Appendix — Nelson v. Moore-McCormack Lines, Inc.

* 5 . | la : ™~

APPENDIX A

Unirep States Court or APPrats

’ For tHe Tuino Cracurr ' .

_ Joun L. Lewis, Henry G. Scumuot ann Joseruine Rocue, as

“Trustees of the Uni1ep Mixe Workers Or America WELFARE

ano Retirement Funp, Appellants |

¥. +

Epwarp Meags, individually and trading as

Mears Coat Company

A from the United States District Court ‘for the

Western District of Pennsylvania. ,

4 Argued June 19, 1961 — °

Before Goopricn, McLaucHuin and Kavooner, Circuit —

* opENON GF THE COURT

(Filed October 11, 1963) — we ts,

By Katooner, Circuit Judge.

The plaintiffs, having suffered judgment agairst ess below

on a jury's verdict and their motions for a directed verdict

and/or a new trial having been Cente, have brought - ap-

peal raising these issues: ¢

(1) Did the trial judge err in permitting parol evidence

1) Did the lg rn permit par eine

between the defendant and the United Mine’ Workers of

‘America (“Union”) which required the defendant to make

certain payments to the plaintiffs’ Welfare and Retirement

"The Opinion of the District Court is reported at 189 F.Supp. 503

(W.D. Pa. 1960).

-_

ae 2

Fund was never consummated because a condition prece-

dent to its consummation never occurred; and

(2) Did the trial judge err.in his refusal to hold as a

matter of law that (a) the defendant had ratified the con-

"tract, and (b) the defendant was estopped from main-

4 taining that the confract was never consummated?

The plaintiffs, itizens of states other than Pennsylvania,

are Trustees-of the United Mine. Workers of America Welfare

and Retirement Fund: of 1950 (“Fund”), The defendant is

Edward Mears, individually and trading as Mears Coal Com-°

pany, a resident of Marion Center, Indiana County, _Pennsyl-

vania. Jurisdiction | exists by reason of diversity’~ —

The Fund was created by the National Bituminous Coal

Wage Agreement of 1950. The latter, as amended effective —

° October 1, 1952, provided that each coal operator entering into

it covenanted to pay into the Fund forty cents for each ton of

coal protiuced for use or sale. Thif Agreement will hereinafter~

be referred to as the “1952 Agreement.” ’

_ In December 1956 the plaintiffs ‘brought suit against the de-

fendant in the District Court of thé’Western District of Penn-

sylvania alleging that he had entered into the 1952 Agreement

. 6n October 31, 1952 and as a consequence was obligated to pay

into the Fund forty cents on each ton of coal produced between

October 1, 1952 and December 31, 1955 and nat he had not

«discharged that obligation. ~ a

At the trial] the defendant was permitted to testify, over the

plaintiffs’ objection, that when in October 1952 he signed the

1952 Agreement, as well as-the 1950 and.1951 Agreements, he

did so-on the representation of Union's bargaining represent-

ative, Arthur Anderson, that the 1952 Agreement “wouldn't

be a contract” until defendant “got the contract back signed

and fully executed” by the Union. The defendent further testi-

fied that he had never received a copy of the . 12 Agreement

signed by the Union and on this score it must bc :.oted that the

plaintiffs made no denial of that circumstance. The testimony.

establi that the 1952 Agreement was signed by the Union

* subseq to the time that the defendant signed it.

qe denied that he had agreed with defendant that

1952 Agreement would not-hecome effective until it was

, | J 3a : ° , ’ >

signed by. Union and a copy returned to defendant. He also

testified that the defendant had signed the 1950 and 1951 Agree- ©

ments on May 15, 1952, and not in October 1952 as emeneen

claimed.

The trial judge. pursuant | to Rule 49 (a); Fed. R. Pa P., 28

.U'S.C.A., submitted to the jury in ‘the first of two Interroga-

tones the ifie issue as to whether Anderson had agreed with ~

e the deferidant that the 1952 Agreement “would not become

: valid afd enforceable” until the deféndant had received a

copy 0f it executed by the officers, of the’ ‘Union.’ The jury

answe eréd “Yes” to this Interrogatory. . hi

The second Interrogatory presented to the jury the issue

Ja to whether the defendant had in writing advised the plain-

tiffs in April 1953 that he had cancelled the contract with the

Union. The jury's answer to this Interrogatory was—“No.*—————

Sas to the jury were limited to those pre-

sented in the two Interrogetoriel and the’ record discloses, as

+ — the trial judge noted in his Opinion, 189 F.. Supp. 505, neither *

counsel requested “that any other issue of fact ne submitted

to the jury.” ° --

——————.

It must be noted, however, that the trial judge in his charge

to the jury directed attention, as bearing upon the issue

whether a’binding contract had been entefed into, to testimony

adduced by the plaintiffs that the defendant had signed the

rg 1950 and 1951 Agfeements on May 15, 1952 and not in October

1952 when defendant said he had signed these Agreements

« ’ The first Interrogatory re ad as ‘follows:

“Did Arthur Anderson agree with the defendant Mears that the

written instruments, Exhibits 1, 2 and 3, at the time they were signed

by Mears, would become valid and enforceable contracts until ‘

Mears received coy thercofixecuted by the Officers of the United

Mine Workers of America”

The record makes clear that Exhibit | was the 1950,Exhibit 2 was the

195) Agreement and Exhibit 3 was the 1952 Agreement. It affords, how-

ever, no explanation as to why the 1950 and _ 1951 SAgreeme nis were

included in the Intefrogatory since the act ion herg was premised on

the 1952 Agreement. The District Court's Opinion throws, no light on

the inclusion of the two earlier Agreements. It stated, however, 189

F.Supp. 505. that “the interrogatories were submitted to counsel prior

jo their closing address to x yurys end neither counsg] made any

objection thereto... -

&

1 :

Bem: wat P

. 4a

along with the 1952 Agreement; that one Blizzard, an employee

of the Fund, had on May 20, 1952 sent forms to the defendant

relating to the tonnage payments and that the defendant had

completed these forms and made payment in accordance there-

with during the intervening,months up to April 5, 1953;° and,

that the ledger records “ofthe. Fund evidenced royalty pay-

ments by the defendant as early as@ly 9, 1952.

Anent the foregoing the trial judge in his charge also called

‘attention to the defendant’s testimony that “although he had

’ been paying royalties for a period prior to October, 1952, he“

did so not because he signed Exhibits 1 and 2 [the 1950 and

1951 Agreements] on May 15, 1952, but because he could not

sell his coal unless he paid the royalties.” ao

With respect to all this testimony the trial judge in substance

instructed the jury that it must be weighed and evaluated in

connection with the issue as,to whether the defendant and

Anderson had agreed that the 1952 Agreement (as well as the

1950 and 1951 Agreements), was not to become valid and bind-

ing until executed by the Union and a copy delivered to the

defendant. At’the same time the trial judge charged the jury -

that it was to consider all the other evidence adduced in arriv-

ing at an.answer to the two Interrogatories.

Upon return of the jury’s answers to the Interrogatories the

trial judge advised the parties that. he would, postpone. .entry

of judgment thereon in favor of the defendants until after

: oral argument on plaintiffs’ motion for-a directed verdict made

prior to the close of the trial. Later, the trial judge denied

plaintiffs’ motion and subsequently denied their further mo-

tions “to reopen judgment and/for a directed verdict” and for

a “new trial.”. This appeal fromthe denial of these motions

followed. ; . a ,

-. We will first direct our attention to the issue ‘as to whether

the trial judge erred in: permitting parol evidence designed

to estabiish that the 1952 Agreement was not to become a con-.

tract until the defendant had received a copy of, it signed by

- Union.

ed u .

-? It was stipulated by the parties prior to the trial that the defendant

had paid royalties on tonnage produced between September 1, 1952 and

February 28, 1953, during October 1952 to March 1953, inclusive.

.

da

Plaintiffs urge that the admission of this parol evidence

violated both the parol evidence rule and the national labor

policy. We do not subscribe to. the’ plaintiffs’ view. It is clear

that the parol evidence rule has no application to “the facts of

this case. The challenged testimony was introduced to prove _

that-the alleged contract never existed. 7 ;

It is well-settled that parol evidence is admissible to prove

that a contract did not exist. In Smilow v. Dickerson, 357 Pa.

455 (1947), od Pennsylvania — Court in so holding

stated (p. 462):

“In the leading English case of Pym v. ase, 6 El.

& Bl. 370, it is said: ‘The distinction in point of law is that

-evidence to vary the terms of an agreement in writing

is not admissible, but evidence to shew that there is not

an. agreement at all is admissible.” (citing cases)

“It was said by Justice Hatlan in Burke v. Dulaney, 153

. US. 228 1894!: ‘The rule that excludes parol evidence in

" ¢ontradiction of a written agreement presupposes the ex-

istence in fact of such agreement at the time suit is

brought. But the rule has no application if the writing

was not deliveted as a present contract . . .,) and parol

evidence was admissible to show that there never was any.

concluded, binding contract entitling the party who

claimed the benefit of it to enforce its stipulations.”

