Petition — United Mine Workers v. Nedd

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re | FILED

OCT 27 1977

AK, JR., CLERK

IN THE :

Supreme Court of the Gnited States

October Term, 1977

No -@@-612'¢

UNITED MINE WORKERS OF AMERICA,

Petitioner,

Vv.

CHARLES NEDD, DOMINIC IERO, MAX DYNOSKI and AN-

THONY GANLY, Members of the Pensioned Anthra-

cite Coal Miners Protest Executive Committee, su-

ing on behalf of Themselves and All Other Members

of the CLASS OF PENSIONED ANTHRACITE COAL MIN-

ERS AND WIDOWS OF DECEASED PENSIONED ANTHRA-

CITE COALS MINERS,

Respondents,

and

EMMETT THOMAS, MART F. BRENNAN, AND JOHN

JILLSON, Trustees of the Anthracite Health and

Welfare Fund.

Petition for a Writ of Certiorari to the

United States Court of Appeals for the Third Circuit

HARRISON COMBS JOSEPH A. YABLONSKI

900—15th Street, N.W. DANIEL B. EDELMAN

Washington, D.C. 20005 Yablonski, Both & Edelman

1150 Connecticut Ave., N.W.

Washington, D.C. 20036

THOMAS N. O’NEILL, JR.

CAROL A. MAGER

Montgomery, McCracken

Walker & Rhoads

Three Parkway

Philadelphia, PA 19102

————— OOOO

TABLE OF CONTENTS

Page

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

EE «05s 0 cs Gabo ow 'ke ENOTES OND CoC Rb EON 1

ee a co ines na We neaseeaascuseees 2

oe ge ceeds (ake oe eaee Ne aw 2

QUESTIONS PRESENTED ............cceecccccccces 2

or rey, yg oy) | Se er Pr rrr 3

ye ves | sy it dies | fot | | amRIat RRSP rere 3

ih, I, hn cin a be aria U CIOS mab E.s 0089” 3

i See CN Sk cack occ C68: cat pene eo ees 8

C. The District Court’s Memorandum and Order .... 10

D. The Court of Appeals’ Opinion ...........655:. 12

REASONS FOR GRANTING THE WRIT ............. 13

I. IN OPENING THE WAY FOR ESTABLISHMENT

OF A FEDERAL COMMON LAW OF PENSION

AND WELFARE TRUST FUND ADMINISTRA-

TION, THE COURT OF APPEALS’ DECISION

CONTRADICTS A LONG-STANDING PATTERN

OF INTERPRETATION BY THIS COURT AND

THE COURTS OF APPEALS ON SECTIONS 801

AND 302 OF THE LABOR-MANAGEMENT RE-

8, EE PP ert e ey Lt RT eee 13

A. The Court of Appeals’ Finding of Federal Juris-

diction Under 302(e) And Its Declaration Of An

Impied Damage Remedy Thereunder Conflict

With Arroyo v. United States, 359 U.S. 419

(1959) And The Decisions Of Other Courts of

SE as «saan deniees a ribdiaineel adie ghee eae 6 20

1. Absent Any Existing or Threatened Struc-

tural Violation of Section 302 at The Time

Section 302(e) is Invoked, There Can Be No

Jurisdiction Thereunder .............+5. 23

2. Section 302(e) By Its Terms Authorizes

Only An Injunctive Remedy “To Restrain

Violations” of Section 302 and Does Not Au-

thorize Judicial Declaration Of An Implied

Cause Of Action for Damages ............ 26

3. As a Matter of Substantive Law, Section

302(e) is Concerned With “Structural Vio-

lations” And Not Fiduciary Breaches in the

Administration of Collectively-Bargained

oe edn cd al Wane eEEne ee nets 30

B. The Holding That Section 301 of LMRA Confers

Jurisdiction To Adjudicate Claims of Negligence

and Breaches of Trust In The Administration of

a Coilectively-Bargained Pension Fund is Contrary

To The Plain Words of The Statute and is Incon-

sistent With Thirty Years of Interpretation of

Section 301 By This Court and The Courts of

Appeals .... ccc cece cece eee eeeceeneeees 32

Il. THE HOLDING THAT PETITIONER OWED A

DUTY OF FAIR REPRESENTATION TO RE-

TIREES—PERSONS INDISPUTABLY OUTSIDE

THE BARGAINING UNIT—IS DIRECTLY CON-

TRARY TO THIS COURT’S DECISION IN PITTS-

BURGH PLATE GLASS AND THE ENTIRE

LINE OF FAIR-REPRESENTATION DECISIONS

WHICH LIMIT THE DUTY ONLY TO BARGAIN-

ING DNIT EMPLOYEES ........+-+++++++0+055 38

A. The Court of Appeals Decision is Inconsistent

With the Entire Line of This Court’s Fair Rep-

resentation Decisions ...............--+++++: 39

B. The Decision Below is Contrary to this Court’s

Decision in Pittsburgh Plate Glass ............ 42

III. THE COURT OF APPEALS’ DISPOSITION OF

THRESHOLD ISSUES BEARING ON THE UN-

ION’S LIABILITY UNDER RESPONDENTS’

FEDERAL CLAIMS AND ITS ENTITLEMENT

TO CREDIT FOR LOANS TO THE FUND DE-

PARTS FROM ESTABLISHED DOCTRINES OF

FEDERAL LAW AS ARTICULATED IN DECISI-

SIONS OF THIS COURT AND OTHER COURTS

OP APPTIBALS 2... .vccccccccrccvccesccssvccess 46

CRT ccc ccc ccc ccc esate toascccsecevecsseess 50

iii

TABLE OF AUTHORITIES

Cases

Page

Adams v. Budd Co., 349 F.2d 268 (C.A. 3, 1965)...... 37

Alexander v. Pacific Maritime Ass’n., 314 F.2d. 690

Sees ee Pee oad oon Ae h cede ebro ecken 36

Allied Chemical Workers v. Pittsburgh Plate Glass Co.,

Se ee ee ED. odo 0c hws cea xs 8, 10, 38, 39, 41, 42,

43, 44, 45, 46

Arroyo v. United States, 359 U.S. 419 (1959) .... 14, 20, 27

Blankenship v. Boyle, 329 F.Supp. 1089 (D.D.C. 1971). 49

Blassie v. Kroger Co., 345 F.2d 58 (C.A. 8, 1965) .... 14

Boys Markets, Inc. v. Retail Clerks Union, 398 U.S. 235

SEE Troe Fed oe Sea Oa wc Cha eGTKS thes ieiseus 34

Bowers v. Moreno, 520 F.2d 843 (C.A. 1, 1975) .... 14, 15,

28, 31

Bowers v. Ulpiano Casal, Inc., 393 F.2d 421 (C.A. 1,

SE ddduditddvesckeacunnea 14, 15, 21, 28, 31, 32, 35, 36

Bricklayers Local 15 v. Stuart Plaster Co., 512 F.2d 1017

i EE 5 wdc olloelde ed ve clea hs lead dees < 43

Buffalo Forge Co. v. United Steelworkers of America,

Ne ee ede ee tl 38

Burroughs v. Bd. of Trustees of Pension Trust, etc., 542

F.2d 1128 (C.A. 9, 1976) cert. denied, U.S. —,

4 RR pte le yah a rg ere et 29, 30, 31

Copra v. Suro, 236 F.2d 107 (C.A. 1, 1956) .......... 28, 29

Costello v. Lipsitz, 547 F.2d 1267 (C.A. 5, 1977) ..... 14, 16

Crawford v. Cianciulli, 357 F.Supp. 357 (E.D.Pa. 1973) 19

DeArroyo v. Sindicato de Trabajadores Packinghouse,

ie » 7 3 Er ages oer 36

Employing Plasterers’ Ass’n. v. Journeymen, etc., 279

i. . £ 2S Beer ress ore eee tf 14, 28

Emporium Capwell Co. v. Western Addition Comm.

ee EE ee eee P 40

Feeley v. United States, 337 F.2d 924 (C.A. 3, 1964).. 49

Ford Motor Co. v. Huffman, 345 U.S. 330 (1953) ..... 48

Page

Humphrey v. Moore, 375 U.S. 335 (1964) ........... 48

Johnson v. Bottica, 537 F.2d 930 (C.A. 7, 1976) .. 21, 29, 31

Haley v. Palatnik, 509 F.2d 1038 (C.A. 2, 1975) ...... 28

International Union, UAW v. Hoosier Cardinal Corp.,

ee Wt, SE GD: 6 novinuescns éoennewesenwenens 34

Leskiw v. Local 1470, IBEW 464 F.2d 721 (C.A.3,1972) 37

Liner v. Jafco, Inc., 375 U.S. 301 (1964) ............ 26

Local 174, Teamsters v. Lucas Flour Co., 369 U.S. 95

CED Badu. bude s Coedbke slows oe desu ls Uses wees 34

Lugo v. Employees Retirement Fund, 529 F.2d 251 (C.A.

2, 1976), cert. denied, U.S. ——, 97 S.Ct. 81. . 14, 17,

18, 19, 21, 29, 31

Miller v. Davis, 507 F.2d 308 (C.A. 6, 1974) ..... 14, 16, 35

Moyer v. Kirkpatrick, 265 F.Supp. 348 (E.D.Pa. 1967),

aff'd per curiam, 387 F.2d 955 (C.A. 3, 1968).. 21, 30, 31

Mumford v. Glover, 503 F.2d 878 (C.A. 5, 1974)...... 34, 35

Nedd v. United Mine Workers, 225 F.Supp. 750 (E.D.

Pa., 1963), aff’d, 332 F.2d 373 (C.A. 3, 1964) ....... &

Nedd v. United Mine Workers, 400 F.2d 103 (C.A. 3,

ED duid be ote CS 106 cdiale Ob 0 6 Case eae 8, 9, 32, 37

Nolan v. Meyer, 520 F.2d 1276 (C.A. 2, 1975) ......... 18

Olivas v. United States, 506 F.2d 1158 (C.A. 9, 1974). 49

Palnau v. Detroit Edison, 301 F.2d 702 (C.A. 6, 1962). 35

Prescription Plan Service Corp. v. Franco, 552 F.2d 493

Fe S) errr re 14, 16, 17,31

Railroad Trainmen v. Howard, 343 U.S. 768 (1952)... 41, 42

Republic Steel Corp. v. Maddox, 379 U.S. 650 (1965).. 34

Retail Clerks v. Lion Dry Goods, Inc., 369 U.S. 17

rrr vite? Tiree eT 34

Royal Typewriter Co v. NLRB, 533 F.2d 1030 (C.A. 8,

a errrer rere ry TT Tre rrr Te 43

Santa Fe Industries, Inc. v. Green, US. —, 97

BE, GOED. cccccccccossnencnensccceneseens 19

Page

SEC v. Medical Comm. For Human Rights, 404 U.S. 403

CHD .d.6cdec Fin dike ons 0b00ene ieee eee 26

Smith v. Evening News Ass’n., 371 U.S. 195 (1962) ..34, 36

Snider v. All State Administrators, Inc., 481 F.2d 387

(C.A. 5, 1973), cert. denied, 415 U.S. 957 ..14, 15, 19, 21

27, 28, 30, 35

Steele v. Louisville & N.R. Co., 323 U.S. 192 (1944) ... 39

Textile Workers v. Lincoln Mills, 353 U.S. 448 (1957) . 13,

14, 16, 34

Tunstall v. Brotherhood of Locomotive Firemen, 323

US: GO CH idies ceive Sine 39

United Airlines v. Evans, U.S. ——, 97 S.Ct. 1885

COPED D onecnc duvokébacds 0s celle 26

United States v. W. T. Grant Co., 345 U.S. 629 (1953). 24, 25

United Steelworkers of America v. American Manufac-

turing Co., 363 U.S. 564 (1960) .................. 34

United Steelworkers of America v. Enterprise Wheel &

Car Corp., 368 US. GES (IGGR) ...cccccccccccsces 34

United Steelworkers of America v. Warrior & Gulf Nav.

Ga, Ge Was ee CD Gels bn0% coneeeceeunee 34

Vaca v. Sipes, 386 U.S. 171 (1967) ............ 39, 40, 47, 48

Wheeldin v. Wheeler, 373 U.S. 647 (1963) ........... 16

Statutes and Rules

Employee Retirement Income Security Act of 1974

(ERISA), 29 U.S.C. 1001, et seg. ............. 17, 18, 37

Federal Rules of Civil Procedure Fed. R. Civ. P. 15(c)

22, 23, 24, 26

General Rules of the United States Supreme Court

Pre re PEE A Rr 38

Labor-Management Relations Act,

ny te, ee Gs OE 6 coco 00 caseeeeeenesuel 39

asseem G, Gy Wes OD ooo cv deccccccesdecceccees 46

Section 301, 29 U.S.C. ¢ 185 ..2, 3, 8, 9, 13, 14, 15, 32, 33

34, 35, 36, 37, 38, 45, 47, 48

Page

Section 302, 29 U.S.C. § 186 . .2, 3, 5, 9, 10, 13, 14, 15, 20,

21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 38, 48

United States Constitution Art. III, §2.............. 26

United Stated Judicial Code

en nd eubesues 2

et eepewet ces 8

eB oe ee eeeeeeeeeeebe 38

2 ae ok ck eseueecee 38

Miscellaneous

Moore’s Federal Practice (2d Ed. 1976) ............ 23, 24

Legislative History of the Employee Retirement Income

Security Act of 1974, prcepared by the Subcommittee

on Labor, Senate Committee on Labor and Public Wel-

fare (1976), (House Report No. 93-533 on H.R. 2,

93rd Cong., Ist Sess., Senate Report 93-127 on S.4,

Des eheteces wee 17

OD te te 8 ROWS me

IN THE

Supreme Court of the GQnited States

October Term, 1977

No.

UNITED MINE WORKERS OF AMERICA,

Petitioner,

Vv.

CHARLES NEDD, DOMINIC IERO, MAX DYNOSKi and AN-

THONY GANLY, Members of the Pensioned Anthra-

cite Coal Miners Protest Executive Committee, su-

ing on behalf of Themselves and All Other Members

of the CLASS OF PENSIONED ANTHRACITE COAL MIN-

ERS,

Respondents,

and

EMMETT THOMAS, MART F. BRENNAN, AND JOHN

JILLSON, Trustees of the Anthracite Health and Wel-

fare Fund.

Petition for a Writ of Certiorari to the

United States Court of Appeals for the Third Circuit

The Petitioner, United Mine Workers of America

respectfully prays that a writ of certiorari issue to

review the decision of the United States Court of Ap-

peals for the Third Circuit entered in this proceeding

on April 28, 1977.

OPINIONS BELOW

The opinion of the United States Court of Appeals

for the Third Circuit is reported at 556 F. 2d 190 and

is appended to this petition as Appendix A (1la-47a).

The Memorandum and Order of the United States

District Court for the Middle District of Pennsylvania

are appended to this petition as Appendix B (48a-165a,

167a).

JURISDICTION

The jurisdiction of this Court is invoked under 28

U.S.C. 1254(1). The decision of the United States

Court of Appeals was enter2d on April 28, 1977. A

timely petition for rehearing en banc was denied on

June 14, 1977. The time for filing this petition was

extended by Mr. Justice Brennan from September 12,

1977 to and including October 27, 1977 by orders dated

August 26, 1977 and September 27, 1977.

QUESTIONS PRESENTED

1. Do Sections 301 and 302 of the Labor-Manage-

ment Relations Act mandate the federal courts to de-

velop a body of federal common law under which to

adjudge and remedy claims of negligence and breach

of fiduciary duty regarding the administration of col-

lectively-bargained pension funds?

a. Did the Court of Appeals err in holding—contrary

to the decisions of other federal courts of appeals—

that Section 302 of LMRA authorizes development of

such a body of federal common law, that federal juris-

diction thereunder is not limited to the restraint of

violations of the Section, and that Section 302 gives

rise to an implied cause of action for damages?

b. Did the Court of Appeals err in holding, contrary

to decisions of this Court and other federal courts of

appeals, that Section 301 confers jurisdiction over

claims involving negligence and breach of fiduciary

duty in the administration of a collectively-bargained

pension fund which are not breaches of a collective bar-

gaining agreement or other contract?

2. Did the Court of Appeals err in holding that the

Union owed a duty of fair representation to retirees—

non-bargaining unit members—in light of this Court’s

decisions creating and limiting the “duty” to bargain-

ing unit members, and specifically, its decision in

Allied Chemical Workers v. Pittsburgh Plate Glass Co.,

404 U.S. 157 (1971), which unequivocally stated that

because retirees were not employees within a bargain-

ing unit represented by the Union, they were owed no

such duty?

3. Did the Court of Appeals err in its threshhold

determinations regarding the conditions under which

liability might be assigned to a labor union under the

federal labor laws for negligence of trustees in the gov-

ernance of a collectively-bargained pension fund?

STATUTES INVOLVED

This case involves Sections 301 and 302 of the Labor-

Management Relations Act, as amended, 61 Stat. 156,

29 U.S.C. 185 and 186. These provisions are appended

as Appendix C (168a-174a).

STATEMENT OF THE CASE

A. Background

In this derivative litigation, beneficiaries of a col-

lectively-bargained pension trust fund seek to hold

their union liable for some $10 million in pension fund

contributions plus interest owed contractually—not by

the union—but by employers signatory to collective

bargaining agreements under which the pension fund

was established. Such a novel transferance of liability

is sought by them despite the Union’s extension of close

to $10 million dollars in loans—the greater portion of

which have been forgiven—for the specific purpose of

enabling the Fund to continue to make pension pay-

ments. The Court of Appeals’ decision, resting in part

on recognition of a new implied federal cause of action,

constitutes a vast expansion of federal jurisdiction

under the Labor-Management Relations Act and of the

theories for imposition of liability thereunder so as

amply to justify this Court’s review under Rule 19.

Petitioner, the United Mine Workers of America

(hereinafter “UMWA” or “Union’’), is a labor orga-

nization whose members include active and retired

coal m..ners throughout the coal-mining regions of the

United States and Canada. The UMWA has been the

collective bargaining representative of coal miners in

the anthracite mining region of northeastern Pennsyl-

vania for most of the twentieth century.’

Respondents are several retired anthracite miners

receiving pensions from the Anthracite Health and

Retirement Fund (hereinafter “Fund”). The Fund

was created in 1946 through collective bargaining be-

tween the Union and anthracite mine operators signa-

tory to the union contract and has been carried for-

ward in successive collective bargaining agreements

to date. Employer obligations to the Fund—out of

which pensions are to be paid—are keyed to coal pro-

duction.’ Management of the Fund—including respon-

' The bulk of UMWA members are active and retired miners

of bituminous coal. Active and retired miners of anthracite

constitute approximately five per cent of the UMWA member-

ship.

