Anker Energy Corp. v. Consolidated Coal Co. , 84 F. App'x 182 ( 2003 )


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  •                                                                                                                            Opinions of the United
    2003 Decisions                                                                                                             States Court of Appeals
    for the Third Circuit
    12-22-2003
    Anker Energy Corp v. Consol Coal Co
    Precedential or Non-Precedential: Non-Precedential
    Docket No. 03-1590
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    Recommended Citation
    "Anker Energy Corp v. Consol Coal Co" (2003). 2003 Decisions. Paper 34.
    http://digitalcommons.law.villanova.edu/thirdcircuit_2003/34
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    NOT PRECEDENTIAL
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    ____________
    No. 03-1590
    ____________
    ANKER ENERGY CORPORATION;
    KING KNOB COAL CO., INC.,
    Appellants
    v.
    CONSOLIDATED COAL COMPANY; UNITED
    MINE WORKERS OF AMERICA COMBINED
    BENEFIT FUND; MARTY D. HUDSON, Trustee;
    MICHAEL H. HOLLAND; Trustee; THOMAS O.S.
    RAND, Trustee; ELLIOTT A. SEGAL, Trustee;
    CARLTON R. SICKLES, Trustee; GAIL R.
    WILENSKY, Trustee; WILLIAM P. HOPGOOD,
    Trustee; *JO ANNE BARNHART, Commissioner
    of Social Security Administration
    *(Pursuant to Rule 43(c) F.R.A.P.)
    ____________
    Appeal from the United States District Court
    For the Western District of Pennsylvania
    D.C. No.: 96-cv-01938
    District Judge: Honorable William L. Standish
    ____________
    Argued: October 22, 2003
    Before: ALITO, FUENTES, and ROSENN, Circuit Judges.
    (Filed: December 22, 2003)
    Paul A. Manion (Argued)
    Manion, McDonough & Lucas
    600 Grant Street, Suite 1414
    Pittsburgh, PA 15219
    Counsel for Appellants
    Edwin J. Strassburger (Argued)
    H. Yale Gutnick
    David A. Strassburger
    Strassburger, McKenna, Gutnick & Potter
    322 Boulevard of the Allies, Suite 700
    Pittsburgh, PA 15222
    Counsel for Appellees
    ____________
    OPINION OF THE COURT
    ____________
    ROSENN, Circuit Judge.
    This appeal presents to this court for the second time an issue that has its genesis in
    the terms of a Settlement Agreement entered into by the parties in 1982. Consolidated
    Coal Company (“Consol”), a long-time coal operator, decided to supplement its coal
    production by contracting in 1975 with King Knob, a contract mining company, to mine
    coal from Consol’s Booth and Robinson Run properties in West Virginia. In addition to
    paying King Knob a sum for each ton of coal mined and delivered to Consol, Consol paid
    directly to the United Mine Workers of America Fund (UMWA) all pension and health
    benefits that King Knob was contractually obligated to make on behalf of its miners.
    In 1982, due to a reduction in the demand for coal, Consol terminated both
    2
    contract mining agreements with King Knob. Consol also ceased making the
    contributions for pension benefits and ceased reimbursing King Knob for premiums for
    health benefits that King Knob was contractually obligated to make on behalf of its
    UMWA-represented miners. King Knob complained that the terminations were
    wrongful, leading to settlement negotiations with Consol. They executed a written
    Settlement Agreement in October 1982, which is the subject of this litigation.
    Under paragraph 4(b), Consol agreed to:
    promptly reimburse King Knob for all subsequent payments
    due to the UMWA Fund or any successor fund attributable to
    (i) tonnage of coal produced under the Contracts, (ii) hours
    worked at the mine operated under the Robinson Run
    Contract on or before August 31, 1982, and (iii) hours worked
    at the mines operated under the Booth Contract on or before
    June 30, 1982.
    Due to significant under-funding by the late l980s of the 1950 UMWA Benefit Plan
    and the 1974 UMWA Benefit Plan, Congress enacted the Coal Industry Retiree Health
    Benefit Act (the Coal Act) in 1992, approximately ten years after the execution of the
    Settlement Agreement in this case, which changed the funding mechanism. If the
    signatory operator of an eligible beneficiary of the Combined Fund is no longer in
    business, the eligible beneficiary is assigned for the benefits to a “related person” of the
    signatory operator, which includes “a member of the controlled group of corporations
    which includes the signatory operator.” 
    26 U.S.C. § 9701
    (c)(2)(A).
    On March 30, 1994 and June 30, 1995, the Commissioner of Social Security
    3
    (Commissioner), pursuant to the Coal Act, assigned eligible beneficiaries of the Combined
    Fund to Anker Energy Corporation (Anker). The assignments included, among others,
    eligible beneficiaries who had worked for King Knob at the Booth and Robinson Run
    properties pursuant to the contract mining agreements between Consol and King Knob.
    These assignments were made to Anker, not as a coal operator, but based solely on
    Anker’s status as a “related person” to King Knob.1
    Anker paid the sum due from King Knob to the Combined Fund and instituted these
    proceedings to recover the money so paid from Consol. Upon remand, following our
    decision in Anker Energy corp. v. Consolidated Coal Co., 
    177 F.3d 161
     (3d Cir.), cert.
    denied, 
    528 U.S. 1003
     (1999)(“Anker I”), the District Court held that neither King Knob
    nor Anker were eligible as a matter of law for reimbursement of the payments made under
    the Coal Act. Anker I at 168. We rejected the District Court’s judgment as a matter of
    law in Anker I and concluded that the District Court’s disposal of the issue on the
    pleadings “was premature, and that further proceedings with respect to it are necessary.”
    