As to the plaintiffs’ contention that apart from the parol |

evidence rule national labor policy precluded the admission of

the defendant’s testimony concerning his crai agreement with

Anderson.it fi¢ed only be said that while if is true that the

Supreme Court has held that the federal courts may “fashion

a body of federal law for the enforcement of collective bargain-

ing agreements,” Lewis v- Benedict Coal Corp., 361 U.S. 459,

470 (1960) and that national labor policy may require modifica-

tion of the traditional.rules of contract law in the case of these.

agreements, none of the cases cited by plaintiffs preclude the

use of parol evidence to establish that an effective acceptance

was not communicated by the offeree to the offeror. %

In our opinion national labor policy does not require the

exclusion of parol evidence which shows the lack of an effece.

tive acceptance of an offer.

ts

There remains for disposition the points raised by the plain-

tiffs that the trial judge erred in his refusal to hold as a matter

of law that (1) the defendant had ratified the contract, and

(2) the defendant was estopped from maintaining that the

contract was never consummated.

On the score of the foregoing it need only be said that the

trial judge made factual findings, in accordance with the jury’s

- answers to the Interrogatories,‘ that the elements necessary

to support .conclusions of law that ratification and estoppel

existed were not established by the evidence. We cannot say

that these factual findings were clearly erroneous. It would

serve no useful! purpose to dwell further on these points in

view of their extensive discussion by the trial judge in his

opinion.

- For the reasons stated the judgment of the District Court in

favor of the defendant will be affirmed.

On } Soe from the United ‘States District Court for the

Western District of Pennsylvania

Present: GoopricH, MCLAUGHLIN and KALODNER, Circuit Judges.

JUDGMENT ©

_ This cause came on to be heard on the record from the

United States District Court for the Western District of Penn-

sylvania and was argued by counsel.

On consideration whereof, it is now here ordered and ad- —

judged by this Court that the judgment of the said District

Court in this case he, and the same is hereby affirmed, with

costs.

Dated October 11, sire

—-—+--+ —~~

“Rule 49 (a), Fed. R. Civ. P. 28 U.S.A.

7a

APPENDIX B

Unrtep States Court or ApPreaLs

For THe Turrp Cracuit

No. 13.502

Joun L. Lewis, Henry G. Scumivt anp Josepuine Rocue, as.

Trustees of the UniTep Mine Workers OF AMERICA WELFARE

AND RETIREMENT. Fund, Appellants

Vv.

Epwarb Meaks, individually and trading as

Mears Coat Company

OPINION SUR PETITION FOR REHEARING |

(Filed January 4, 1962)

Presént: Biccs, Chief Judge, Goopricn, McLaucHiin, KALop-

NER, STALEY, Hastie, Ganey and Situ, Circuit Judges.

Per CurIAM :

There is not a majority of the Court in ova of granting the

petition for rehearing. Accordingly the petition will be denied.

Bices, Chief Judge, dissenting. ©

Putting to one side any contention that Mears ratified the

1952 National Bituminous Coal Wage Agreement, that he is

‘estopped to deny that he was bound by it, or that“the parole

‘evidence rule was violated, the court below and this court

erred in holding that the terms of that Agreement might be

nullified by an alleged oral prior or contemporaneous under- .

standing that the terms of the Agreement should not be valid

until it was delivered back to Mears. The royalty payments

provided for by the Agreement rie. “really another form of

compensation to the employees”. Lewis v. Benedict Coal Corp.,

361 U.S..459, 469 (1960). As Chief Judge Sobeloff points out in

his dissenting opinion in Lewis. Trustee, et al. v. Lowry, 295

F.2d 197 (4 Cir. 1961). the position taken by the majority

emasculates the policy intended to be created by Congress in

enacting Section 302(c) (5) (B) and vitiates the spirit of Sec-

tion 8(d) of the Labor Management Relations Act, 29 U.S.C.A.

§-186(c) (5) (B) (Supp. 1960) and § 158(d). The federal courts

8a *

in fashioning a body of federal common law i ir the enforce-

ment of collective bargaining agreements, Lewis v. Benedict

Coal Corp., supra, p. 470, must shape that law so that such

- agieermments cannot be modified or nullified by covert condi-

tions or stipulations entered into between the employer and

the union. If it be otherwise ‘industrial strife is sure to ensue

and the stabilizing effect on labor relations of the Labor Man-

agement Relations Act will be destroyed.

For this reason I dissent from the.order of this court dene ing

rehearing en banc.

I am authorized to state that J iia Staley, joaae Ganey and

Judge Smith join in the-views expressed in this opinion.

No. 13,502

SUR PETITION FOR REHEARING

Present: Biccs, Chief Judge; Goopricu, McLAuGHLIN, KALop-

NER, STALEY, Hastiz, GANEY and SMITH, Circuit Judges.

After due consideration the petition

‘for rehearing in the above-entitled case is hereby denied.

Dated: . January 4, 1962

APPENDIX C

Section 8(d), Labor Management Relations Act. 1947

|29 USCA 158(d)':

“For the purposes of this section, to bargain collectively is

the performance of the mutual obligation of the employer and

the representative of the employees to meet at reasonable

‘times and confer in good faith with respect to wages, hours,

and oiher terms and conditions of employment; or the negotia-

tion of an agreement, or any question arjsing-thereunder, and

the execution of a written contract incorporating any agree-

ment reached if requested by either party, but such obligation

does not compel either party ta. agree to a proposal or require ,

the making of a concession: ...”

Section 302, Labor Management Relations Act, 1947

[29 USCA 186):

“(a) It shall be unlawful for any employer to pay or deliv er,.

or to agree to pay or deliver, any money or other thing of value

a“ Ga a:

to any representative of any of his emplovees who are em-

ployed in an industry affecting commerce.

_“(b) It shall be unlawful for any representative of any em-

ployees;who are employed in an industry affecting commerce

to receive or accept. or to agiee to rece: ve or accept from the

emplover of such employ ees any money or ‘other thing of value.

“(e) The provisionsof this section shatl not be’ applicable

. (5) with respect to money or other thing of value paid to |

a trust fund’ established.by such represe:tative, for the sole

and exclusive benefit of the emplovees cf such employer. and .

their families and dependents (or of such employees, families.

and dependénts jointly with the employees of o’her emplovers

‘making similar payments, and their famzhes and dependents)

Provided, That (A) such pay ments are held in trust. for the

_ purpose of paving, either a avg aay or income or ee

‘for medical or hospital care, _ pensions on retirement or de ath

-of employees, compensation” fwr injuries or illness resulting

from occupational activity or insurance to provide any of the

foregoing, or unemployment benefits or life isurance. dis-

ability and sickness insurance, or accident *nsurance; (B) the

detailed basis on which such payments are to be made is speci-’

fied in a written agreement with the employer. and employees

and employers are equally’ represented in the administration

of such fund, together with such neutral persons as the repre-

sentatives of the employers and the representatives of the em-

ployees may agree upon and in the‘event the employer and

employee greups 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 dispute, or in +

event of their failure to agree within a reasonable length of

time, an impartial umpire to deeide such dispute shall, on

petition of either group, be appointed by the district court of

the United States for the district where the trus: fund has its

principal office, and shall also contain provisions for an anr.ual

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-

”

designatgd in such written agieement; .

tc

‘10a

APPENDIX D

Unirep StaTes Court of APPEALS

For THE Fourtu Circuit

+

-_—— nal

ae No. 8298

Joun L. Lewis, HENRY G. Scumipt and Josernine Rocue. as

Trustees of THe Untvep Mine Workers or America WEL-

FARE AND RETIREMENT\FUND oF 1950. Appellees. .

v.

F. Arnotp Lowry. individually and trading-as Lowry Coat

Z Company. Appellant. ;

/

Appeal from the United States District Court for the

Western District of Virginia. at Abingdon

Tep Daiton, District Judge —

= ——

(Argued April 19. 1961 Decided September 16. 1961)

" ©

,

-

Before Sope.orr. Chief Judge, and Sover and Hayxswortu.

