Ambromovage v. United Mine Workers of America

Decision Date25 January 1984
Docket Number82-3515,Nos. 82-3496,s. 82-3496
Citation726 F.2d 972
Parties115 L.R.R.M. (BNA) 2584, 100 Lab.Cas. P 10,755, 1 Fed.R.Serv.3d 432, 5 Employee Benefits Ca 1042 Napolean S. AMBROMOVAGE, Lewis Kurtz, Frank Tragus, John Brinkash, Alex Gonzales, Emmett Thomas, Nicholas J. Haydock, John D. Jillson, Joseph Fauzio, and Frank J. Galgay, Trustees of the Anthracite Health and Welfare Fund, Plaintiffs-Appellants v. UNITED MINE WORKERS OF AMERICA, An Unincorporated Trade Union Association, Defendant-Appellee. Appeal of Napolean S. AMBROMOVAGE, et al. Napolean S. AMBROMOVAGE, Lewis Kurtz, Frank Tragus, John Brinkash, Alex Gonzales, Emmett Thomas, Nicholas J. Haydock, John D. Jillson, Joseph Fauzio, and Frank J. Galgay, Trustees of the Anthracite Health and Welfare Fund, Plaintiffs-Appellees v. UNITED MINE WORKERS OF AMERICA, An Unincorporated Trade Union Association, Defendant-Appellant. Appeal of UNITED MINE WORKERS OF AMERICA, An Unincorporated Trade Union Association.
CourtU.S. Court of Appeals — Third Circuit

Thomas M. Kittredge (argued), Morgan, Lewis & Bockius, Philadelphia, Pa., James S. Palermo, Hazelton, Pa., for plaintiffs-appellants in No. 82-3496 and plaintiffs-appellees in No. 82-3515.

Daniel B. Edelman (argued), Joseph A. Yablonski, Yablonski, Both & Edelman, Washington, D.C., Thomas N. O'Neill, Jr., Carol A. Mager, Montgomery, McCracken, Walker & Rhoads, Philadelphia, Pa., for defendant-appellee in No. 82-3496 and defendant-appellant in No. 82-3515.

Before GIBBONS and BECKER, Circuit Judges and WEBER, * District Judge.


BECKER, Circuit Judge.

These appeals concern the liability of cross-appellant United Mine Workers of America (the "Union") for failure to collect royalties owed by a number of coal operators to the Anthracite Health and Welfare Fund (the "Fund"), and the availability for set-off against such liability of certain loans made by the Union to the Fund. Appellants, retired mine workers or their dependents, are the beneficiaries of the Fund.

This is the fourth time that this Court has addressed some aspect of this litigation, which is now in its twenty-first year. 1 In Nedd v. United Mineworkers of America, 556 F.2d 190 (3d Cir.1977) ("Nedd II" ), we held that the Union could be held liable for the delinquent royalties. Our holding was based on the Union's role in controlling the Fund from 1947 to 1967, principally its illegal control of the board of directors of the Fund. We held that this control imposed a fiduciary duty on the Union with regard to its efforts to collect the royalties owed to the Fund, beyond any that might have existed by virtue of its status as collective bargaining representative. We remanded for further proceedings. These appeals stem from those proceedings, in which the district court sought to follow the mandate of Nedd II. The court took certain additional evidence and then applied the holding of Nedd II to the record. The court found the Union liable for some seven and one-half million dollars for failure to collect royalties, but, finding that loans to the Fund by the Union totalling more than thirteen million dollars were available to offset the Union's liability, entered judgment for the Union.

This appeal presents three principal questions, one dealing with the liability of the Union and two with the set-off, which we will dispose of as follows. First, we will affirm the district court's exercise of discretion in denying pre-judgment interest on the amounts for which it held the Union liable. This is the appellants' only challenge to the district court's calculation of the Union's liability. Our holding on this point fixes the maximum liability of the Union at $7,589,296.63. 2 Second, we will affirm the district court's determination that the Union met its burden (imposed by Nedd II ) of showing that its forgivenesses of certain loans made in the 1950's and 1960's (the "1950's loans" and the "1960's loans") were not intended as gifts, and were thus available for set-off against the Union's liability.

