Connors v. Hallmark & Son Coal Co.

• Decision Date: 14 June 1991
• Docket Number: No. 90-7157,90-7157
• Citation: 935 F.2d 336
• Court: U.S. Court of Appeals — District of Columbia Circuit
• Parties: , 60 USLW 2016, 119 Lab.Cas. P 10,770, 20 Fed.R.Serv.3d 108, 13 Employee Benefits Ca 2626 Joseph P. CONNORS, Sr., et al., as Trustees of the United Mine Workers of America Health and Retirement Funds, Appellants, v. HALLMARK & SON COAL COMPANY, Appellee.

Page 336

935 F.2d 336

290 U.S.App.D.C. 170, 60 USLW 2016,

119 Lab.Cas. P 10,770,

20 Fed.R.Serv.3d 108,

13 Employee Benefits Ca 2626

Joseph P. CONNORS, Sr., et al., as Trustees of the United Mine Workers of America Health and Retirement Funds, Appellants, v. HALLMARK & SON COAL COMPANY, Appellee.

No. 90-7157.

United States Court of Appeals District of Columbia Circuit.

Argued May 6, 1991.

Decided June 14, 1991.

Appeal from the United States District Court for the District of Columbia (Civil Action No. 87-00567).

Stephen J. Pollak, with whom Wendy S. White, Washington, D.C., and David W. Allen, were on the brief, Baltimore, Md., for appellants.

Barry V. Frederick, of the bar of the Supreme Court of Ala., pro hac vice, by special leave of the Court, Birmingham, Ala., with whom Luther Zeigler, was on the brief, for appellee. Richard McMillan, Jr., also entered an appearance, Washington, D.C., for appellee.

Before RUTH B. GINSBURG, SILBERMAN and D.H. GINSBURG, Circuit Judges.

Opinion for the Court filed by Circuit Judge RUTH BADER GINSBURG.

RUTH BADER GINSBURG, Circuit Judge:

In March 1987, the Trustees of the United Mine Workers of America Health and Retirement Funds ("the Trustees") brought this action in district court against appellee Hallmark & Son and other coal companies, alleging that the companies had failed to report and pay pension fund contributions due under national industry wage agreements of 1978, 1981, and 1984. In its July 12, 1990 order, the district court granted partial summary judgment for Hallmark, ruling that the Trustees' claims for the 1980-82 period were barred by the statute of limitations. We vacate the final judgment thereafter entered for Hallmark and remand for further proceedings.

I.

As a signatory to the National Bituminous Coal Wage Agreements of 1978, 1981, and 1984 ("Agreements"), Hallmark is required to contribute to the United Mine Workers of America Health and Retirement Funds ("Funds"). Contributions are in the form of royalties, based on the number of hours worked and tons of coal produced, as well as the tons of nonunion coal the employer has purchased. Article XX, Section (d)(5) of the Agreements places a "self-reporting" obligation upon Hallmark and other employers to provide monthly statements to the Trustees of the Funds "showing on a mine-by-mine basis the full amounts due"; by the tenth day of the following month, the full amounts due must be paid. Under Article XX, Section (f)(2), if the Trustees "determine that there is reasonable cause to question the accuracy" of the reported amounts, the employer must make available to the Trustees the records "necessary to verify the accuracy of the sums paid."

In accordance with this last provision, the Trustees implemented a program in late 1978 of auditing employers' contributions to the Funds, in instances in which the Trustees suspected underpayments. Finding cause to suspect Hallmark of underpayments, the Trustees began an audit in late 1979 or early 1980. According to this audit, Hallmark had, between 1977 and August 1979, underreported the number of hours worked and tons of coal produced. The amount in question was relatively small--$5,535.20, exclusive of interest--and the Trustees raised no question as to unreported purchases of nonunion coal. Hallmark paid the amount requested.

In January 1983, the trustees requested records for a second audit of Hallmark, this time covering the period between September 1979 and and the beginning date of the audit. Seven months later, in August 1983, Hallmark provided the records and the audit began. Field work, completed by March 15, 1984, indicated that Hallmark had failed to pay some $60,619.72 in contributions on nonunion purchased coal, $9,055.59 in contributions on produced coal, and $139.08 in contributions on hours worked. (All figures are exclusive of interest.)

Just before the field report was completed, the District Court for the Western District of Pennsylvania enjoined enforcement of the "purchase of coal" clause, effectively barring the Trustees from collecting approximately 87% of the amount they believed Hallmark had failed to pay. See In re Bituminous Coal Wage Agreements Litigation, 580 F.Supp. 670 (W.D.Pa.1984). This state of affairs continued for almost twenty months, from February 21, 1984 until October 10, 1985, when the Third Circuit, on appeal, vacated the injunction. See In re Bituminous Coal Wage Agreements, 756 F.2d 284 (3d Cir.), cert. denied, 474 U.S. 863, 106 S.Ct. 180, 88 L.Ed.2d 149 (1985). Thereafter, in September 1986, the Trustees formally requested Hallmark to pay the delinquent contributions. Hallmark refused to pay, and the Trustees commenced this action on March 3, 1987.

