Connors v. Peles
| Decision Date | 02 November 1989 |
| Docket Number | Civ. A. No. 86-1107. |
| Citation | 724 F. Supp. 1538 |
| Parties | Joseph P. CONNORS, Sr., Donald E. Pierce, Jr., William Miller, William B. Jordan and Paul R. Dean, as Trustees of the United Mine Workers of America 1950 Pension Trust, 1950 Benefit Plan and Trust, 1974 Pension Trust and the 1974 Benefit Plan and Trust, Plaintiffs, v. Nestor PELES, Nicholas Rend, Stephen Peles and Linda Peles Kohut, Defendants. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
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Jack W. Plowman, Plowman and Spiegel, Pittsburgh, Pa., for plaintiffs.
Robert W. Lambert, Indiana, Pa., for defendants.
FINDINGS OF FACT, CONCLUSIONS OF LAW, OPINION AND ORDER
1. Plaintiffs, Joseph P. Connors, Sr., Donald E. Pierce, Jr., William Miller, William B. Jordan and Paul R. Dean, are the Trustees of the United Mine Workers of America 1950 and 1974 Pension Plans.
2. The Pension Plan is domiciled in the District of Columbia.
3. Pelbro Fuel, Inc., is a Pennsylvania business corporation, with offices at R.D. # 1, Glen Campbell, Pennsylvania, duly incorporated under the laws of the Commonwealth of Pennsylvania pursuant to a charter issued by the Department of State thereof on September 17, 1973.
4. Pelbro was incorporated by Defendant Nestor Peles, and his brother, Joseph Peles, to provide continuity of life to a business enterprise, for tax purposes and as a shield against personal liability.
5. Defendants, Nestor Peles, Nicholas Rend, Stephen Peles and Linda Kohut are, at all time material hereto, were shareholders of Pelbro. Each of the Defendants was a resident of the Commonwealth of Pennsylvania at all times material to this litigation.
6. On March 27, 1981, all of the outstanding and issued shares of Pelbro stock were held by Robert Westrick, and by Defendants Nestor Peles, Nicholas Rend, Stephen Peles and Linda Peles Kohut.
7. From September 19, 1973, through the time of trial, Defendant Nestor Peles was the president and chief executive officer of Pelbro, and a director of Pelbro.
8. At all times material to this litigation, Defendant Nicholas Rend was a vice president of Pelbro. Nicholas Rend served as a director of Pelbro from 1981 through the date of trial.
9. From October 22, 1981 to July 1, 1984, Defendant Stephen Peles was a Vice President of Pelbro.
10. From March 5, 1974 through September 17, 1974, Defendant Linda Peles Kohut served as secretary of Pelbro.
11. From September 17, 1974, through October 21, 1981, Robert Westrick served as Secretary of Pelbro.
12. Between October 26, 1976, and March 27, 1981, Pelbro and the United Mine Workers of America, were signatory to the 1974 Bituminous Coal Wage Agreement and the 1978 Bituminous Coal Wage Agreement.
13. The National Bituminous Coal Wage Agreement of 1978 expired on March 27, 1981.
14. Pursuant to Article XX(d)(1) of the National Bituminous Coal Wage Agreement of 1978, Pelbro was required to make contributions on behalf of its work force to the Pension Fund.
15. Following the expiration of the 1978 National Bituminous Coal Wage Agreement on March 27, 1981, Pelbro has not been required to make contributions to the Pension Fund, and thereby incurred a "withdrawal" within the meaning of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. ? 1001, et seq., as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA").
16. At all times material hereto, Pelbro was engaged in the mining of bituminous coal in Western Pennsylvania.
17. Between October 26, 1976 and March 27, 1981, Pelbro employed four to ten union employees under the Bituminous Coal Wage Agreements.
18. In 1974, Pelbro acquired extensive mining rights to two separate undeveloped surface mining operations known as the "Penn Run" and "Brush Valley" jobs, covering in excess of 1,000 surface acres.
19. Pelbro engaged in the mining of its "Penn Run" job from 1974 through 1976, and operated the "Brush Valley" job from 1976 through 1985. Pelbro ceased active mining operations in 1985, but has attended to backfilling and reclamation to some degree since that time.
20. The "Penn Run" leases acquired by Pelbro had a value, at the time of acquisition, of $100,000 to $125,000.
21. From 1974, and throughout the course of its coal mining operations, Pelbro held a valid surface mining operators license, mine drainage permits and mining permits on its strip mining operations, issued by the Department of Environmental Resources of the Commonwealth of Pennsylvania.
22. From 1976 to 1978, Pelbro's coal production was sold to Greenwich Collieries, a division of Pennsylvania Mines Corporation. Pennsyvlania Mines Corporation was a subsidiary of Pennsylvania Power and Light Corporation.
