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Connors v. Fawn Mining Corp.

argued: January 10, 1994.


On Appeal From the United States District Court For the Western District of Pennsylvania. (D.C. Civil Action No. 92-00305).

Before: Stapleton, Cowen and Alito, Circuit Judges.

Author: Stapleton


STAPLETON, Circuit Judge:

The trustees of the United Mine Workers of America 1950 Pension Benefit Plan and Trust ("the 1950 Plan"), and the United Mine Workers of America 1974 Pension Benefit Plan and Trust ("the 1974 Plan") (collectively, "the Plans"),*fn1 claim that Fawn Mining Corporation ("Fawn Mining") failed to fulfill its obligations under the 1988 National Bituminous Coal Wage Agreement ("Wage Agreement")*fn2 when it failed to contribute to the 1950 Plan for its employees for the period of May 24, 1990, through April 30, 1991.*fn3 The trustees initiated this action pursuant to section 301 of the Labor Management Relations Act, 29 U.S.C. § 185, and section 502(e) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(e), to collect these allegedly delinquent contributions. Fawn Mining responded by filing a third-party complaint against District 5, United Mine Workers of America, AFL-CIO ("District 5"), and the United Mine Workers of America International, AFL-CIO ("International") (collectively, "the UMW"), alleging that it was not contractually obligated to contribute to the 1950 Plan because the UMW had agreed to exempt Fawn Mining from the portion of the Wage Agreement that required contribution to this plan. Fawn Mining further claimed that if it were responsible for contributions to the 1950 Plan, it would be entitled to indemnification from the UMW.

Following discovery, all parties filed motions for summary judgment. A magistrate considered these motions and prepared a report and recommendation. The magistrate found that even assuming that the UMW agreed to waive Fawn Mining's contractual obligations regarding the 1950 Plan, this agreement would not be binding on the trustees of the benefit plan. With regard to the union's liability to Fawn Mining, the magistrate concluded that there was no basis for requiring the UMW to indemnify Fawn Mining. Thus, the magistrate Judge recommended that the court grant both the Plans' and the UMW's motions for summary judgment, and deny Fawn Mining's motion for summary judgment. The district court adopted the magistrate Judge's report and recommendation as the opinion of the court. Fawn Mining now appeals.


BethEnergy Mines, Inc. and Bethlehem Steel Corporation (collectively, "BethEnergy") intended to terminate operations at their Saxonburg, Pennsylvania coal mine facility and permanently lay-off all employees who worked at this site. Those employees were represented by District 5. When District 5 learned of the planned closing, it began to actively solicit prospective buyers of the mine so that operations could continue and the jobs of its members could be saved. Donald Redman ("Redman"), president of District 5, contacted principals of the CLI Corporation ("CLI") in January, 1990, to ask if CLI was interested in purchasing the mine. CLI expressed interest in arranging for Fawn Mining, one of its subsidiaries, to purchase the mining assets from BethEnergy.

After some investigation, however, Fawn Mining representatives concluded that it would not be profitable for it to purchase the mine if it would be bound by the terms of the Wage Agreement, which BethEnergy and District 5 had previously signed. This created a problem, however, because Article I of the Wage Agreement stated that:

Each employer promises that its operations covered by this Agreement shall not be sold, conveyed, or otherwise transferred or assigned to any successor without first securing the agreement of the successor to assume the Employer's obligations under this Agreement.

Fawn Mining thus knew that BethEnergy would not sell it the mining operation unless it either agreed to assume the terms of the Wage Agreement or gained concessions from the UMW regarding the requirements of that agreement.*fn4 As a result, Fawn Mining representatives had numerous Discussions with Redman regarding the Wage Agreement. These Discussions focused on the possibility of exempting Fawn Mining from the provision of the Wage Agreement that required employer contributions to the 1950 Plan. Redman, who stated at his deposition that his biggest concern was keeping the mine open and his members employed, admitted to having lengthy Discussions with Fawn Mining regarding the possibility of granting Fawn Mining an exemption from participating in the 1950 Plan.

Redman told representatives of Fawn Mining that other companies that had purchased struggling mining operations were granted exemptions by the UMW from some of the terms of the 1988 Wage Agreement, including the term requiring contribution to the 1950 Plan. Redman stated, either explicitly or implicitly, that he favored granting Fawn Mining an exemption from the requirement that it contribute to the 1950 Plan at some time down the road if it would keep the mine open and UMW members employed. Fawn Mining representatives knew, however, that Redman alone did not have the authority to grant such an exemption.

