International Union of Painters and Allied Trades Drywall Tapers, Finishers & Allied Workers, Local Union 1944 v. TNT Plastering & Stucco, LLP

Filing 61

ORDER ADOPTING MAGISTRATE JUDGE'S 53 FINDINGS AND RECOMMENDATION TO DENY TNT PLASTERING & STUCCO, LLP'S MOTION FOR ATTORNEYS' FEES AND GRANT IN PART AND DENY IN PART TNT PLASTERING & STUCCO, LLP'S BILL OF COSTS, AND OVERRULING TNT PLASTERING & STUCCO, LLP'S OBJECTIONS TO FINDINGS AND RECOMMENDATION. Signed by JUDGE DERRICK K. WATSON on 3/31/2014. (ecs, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAI`I

INTERNATIONAL UNION OF
PAINTERS AND ALLIED TRADES,
DRYWALL TAPERS, FINISHERS &
ALLIED WORKERS, LOCAL UNION
1944,
Plaintiff,

vs.
TNT PLASTERING & STUCCO,
LLP (2012-024)

CIVIL NO. 13-00238 DKW-RLP
ORDER ADOPTING MAGISTRATE
JUDGE’S FINDINGS AND
RECOMMENDATION TO DENY
TNT PLASTERING & STUCCO,
LLP’S MOTION FOR ATTORNEYS'
FEES AND GRANT IN PART AND
DENY IN PART TNT PLASTERING
& STUCCO, LLP’S BILL OF
COSTS, AND OVERRULING TNT
PLASTERING & STUCCO, LLP’S
OBJECTIONS TO FINDINGS AND
RECOMMENDATION

Defendant.

ORDER ADOPTING MAGISTRATE JUDGE’S FINDINGS AND
RECOMMENDATION TO DENY TNT PLASTERING & STUCCO, LLP’S
MOTION FOR ATTORNEYS' FEES AND GRANT IN PART AND
DENY IN PART TNT PLASTERING & STUCCO, LLP’S BILL OF COSTS,
AND OVERRULING TNT PLASTERING & STUCCO, LLP’S
OBJECTIONS TO FINDINGS AND RECOMMENDATION