Third, we will affirm the district court's holding that it had jurisdiction over the Union's claim for set-off based on loans made by the Union to the Fund in the 1970's (the "1970's loans"), although on different grounds. Notwithstanding that this set-off is a permissive counterclaim for which there is no independent basis of federal jurisdiction, we hold that the question of the existence of ancillary jurisdiction does not turn on the characterization of the counterclaim as "permissive" or "compulsory," but rather on the presence or absence of a "common nucleus of operative fact," the jurisdictional test propounded in United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). Finding such a common nucleus between the appellants' claim and the 1970's loans, we conclude that there is federal jurisdiction. We also agree with the district court that all of the 1970's loans have matured, 3 hence the amount of the Fund's liability to the Union based on these loans is also available for set-off.

Because the amounts available for set-off from the 1950's, 1960's, and 1970's loans is $12,634,000.00, while the maximum liability of the Union, once appellants' claim for pre-judgment interest has been rejected, is only $7,589,296.63, we will affirm the judgment of the district court in favor of the Union. The other contentions of the parties would either decrease the Union's liability or increase the amount available for set-off; because the Union does not seek an affirmative recovery, we do not reach those other contentions.


The events that led to this litigation began with the signing of the Anthracite Wage Agreement of 1946 between the Union and the Anthracite Coal Mine Operators. That agreement created the Fund as an independent trust fund for the collection of contributions from the operators based on their production, and for the distribution of pensions to former Union members and their dependents. The 1946 Wage Agreement provided that the Fund would be managed by three trustees, one appointed by the operators and two appointed by the Union. In 1947, Congress enacted the Labor-Management Relations Act (the "Taft Hartley Act"), which requires that unions and management be equally represented on the board of trustees of pension trust funds. See 29 U.S.C. Sec. 186(c)(5) (1982). The Union and the mine operators thereupon agreed to designate one of the Union trustees as "neutral," in order to bring the Fund within the requirements of the Taft-Hartley Act.

In addition to de facto control of the Fund's board of trustees, the Union was actively involved in efforts to insure the collection of payments from the operators. These efforts "paralleled, and in some instances replaced, trustee enforcement efforts." Ambromovage v. Thomas, Civ. No. 8696, slip op. at 9 (M.D.Pa. July 9, 1982) [hereinafter "1982 Mem.Op."]. 4 In addition beginning in 1951, the Union made numerous loans to the Fund, eventually totalling $13,247,344.00. These loans were made in order to enable the Fund to continue paying pensions to the retired miners. As will be explained in detail below, many of the loans have since been forgiven. 5 In short, for the first two decades of its existence, the Fund operated substantially as an adjunct to the Union.

The history of the Fund has been characterized by severe financial distress. Beginning in the 1950's, anthracite coal production suffered a precipitous and prolonged decline. Many operators fell behind on the payment of royalties to the Fund. This created a situation in which the Union's loyalties were divided: although the interests of pensioned miners required diligent collection of Fund royalties, the Union was inclined to be less than vigorous in pressing financially distressed operators to pay delinquent royalties, lest their efforts drive the operators out of business and destroy the jobs of active members. The Union's attempts to balance the interests of its two constituencies resulted in a growing number of delinquencies, and a corresponding decline in benefit payments. This litigation grew out of a movement to protest benefit reductions which began in 1961. 6

The complaint in this case 7 alleged four theories of liability. The first was based on the Union's duty to enforce a collective bargaining agreement, which was inferred from the jurisdictional grant in section 301(a) of the Taft-Hartley Act, 29 U.S.C. Sec. 185(a). 8 The second theory was based on the federal common law duty of fair representation. The third theory was based on a fiduciary duty implied from section 302(c) of the Taft-Hartley, 29 U.S.C. Sec. 186(c), which requires that pension payments be made through a pension plan jointly administered by management and the union. 9 Finally the complaint included a claim based on the Pennsylvania law of trusts, over which the district court had pendent jurisdiction.

The case was tried to the district court without a jury on July 15-16, 1974. In its opinion, filed on April 13, 1976, Nedd v. United Mineworkers of America, Civ. No. 8796 (M.D.Pa. April 13, 1976) [hereinafter "1976 Mem.Op."], the court held that it had no subject matter jurisdiction over the appellants' claims. 10 In spite of this holding, the district court proceeded to make a determination on the merits, finding no breach of duty by the Union under any of the appellants' theories. Although the court found the trustee's failure to act during the 1950's to be negligent, it held that neither the trustees nor the Union acted in bad faith toward the pensioned miners, and that the Union was not vicariously responsible for the trustees' negligence because the trustees were not acting as agents of the Union in their role as trustees. The court also held that, even if the Union were liable, the damages should be reduced by the amount of the loans made by the...

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