*The “royalty” payment, originally 5 cents per ton, was

increased to 10 cents in 1947, 30 cents in 1950, 50 cents in

1952, and 70 cents in 1959 (51la-52a).

sibility for collection of royalty payments has, since

the Funds’s creation, been entrusted solely to a com-

mittee of three trustees.’

The Fund suffered severe economic difficulties al-

most from the onset incident to the displacement of

anthracite as a space heating fuel by oil and natural

gas and the consequent, unanticipated, virtual total

collapse of the anthracite industry.‘ As production

"The composition of the trustees’ committee, as found by

the District Court (52a-53a) has been as follows. When the

Fund was created in 1946, prior to enactment of the Labor-

Management Relations Act of 1947, the collective bargaining

agreement provided that two of the trustees would be desig-

nated by the Union and one by the operators. In an effort

to comply with the equal representation requirement of Sec-

tion 302 of LMRA, 29 U.S.C. 186, the 1948 Agreement pro-

vided that trustees would be chosen, one by the Union, one by

the operators and one by joint appointment, “this joint ap-

pointee so chosen being equally the appointee of each of said

parties ....” During the ensuing period—through 1967—

the joint appointee was an individual who was also a member

and officer of the Union. The 1966 Agreement provided that

one trustee would be appointed by the Union, one by the

operators, and the other would be a neutral person selected

by the other two trustees; that Agreement further provided

that the prior “neutral” trustee (the joint appointee) would

remain as the “neutral” trustee. The person so designated

remained until 1967, at which time he resigned, and a “neu-

tral” with no UMWA affiliation was designated.

*The District Court’s findings, in summary, sketched the

magnitude of the collapse as follows: Whereas in 1947, the

industry employed 80,000 miners who produced fifty-eight

million tons of coal and had gross revenues of $413,000,000,

by 1955, employment had dropped to 37,000 miners, produc-

tion declined markedly to twenty-six million tons and gross

revenues fell to $206,000,000. By 1965, the loss of demand had

cut further into employment, production and sales; at that

time, employment was down 85 percent from the post-War

years to 12,000, while production was 14,000,000 tons—less

than 20 percent of the 1947 figures. Total sales for the entire

industry in 1965 were $97,000,000 (54a-55a).

plummetted and mines closed down, operator delin-

quencies to the Fund spiralled upward. The District

Court found $2.5 million owed by 46 companies in

1954 and close to $12 million owed by 120 companies

in 1962 (35a).’

* District Judge Nealon, who not only scrutinized the volu-

minous record in this case, but witnessed these events first-

hand, described the precipitous decline of the Industry and

Fund income as follows:

“To begin with, the market for Anthracite diminished

drastically during the 1950s, total production declining

precipitously during every year of the decade but 1956,

when the market made a slight and shortlived recovery.

This reduction in demand for Anthracite was caused pri-

marily by competition from the natural gas and heating

oil industries, as those fuels replaced coal as the primary

sources of domestic heating fuels in this country. .. -

At the same time that total production was declining

as a result of competition from other industries, the An-

thracite industry was being ravaged by intense competi-

tion within itself, as the existing companies sought to

retain as much as possible of a rapidly shrinking market.

The most obvious sign of this intra-industry competition

was a steady drop in market price of Anthracite during

the 1950s. . . . The most significant result of this com-

petition, from the standpoint of the Fund at least, was the

low profit margin which the operators maintained, as the

companies sold their coal at or near cost in order to

retain as much of the market as possible... .

This meant that any non-production expenditure, such

as the royalty payments to the Fund, the rate of which,

incidentally, increased steadily during the decade, be-

came more difficult to make under normal circumstances,

and close to impossible to make in the event of unfore-

seen circumstances, such as disasters or sudden and

dramatic drops in the market.

Such unforeseen circumstances occurred regularly

during the 1950s. The precipitous decline of the Anthra-

cite market during those years has already been men-

tioned. Disasters seemed to hit the coal companies almost

as frequently as market declines. The record is replete

with examples of fires, floods and cave-ins which dec-

imated some of the companies.

“Good times” never returned to the Industry nor to

those dependent on it, including the Fund and its ben-

eficiaries. Despite substantial negotiated increases in

the amount of royalty to be paid per ton, royalty in-

come to the Fund actually declined so that by the late

1960’s, Fund income was approximately one-half what

it had been in the mid-1950’s (See Table at 165a). At

the same time, bankruptcies and mine closures forced

more and more miners into premature retirement. The

pensioner population nearly doubled in the twenty

years from 1949 to 1969, increasing from 7,000 to 13,-

000 (55a). The combination of an increased number

of pensioners and a substantial decrease in revenues

forced a sharp reduction in benefits and has threat-

ened the cessation of pension payments altogether.”

As a result of these conditions, many operators ceased

making royalty payments altogether, or made them only

irregularly, as all costs were trimmed to the bone in an

attempt to weather what was viewed as a passing market

depression and temporary bad times; these operators were

quick to plead their hard times as excuses for their failure

to make payments to the Fund, and to promise full pay-

ment just as soon as the good times returned” (131la-

133a).

*® The District Court described the reduction of benefits and

the consequent emergence of Respondents as a protest group

as follows:

“The amount initially paid by the Fund to each increased

sioner was $100 per month, and the death benefit pay-

able to widows and orphans was $1,000. In 1954 these

amounts were reduced to $50 and $500 respectively, and,

in 1958, the pension was further reduced to $30 per

month. After the pension had been temporarily increased

to $50 per month, it was again reduced to $30 in 1961.

No death benefits were paid during the years 1959-61,

and none have been paid since 1964. It was following

the 1961 reduction that the Panther Valley Protest Com-

mittee, a group of pensioned anthracite miners, was

formed, and Charles Nedd, one of the plaintiffs in this

case, was selected as Chairman of that committee” (54a).

el ie

‘ ry

“a

It was in this context that the UMWA made nearly

$10 million dollars of loans to the Fund out of the dues

of its members at large—loans which have never been

repaid and have in large part been forgiven—so that

pension payments would not cease entirely. It was in

this same context of collapse of the anthracite industry

that Respondents—despite the Union’s bestowal of

vast sums out of its own resources—brought suit seek-

ing to hold the Union answerable for failure of the em-

ployers to satisfy their contractual obligations.

B. Procedural H istory

Respondents sued originally in 1963 alleging that

the Union had failed to carry out unspecified terms of

the Anthracite Wage Agreement which, they claimed,

obligated it to collect delinquent royalties owed by the

mine operators to the Fund. The Complaint, predi-

cated on diversity of citizenship, was dismissed for

lack of jurisdiction, and the dismissal was thereafter

affirmed.’ On January 21, 1965, the present action was

filed naming the Union as the sole defendant, jurisdic-

tion was asserted under Section 301 of LMRA, 29

U.S.C. 185, again on the theory that the Union had

breached a contractual duty to collect delinquent roy-

alties. The Union made a motion for dismissal for lack

of jurisdiction which the District Court denied. On an

appeal under 98 U.S.C. 1292(b), the Third Circuit

held 4 301 jurisdiction lacking, declaring that the Un-

ion had made no contractual undertaking to collect

royalties.. At the same time, the Court noted that

« Nedd v. United Mine Workers, 225 F. Supp. 750 (E.D.

Pa., 1963), aff’d., 332 F. 2d 373 (C.A. 3, 1964).

: Nedd v. United Mine Workers, 400 F. 2d 103, 105 (C.A. 3,

1968) (‘Neither the original Complaint, the presently pro-

posed amendments, nor anything submitted in briefs or argu-

Plaintiffs might have a cognizable claim for breach of

the duty of fair representation, 400 F.2d at 105-106,

and directed—should such a claim be pursued—that

the Trustees be added as parties in order to receive

any judgment on behalf of the Fund.

On January 23, 1969, Respondents filed an amended

Complaint asserting breach of the duty of fair repre-

sentation. The gravamen of their claim was that the

Union—and the trustees under Union domination—

had, out of a preference for the interests of active min-

ers over those of retirees, purposefully refrained from

taking vigorous action to collect employer delinquen-

cies because they believed such action might put ac-

tive miners out of work. Despite the Circuit Court’s

holding that the Union had no contractual obligations

to collect royalties, the amended Complaint realleged

Section 301 jurisdiction. Respondents also—for the

first time—asserted federal jurisdiction under Section

302(e) of LMRA, 29 U.S.C. 186(e), and pendent jur-

isdiction of non-federal claims.”

The Union again sought dismissal for lack of juris-

distion. The District Court acknowledged the strength

ments, points to any provision of the contract in which the

Union obligates itself to enforce the operator’s promise to

contribute to the Fund, and our independent study of the

contract has disclosed no such provision.”).

“Section 302(e), by its terms, confers federal jurisdiction

“to restrain violations” of Section 302. The Amended Com-

plaint asserted the prior composition of the Trustees’ Com-

mittee contrary to the equal representation requirement of

Section 302(c) (5), 29 U.S.C. 186(c) (5), but did not seek

injunctive relief to correct such condition or prevent its re-

currence. As stated above, n. 3, any possible unequal rep-

resentation had been corrected in 1967, two years before

respondents’ first assertion of jurisdiction under Section

302(e) at which time there was, therefore, no violation left

to restrain.

of the asserted bases for dismissal, but indicated that

—given the protracted history of the litigation—it

would proceed to trial and address all issues there-

after. Thus, after a non-jury trial in July 1974, re-

ceipt of voluminous post-trial submissions and oral

argument in June 1975, the District Court in April

1976, filed a substantial 121-page Memorandum and

Order comprehensively detailing its findings and con-

clusions (48a-167a).

C. The District Court’s M emorandum and Order

In summary, the District Court held federal juris-

diction lacking under each of the bases asserted by Re-

spondents, and consequently, held pendent jurisdiction

lacking as well. The District Court held that Respond-

ents’ fair representation claim, with its origin in the

Third Circuit’s 1968 dictum, had been foreclosed by

this Court’s 1971 decision in Pittsburgh Plate Glass,

supra (88a-96a). It held jurisdiction of the Section

301 claim precluded by the Third Circuit’s 1968 hold-

ing that the Union simply had no contractual duty to

attempt to collect royalty payments (8la-88a). Fur-

ther, it held that federal jurisdiction under Section

302(e) is limited to injunctive restraint of violations

of the Section 302(c) (5) structural standards, and

that as of the filing of the Amended Complaint there

was no such violation in existence which the Court

might restrain (73a-81a).

Seeking to resolve all pending issues, the District

Court proceeded to address the merits of Respondents’

claims, assuming arguendo the existence of jurisdic-

tion. Respondents asserted that the Union—and the

trustees under Union domination—had refrained from

vigorous litigative action to collect delinquencies out

of favoritism for the interests of working miners over

those of retirees and a belief that such action would

put active miners out of work. The District Court re-

jected this—Respondents’ central assertion—as a mat-

ter of fact. It did find that the trustees—acting in

good faith—had been negligent in too long tolerating

operator delinquencies and not sooner assuming a vig-

orous litigation posture (124a, et. seg.). But it found

that the trustees had not purposely refrained from

collecting operator delinquencies and that neither they

nor the Union had favored the interests of working

miners over those of present pension beneficiaries

(117a-124a, 149a-150a). It acknowledged that the Un-

ion’s involvement with the Fund had historically been

close but specifically rejected Respondents’ assertion

that the Fund had been harmed thereby. Indeed, it

found to the contrary:

“The record discloses almost uninterrupted sup-

port and assistance of the Fund by the Union. It

was due to the efforts of the Union at the bargain-

ing table that the Fund was established in the

first place and that royalty rate increases were

negotiated on a regular basis. Moreover, the Un-

ion was the most active participant in the at-

tempts that were made to enforce the operators’

responsibilities to the Fund. It administered the

notice of delinquency program and staged the few

strikes that were called against delinquent oper-

ators: it was the driving force behind the inten-

sive and forceful negotiations during the latter

part of 1962 which resulted in the signing of let-

ter agreements by many of the operators; and

throughout the Fund’s history, Union officials ha-

rangued and jawboned delinquent operators in an

effort to make them comply with the agreement.

See, e.g., the countless references in the record to

phone calls and letters from Joseph Kershetsky,

who was the president of District 9. Most illustra-

tive of the Union’s good faith support of the

Fund, though, are the large loans, most of which

have been forgiven, which the Union has period-

ically made to the Fund to permit it to continue

paying pensions to retired miners when, had it

not been for the loans, the precarious financial

position of the Fund would have forced a tempor-

ary suspension of pension payments. A total of

$9,247,334 has been loaned over the years, of

which all but $1,954,000 has been cancelled and

forgiven.” (15la)

Finally, the Court found that the Union’s intent and

motives were proper at all times and that it had but-

tressed its bona fides with nearly $10 million in loans

to the Fund, much of which had been forgiven, ex-

tending from the 1950’s through the 1970’s: “More

than any other factor, these loans refute Plaintiffs’

contention that the Union has arbitrarily or in bad

faith discriminated against the Fund and its bene-

ficiaries” (15la). Accordingly, while the District

Court found that past trustees had been negligent in

handling the problem of delinquencies, it could find no

basis for imputing liability to succeeding trustees or

to the Union (147a, 158).

Moreover, the District Court found that even if the

Union were liable, it would be entitled to deduct from

any recovery against it an amount equal to the total

sum—nearly $10 million—in unpaid loans it had

made to the Fund since its creation (159a-163a).

D. The Court of Appeals’ Opinion

On April 28, 1977, the Third Circuit entered an

Opinion and Order of reversal and remanded the mat-

ter for further proceedings. The result reached by the

Court of Appeals rests necessarily upon jurisdictional

determinations which are—as shown below—absolu-

tely unprecedented as to each of the three federal

claims, and which compel this Court’s attention

through the granting of this Petition. It also rests up-

on legal determinations regarding liability of the Un-

ion for the negligent breaches of trust found by the

District Court to be assignable to the past trustees and

the Union’s right to a credit of amounts loaned to the

Fund against any liability which might be assigned

to it. Notably, the Court of Appeals did not purport to

reject as “clearly erroneous” any of the District

Court’s findings. The District Court’s findings—most

significantly, its findings that the Union did not favor

the interests of working miners over those of pension-

ers, and that the Fund was substantially benefitted

rather than harmed by its close association with the

Union—were at least purportedly accepted by the

Court of Appeals, and should guide this Court in its

approach to the issues presented by this Petition.

REASON FOR GRANTING THE WRIT

I. IN OPENING THE WAY FOR ESTABLISHMENT OF A

FEDERAL COMMON LAW OF PENSION AND WEL-

FARE TRUST FUND ADMINISTRATION, THE COURT

OF APPEALS’ DECISION CONTRADICTS A LONG-

STANDING PATTERN OF INTERPRETATION BY THIS

COURT AND THE COURTS OF APPEALS OF SECTIONS

301 AND 302 OF THE LABOR-MANAGEMENT RELA-

TIONS ACT

Prior to the Court of Appeals’ decision in this case,

the Federal Courts had not been authorized to estab-

lish a body of federal common law pertaining to pen-

sion and welfare trust funds similar to that which has

evolved as a result of Textile Workers v. Lincoln Mills,

353 U.S. 448 (1957), governing collective bargaining

agreements. This Court certainly has never declared

any such mandate. Indeed, on the single occasion

when it has spoken regarding the scope of feder-

al jurisdiction to address questions relating to the

governance of collectively-bargained funds, it read

that jurisdiction narrowly. Thus, in Arroyo V. United

States, 359 U.S. 419, 427 (1959), this Court declared

that “[t]he legislative history fof the Labor-Manage-

ment Relations Act, Section 302(e)] is devoid of any

suggestion that defaleating trustees were to be held

accountable under federal law, except by way of the

injunctive remedy provided in that subsection.” The

stricture of Arroyo contrasts markedly with Lincoln

Mills’ mandate for judicial “inventiveness” in fashion-

ing federal substantive and remedial law applicable

in suits for enforcement of labor contracts under Sec-

tion 301. Several Courts of Appeals have recognized—

consistent with Arroyo but directly contrary to the

Third Circuit decision herein—that the function of de-

termining the legality with which trust funds are ad-

ministered belongs, not to federal, but to state law,

Employing Plasterers’ Ass'n. V. Journeymen, etc., 279

F.2d 92, 97 (C.A. 7, 1960) ; Blassie v. Kroger Co., 345

F.2d 58 (C.A. 8, 1965) ; Bowers v. Ulpiano Casal, Inc.,

393 F.2d 421, 424-6 (C.A. 1, 1968) ; Bowers V. More-

no, 520 F.2d 843 (C.A. 1, 1975); Miller v. Davis, 507

F.2d 308 (C.A. 6, 1974) ; Snider v. All State Adminis-

trators, Inc., 481 F.2d 387, 390-1 (C.A. 5, 1973), cert.

denied, 415 U.S. 957; Costello v. Lipsitz, 547 F.2d

1267 (C.A. 5, 1977); Lugo v. Employees Retirement

Fund, 529 F.2d 251 (C.A. 2, 1976), cert. denied,

USS. 97 S.Ct. 81; Prescription Plan Service Corp.

vy. Franco, 552 F.2d 493 (C.A. 2, 1977).

The Court of Appeals in this case, however, looking

to the mandate of Lincoln Mills, supra, declared the

existence of “a federal common law cause of action im-

plied from provisions of §302(c)(5)” (22a) and

opined that “the same policy considerations which

favored recognizing a uniform federal law of collective

bargaining agreements apply with equal force to sup-

port the application of federal common law to the in-

stant claim... .” (9a) Elaborating on this broad de-

parture, it contemplated that ‘federal courts would

fashion both remedial and substantive rules of law

for [the] disposition” of such actions (24a) ; declared

that “fiduciary duties applicable to the present case

must be fashioned from federal common law under

§ 302” (28a & n. 31): stated that “302(e) establishes

a federal forum in which to try claims of a breach of

fiduciary duty by a union pension fund trustee” (9a

& n. 12); and recited that “a claim of tortious inter-

ference with a collective bargaining agreement by a

Fund trustee states a non-frivolous cause of action

under ‘ 301 of the Taft-Hartley Act... .” (9a & n.

12) (emphasis added).

While these heady views may find some support in

law review articles by isolated commentators, (See

citations in the Court’s opinion, 9a & n. 12), they are

not supported by federal court authority at any level.