INTRODUCTION
Defendant TNT Plastering & Stucco, LLP (“TNT LLP”) objects to a
portion of the Magistrate Judge’s February 14, 2014 Findings and Recommendation,
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denying TNT LLP’s motion for attorneys’ fees. Because the Magistrate Judge
properly found that TNT LLP was not entitled to attorneys’ fees under the bad faith
exception to the Labor Management Relations Act, the Court ADOPTS the Findings
and Recommendation and overrules TNT LLP’s objections.
BACKGROUND
On November 23, 2013, this Court granted TNT LLP’s Motion to
Vacate Arbitration Decision and Award and denied Plaintiff International Union of
Painters and Allied Trades, Drywall Tapers, Finishers & Allied Workers, Local
Union 1944’s (the “Union”) Motion to Confirm and Enforce Arbitration Decision
and Award. The Court concluded that: (1) the Joint Industrial Committee (“JIC”)
and the Union failed to provide TNT LLP with notice of the arbitration hearing; and
(2) the JIC exceeded its jurisdiction and powers when it found that TNT LLP was an
“alter ego” of TNT Inc. and thereby a party to the relevant labor agreements.
Thereafter, TNT LLP filed a Motion for Attorneys’ Fees and Bill of
Costs (“Motion”), seeking fees on two alternative bases: (1) Hawaii Revised
Statutes Section 658A-25; and (2) pursuant to the Court’s inherent powers and the
bad faith exception to the Labor Management Relations Act (“LMRA”). The
Magistrate Judge recommended that the Motion be denied, and that the Bill of Costs
be granted in part and denied in part, awarding TNT LLP $689.20 in costs.
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TNT LLP now objects to the Magistrate Judge’s Findings and
Recommendation only to the extent that it recommends denying fees pursuant to the
Court’s inherent powers and the LMRA’s bad faith exception. TNT asks the Court
to reject these findings or to recommit the matter to the Magistrate Judge with
instructions to make findings with respect to whether the Union acted in bad faith by
pursuing the underlying arbitration and the instant action before adjudication of
whether TNT LLP was the alter ego of TNT Inc.
STANDARD OF REVIEW
When a party objects to a magistrate judge’s findings or
recommendations, the district court must review de novo those portions to which the
objections are made and “may accept, reject, or modify, in whole or in part, the
findings or recommendations made by the magistrate judge.” 28 U.S.C.
§ 636(b)(1); see also United States v. Raddatz, 447 U.S. 667, 673 (1980); United
States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc) (“[T]he district
judge must review the magistrate judge’s findings and recommendations de novo if
objection is made, but not otherwise.”).
Under a de novo standard, this Court reviews “the matter anew, the
same as if it had not been heard before, and as if no decision previously had been
rendered.” Freeman v. DirecTV, Inc., 457 F.3d 1001, 1004 (9th Cir. 2006); see also
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United States v. Silverman, 861 F.2d 571, 576 (9th Cir. 1988). The district court
need not hold a de novo hearing. However, it is the Court’s obligation to arrive at
its own independent conclusion about those portions of the magistrate judge’s
findings or recommendation to which a party objects. United States v. Remsing,
874 F.2d 614, 616 (9th Cir. 1989).
DISCUSSION
Under the “American Rule,” the prevailing party generally cannot
recover its attorneys’ fees “unless an independent basis exists for the award.”
Middle Mountain Land & Produce Inc. v. Sound Commodities Inc., 307 F.3d 1220,
1225 (9th Cir. 2002) (citation omitted). The United States Supreme Court has
noted that the exceptions to the American Rule include: (1) a statutory basis; (2) an
enforceable contract; (3) a willful violation of a court order; (4) a bad faith action;
and (5) litigation creating a common fund for the benefit of others. See Alyeska
Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 257-59 (1975). “These
exceptions are unquestionably assertions of inherent power in the courts to allow
attorneys’ fees in particular situations, unless forbidden by Congress[.]” Id. at 259.
TNT LLP seeks fees under the LMRA’s bad faith exception. As the
Magistrate Judge noted -

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[a]lthough the LMRA does not authorize attorneys’ fees for a
violation of Section 301, a court may award fees if it finds that a
party acted in “bad faith, vexatiously, wantonly or for oppressive
reason.” Roy Allen Slurry Seal v. Laborers Int’l Union of N.
Am. Highway and Street Stripers/Road and Street Slurry Local
Union 1184, AFL-CIO, 241 F.3d 1142, 1148 (9th Cir. 2001)
(“the claim for attorney’s fees under the LMRA should be
examined under a bad faith standard”) (citing Wellman v. Writers
Guild of America, West, Inc., 146 F.3d 666, 674 (9th Cir.
1998))). The Ninth Circuit requires an explicit finding of bad
faith. Fink v. Gomez, 239 F.3d 989, 992 (9th Cir. 2001). This
means that a court must specifically find bad faith or conduct
tantamount to bad faith. Id. at 994. A finding of bad faith can
be based on “a variety of types of willful actions, including
recklessness when combined with an additional factor such as
frivolousness, harassment, or an improper purpose.” Id
Findings & Recommendation at 5; see also Zeman v. Office & Prof'l Employees Int’l
Union, Local 35, 91 F.Supp.2d 1247, 1249 (E.D. Wis. 2000) (“Section 301 . . . does
not authorize the award of attorney fees[.]”).
A court also has the inherent power to assess attorneys’ fees against
counsel for abuse of the judicial process or other bad faith conduct during the course
of litigation. Roadway Express, Inc. v. Piper, 447 U.S. 752, 765-66 (1980); see
also Primus Auto. Fin. Servs., Inc. v. Batarse, 115 F.3d 644, 648 (9th Cir. 1997) (a
district court may award sanctions in the form of attorneys’ fees against a party or
counsel who acts “in bad faith, vexatiously, wantonly, or for oppressive reasons”).
“‘[B]ad faith’ may be found, not only in the actions that led to the lawsuit, but also in

