Pocahontas Supreme Coal Co., Inc. v. Bethlehem Steel Corp.
| Decision Date | 22 October 1987 |
| Docket Number | VP-5,Nos. 86-3571,86-3614,86-3601,86-3604,s. 86-3571 |
| Citation | 828 F.2d 211 |
| Parties | 1987-2 Trade Cases 67,688, RICO Bus.Disp.Guide 6731 POCAHONTAS SUPREME COAL COMPANY INC.; Edward Borg, Plaintiffs-Appellants, v. BETHLEHEM STEEL CORPORATION, Jones & Laughlin Steel, Inc.; Island Creek Coal Company; Republic Steel Corporation; National Mines Corporation; National Steel Corporation; Beatrice Pocahontas Company; Beckley Coal Mining Company; Bethlehem Mines Corporation; Beth-Elkhorn Corporation; Bishop Coal Company; Consolidation Coal Company; Gateway Coal Company; Harmar Coal Company; Itmann Coal Company; Kanawha Coal Company; Mathies Coal Company; National Coal Mining Company; Olga Coal Company; Peter White Coal Mining Corp.; Remanco, Inc.;Mining Company; John Doe; Richard Roe; Inland Steel Corp., Defendants-Appellees, and Wheeling Pittsburgh Steel Corp.; Marty Corp.; Omar Mining Company, Defendants. (Two Cases) POCAHONTAS SUPREME COAL COMPANY INC.; Edward Borg, Plaintiffs-Appellees, v. BETHLEHEM STEEL CORPORATION, Island Creek Coal Company; Beatrice Pocahontas Company; Bethlehem Mine Corporation; Beth-Elkhorn Corporation; Bishop Coal Company; Consolidation Coal Company; Gateway Coal Company; Harmar Coal Company; Itmann Coal Company; Remanco, Inc.; Mining Company; Inland Steel Corp., Defendants-Appellants, and Jones & Laughlin Steel, Inc.; Republic Steel Corporation; National Mines Corporation; National Steel Corporation; Beckley Coal Mining Company; Kanawha Coal Company; Mathies Coal Company; National Coal Mining Company; Olga Coal Company; Peter White Coal Mining Corp.; John Doe; Richard Roe; Wheeling Pittsburgh Steel Corp.; Marty Corp.; Omar Mining Company, Defendants. POCAHONTAS SUPREME COAL COMPANY INC.; Edward Borg, Plaintiffs-Appellees, v. NATIONAL MINES CORPORATION; National Steel Corporation; Mathies Coal Company; National Coal Mining Company; Peter White Coal Mining Corp.; Defendants-Appellants, and Bethlehem Steel Corporation, Jones & Laughlin Steel, Inc.; Island Creek Coal Company; Republic Steel Corporation; Beatrice Pocahontas Company; B |
| Court | U.S. Court of Appeals — Fourth Circuit |
Andrew Apostile Raptis, Charleston, W.Va., Robert Becht, William M. Wycoff (Thorpe, Reed & Armstrong, Pittsburgh, Pa., on brief), for Pocahontas Supreme Coal Co., Inc. and Edward Borg.
Kathleen Merry Mills, Curtis H. Barnette, Bethlehem, Pa., on brief, for Bethlehem Steel Corp.
James Michael Brown, File, Payne, Scherer & Brown, Beckley, W. Va., (William Leonard Neary, on brief, for Jones & Laughlin Steel, Inc. and Republic Steel Corp.
W. Warren Upton (Winfield Turley Shaffer, Thomas J. Hurney, Jr., Jackson, Kelly, Holt & O'Farrell, Charleston, W.Va., on brief), for Island Creek Coal Co.
E. Glenn Robinson (Robinson & McElwee, Charleston, W.Va., on brief), for Nat. Mines Corp.
Robert F. Ruyak, Kevin P. O'Rourke, Howry & Simon, Washington, D.C., on brief, for Beckley Coal Mining Co., Kanawha Coal Co., and Olga Coal Co.
Before RUSSELL and PHILLIPS, Circuit Judges, James R. SPENCER, United States District Judge, sitting by designation.
Pocahontas Supreme Coal Co. and its sole stockholder, Edward Borg (collectively "Pocahontas"), sued the defendants, various coal mining companies, alleging a number of federal and state antitrust violations and a civil RICO violation. The district court dismissed some of the claims as time barred, and the others for failure to state claims under Fed.R.Civ.P. 12(b)(6). The court also declined to award attorney's fees to defendants as sanctions under Fed.R.Civ.P. 11. Both parties have appealed and we affirm on both appeals.