Although the particular conflict between the Court of

Appeals’ decision here and decisions of other Circuits

in their interpretations, respectively of Section 302

and Section 301 will be examined in the ensuing sec-

tions, the point here—more broadly—is that in author-

izing development of federal common law principles

for governance of collectively-bargained trusts the

Third Circuit is by itself on a foray which other courts

have expressly declined to join. Thus, in Bowers v. Ul-

piano Casal, Inc., supra, the First Circuit declared it-

self in accord with “the current majority position that

section 302(e) is not the foundation stone for federal

court management of trust funds,” 393 F.2d at 426.

Accord: Bowers Vv. Moreno, supra. Similarly, in Snider

v. All State Administrators, supra, 481 F.2d at 390,

the Fifth Circuit stated that collectively-bargained

funds are “established under the laws of the respective

states” and that “[s]tate authority remains the legal

foundation upon which such funds are constructed.’

Accord: Costello v. Lipsitz, supra; Miller Vv. Davis,

supra.

Most recently, in Prescription Plan Service Corp.,

supra, the Second Circuit declined a request that it

“ereate a ‘federal common law tort,’ ” 552 F.2d at 495

—comparable to that of “tortious interference with a

collective bargaining agreement” which the Third Cir-

cuit recognized here. The Second Circuit held that this

was not one of those “few and restricted” instances In

which federal common law should be developed, Wheel-

din v. Wheeler, 373 U.S. 647, 651 (1963).” Id. It ex-

pressly rejected the argument that Lincoln Mills was

authority for judicially federalizing the law of col-

lectively-bargained funds: .

“Appellant’s reliance on Textile Workers Union

v. Lincoln Mills, 353 U.S. 448, 77 S.Ct. 923, 1 L.

Ed.2d 972 (1957), is misplaced. Lincoln Mills

did hold that a federal grant of jurisdiction could

be the basis for implying federal substantive rem-

edies, but the Supreme Court there was deciding

a choice-of-law question—whether to apply state

or federal law to suits for violation of labor con-

tracts—in a context in which jurisdiction in the

federal courts was clear under LMRA § 301(a),

29 U.S.C. § 185(a). Here, by contrast, appellant’s

claim does not fall within the jurisdictional terms

of the statutes on which it relies. The Lincoln

Mills :olding, moreover, rested on a careful ex-

amination of congressional intent to provide sub-

stantive remedies under LMRA § 301; no similar

intent is even suggested by appellant here. While

the Lincoln Mills Court believed ‘301 was in-

tended to be read broadly, 353 U.S. at 456, 77

S.Ct. 923, the principal statute at issue here,

§ 302, has consistently been read narrowly by this

court, Lugo v. Employees Retirement Fund,

supra, 529 F.2d at 255; Cuff v. Gleason, 515 F.2d

at 127 (2d Cir. 1975) (per curiam).” 522 F.2d

at 495-6.

In Lugo, the Second Circuit had held that it would be

particularly inappropriate to mandate judicial devel-

opment of a federal common law of fiduciary stand-

ards for collectively bargained funds in the face of

Congress’ enactment of the Employee Retirement In-

come Security Act of 1974 (ERISA), 29 U.S.C. 1001,

et seg., comprehensively governing fiduciary respon-

sibilities applicable to such funds, 29 U.S.C. 1101-

1114:°

“Plaintiff argues, on the other hand, that the

quoted language, coupled with the jurisdictional

grant in section 302(e), confers on the federal

courts the power to create a federal common law

® The legislative history of these sections makes plain Con-

gress’ recognition that theretofore fiduciary standards had

been governed wholly by state law, Legislative History of the

Employee Retirement Income Security Act of 1974, prepared by

the Subcommittee on Labor, Senate Committee en Labor and

Public Welfare (1976), pp. 597, 2350-4, 2359, 3295-6, 3359.

The reports issued by the House Committee on Education and

Labor and the Senate Committee on Labor and Public Welfare,

on the Bills which ultimately became ERISA, contained the

identical description of the limited nature of regulation pro-

vided by Section 302:

“The Labor-Management Relations Act, Sec. 302, provides

the fundamental guidelines for the establishment and

operation of pension funds administered jointly by an

employer and a union. The Act is not intended to estab-

lish nor does it provide standards for the preservation

of vested benefits, funding adequacy, security of invest-

ment, or fiduciary conduct.”

Id at pp. 590, 2351 (House Report No. 93-533 on H.R. 2

93rd Cong., Ist. Sess.; Senate Report 93-127 on S. 4 93rd

Cong., Ist Sess.).

governing the management of pension plans. Cf.

Textile Workers Union of America v. Lincoln

Mills of Alabama, 353 U.S. 448, 77 S.Ct. 912, 1

L. Ed 2d 972 (1957). We have considerable doubt

about this proposition. The length and detail of

the Employee Retirement Income Security Act

(ERISA), 29 U.S.C. § 1001 et seq., indicate that

the regulation of pension funds with regard to

such matters as vesting and procedural rights is

a complex task more appropriate for Congress

than for the courts. The careful attention paid by

Congress in that recently enacted statute to the

problem of effective dates and coverage makes us

hesitate to conclude that the courts have long been

authorized, via the fifth exception to a criminal

statute, .. . [§ 302(c) (5)], to create obligations

similar to those of ERISA.” (Footnotes omitted;

Emphasis supplied) 529 F.2d at 255.”

Thus, in holding that the Federal Courts are author-

ized by the Labor-Management Relations Act to devel-

op “both remedial and substantive rules of law” for

the disposition of federal actions such as this one in-

volving administration of collectively-bargained pen-

sion and welfare trust funds (24a), the Third Circuit

was undeterred by the lack of guidance from this

Court and unhampered by the unanimous declination

by other Circuits to promulgate and enforce federal

authored by Judge Gibbons, is contrary to that of Nolan V.

Meyer, 520 F. 2d 1276 (C.A. 2, 1975) where Judge Gibbons,

sitting by designation, also spoke for the Court. There Judge

Gibbons acknowledged that the effect of ERISA was pro-

spective and accordingly, refused to mandate federal common

law to govern entitlement to certain profit-sharing benefits,

which like the fiduciary standards here, had otherwise been

left to state law, 520 F. 2d at 1278.

standards governing collectively-bargained trusts.”

The recognition of new federal common law rights and

remedies by a lower federal court, as here, contrary to

unanimous authority that the underlying federal stat-

ute is not to be so construed, is necessarily a matter

which calls for the exercise of this Court’s certiorari

jurisdiction.

The Court of Appeals’ result conflicts dramatically

with the rationale of this Court’s holding in Santa Fe

Industries Vv. Green, U.S. ——, 97 S.Ct. 1292

(1977), decided only last Term. There, in the context

of federal securities litigation, the Court disapproved

the federalization of fiduciary standards in connection

with governance of corporations. It observed: “this

extension of federal securities laws would overlap and

quite possibly interfere with state corporate law...

Absent a clear indication of congressional intent, we

are reluctant to federalize [a] substantial portion of

the law of corporations. .. .”, 97 S.Ct. at 1303-4. As

indicated by such decisions as Snider, supra, and

Lugo, supra, the same may be said of judicial feder-

alization of fiduciary standards pertaining to govern-

ance of collectively-bargained trusts.

™ The Court of Appeals cited Crawford vy. Cianciulli, 357

Public Welfare (1976), pp. 597, 2350-4, 2359, 3295-6, 3359. The

F. Supp. 357, 367 (E.D. Pa., 1973), as a case recognizing

that approval of federalization of fiduciary standards of

collectively-bargained for contract obligation “is not foreclosed

by prior case law and is not frivolous.” (12a). Crawford said

no such thing. To the contrary, Crawford held, as the District

Court here recognized, that the creation of a federal common

law of collectively-bargained trusts “must be directed to an-

other forum.” (97a). The District Court, quoting Crawford,

held that guidance from this Court had not authorized such an

expansive interpretation of Section 302. “Without guidance

by the Supreme Court we do not have authority to establish

such a federal common law for union-management negotiated

pension fund agreements.” (97a), quoting Crawford v. Cian-

ciulli, 357 F. Supp. 357, 360 (E.D. Pa., 1973).

A. The Court of Appeals’ Finding of Federal Jurisdiction

under Section 302(e) and Its Declaration of an Implied

Damage Remedy Thereunder Conflict with Arroyo v.

United States, 359 U.S. 419 (1959), and the Decisions of

Other Courts of Appeals.

In enacting Section 302 of LMRA, 29 U.S.C. 186,

Congress addressed the corruptive influence of pay-

ments by employers to the bargaining representatives

of their employees, making it generally unlawful for

any employer to offer, or any representative to accept,

money or other things of value, Section 302 (a) and

(b), 29 U.S.C. 186(a) and (b). This blanket prohibition

is subject to several specific exceptions, Section 302

(c), 29 U.S.C. 186(c), including that set forth in Sec-

tion 302(c)(5), for payment to certain collectively-

bargained trust funds. Congress sought to shield such

funds from corruptive influence by allowing employer

payments to be made only to trusts complying with

the structural specifications which Section 302(c) (5)

sets forth. Particularly relevant to this litigation are

the specifications that “employees and employers are

equally represented in the administration of such

fund. .. .” and that the fund be established “for the

sole and exclusive benefit of employees.” In subsection

(d), Congress established a criminal penalty for viola-

tions of Section 302 and in subsection (e) it estab-

lished federal jurisdiction “to restrain violations”

thereof.

Except for the decision by the Court of Appeals in

this case, Section 302(e) has never been taken as a

foundation stone for federal court management of

trust funds. Rather, it has been generally held to au-

thorize exercise of federal equity jurisdiction to elim-

inate potential corruption by correcting “structural

violations’ and thereby conforming collectively-bar-

gained trusts to the specifications of Section 302 (c)

(5). Bowers v. Ulpiano Casal, Inc., supra, 393 F.2d

at 424; Lugo, supra, 529 F.2d at 255; Moyer v. Kirk-

patrick, 265 F.Supp. 348 (E.D.Pa., 1967), aff’d, 387

F.2d 955 (C.A. 3, 1968); Snider, supra, 481 F.2d at

390; Johnson Vv. Bottica, 537 F.2d 930, 933 (C.A. 7

1976). |

The correction of structural violations has, how-

ever, never been even a part of Respondents’ objective

in this suit. The sole “structural violation” found by

either court below was a breach of the statutory re-

quirement of equal representation which the District

Court found continued until 1967 (18a, 78a). Respond-

ents never sought to enjoin the continuation of such

violation.” Their 1963 and 1965 complaints neither as-

serted jurisdiction under Section 302 nor, in any way,

took issue with the composition of the Trustees’ Com-

mittee. It was not until 1969—-after the Court of Ap-

peals had rejected their original jurisdictional basis

and after the unequal representation ultimately found

by the District Court had been corrected—that they

first looked to Section 302(e). Still not seeking injunc-

tive relief, Respondents in their amended complaint

alleged that unequal representation had existed—by

way of the prior composition of the Trustees’ Commit-

tee—and that the Fund had not been established for

the sole and exclusive benefit of employees."

. The District Court, under those conditions, held jur-

isdiction under Section 302(e) to be lacking. It held

'? Nor, obviously, did they ever seek t joi i

oe, , 0 enjoin the makin

of payments into what would have been an illegally aa.

tuted trust; their complaint, as noted by the District Court

—— has always been that more such payments were not

'* Neither in the Amended Complai

plaint nor thereafter did

Respondents suggest to the District Court that injunctive

relief was necessary either to correct, or prevent recurrence,

of unequal representation or any other structural violation.

that Respondents’ amended complaint failed to state a

valid claim of violation of the ‘‘sole and exclusive bene-

fit” requirement (80a-8la), a conclusion with which

the Court of Appeals did not disagree. With respect to

unequal representation, the District Court held as

follows:

“ .. [T]he fact that the Fund violated the equal

representation requirement during the years

1948-1967 is not in itself sufficient to confer juris-

diction under Section 302(e). ‘| D]istrict court jur-

isdiction under Sec. 302(e) is limited to restrain-

ing future violations of the statute and does not

include granting relief by way of accounting,

receivership, or removal of defaleating trustees

or administrators.’ Snider v. All State Adminis-

trator, Inc., 481 F. 2d 387 (5th Cir. 1973). See also

Moyer v. Kirkpatrick, 265 F. Supp. 348 (E. D. Pa.

1967), aff'd per Curiam, 387 F. 2d 955 (3d Cir.

1968). Inasmuch as plaintiffs seek no future in-

junctive relief with respect to the composition of

the Fund’s trustees, but claim instead what is in

effect an accounting of the damages allegedly

caused the Fund by an imbalance in the makeup

of the trustees at a time almost ten years ago,

Section 302(e) confers no jurisdiction in this

Court over plaintiffs’ claim to the extent that it

is based on a violation of the equal representation

requirement.” (78a)

In short, Respondents had invoked federal equity

jurisdiction at a time when structural violations with-

in the purview of Section 302(e) were neither existing

nor threatened.

The Court of Appeals acknowledged that the struc-

tural violation had been corrected at the time of Re-

spondents’ amended complaint, but reasoned that the

amendment could, under Rule 15(c), F. R. C. P., “relate

back to the filing of the \ 301 complaint in 1965” so as

to vest Section 302(e) equitable jurisdiction as of a

time prior to correction of the violation (18a). Second,

the Court of Appeals held—as a matter of remedial

law—that, regardless of its terms, Section 302(e) au-

thorizes not only injunction restraint of violations of

Section 302(e) but implies a damage remedy as well

(23a-25a). Third, the Court of Appeals declared—as a

matter of substantive law—that “[a]ny fiduciary du-

ties applicable to the present case must be fashioned

from federal common law under § 302.” (28a & n. 31).

The Court’s holding as to Section 302 in each of these

three respects is contrary to decisions either of this

Court, other courts of appeals, or both.

1. Absent Any Existing or Threatened Structur-

al Violation of Section 302 at The Time Section

302(e) Is Invoked, There Can Be No Jurisdic-

tion Thereunder.

The Court of Appeals’ Section 302 holding rests at

the outset, on a totally novel application of the “rela-

tion back” doctrine of Rule 15(c), F.R.C.P. The con-

cern of that Rule is with the timeliness of amended

pleadings under statutes of limitations. It has not—

other than by this Court of Appeals—been applied so

as retroactively to vest subject matter jurisdiction

even though conduct which might earlier have been

enjoined has, in the interim since the original com-

plaint, ceased without even a suggested threat of re-

currence. The sole authority cited by the Court of Ap-

peals, ? Moore’s Federal Practice, 15-15 [3], in no way

suggests any application of the relation-back doctrine

other than to escape the effect of limitations.”* Indeed,

Even if limitations were the question here, the Court of

Appeals’ application of the relation-back doctrine would be

the outset of Professor Moore’s discussion focuses the

purpose of Rule 15(c):

... Rule 15(c) is based on the concept that a party

who is notified of litigation concerning a given

transaction or occurrence has been given all the

notice that statutes of limitations are intended to

afford. Thus, if the original pleadings gives fair

notice of the general fact situation out of which

the claim or defense arises, an amendment which

merely makes more specific what has already been

alleged .. . will relate back even though the statute

of limitations has run in the interim.” 3 Moore,

supra, at pp. 1025-26 (Emphasis added).

Rule 15 was never intended to address the situation

where what has lapsed in the interim is not limitations

but the basis of federal jurisdiction.

Application of the Rule 15(c) concept in this context

is contrary to fundamental notions of both equity and

federal jurisdiction under the United States Constitu-

tion, Art. III, Sec. 2. The measure of equitable jurisdic-

tion to grant an injunctive remedy such as that pro-

vided in Section 302(e) is whether some violation is

either existing or threatened, United States v. W.T.

Grant Co., 345 U.S. 629 (1953). There, this Court

stated :

“The purpose of an injunction is to prevent future

incorrect. Contrary to the Court of Appeals’ recitation, the

predicate for Section 302(e) jurisdiction—past unequal rep-

resentation—is not common with the claims which Respond-

ents had made in the past. As stated above, Respondents’ 1965

Complaint was simply silent as to composition of the Trustees’

Committee. As Professor Moore recites, “An amendment

which changes the jurisdictional basis of an action will .. .

relate back, the factual situation alleged otherwise remaining

unaltered.” 3 Moore, supra at p. 1031. Here, the Amended

Complaint alleged different facts.

violations ... [T]he moving party must satisfy

the court that relief is needed. The necessary de-

termination is that there exists some cognizable

danger of recurrent violations, something more

than the mere possibility which serves to keep the

case alive.” 345 U.S. at 633.

W. T. Grant Co. is significant both for its similari-

ties to this case and its differences. There, the Court

affirmed dismissal of a suit by the United States under

the Clayton Act, which sought to enjoin continuation

of certain interlocking directorships, because the chal-

lenged conduct had been discontinued and the lack of

any threat of recurrence was not genuinely in dispute.

Given a voluntary cessation of the challenged conduct

and the absence of any threat of recurrence, this Court

upheld the District Court’s conclusion that the United

States, as the moving party, had failed to demonstrate

“that relief is needed.” This case is similar because it

too presents a voluntary cessation of the challenged

conduct without even an attempted demonstration by

Respondents of need for injunctive relief available

under Section 302(e). This, however, is an a fortiori

case as compared with W. T. Grant Co. There, the con-

duct in question was discontinued only after it had

been challenged by the Government’s suit, an the

Government’s complaint did allege a threat of recur-

rence. That being the case—though it upheld the dis-

missal as a matter of equitable discretion and practice

—this Court observed that the issue had not become

technically moot and that the court’s constitutional

power to treat with it survived the cessation, 345 U.S.

at 632-3. Here, in contrast, the alleged unequal repre-

sentation was voluntarily discontinued before Respon-

dents put it at issue and Respondents did not even

allege a threat of recurrence. That being the case, dis-

missal of the Section 302 claim was due not only as a

matter of equitable discretion, but for lack of power to

adjudicate as well. The amended complaint failed to

allege a live, present ‘“‘case or controversy” as required

by Art. III, Sec. 2 of the Constitution. Any dispute as

to existence of a Section 302 structural violation was,

in fact, moot as of the time Respondents first presented

it in their amended complaint. As of that time, it was

at most, “merely an unfortunate event in history [ with-

out] present legal consequences.” United Air Lines V.

Evans, USS. , 97 S.Ct. 1885, 1889 (1977).

Whether the amended complaint may “relate back”

for purposes of avoiding the bar of limitations is

simply irrelevant to whether it could relate back so as

to revive a moot question as to which any constitutional

case or controversy has since lapsed. Where a question

has become moot, a federal court has no authority

under Article III of the Constitution to exercise juris-

diction. SEC v. Medical Comm. for Human Rights, 404

U.S. 403, 407 (1972); Liner v. Jafco, Inc., 375 U.S.

301, 306 & n.3 (1964). Unlike the bar of limitations

addressed by Rule 15(c), F.R.C.P., the constitutional

requirement of a present case or controversy cannot be

defeated through the fiction of “relation back.”

