Resilient Floor Covering Pension Trust Fund Board of Trustees et al v. Michael's Floor Covering, Inc.
Filing
203
ORDER by Magistrate Judge Jacqueline Scott Corley denying 189 Motion for Attorney Fees. (ahm, COURT STAFF) (Filed on 1/3/2017)
1
2
3
4
5
6
7
UNITED STATES DISTRICT COURT
8
NORTHERN DISTRICT OF CALIFORNIA
9
10
United States District Court
Northern District of California
11
RESILIENT FLOOR COVERING
PENSION TRUST FUND BOARD OF
TRUSTEES, et al.,
14
15
16
17
18
ORDER DENYING DEFENDANT’S
MOTION FOR ATTORNEY'S FEES
Plaintiffs,
12
13
Case No.11-cv-05200-JSC
v.
Re: Dkt. No. 189
MICHAEL'S FLOOR COVERING, INC.,
Defendant.
Following the Court’s grant of summary judgment in Defendant’s favor, Defendant
Michael’s Floor Covering, Inc. (“Michael’s”) moves for attorney’s fees and costs. (Dkt. No. 189.)
Michael’s seeks $323,480 in fees and $8,267.96 in costs. Having considered the parties’ briefs
19
and having had the benefit of oral argument on November 17, 2016 as well as supplemental
20
briefing, the Court DENIES Defendant’s motion. On balance, the factors which the court applies
21
in considering a request for fees weigh against a fee award.
22
DISCUSSION
23
Section 502(g)(1) of ERISA gives the court discretion to award attorney’s fees. See 29
24
25
U.S.C. §§ 1132(g)(1); 1451(e). Five factors guide the district court’s exercise of discretion: (1)
the degree of the opposing parties’ culpability or bad faith; (2) the ability of the opposing parties
26
to satisfy an award of fees; (3) whether an award of fees against the opposing parties would deter
27
others from acting under similar circumstances; (4) whether the parties requesting fees sought to
28
1
benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal
2
question regarding ERISA; and (5) the relative merits of the parties’ positions. Hummell v. S.E.
3
Rykoff & Co., 634 F.2d 446, 453 (9th Cir. 1980). No one of these factors is “necessarily
4
decisive,” and some may not be relevant in a given case. Carpenters S. California Admin. Corp. v.
5
Russell, 726 F.2d 1410, 1416 (9th Cir. 1984). “[T]he Hummell factors very frequently suggest that
6
attorney’s fees should not be charged against ERISA plaintiffs.” Id. However, “the playing field
7
is level” and does not “favor[] one side or the other.” Estate of Shockley v. Alyeska Pipeline Serv.
8
Co., 130 F.3d 403, 408 (9th Cir. 1997).
9
1. Plaintiffs’ Bad Faith
10
Michael’s contends that Plaintiffs brought this action in bad faith because their position
United States District Court
Northern District of California
11
that no notice was required to impose successor liability under ERISA was legally unreasonable,
12
and Plaintiffs failed to produce any evidence demonstrating that Michael’s had any actual notice
13
of withdrawal liability. In doing so, Michael’s relies heavily on the Ninth Circuit’s decision in
14
Credit Managers Ass’n of S. California v. Kennesaw Life & Acc. Ins. Co., 25 F.3d 743, 749 (9th
15
Cir. 1994), wherein the court upheld a fee award based on bad faith in light of the plaintiff’s
16
misrepresentations and failure to assess the evidence in support of its claims.
17
Plaintiffs respond that (1) the type of notice required for successor liability under the
18
construction industry exception is an unsettled area of law, and (2) under at least one construction
19
of the level of notice required, Plaintiffs’ showing of notice was adequate. Plaintiffs reiterate their
20
argument from the parties’ summary judgment briefing that notice is not an “indispensable”
21
requirement of successor liability. Although Plaintiffs concede that notice is required in many
22
contexts to impose successor liability, they urge that there is no uniform rule and argue that the
23
successorship determination depends on the facts of each case. Plaintiffs point to the fact that in
24
the context of the Family Medical Leave Act, notice is not a consideration. See 29 C.F.R. §
25
825.107; Sullivan v. Dollar Tree Stores, 623 F.3d 770, 780 (9th Cir. 2010). Under the Ninth
26
Circuit’s decision here, Plaintiffs argue that reasonable minds could differ as to whether notice is
27
always required and suggest that a reasonable interpretation of the Ninth Circuit’s order could be
28
that when a successor consciously decides to take over its predecessor’s customer base no notice is
2
1
required. Alternatively, Plaintiffs suggest that the notice required could be merely notice that the
2
predecessor used union labor, in which case they offered sufficient evidence to survive summary
3
judgment.