Circuit Judges

Haynswortn, Circuit Judge

. Summary judgment was entered for the plaintiffs in this

suit by’the Trustees for the Welfare and Retirement Fund of

1950 (United Mine Workers of America) against a mine oper-.

ator for “royalty” payments at the rate of forty cents per ton

of coal mined by the defendant We thitik the summary judg-

ment was inappropriate in the light of the factual issues

tendered

From May 1955 to August 1958 the defendant was engaged

‘in a strip mining operation in Harlan County. Kentucky He

employed three or four men at a time mn the operation, and

—

Lewi: v. Lowry. W.D. Va. 190 F. Supp 490

>

>

e

" Jla

during the entire period seven different individuals were em-

ployed by him in the work

The defendant clainis that shortly after the. operation com-

menced. a representative of the United Minc Workers. Floya

_ came to the job and demanded, that he sign the National Bitu-

minous Coal Wage Agreement of 192 with its amendménts

At that time. the defenaant had only three emplovees. only

one of whom. he claims. was a member of the UMW Never-

theless, the defendant signed the agfeement and later signed

the subsequent agreements of 1955 and 1956 Though he admms

- that Floyd made no threats of any kind to him. he claims that

he, was duressed inte signing these agreements because of his

conviction, based upon vielence in Harlan. County. Kentucky

in previous years, that. if he did not do so. he and his emplovees

would suffer injury to their persons or the:r party Perhaps

inconsistently. but more importantly. the defendant claims that’

. before signing the first agreement he explained to Floyd that

he could not pay a royalty of forty cents a ton or the union’

wage scale: and that Floyd prevailed upon him to sign. the

agreement as a mere formality. but with the clear understand-

ing that he would not be bound by it The defendant savs-that

he operated on that basis during the three sears precedin

1955. and that it was recognized by Flovd that the defendang

could not afford the wages and royeliv pasments speciied by

‘the national agreement. and that he was not expected ty pay

them.

)

The defendant also savs that in performance he didi not pay -

the wages required by the nationa! agreement that question.

affecting working conditions were settled on the scene. and

_ thet he sent monthly checks to the plaintiffs in amounts which

he felt he could afford and without regard to the tonnage of

coal mined, this be:rg in accordance with !us claiméd under- .

standing with Floyd These monthly payments to the plaintiffs.

were in small, even amounts Seven of them were for $120

each, two of them weré for $140 each, three of them were for

$200 each, three of them were for $100 each. and the remainder

' were for similar, even. moderate sums The total of these pay-

“ments aggregated $3,264. and the defendant suggests that

neither the plaintiffs nor anyone else could have supposed that

‘such even figures could haye been pased upon actual cova] pro-

“12a

duction. He points to his actual production figures which when

_ computed for each month to a fraction of a ton in tenths and

_. multiplied by forty cents a ton, would invariably produce an

odd dollar amount for the royalty payment.

_ The plaintiffs claim that payments aggregating $52,795.40

‘should have been made to them and seek the recovery in this —

action, after crediting the defendant with the $3,264 he paid,

of $49,531.40.

On summary judgment, the plaintiffs concede, as-they must,

that Floyd did and said everything that the defendant says he

did and they accept the other facts asserted by the defendant. -

The plaintiffs stand on the parol evid»nce rule and upon a

theory that the policy of the National Labor Relations Act

gives some added protection to labor agreements -attacked as

sham.

Before we give consideration to the legal issues tendered,

we think the factual situation should be more fully developed.

The defendant seeks to bring himself within the usual rule

that an agreement which is purely pretensive and delivered

with no intention that it is to be binding upon either party

may be showr by parol evidence to have created no contractual

-obligations.’ It may be a salutary limitation upon the rule that

the bare assertion of the.party to be bound is not enough to.

show that the purported contract was a pretense and a sham,’

but here the defendant claims co-roboration in the circum-

stances of his performance. .

On the present record we think the facts are not sufficiently

established to determine whether the situation is governed by

the rule which denies enforcement of pretensive agreements

or vy the rule which forecloses the use of parol eviderice to

establish a contemporaneous oral agreement to vary the terms

of valid contract.

It is suggested, however, that a remand would be purpose-

. less, and that the usual rule, which permits 4 party to show the

real. agreement, notwithstanding the existence of a pretensive

=

_ ? Lewis v. Mears, W.D. Pa, 189 F.Supp. 503; and see Burke v.

Dulaney, 153 U.S. 228. 14 S. Ct. 816, 38 L. Ed. 698; In re Hicks & Eon.

Inc., 2.Cir.,.82 F. 2d 277.

> Rock-Ola Manufacturing Corporation v. Wertz, 4 Cir., 282 F. 2d-208.

s— 13a

writing, is inapplicable to collective bargaining agreements.

The contention is founded principally upon that provision in.

the National Labor Relations Act‘ which requires that a col-

lective bargaining agreement be reduced to writing if re-

qu y either party. We find, however, no such broad and

collateral effect of the statutory provision.

The requirement that collective bargaining agreements be

reduced to writing came into the Act after a history of refusal’

by some employers to make a memorial of agreements reached

in collective bargaining negotiations. The Congress was-of the.

opinion that refysal to record an agreement reached was not

the sort of good faith bargaining required by the Act. , The

requirement, however, is directed to the real agreement of

the parties. It does not Make sacrosanct a pretensive agree-

ment inconsistent with the real agreement reached in the col-

lective bargaining process. :

If negotiators in a collective bargaining session should arrive

at a complete agreement on the eve of April Fool’s Day and,

. out of a perverted sense of humor, should reduce to writing,

sign, and distribute a pretensive agreement far from the real

agreement they had reached, surely either party could show

that the pretensive agreement was in fact pretensive, and the

right*of each to require that the real agreement be reduced

" to writing would-be preserved. The requirements of the Act,

are directed to. the protection of the real agréement of the

partis and not fo alteration of accepted principles governing

proof of the terms of the real agreement.

" If, therefore, it should be made to appear that the union,

for the sake of-its relations with the larger mine operators,

or for any other reason, insisted upon execution by the small

operator of an agreement which in fact was pretensive and

not the real agreement of the parties, nothing appears in the °

federal statutes which would prevent disclosure and proof of

the real agreement between the union and the mine operator.

Finally, it is suggested that the plaintiffs, the Trustees of

the Welfare and Retirement Fund, may have some greater

right to enforce a pretensive agreement than would either of

the immediate parties to it. The rights of the trustees, how-

*

+29 USCA § 158 (d). ,

14a -

a

ever, are entirely derivative. Their right to recover. contribu-

tions from the mine operator is dependent entirely upor the

real agreement between the operator and the union. The

tribute. The trustees are the third party benefitiaries of the

real agreement between the union and the operator, which

they may enforce in accordance with its terms, but the fact

that the suit is brought for the benefit of the third party bene

ficiaries would not foreclose a defense that there was no con-

tract or that the writing upon which the complaint is based

is not, in fact, the real ¢greement between the operator and

the union.”

The judgment will be reversed and the case remanded for

further proceedings.

Reversed and remanded.

Sose.orr, Chief Judge. dissenting:

The District Court’s action was sound and its judgment

should not be disturbed.

Remand to the District Court is worse than useless since it

is for the purpose of establishing a legal irrelevancy. This

course is not justified because the only possible result of a trial

on the issue of “sham contract” would be to ascertain. facts

which could constitute no defense. 2 |

Lowry became a party to the industry-wide collective bar-

gaining agreement which obligated him to make royalty pay-*

ments to the Trustees of the Welfare and Retirement Fund

at the rate of $0.40 per ton. He regularly paid the fixed amount

upon the number of tons he reported to the Trustees, reducing

the total payments by the simple expedient of understanding

the tonnage in each of twenty-five payments made during the

period in question. When the Trustees discovered from his

» One can imagine circumstances in which a pretensive agreement be-

tween the union and a mine operator might induce action by the Trus-

tees or employees to their detriment. In such a situation an estoppel

might arise or the union and the employer might be held responsible

for the losses in a tort action. No such circumstances are developed on

this record. r

.. - 15a

’ - ‘

reports to other agencies that his production was much greater

than he had accounted for to the Trustees. they demanded pay-

gnent of the difference due. Lowry did not interpose the pres-

ent defense of “sham agreement,” out sought to-defend the

correctness of the remittances made by him. He would not,

however. agree to an inspection of his production records,

-either by a certified public accountant of his own choice or by

accoutitants from the Trustees’ office. It happens that each of

his seven employees whose names Lowry remembered in his

deposition had been certified by him from time-to time to

‘2 collect, and did collect, benefits from the Trust Fund.

However, my. dissent is based not upon the defendant's

" of equity, but upon broader grounds, for, this is not just a sma

case involving a few miners. If the present employer is pe

mitted to circumvent his written collective bargaining agree-

ment, the effects will-be industry wide.

_ There are three reasons why the defendant's allegations fail

to constitute a defense to the suit by the Trustees. First, the,

statute authorizing agreements to establish industrial trust °

funds, properly interpreted, requires that such agreements

shall be in writing. Second, broadly as a matter of federal

labor law, the so-called “sham” exception to the parol evidence

rule should not be allowed in suits under collective bargaining

agreements. Third, even if a private oral agreement. said to

The present case dhvolves no “April Fool’ Day” joke, but is one of a

series of attempts by coal operators over the nation to renege on ‘their

agreed-upon obligations with respect to the Union Welfare and Retire- :

ment Fund. For other cases where coal operators have attempted, un-

successfully, to escape the payment of royalties to the Welfare Fund.

some of them involving the same contentions as in the instant case and

some involving different ones, see: Lewts v. Fentress Coal and Cok->

Company, 160 F. Supp. 221 (MLD. Tenn., 1958), aff'd 264 F. 24 134 (6th

Cir.. 1959); Lewis @ Mearns, 168 F. Supp. 134 (ND. W. Va. 1958).

aff'd 268 F 2d 427 (4th Cir. 1959); Lewis v. Quality Coal Corporation, *

270 F. 2d 140 (7th Cir.. 1959). cert. denied 361 U-S. 929 (19%). Lewis

v. Cable, 107 F. Supp. 196 (WD. Pa. 1952): Lewis v. Hixron, 174 F.-

Supp. 241 (WD. Ark. 1959); Lewis v. Kerns, 175 Py Supp. 115 (S5.D.