2. Section 302(e) By Its Terms Authorizes Only

An Injunctive Remedy “To Restrain Viola-

tions” of Section 302 And Does Not Authorize

Judicial Declaration Of An Implied Cause Of

Action for Damages.

Section 302(e) provides an injunctive remedy:

“The district courts of the United States .. . shall

have jurisdiction . . . to restrain violations of this

Section.”’

While the lower federal courts have spoken fre-

quently regarding the scope of remedial jurisdiction

authorized by Section 302(e), this Court has had oc-

casion to do so only once. In Arroyo, supra, this Court

stated that trustees of collectively-bargained funds

would not be “accountable under federal law, except by

way of the injunctive remedy provided in” Section

302(e), 359 U.S. at 427 (Emphasis added).*

At the outset it should be clear that there is square

circuit conflict as to the reading to be given this Court’s

comments in Arroyo regarding the scope of Section

302(e) jurisdiction.

The Court of Appeals here read the quoted language

of Justice Stewart as “simply a rejection of the con-

tention that ‘ 302 is the source of a federal common

law crime not expressly defined by statute” and con-

cluded that it did not preclude the declaration of an

implied action for damages (22a & n. 25)."

In contrast, the Fifth Circuit in Snider, supra, 481

F. 2d at 390, declared itself :

“persuaded .. . by the weight of reason and au-

thority and by the plain language of the statute

that district court jurisdiction under Sec. 302(e)

is limited to restraining future violations of the

Statute and does not include granting relief by

way of accounting, receivership, or removal of de-

falcating trustees or administrators.”

It proceeded to quote the same passage from Arroyo,

supra, and concluded as follows:

a The District Court, like Petitioner, read Arroyo as bar-

ring relief under Section 302(e) other than an injunctive

remedy to prevent and correct violations in the future.

‘* Petitioner submits that the Court of Appeals’ reading of

Arroyo was wrong. If, as the Court of Appeals suggests, Jus-

tice Stewart had meant only to disapprove conviction of a

common law crime, he undoubtedly would have said so in so

many words, rather than stating that Section 302(e) allowed

trustees to be held accountable only by way of the injunctive

remedy provided in ti.at Section.

“(T]he federal court’s ultimate exercise of adju-

dicatory power under this section is limited to the

prevention of future violations, since the Con-

gress, as architect of its jurisdictional gambit, has

not chosen to empower it to require an accounting

or similar noninjunctive relief.” Id.

The other circuits that have addressed the question

of the scope of remedial jurisdiction under Section

302(e) are in accord with Snider. In Bowers v. Ul-

piano Casal, Inc., supra, the First Cireuit described

Section 302(e) as “a preventive civil remedy to en-

force compliance with the statutory standards”, 393

F. 2d at 425, and noted that it “speaks in terms of re-

straining action” and not of such remedies as “cancel-

lation of a mortgage and the repayment of liquidated

sums.” 393 F. 2d at 426." Similarly in Bowers V. Mo-

reno, supra, the First Circuit again stressed the “limi-

tation[s] of relief authorized by 302(e)”; referring to

Haley v. Palatnik, 509 F.2d 1038 (C.A. 2, 1975),

where Section 302(e) substantive jurisdiction had

been upheld, it stated that “[a]|ny ultimate relief given

in Haley would similarly be limited to enjoining future

payments.” 520 F. 2d at 846."

The Seventh Circuit in Employing Plasterers’ Ass’n.,

supra, 279 F.2d at 97, also observed that Section

302(e) “provides the civil remedy of injunction to re-

‘? To the extent that the First Circuit had earlier suggested

the appropriateness of broader equitable jurisdiction under

Section 302(e) in Copra v. Suro, 236 F. 2d 107, 114 (C.A. 1,

1956), it repudiated that view in Bowers v. Ulpiano Casal,

Inc., 393 F. 2d at 423-25.

‘8 The opinion below acknowledged conflict with decisions

of the First and Fifth Circuits (19a & n. 19). As seen below,

however, the weight of authority is far more heavily stacked

against the free-wheeling view of Section 302(e) adopted by

the Court of Appeals in this case.

strain violations of the section” and “is aimed pri-

marily at the prevention of possible abuse and not at

providing a remedy for abuse actually perpetrated.”

More recently, the Seventh Circuit in Johnson v. Bot-

tica, 537 F.2d 930 (C.A. 7, 1976), reviewed the some-

what differing positions taken by various Courts of

Appeals regarding the scope of substantive concerns

within the purview of Section 302(e), Id. at 933-4,”

but observed that the “language of 29 U.S.C. § 186(e),

which grants to the district courts jurisdiction to re-

strain violations of that section, does not confer reme-

dial power to reformulate or redraft the eligibility re-

quirements of a pension plan.” It reasoned that the

“narrow latitude” allowed under Section 302(e) thus

required an exception to the “general principle of

equity jurisprudence” under which a court of equity

is empowered to reform a trust instrument to conform

to the parties’ intentions, 537 F.2d at 937-8. If the

scope of remedies permissible under Section 302 is even

narrower than that normally available to a court of

equity, surely implication of a damage remedy must

be precluded as well.

Similarly, the Second Circuit in Lugo, supra, 529 F.

2d at 255, stated it had joined “the courts that have

taken a narrow view of section 302(e)”” and the

Ninth Circuit in Burroughs v. Bd. of Trustees of Pen-

** As seen in Part I(A) (3), infra, none of those decisions

remotely support the views of the Court of Appeals here

regarding Section 302(e) substantive jurisdiction.

*° While it said that support for the broad view “can be

found in a number of cases”, 529 F. 2d at 254. it cited only

Copra V. Suro, supra, which it recognized had since been dis-

avowed by the First Circuit. Petitioner is aware of no Circuit

Court authority other than the decision of the Court of Ap-

peals here holding that Section 302(e) is not a limitation

upon available relief.

sion Trust, Etc., 542 F. 2d 1128, 1130 (C.A. 9, 1976),

cert. denied, USS. , 97 S.Ct. 1113, stated that

Section 302(e) “does not... confer general power’’ to

go beyond “‘determin[ing] whether the provisions of

a given retirement fund constitute a structural defect

in violation of \ 302(c) (5).”

Indeed, other than in this case, the Third Circuit

itself has respected the limitations imposed by the

language of Section 302(e) on the scope of available

remedies. In Moyer v. Kirkpatrick, 387 F. 2d 955 (C.

A. 3, 1968), aff’g 265 F. Supp. 348 (E. D. Pa. 1967),

the Third Circuit affirmed and adopted the District

Court holding that “. . . jurisdiction to restrain ‘vio-

lations’ of LMRA § 302 was clearly designed to pre-

vent the prohibited payments, not to oversee or to regu-

late permited payments.” 265 F. Supp. at 351. Pecu-

liarly, the Third Circuit in this case declined even to

cite Moyer even though Petitioner had expressly relied

upon it as stating the law of the Circuit. The Third

Circuit’s omission is al! the more telling in that the

Fifth Circuit in Snider, which it did cite as taking a

position contrary to that which it took here, listed the

Third Circuit, in Moyer, as one of the several circuits

which the Fifth Circuit in Snider joined in holding

§ 302 jurisdiction limited to granting injunctive relief,

481 F. 2d at 390.

3. As a Matter of Substantive Law, Section

302(e) Is Concerned With “Structural Viola-

tions” And Not Fiduciary Breaches In The

Administration of Collectively - Bargained

Funds.

As stated above, the overwhelming weight of lower

court authority is that Section 302(e) was not in-

tended to be a “foundation stone” for federal court su-

pervision of collectively-bargained pension funds. The

suggestion by a few commentators that the law of

fiduciary duties owed in connection with such funds

be judicially federalized has been uniformly rejected

by the courts of appeals other than by the Third Circuit

in this case (p. 13, supra). As recognized by the First

Circuit in Bowers v. Ulpiano Casal, Inc., supra, 393 F.

2d at 425, Congress “was dealing with a very specific

problem” in enacting Section 302(e) and sought to

prevent potential abuses by conforming the structure

of collectively-bargained trusts to the specifications of

Section 302(c) (5). As a matter of remedy, as seen,

this has meant that relief is limited to restraint of vio-

lations; as a matter of substance, it has meant that the

violations addressed are violations of the structure

specified by Section 302(c) (5) rather than violations

of fiduciary duty owed in connection with trust ad-

ministration. The two limitations, while distinct, are

closely related in function. Many of the decisions hold-

ing Section 302(e) limited as to remedy also hold it

limited as to substance. This is true of Bowers v. Ul-

piano Casal, Inc., supra; Bowers v. Moreno, supra;

Lugo, supra; Prescription Plan Service Corp., supra;

Snider, supra; Johnson v. Bottica, supra; and Bur-

roughs, supra. It is also true of the Third Circuit’s

earlier decision in Moyer, supra.

The Third Circuit’s decision in this case is to the

contrary. The Third Circuit’s decision departs from

prior authority as to substance as well as remedy. It

appears to contemplate imposition of ‘ 302 damage

liability not merely for harm to a trust resulting from

a structural violation—after all the District Court’s

finding that the Anthracite Fund had benefitted, not

suffered, by its close association with the Union was not

rejected by the Court of Appeals—but also for breach-

es of the newly-declared federal fiduciary standard.

Such a result is yet a further step removed from Con-

gress’ “very specific” concern, Bowers v. Ulpiano Ca-

sal, Inc., supra, in enacting Section 302.

B. The Holding that Section 301 of LMRA Confers Jurisdic-

tion to Adjudicate Claims of Negligence and Breaches of

Trust in the Administration of a Collectively Bargained

Pension Fund Is Contrary to the Plain Words of the

Statute and Is Inconsistent with Thirty Years of Interpre-

tation of Section 301 by This Court and the Courts of

Appeals

In reversing the District Court’s holding that juris-

diction of Respondents’ Complaint was lacking under

Section 301 of LMRA, the Third Circuit was confront-

ed with the decision which it entered seven years ear-

lier in this very case. In its 1968 decision, the Court

had found that no violation of contract had been plead-

ed nor could one be found. Accordingly, it held that

jurisdiction was lacking because “violation of [a] con-

tract ... [is] the only type of wrong which Section

301(a) bring within federal jurisdiction.” Nedd V.

United Mine Workers of America, supra, 400 F. 2d at

106. (Emphasis added)

In its present decision, the Third Circuit acknowl-

edged that it had reexamined the contract in light of

its prior finding that the Union had no contractual ob-

ligation to undertake collection of royalties and again

announced that “[t]here is no such obligation.” (7a &

n. 7). Contrary to the earlier decision, the present

Third Circuit panel upheld Section 301 jurisdiction de-

spite the absence of a contract violation:

“The federal common law of collective bargaining

agreements, which grows out of 29 U.S.C. § 185

(a), would permit pension trust fund benefici-

aries to sue, derivatively, to enforce the mine oper-

ators’ payment obligations when the trustees did

not. It is but a small step further to suggest that

the same federal common law of collective bar-

gaining agreements permits a suit against the

Fund Trustees, and the Union which allegedly

acted in concert with them for the destruction of

the value of the bargained-for and vested contract

rights.

* * *

“While we certainly do not hold that all breaches

of fiduciary duty may be redressed in an action

under § 301 of the Labor Management Relations

Act, sound public policy compels the conclusion

that § 301 supports a federal common law cause

of action for tortious interference with a collec-

tive bargaining agreement by a pension fund

trustee, in violation of his fiduciary duty to the

pensioners. (footnote omitted) (8a, lla & n. 13).

Despite the Third Circuit’s effort to limit its recent

holding, the conclusion that even some fiduciary

breaches are federally actionable under Section 301 is

a quantum leap, not a mere ‘smali step,” from the

plain words of Section 301(a). The ianguage of the

statute is, in this respect, clear and unequivocal:

“Suits for violation of contracts between an

employer and a labor organization representing

employees in an industry affecting commerce as

defined in this chapter, or between any such labor

organizations, may be brought in any district

court of the United States having jurisdiction of

the parties, without respect to the amount in con-

troversy or without regard to the citizenship of

the parties.” (168a.)

Because the statute so clearly addresses only “viola-

tion of contracts,” the Courts have had limited oppor-

tunities to decide whether jurisdiction extends beyond

contract violations to matters involving alleged fiduci-

ary breaches or ‘tortious interference” with contrac-

tual rights. This Court has frequently provided guid-

ance in Section 301 cases, but has never even hinted

that torts or fiduciary breaches are cognizable wrongs

under Section 301." Those Circuits which have ex-

pressed their views, are squarely in conflict with the

result below. In Mumford v. Glover, 503 F.2d 878 (C.

A. 5, 1974), the Fifth Circuit held as follows:

“Section 185 provides jurisdiction only in ‘suits

21 Since Lincoln Mills, this Court has decided a wide variety

of Section 301 actions. Thus, this Court has required the ex-

haustion of contract remedies before initiation of a Section

301 suit, Republic Steel Corp. v. Maddox, 379 U.S. 650 (1965) ;

has held that individuals may file Section 301 actions for

violations of collective bargaining agreements, Smith v. Eve-

ning News Ass’n., 371 U.S. 195 (1962); and has held that

remedies for contract violations include the awarding of

damages, Local 174, Teamsters v. Lucas Flour Co., 369 U.S.

95 (1962) as well as injunctive relief; United Steelworkers of

America v. American Manufacturing Co., 363 U.S. 564

(1960) ; United Steelworkers of America v. Warrior & Gulf

Nav. Co., 363 U.S. 574 (1960) ; United Steelworkers of Amer-

ica v. Enterprise Wheel & Car Corp., 363 U.S. 593 (1960) ;

Boys Markets, Inc. v. Retail Clerks Union, 398 U.S. 235

(1970). While not directly holding that only contract viola-

tions are adjudicable in Section 301 actions, all of the fore-

going cases emphasize and underscore the contractual nature

of Section 301 suits.

Two other decisions by this Court indicate that Section 301

jurisdiction is purely contractual. In Retail Clerks v. Lion

Dry Goods, Inc., 369 U.S. 17 (1962) this Court held that the

word “contract” in Section 301(a) included a strike settlement

agreement. By detailing the indicia of those agreements which

were enforceable in Section 301 actions (369 U.S. at 28), the

Lion Dry Goods decision clearly negates any contention that

Section 301 provides a jurisdictional basis for adjudication

of non-contract suits. Finally, when this Court determined

what limitations period was applicable to Section 301 actions,

it held that reference should be made to the appropriate state

statute of limitations in contract—not tort—actions. /nter-

national Union, UAW v. Hoosier Cardinal Corp., 383 U.S. 696

(1966).

for violation of contracts between an employer

and a labor organization . . . or between any such

labor organizations’ (emphasis supplied). This

section expressly requires a violation of a labor

contract before it may be employed as a jurisdic-

tional device. And the literal meaning of the stat-

ute is the first reference for Congressional intent.

Perry v. Commerce Loan Co., 1966, 383 U.S. 392,

400, 86 S.Ct. 852, 15 L.Ed.2d 827, 833, quoting

United States v. American Trucking Associa-

tions, 1940, 310 U.S. 534, 543, 60 S.Ct. 1059, 84

L.Ed.1345, 1350; Flora v. United States, 1958,

357 U.S. 63, 65, 78 S.Ct. 1079, 2 L.Ed.2d 1165,

1167; Ray Baille Trash Hauling Inc. v. Kleppe,

5 Cir. 1973, 477 F.2d 696, 707. It is on this basis

that we decide that Section 185 will not serve to

bring this action before a federal court.” 503 F.2d

at 882 (emphasis in original text).

More recently, the Sixth Circuit adhered to its prior

decision in Palnau v. Detroit Edison, 301 F.2d 702, 704

( C.A. 6, 1962) which had held that Section 301 is

limited to adjudication of contract violations, Miller

V. Davis, 507 F.2d 308, 311 (C.A. 6, 1974). In Miller

the Sixth Circuit declared that Section 301 “does not

establish subject matter jurisdiction over claims of im-

so “nf administration of union trust funds.” 507 F.2d

a S

The conflict is most pronounced between the decision

below and Bowers v. Ulpiano Casal, Inc., supra, where

Judge Coffin of the First Circuit considered and re-

*? Quoting from Snider v. All State Admini

. Snid ; istrators, Inc.,

supra, the Sixth Circuit noted that “‘[s]tate authority re-

veer de» —_ foundation upon which such funds are con-

structed’” and “govern[s] the obligations of the Fund’

trustees. . . .” 507 F. 2d at 311 &n.3. aya

jected the very rationale for extending Section 301

jurisdiction which Judge Gibbons adopted here. The

Bowers appellants urged that since Smith v. Evening

News Ass’n., 371 U.S. 195 (1962) authorized them to

sue for violations of a collective bargaining agreement,

they should also be permitted individually to sue the

fund trustees and those who allegedly conspired with

them. Unlike the Court below, the First Circuit de-

clined to find that such “tortious interference” with

a contract could be an actionable contract violation

within the meaning of Section 301:

“Even if Smith were to be so extended, however,

the complaint against these appellees does not and

could not allege that they have violated a contract.

While appellees allegedly ‘nowingly shared in the

fruits of malfeasance and possible breach of con-

tract on the part of the Fund’s trustees, they

themselves can no more be successfully sued ‘for

violation of contract’ than one who buys a house

from a seller, knowing that the seller has broken

his exclusive agency agreement with a broker.”

393 F.2d at 423.”

Thus, no less than three other Courts of Appeals have

expressly rejected the interpretation of Section 301

adopted by the Third Circuit in the instant decision.

Ironically, the most cogent articulation of the limi-

tations of Section 301 jurisdiction was expressed by

Judge Hastie, in this very case, eight years ago:

“We recognize that the enforcement of collective

bargaining agreements under Section 301(a)

*s Accord: De Arroyo V. Sindicato de Trabajadores Packing-

house, 425 F. 2d 281, 285-287 (C.A. 1, 1970). See also Alez-

ander V. Pacific Maritime Ass’n., 314 F. 2d 690, 694 (C.A. 9,

1963).

‘calls into being a new common law,’ John Wiley

& Sons, Inc. v. Livingston, 1964, 376 U.S. 543,

550, 84 S. Ct. 909, 914, 11 L. Ed. 2nd 898, which

In some aspects is fashioned ‘from the policy of

our national labor laws.’ Textile Workers Union

of America v. Lincoln Mills, 1957, 353 U.S. 448,

456, 77S. Ct. 912, 918, 1 L. Ed 2d 972. But we find

nothing in national labor policy which would jus-

tify abrogation of normal conceptions of contract

law in order to characterize the union’s conduct

in failing to compel the operators to carry out

their promises to it as a breach of the union’s own

contractual undertaking.

ad * e

... [W]e think that the union’s failure to act

- . . Was not ‘a violation of [a] contract between

an employer and a labor organization’, the only

type of wrong which section 301(a) brings within

federal jurisdiction.” Nedd v. United Mine Work-

ers of America, supra, 400 F. 2d at 105-106."

