Anker Energy Corp. v. Consolidated Coal Co.

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Precedential or Non-Precedential: Non-Precedential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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NOT PRECEDENTIAL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