Ind.. 1959); Lewis v. Milt Ridge Coals, Inc., 188 F. Supp. 4 (E.D. Ky.

1960); Lewis v. Young & Perkins Coal Company, 190 F. Supp. 838

(W.D. Ky., 1960); Lewis-v. Gilchrist, .... F. Supp. .... (ND. Ala.

decided April 6. 1961). For one case upholding a contention similar to

that of the defendant in the present case. see Lewis v Mears, 189 F.

Supp. 503 (W.D. Pa., 1960). °

eo}

16a”

_ be the “real contract”, could be relied upon by Lowry in u. .

suit by the union, it cannot be asserted as against ‘the Trustees.

I.

_In section 302 of the Labor Management Relations Act,’

Congress shows a coricern for the abuses accompanying the

growth of the industrial trust funds. Primarily, it was feared

that if the management of the funds were left entirely in the

discretion of union officials, the money contributed by em-

ployers and by employees*might not be used for welfare pur-

poses. As Senator Taft said, “Unless we impose some re-

strictions, we shall find that the welfare fund will become

merely a war chest for the particular union * * *.”’ One of the

safeguards imposed by the act is that “the detailed basis on

which such payments are to be made is specified in a written

agreement with the employer.’”* According to law’s fram-

ers, the primary purpose of this provision was ble em-

ployees to know what they were entitled to receive in welfare

benefits and to be able’ to bring suit against the Trustees ‘if

Literally read, section 302(c) (5) (B) may be thought to re-

quire that only the terms of the payments to the employees be

in writing. Nevertheless, the protection of the employees is

not ¢omplete unless the statute is read to réquire as well that

the terms on which payments are to be made into the Trust

Fund be similarly stated in writing. Congress could not have .

intended to safeguard against the improper use of money once

it has been contributed to the find, but not against evasion of

the primary obligation to contribute.’ :

Further, it would be inconsistent to read the statute to re-

‘quire that the agreement as to terms of payment to the fund

be in writing and yet to permit an employer to claim the

“sham” exception to the parol evidence rule. The royalty pay-

*61 Stat. 157 (1947), as amended, 29 U.S.C.A. § 186 (Supp. 1960).

93 Gong. Rec. 4747 (1947).

-+ 4QLabor Management Relations’ Act § -302(c) (5) (B), 61 Stat. 157-58

(1947), as amended, 29 U.S.C.A. § 186(c) (5) (B) (Supp. 1960).

5 See William Dunbar Co. v. Painters & nash Dist. Council, = ae.

Supp. 417, 423 (D.C. D.C., 1955).

17a

_ ments are an indirect method of compensating the employets,

“and they have a right to know exactly what they are receiving

for their services. They al3o have a right to know how well

their union negotiators represented their interests. They are

being deceived if the publicly declared, written agreement may

be sapped by a secret compact. In addition, the establishment

of this type of trust fund is generally made on an industry-

wide basis. If some employers secretly contribute less than

their shares, other employers may be. forced to contribute more

to enable the fund to meet its obligations. Assumurtg that

different royalties may be charged different employers, the

other employers are at least entitled to know when someone is

paying less per ton than they are. If then Congress has re-

quired that the agreement be reduced to. writing, it cannot be

supposed to have contemplated that a party may come into

court with the defense, “Yes, we have obediently put at in

‘writing, but we did not mean it.” The salutary scheme to

cushion the financtal impact on employees and their families

of unemployment, 1. xess, old age and death could be reduced *

to chaos by a succession of such defenses as that attempted

here, bringing in its tréfh-a host of social evils

*

- IL

rabecint ot to uke commercial contracts the high post-

tion accorded to written agreements, as wjtnessed by the parol

evidente rule ‘itself, may under some circumstances vield to

» the “sham” exception.’ Nevertheless, asa matter of substan-

_ . tive labor law, courts should not permit the exception.

A collective bargaining agreement has been called a “gen-

eralized“céde” for the industry 40-which it applies, and has

been likened to a™“eharter, iristrument of a ‘system of industrial

self-government, like words in a statute.” If ‘these are valid

* Lewis v, Benedict Coal Corp., 361 U.S. 459, 409 +1960). :

’ See Lewis vy. Benedict Coal Corp., supra ot 469 +1960) °

* The parties are in disagreement us to whether under Kentucky low

if applicable, the “sham” exception to the parol ev idence rule is recog-

nized. I find it unnegessary to decide thir.

* United Steelworkers v. Warrior & Gulf Nar. Co., 363.U.S. 574. 578

(1960) (Douglas, J.). °

'? United Steelworkers v. American Mfg. Co., 363 U.S. 564, 570 (1960)

(Brennan, J.; concurring). See Cox, The Legal Nature of Collective

Bargaining Agreements, 57 Mich.L. Rv. !. 22-36 1.1958)

3s 18a 5 : .

concepts, a.union and an employer can no more make covert

exceptions to the contract than a legislative body could to a

statute which it adopts. Both are frauds upon the constituen-

cies concerned. This is not to say that.a collective bargaining

agreement may never be oral, but where the parties have put

it into’ writing, as in the usual case, it may not be varied by a

contradictory oral agreement.

The union is not bargaining for itself alone, but as a repre-

sentative of employees, ‘and sometimes of others such as the

Trustees in the instant case. It is imperative that the employees -

and other direct beneficiaries have a written embodiment of

their rights and dutits which can be ascertained by all. The

public also has a right to know precisely what was agreed

- upon. If this “sham” exception is recognized, none of these

- interests will have any. idea what the terms of the “real’’ col-

lective bargaining contract are.

We must have regard for the spirit of the legislation. Section .

8(d). of the Labor Management Relations Act’' has recognized

the importance of having a collective bargaining contract in

writing by providing that bargaining in good faith includes a

willingness to embody the agreement in writing at the request

of the other party. See H. J. Heinz Co. v.. N.L.R.B., 311 U.S.

514,-523-26 (1941).- A written labor agreement settles questions

‘that if left unsettled could lead to industrial strife. Its purpose

is to avoid strikes, walkouts, workstoppages and the like. If

such written contracts can be nullified whenever the employer

and union come to some other secret. oral agreement, ‘the pur-

pose of the contract as ari instrument of industria! peace may

be frustrated. = ‘

sc é

61 Stat. 142 (1247). 29 US.C.A. $. 158. (d) (1956).

‘ The majority opinion suggests in footnote 5 that an employer might

be estopped from asserting an oral understanding with the union con-

tradic ting their written agreement if it were shown that the Trustees or

employees acted to their detriment. The simple answer is that specific

detriment to these third parties is not required to. be shown to invoke

the rule against secret evasion of the written agreement because detri-.

ment is inherent in the frustration of ‘Trustees’ and employees’: rights

which has been fully pointed out ebove in ine text.

.

‘19a

: ITI.

Even if it be assumed that in a suit by the union rather than

the Trustees a sub-rosa understanding could be asserted by the

employer, to allow the defense as against the Trustees would

tend to undermine the statutory scheme for the creation of an

irrevocable trust for.the employees. The plan is one sponsored

jointly by industry and labor and approved by Congress. The

fund is jointly administered by representatives of employers |

and labor along with a_neutral third party. It would -be an

unbearable incongruity. at war with the law's underlying

policy, to allow the trust fund to be eroded in the manner pro-

posed, for what kind of trust is it that leaves the door open to

impairment by secret agreements.. bd en those participated in

by a donor?

The Supreme oust in Lewis v. Benedict Coal Corp., 361 U.S.

459, 465 (1960), pointed out that a trust’ fund is in.“*noway' an

asset or property of the union.” See 93 Cong. Rec. 4678 (1947)

(remarks_of.Senator Ball). In that case the trust fund was

considered so far independent of the union that although a

money judgment had been rendered in favor of the employer

against the union, the employer was not permitted to’use it as a

set-off to a judgment against the employer in favor of the

trustees. The considerations bearing on the protection of the

interests of beneficiaries, which were stressed in Benedict,

apply in logic and common sense with no less force here.

Royalty payments to the Trustees may not be curtailed: by

private oral agreements between an employer and a union, any

more than they were permitied to be reduced by- damage

claims of the employer against the union. -The Trust Fund's

obligation to pay benefits.to. Lowry’s employees could not be

affected by secret understandings between the coal company

and the union; neither may the employer's obligation to pay

royalties to the Trustees be diminished by clandestine arrange-

ments between the employer and the union,

|

The court's opinion treats the defense of coercion as friv-

olous, and with this I fully agree. No threats are claimed.