Petitioner submits that nothing has changed in the

past eight years which could somehow transform a

tort into a contract violation.*’

The Third Circuit’s decision represents a far-reach-

* Prior to the present case, the Third Circuit decisi h

consistently held—~both before and after the catia Nena

decision—that Section 301 provided jurisdiction to adjudicate

ee eee Leskiw Vv. Local 1470, IBEW, 464 F

, 722-28 (C.A. 3, 1972) ; Adams Vv. B

368 (C.A. 3, 1965). neil endian

* If anything, the events of the past eight year ili

more strongly than before that Section 301 “ ee teen

to contract violations. During this period, ERISA was enacted

establishing pervasive pension regulations including fiduciary

standards and federal jurisdiction to remedy violations of

that statute and regulations. Further, the proliferation of

ing departure from uniform doctrine developed over

the more than 30 years since the enactment of Taft-

Hartley so as to comprehend a broad range of conduct

not federally actionable heretofore. The Rule 19 stand-

ards for review by this Court are amply satisfied. Cer-

tiorari should be granted so that the circuit conflicts

over the proper scope of federal court jurisdiction un-

der Sections 301 and 302 may be resolved before they

deepen and expand.

Il. THE HOLDING THAT PETITIONER OWED A DUTY OF

FAIR REPRESENTATION TO RETIREES—PERSONS

INDISPUTABLY OUTSIDE THE BARGAINING UNIT—

IS DIRECTLY CONTRARY TO THIS COURT'S DECt-

SION IN PITTSBURGH PLATE GLASS AND THE EN-

TIRE LINE OF FAIR-REPRESENTATION DECISIONS

WHICH LIMIT THE DUTY ONLY TO BARGAINING

UNIT EMPLOYEES.

Respondents also asserted federal jurisdiction under

28 U.S.C. 1331 and 1337 contending that the Union

owed them—as retirees—a duty of fair representation.

The District Court concluded that Allied Chemical

Workers v. Pittsburgh Plate Glass Co., 404 U.S. 157

(1971) (PPG), which held that retirees were not “em-

ployees” under federal labor law and were not within

the bargaining unit, foreclosed any duty of fair repre-

sentation claim because the “duty” extends only to bar-

gaining unit members. Indeed, in Pittsburgh Plate

Glass, this Court so stated:

legitimate contract actions under Section 301 has already

seriously taxed the resources of the district courts. If the

statute is construed contrary to its plain words, as consistently

interpreted over 30 years, to include tort claims and fiduciary

violations, it would unnecessarily embroil the district courts in

additional, massive litigation. See Buffalo Forge Co. V. United

Steelworkers of America, 428 U.S. 397, 411 & n. 12 (1976).

“Since retirees are not members of the bargaining

unit, the bargaining agent is under no statutory

duty to represent them in negotiations with the

employer.” 404 U.S. at 181 & n. 20.

The Court of Appeals rejected the District Court’s

determination that PPG was dispositive, holding—in-

correctly—that Petitioner owed a duty of fair represen-

tation to the retiree respondents (a) because the duty

of fair representation is not limited to bargaining unit

employees; and (b) because the Union, having under-

taken to bargain for retirees, owed a duty to bargain

fairly on their behalf.

A. The Court of Appeals Decision is Inconsistent with the

Entire Line of This Court’s Fair Representation Decisions.

Since spawning the duty of fair representation in

Steele v. Louisville & N.R. Co., 323 U.S. 192 (1944),

and Tunstall v. Brotherhood of Locomotive Firemen,

323 U.S. 210 (1944), this Court has repeatedly de-

clared that the duty is owed only to members of the bar-

gaining unit. Members of the bargaining unit can in-

clude only persons who are “employees” as defined by

Section 2(3) of LMRA, 29 U.S.C. 152(3), and who are

employed within a bargaining unit for which the par-

ticular union is the exclusive representative. In Vaca v.

Sipes, 386 U.S. 171 (1967), the Court reviewed the

evolution of the fair representation duty noting its

scope of recipients as follows:

“It is now well established that, as the exclusive

bargaining representative of the employees in

[the] bargaining unit, the Union had a statutory

duty fairly to represent all of those employees,

both in its collective bargaining . . . see Ford

Motor Co. v. Huffman, 345 U.S. 330, Syres v. Oil

Workers International Union, 350 U.S. 892, and

in its enforcement of the resulting coliective bar-

gaining agreement, see Humphrey v. Moore, 375

U.S. 335. The statutory duty of fair representa-

tion was developed over 20 years ago in a series of

cases involving alleged racial discrimination by

unions certified as exclusive bargaining represen-

tatives under the Railway Labor Act, see Steele v.

Louisville & N.R. Co., 323 U.S. 192, Tunstall v.

Brotherhood of Locomotive Firemen, 323 U.S.

210, and was soon extended to unions certified

under the N.L.R.A., see Ford Motor Co. v. Huff-

man, supra. Under this doctrine, the exclusive

agent’s statutory authority to represent all mem-

bers of a designated unit includes a statutory ob-

ligation to serve the interests of all members with-

out hostility or discrimination toward any, to ex-

ercise its discretion with complete good faith and

honesty, and to avoid arbitrary conduct. Hwm-

phrey v. Moore, 375 U.S. at 342.” 386 U.S. at 177

(Emphasis supplied).

There are scores of decisions which hold that the duty

of fair representation is co-extensive with the bargain-

ing unit the Union is certified to represent. The es-

sence of the “duty”—that it was created as a result of

a union’s exclusive status and owed only to those em-

ployees the union was authorized to represent in the

unit—was only recently re-emphasized by this Court:

“TW Je have held, by the very nature of the exclu-

sive bargaining representative’s status as repre-

sentative of ALL unit employees, Congress im-

plicitly imposed upon it a duty fairly and in good

faith to represent the interests of minorities

within the unit. Emporium Capwell Co. v. West-

ern Addition Comm. Org., 420 U.S. 50, 64

(1975).” (Emphasis supplied ; capitalized word is

emphasized in original text).

The duty exists to assure that a bargaining repre-

sentative which enjoys exclusive status under federal

law acts fairly on behalf of all persons for whom it ex-

ercises mandatory bargaining prerogatives. To extend

the duty of fair representation to persons who are

neither “employees” nor “bargaining unit members” is

totally inconsistent with the duty’s raison d'etre.

In declining to follow the foregoing decisions and by

extending the duty owed by Petitioner to non-bargain-

ing unit members, the Third Circuit relied exclusively

on Railroad Trainmen v. Howard, 343 U.S. 768

(1952). Remarkably, the Court relied upon Howard

even though it quoted the following passage from

Pittsburgh Plate Glass decision declaring limits on the

reach of that decision:

“(njothing in Railroad Trainmen v. Howard,

343 U.S. 768, 72 S.Ct. 1022, 96 L.Ed. 1283

(1952), is to the contrary. In Howard we held

that a union may not use the powers accorded it

under law for the purposes of racial discrimina-

tion even against workers who are not members

of the bargaining unit represented by the union.

The reach and rationale of Howard are a matter

of some conjecture. See Cox, The Duty of Fair

Representation, 2 Vill. L. Rev. 151, 157-159

(1957). But whatever its theory the case obvious-

ly does not require a union affirmatively to repre-

sent nonbargaining unit members or to take into

account their interests in making bona fide eco-

nomic decisions in behalf of those whom it does

represent.” (14a quoting 404 U.S. at 181 & n. 20).

Thus, despite the clear statement that Howard did

not require union representation of nonbargaining unit

members, the Third Circuit squarely held that the fore-

going quotation “preserve[d] Howard”, that it was

applicable here, and that the Union thereunder owed a

duty of fair representation to these nonbargaining unit

members. To paraphrase this court in PPG, whatever

Howard’s theory, it obviously cannot be read, consist-

ent with the ensuing case law, to support wholesale ex-

tension of the fair representation duty to persons who

are not even “employees”, let alone “employees in the

bargaining unit”.

Moreover, apart from the caveat stated in PPG, ex-

amination of Howard itself reveals unique character-

istics not even remotely present here. In Howard, this

Court held that a union representing an all-white unit

of “brakemen” should be enjoined from effectuating

an agreement with a railroad employer which would

eliminate the jobs of black employees classified in a

different unit who performed essentially the same

work as brakemen. The Court held that the Railway

Labor Act “prohibits bargaining agents it authorizes

from using their position and power to destroy colored

workers’ jobs in order to bestow them on white work-

ers.” 343 U.S. at 774. Howard accorded job protection

to black workers who were “employees” within the

meaning of federal labor law where the existence of

racially separate units ensued from racial discrimina-

tion. Surely, Howard does not support invocation of the

fair representation duty by retirees who are not “em-

ployees” within the meaning of LMRA and whose }10-

sition outside the bargaining unit is a natural incident

of retirement and is attributable neither to any action

by the union nor to invidious discrimination of any

sort.

B. The Decision Below Is Contrary to This Court’s Decision

in Pittsburgh Plate Glass

The Court of Appeals, despite this Court’s state-

ment in Pittsburgh Plate Glass that the fair represen-

tation duty does not extend to retirees, 404 U.S. at

181 and n. 20, held that Respondents’ claim was not

foreclosed by that decision. It observed that retirees’

benefits do form a permissive—albeit not a mandatory

—subject of bargaining and reasoned that “[{w]hen

the Union elects to undertake such bargaining, the

pee duty of fair representation must apply.”

a).

The Third Circuit did not cite cases in support of

this proposition nor did it attempt to reconcile its

nolding with this Court’s observation in PPG that the

duty does not apply to retirees. The conclusion that

application of the duty to retirees somehow “must”

follow as a result of permissive bargaining over their

benefits is contrary, not only to this Court’s flat state-

ment referred to above, but to the Court’s explanation

as to the legal effect of permissive bargaining. The

Court in PPG rejected the argument of the National

Labor Relations Board—which parallels the Court of

Appeals’ holding in this case—that retirees should

be treated as bargaining unit members because of the

common practice of unions in bargaining over reti

benefits. The Court stated as follows: , ag

“[I)ndustrial practice cannot alter the conclu-

sions that retirees are neither ‘employees’ nor bar-

gaining unit members . . . Common practice can-

not change the law and make into bargaining unit

‘employees’ those who are not.” 404 U.S. at 176.

The Third Circuit’s views as to the effect of permis-

sive bargaining is contrary to PPG and to the reading

given it by the Fifth Circuit in Bricklayers Local 15

v. Stuart Plaster Co., 512 F.2d 1017, 1029 (C.A. 5,

1975).* Not only did this Court in PPG observe that

** It is similarly in conflict with the reading gi

ilarl; g given PPG by

the Eighth Circuit, Royal Typewriter Co. v. NLR

1030, 1039 & n. 10 (C.A. 8, 1976) : —

voluntary industry-labor practice cannot expand the

scope of the bargaining unit, it also declared that a

union’s voluntary undertaking to bargain over retir-

ees’ benefits does not oblige it, vis-a-vis those retirees

to bargain for them in the future. Indeed, it was in the

course of stating that a union’s voluntary undertaking

to bargain for retirees could have no such effect that

the Court in PPG declared the fair representation

duty inapplicable to retirees:

“Having once found it advantageous to bargain

for improvements in pensioners’ benefits, active

workers are not forever thereafter bound to that

view or obliged to negotiate in behalf of retirees

again.” To the contrary, they are free to decide,

for example, that current income is preferable to

greater certainty in their own retirement benefits

or, indeed, to their retirement benefits al-

together.”

2 “Since retirees are not members of the bargaining won

the bargaining agent is under no statutory duty to represen

them in negotiations with the employer.” 404 U.S. at 181 & n.

20.

PPG makes clear that the fair representation duty

—which arises out of an exclusive status conferred on

the union by federal statute—cannot be created

through voluntary industry-labor practices. Just as

“The Supreme Court has not yet recognized a duty to con-

tinue to bargain over what was not a subject of man-

datory bargaining in the first instance. See Allied Chem-

ical Workers, Local 1 v. Pittsburgh Plate Glass Co., 404

U.S. 157, 187-88, 92 S. Ct. 383, 401, 30 L. Ed. 2d 341,

362 (1971). ‘No matter how lengthy the bargaining about

a permissive subject, it never changes into a mandatory

subject.’ C. Morris, The Developing Labor Law 425

(1971). See NLRB v. Davison, 318 F. 2d 550, 557-58

(4th Cir. 1963).”

such practices cannot transform persons foreign to

the unit into bargaining unit employees, they cannot

change the scope of the statutory duty.”

The Supreme Court’s PPG holding rests on recog-

nition that retirees are a “limited-purpose consti-

tuency” within a union whose inclusion in the bar-

gaining unit “would create the potential for severe

internal conflicts that would impair the unit’s ability

to function and could disrupt the processes of collec-

tive bargaining.” 404 U.S. at 173. The same reasons

that militated against holding retirees to be bargain-

ing unit members and against holding their benefits

to be mandatory subjects of bargaining, also militate

against the Third Circuit’s holding that the occurrence

of permissive bargaining over their benefits gives rise

to the fair representation duty.

Petitioner submits that PPG and the Third Circuit’s

decision cannot be reconciled. Assuming they could

stand together, however, they would render a union’s

voluntary undertaking of permissive bargaining over

retiree benefits a veritable minefield of legal hazards

and create a serious imbalance in the relative bargain-

ing positions. Employers—despite a history of per-

** Where permissive bargaining occurs, its effect is not to

give rise to the fair representation duty, but te specified con-

tract rights which the reitrees, as third-party beneficiaries,

may enforce in an action under Section 301 of LMRA. That

this was the nature of retirees’ protection of rights conferred

by permissive bargaining was explicitly recognized by the

Court in PPG, 404 U.S. at 181 & n. 20. Indeed, Respondents

as pension beneficiaries could have sued derivatively to en-

force delinquent operators’ obligations to the Fund. The

Court of Appeals statement that they were somehow legally

foreclosed from doing so by conduct of the Union with respect

to delinquencies (15a) is simply incorrect. While Respondents

remained free to sue under Section 301 for “violation of a

contract”, they could not sue thereunder based on “tortious

interference” or breach of fiduciary duty.

missive bargaining over such benefits—would indis-

putably be free under PPG to cease bargaining at any

time when to do so appeared to serve their overall

bargaining strategy.” The union on the other hand,

having undertaken voluntary bargaining, could as a

result of the Third Circuit’s holding, be exposed to a

duty of fair representation challenge should it for

overall strategic reasons abandon permissive bargain-

ing. The union’s bargaining power would be seriously

compromised if its undertaking of permissive bar-

gaining gave rise to additional legal duties while that

of the employer did not. It is simply absurd to suppose

that occurrence of permissive bargaining could have

such a one-sided effect. Yet the Third Circuit’s reading

of PPG makes such a conclusion inevitable.

Petitioner submits that the Third Circuit’s holding

is in manifest conflict both with PPG and the readings

given PPG by other Courts of Appeals. The need to

resolve this conflict and restore the duty of fair repre-

sentation to its historical scope and function amply

justifies this Court’s attention by way of certiorari.

Ill. THE COURT OF APPEALS’ DISPOSITION OF

THRESHHOLD ISSUES BEARING ON THE UNION’S

LIABILITY UNDER RESPONDENTS’ FEDERAL

CLAIMS AND ITS ENTITLEMENT TO CREDIT FOR

LOANS TO THE FUND DEPARTS FROM ESTAB-

LISHED DOCTRINES OF FEDERAL LAW AS ARTICU-

LATED IN DECISIONS OF THIS COURT AND OTHER

COURTS OF APPEALS.

The Court of Appeals’ discussion of the merits (31a-

47a), while not resolving ultimate issues of the Union’s

Should the union insist on continued retiree bargaining,

it would undoubtedly be charged with unfair labor practices

under Section 8(b) (3) of LMRA, 29 U.S.C. 158(b) (3). Yet

having voluntarily undertaken bargaining the union might be

charged with breach of the fair representation duty for failing

to follow through.

liability and entitlement to credit for its loans to the

Fund, sets forth a number of threshhold determinations

which will bear on resolution of those issues and which

are blatantly contrary to established federal doctrine.

First, in describing the standard for imposition of

liability, the Court of Appeals lumped together each of

Respondents’ federal theories and apparently declared

that liability under each would be established by a

showing of breach of fiduciary duty. The Court de-

clared as follows:

“Whether one looks to the Pennsylvania law of

trusts or to an appropriate federal standard cre-

ated under any of the three federal legal theories

asserted by the plaintiffs the Union must, in the

circumstances of this case, be held to the same

standard of conduct in discharging its assumed

obligations toward the Fund as that of the Fund’s

nominal Trustees.” (36a).

Thus, with one fell swoop, and without so much as lip-

service to the decisions which differentiate their dis-

tinctive natures, the Court of Appeals equated all of

Respondents’ federal claims with a common law breach

of trust. While the District Court’s analysis of the

question of liability for breach of the duty of fair rep-

resentation was firmly grounded in the standard of

Vaca v. Sipes, 386 U.S. 171, 190 (1967) (148a-152a),

the Court of Appeals abandoned that standard alto-

gether. Similarly, while the District Court correctly

held that lack of a contract violation by the Union dis-

posed of the question of Section 301 liability as well as

jurisdiction (112a), the Court of Appeals held—con-

trary to the decisions cited in Part I-B, swpra—that

the Union could be held liable under Section 301 for

breaches of fiduciary duty by the trustees. The imposi-

tion of liability for breach of the duty of fair represen-

tation absent “hostile discrimination” and conduct

which was either “arbitrary” or in “bad faith” (Vaca

v. Sipes, 386 U.S. at 194) and for violation of Section

301 absent breach of contract would simply miscon-

ceive the parameters of established doctrine.” Finally,

the very notion of damage liability under Section 302

is difficult to assess because of its novelty; however,

the Court of Appeals’ determination is necessarily con-

trary to decisions cited in Part I-A, supra holding that

matters of fiduciary breach are not the concern of that

section.

Second, the Court of Appeals erroneously held that,

as long as two of the trustees were Union officers, the

Union would be automatically answerable for the trus-

tees’ breaches—even those found to have been com-

mitted non-intentionally, in good faith, and without any

purpose to benefit the Union. Notably, the District

Court had found neither a factual nor a legal basis for

such an imposition of vicarious liability on the Union:

“'.. 1am unwilling to infer that the Union trus-

tees acted on behalf of the Union in their capacity

as trustees from the mere fact that they were

Union officials at the same time they were trus-

tees. There would have to be additional evidence

of such an improper allegiance by the Union trus-

tees to support such an inference, and I find no

such evidence in this case.” (157a).