23. From January 1, 1979, and thereafter, Pelbro sold its coal production to Yellow Creek Coal Sales.
24. Yellow Creek Coal Sales was a sole proprietorship owned by Stephen Peles.
25. Yellow Creek Coal Sales did not hold a surface mining operators license, mine drainage permits or mining permits and was not authorized by the Commonwealth of Pennsylvania to engage in coal mining operations, and never engaged in coal production. Yellow Creek Coal Sales was solely engaged in the purchase, marketing and sale of coal.
26. Yellow Creek Coal Sales was formed by Stephen Peles, upon the advice of his father, Nestor Peles, after consultation between Pelbro officials and officials of the Pennsyvlania Power and Light network, for the specific purpose of creating a separate business entity to provide a market for Pelbro's coal, and to acquire coal from other sources independent of Pelbro, of different quality and specification than the Pelbro coal, to meet certain standards of the PP & L coal order, resulting from an existing deterioration in the sulphur quality of the Pelbro coal production, which threatened Pelbro's purchase order with the PP & L network.
27. Pelbro was advised by Pennsyvlania Power and Light officials, that if the purchase orders were taken from Pelbro and granted to Yellow Creek Coal Sales, that the purchase orders should thereafter permanently remain with Yellow Creek Coal Sales.
28. On December 26, 1978, Pelbro sent written notice to the United Mine Workers of America, advising them that Pelbro's coal production would be sold to Yellow Creek Coal Sales, effective January 1, 1979.
29. PR & W was a partnership comprised of Nestor Peles, Nicholas Rend, Linda Peles Kohut and Robert Westrick, formed for the purpose of providing management and consulting services to Pelbro.
30. PR & W from time to time provided management and consulting services to Pelbro. Following the creation of Yellow Creek Coal Sales in 1979, PR & W provided management and consulting services to Yellow Creek Coal Sales.
31. PR & W was terminated in 1982 following Robert Westrick's sale of his stock in Pelbro.
32. A successor partnership to PR & W was formed by Nestor Peles, Nicholas Rend, Stephen Peles and Linda Peles Kohut, under the name of Ren-Koe.
33. Pelbro paid management and consulting fees of $65,000 to PR & W, comprised of a payment of $45,000 on November 25, 1979, $10,000 on April 9, 1980 and $10,000 on June 10, 1980. Management and consulting fees were paid by Pelbro to Ren-Koe of $3,000 on September 10, 1985.
34. Yellow Creek Coal Sales paid management and consulting fees to PR & W of $158,798 during calendar year 1979, $146,898 during calendar year 1980 and $223,006 during calendar year 1981.
35. Fair and reasonable compensation paid to managers and supervisors of coal mining operations in Western Pennsylvania during the years material to this litigation was $50,000 to $75,000 per year.
36. On March 27, 1981, the United Mine Workers of America commenced a prolonged strike, resulting in a cessation of Pelbro's mining operations for approximately two and one-half months.
37. Pelbro did not engage in coal mining operations during the term of the strike.
38. Following the conclusion of the strike, all but two of Pelbro's employees returned to work with Pelbro, however, they did not return as union employees, and at no time thereafter was Pelbro a party to any further collective bargaining agreement with the United Mine Workers of America, nor obligated to make further contributions to the Pension Plan, resulting in Pelbro's withdrawal under ERISA from the Pension Fund.
39. In 1982, Pelbro was ordered by the Department of Environmental Resources of the Commonwealth of Pennsylvania to engage in substantial backfilling operations, requiring Pelbro to remove heavy equipment from its coal production operations and to devote the equipment and attendant manpower to backfilling and reclamation, at a considerable expense and resulting in a substantial decrease in coal production.
40. During 1982, Pelbro encountered an unexpected geologic fault, from a vein of coal previously mined by Pelbro of approximately 38 inches, dipping and rolling down to meager veins of, at times, 6 inches, in the coal seams at its Brush Valley job, resulting in a total, catastrophic loss of its coal reserves.
41. From time to time, Pelbro borrowed funds from banks, from its shareholders, from PR & W and from Yellow Creek Coal Sales.
42. On March 27, 1981, the sum of the non-bank loans outstanding to Pelbro was $255,000, comprised of a loan from Nestor Peles of $90,000, Yellow Creek Coal Sales $35,000 and PR & W $130,000.
43. By August 31, 1983, the aggregate of the non-bank loans to Pelbro had risen to $569,853, an increase of $314,853 over the loan balances at August 31, 1981. The August 31, 1983 loan balance was comprised of loans due PR & W of $73,053, Yellow Creek Coal Sales of $154,400, Nestor Peles of $132,101, Nicholas Rend of $73,500, Stephen Peles of $73,500, Linda Kohut Peles of $23,299 and Ren-Koe of $40,000. These additional loans were made to Pelbro to enable Pelbro to comply with the backfilling order of the Department of...
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