UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

THE BOARD OF TRUSTEES OF THE

INTERNATIONAL BROTHERHOOD OF

ELECTRICAL WORKERS, Local #141

Pension Fund ("The Fund"); GEORGE

P. STEFANOW; PATRICK J.

MCDERMOTT; RICHARD W. YAHN;

EDMUND J. YAHN; HOWARD ALLEN,

as Trustees of the fund ("Trustees"),

Plaintiffs-Appellees,

and

DANIEL B. AMEND; JAMES No. 95-2802

STUBENROD; HOWARD ALLEN;

EDMUND J. YAHN; JOHN KEMP, SR.;

LEWIS CRIMINSKI; PAUL W. SIMONS;

JOSEPH L. SBERNA, individually and

as former trustees,

Plaintiffs,

v.

THE AETNA CASUALTY & SURETY

COMPANY, a foreign corporation,

Defendant-Appellant.
THE BOARD OF TRUSTEES OF THE

INTERNATIONAL BROTHERHOOD OF

ELECTRICAL WORKERS, Local #141

Pension Fund ("The Fund"); GEORGE

P. STEFANOW; PATRICK J.

MCDERMOTT; RICHARD W. YAHN;

EDMUND J. YAHN; HOWARD ALLEN,

as Trustees of the fund ("Trustees"),

Plaintiffs-Appellants,

and

DANIEL B. AMEND; JAMES No. 95-2826

STUBENROD; HOWARD ALLEN;

EDMUND J. YAHN; JOHN KEMP, SR.;

LEWIS CRIMINSKI; PAUL W. SIMONS;

JOSEPH L. SBERNA, individually and

as former trustees,

Plaintiffs,

v.

THE AETNA CASUALTY & SURETY

COMPANY, a foreign corporation,

Defendant-Appellee.

Appeals from the United States District Court

for the Northern District of Virginia, at Wheeling.

Frederick P. Stamp, Chief District Judge.

(CA-93-199-CV-5)

Argued: December 5, 1996

Decided: January 27, 1997

Before WILKINS and LUTTIG, Circuit Judges, and BUTZNER,

Senior Circuit Judge.

_________________________________________________________________

 2
Affirmed in part, vacated in part, and remanded by per curiam unpublished opinion.

_________________________________________________________________

COUNSEL

ARGUED: Thomas A. Doyle, BAKER & MCKENZIE, Chicago,

Illinois, for Appellant. Patrick Stanley Cassidy, CASSIDY, MYERS,

COGAN, VOEGELIN & TENNANT, L.C., Wheeling, West Virginia,

for Appellees. ON BRIEF: Donald J. Hayden, Lisa S. Brogan,

BAKER & MCKENZIE, Chicago, Illinois; Avrum Levicoff,

ANSTANDIG, LEVICOFF & MCDYER, Pittsburgh, Pennsylvania,

for Appellant. Wray V. Voegelin, CASSIDY, MYERS, COGAN,

VOEGELIN & TENNANT, L.C., Wheeling, West Virginia, for

Appellees.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Appellees/cross-appellants, the Board of Trustees of the International Brotherhood of Electrical Workers Local #141 Pension Fund

(the "Fund"), purchased a "Pension and Welfare Fund Fiduciary

Responsibility Insurance Policy" from appellant/cross-appellee Aetna

Casualty & Surety Co. ("Aetna") in 1978. The policy provided in relevant part:

I. INSURING AGREEMENT

The Company will pay on behalf of the Insured all sums

which the Insured shall become legally obligated to pay as

Damages on account of any claim made against the Insured

for any Wrongful Act.

 3
. . .

(3) "Damages" shall mean sums of money payable as compensation for loss or in discharge of an

obligation of an Insured to make good a shortage

in the Insured Trust or Employee Benefit Fund.

The word "Damages" shall not include:

(a) Fines, penalties, taxes, or punitive or

exemplary damages.

J.A. at 53.

From 1986-1988, the Fund's then-incumbent board of trustees (the

"former trustees") failed to timely sign formal amendments to the

pension plan's governing documents required by three different taxrelated statutes, and, as a result, the Fund's tax exempt status was

drawn into question. See J.A. at 187. In 1989, the former trustees

attempted to amend retroactively the Fund's governing documents to

comply with these laws. Additionally, they sought a determination

from the IRS that the pension plan, as amended, remained qualified

as tax exempt during these years. See id. The IRS took the position

that the former trustees had failed to amend the plan by the required

compliance dates under the three statutes and thus that the Fund did

not qualify for tax exempt status in 1986-88. See J.A. at 187-88. After

negotiations with the IRS, the Fund participated in the IRS's "Closing

Agreement Program" ("CAP"), ultimately paying to the United States

Treasury $142,000 in order to maintain its tax exempt status for the

years in question. See J.A. at 189.