“Nor did the Union trustees in this case actually

*° In Humphrey V. Moore, 375 U.S. 335 (1964), this Court

again recognized as it had in Ford Motor Co. v. Huffman,

supra, that “[i]nevitably differences arise” in the application

of an agreement, but the “existence of such differences does

not make them invalid.” “A wide range of reasonableness

must be allowed a statutory bargaining representative in

serving the unit it represents. .. .” 375 U.S. at 349 quoting

from 345 U.S. at 338.

act as agents of the Union in their administration

of the Fund.” (156a-157a).

In marked contrast to the result reached by the Court

of Appeals is Blankenship v. Boyle, 329 F.Supp. 1089

(D.D.C., 1971), relied upon by both the District Court

and the Court of Appeals below. That case involved de-

terminations of numerous breaches of trust by trustees

designated, respectively, by the Union and the em-

ployer association. The District Court in Blankenship

held the Union liable for those specific breaches by its

trustee which inured to its benefit but, contrary to the

Court of Appeals here, held that neither the Union nor

the employer association could be held liable for fiduci-

ary breaches committed by their respective trustees

which did not result in benefit to either, 329 F.Supp. at

192 & n.1, 1104-06.

Third, the Court of Appeals citing no cases, held

that the Union would not be entitled to a credit in the

amount of forgiven loans were the forgiveness found

to be a gift (46a). Regardless of the motivation for

forgiveness of the loans—and even if forgiveness were

found to be a gift—a credit would be necessary in the

interests of justice to prevent double recovery from a

single source. The Third Circuit’s holding in this re-

spect is contrary to decisions of other Courts of Ap-

peals which have held motivation irrelevant in preclud-

ing double recovery from a non-collaterial source,

Olivas v. United States, 506 F.2d 1158 (C.A. 9, 1974),

and to its own decision which it failed to cite, Feeley

v. United States, 337 F.2d 924 (C.A. 3, 1964). Con-

trary to the Third Circuit’s reasoning, if forgiveness

of the loans were a gift, that would only further dem-

onstrate the Union’s unstinting support for the Fund

and its benefiiciaries, and provide further equitable

basis for allowance of a credit.

CONCLUSION

To reach the result it sought, the Third Circuit pan-

el repudiated a thorough and well-reasoned District

Court decision, disregarded its own prior decisions and

the decisions of this Court, adopted unprecedented

views regarding the scope of federal jurisdiction,

deemed the Petitioner presumptively answerable for

the effect of an industry-wide collapse, and treated

as practically irrelevant the millions of dollars loaned

by Petitioner to enable pension payments to continue.

For some reason unknown to Petitioner, the Third

Circuit, as indicated by the tenor of its opinion, the

novelty of its jurisdictional holdings and the lengths

to which it went to distinguish and indeed overlook

contrary authority, appeared to have been virtually

predisposed to find for Respondents.

In addition to exposing the Petitioner to a potential

multi-million dollar liability, the decision below consti-

tutes an unwarranted expansion of federal jurisdic-

tion which is contrary to thirty years of interpreta-

tion of the labor statutes by this Court and the various

Courts of Appeals. The granting of certiorari is es-

sential in order to resolve the circuit conflict and to

restore federal court jurisdiction in labor cases to its

historical scope.

Respectfully submitted,

HARRISON COMBS JOSEPH A. YABLONSKI

900—15th Street, N.W. DANIEL B. EDELMAN

Washington, D.C. 20005 Yablonski, Both & Edelman

1150 Connecticut Ave., N.W.

Washington, D.C. 20036

THOMAS N. O’NEILL, JR.

CAROL A. MAGER

Montgomery, McCracken

Walker & Rhoads

Three Parkway

Philadelphia, PA 19102

APPENDIX

APPENDIX A

UNITED STATES COURT OF APPEALS

FoR THE THIRD CIRCUIT

No. 76-1978

CHARLES NEDD, DOMINIC IERO, MAX DYNOSKI and AN-

THONY GANLY, Members of the Pensioned Anthra-

cite Coal Miners Protest Executive Committee,

suing on behalf of Themselves and All Other Mem-

bers of the CLASS OF PENSIONED ANTHRACITE COAL

MINERS AND WIDOWS OF DECEASED PENSIONED AN-

THRACITE COAL MINERS

Appellants

AND

EMMETT THOMAS, MART F. BRENNAN, and JOHN

JILLSON, Trustees of the Anthracite Health and

Welfare Fund

UNITED MINE WORKERS OF AMERICA, an unincorpo-

rated trade union association; EMMETT THOMAS,

NICHOLAS J. HAYDOCK and JOHN D. JILLSON, Trus-

tees of the Anthracite Health and Welfare Fund,

Joseph Fauzio; Frank J. Galgay, (Added as Trustees

of Anthracite Health and Welfare Fund, per D.C.

order of 7/3/74)

(D.C. Civil Action No. 8796)

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

Argued February 24, 1977

Before FORMAN, GIBBONS and ROSENN, Circuit Judges

OPINION OF THE COURT

(Filed April 28, 1977)

GIBBONS, Circuit Judge.

This appeal concerns the right of pensioned coal

miners to obtain relief for the failure of their pension

fund trustees and their union to enforce anthracite

coal mine operators’ contractual obligations to pay a

tonnage royalty to the Anthracite Health and Welfare

Fund (“The Fund”). It has been litigated in the federal

courts for fourteen years. There has been other, related

litigation, seeking the same object: payment of earned

sums for the benefit of the Fund’s lawful cestuzs.’

The Fund was created by the terms of the Anthra-

cite Wage Agreement of 1946, when anthracite pro-

duction was at its modern peak. Its purpose was to pro-

vide miners with retirement pensions. A sharp and

prolonged decline in the anthracite mining industry,

the result of competition from other energy sources,

resulted in reduced income to the fund. In addition to

the decline in production substantial delinquencies also

accrued. By 1962, 120 mine operators owed almost $12

million to the Fund.

The gravaman of the pensioners’ complaint, whether

predicated on federal or on state law, is that the Trus-

tees and the Union favored the interests of working

miners over those of retirees and therefore failed to

take prudent action to collect delinquencies from mine

operators, who provided job opportunities. The district

court rejected the contention that any harm resulted to

the Fund from its relationship with the Union, and

held that neither the Union nor the Trustees are liable

to the Fund on account of the delinquencies.

On March 11, 1963 the pensioners filed a diversity

action against the United Mine Workers, which was

'E.g., Thomas v. Honeybrook Mines, Inc., 428 F.2d 981 (3d

Cir. 1970), cert. denied, 401 U.S. 911, 91 S.Ct. 874, 27 L.Ed.2d

809 (1971).

dismissed for lack of complete diversity.’ Since under

§ 301(b) of the National Labor Relations Act, 29 U.S.C.

§ 185(b), the Union is suable as an entity, the pension-

ers filed a new complaint alleging a breach of contract.

On an appeal certified to this court pursuant to 28

U.S.C. § 1292(b) we held that nothing in the labor

agreement between the Union and the coal operators

obligated the Union to enforce the operators’ promise

to pay royalties to the Fund. Thus we concluded that

the complaint, as then drafted, did not state a claim

upon which relief could be granted under § 301(a) of

the National Labor Relations Act.’ Although we did

not agree that the complaint stated a cause of action

for breach of a labor agreement, we recognized that

the allegations of failure to enforce the operators’

promise might state a claim for a breach of the Union’s

equitable duty as a fiduciary to act in the interest of

the pensioners and its employed members without un-

reasonable discrimination. 400 F.2d at 105. We re-

manded with instructions to allow plaintiffs a reason-

able time to amend their complaint to state such a

claim, and to join the Fund Trustees as necessary

parties. We recognized that the district court would

have jurisdiction over such a claim under 28 U.S.C.

§ 13837.‘ Nedd v. United Mine Workers, supra, 400 F.2d

* Nedd Vv. United Mine Workers of America, 225 F.Supp. 750

(E.D.Pa. 1963), aff'd 332 F.2d 373 (3d Cir. 1964) (per cur-

iam).

* Nedd v. United Mine Workers, 400 F.2d 103 (3d Cir.

1968).

* That section provides:

[t]he district courts shall have original jurisdiction of

any civil action or proceeding arising under any Act of Con-

gress regulating commerce or protecting trade and com-

merce against restraints and monopolies.

Implicitly, we recognized that there would be § 1337 jur-

isdiction as well, since all § 1237 cases, save those where the

amount in controversy is less than $10,000, also meet the

at 106. On remand, an amended complaint joined the

Fund Trustees as defendants, and alleged jurisdiction

under 28 U.S.C. § 1337 and under 29 U.S.C. §§ 157, 158

(b), 159(a), 185, 186, 301 et seq. and 501. The amended

complaint alleged violations of federal law, but also in-

cluded a pendent state law claim for breach of fiduci-

ary duty. Plaintiffs demanded a jury trial. By an order

dated June 30, 1970 the district court struck this de-

mand. After protracted discovery, a non jury trial was

held in June of 1974. The district court’s opinion was

filed on April 13, 1976." It concludes:

[t]he following are this Court’s holdings in

this case:

1. This Court does not have subject-matter jur-

isdiction of plaintiffs’ claims;

2. However, assuming that there is jurisdic-

tion,

A. the statute of limitations was tolled by the

trustees’ actions and does not bar this suit;

B. the trustees are not liable either for violation

of Section 302 of the Labor Management Relations

Act of 1947, 29 U.S.C. 4 186, or for breach of the

common law duty of undivided loyalty of a trus-

tee;

C. although past trustees were guilty of a

breach of a trustee’s duty to enforce claims by

virtue of their negligent handling of the problem

of operator delinquencies, none of the trustees who

requirements of 28 U.S.C. § 1331. See Jersey Central Power

& Light Co. v. Local Union No. 327, etc., of 1.B.E.W., 508

F.2d 687, 699 n.34 (3d Cir. 1975), vacated on other grounds

sub nom.-Equal Employment Opportunity Comm’n. v. Jer-

sey Central Power & Light Co. et al., 425 U.S. 987, 96 S.Ct.

2196, 48 L.Ed.2d 812 (1976).

5 Nedd v. United Mine Workers, Civil No. 8796 (M.D.Pa.,

Apr. 13, 1976).

are defendants in this case may be held liable for

that breach;

D. the Union is not liable under any of the

theories advanced by plaintiffs; and

E. if the Union is liable, it is entitled to have de-

ducted from any recovery against it an amount

equal to the total sum it has loaned the Fund since

its inception.

In accordance with the above, judgment will be

entered for the defendants.

Joint Appendix at 152a.

While at first blush it would seem that the district

court should have stopped after concluding it lacked

subject matter jurisdicvion, the actual holding appears

to be a rejection of the federal claims as a matter of

law after a full trial. and a rejection of the pendent

state law claim on the merits as well. On appeal the

pensioner plaintiffs advance several contentions. They

eontend that the court erred in rejecting all federal

claims; that their federal claims were sufficiently sub-

stantial to support pendent jurisdiction over their state

law claims; that the court erred in striking their de-

mand for a jury trial; and that it erred in entering

judgment for the defendants. The defendant Union and

the defendant Fund Trustees urge that the federal

claims are so insubstantial that the district court was

correct in holding that it lacked subject matter juris-

diction, but that its findings that there were no

breaches of fiduciary duties are not clearly erroneous

and should be affirmed if there was jurisdiction.

I. FEDERAL QUESTION

JURISDICTION

The amended complaint alleges three federal law

theories: (1) failure to enforce a collective bargaining

contract, a federal common law action implied from the

jurisdictional grant over such claims in § 301 of the

Labor Management Relations Act of 1947, 29 U.S.C.

§ 185(a); (2) breach of the federal common law duty

of fair representation; and (3) breach of fiduciary

duties implied from the prohibitions of ‘ 302 of the

Labor Management Relations Act of 1947, 29 U.S.C.

§ 186. The district court, after an extended analysis,

concluded that none of these theories would support

federal jurisdiction and that since there was no federal

question jurisdiction, it could not exercise pendent

jurisdiction." We conclude that in the circumstances of

this case federal law causes of action of sufficient sub-

stance to support federal question jurisdiction were

pleaded. Moreover, we conclude that the court could

properly, as ultimately it did, try the pendent state law

cause of action.

A. The § 301 Contract Claim

The § 301 claim against the Union must be consid-

ered separately from that against the Trustees. Al-

though our prior decision in Nedd v. United Mine

Workers, supra, discussed a ‘ 301 claim against the

Union, that opinion did not reach the issues presently

before us.’

“ The court then said:

{njotwithstanding the jurisdictional conclusions here-

inbefore articulated, in order to completely fulfill this

Court’s responsibilities as a trial court and to ensure a final

resolution of this protracted lawsuit in the event that an

appellate court determines that there is federal jurisdiction

here, I will address myself to the question whether, as-

suming federal jurisdiction of the issues in this case, plain-

tiffs are entitled to relief.

‘Our prior decision merely established that the union was

not by contract obligated to enforce the royalty provisions of

the Anthracite Wage Agreement. The Trustees were not then

The § 301 claim against the Trustees is based on a

provision in the 1952 interim Agreement between the

Union and the operators:

The Trustees of the Fund shall use due diligence

and all reasonable means to collect and prevent

delinquent obligations to the Fund.

Plaintiffs’ exhibits, Vol. A, p. 67. This provision was

incorporated by reference in all subsequent Anthracite

Wage Agreements. The district court points out that

the trustees were not parties to the contract, and there-

fore undertook no duties under it. It urges, moreover,

that the clause is merely a statement of the trustees’

fiduciary duties, and does not render those duties con-

tractual in nature. Granted these premises, the con-

clusion which the district court drew, that it lacked

§ 301 jurisdiction, does not follow.

[1-4] The above quoted clause is a contractual recog-

nition that the trustees have standing to sue to enforce

the royalty provisions." It is settled law that a suit by

non-party trustees to enforce those provisions may be

entertained in federal district court by virtue of § 301.°

It is also settled law that employees, although not for-

mally parties to a collective bargaining agreement, can

bring a § 301 suit to enforce its terms. Smith v. Eve-

before the court, nor did we then have occasion to consider the

issue of liability for destruction of bargained-for benefits.

Moreover, plaintiffs urge that our prior decision is not

controlling because this court failed to consider the impact of

certain relevant contractual provisions. We have examined

the proffered contract, and conclude that it does not require

any revision of our previous ruling with respect to the Union’s

contractual obligation to undertake collection of the royalties.

There is no such obligation.

“See Note, Pension Plans and the Rights of the Retired

Workers, 70 Colum.L.Rev. 909, 922 n.64 (1970).

*Id.; Lewis v. Benedict Coal Corp., 361 U.S. 459, 80 S.Ct.

489, 4 L.Ed.2d 442 (1960).

ning News Ass’n., 371 U.S. 195, 83 S.Ct. 267, 9 L.Ed.

2d 246 (1962). Where the trustee may sue and wrong-

fully fails to do so, the beneficiary may sue the trustee

as well as the party or parties the trustee failed to

sue.”” Thus, the complaint states a non-frivolous cause

of action under 29 U.S.C. ‘301, which provides for

suits in federal court for violation of such contracts.

[5-6] In Chemical Workers v. Pittsburgh Glass, 404

U.S. 157, 181 n.20, 92 S.Ct. 383, 398 n.20, 30 L.Ed.2d

341 (1971), while holding that an employer had no

statutory duty to bargain collectively with a union rep-

resenting its employees over benefits for retirees, the

Court observed:

[t]his does not mean that when a union bar-

gains for retirees—which nothing in this opinion

precludes if the employer agrees—the retirees are

without protection. Under established contract

principles, vested retirement rights may not be

altered without the pensioner’s consent. See gen-

erally Note, 70 Col.L.Rev. 909, 916-20 (1970).

The retiree, moreover, would have a federal rem-

edy under ‘ 301 of the Labor Management Rela-

tions Act for breach of contract if his benefits

were unilaterally changed. See Smith v. Evening

News Assn., 371 U.S. 195, 200-201, 83 S.Ct. 267,

' Note, supra n.&, at 992 n.64; Restatement (2d) of Trusts,

< 282(2) (1959); 4 A. Corbin, Contracts, § 779A (1950). An

action by a trust beneficiary is rooted in the law of trusts

rather than of contracts. Yet, as Corbin points out, a suit by

a trust cestui is essentially similar to a suit by a third party

donee beneficiary. In either event, a non-party to the original

instrument, who has given no consideration for the benefit af-

forded him, is entitled to press for performance of obligations

undertaken for his benefit. Although the cause of action in

the case at bench against the trustees arises from the trust

relationship, it is plain that the source of the rights asserted

is the collective bargaining agreement.

9 L.Ed.2d 246 (1962); Lewis v. Benedict Coal

Corp., 361 U.S. 459, 470, 80 S.Ct. 489, 4 L.Ed.2d

442 (1960).

The federal common law of collective bargaining agree-

ments, which grows out of 29 U.S.C. § 185(a), would

permit pension trust fund beneficiaries to sue, deriva-

tively, to enforce the mine operators’ payment obliga-

tions when the trustees did not. It is but a small step

further to suggest that the same federal common law

of collective bargaining agreements permits a suit

against the Fund Trustees, and the Union which al-

legedly acted in concert with them for the destruction

of the value of the bargained-for and vested contract

rights."

[7-8] The district court held that the entire matter

was referable to the state law of trusts. We think, how-

ever, that the same policy considerations which favored

recognizing a uniform federal law of collective bar-

gaining agreements apply with equal force to support

the application of federal common law to the instant

claim against ‘ 302 pension fund trustees.’* The An-

't See n.10 supra.