II.

The Trustees' complaint alleged that, by failing to provide accurate monthly reports and make required contributions to the Funds, Hallmark had violated section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. Sec. 185, ¹ and sections 502 and 515 (as amended) of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. Secs. 1132,1145. ² Hallmark denied these allegations and raised twelve affirmative defenses. The ninth of these twelve defenses read, in full: "The plaintiffs' claims, or some of them, are barred by the applicable statute of limitations."

By February 1989, post-discovery settlement negotiations between the Trustees and Hallmark seemed likely to resolve all issues. See Appendix ("App.") at 181 (transcript of Feb. 6, 1989 status conference, at which Hallmark attorney Zeigler was "optimistic and confident" that an agreement would be "finalized and executed within a week"); id. at 189-90 (Feb. 16, 1989 letter from Hallmark attorney Frederick, informing the court that "[t]he Trustees and Hallmark have agreed in principle on all aspects of a settlement," with only "minor details" on "the particular language" to be worked out). The parties did settle all claims pertaining to the period after March 3, 1984. ³ But the settlement concerning the 1980-84 period fell apart over the statute of limitations issue. As Hallmark's lead attorney explained:

The original settlement proposal came from someone other than myself, and it was made on the assumption that there was a six-year statute of limitations. And I guess that assumption arose because we assumed that at some point we might be ... in the Alabama court ..., and we always, or others always calculate, a potential liability based on the six-year statute applicable in Alabama. When I got involved in the middle of the settlement process, I just rode with that assumption. I woke up at the last minute and recognized that that assumption was wrong, that it is a three-year statute of limitations in the District that is applicable.

App. at 195 (transcript of June 2, 1989 status conference). Accordingly, Hallmark refused to settle claims for payments due more than three years before the Trustees filed suit.

Hallmark moved for summary judgment on the unsettled claims, arguing that the statute of limitations began to run on each monthly payment when it fell due, and that the three-year limitations period ⁴ had therefore expired for each claim for payment that came due before March 3, 1984. Hallmark added that the Trustees had indicated "[t]his year, ... for the first time," that the limitations period "should be tolled under the doctrine of 'fraudulent concealment.' " Hallmark argued that the Trustees, if they wished to assert tolling, should have alleged fraudulent concealment in the complaint. Because the discovery phase of the case had ended, Hallmark urged, the Trustees should not be allowed to alter the pleadings to insert new matter.

In their memorandum opposing summary judgment for Hallmark, the Trustees conceded that the applicable statute of limitations established a three-year period. They contended, however, that

where, as here, a plaintiff must rely on a self-reporting system in collecting contributions, and where the defendant submits inaccurate reports, the statute of limitations is tolled until the plaintiff discovers, or with reasonable diligence could have discovered, the contract breach.

The Trustees stated that they did not discover Hallmark's inaccuracies until March 15, 1984, when the second field report was completed; thus, they maintained, even without taking account of the twenty-month injunction period during which the statute must be tolled, see D.C.Code Sec. 12-304, the suit was timely filed.

The Trustees, at this point, did invoke the doctrine of "fraudulent concealment." They contended that another judge of the district court had applied that doctrine to toll the statute of limitations in circumstances virtually identical to those of the present case. See Trustees of the United Ass'n [of] Full-Time Salaried Officers & Employees of Local Unions, Dist. Councils, State & Provincial Ass'ns Pension Plan v. Steamfitters Local Union 395 ("Steamfitters"), 641 F.Supp. 444 (D.D.C.1986) (allowing full recovery under ERISA and section 301 against an employer who, for fourteen years, had failed to make contributions and had submitted false reports). Steamfitters, as the Trustees observed, held that the pension fund was not required to allege that the employer intended to defraud the trust: "submission of a misleading report," the judge in Steamfitters ruled, "is, absent notice of facts contradicting it, sufficient to conceal a cause of action." Steamfitters, 641 F.Supp. at 447. ⁵

As for Hallmark's charge that the Trustees should have alleged fraudulent concealment in their complaint, the Trustees contended that their opening pleading presented the factual circumstances--Hallmark's obligation to provide accurate monthly statements concerning hours worked, coal produced, and nonunion coal purchased, dishonored by Hallmark's submission of inaccurate reports--with sufficient particularity to indicate Hallmark's concealment.

The district court granted summary judgment...