Prior to consummation of this transaction between the IRS and the

Fund, however, the Fund filed a claim for insurance coverage with

Aetna, which Aetna eventually denied. Aetna denied coverage on the

ground that the Fund's payment to the IRS constituted a tax, and the

insurance policy explicitly excluded coverage for taxes owed. See

J.A. at 188-89.

Prior to concluding its transaction with the IRS, the Fund's current

trustees also filed suit against the Fund's former trustees (the "trustee-

 4
trustee suit"), alleging that the former trustees breached their fiduciary

duty by failing to sign the amendments. The Fund claimed as damages in this suit solely the amount that the Fund was negotiating to

pay to the IRS under CAP, together with attendant attorney's fees.

See id. The parties to this trustee-trustee suit ultimately entered into

a court-approved consent judgment against the former trustees for

$293,478.22 (representing the $142,000 payment to the IRS plus

attorney's fees), plus interest at 10% per annum. See id. The settlement provided that the Fund would not seek to execute the judgment

against the personal assets of the individual former trustees, but,

rather, would look solely to Aetna in order to satisfy the judgment.

See J.A. at 122. The former trustees also assigned any and all rights

against Aetna to the Fund. See id.

Subsequent to executing the CAP settlement with the IRS, the current trustees sued Aetna for a declaratory judgment that Aetna was

liable under the policy either for the CAP payment or for the judgment awarded in the trustee-trustee suit. See J.A. at 189. On crossmotions for summary judgment, the court rendered judgment in favor

of the Fund, holding that the Fund's payment to the IRS was neither

a "tax" nor a "penalty," and thus that the payment did constitute

"damages" covered under the policy. See J.A. at 193-95. Alternatively, the district court found that Aetna was liable to pay the former

trustees' debt to the current trustees arising from the consent judgment in the trustee-trustee suit, because this sum, although based

solely on the sum paid to the IRS, was clearly tort law damages for

breach of fiduciary duty rather than a tax or a penalty. See J.A. at 195-

96. Although the district court awarded the Fund a total of

$293,478.22 (the exact amount of the judgment in the trustee-trustee

litigation), the court denied the plaintiff's request for "costs, additional attorney's fees, prejudgment interest and damages for annoyance and inconvenience." J.A. at 197.

From the district court's grant of summary judgment, Aetna

appeals. The Fund cross-appeals the district court's failure to award

pre-judgment interest and attorney's fees. For the reasons that follow,

we affirm the district court's grant of summary judgment. However,

we remand the damages issue to the district court because, although

the district court properly exercised its discretion by declining to

 5
award pre-judgment interest, the Fund is entitled to the award of attorney's fees under West Virginia law.

I.

If Aetna is liable to the Fund for either the judgment awarded in

the trustee-trustee suit or for the Fund's payment to the IRS pursuant

to the CAP settlement, then summary judgment was properly granted

to the Fund. We conclude that Aetna is, indeed, liable to the Fund for

the judgment awarded against the former trustees in the trustee-trustee

suit. Accordingly, we need not, and do not, reach the question of

Aetna's liability for the Fund's payment to the IRS pursuant to the

CAP settlement.

Under the express terms of the settlement agreement and consent

judgment reached in the trustee-trustee litigation, the Fund obtained

all rights that the former trustees possessed against Aetna. The former

trustees agreed to pay $293,478.22 in exchange for their release from

liability for an admitted breach of fiduciary duty in failing to ensure

that the Fund's charter was formally amended. Because the former

trustees are also insured under the Aetna policy, this amount is a

"sum[ ] which the Insured [is] legally obligated to pay as Damages on

account of [a] claim," and therefore Aetna is obligated to pay this

amount to the Fund (standing in the shoes of the former trustees),

under the express terms of Part I of the insuring agreement. J.A. at

53.

Aetna agrees that, generally, a breach of fiduciary duty is covered

under its policy. It argues, however, that the damages award in the

trustee-trustee suit is, in reality, a tax or a penalty, because the damages award was in the amount of the Fund's tax liability, as agreed

upon with the IRS. "The underlying tax or penalty liability is not

changed," Aetna contends, "by claiming that a tort occurred that

caused one to be liable for those taxes." Appellant's Br. at 28. Therefore, it argues, the former trustees' payment to the Fund is excluded

from coverage under Exclusion 3(a) of the Aetna insurance policy.

While we are not unsympathetic to this argument, absent a claim

that the trustee-trustee litigation was a sham,* we are ultimately

_________________________________________________________________

*The district court expressly holding that the trustee-trustee suit was

"not a sham and [ ] permissible." J.A. at 196. Aetna does not argue on

 6
unpersuaded. Even though the $293,478.22 recovery in the trusteetrustee suit was based entirely upon the amount the Fund paid the IRS

in settlement of the Fund's tax liability, the award in the trusteetrustee suit is unquestionably a tort law compensatory damage award.