At the time in issue Pocahontas was a contract mining company that operated mines in McDowell and Wyoming Counties, West Virginia, until 1979. Appellant Edward Borg purchased the stock of Pocahontas in 1977. Appellees were companies engaged in the mining, purchasing, and selling of metallurgical coal in southern West Virginia.
From 1977 to 1979, Pocahontas entered into a series of at will contract mining agreements with appellee National Mines Corporation, a subsidiary of appellee National Steel Corporation. Pursuant to these agreements, Pocahontas mined coal on a particular tract of land, and National Mines paid Pocahontas a fixed price per clean ton delivered. National Mines then sold the coal to National Steel. On May 1, 1979, National Mines unilaterally terminated its agreements with Pocahontas.
Around February 1, 1980, Pocahontas sold its assets to another contract miner, Coal America, Inc. In consideration for this transfer of assets, Coal America agreed to pay Pocahontas a royalty per ton on all coal mined from the property. In January 1982, National Mines cancelled mining agreements with Coal America, agreements that served as a basis for the royalty payments from Coal America to Pocahontas.
Pocahontas then brought this action on December 19, 1984, against National Mines, National Steel and a number of other companies involved either directly or indirectly through affiliates in the mining and production of metallurgical coal in West Virginia. 1 The complaint charged as the principal basis of its several claims that the defendant companies had illegally exploited a web of subsidiary, affiliate, and contractual relationships to control the production and pricing of coal to Pocahontas's injury. Specifically, the complaint alleged that the various parent companies among defendants "deputized" persons to sit on the boards of competing subsidiaries and thereby created an interlocking directorate violative of Sec. 8 of the Clayton Act, 15 U.S.C. Sec. 19. The complaint further charged that through these interlocking directorates the defendants conspired to control the pricing and delivery of coal, thereby restraining trade in violation of the Sherman Act, 15 U.S.C. Secs. 1 et seq., as well as West Virginia Antitrust Law, W.Va.Code Secs. 47-18-1 et seq. Finally the complaint charged this general pattern of conduct as a civil claim under RICO, 18 U.S.C. Secs. 1961 et seq.
In more detail, Pocahontas asserted that National Mines's termination of the mining agreements with Pocahontas and Coal America was part of a general conspiracy among defendants to eliminate certain contract miners, including Pocahontas, and thereby to monopolize the trade in metallurgical coal in the relevant market area. Seeking to forestall time-bar defenses, Pocahontas asserted that it did not discover the existence of the alleged conspiracy until early 1984. Although they had inquired of National Mines from time to time about the low prices being paid for coal, National Mines's invariable response was market conditions. Only after searching through public records, including land title documents and mining applications at the West Virginia and Kentucky state mine agencies, and examining the many defendants' annual reports, had Pocahontas learned of the inter-relationships that alerted them to the bases for the claims made in their action.
The gist of Pocahontas's Clayton Act claim was that the various interrelationships that they eventually discovered between defendants made it possible for the parent corporations in the group to designate persons to sit on the boards of various competing subsidiaries of the parents. Because each such "planted" director acts as the agent or "deputy" of the designating parent, the effect is to create a type of interlocking directorate that violates Sec. 8 of the Clayton Act.
After a period of discovery, defendants moved to dismiss the action on a variety of grounds, and the district court dismissed on the grounds urged. Following entry of the judgment of dismissal, defendants moved for sanctions under Fed.R.Civ.P. 11, which the court denied.
This appeal by Pocahontas and cross-appeal by the defendants followed.
The district court properly dismissed Pocahontas's "interlocking directorates" claim under Sec. 8 of the Clayton Act.
Defendants' motion to dismiss this claim was made under Fed.R.Civ.P. 12(b)(6). But we think the district court in its eventual ruling properly acted upon it, though without formally so stating, as a motion for summary judgment under Fed.R.Civ.P. 12(b) which authorizes such a disposition when "matters outside the pleading are presented to and not excluded by the court." Here, following the filing of the 12(b)(6) motion, the defendants submitted, by direction of the court, memoranda of law particularizing their assertion that Pocahontas's Sec. 8 claim was not provable as alleged. Specifically they questioned whether Pocahontas's conclusory allegations, which essentially simply tracked the statutory language of Sec. 8, could be supported by the necessary hard evidence on certain key elements of the claim. Before ruling on the motion, as supported by these particularized assertions of deficiency, the district court allowed a period of discovery specifically devoted to the matters raised in the motion to dismiss. Pocahontas availed itself of this opportunity by serving and receiving responses to interrogatories which inquired extensively into the details of defendants' production, pricing, purchases, sales, capital structures, business names, business affiliation and subsidiaries, commercial relationships, and internal governance procedures. When the district court ruled on the motion, it had before it all of the pleadings, motion papers, and discovery materials related to this claim.
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