The parties disagree about what exactly happened next. According to Fawn Mining representatives, Redman told them that he had spoken to the International President, and that the president had given him the authority to grant Fawn Mining an exemption from the 1950 Plan. Fawn Mining representatives further testified that Redman promised them that if Fawn Mining purchased BethEnergy's assets, it would be immediately exempt from contributing to the 1950 Plan. In other words, the collective bargaining agreement between Fawn Mining and the UMW would be identical to the Wage Agreement, except that it would not include a provision requiring contribution to the 1950 Plan. Redman, however, remembered the negotiations somewhat differently. According to him, he made it clear to Fawn Mining representatives that he had no authority to grant an exemption from the 1950 Plan. Furthermore, he claimed that he promised only that he would seek the exemption from International President Trumpka after Fawn Mining had operated the mine for one year. Redman stated that he told Fawn Mining representatives he wanted to wait a year before granting the exemption because if operations continued for at least that much time, it would be clear that Fawn Mining was serious about turning the mining operations into a profitable business, and that it was possible to do so. At that point, if it would help save the mine for the long term, Redman would seek the exemption.

While these negotiations between Fawn Mining and the UMW were taking place, BethEnergy issued a "WARN" notice announcing that it would close the mine on May 25, 1990 unless a purchaser who had a collective bargaining agreement with the UMW was found by that time. Representatives of the UMW knew that once the mine was shut down, it would be even more difficult to find a purchaser and re-start operations. So, on May 24, 1990, the day before the purchase deadline imposed by BethEnergy, Fawn Mining Vice President Robert Irey ("Irey") and CLI Chief Financial Officer William Stein ("Stein") met with Redman at the District 5 office to reaffirm understandings reached in the prior negotiations covering the mining operation.

At the end of this meeting, Redman and Irey both signed a single sheet of paper confirming their agreement. This paper was a copy of the last page of the 1988 Wage Agreement, which is the page that employers and local unions sign to indicate that they are consenting to becoming parties to that agreement. At the time Redman and Irey signed this page, however, it was not attached to any other document. According to Irey and Stein, when Irey signed this page, they and Redman had an understanding that they were signing a commitment to be obligated by the terms and conditions of the 1988 Wage Agreement, but with the promised exemption from the 1950 Plan. Furthermore, Irey and Stein claimed that all parties agreed that the signature page would be sent to International President Trumpka for his signature. Then, the signature page would be attached to a document identical to the Wage Agreement except for the 1950 Plan exemption, and a copy would be sent to Fawn Mining. Redman, however, denied that any such agreement existed when he and Irey signed the signature page. He stated that at the time of signing, he believed that Fawn Mining was signing onto the entire Wage Agreement, including the provision requiring contribution to the 1950 Plan, and that the only understanding between the parties was that Redman would seek the exemption in one year if it would increase the longevity of the mine.

One day later, on May 25, 1990, Fawn Mining signed an Asset Purchase Agreement for the acquisition of the mine from BethEnergy. Article 3.1.5 of this Asset Purchase Agreement stated that Fawn Mining would assume all of BethEnergy's obligations and liabilities under the Wage Agreement, and it acknowledged that it had copies of this agreement. The Asset Purchase Agreement did not mention any exemption from the 1950 Plan. BethEnergy sent a letter to the UMW on June 4, 1990 announcing the sale of the mine to Fawn Mining, and stating that Fawn Mining had agreed to accept BethEnergy's obligations under the Wage Agreement. This letter also did not mention a waiver of any of the agreement's provisions.

Once Fawn Mining took over operations it began to make remittances to the 1974 Plan, as required by the Wage Agreement. It did not, however, make any contributions to the 1950 Plan. In August of 1990, the Plans informed Fawn Mining that they still had not received a signed copy of the agreement reached between it and District 5, and requested that they be sent one. Fawn Mining responded to the Plans' request by sending them a file it kept of information regarding the contract and a copy of the signature page signed by representatives from District 5 and Fawn Mining.

In October 1990, Fawn Mining began to receive notices from the 1950 Plan that contributions were owed.*fn5 However, Fawn Mining did not respond to any of the Plans' notices. In fact, it did not inform the Plans that it believed it was exempt from contributing to the 1950 Plan until April 1992, when it sent the Plans a memorandum. According to Fawn Mining representatives Irey and David Chedgy (CLI's President), the reason for this delay was that during this time they were attempting to obtain from Redman a copy of the ...

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