## Facts

- Coal miners who were present or future beneficiaries of the United Mine Workers of America Welfare and Retirement Fund of 1950 sued in a derivative class action.
- The Fund was created under the National Bituminous Coal Wage Agreement of 1950 as an irrevocable trust authorized by LMRA § 302(c) to provide pensions and health-related benefits.
- The Fund was administered by three trustees: one designated by the union, one by coal operators, and one neutral trustee; administration was centered in Washington, D.C.
- The Fund conducted its banking primarily with the National Bank of Washington, an institution closely affiliated with and influenced by union leadership; union officials and Fund personnel had overlapping roles with the bank.
- The Fund maintained large, non-interest-bearing demand deposit balances at the bank for extended periods.
- Trustee governance was informal; major decisions were often made without regular formal meetings and with limited participation by the operators’ trustee.
- Plaintiffs alleged fiduciary breaches and related participation by the union and the bank, focusing on (1) excessive idle cash kept without interest, (2) investments influenced by union labor-policy goals rather than beneficiary returns, and (3) pension increases adopted without adequate actuarial or financial review.
- Defendants denied wrongdoing and asserted laches and statute-of-limitations defenses.
- After extensive discovery, the case was tried to the court; the opinion addressed liability and equitable relief, leaving damages for later proceedings.

## Issues

1. Whether Fund trustees breached duties of loyalty and prudence by maintaining excessive non-interest-bearing cash balances at a union-affiliated bank.
2. Whether trustees breached fiduciary obligations by pursuing investment strategies influenced by union labor-relations objectives rather than the beneficiaries’ financial interests.
3. Whether trustees acted imprudently in approving pension increases without sufficient actuarial or financial analysis.
4. Whether the union and the bank knowingly participated in or conspired in fiduciary breaches.
5. Whether laches or limitations barred claims challenging ongoing Fund practices, and what equitable relief was warranted.

## Decision

- The court held the Fund was a trust subject to traditional trust-law fiduciary standards, including undivided loyalty to beneficiaries and prudent management of assets.
- The court found fiduciary violations in the Fund’s cash-management and related-party banking practices, where large non-interest-bearing balances at a union-dominated bank deprived beneficiaries of investment return and reflected conflicted administration.
- The court concluded trustees could not subordinate beneficiaries’ interests to union or employer objectives; investment decisions driven by non-beneficiary goals supported findings of breach to the extent they compromised the sole-benefit obligation.
- The court criticized informal, dominated governance practices as contributing to conflicts of interest and impaired independent decision-making.
- The court rejected laches/limitations as a bar to challenging continuing or recently discoverable breaches in an ongoing trust relationship.
- The court ordered equitable relief and structural reforms directed at banking practices, governance procedures, and investment decision-making, with damages to be addressed separately.

## Legal Principles

- Trustees of an LMRA § 302(c) welfare and retirement fund owe fiduciary duties comparable to trustees of a private trust, including loyalty, prudence, and good-faith administration for beneficiaries.
- Fiduciaries must manage cash and investments to obtain reasonable return consistent with safety; leaving substantial assets idle in non-interest-bearing accounts without justification can breach prudence.
- Related-party arrangements and interlocking relationships heighten scrutiny; fiduciaries must avoid conflicts and preserve the fund’s independence from union or employer institutional interests.
- Trustees may not use fund assets to advance union labor-policy objectives or other non-beneficiary goals when doing so risks or sacrifices beneficiary financial interests.
- In a continuing trust, ongoing fiduciary breaches may remain actionable notwithstanding delay defenses where beneficiaries lack practical access to information about fund operations.
- Courts may grant broad equitable relief to correct conflicted administration and prevent recurrence, including governance and financial-practice reforms.

## Conclusion

The court treated the benefits fund as a true trust governed by strict fiduciary standards, found that conflicted banking and certain decision-making practices violated duties of loyalty and prudence, and imposed equitable reforms to ensure independent governance and beneficiary-focused cash and investment management.


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