Galgay v. Gil-Pre Corp.

• Citation: 864 F.2d 1018
• Decision Date: 23 December 1988
• Docket Number: 88-5201,Nos. 88-5200,GIL-PRE,s. 88-5200
• Parties: 130 L.R.R.M. (BNA) 2217, 110 Lab.Cas. P 10,906 GALGAY, Frank J. and Bonner, Francis P., Trustees of the Anthracite Health and Welfare Fund, and The Anthracite Health and Welfare Fund, Appellants, v.CORPORATION. GALGAY, Frank J. and Bonner, Francis P., Trustees of the Anthracite Health and Welfare Fund and The Anthracite Health and Welfare Fund, Appellants, v. GILBERTON ENERGY CORPORATION.
• Court: U.S. Court of Appeals — Third Circuit

Page 1018

864 F.2d 1018

130 L.R.R.M. (BNA) 2217, 110 Lab.Cas. P 10,906

GALGAY, Frank J. and Bonner, Francis P., Trustees of the

Anthracite Health and Welfare Fund, and The

Anthracite Health and Welfare Fund, Appellants, v. GIL-PRE CORPORATION.

GALGAY, Frank J. and Bonner, Francis P., Trustees of the

Anthracite Health and Welfare Fund and The

Anthracite Health and Welfare Fund, Appellants, v. GILBERTON ENERGY CORPORATION.

Nos. 88-5200, 88-5201.

United States Court of Appeals,

Third Circuit.

Argued Aug. 16, 1988.

Decided Dec. 23, 1988.

A. Richard Caputo (argued), Cynthia A. Smith, Shea, Shea & Caputo, Wilkes-Barre, Pa., for appellants.

Howard A. Rosenthal (argued), Gary D. Fry, Pelino & Lentz, P.C., Philadelphia, Pa., for appellees.

Before STAPLETON and MANSMANN, Circuit Judges, and FISHER, District Judge. ^*

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. Sec. 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. Sec. 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, 2512, 91 L.Ed.2d 202 (1986); Matsushita Elec. Industrial Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (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 Sec. 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 ¹ "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 ² 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%. ³ 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. ⁴

II.

A.

This is not the first time the courts of this circuit have been called upon to interpret the phrase "anthracite produced for use or for sale" as used in a collective bargaining agreement between the UMWA and the Anthracite Coal Operators. In Thomas v. Blue Coal Corp., 355 F.Supp. 510 (M.D.Pa.1973); aff'd by judgment order sub nom. Savitsky v. Blue Coal Corp., 485 F.2d 681 (3rd Civ.1973), the district court interpreted the disputed language in the context of an earlier version of the agreement now before us. In Thomas, culm was processed through a breaker by a nonsignatory. The defendant then blended the nonsignatory's coal with its own. In addressing the issue of whether that blending constituted "production" under the agreement, the court held that coal is "produced for use or for sale" when it is "first made marketable or usable as fuel." Since marketability of the anthracite as fuel had first occurred when the coal was processed through a breaker by a nonsignatory, the Thomas court concluded that the defendant was not liable for royalties on the coal that it sold. As the court correctly pointed out, its reading of the relevant phrase is not only consistent with the language of the agreement, but also necessary to avoid liability for multiple royalties on the same coal.

This court affirmed the decision of the district court in Thomas by judgment order. As a result, the Thomas case is not precedent binding on this court. ⁵ As we will see, however, the existence of the decision in that case is nonetheless of substantial assistance in resolving the issue before us.

B.

As we have noted, the district court in this case concluded that "where the Anthracite Wage Agreement refers to 'anthracite produced for use or for sale,' the parties intended that the provision be synonymous with ... 'anthracite ... processed through a coal preparation plant.' " Mem. op. at 10-11. In support of this conclusion, the district court cited the Thomas decision, the course of dealing between the parties, negotiations between the parties, and a 1981 amendment to the agreement pertaining to coal with high ash content. We find the district court's reasoning unpersuasive.

1.

The district court misread the Thomas decision. While the Thomas court noted, as an undisputed fact, that the coal purchased and intermingled by the defendant had first become marketable as fuel when it passed through the breaker, it had no occasion to consider whether a royalty was due on coal that had not been processed through a breaker. Accordingly, Thomas did not come to the conclusion--whether in its holding, dicta, or by implication--that "anthracite produced for use or for sale" meant "anthracite processed through a coal preparation plant." As we have noted, the Thomas court held that the disputed phrase referred to anthracite processed to the point where it first became marketable or usable for fuel.

2.

The district court in this case correctly noted that the parties to the agreement historically followed the practice of measuring the coal produced at the outflow of the breaker and of paying the royalty based upon that measurement. The court then concluded that this practice narrowed the meaning of the phrase "produced for use or for sale" to require the use of a breaker. We find the historic practice of the parties in this regard far less significant than did the district court.

In determining whether the practice of using the breaker was a ...