4
While Plaintiffs’ position regarding notice did not prevail, their arguments were not in bad
5
faith. Both parties consistently argued that this case was unique—albeit on different bases—and
6
the parties agree that the case raised an issue of first impression regarding whether a successor
7
employer can be subject to withdrawal liability under the Multiemployer Pension Plan
8
Amendments Act of 1980. This is not a case where Plaintiffs maintained a position that was
9
unsupported by the law; rather, it is a case where Plaintiffs argued for extension of the law. “[T]o
avoid a finding of bad faith under the Hummell factors, plaintiffs must have a reasonable belief
11
United States District Court
Northern District of California
10
that they could prove an actionable ERISA claim.” Cline v. Indus. Maint. Eng’g & Contracting
12
Co., 200 F.3d 1223, 1236 (9th Cir. 2000) (citing Kennesaw, 25 F.3d at 749). Further, the Ninth
13
Circuit has emphasized that the “culpability” of a losing plaintiff trustee differs from that of a
14
losing defendant employer. Russell, 726 F.2d at 1416. “While the latter has necessarily violated
15
ERISA, the former may only be in error or unable to prove his case.” Id. The Court thus
16
concludes that Plaintiffs’ arguments were not made in bad faith. See, e.g., Auto. Indus. Pension
17
Trust Fund v. Tractor Equip. Sales, Inc., No. 13-CV-03703-WHO, 2014 WL 7336695, at *2 (N.D.
18
Cal. Dec. 23, 2014) (“That the claims were ultimately unsuccessful does not equate to a showing
19
of bad faith.”).
20
2. Plaintiffs’ ability to pay
21
Plaintiffs argue that they lack the ability to pay any fee award because the Fund is in
22
critical status. In support of this argument they offer the Declaration of Paul C. Poon who is the
23
Vice President and Associate Actuary with Segal Consulting, the company employed to provide
24
an Actuarial Certification of Plan Status as of January 1, 2016 to the Plan Trustees. (Dkt. No.
25
196-1.) The attached document states that “[a]s of January 1, 2016, the Plan is in critical status
26
but not declining status (Red Zone).” (Dtk. No. 196-1 at 5.) Michael’s contends that the
27
declaration does not actually address the Plan’s ability to pay—this is true, it just attaches the
28
actuarial certification. It is also nearly a year old. Michael’s thus requested discovery to
3
1
determine whether and to what extent insurance is available for the fee award because “ERISA
2
trust documents routinely provide for the ability to insure losses caused by the Trustees’ lack of
3
prudence.” (Dkt. No. 197 at 3:17-18 (citing 29 U.S.C. § 1110(b); 29 CFR § 2509.75-4).)
The Court heard argument regarding this issue and granted Michael’s request for discovery
4
5
ordering Plaintiffs to provide a copy of their insurance policy and allowing the parties to submit
6
supplemental briefing. The Court has reviewed the supplemental briefing and concludes that it
7
sheds little light on whether the fund has the ability to pay. (Dkt Nos. 201 & 202-1.) The attached
8
insurance policy indicates that it covers “wrongful acts” by the plan trustees which includes, as
9
relevant here, a breach of fiduciary duty, or acts of negligence or omission. (Dkt. No. 202-1 at 30.
1
11
United States District Court
Northern District of California
10
fiduciary duties. Nor was there a finding of negligence. Rather, as discussed supra, the Court
12
concluded that Plaintiffs’ position regarding notice was unavailing, but not that it was frivolous or
13
in bad faith. Michael’s insistence that Plaintiffs would be required to contend to their insurance
14
carrier either (1) that they breached their duties of prudence or due care to meet their duty to
15
preserve fund assets, or (2) were negligent if the Court were the Court to award fees here
16
overreaches.
) However, as Plaintiffs point out, there was no claim or finding that the trustees breached their
The actuarial certification states that the fund is in critical status because (1) a funding
17
18
deficiency is expected in the next four years, and (2) the present value of vested benefits for non-
19
actives is more than the present value of vested benefits for actives. (Dkt. No. 96-1 at 10, 12.)
20
The certification was provided pursuant to ERISA Section 305, codified at 29 U.S.C. § 1085. (Id.