    Id.
     On remand, and after discovery, the District Court again entered summary judgment
    for Consol. King Knob and Anker timely appealed. For reasons that follow, we again
    reverse and remand for trial.
    1
    An affiliate of Anker acquired King Knob in 1975. Anker I, 
    177 F.3d at 167
    .
    Consol states in its brief that King Knob was 100 percent owned by Vantrans, Inc.,
    which in turn was 100 percent owned by Vebe International, Inc., of which Anker
    is a subsidiary. Consol’s Brief at 6. “In human terms, King Knob and Anker are
    related in the third degree of consanguinity, i.e., nephew/uncle.” 
    Id.
    4
    I.
    In this appeal, Anker contends, as it did in the District Court, that it has a
    recoverable claim against Consol for breach of the Settlement Agreement because Anker’s
    liability is secondary and it is, therefore, subrogated to King Knob’s rights under the
    Settlement Agreement for the payment it made to the Combined Fund. King Knob asserts
    that it has a claim under the Settlement Agreement because payment is not a condition
    precedent to Consol’s obligation.
    Because the pertinent history of the Bituminous Coal Wage Agreement, the Coal
    Act legislation, and the significant facts leading to the present appeal are set forth in Anker
    I, we limit our references to them.
    Consol was a member of the Bituminous Coal Operators Association (BCOA)
    during the relevant period. As a member of the BCOA, Consol was bound by the National
    Bituminous Coal Wage Agreements (NBCWA) executed by the BCOA and the United
    Mine Workers of America (UMWA) in relation to employee benefits for UMWA-
    represented coal miners and retirees. A coal operator that was not a member of the BCOA
    could agree to be bound by the terms of an NBCWA by signing a “me too” agreement.
    In the l970s, Consol owned coal lands in West Virginia, including properties known
    as the Booth property and the Robinson Run property. When the demand for coal was
    high, Consol utilized contract mining companies to supplement its coal production.
    Therefore, on April 1, 1975, Consol contracted with King Knob to have it perform the
    5
    services of a contract coal miner for Consol at the Booth property. On September 1, 1977,
    Consol entered into a similar mining agreement with King Knob for the removal of coal
    under the Robinson Run property.
    When utilizing a contract mining company on one of its properties, Consol had a
    policy of making all payments for pension and health benefits directly to the UMWA Fund
    that the contractor mining company contractually was obligated to make on behalf of its
    miners. The contract mining agreements for the Booth and Robinson Run properties
    contained provisions to effectuate this policy. 2
    In 1978, the structure of the earlier benefit plan known as the 1974 UM WA Benefit
    Plan was changed. The 1978 plan required each signatory operator, including Consol and
    2
    The Booth contract provided in relevant part:
    4.    Consol shall pay, on all coal delivered by [King Knob] and accepted
    by Consol, the prevailing rate payable to the United Mine Workers of
    America Welfare Retirement Plans and Trusts under the contract existing
    between the United M ine Workers of America and Consol, which said
    payments shall not be deducted or credited against the amounts to be paid to
    [King Knob] hereunder.
    The Robinson Run contract provided in relevant part:
    7.     King [Knob] shall furnish to Consol by the third working day of each
    month its man-hours for the preceding month. Consol shall pay into the
    United Mine Workers of America Benefit Trusts such amount as may be
    required under the National Bituminous Coal Wage Agreement then in
    force and effect, on such man-hours and on each ton of bituminous coal
    sold by Consol which is produced under this contract, and Consol shall
    furnish to King [Knob] a copy of its advice letter of payment of such sum to
    the Benefit Trusts.
    6
    King Knob, to provide health benefits for their active UMWA-represented miners and
    their UMWA-represented retirees eligible to receive health benefits from the 1974
    UMWA Benefit Plan through an individual employer plan. Pursuant to the 1978 plan,
    King Knob, which had signed a “me too” agreement and became thereby a signatory to the
    then current NBCWA, implemented its own plan by purchasing health insurance for its
    employees. As a result, beginning in 1978, under the contract mining agreements for the
    Booth and Robinson Run properties, Consol reimbursed King Knob for the cost of
    premiums paid by King Knob to fund its individual employer plan.
    II.
    Count II of the amended complaint alleges that Consol was responsible for the
