and break up coal into smaller pieces. Coal operators were vertically integrated and almost always unionized. Thus a single, unionized operator would mine, process, and ship the coal. The practice of the signatories of the anthracite agreement was to pay royalties on the tonnage remaining after the coal was processed through a breaker. Since all coal was processed with breakers, and since the breakers were always operated by signatories, royalties were paid on most, if not all, marketable anthracite.

In recent years, the industry has become less unionized and less vertically integrated, and breakers are not necessarily used to make coal marketable. As a result, nonsignatories often operate breakers, and signatories often treat anthracite without breakers.

Breakers are also not always used in processing culm, a byproduct of anthracite processing. Considered waste in the 1940s because of its high ash content, culm was not subject to royalties. It can now be reprocessed*fn2 to remove some of the ash, rendering the resulting product usable for fuel.

Despite these changes in the coal industry, the phrase "produced for use or for sale" has survived--intact and without clarification--the seventeen renegotiations of the collective-bargaining agreement. The 1981 version of the pension-fund provisions contains only two changes from prior versions: The royalty on coal "produced for use or for sale" was raised from $1.50 to $1.60 per ton, and a separate royalty rate of 20 cents per ton was created for "[a]nthracite coal processed through a coal preparation plant and containing an ash content of 18% or higher."

Appellee Gil-Pre Corp. pre-processes culm. It does not use a breaker for this processing. After Gil-Pre's treatment, its product has an ash content of 60%.*fn3 Gil-Pre's product must be further processed before it is commercially usable as fuel. Gil-Pre does not perform that processing.

Appellee Gilberton Energy Corp. buys coal that is already commercially usable as fuel and then bags it for use as a filter medium in water-filtration systems. Gilberton Energy does not process its coal in a breaker or by any other means.*fn4

II ...


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