pursuant to Section 302(c) of the Labor-Management Relations Act of 1947, 29 U.S.C. § 186(c), and has been continuously in operation with only slight modifications since its creation.
The Fund is administered by three trustees: one designated by the Union, one designated by the coal operators, and the third a "neutral party designated by the other two." The Union representative is named Chairman of the Board of Trustees by the terms of the trust. Each trustee, once selected, serves for the term of the Agreement subject only to resignation, death, or an inability or unwillingness to serve. The original trustees named in the Agreement were Charles A. Owen for the Operators, now deceased; John L. Lewis for the Union, now deceased; and Miss Josephine Roche. The present trustees are W.A. (Tony) Boyle, representing the Union; C.W. Davis, representing the Operators; and Roche, who still serves.
Each coal operator signatory to the Agreement (there are approximately fifty-five operator signatories) is required to pay a royalty (originally thirty cents, and now forty cents per ton of coal mined) into the Fund. These royalty payments represent in excess of ninety-seven percent of the total receipts of the Fund, the remainder being income from investments. In the year ending June 30, 1968, royalty receipts totalled $163.1 million and investment income totalled $4.7 million. Total benefit expenditures amounted to $152 million.
In general, the purpose of the Fund is to pay various benefits, "from principal or income or both," to employees of coal operators, their families and dependents. These benefits cover medical and hospital care, pensions, compensation for work-related injuries or illness, death or disability, wage losses, etc. The trustees have considerable discretion to determine the types and levels of benefits that will be recognized. While prior or present membership in the Union is not a prerequisite to receiving welfare payments, more than ninety-five percent of the beneficiaries were or are Union members.
The Fund has maintained a large staff based mainly in Washington, D.C., which carries out the day-to-day work under policies set by the trustees. Roche, the neutral trustee, is also Administrator of the Fund serving at an additional salary in this full-time position. Thomas Ryan, the Fund's Comptroller, is the senior staff member next in line.
The trustees hold irregular meetings, usually at the Fund's offices. Formal minutes are prepared and circulated for approval. In the past, a more detailed and revealing record of discussions among the trustees has been prepared and maintained in the files of the Fund by the Fund's counsel, who attended all meetings. The Fund is regularly audited, and a printed annual report summarizing the audit and other developments was published and widely disseminated to beneficiaries, Union representatives, and coal operators, as well as to interested persons in public life.
From the outset the trustees contemplated that the Fund would operate on a "pay-as-you-go" basis -- that is, that the various benefits would be paid out largely from royalty receipts rather than solely from income earned on accumulated capital. Always extremely liquid, the Fund invested some of its growing funds in United States Government securities and purchased certificates of deposit. It also purchased a few public utility common stocks, and in very recent years invested some amounts in tax-free municipal securities. The chart attached as Appendix A reflects in a general way the growth of the Fund's assets and its investment history until June 30, 1969.
From its creation in 1950, the Fund has done all of its banking business with the National Bank of Washington. In fact, for more than twenty years it has been the Bank's largest customer. When this lawsuit was brought, the Fund had about $28 million in checking accounts and $50 million in time deposits in the Bank. The Bank was at all times owned and controlled by the Union which presently holds 74 percent of the voting stock. Several Union officials serve on the Board of Directors of the Bank, and the Union and many of its locals also carry substantial accounts there. Boyle, President of the Union, is also Chairman of the Board of Trustees of the Fund and until recently was a Director of the Bank.
Representatives of the Fund have also served as Directors of the Bank, including the Fund's house counsel and its Comptroller. The Fund occupies office space rented from the Union for a nominal amount, located in close proximity to the Union's offices.
B. The Responsibilities of the Trustees
The precise duties and obligations of the trustees are not specified in any of the operative documents creating the Fund and are only suggested by the designation of the Fund as an "irrevocable trust." There appears to have been an initial recognition by the trustees of the implications of this term. Lewis, who was by far the dominant factor in the development and administration of the Fund, stated at Board meetings that neither the Union's nor the Operators' representative was responsible to any special interest except that of the beneficiaries. He declared that each trustee should act solely in the best interests of the Fund, that the day-to-day affairs of the Fund were to be kept confidential by the trustees, that minutes were not to be circulated outside the Fund, and that the Fund should be soundly and conservatively managed with the long-term best interests of the beneficiaries as the exclusive objective. While he ignored these strictures on a number of occasions, as will appear, his view is still accepted by counsel for the Fund in this action, who took the position at oral argument that the duties of the trustees are equivalent to the duties of a trustee under a testamentary trust. Counsel stated, "You can't be just a little bit loyal. Once you are a trustee, you are a trustee, and you cannot consider what is good for the Union, what is good for the operators, what is good for the Bank, anybody but the trust." (Tr. 2590).
This view, which corresponds with plaintiffs' position, is not accepted by all parties. While acknowledging that a trustee must be "punctilious," counsel for some of the parties urge that trustees as representatives of labor or management may properly operate the Fund so as to give their special interests collateral advantages (e.g., managing trust funds so as to increase tonnage of Union-mined coal), and that this is not inconsistent with fiduciary responsibility since such actions ultimately assist beneficiaries by raising royalty income. But there is nothing in the Labor-Management Relations Act or other federal statutes or in their legislative history which can be said to alleviate the otherwise strict common-law fiduciary responsibilities of trustees appointed for employee welfare or pension funds developed by collective bargaining. Indeed, the statute under which the 1950 Fund is organized was designed expressly to isolate such welfare funds from labor-management politics. In Lewis v. Seanor Coal Co., 382 F.2d 437, 442 (3d Cir. 1967), the court indicated that Congress was motivated by the example of the UMWA's pre-1950 Fund:
This provision was written into the statute because of the special concern of Congress over the welfare fund of the United Mine Workers of America, which already was in existence and which Senator Taft described as administered without restriction by the union so that "practically the fund became a war chest . . . for the union."