* Cf. Goetz, Developing Federal Labor Law of Welfare and

Pension Plans, 55 Cornell L.Rev. 911, 930-31 (1970) ; Herbert,

Investment Regulation and Conflicts of Interest in Employer-

Managed Pension Plans, 17 B.C. Ind. & Comm’! L.Rev. 127,

147, 148 (1976) (arguing that state trust law is both incon-

sistent and inadequate to protect beneficiaries, and that § 302

was intended to create a federal trust law standard). Our

conclusion is only that a claim of tortious interference with

a collective bargaining agreement by a Fund Trustee states a

non-frivolous cause of action under § 301 of the Taft-Hartley

Act sufficient to support pendent jurisdiction of state law

claims in federal court. That conclusion follows from two

premises: first, that § 302(e) establishes a federal forum in

which to try claims of a breach of fiduciary duty by a union

pension fund trustee; and second, that § 301 provides a fed-

eral forum for claims of a violation of a collective bargaining

10a

thracite Wage Agreement was a national contract. The

royalty obligations, which are the sole source of Fund

corpus, are entirely a creature of the federal law of

labor contracts. It would advance no sound public pol-

icy to hold that liability for the destruction of those

obligations by purposeful or careless nonenforcement

should vary from state to state, depending upon the

vagaries of the state law of trusts. We therefore dis-

agree with the district court’s conclusion that jurisdic-

tion under ‘ 301 was lacking.”

agreement. The instant claim against the trustees partakes

of both. It is essentially the same as the cause of action de-

scribed in 4 A. Corbin, Contracts, § 779A, n.61 (1950). See

n.10 supra. The issue before us is neither the legitimacy of

such a cause of action nor the capacity of federal common

law to encompass it, but rather the appropriateness of couch-

ing it in terms of § 301. As § 301 has been recognized as a

source of federal common law of labor contracts since Teztile

Workers Union v. Lincoln Mills, 353 U.S. 448, 77 S.Ct. 923,

1 L.Ed.2d 972 (1957), we conclude that the pensioner plain-

tiffs’ complaint arose under 29 U.S.C. § 301 and 28 U.S.C.

$ 1337.

‘8 The district court relied on Bowers v. Ulpiano Casal, Inc.,

393 F.2d 421 (1st Cir. 1968). That case held that § 301 did

not give federal courts jurisdiction of a fund trustees’ suit to

redress a wrongful diversion of monies from the fund, where

such wrongful diversion was alleged to be a violation of the

collective bargaining agreement. However, we read that hold-

ing as a standing decision rather than a more general judg-

ment on the question of a cause of action for tortious inter-

ference with contract under § 301. The First Circuit wrote:

Appellants contend that as long as the contract is be-

tween an employer and a labor organization, “any party

who claims rights thereunder may sue for breach,” citing

Smith v. Evening News Ass’n., 371 U.S. 195, 83 S.Ct. 267,

9 L.Ed.2d 246 (1962). In Smith, the Court allowed individ-

ual employees to sue employers under section 301, reason-

ing that restricting section 301 to “labor organizations”

would stultify congressional policy in that employee claims

are “to a large degree inevitably intertwined with union

interests and many times precipitate grave questions con-

lla

Since the district court did not consider § 301 as we

have done, it had no occasion to decide whether a

federal court would apply Pennsylvania legal precepts

to the § 301 claim against the trustees or fashion its

own rule. We will address that question later in our

discussion of the merits of the claim. For our immedi-

ate purpose we merely note that judged by the stand-

ards for determining whether a federal jurisdictional

allegatioiu. supports pendent jurisdiction, the 4 301

claim against the trustees was sufficient.'* The conten-

cerning the interpretation and enforceability of the collect-

ive bargaining contract on which they are based.” Smith,

supra at 200, 83 S.Ct. at 270.

It is difficult to see how such a rationale could justify

allowing third parties who are not employers, unions, or

employees to bring suit under this section. 393 F.2d at 423

(emphasis supplied).

The First Circuit failed to consider Lewis v. Benedict Coal

Corp., 361 U.S. 459, 80 S.Ct. 489, 4 L.Ed.2d 442 (1960), which

preceded Smith and left no doubt of the Trustees’ standing

to enforce a contribution provision of a collective bargaining

agreement to which they were not parties. Thus, we disagree

with the First Circuit’s standing conclusion, and do not feel

constrained, as did the district court, to follow the First

Circuit’s dictum concerning the applicability of §301 to a

breach of fiduciary duty. While we certainly do not hold that

all breaches of fiduciary duty may be redressed in an action

under § 301 of the Labor Management Relations Act, sound

public policy compels the conclusion that § 301 supports a fed-

eral common law cause of action for tortious interference

with a collective bargaining agreement by a pension fund

trustee, in violation of his fiduciary duty to the pensioners.

All that we have said with respect to the claim against the

Trustees is a fortiori true with respect to a similar claim

against the Union, which was a party to the collective bar-

gaining agreement and which controlled the Trustees.

™ The most recent statement of that standard is found in

the Supreme Court’s opinion in Mt. Healthy School Dist. v.

Doyle, U.S. ‘ , 97 S.Ct. 568, 572, 50 L.Ed.2d

471 (1977):

. where an action is brought under § 1331, the catch-all

12a

tion that there is a ‘ 301 federal common law cause of

action for the destruction of a collectively bargained-

for contract obligation is not foreclosed by prior case

law and is not frivolous. Cf. Crawford v. Cianciulli,

357 F.Supp. 357, 367 (E.D. Pa. 1973).

B. Duty of Fair Representation

[9] The district court has jurisdiction under §\ 1331

and 1337 over a claimed breach of the duty of fair rep-

resentation.’’ In Nedd v. United Mine Workers of

America, supra, 400 F.2d at 105, this Court noted that

the conduct attributed to the union

[m]lay well constitute a breach of the union’s

equitable duty as a fiduciary representative of em-

ployees to act in their interest, fairly and in good

faith, and without discrimination throughout the

area in which it has been impowered to function.

federal question provision requiring $10,000 in controversy,

jurisdiction is sufficiently established by allegation of a

claim under the Constitution or federal statutes, unless it

“clearly appears to be immaterial and made solely for the

purpose of obtaining jurisdiction .. .” Bell v. Hood, 327

U.S. 678, 682, 66 S.Ct. 773, 90 L.Ed. 939 (1946) ; Montana-

Dakota Utilities v. Public Services Co., 341 U.S. 246, 249, 71

S.Ct. 692, 95 L.Ed. 912 (1951).

The federal standard of substantiality is also set forth at

length in Hagans vy. Levine, 415 U.S. 528, 536-38, 94 S.Ct.

1372, 39 L.Ed.2d 577 (1974). See especially 415 U.S. at 538,

94 S.Ct. at 1379, where the Court, quoting prior authority,

held that

fa] claim is insubstantial only if “ ‘its unsoundness so

clearly results from the previous decisions of this court as

to foreclose the subject and leave no room for the inference

that the questions sought to be raised can be the subject of

controversy.’ ”

' E.g., Vaca V. Sipes, 386 U.S. 171, 177, 87 S.Ct. 903, 17

L.Ed.2d 842 (1967); Nedd v. United Mine Workers, supra,

400 F.2d at 106; Brady v. Trans World Airlines, Inc., 401

F.2d 87, 94 (3d Cir. 1968), cert. denied, 393 U.S. 1048, 89

S.Ct. 680, 21 L.Ed.2d 691 (1969).

13a

Since we remanded for the purpose of considering the

claim that the Union may have breached its duty of

fair representation, it would be difficult to say that

such a federal claim was so patently groundless that it

would not support pendant jurisdiction, unless devel-

opments subsequent to our last opinion rendered it so.

The subsequent development relied on by the district

court is the Supreme Court’s decision in Chemical

Workers Vv. Pittsburgh Plate Glass, supra. In that case

the Court held: (1) that retirees were not members of

a collective bargaining unit, and that their benefits

were not a mandatory subject of collective bargaining

within the meaning of § 8(d) of the National Labor

Relations Act, 29 U.S.C. § 158(d) ; and (2) that an em-

ployer did not commit an unfair labor practice by mak-

ing a unilateral change in retiree benefits. As the Court

wrote:

“(t]he remedy for a unilateral mid-term modifica-

tion to a permissive term lies in an action for

breach of contract, see n. 20, supra, not in an un-

fair-labor-practice proceeding.” 404 U.S. at 188, 92

S.Ct. at 402.

Chemical Workers v. Pittsburgh Plate Glass, supra,

does not deal explicitly with the question for the deci-

sion of which we remanded when this case was before

us in 1968.

{10,11| The district court concluded that Chemical

Workers implicitly controlled, by holding that retirees

were not members of the bargaining unit for purposes

of mandatory collective bargaining. The duty of fair

representation, it held, extends only to members of the

bargaining unit. But in Railroad Trainmen v. Howard,

343 U.S. 768, 72 S.Ct. 1022, 96 L.Ed. 1288 (1952) the

Court held that the duty of fair representation pre-

vented a union from discriminating on the basis of race

in the collective bargaining process against employees

14a

who were not members of the bargaining unit the

union represented. See generally Goetz, Developing

Federal Labor Law of Welfare and Pension Plans, 55

Cornell L.Rev. 911, 913-14 (1970). In Chemical Work-

ers V. Pittsburgh Plate Glass, supra, 404 U.S. at 181,

n. 20, 92 S.Ct. at 398, Justice Brennan said:

“nothing in Railroad Trainmen v. Howard,

343 U.S. 768, 72 S.Ct. 1022, 96 L.Ed. 1283 (1952), is

to the contrary. In Howard we held that a union

may not use the powers accorded it under law for

the purposes of racial discrimination even against

workers who are not members of the bargaining

unit represented by the union. The reach and ra-

tionale of Howard are a matter of some conjec-

ture. See Cox, The Duty of Fair Representation, 2

Vill.L.Rev. 151, 157-159 (1957). But whatever its

theory the case obviously does not require a union

affirmatively to represent nonbargaining unit

members or to take into account their interests in

making bona fide economic decisions in behalf of

those whom it does represent.”

This footnote reference plainly preserves Howard.

While Chemical Workers v. Pittsburgh Glass held that

future retirees benefits were not the subject of manda-

tory collective bargaining, it also recognized that such

benefits were a permissive subject of bargaining. When

the Union elects to undertake such bargaining, the un-

ion’s duty of fair representation must apply. It is

hardly conceivable that a union could discriminate

among retirees on the basis of race, religion, or sex, for

example. Moreover, Chemical Workers, supra, deals

with bargaining over future retiree benefits. It does

not deal with the Union’s duty when it unilaterally un-

dertakes, as the Mineworkers’ Union undertook, to act

as collector and enforcer of the Fund’s contractual

royalty entitlement. The Union need not have done so,

15a

and if it had not, the pensioners would have had a rem-

edy against the employers for any delinquencies.

Chemical Workers, supra, 404 U.S. at 181 n. 20, 92 S.Ct.

383. But having undertaken, on behalf of the Fund, to

enforce the employers’ obligation to pay royalties, the

Union was not then entitled to act in a manner which

discriminated against the pensioners.

[12] The district court reasoned that “. . . federal

labor policy does not necessarily require that a union

which acts as the exclusive bargaining agent for re-

tirees be held to the statutory duty of fair representa-

tion.” Joint Appendix at 80a. Federal labor policy does

not “necessarily” require the recognition of a duty of

fair representation at all. But federal common law im-

plied from the statutory authority conferred upon col-

lective bargaining representatives has recognized the

need to place limitations upon the power of the recog-

nized bargaining representative to injure minorities

inside and outside the bargaining unit. We do not read

Chemical Workers v. Pittsburgh Plate Glass, supra, as

overruling what this court said in Nedd v. United Mine

Workers, supra. The allegation, that the Union’s actual

and voluntary participation in non-enforcement of the

obligation to pay royalties violated a federal law duty

of fair representation, states a not substantial claim

over which the court had § 1331 and 4 1337 jurisdic-

tion. That sufficed for purposes of pendent jurisdiction

over the state law issues. As with the ‘ 301 claim, we

defer to our discussion of the merits the substance of

the federal law cause of action.

C. The § 302 Claim of Breach of Fiduciay Duty

[13] The Labor Management Relations Act of 1947

was inspired in part by the very Fund in issue in this

case. Section 302 of the Act contains a broad prohibi-

tion against payments from employers to representa-

l6a

tives of employees.” Because this broad prohibition

16 Section 302(a), (b), 29 U.S.C. § 186(a), (b) provides:

(a) It shall be unlawful for any employer or association of

employers or any person who acts as a labor relations expert,

adviser, or consultant to an employer or who acts in the in-

terest of an employer to pay, lend, or deliver, or agree to pay,

lend, or deliver, any money or other thing of value—

(1) to any representative of any of his employees who

are employed in an industry affecting commerce; or

(2) to any labor organization, or any officer or employee

thereof, which represents, seeks to represent, or would

admit to membership, any of the employees of such em-

ployer who are employed in an industry affecting com-

merce; or

(3) to any employee or group or committee of employees

of such employer employed in an industry affecting com-

merce in excess of their normal compensation for the pur-

pose of causing such employee or group or committee di-

rectly or indirectly to influence any other employees in the

exercise of the right to organize and bargain collectively

through representatives of their own choosing; or

(4) to any officer or employee of a labor organization en-

gaged in an industry affecting commerce with intent to in-

fluence him in respect to any of his actions, decisions, or

duties as a representative of employees or as such officer

or employee of such labor organization.

(b) (1) It shall be unlawful for any person to request,

demand, receive, or accept, or agree to receive or accept, any

payment, loan, or delivery of any money or other thing of

value prohibited by subsection (a) of this section.

(2) It shall be unlawful for any labor organization, or for

any person acting as an officer, agent, representative, or em-

ployee of such labor organization, to demand or accept from

the operator of any motor vehicle (as defined in part II of

the Interstate Commerce Act) employed in the transportation

of property in commerce, or the employer of any such oper-

ator, any money or other thing of value payable to such or-

ganization or to an officer, agent, representative or employee

thereof as a fee or charge for the unloading, or in connection

with the unloading, of the cargo of such vehicle: Provided,

That nothing .n this paragraph shall be construed to make

unlawful any payment by an employer to any of his employees

as compensation for their services as employees.

17a

would prevent payments to a union pension or welfare

fund, § 302(c)(5) contains an exception for such

funds. That subsection also provides, however, that em-

ployees and employers be equally represented in their

administration." The pensioners contend that for many

” Section 302 (c) (5), 29 U.S.C. § 186(c) (5) provides:

(5) with respect to money or other thing of value paid to a

trust fund established by such representative, for the sole

and exclusive benefit of the employees of such employer, and

their families and dependents (or of such employees, fam-

ilies, and dependents jointly with the employees of other em-

ployers making similar payments, and their families and de-

pendents): Provided, That (A) such payments are held in

trust for the purpose of paying, either from principal or in-

come or both, for the benefit of employees, their families and

dependents, for medical or hospital care, pensions on retire-

ment or death of employees, compensation for injuries or ill-

ness resulting from occupational activity or insurance to pro-

vide any of the foregoing, or unemployment benefits or life

insurance, disability and sickness insurance, or accident in-

surance; (B) the detailed basis on which such payments are

to be made is specified in a w tten agreement with the em-

ployer, and employees and employers are equally represented

in the administration of such fund, together with such neutral

persons as the representatives of the employers and the repre-

sentatives of employees may agree upon and in the event the

employer and employee groups deadlock on the administration

of such fund and there are no neutral persons empowered to

break such deadlock, such agreement provides that the two

groups shall agree on an impartial umpire to decide such dis-

pute, or in event of their failure to agree within a reasonable

length of tine, an impartial umpire to decide such dispute

shall, on petition of either group, be appointed by the district

court of the United States for the district where the trust

fund has its principal office, and shall also contain provisions

for an annual audit of the trust fund, a statement of the

results of which shall be available for inspection by interested

persons at the principal office of the trust fund and at such

other places as may be designated in such written agreement;

and (C) such payments as are intended to be used for the

18a

years during which the mine operator delinquencies

were permitted to accumulate there was what is com-

monly referred to as a “structural” violation of ‘ 302-

majority. The pensioners urge that this “structural”

violation gives rise to a federal common law cause of

action “ for breaches of fiduciary duties which were

made possible by the fact of union domination. The

§ 302(c) (5) claim was added by amendment following

our remand in Nedd v. United Mine Workers, supra.

By that time the structural violation of § 302(c) (5)

had been corrected, but the court permitted the amend-

ment. The defendants do not dispute that this was an

amendment which, under Fed.R.Civ.P. 15(c), could

properly relate back to the filing of the § 301 complaint

in 1965. Nor could they, since the predicate for the

purpose of providing pensions or annuities for employees are

made to a separate trust which provides that the funds held

therein cannot be used for any purpose other than paying

such pensions or annuities.

1’ An allegation of “structural violations” is sufficient to

vest jurisdiction under 29 U.S.C. § 186 and 28 U.S.C. § 1337.

Lugo v. Emp. Retire. Fund, 529 F.2d 251, 254-56 (2d Cir.

1976). Johnson V. Botica, 537 F.2d 930, 933 (7th Cir. 1976).

Compare Giordani v. Hoffmann, 295 F.Supp. 463, 471-72 (E.

D.Pa. 1969) (allegation of § 302(c) violation sufficient to

create jurisdiction) with Bowers v. Ulpiano Casal, Inc., supra,

393 F.2d at 426 (jurisdiction lacking where complaint failed

to allege a violation of § 302(c) (5) standards). Clearly, the

amended complaint was sufficient to withstand a motion to

dismiss under Fed.R.Civ.P. 12 (b) (1). See n. 14, supra.

However, Tully v. Mott Supermarkets, 540 F.2d 187, 196

(3d Cir. 1976), requires us, where the existence of pendent

jurisdiction is at issue, to examine the cause of action and to

determine whether it can withstand a motion to dismiss under

Fed.R.Civ.P. 12(b) (6). For it is an abuse of discretion for

a district court to exercise pendent jurisdiction where the

federal claim is frivolous. Jd. See also Johnson v. Botica,

supra, 537 F.2d at 933 n. 2.

19a

pensioners’ claims is common to the to the several

theories advanced in support of federal question juris-

diction, including the \ 302(c)(5) theory. See 3 J.

Moore, Federal Practice § 15.15[3], pp. 1027-1031

(1974). Rather, they contend that a Rule 12(b) (6)

motion on the § 302(c)(5) claim for money damages

should so clearly have been granted that the assertion

of such a claim is insufficient to support pendent juris-

diction. The district court agreed. We do not.

Many courts which have considered whether there

can be a federal cause of action for money damages

growing out of a structural violation of § 302 have

taken as their point of departure the language of

§ 302(e):

“Ttjhe district courts of the United States...

shall have jurisdiction for cause shown . . . to

restrain violations of this section, without regard

to the provisions of section 17 of Title 15 and

section 52 of this title, and the provisions of sec-

tions 101-115 of this title.”

Courts have differed on the question whether this sec-

tion confers jurisdiction over all cases concerning § 302

pension plans, or limits jurisdiction to suits for injunc-

tive relief against structural deficiencies which violate

'* Some courts have taken a narrow view of § 302(e). E.g.,

Bowers ». Moreno, 520 F.2d 843, 846 (1st Cir. 1975) ; Snider

v. All Scate Administrators, 481 F.2d 387, 390 (5th Cir. '973),

cert. denied, 415 U.S. 957, 94 S.Ct. 1484, 39 L.Ed.2d 571

(1974). Others, most notably the district courts of this

Circuit, have read that section less restrictively. F.g., Porter

v. Teamsters, etc. Funds, 321 F.Supp. 101, 104 (E.D.Pa.