As such, the award simply does not constitute a"[f]ine[ ], penalt[y],

tax[ ], or punitive or exemplary damages" award. See J.A. at 53. Consequently, the award is not excluded by the express terms of Exclusion 3(a) of the insuring agreement.

Even were it less clear that the award falls outside any of the contract's exclusions from coverage, Aetna could not be relieved of its

contractual obligation to the Fund. "`It is well settled law in West Virginia that [ambiguous terms in] insurance contracts are to be strictly

construed against the insurance company and in favor of the

insured.'" National Mut. Ins. Comp. v. McMahon & Sons, Inc., 356

S.E.2d 488, 494 (W. Va. 1987) (quoting West Virginia Pub. Employees Ins. Bd. v. Blue Cross Hosp. Serv., Inc. , 328 S.E.2d 356, 359 n.3

(W. Va. 1985)) (alterations in original). This rule applies especially

"where the policy language involved is exclusionary" so that "the purpose of providing the indemnity will not be defeated." Id. If the contract is not clear that the judgment award in the trustee-trustee suit is

neither a "tax" nor a "penalty," it is, at the very least, ambiguous as

to whether it is either.

We therefore hold that the district court did not err in concluding

that Aetna is liable to the Fund for the tort law damages awarded in

the trustee-trustee suit.

II.

The district court, stating that there was no evidence in the record

that Aetna acted in bad faith, did not grant the Fund's request for prejudgment interest in the amount of the post-judgment interest awarded

in the trustee-trustee suit or the Fund's request for attorneys fees

incurred in pursuing the instant declaratory judgment action. The

Fund argues that, in these regards, the district court erred. For the rea-

_________________________________________________________________

appeal -- and we find no basis in the record for holding -- that this conclusion is clearly erroneous.

 7
sons that follow, we affirm the district court's decision not to award

pre-judgment interest in the amount of the post-judgment interest

awarded in the trustee-trustee suit. However, we vacate and remand

the damages award because the Fund is entitled to receive reasonable

attorney's fees for pursuing this declaratory judgment action.

In the trustee-trustee litigation, the district court awarded to the

Fund $293,478.22, plus interest at the agreed-upon annual rate of

10%. In the instant declaratory judgment action against Aetna, however, the district court did not award interest, at either the market rate

or the rate awarded in the trustee-trustee case, when it awarded the

$293,478.22 judgment in favor of the Fund. This disparity between

the two awards created an inconsistency between the amount the former trustees were ordered to pay to the current trustees and the

amount Aetna was ordered to pay to the current trustees on behalf of

the former trustees. The "loss" thereby created falls on the Fund, since

it has agreed not to collect against the former trustees.

The Fund argues that it is entitled to some interest on the amount

awarded in the trustee-trustee litigation, either at the agreed rate of

10% or the market rate, citing, inter alia, 28 U.S.C. § 1961(a); United

States v. Michael Schiavone & Sons, Inc. 450 F.2d 875 (1st Cir.

1971); and Hymel v. UNC, Inc., 994 F.2d 260 (5th Cir. 1993). We

reject this argument. Because the post-judgment interest on amounts

awarded in the trustee-trustee lawsuit is pre-judgment interest with

respect to the instant declaratory judgment action, the award of interest lies within the sound discretion of the trial court, see Coliseum

Cartage Company, Inc. v. Rubbermaid Statesville Inc., 975 F.2d

1022, 1026 (4th Cir. 1992). Here, given the absence of any evidence

of bad faith on the part of Aetna, we cannot conclude that the district

court abused its discretion in not awarding the pre-judgment interest

requested by the Fund.

The Fund is, however, entitled to reasonable attorney's fees

incurred pursuing its declaratory judgment. The settlement agreement

in the trustee-trustee lawsuit assigned from the former trustees to the

Fund "any and all rights of action, claims and demands [the former

trustees] may have against Aetna. . . ." J.A. at 222. Under West Virginia law, an insured who substantially prevails in any declaratory

judgment action against his insurer is entitled to recover attorneys

 8
fees, regardless of whether the insurer acted in good faith. See Aetna

Casualty & Surety Co. v. Pitrolo, 342 S.E.2d 156 (W. Va. 1986);

Hayseeds, Inc v. State Farm Fire & Casualty , 352 S.E.2d 73 (W. Va.

1986). Since the Fund prevailed in this case, it is entitled to collect

attorney's fees, just as the former trustees would have been entitled

to receive such fees if they had pursued the matter themselves. We

remand to the district court to determine the reasonable level of attorneys fees to be awarded in this case in light of the factors outlined in

Marshall v. Fair, 416 S.E.2d 67 (W. Va. 1992).

III.

The district court's grant of summary judgment in favor of the

Fund is affirmed. The damages award is vacated and the case

remanded for further proceedings to determine the amount of attorneys fees to which the Fund is entitled under the law of West Virginia.

AFFIRMED IN PART, VACATED IN PART, AND REMANDED 

 9