    benefits paid on behalf of the eligible beneficiaries assigned to Anker under the Coal Act
    based on the provisions of paragraph 4 of the Settlement Agreement and that Consol had
    breached its obligations under the Settlement Agreement. 3 In its earlier and unpublished
    3
    Specifically, Count II of the amended complaint, entitled “Liability of Consol
    under the Settlement Agreement,” alleges:
    44.   Under the Settlement Agreement, Consol retained the liability
    for all amounts that were assessed or might be assessed for all King Knob
    retirees and miner who worked for King Knob prior to June 30, 1982 on the
    Booth contract and prior to August 31, 1982 on the Robin Run contract.
    Consol is obligated to pay and satisfy any and all amounts to the Combined
    Fund (as a successor fund) that have been and may be assessed against
    Anker or King Knob under the [Coal] Act for retirees, spouses and
    beneficiaries covered by the Consol and King Knob contract mining
    agreements.
    7
    opinion, the District Court granted Consol’s motion for judgment on the pleadings as to
    Count II on two grounds. First, the District Court held that King Knob and Anker were
    not eligible as a matter of law for reimbursement of the payments that they were required
    to make under the Coal Act. Anker I, 
    177 F.3d at 168
    . The court reasoned that unlike the
    payments due under the Settlement Agreement, the premiums under the Coal Act were not
    attributable to the tonnage of coal produced and the number of hours worked under the
    contract mining agreements. 
    Id.
     The court concluded that the Combined Fund was not a
    “successor fund” within the meaning of the Settlement Agreement. 
    Id.
     Second, relying on
    Carbon Fuel Co. v. USX Corp., 
    100 F.3d 1124
     (4th Cir. 1996), the District Court held that
    even if Anker was entitled to reimbursement under the Settlement Agreement, Consol
    would be nevertheless entitled to judgment as a matter of law because, in the court’s
    opinion, the Coal Act had abrogated pre-Act contracts reallocating mining companies’
    obligations to pre-Act benefit plans. Anker I at 168.
    We rejected for reasons stated in our opinion both of the grounds relied on by the
    District Court for its judgment as a matter of law in Anker I. We also made it very clear in
    that opinion that the Coal Act “does not abrogate a private party’s liability to another
    private party for indemnification.” 
    Id. at 178
    .
    Following our remand, Consol again filed a motion for summary judgment as to
    Count II on three new grounds. Specifically, it asserted first that King Knob was not
    entitled to reimbursement under the Settlement Agreement because it had not made any
    8
    payments to the Combined Fund for its retirees’ health benefits. Second, because Anker
    was not a party to the Settlement Agreement between Consol and King Knob, Consol
    asserted that Anker had no right to reimbursement under the agreement for its payments to
    the Combined Fund. Finally, Consol contended that the indemnification clause, paragraph
    4(b) of the Settlement Agreement, did not apply to health benefits, but was limited to
    contributions to the 1974 UM WA Pension Plan for pension benefits. In opposition to
    Consol’s motion for summary judgment, King Knob and Anker argued that Consol had
    waived these arguments because they were not raised in Consol’s earlier motion for
    judgment on the pleadings or during the appeal from the District Court’s order granting
    that motion. They also argued that genuine issues of material fact existed precluding
    summary judgment.
    The District Court rejected plaintiffs’ waiver argument, concluding that the waiver
    provision of Federal Rule of Civil Procedure 12(g) applies only to a pre-answer motion
    and not to a motion for summary judgment. The court rejected the waiver argument also
    on the ground that Consol’s defense that the plaintiffs had failed to state a claim upon
    which relief may be granted, which was the essence of its arguments, may be asserted at
    any time before a decision on the merits of the case.4
    With respect to King Knob’s claim for reimbursement against Consol, the District
    4
    King Knob and Anker on appeal have not objected to the District Court’s ruling
    in this regard, and, therefore, we do not review the ruling.
    9
    Court agreed with Consol’s argument that King Knob had no right to indemnification
    under Pennsylvania law because it had never paid the premiums for health benefits due the
    Combined Fund under the Coal Act. (Dist. Ct. op. at 19.) The court, accordingly, granted
    Consol summary judgment as to King Knob’s claims of indemnity and breach of contract.