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the conduct of the litigation.” Hall v. Cole, 412 U.S. 1, 15 (1973). A party may
demonstrate bad faith “by delaying or disrupting the litigation or hampering
enforcement of a court order.” Primus Auto, 115 F.3d at 649. In addition, a court
may assess attorneys’ fees when the litigation is perceived to have been brought in
bad faith to harass or vex a party. Sheetmetal Workers Int’l Ass’n Local Union No.
359 v. Madison Indus., Inc. of Arizona, 84 F.3d 1186 (9th Cir. 1996).
TNT LLP argues that the Magistrate Judge (1) erroneously concluded
that, because there was no explicit finding of bath faith in the Court’s November 23,
2013 Order, there was therefore no “bad faith”; and (2) did not properly consider
that the Union pursued an action against TNT LLP when the Union knew that it had
to first get a ruling from the Court regarding TNT LLP’s alter ego status. The Court
disagrees.
First, the Magistrate Judge did not limit his analysis to the lack of an
explicit finding of bad faith in the Court’s November 23, 2013 Order. As an initial
matter, the Magistrate Judge correctly noted that “the district court did not find that
the Union acted with an improper purpose” and “did not find that those arguments
[relating to alter ego] were frivolous.” Findings & Recommendation at 6. Rather
than limit his analysis to the absence of such express findings, the Magistrate Judge
also reviewed the record and independently found that:
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Although the Union’s arguments against vacatur were
determined to be without merit, there is no evidence that they
were made for vexatious or oppressive reasons. Based on the
record before the Court, it does not appear that the Union
pursued arbitration against TNT LLP in bad faith.
Findings & Recommendation at 6. In other words, the Magistrate Judge
appropriately made his own express finding of no bad faith on the part of the Union,
based on his review of the record, and did not rely solely on the absence of such a
conclusion by this Court.
Further, this Court agrees that the evidence of bad faith or improper
purpose by the Union is lacking. TNT LLP argues that “the interests of justice
require that TNT LLP be awarded its attorneys’ fees because the Union improperly
pursued TNT LLP even though it knew that it had to get a court to decide the alter
ego issue before pursuing arbitration and confirmation of an arbitration award
against TNT LLP.” TNT LLP’s Reply to Response at 1. To the contrary, the
Union argued before the district court that it was not required to get a ruling from a
court on the alter ego issue before proceeding with arbitration. See Union Mem. in
Opp. to Mot. to Vacate at 24-26. In the alternative, the Union argued before the
district court that “the parties did submit to the grievance and arbitration process
[the] question of a signatory and nonsignatory jointly performing tapering work
outside the contract.” Id. at 26. Although the Court ultimately agreed with TNT
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LLP that the JIC did not have the authority to determine that TNT LLP was the alter
ego of TNT Inc., the Court is not persuaded that the Union was motivated by an
improper purpose. Despite TNT LLP’s insistence, there is simply no compelling
evidence that the Union initiated arbitration or conducted the litigation against TNT
LLP in bad faith, vexatiously, wantonly, or for oppressive reasons. Accordingly,
neither the LMRA’s bad faith exception nor the Court’s inherent powers require the
imposition of attorneys’ fees in this matter, and the Court declines to do so.
CONCLUSION
On the basis of the foregoing, and after careful de novo review and
consideration of the Findings and Recommendation and record in this matter, the
Court hereby OVERRULES TNT LLP’s Objections and ADOPTS the Magistrate
Judge’s February 14, 2014 Findings and Recommendation to Deny TNT Plastering
& Stucco LLP’s Motion for Attorneys’ Fees and Grant in Part and Deny in Part TNT
Plastering & Stucco LLP’s Bill of Costs.
IT IS SO ORDERED.
DATED: HONOLULU, HAWAI‘I, March 31, 2014.

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