21
at 7.) While Plaintiffs have not elaborated on the actuary’s conclusions regarding the fund status,
22
at oral argument Plaintiffs suggested this was because the Court’s prior order denying Michael’s
23
motion for attorney’s fees concluded that based on the actuary’s certification that the Plan was in
24
critical status that there were concerns regarding whether the Fund could satisfy the fee award
25
without undermining its finances and jeopardizing retirees’ vested pension benefits. (Dkt. No.
26
135.) Other courts in this district have accepted similar representations as evidence that a fund
27
1
28
Record citations are to material in the Electronic Case File (“ECF”); pinpoint citations are to the
ECF-generated page numbers at the top of the documents.
4
1
lacks the ability to pay an award of attorney’s fees. See, e.g., Auto. Indus. Pension Trust Fund,
2
2014 WL 7336695 at *3 (relying on a declaration from Mr. Poon to conclude that the court had
3
concerns about the plan’s ability to satisfy a fee award); Resilient Floor Covering Pension Fund v.
4
M & M Installation, Inc., No. C08-5561 BZ, 2012 WL 1813395, at *1 (N.D. Cal. May 17, 2012)
5
(concluding, based on “a declaration stating that the Pension Fund has been certified as ‘in critical
6
status’ by its actuary since March 2010”, that the court was “not persuaded that Plaintiffs could
7
satisfy an award of attorneys’ fees”). Under these circumstances, the Court concludes that
8
concerns regarding Plaintiffs’ ability to pay a fee award without jeopardizing Plan assets weigh
9
against an award of attorney’s fees.
3. Deterrence Effect of any Fee Award
11
United States District Court
Northern District of California
10
The deterrence factor rarely weighs in favor of a fee award against plaintiff-trustees. See
12
Russell, 726 F.2d at 1416 (“deterrence, also suggests that fee awards very likely will be less often
13
justified for employers than for trustees”). Generally, plaintiff-trustees “will be sufficiently
14
deterred from instituting vexatious suits by the absence of personal gain therefrom and the
15
likelihood that they will have to pay their own fees and costs should they not prevail.” Id.
16
Michael’s argues that this lawsuit has always been motivated by feelings of animosity towards
17
non-participating employers pointing to emails produced in discovery in this action. Whether this
18
assertion is true, Plaintiffs had a non-frivolous basis for pursuing this case such that there would
19
be little to no deterrent effect to awarding fees here.
20
21
22
23
24
25
26
27
28
4. Whether Michael’s Sought to Benefit ERISA Participants or to Resolve a
Significant Legal Question
Michael’s does not contend that it sought to benefit ERISA participants, and instead,
appears to suggest that it resolved a significant legal question arguing that the result here will
inform employers and fiduciaries invoking successor employer liability. However, Michael’s did
not pursue this theory to resolve an unsettled issue of the law—its position has always been that
notice is required prior to imposing liability on a successor employer and no such notice existed
here. This factor generally does not apply when considering a fee request from a successful
employer, and does not weigh in favor of an award of fees here. See Russell, 726 F.2d at 1416 (“A
5
1
successful suit to enforce ERISA will generally benefit the plan’s participants, and the resolution
2
of significant legal questions under ERISA will often depend on a plaintiff’s initiative in bringing
3
suit”).
4
5. The Relative Merits of the Parties’ Positions
5
“[I]n evaluating the fifth factor, the relative merits of the parties’ positions, courts should
6
be careful neither to penalize trustees for seeking to enforce employer obligations under ERISA
7
nor to encourage employers to be indifferent to their obligations.” Russell, 726 F.2d at 1416.
8
Michael’s reiterates its arguments regarding Plaintiffs’ bad faith in pursuing their withdrawal
9
liability claim here. As noted above, while unsuccessful, Plaintiffs’ arguments cannot be said to
have been made in bad faith. Plaintiffs found themselves in a difficult position following Studer’s
11
United States District Court
Northern District of California
10
withdrawal and pursued a creative legal strategy to recover the unpaid contributions. That it failed
12
is not reason in and of itself to award fees.
CONCLUSION
13
14
15
On balance, the Court concludes that the Hummell factors weigh against an award of
attorney’s feed here. Michael’s motion is therefore DENIED. (Dtk. No. 189.)
16
17
18
IT IS SO ORDERED.
Dated: January 3, 2017
19
20
JACQUELINE SCOTT CORLEY
United States Magistrate Judge
21
22
23
24
25
26
27
28
6
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?