The mere fear that if one will not sign the agreement there

“xm Will be a strike or walk-out is not the kind of coercion that a

>.

20a

court will recognize as sufficient to invalidate an agreement.

This is elementary.'? Certainly no remand is warranted to take

testimony in support of this “defense.”

For the above reasons, I think that the order of the District

Court should be affirmed. Remand erroneously implies that ,

if the facts that have been asserted could be established, they

would constitute a valid defense. With this I do not agree.

"’ See, e.g., Lewis v. Quality Coal Corporation, 270 F. 2d 140 (7th Cir.,

1959); Lewis v. Kerns, 175 F. Supp. 115 (S.D. Ind., 1959).

Zila -

APPENDIX -E.

In THE Unitep States District Court

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

Joun L. Lewis, et al., Plaintiffs

v.

Epwarp. J. Toru, Defendant

Civil Action No. 14875

TRANSCRIPT OF ORAL OPINION OF COURT

+ BY: Hon. Edward Thaxter Gignoux, DJ. .

DATE: October 30, 1959

PLACE: Pittsburgh, Pennsylvania

COUNSEL PRESENT: : .

ALEXANDER Unkovic, Esq., for Plaintiffs

Kim Danrracu, Esq., for Defendant

THE COURT: The Court is prepared to rule at this time, to

announce his ruling, and to state the basis for its ruling.

The Court is prepared to do so inasmuch as the legal question

presented by this motion was presented to the Court by a

motion for directed verdict which was filed by the plaintiffs at

the conclusion of the defendant's evidence and renewed by the

plaintiffs at the conclusion of all the evidence, and the Court

has had the time since the original motion was presented, after

having heard the arguments of counsel and having considered

the trial briefs filed by counsel,,to review the authorities cited

in the briefs and other authorities which have been called to

the Court’s attention which satisfy this Court as to what the

decision should be.

The motion is granted. The Court ‘accepts for the purp»ses

of this ruling the proposition that the law as set forth in Section

22a

473 of the Restatement of Contracts, 1932, that a contractual

promise made with the intention of not performing it is fraud,

is the law of Pennsylvania. Although a reading of the case

of Nissenbaum vs. Farley, 380 Pa. 257, 1955; in conjunction

with the case of International Milling. Company vs. Hach-

meister, 380 Pa. 407, 1955, leaves some question in the Court's

mind as to whether the rule as set forth in the Restatement is

the law in Pennsylvania, however, by accepting the Restate-

‘ment ‘rule as law of Pennsylvania, the Court is resolving that

question most favorably to the defendant in the consideration

of this motion. The Court also, in ruling upon this motion, has

considered all the evidence in the light most favorable to the .

defendant and has drawn from the evidence the inferences:

‘which could be drawh most favorably to the defendant. It is_

the Court’s understanding it is the Court's function for ruling

on a directed verdict or motion for judgment n:o.y. under

Rule 50 of the Federal Rules of Civil Procedure, so, viewing

this record, it is the conclusion of this Court that no reasonable

jury could find under the evidence presented to it in this case

that fraud had been established as present in the negotiations

which ended in the written contracts. The Court has in mind

the Pennsylvania law that evidence of fraud when offered by

the party to a avritten agreement for the purpose of avoiding

the written agreement, must be clear, precise and indubitable,

that law being set forth in the cases of Wagner vs. Somerset

County Memorial Park, 372 Pa. 338, 1952, and Gerfin vs. Colo-

nial Smelting and Refining Company, 374 Pa: 66, 1953. among

other cases. :

It is the opinion of this Court at most, if the defendant's

testimony is to be believed, and apparently the jury did believe

his testimony with respect to the first three contracts, the de-

fendant has shown only a prior or contemporaneous oral agrec-

ment which he is barred from establishing to modify or vary the |

terms of, the written agreement by the parole evidence’ rule as

that rule- has been developed and applied by the more recent

decisions at least of the Supreme Court of Pennsylvania, the

earliest Pennsylvania case apparently being the case of Gianni

vs. Russell & Company, 281 Pa. 320, 1925, the law having been

further developed through a series of cases including the case

of Bardwell vs. The Willis Company, 375 Pa. 503, 1953, which, .

at page 507, contains a concise statement of the rule; and the

23a

rule having been most recently stated both in the majority and

in the dissenting opinions in the case of, Boyd Estate, 394 Pa.

- 205, 1958, a case which’ was-religd upon by both parties in this

litigation in connection with their initial presentations upon

the motion for directed. verdict.

In the Court’s opinion the actual holding of the Court in

Boyd Estate is clearly distinguishable from the ‘situation pre-

sented in this case by at least two factors, the first being. that

the subject matter of the alleged oral agreement in this case .

is the same as that contained in an express written provision

of the written, contracts, and the second being that in Boyd

Estate the party who was seeking to enforce the written agree-

ment had expressly admitted the contemporaneous oral ‘agree-

ment.

To summarize the Court's conclusions as to the Pennsylvania

law as just stated, it seems to me that.a fraudulent misrepre-

. sentation in promissory form may be established despite the

pgrole evidence rule only where through fraud or because of

. the alleged fraud something was left out of or omitted from

the written contract which. if it had not been for the alleged

fraudulent promise, would have been included in the contract.

In this case there is no allegation, nor is there any evidence,

that the defendant ever wanted there to be any provision con-

cerning his royalty obligation upon coal mined and sold by him

to the Duquesne Power & Light Company. or that the defendant

understood that there was any such express provision im the

written contracts. -

In addition, the written agreements here were the final step

in a collective bargaining process under Section 8(d) of the

Taft Hartley Act, and under that Act the parties to collective

bargaining agreements are precluded fromi relying on prior —

or contemporaneous oral agreements. It was so held in Gatliff

Coal Company vs. Cox, 152 F.2d 52, Sixth Circuit, 1945.

For the foregoing reasons, this, Court has concluded that

even accepting the evidence in the light most favorable to the

defendant and drawing therefrom all inferences which can be

drawn most favorably to: the defendant, no reasonable jury

could find that this evidence established fraud in the induce-

ment of these contracts clearly, precisely and indubitably. and

lda

this Court has no alternative other than to set the verdict

» aside and to enter judgment for the plaintiffs against the de-

fendant in the full sum of the claim. which is $15.691 99 with

interest. The Court is signing an order to that effect

* » --

The Court will add to the order. which as presented calls for

judgment in the amount of $15,691.99. together with interest -

and costs, the Court will insert. following the word ° ‘interest.

the words “from ‘this date.”

* » i &

Reporter's Certificate

1 hereby certify that .the foregoing pages contain a true

srainctin of the Order of Court entered on October 30. 1959 in

Civil Action No. 14875 at Pittsburgh. Pennsylvania

George Geiger €

: Official ‘Reporter

November 10, 1959 ;

‘Pittsburgh. Pennsylvania

2a

Unitep States Court of Arras

J For tHe Trinp Circvit

No. 13.15%

Joux L. Lewis. Henry G Scumipt and JostrHine Rocnt as

Trustees of Tut Unitep Mine WorKrks OF AMERICA Wet-

FARE AND RETIREMENT Funp.

Vv

Epwarp J. Totn. individually and trading a>

Totn Consterction Company. Appellant

’

Appeal from the United States District Court for the

Westérr. District of Pennsylvania

Argued Jue 7 i960)

Before Biccs. Chief Judge. and Havtir and Forman. *

Circuit Judges

OPINION OF THE COURT

: ;

(Filed July 2. 1960)

_ Per CURIAM.

» We-have éxamined the record in this appeal anu nave con-

sidered carefully the arguments of counse! We can perceive

no error and consequently the Judsment appeased trom will

be affirmed

A true Copy.

Teste

Clerk of the Cited States Coutt of Appeals

jor the Tiird Circus -

+

*

APPENDIX F

Civil

Action Date

Sttle No. Court Amount Filed

Lewis et al v. George A. 3223 USDC. $19,946.01 Apr. 17,1958

Bryant, et al, individ- - E.D. Tenn. wet ete

ually and trading as ~ Southern

George A. Bryant & Division

Sons Coal Co., a part-

nership ;

Lewis et al v..E. Dick 3153 USDC. $23.560.00 Jan. 2.1958

Burrow, individually E.D. Tenn.

& trading as E. Dick Southern

Byrrow Coal Co. - -Division

Lewis et al v. Willis 3455 USDC., $21,35048 Oct: 28,1958

Flynn, individually & | E.D. Tenn.

trading as Willis Southern

Flynn Coal Co. Division

Lewis et al v. Howard 3369 USDC. $12,452.15 Nov. 10,1958

Higgins, individually ~ E.D. Tenn.