1970) ; Giordani ». Hoffman, 295 F.Supp. 463, 472 & n. 3 (E.

D.Pa.1969) ; Raymond v. Hoffmann, 284 F.Supp. 596, 601-02

(E.D.Pa.1966).

20a

the “sole and exclusive benefit” provisions of § 302-

We are not convinced, however, that \ 302(e) is, for

jurisdictional purposes, the appropriate starting point.

The subsection uses the language “shall have jurisdic-

tion,” but the usage must be read in conjunction with

the cross references to the anti-injunction provisions of

the Clayton Act * and the Norris-LaGuardia Act.” The

latter, in particular, is couched in terms of a lack of

jurisdiction to issue an injunction. 29 U.S.C. § 101. It

seems likely that no more was intended by \ 302(e)

than to remove, in the context of enforcement of § 302,

the bar of the anti-injunction statutes to which refer-

ence was made.” That, certainly, was the explanation

of Senator Ball, who introduced ‘ 302 as an amend-

*° See n. 19, supra.

*' Act of October 15, 1914, c. 323, $s 6, 20, 38 Stat. 731,

738 (1914), 15 U.S.C. § 17, 29 U.S.C. § 52.

** Act of March 23, 1932, c. 90, 47 Stat. 70-73 (1932), as

amended, 29 U.S.C. §§ 101-110, 113-115.

** See Moses v. Ammond, 162 F.Supp. 866, 869-70 (S.D.N.Y.

1958) :

I do not believe that 29 U.S.C.A. § 186(e), in itself, vests

any jurisdiction in the District Courts. Such an interpreta-

tion would be possible if the subsection . . . ended after the

words “restrain violations of this section.’”’ But the subsec-

tion as a whole indicates, I believe, that its purpose was to

remove the bar of sections 6 and 20 of the Clayton Act, 38

Stat. 731, 738 (1914), 15 U.S.C.A. § 17, 29 U.S.C.A. § 52,

and the bar of the Norris-LaGuardia Act, 47 Stat. 70

(1932), as amended, 29 U.S.C.A. §§ 101-110, 113-115, so as

to permit the courts of the United States, in cases in which

jurisdiction was otherwise present, to enjoin violations of

subsections (a) and (b) of 29 U.S.C.A. § 186.

See also Note, 72 Harv.L.Rev. 778 (1959).

2la

ment during the consideration of the Labor Manage-

ment Relations Act.”

If one looks upon ‘ 302(e) as the removal of a bar to

injunctive relief, rather than as an affirmative grant of

jurisdiction, then two things become plain. The first is

that civil suits in federal courts were contemplated by

§ 302, and that some federal law would have to govern

such suits in order to meet Article III jurisdictional

requirements. The second is that jurisdiction was as-

sumed to exist, rather than granted.

[14] The problem, then, is not unlike that considered

in Textile Workers v. Lincoln Mills, 353 U.S. 448, 77

S.Ct. 912, 1 L.Ed.2d 972 (1957), in which the Court

undertook to determine what Congress meant by the

language in § 301.

“TSjuits for violation of contracts . . . may be

brought in any district court of the United States

having jurisdiction of the parties, . . . without

regard to the citizenship of the parties.”

The Court found in that provision authority to fashion

federal common law. 353 U.S. at 456, 77 S.Ct. 912. As

to jurisdiction, however:

“Title 28 U.S.C. § 1337 says that ‘The district

courts shall have original jurisdiction of any ac-

tion or proceeding arising under any act of Con-

gress regulating commerce . . . ’” It is that orig-

inal jurisdiction that a § 301 action invokes.”

Avco Corp. Vv. Aero Lodge 735, 390 U.S. 557, 561-

62, 88 S.Ct. 1235, 20 L.Ed.2d 126 (1968).

** Senator Ball stated:

“(sjubsection (e) gives the district courts jurisdiction to

restrain and to punish violations of the section, notwith-

standing the provisions of the Norris-LaGuardia Act.” 93

Cong.Rec. 4678 (1947).

22a

It is the jurisdiction conferred in § 1331 and 1337 that

is invoked by the allegation of a federal common law

cause of action implied from the provisions of 4 302-

[15] In determining whether such a cause of action

may be implied, and for what purposes, we must look

for guidance to such recent Supreme Court pronounce-

ments as Santa Fe Industries v. Green, U.S. —-,

97 S.Ct. 1292, 51 L.Ed.2d 480 (1977), Cort v. Ash,

422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975).

Securities Investor Protection Corp. Vv. Barbour, 421

U.S. 412, 95 S.Ct. 1733, 44 L.Ed.2d 263 (1975) and

National Railroad Passenger Corp. v. National Asso-

ciation of Railroad Passengers, 414 U.S. 453, 94 S.Ct.

690, 38 L.Ed.2d 646 (1974). In Cort v. Ash, supra,

Justice Brennan summarized:

“In determing whether a private remedy is im-

plicit in a statute not expressly providing one,

several factors are relevant. First, is the plaintiff

‘one of the class for whose especial benefit the stat-

ute was enacted,’ . . . —that is, does the statute

create a federal right in favor of the plaintiff?

°° The defendants place great reliance on Justice Stewart’s

statement in Arroyo Vv. United States, 359 U.S. 419, 427, 79

S.Ct. 864, 869, 3 L.Ed.2d 915 (1959) that “[t]he legislative

history [of § 302] is devoid of any suggestion that defalcating

trustees were to be held accountable under federal law, ex-

cept by way of the injunctive remedy provided in that sub-

section.” Arroyo was an appeal from a federal criminal con-

viction of an employer representative who embezzled welfare

funds. The quoted language is simply a rejection of the

contention that § 302 is the source of a federal common law

crime not expressly defined by statute. Since it is well es-

tablished that there are no federal common law crimes, and

that all federal crimes are defined by statute, Justice Stew-

art’s observation is simply inapposite to the question pres-

ently before us.

23a

Second, is there any indication of legislative in-

tent, explicit or implicit, either to create such a

remedy or to deny one? . . . Third, is it consis-

tent with the underlying purposes of the legisla-

tive scheme to imply such a remedy for the plain-

tiff? . . . And finally, is the cause of action one

traditionally relegated to state law, in an area

basically the concern of the States, so that it would

be inappropriate to infer a cause of action based on

federal law?” 422 U.S. at 78, 95 S.Ct. at 2087

(emphasis in original).

Appellants argue that the Fund’s monetary loss was

due to Union domination, in violation of § 302(c) (5),

and claim entitlement to a money judgment by virtue of

that section. Applying the four-pronged test of Cort v.

Ash, we think their complaint states a cause of action

properly implied from § 302. First, the fund benefi-

ciaries are the class for whose especial benefit ‘ 302-

(c)(5) was enacted.” Second, there is a clear indica-

*® When an early draft of the Labor Management Relations

Act of 1947 was reported out of committee, it lacked § 302.

In fact, section 8(a) (2) (C) (ii) of that bill made it an unfair

labor practice for an employer to contribute to any union fund

or trust. See H.R.3020, 80th Cong., Ist Sess., § 8(a) (2) (C)

(ii), reprinted in NLRB, Legislative History of the Labor

Management Relations Act of 1947, pp. 50-51 (1948) (herein-

after referred to as “Leg.Hist.”) Section 302 did not appear

until the passage by the Senate of the Ball Amendment, co-

sponsored by Sens. Ball, Byrd, George and Smiths The state-

ments by § 302’s supporters make plain the purpose of that

section:

“Mr. President, the sole purpose of the amendment is not to

prohibit welfare funds, but to make sure that they are

legitimate trust funds, used actually for the specified bene-

fits to the employees of the employers who contribute them,

and that they shall not degenerate into bribes.” 93 Cong.

Rec. 4805 (1947), Leg.Hist. at 1302 (Remarks of Sen. Ball).

24a

tion in « 302(e) that civil remedies for enforcement

would be recognized.” Since some federal civil actions

would be recognized, Congress obviously assumed that

the federal courts would fashion both remedial and sub-

stantive rules of law for their disposition. Nothing in

either the text of ‘ 302 or in its legislative history sug-

gests any hostility to damage remedies. Third, the rec-

ognition of private enforcement is entirely consistent

“The purpose of the amendment is to require that the fund

shall be established in definite, detailed form... [t}he

purpose is to prevent the abuse of welfare funds. .. . Cer-

tainly unless we impose some restrictions we shall find that

the welfare fund will become merely a war chest for the

particular union, and that the employees for whose benefit

it is supposed to be established, for certain definite welfare

purposes, will have no legal rights and will not receive the

kind of benefits to which they are entitled after such de-

ductions from their wages.” 93 Cong.Rec. 4876-77 (1947),

Leg.Hist. at 1310-13 (Remarks of Sen. Taft).

* * * * *

“Mr. President all seek to do by the amendment is to make

sure that the employees whose labor builds this fund and

who are really entitled to benefits under it shall receive the

benefits; that it is a trust fund, and that, if necessary, they

can go into court and obtain the benefits to which they are

entitled. 93 Cong.Rec. 4883 (1947), Leg.Hist. at 1322 (Re-

marks of Sen. Ball).

It is beyond question that § 302 was enacted for the “especial

benefit” of the beneficiaries of union welfare and pension

funds. The chief protection Congress sought to provide was

protection from exploitation of the fund by Union officials

for improper purposes. See, e.g., Arroyo V. United States,

supra, 359 U.S. at 425-26, 79 S.Ct. 864; United States V. Ryan,

250 U.S. 299, 304-06, 76 S.Ct. 400, 100 L.Ed. 335 (1956) ;

Alvares V. Erickson, 514 F.2d 156, 164 (9th Cir. 1975) ; Bow-

ers V. Ulpiano Casal. supra, 393 F.2d at 425; 2 U.S.Code Cong.

& Admin. News, pp. 2326-31 (1959) (LMRA) amendments

to $302 of LMRA); 1 U.S. Code Cong. & Admin. News pp.

1159-60 (1969) (P.L. 91-86, amending § 302(c) ).

7 See pp. 201-203 and nn. 19, 23 & 24, supra.

25a

with the underlying legislative scheme. In contrast with

the statute considered in Cort v. Ash, supra, we are

dealing with more than a bare criminal statute.” In

contrast with that considered in National Railroad

Passenger Corp. V. National Association of Railroad

Passengers, supra, we are not dealing with a statute

naming specific prospective plaintiffs. In contrast with

Securities Investor Protection Corp. v. Barbour, supra,

recognition of an implied private action for recovery

of money can in no way conflict with enforcement ef-

forts intrusted to a public agency. Recognition of a

derivative cause of action for the recovery of money

for the trust is consistent with the overall statutory

purpose of ‘ 302(c) (5)—the preservation of the trust

corpus for its intended beneficiaries. Fourth, while the

duties of fiduciaries has traditionally been a matter of

concern of the States, collective bargaining agreements,

at least in the private sector,” have since 1947 been of

federal concern. While the Fund is nominally a trust

created under state law, it is a unique kind of trust, the

corpus of which is the fruit of collective bargaining

agreements.” The very enactment of § 302(c) (5)

** Section 302(d) addresses criminal violations, but § 302(e)

plainly contemplates enforcement by means other than indict-

ment. Moreover, § 302(e) is not limited, by terms, to § 302-

to §302(a) and (b). We will not endorse a federal law of

remedies that would prohibit a court, properly entering a

restraining order, from awarding damages incidental to equi-

table relief. But cf. Arroyo v. United States, supra, 359 U.S.

at 424, 79 S.Ct. 864; Goetz, Employee Benefit Trusts Under

Section 302 of the Labor Management Relations Act, 59

N.W.U.L.Rev. 719, 720 (1965) (§ 302 a “criminal statute’).

** Section 302 does not apply to public employee unions. See

Crilly v. SEPT A, 529 F.2d 1355 (3d Cir. 1976).

* The Fund exists as a hybrid creature of both state and

federal law. It was chartered and achieved entity status under

state law. Federal labor law both sanctions the bargaining

26a

shows that Congress was not satisfied to leave protec-

tion of these bargained-for benefits entirely to the state

law of trusts.

[16] That does not necessarily mean that Congress

has preempted all state law with respect to the fidu-

ciary obligations of welfare fund trustees. Such a con-

struction of the statute is possible. Cf. Teamsters Local

v. Lucas Fiour, 369 U.S. 95, 102-04, 82 S.Ct. 571, 7

L.Ed.2d 593 (1962). Another construction might re-

sult in the establishment of federal minimums for fidu-

ciary conduct with state law remaining operative when

it imposed higher obligations." Most of the federal

process, the very genesis of the Fund, and prescribes the

structure and purpose of the Fund. As noted above, supra,

n. 10, the laws of both trusts and labor contracts are relevant

to a section 302 fund. See also Goetz, Developing Federal Labor

Law of Welfare and Pension Plans, 55 Cornell L.Rev. 911,

926 (1970). But to conclude that because state law tradition-

ally governs trusts no federal cause of action may be implied

from § 302 is to say that state law preempts federal law

where both apply to a subject of federal legislation. Without

a Congressional statement of intent to arrive at that accommo-

dation, such a conclusion is insupportable.

" Although we need not decide the question, it seems plain

that the proper conclusion is that federe'! law should preempt

all state law inconsistent with the federal common law stand-

ards for fiduciary conduct by union pension fund trustees.

See, e.g., Employee Retirement Income Security Act of 1974,

88 Stat. 829 et seq., 93d Cong., 2d Sess. (1974). Section 514 (a)

of the Act, 29 U.S.C. § 1144(a) provides:

(a) Except as provided in subsection (b) of this section,

the provisions of this subchapter and subchapter Ii of this

chapter shall supersede any and all State laws insofar as

they may now or hereafter relate to any employee benefit

plan described in section 1003(a) of this title and not

exempt under section 1003 (b) of this title. This section shall

take effect on January 1, 1275.

This subsection mandates federal supremacy of Part IV of

Subchapter I, dealing with trustees’ fiduciary duties, over

inconsistent state laws. That Part, §§ 401-414 of the Act, 29

27a

courts which have considered the availability of pri-

vate federal law causes of action implied from 4 302-

U.S.C. $$ 1101-1114, states the basic rules of federal fiduciary

duty in § 404, 29 U.S.C. § 1104, which provides:

(a) (1) Subject to sections 1103(c) and (d), 1342, and

1344 of this title, a fiduciary shall discharge his duties with

respect to a plan solely in the interest of the participants

and beneficiaries and—

(A) for the exclusive purpose of :

(i) providing benefits to participants and their benefi-

ciaries; and

(ii) defraying reasonable expenses of administering the

plan;

(B) with the care, skill, prudence, and diligence under

the circumstances then prevailing that a prudent man acting

in a like capacity and familiar with such matters would use

in the conduct of an enterprise of a like character and with

like aims;

minimize the risk of large losses, unless under the circum-

stances it is clearly prudent not to do so; and

(D) in accordance with the documents and instruments

governing the plan insofar as such documents and instru-

ments are consistent with the provisions of this subchapter.

(2) In the case of an eligible individual account plan (as

defined in section 1107(d) (3) of this title), the diversifica-

tion requirement of paragraph (1)(C) and the prudence

requireme:'t (only to the extent that it requires diversifica-

tion) of paragraph (1) (B) is not violated by acquisition or

holding of qualifying employer real property or qualifying

employer securities (as defined in section 1107(d) (4) and

(5) of this title).

(b) Except as authorized by the Secretary by regulation,

no fiduciary may maintain the indicia of ownership of any

assets of a plan outside the jurisdiction of the district courts

of the United States.

vidual accounts and permits a participant or beneficiary to

exercise control over assets in his account, if a participant

or beneficiary exercises control over the assets in his ac-

count (as determined under regulations of the Secretary) —

(1) such participant or beneficairy shall not be deemed to

be a fiduciary by reason of such exercise, and

(2) no person who is otherwise a fiduciary shall be liable

under this part for any loss, or by reason of any breach,

28a

such law might operate.” They have drawn the line

between actions involving structural! deficiencies in

the fund administration or provisions, and ordinary

breaches of fiduciary duties by trustees of a Fund con-

forming with § 302(c) (5). Since this case involves a

structural deficiency claim, we need only consider

whether federal law provides a derivative damage

remedy for that claim against the Trustees, the Union,

or both. We agree with the courts which have held that

a pleading which alleges such a claim is sufficiently non-

frivolous to vest federal question jurisdiction. More-

over, we hold that such a claim could not be dismissed

on a Rule 12(b) (6) motion that it was not appropriate,

on this record, for summary judgment, and that it was

properly disposed of only after a hearing.

[17] Although the district court concluded that it

lacked subject matter jurisdiction, it did so only after

which results from such participant’s or benefiiciary’s

exercise of control.

The heart of this provision is § 1104(a) (1) (B), which estab-

lishes a “prudent man” standard. This rule, which supersedes

all inconsistent state law, is no ¢cifferent from, nor more ex-

plicit than, the federal fiduciary duty under § 302 of the

Taft-Hartley Act. Indeed, ERISA has been criticized for that

reason. See, Herbert, Investment Regulation and Conflicts of

Interest in Employer-Managed Pension Plans, 17 B.C. Ind.

& Com. L.Rev. 127, 148, 157 (1976).

Section 514 of ERISA, 29 U.S.C. § 1144, plainly indicates

that it does not govern the suit presently before us. Any fidu-

ciary duties applicable to the present case must be fashioned

from federal common law under § 302. But Congress’ plain

intent to apply the § 302 standard preemptively in Subchapter

I, Part 4 of ERISA, guides us to a like conclusion for § 302

common law. See Landis, Statutes and the Sources of Law,

in Harvard Legal Essays 213, 226-27 (1934) (a legislative

establishment of policy sometimes carries significance beyond

the particular scope of the statute involved).

2 See cases cited in n. 19, supra: See also Goetz, supra n. 30,

at 926-929.

29a

the case was fully litigated. Since we have held that

non-frivolous federal causes of action were pleaded

which support jurisdiction under 28 U.S.C. §§ 1331

and 1337, the court properly tried the pendent state

law claims as well. We therefore proceed to the merits

of the appeal.

Ill. THE JURY TRIAL CONTENTION

The pensioners’ complaint made a timely demand for

a jury trial. The defendants moved pursuant to Fed.

R.Civ.P. 39(a) (2) to strike that demand, contending

that the action, whether based on federal or state law,

was essentially an equitable one, unknown at common

law. The district court granted the defendants’ motion,

and the case

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