    With respect to Anker’s claim for reimbursement against Consol, the District Court
    rejected Anker’s argument that it was entitled to reimbursement under the doctrine of
    equitable subrogation. Relying on this Court’s summary of Pennsylvania’s case law in
    Tudor Dev. Group, Inc. v. United States Fidelity & Guaranty Co., 
    968 F.2d 357
    , 361 (3d
    Cir. 1992), and United States Fidelity & Guaranty Co. v. United Penn Bank, 
    524 A.2d 958
    ,
    963-64, alloc. denied, 
    536 A.2d 1333
     (Pa. 1987), the court concluded that the doctrine of
    equitable subrogation was not available to Anker for three reasons. First, Anker was
    primarily, not secondarily, liable under the Coal Act for the premiums due the Combined
    Fund for health benefits for King Knob’s retirees who worked at the Booth and Robinson
    Run properties. Second, if subrogation applied, Anker might be subrogated to the rights of
    the Combined Fund, the obligee, and Anker’s claim of equitable subrogation would be
    asserted against King Knob, rather than Consol, because Anker had conceded that King
    Knob was primarily liable for the benefits payments under the Coal Act. Finally, the court
    concluded that the equities weighed against allowing Anker to recover from Consol
    because the related party to King Knob was Anker, not Consol, and because King Knob
    was the coal operator going out of business and “orphaning” its miners.
    10
    III.
    A.
    Anker argues on appeal that the District Court erred in ruling that the doctrine of
    equitable subrogation was unavailable to it. It asserts that the doctrine of equitable
    subrogation should be liberally construed and that it should be equitably subrogated to
    King Knob’s rights under the Settlement Agreement. Specifically, Anker argues that the
    District Court erred in holding that it could only be subrogated to the rights of the
    Combined Funds against King Knob, but not the rights of King Knob against Consol.
    Anker also contends that the District Court erred in holding that Anker’s direct liability to
    the Combined Fund barred the applicability of the doctrine of equitable subrogation, and
    that the equities favored Consol. Anker also argues that its payment has satisfied any
    payment requirement necessary for the applicability of the doctrine of equitable
    subrogation. Finally, Anker urges that it is entitled to “common law” indemnity from
    Consol.
    King Knob argues on appeal that the District Court erred in ruling that it had no
    claim for reimbursement against Consol because it had never made any payment to the
    Combined Fund. Specifically, King Knob asserts that payment is not a condition
    precedent to its claim against Consol pursuant to Consol’s liability under the Settlement
    Agreement, that Consol’s liability was triggered when payment was due the Combined
    Fund, and that Anker’s payment on behalf of King Knob satisfied any payment
    11
    requirement. Finally, both appellants contend that there is no merit to Consol’s alternative
    argument in support of its motion for summary judgment, not addressed by the District
    Court, that its obligation under the Settlement Agreement is restricted to the 1974 UMWA
    Pension Plan for pension benefits and does not extend to health benefits of the retirees,
    which was paid by Anker.
    Consol’s arguments on this appeal follow its arguments made in support of its
    motion in the District Court for summary judgment. Specifically, in response to Anker’s
    argument that it is not primarily liable for the payments due the Combined Fund, Consol
    argues that Anker and King Knob are “jointly and severally” liable for the payments and
    that they are “alter egos” or “joint obligors” under the Coal Act. Consol argues
    additionally that Anker made the payments on behalf of itself, rather than King Knob,
    because its liability was primary under the Coal Act. Consol argues alternatively that its
    obligation under the Settlement Agreement is restricted as a matter of law to the 1974
    UMWA Pension Plan for pension benefits and does not extend to health benefits of the
    retirees, which was paid by Anker.
    B.
    Anker’s claim for reimbursement pursuant to the Settlement Agreement must be
    understood in the context of its status as a joint obligor with King Knob under the Coal
    Act for being a “related person” to King Knob. In treating them as essentially one entity
    for purposes of Coal Act liability but as two distinct entities for purposes of contractual
    12
    indemnity, the District Court erred in elevating form over substance. Admittedly, Anker
    was not a party to the Settlement Agreement executed between King Knob and Consol.