& trading as Howard Southern a

Higgins Coal Co. Division

Lewis et alv.R:B Ivey, 3434 USDC. $23,082.22 Oct. 28,1958

individually & trading E.D. Tenn. . . .

ds R. B. Ivey Coal Co. Southern

Division -

Lewis et alv. Will Land, 3436 USDC. $12,302.90 Oct. 31, 1958

individually & trading E.D. Tenn.

as Will Land Coal Co. Southern

and/ur Will Land & Division

Sons Coal Co. Ss

Lewis et al vy. Charlie 485 USDC. $33,526.03 Jan. 30,1959

Martin, individually E.D. Tenn.

& trading as Charlie Winchester

Martin Coal Co. Division

Cordell Coal &

Constr Co.

— ae a

Civil

Action

» Style No. Court

Lewis et al v. EwingS. 3431 USDC.

Hampton et al, indi- E.D. Tenn.

vidually and trading ‘Southern

as Patrick & Hampton Division

Coal Co., a partner-

ship a

Lewis et al v. Earl Pat- 3432 USDC.

ton, individually & E.D. Tenn.

trading as Ear] Patton Southern

Coal Co. Division

Lewis et al v. Hampton 3433: USDC.

E. Patton, individually - ED. Tenn.

& trading as Hampton Southern

E. Patton Coal Co. Division

Lewis et al v. James 3438 USDC...

Patton, individually & E.D. Tenn.

_ trading as James Pat- Southern

ton Coal Co. Division

Lewis et al v. J. W. 3437 USDC.

Sanders, individually “ E_D. Tenn.

& trading as J. W. Southern —

Sanders Coal Co., ar. Division

individual proprietor-

ship; and J. W. Sand-

ers, et al, individually

& trading as J. W. ———

Sanders & Sons Coal ”

Co.,a partnership _ ;

Lewis et al v. J. A. 492 USDC..

Cordell, individually * ED. Tenn.

& trading as J. A. Cor- Winchester |

dell Coal Co. and/or Division

Amour.t

$41.741.34

$18.442.61.°

$36,564 30

$6.124 44

$11.170.72

Date

Filed

——— - —

$22.45730 Apr 21,1958

Oct. 6.1958

Oct. 6, 1958

Mar 19.1959

Myers Coal Co.

Division

Civil .

° » Action : Date

Style No. Court Amount Filed

Lewis et alv.H.A.Daf- 3287 USDC, $13,692.71 Jul. 16,1958

fron, individually &. - -E.D. Tenn. :

trading as H. A. Daf- Southern

fron Coal Co. Division

- Lewis et al v. M. T. 3361 US.DC., $16,345.40 Oct. 28,1958

Dixon, individually & E.D. Tenn.

trading as M. T. . Southern

Dixon Coal Co. © Division mt

Lewis et al v.J.J.Gra- 3224 USDC. $12,948.80 Apr. 17, 1958

ham, individually & E.D. Tenn. es alia

trading as J. H. Gra-’ Southern

‘ham Coal Co. Division

- Lewis et al v. W. T. 3286 - US.DC., $35,898.15 Jul. 16, 1958

Morrison et al, indi- E.D. Tenn. _

vidually & trading as Southern °

M. & T. Coal Co., a - Division

partnership :

Lewis et al v. Marshall 458 US.DC., $46,113.36 Oct. 28, 1958

Meeks, individually & E.D. Tenn.

trading as Marshall Winchester

Meeks Coal Co. Division

Lewis et.al v. W. T. 3284 «=U S.DC,, $21,494.40 Jul. 16,1958

Morrison, individ- E.D. Tenn. ; "9

ually & trading as W. ‘ Southern

T. Morrison Coal Co. Division

- Lewis et al v. Hershel 456 USDC., $15,170.12 Oct. 28, 1958

_ Myers, individually & - E.D. Tenn.

trading as Hershel Winchester

Myers Coal Co. Divis.on

Lewis et al’'v. Waldo 455 USDC. $11,757.30 Oct. 28, 1958

Myers, individually & E.D. Tenn.

trading as Waldo Winchester

29a

Civil

Action

Style No. Court _

Lewis et.al v. Edward 486 US.DC.,

' Nunley, individually E.D. Tenn.

& trading as Edward Winchester

Nunley Coal Co. Division

Lewis et al v. Leon 499 USDC.

Nunley,- individually E.D. Tenn.

& tradirig.as Leon Winchester

Nunley Cual Co. Division

Lewis et al v. Auron 3365 US.DC.,

Presnell, iridividually E.D. Tenn.

& trading as Aaron‘. ‘Southern

Presnell Coal Co. "he Division

Lewis etal.v. F.W. 3285 US.DC.,

Pryor, individually & E.D. Tenn.

trading as F. W. Southern

‘Pryor Coal Co. Division

Lewis et al v. George 462° USDC.,

Ramsey, individually E.D. Tenn.

& trading as Ramse; Winchester

Coal Co., an Individ- Division

ual proprietorship,

Monteagle, Tennessee; -

and George Ramsey “

et al, Individually &

trading as G. & E.

Ramsey Coal Co. a

partnership '

Lewis et al v. Horace J. 3360 USDC.,

Scissom, individuall,’ E.D. Tenn

& trading as Hoface J. Southern

® Scissom Coal Co. Division

Date -

Amount Filed

D.C, $11,782.28 Jun. 30, 1959

$10,069.03 Oct. 28, 1958

$17,012.90 Oct. 31, 1958

- $22,55791 Jul. 16, 1958

2121040 Nov. 10, 1958

$37,457.96 Oct. 28, 1958

Coal Co.

30a :

Action : . Date

| Style “No. (Court Amount. _ Filed

“Lewis et a] v. Howard. 3362 USDC, * $23,790.93 - Oct. 28, 1958

Stephenson et 4l, in- E.D. Tenn. “a ‘

dividually & trading Southegn - ;

as Stephenson & ,, ‘ Division > ‘

- Steplienson Coal Co., “ a

_ sa partnership) * \ 7 | ug

- : . - : |

* Lewis et al v. JOH. 3243 “USDC., $23,171.25 May 15, 1958

Goforth, individually, E.D. Ténn 28 .

& trading as J. H. ‘ Southern -

Goforth Coal Co. ’ Division ee ee .

Lewis et abv. Dewey 476” USDC. $15,436.00 Dec. 9, 1958

_ Trussell, “individually. - E.D. Tenn. ‘ls

, ' & trading as Dewey: Winchester

. ete Grussell Coal Co. ~ - Division ae

_ "Lewis et al v, Rainbow " 628 USDC. $23,345.60. Sept. 23, 1960

Coal Corp. | ' ED. Ky. ape d:

~ Lewis et al v. James C. . 661 ispc, ‘$11,458.57. Jul. 25, 1961

Witten, individually . _ ED. Ky.

& trading as Witten ,

e Mining Co. :

Lewis et al v. Dewey 1148 USDC., $13,143.25 Aug. 26, 1961

Cook, Jr., individually - E.D. Ky. Slt

: . & trading as Days* a

Branch Darby —

Co. :

Lewis “et. al v. ee 3493°- U.SD.C., —$129,724.40 | Mar. 13, 1958

_ Ine. ’ E.D. Tenn.”

, Northern

Division ig

Lewis et alv. Paul ° 419 USDC. $38,476.80 Maf...)6, 1958

-. Gibbs, individually & E.D. Tenn. .

trading. as Paul Gibbs Winchester ?

Division

sla.

, A f

® > . ‘ivil

Action 4 :

Style No. Court Amount

Lewis et al v.\James O. - 690 _ US.DC., $25,660 42

@

.

Large, individually & %S.D. W.Va. ¢

’ trading as American - Ae .

Pocahontas Coal Co. ~ °

Lewis et.al v.. Robin. 695. USDC, © $24.387.25

Red Ash Coal Co., af S.D. W: Va. ,

corporation :

Lewis et al v. H.R. 290 USDC. . $51,748.60

Gifford, individually _ §.D. W.Va.

& trading’as H.R. .

- Gifford Coal , ,

Lewis et alv.F. Arnold 673 U.S.D-C., . $49,531.40

~ Lowry, individually & W.D. Va. i

trading as Lowry

Coal Co. -— | - |

Lewis et al v. Edward 15288 U.SD.C. . - $3,395.93

Mears, individually & - W.D. Px. :

trading as Mears Coal © : — --

= Total - $1,007,561.66

as

*.

: Date

- Filed

Dec ~ 27, 1961

- Jan. 18, 1962

Dec. 27, 1961

Feb. 16, 1959

Dec. 19,1956

32a—ti« +e

We ees $ APPENDIX 6

In THE . R

UNITED STATES COURT OF APPEALS

For THE THIRD GIRCUIT re

ale fo No. 13,502

«

,

Joun L. Lewis, HENRY G. ScHMIDt and JosEPHINE Rocue, as

a Trustees of the UniTep Mine WorKERS OF America WEL-

FARE AND RETIREMENT FUND, Appellants. ‘

v.

