Court Opinion

ID: 8922118
Source: CourtListenerOpinion
Date Created: 2022-11-27 06:20:42.331868+00
Date Added: 2024-06-11T17:09:18.842942
License: Public Domain

SPROUSE, Circuit Judge,
dissenting:
I respectfully dissent.
The majority opinion is well-written and ultimately achieves a humane result, but I believe it places the financial burden for the retirees’ benefits on the wrong party. Allied, not the UMWA Benefit Trust Fund (Fund), should be .assessed the costs of these pensioners health and insurance benefits, for its breach of the 1978 Wage Agreement and ERISA caused the threatened cut-off.
The Fund’s principal purpose is to provide health and insurance coverage to 1974 UMWA pensioners whose last known employer is no longer in the coal-mining business. An employer no longer engages in coal-mining for the purposes of assigning liability to the Fund when it and its successors cease the sale, production or transportation of coal. Benefit Trust Agreement, Question and Answer, H-16. The Fund, in denying benefits to the nearly 200 pensioners involved in this appeal, found that Allied, though no longer in business itself, sold its operations to firms meeting the successor criteria. It ruled that, since these successors were still mining at the locations purchased from Allied, the Fund’s regulations prevented it from picking up the cost of the pensioners’ benefits.
The majority reverses this decision because it believes the Fund acted arbitrarily in denying benefits. See, e.g., Maggard v. O’Connell, 671 F.2d at 571. I cannot agree. A successor exists for the purpose of deciding the Fund’s liability if the purchaser (1) signs the 1978 NBCWA, (2) draws a majority of its employees from the seller, in this case Allied, (3) operates at the same geographical location performing essentially the same job functions, (4) has not suspended its operations for more than six months, and (5) either acquires a substantial portion of the seller’s assets or is owned and operated by the same people controlling the seller. The majority concedes that criteria (1), (3), and (4) have been met, but curiously finds no evidence that the successors drew a majority of their employees from Allied (2) or acquired a substantial portion of its assets (5).
The record and a fair reading of the Fund’s regulations, however, dispute the majority’s interpretation of the available evidence. The Fund, in reaching its decision on the retirees’ benefit applications, stated that Armco employed 159 former Allied workers in its 215 person work force, *135while Shannon employed 298 former Allied workers in its 401 person work force. None of the parties in this litigation have disputed these figures, yet the majority inexplicably ignores this information in placing liability on the Fund.
The majority further concludes that “[t]he Trustees did not address the question of the proportion of Allied’s assets acquired by Armco and Shannon”. This conclusion is simply wrong. The Fund’s opinion explicitly states that Allied “transferred most of the assets of its mines” to Armco and Shannon Pocahontas, a finding confirmed by Allied officials in testimony before the district court. I can only surmise that the majority overlooks this evidence because it believes that Allied’s total corporate assets, even those unrelated to coal mining, must be considered in determining whether it has sold a substantial part of its operations to a successor. The illogie of this position becomes evident, however, when one realizes that such a construction of the Fund’s criteria would virtually preclude large, diversified companies from ever having a smaller successor — an advantage I seriously doubt the drafters of the 1978 Wage Agreement intended to confer.
The Fund meticulously followed its rules and procedures in deciding the pensioners eligibility for benefits, and its substantive conclusion concerning the successorship status of Armco and Shannon Pocahontas was unassailable. In these circumstances, the Fund’s denial of benefits was anything but arbitrary and capricious. Maggard v. O’Connell, 671 F.2d at 570-571, See also UMWA v. Robinson, 455 U.S. 562, 102 S.Ct. 1226, 71 L.Ed.2d 419 (1982).
The majority’s error in placing liability on the Fund does not mean that the retirees should be denied continued benefits or even that the responsibility should be shifted to the successor companies, Armco and Shannon. Cf. Howard Johnson Co. v. Detroit Local Joint Executive Board, Hotel and Restaurant Employees’ Union, 417 U.S. 249, 94 S.Ct. 2236, 41 L.Ed.2d 46 (1974). In my mind, the threat to the pensioners’ benefits flows directly from Allied’s breach of the 1978 Wage Agreement and ERISA and consequently continued responsibility rests with it. '
In Article I of the 1978 Wage Agreement, Allied agreed that its [coal-mining] operations ... [would] not be sold, conveyed, or otherwise transferred ... to any successor without first securing the agreement of the successor to assume [Allied’s] obligations under this [contract].” It breached this agreement by selling its Harewood and McDowell County coal operations without passing along its pensioner obligations to the successors. The majority is not disturbed by this breach because Allied provided a form of alternative performance that guaranteed the pensioners’ benefits for the life of the 1978 contract. Article I of the 1978 Wage Agreement, however, guaranteed pensioners more than the right to benefits for the life of the contract; it provided an assurance that their interests would be fully protected if the health plans were later renewed in the 1981 National Bituminous Coal Wage Agreement. The right guaranteed through this assurance was contingent, but it is obvious value to the pensioners as demonstrated by the present controversy. Had Allied abided by the terms of Article I, Armco and Shannon would have entered the 1981 negotiations as the last responsible employers of the retirees. As such, they would have been obligated to negotiate with the union concerning the continual funding of the 1974 Benefit Fund. The companies may have succeeded in bargaining away these obligations or modifying the benefit arrangements, but the pensioners’ rights would have been finally decided by the same process that created them, collective bargaining. Allied’s breach short-circuited this process and removed the pensioners’ benefits from consideration at the bargaining table. The resulting threat to the pensioners continued benefits was a natural and foreseeable consequence of Allied’s self-serving unilateral action, and thus was remediable under the Hadley v. Baxendale rationale.
*136Finally, I believe the majority is mistaken when it concludes that the remedy ordered by the district court was not appropriate under ERISA. Section 1109 of the Act provides that “[a]ny person ... who breaches any of the responsibilities, obligations or duties imposed upon fiduciaries ... shall be subject to such other equitable or remedial relief as the court may deem appropriate.” (emphasis added). The senate committee reports discussing this provision emphasize that Congress intended to give courts broad discretion in fashioning a remedy that best carries out the purposes of the Act and is most advantageous to the participants and beneficiaries of the involved health and insurance plan. S.Rep. No. 93-127, 93d Cong., 1st Sess., reprinted in, 1974 U.S.Code Cong. & Admin.News 4639, 4838, 4871. See also Eaves v. Penn, 587 F.2d 453, 462-63 (10th Cir.1978); Freund v. Marshall & Ilsley Bank, 485 F.Supp. 629, 643 (W.D.Wis. 1979). These reports further emphasize that federal courts are to draw on principles of traditional trust law “in using [their] equitable and remedial powers to rectify ERISA violations” Eaves v. Penn, 587 F.2d at 462.
One of the remedies traditionally available to beneficiaries injured by a breach of trust is to be restored “to the position they would have occupied but for the breach.” Eaves, 587 LF.2d at 462. The district court, in the present case, attempted to accomplish just that by ordering Allied to continue paying the costs of the pensioners’ benefit package. Its decision furthered ERISA’s expressed goal of safeguarding worker benefits and was consistent with the broad remedial powers Congress granted to the courts. Accordingly, I would affirm the district court’s judgment.