    Anker would have no standing to assert a claim for breach of contract or for contractual
    indemnity under the Settlement Agreement if this action were purely an action for breach
    of contract. Anker’s status as a joint obligor with King Knob under the Coal Act,
    however, transforms it from an outsider to an interested insider as to the Settlement
    Agreement and gives it standing.
    Under the Coal Act, Anker and King Knob were treated as a “single employer” and
    were “jointly and severally” liable for the payments to the Combined Fund. See Berwind
    Corp. v. Comm’r of Social Security, 
    307 F.3d 222
    , 226 (3d Cir. 2002). This court stated
    in Berwind: “The Coal Act sets forth several provisions that, taken together, treat a
    commonly controlled group of related corporations as a single employer.” 
    Id.
     “These
    ‘related persons’ have a broad, shared responsibility for statutory premiums. . . . [R]elated
    persons may be held ‘jointly and severally liable for any premium required to be paid’ by
    its affiliated signatory operator.” 
    Id.
     (citing 
    26 U.S.C. § 9704
    (a)). As stated by Consol in
    its brief, Anker and King Knob were “alter egos” or “joint obligors” for purposes of the
    Coal Act liability. Consol’s Brief at 22-25 (citing Berwind, at 226).
    Where, as here, two corporate entities are treated as a single entity or joint obligor
    for purposes of the Coal Act liability, they must be similarly treated for purposes of
    indemnity. It would be both inconsistent and inequitable not to regard the payment made
    13
    by the affiliate corporation Anker in behalf of its related subsidiary, King Knob, as
    payment for purposes of contractual indemnity. Undoubtedly, but for King Knob’s
    inability to pay, Anker would not have made the payments. As between them, King Knob
    as the employer was primarily liable under its agreements with UMWA and Anker was
    secondarily liable under the Coal Act obligations. When Anker became liable under the
    Coal Act as the alter ego of King Knob, as asserted by Consol, Anker’s payments in behalf
    of King Knob must also be deemed as King Knob’s payments by virtue of their status as
    joint obligors. See Restatement (Second), Contracts § 293 (1981). Accordingly, we hold
    that because King Knob and Anker are a single entity for purposes of liability under the
    Coal Act, they must be similarly regarded for purposes of contractual indemnity to recover
    the payments made pursuant to the Act.
    C.
    We reject Consol’s alternative argument that the indemnity clause, paragraph 4(b)
    of the Settlement Agreement, does not apply as a matter of law to the premiums due the
    Combined Fund for health benefits because that clause, according to Consol, applies only
    to payments for pension benefits due the 1974 Pension Trust or a successor thereto. We
    note that from 1975 to 1978 Consol had a policy of making all payments directly for both
    pension and health benefits on behalf of King Knob to avoid the risk of a strike over
    benefits at a contract mine. (Dist. Ct. Op. at 4.) We note also that from 1978 to at least
    1982, Consol directly reimbursed King Knob for the cost of health insurance premiums it
    14
    paid to fund its individual employer plan, rather than making payments directly to the 1974
    UM WA Benefit Plan. Id. at 5-6. The history of the arrangement between Consol and
    King Knob, during which Consol had paid health benefits on behalf of King Knob or
    reimbursed King Knob for the health insurance premiums paid by King Knob, belies
    Consol’s argument that the indemnity clause does not apply as a matter of law to such
    reimbursement. The language of the indemnity clause, paragraph 4(b) of the Settlement
    Agreement, does not so provide.
    We reiterate now, as we stated in Anker I, 
    177 F.3d at 176-77
    , that there are
    genuine issues of material fact as to the nature and scope of Consol’s obligation under the
    indemnity clause, precluding summary judgment.
    IV.
    For the foregoing reasons, the judgment of the District Court as to Count II of the
    amended complaint will be reversed and the case remanded to the District Court with
    directions to proceed to trial to ascertain whether Consol was obligated under the
    Settlement Agreement to reimburse Anker/King Knob for their payments made under the
    Coal Act. Costs taxed against Consolidated Coal Company.
    15
    TO THE CLERK:
    Please file the foregoing opinion.
    /s/ Max Rosenn
    Circuit Judge
    16
    

Document Info

Docket Number: 03-1590

Citation Numbers: 84 F. App'x 182

Judges: Alito, Fuentes, Rosenn

Filed Date: 12/22/2003

Precedential Status: Non-Precedential

Modified Date: 10/19/2024