EDWARD Mears, Individually and Trading as

Mears Coat Company, Appellee .

—--

Co

PETITION FOR REHEARING

-

Appellants respectfully petition this Honorable Court for a

rehearing of the appeal in the entitled cause and in support of . © |

this Petition represent to the Court as follows: —

; Appellants (herein also called “Trustees”), reserving their

position as to each’ of the points of appeal, in this Petition

address themselves primarily to those features of the decision,

consisting of the Order and Opinion of Judge Kalodner on Octo-

“ber 11, 1961, wherein it is believed that the Court has based its

decision upon the application of incorrect legal principles.

. Therefore, this Petition is devoted to the two major questions.

put to this Court upon appeal in an effort to convince this Court

it has erred in its determination thereof.

. ‘Il.

The Court, in its Opinion, at page 5, a copy of which is ap-

pended hereto,’ has adopted the view that the parol evidence

’ The Court’s opinion appears as Appendix A herein, pp. 1a-7a. “The

’ abbreviation “A.” refers to the Appendix to this Petition.

peer es,

rule has no application to the facts of this case if the common

| -law is to be applied, and further, that the Nationa] Labor .

Policy promulgated pursuant to the Labor Management Rela- |

tions ‘Act, doés not prohibit the introduction of an oral eondi-

tion precedent to a written collective bargaining agreement

after it has been relied upon by third parties (A.5a-fa,. -*

A. The instant case is not one where the Court's vitiation

of the bargaining agreement falls only upon the union as a

party to an oral contemporaneous agreement. Rather, the effect

of the Court’s. action herein places the burden of alleged, oral

agreements between a-union and, the employer asserting such

agreements upon employees’ who are the Fund's ultimate’

beneficiaries, innocent of any wrongdoing, and who produced

the coal from which stemmed Mears’ obligation tu pay the

royalty upon such production. Lewis v. Benedict Coal Corp.. 361

U'S.°459, 466. ;

Yet, this vital factor is totally overlooked in the Court's

opinion. Where, as herein, Trustees had no knowledge of an-

oral agreement at variance with the written contract. and

Mears paid royalties, though inadequate, into the -Fund and

employees produced coal under the belief that a bargaining

_ agreement existed, even if Mears‘could be regarded as inno-

cent of any wrongdoing, as between himself and the Trustees .

(who stand in the shoes of the employees as ultimate benefi-

ciaries, U. S. v. Carter, 353 U.S. 210, 220), Mears is subject to

,, the rule that when one of two innocerit parties must suffer by

the act of a third person, he, who by his act has enabled such

third.person to cause the loss, must sustain it. Eliason v. Wil- —

born, 281 U.S. 457; Farmers Nat. Bank & Trust Co. Vv. Flexible

Truck Corp., 3 Cir., 81 F. 2d 541; NLRB v. Industrial Cotton

Mills, 4 Cir., 208 F. 2d 87, 91. °

-Furthermore, the Court’s application of the rule, that “parol

evidence is admissible to prove that a contract did not exist”,

to labor agreements, and particularly to those which contain

welfare fund provisions, must be appraised in the light of the

Act’s Section 302 (c) (5) (B) and Section 8(d) {29 USCA 186(c).

(5) (B) and 158(d)]. |

In Section’ 302(c) (5) (B), Congress mandated that the de-

-? All emphasis herein are supplied.

‘34a

tailed basis of welfare fund beriefits be “specfied in a written

agreement with the employer”. ‘The agreement herein con-

formed to that requirensent. Such ‘Congressional requirement

emphasizes Trustees’ assertion in their original Brief and

herein, that Section 8(d) of the Act contemplated that their

executed . agreement contained the total agreement between

‘the parties and excluded and foreclosed evidence of any al-

leged contrary oral agreement. oa

In a recent Fourth Circuit ‘case (Lewis v. Lowry), Chief 7

. Judge Sobeloff in a dissenting opinion, challenged the majority’.

holding that a secret. agreement, about which Trustees had

no knowledge, could constitute a defense to a suit by Trustees

to collect: delinquent royalties. The thesis of his dissent was

that “the stgtute aur. rizing agreements to establish indus- —

trial trust funds . . . shall be in writing”; that “broadly as a

matter of federal labor law, the: so-called ‘sham’ exception to

the parol evidence rule should not be allowed in suits under

- eollective bargaining agreements” and “even if a private oral.

agreement, said to be the ‘real contract’, could be relied upon -

by” the employer “in a suit by the union, it cannot be asserted

as against the Trustees”.’

° ; ;

In dissenting, Chief Judge Sobeloff points out the Supreme

Court in Benedict (361 U.S. 459, 465) made. clear “a trust fund

is in ‘no way an asset or property of the .union’” and that the

primary purpose of Sec. 302(c) (5) (B) “was to enable em-

.ployees to-know what they were entitled to receive ‘in welfare

benefits”; arid he cogently declares that employees “are being

deceived if the publicly declared written agreement may be

* The Fourth Circuit's opinion and the dissent of Chief Judge Sobeloff,

- in Lewis v. Lowry, decided September 16, 1961, are printed herein as

Appendix B, pp. Ba-19a. A petition for a writ of certiorari ip’ Lewis v.

Lowry is currently being prepared and will be. filed in the Supreme

Court of the United States not later than November 24, 1961.

Prior to the Fourth Circuit's recent Lewis v. Lowry, the Fourth Circuit

-reached a result contrary to Lowry in its Mearns v. Lewis, 4 Cir., 268 F.

2d 427, where it approved a trial court’s holding (Lewis v. Mearns, DC,

N_D. W. Va., 1958, 168 F. Supp. 134) which rejected a coal operator’s

contention that he was told the written contract was only a “formality”

for the union’s office records and that he need not pay the full royalty

but only “what he could”, the court declaring (168 F. Supp. 138) this

evidence “At most” showed “only a prior, or contemporaneous oral

agreement” which is barred by both the parol evidence rule and the

Act's Section 8(d). m

35a

sapped by” an alleged oral understanding not contained in the

written agreeinent (A. 19a, 16a) and that - :

“It would bean unbearable incongruity, at war witli the

law's underlying policy, to allow the trust fund to. be

eroded in the manner proposed, for what kind of trust 1s

‘sit that leaves the door open to impairment by secret agree-

ments, even those participated in by a donor?” ; be

One may not gainsay, Trustees submit. that Section 3d)

recognizes the impoz.ance of bargaining contracts being in

writing. Its purpose clearly is to avoid industrial strife by its | :

compulsion of placing in writing the conditions of employment

which, left unsettled or uncertain, lead to strikes and lockouts.

If employees-are to believe in the integrity of bargaining agree-

‘ments under which they work; and if-the contract's purpose as

an instrument of industrial peace is to be implemented and

sustained, then both the spirit and language-of the Act demon-

strate that the result reached in the Court’s#pinion is contrary

to-national labor policy and erroneous. ~ _

_ Leng before Section 8(d)’s enactment. the necessity of an

employer's executing a ‘written memorial of his understanding

with a union was proclaimed in H. J: Heinz Co. v. NLRB, 311

U.S. 514, wherein the written agreement was described as a

' “permanent memorial of its terms” and “the final step in the

bargaining process” (pp. 523, 525). Therein, the Supreme Court

recognized the preference that employees. have “an authentic

record” -of—their-employment terms as_contrasted with the.

employer's unilateral statement thereof (311 U.S: 524). In

enacting Section 8(d) Congress, too, recognized the need for

memorializing the agreement in a written instrument, and .

gave statutory emphasis to the Supreme Court’s declaration

that the written instrument was “the effective instrument of

stabilizing labor relations ‘and preventing, through collecjjve

bargaining,\ strikes and industrial strife” (311 U.S. 524). A

district court’s holding that the National Labor Relations Act’.

“clearly preciudes” a contemporaneous oral agreement upon

which a defense was based was approved by the Sixth Circuit

in Cox v. Gatliff Coal Co., D.C., E.D. Ky.. 1945, 59 F- Supp 882,

886, aff’d, 6 Cir., 152 F. 2d 52. .

Though Judge Kalodner, in his opinion (A. 6a) recites that

“national labor policy may require modification of the tradi-

tional rules of contract law in. the case of” labor agreements,

it is difficult to perceive a situation re natiunal labor policy

would precludé the traditional rules’o contract law if the in- —

stant case is not one for its appli¢ation. The Court's refusal

(A. 6a) to apply it in the instant case overlooks the Supreme

Court’s holdings in Benedict (361 U.S. 468-70) that “This col- |

lective bargaining agreement. however, is not a typical third- |

party beneficiary contract”; that “royalty payments are really

another form of ‘compensation to the employees”; that “as

such the obligation to pay royalty might be thought to be

incorporated into the individual employment contracts” and

“Finally a consideration which is not present in - . .

third-party berieficiary contracts is the impact.of the national

‘labor pélicy”.

Even prior to Benedict, the Supreme Court mandated that

where federal labor policy is concerned, federal courts are

obliged to fashion 4 remedy that will effectuate such policy

and that application of common law may be resorted to only

if it “will best effectuate the federal policy”. Textile Workers

Union v. Lincoln Mills, 353 U.S. 448, 457. Clearly, the instant

situation is one which concerns federal labor ‘policy. The

Court's refusal to apply it herein certainly does not effectuate

it in a situation where Trustees seek to.recover moneys belong-

_ ing to an irrevocable trust for the benefit of employees in the

bituminous coat industry: —_

>

While the instant case is one brought by Trustees, the Court’s

error becomes even more glaring when. it"is considered that

the agreement which has been vitiated through the medium

of parol evidence embodied the terms and conditions of em-

ployment for each of the employees covered by it. J. I. Case

Co. v. NLRB, 321.U:S. 332. If one or more employees sought to

sustain some contractual right “against his or their employer,

the principle enunciated in the instant case will, unless cor-

‘rected, permit an employer, as & defense to the action, to assert

some alleged agreement not found in the written instrument

and which the employer would disclose, for the first time, at

the time of itigation.

a

Indeed, even if Mears and the union had the understanding

which Mears claims, neither the Trustees or the employees

+ t

4

3Tas«y

should suffer the loss and benefit of royalties as a resuJt thereof.

In Benedict the Supreme Court refused to place the burden

of damages flowing from the union’s‘alleged breach of contract —

upon the Fund and expressed its concern with protecting the

interest of the Fund’s employee beneficiaries and declared that

“Ultimately this might result in pressures upon the other coal

operators to increase their royalty payments to maintain the

planned schedule of benefits” (361 U.S. 469)" These considera-

_ tions, stated Judge Sobeloff in his Lowry dissent (A. ‘16a, 19ad%;

* “apply in logic and common Sense with no less force” in a situa--

- tion as here where operator endeavor seeks to curtail royalty .

payments by proof of an alleged oral understanding not con-

tained in the executed agreement. As stated in the dissent (A

wot Wa): “The Trust Fund's obligation to pay benefits to” the

employees “could not be affected by secret understandings

between the coal company and the union; neither_may the

- employer’s obligation to pay royalties to the Trustees be di-

minished by clandestine. arrangements between the employer .

and the union.”

4

.

Even at common law an exception to the common-law rule —

which permits oral testimony of a condition precedent to the

effectiveness of a contract is that “Where the written instru- -

ment contains a recitation that it embodies the entire agree-

ment between the parties and that they shall not be bound by

-~any representations, agreements or conditions not therein con-

tained, then parol evidence is inadmissible to show the exist-

ence of an unfulfilled condition precedent not s © forth in the

instrument”. Rowe v. Shehyn, DC, D.C., 1961, 192 F. Supp. 428,

‘431. Though the instruments herein involved did not explicitly

so provide, since the Act’s Section 8(d) provides that good faith ;

collective bargaining includes “the execution of a written

agreement incorporating any agreement reached if requested

by either party .. .”, which was the situation-in-the instant

case, and under NERB-V- Nash-Finch:Co., 8 Cir., 211 F. 2d 622.

“it is conclusively presumed that the entire engagement of the

parties and the extent and manner of their undertaking have

been reduced to writing”, Trustees assert that Section 8(d) -

. supplies to each and every collective bargaining agreement the

language of the principle above quoted.

Furthermore, the Court’s statement (A. 6a) that “national ,

(38a

labor policy does not require ‘the exclusion of parol evidence -

which shows the lack o “an effective acceptance of an offer”

is erroneous in-that it does not accord with the recorded facts.

Contrary to the language quoted, the uncontroverted evidence

is that after Mears admittedly executed the contract, United

Mine Workers of America also executed it. Mears’ defense was

merely that he did not receive a signed copy, not that there

was no effective acceptance of an offer, nor that there was no

- completed executed contract in existence. i

The foregoing shows clearly the Court’s error in its refusal”

to.sustain Trustees’ contention that admission of the alleged

oral agreement was violative of national labor policy.

B. In their original brief, Trustees pointed out that the labor

- contract contained a specific effective date. The agreement =e

‘recited (App. 134a), “This Amended Agreement . .. shall. be .

effective as of October 1, 1952 . '» Prustees argued, as they -

do now, that Mears’ testimony that “the contract wouldn’t be

a contract until I had gotten a copy of it back signed and

completely executed” (App. 50a) * is at complete variance with

the quoted effective date recital in the, agreement, the admis-

sion of which violated the parol evidence rule. :

Williston on Contracts, 3d Ed.. Vol. 4, p. 1028. recites that

“And even where the contract states that it is not to be effec-

tive until 4 certain contingency, a’ contemporaneous oral agree-

- ment that it shall take effect immediately is inadmissible”. The

present case presents the converse of the example in the Willis-

ton text, but the rule recited is equally applicable to the instant

situation and clearly demonstrates the Court’s error. —

CIn the trial court and the Third Circuit, Trustees contended

Mears ratified the bargaining contract jand was fstopped to ~

deny its jural existence. Though Trustees do not herein detail

the discfissions to sustain those assertions, they do not waive

thent ‘ and invite the Court's reconsideration of these: positions

-as found in their original brief. pp. 16-27 and reply brief, pp.

9-12. In a record where it is undisputed that for 11 months

Mears paid royalties into the Fund, accompanying them with

* The abbreviation “App.” refers to the Joint Appendix filed, in this

oe

. <

eS : 39a :

check letters of advice pursuant to the agreement; he admitted

owing moneys to the Fund under-the contract;°when asked

_ to pay, he did not disclaim a contractual obligation but merely -

asserted financia! inabili ity; he never disavowed the agreement ,

either to the union or the Trustees: he claimed to have written

a letter cancelling the contract (a claim the fury rejected):

on sixteen occasions subsequent to his admitted execution of

the contract he used a Fund hospital: card resulting in the

Fund's expending $943.14 for hospital and medical care for his

wife, it is not understandable how the Court, in addition to

holding the contract never had legal existence, could hold, as

‘it did, that the district court's findings on staan and

estoppel were not clearly erroneeus. . —

ant —. CONCLU SION : ;

ne ex vA

"Throughout the fmstant appeal, Seors has ssiaiinaein

is a small case involving a small operator with few. miners*/The

Court should not, however, lose sight of the fact that the > Agree-

ment involved is industry-wide and its opinion and jadgment

‘ herein will stand as an invitation to coal operators.across the

“country to nullify their agreements through the’ medium ‘of

alleged oral agreements. As Chief Judge Sobeloff points out in |

. the Lowry dissent (A. 14a), the present case “#5 one of a series

of attempts by ‘coal operators..over the nation to renege on

their agreed-upon obligations” to the Fund, pointing to nine

‘other such federal court cases exclusivg’6f Lowry. Indeed, the

Court's decision and. opinion, if permitted to stand, provide a

weapon | for employers not only iaAhe coal industry but in

‘every 0. ‘her industry by which to ev ade their collective -bar-

gaining contraétual obligati ons and thereby to frustrate and

defeat national labor policy’ by rendering nugatory written

bargaining .agreéments whieh the Sypréme Court ian Heinz

procla:med “as the e! ‘foive iastrument of stabilizing labor

relations and preventing. thre ouch collective bargairzin: strikes

end industr.al st stil” (311 US. 524).

,

an

It is rest ecttyfly submmit*ed ‘that the Court's orinion and

judaméat in vie. instant case are’clearly in error and should

be recons: dered upon the rehesring sought herein. and that

- ?

4

@ ”

“40a

ad

argument on rehearing be* heard before the entire Court in:

banc pursuant to. Rule 4(3) 0

“Vat J. Mitcu

f the Rules of this Court.

‘Haroip H. Bacon

_ Cnarees L. WIDMAN

7

es

907 Fifteenth Street, N.W.

Washington 5, D.C. —

ALEXANDER UnKOVIC

Witt1aM G. Boye

Kountz, Fry & Meyer

1424 Frick Building

Pittsburgh 19, Pennsylvania

M. E. Botarsry

511 Kanawha Valley Building

Charleston, West Virginia

Attorneys for Appellants *

s

CERTIFICATE

The foregoing Petition is present

[on

for the purpose of delay.

(NOTE: Included in the

ing were Opinion dated.

Mears, etc. and Opinion dated

States Court of Appeals for t

xg —_——_

J

ed in good faith and not .

>. e

°

°

artes L. WIDMAN

Attorney for Appellants °

Appendix to the Petition For Rehear-

ated-October 11, 1961,-efthe United States

- _ Court of Appeals for the Third

Circuit, Lewis et al v. Edward

ptember 16, 1961, of the United

he Fourth Circuit, Lewis et al v.

-F. Arnold Lowry, etc., which are printed in the Appendix to

_ ‘the instant Petition For Writ

Appendix D; réspéctively, and therefore are not repeated. |

of Certiorari as Appendix A and