Unite Here Health et al v. Gilbert et al

Filing 67

ORDER Denying Defendants' 62 Motion for Attorney Fees. Signed by Judge Jennifer A. Dorsey on 07/22/2016. (Copies have been distributed pursuant to the NEF - NEV)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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Unite Here Health, et al.,

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Plaintiffs

2:13-cv-00937-JAD-GWF
Order Denying Motion for Attorney’s
Fees

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v.

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Craig Gilbert, et al.,

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[ECF No. 62]

Defendants

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Plaintiffs are Culinary Union-related employee-benefit trusts that brought this ERISA breach-

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of-fiduciary-duty action against the principals of Nuthin’ Fancy, LLC1 the bankrupt operator of the

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short-lived Lynyrd Skynyrd BBQ and Beer restaurant inside the Excalibur Hotel & Casino. The

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Trusts sought to recover more than half a million dollars in unpaid benefits allegedly due under the

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terms of the collective bargaining agreement between the union and the hotel. On September 30,

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2015, I denied the Trusts’ motion for partial summary judgment on liability and granted the

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Principals’ motion for summary judgment. Relying on the Ninth Circuit’s recent decision in Bos v.

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Board of Trustees,2 I declined to adopt an exception to the general rule announced by the Ninth

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Circuit in Cline v. Industrial Maintenance Engineering and Contracting Company3 that unpaid

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benefits are not plan assets.4 The Principals now seek attorney’s fees in excess of $130,000.5

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Having considered the five Hummel factors that govern fee awards in ERISA cases, I exercise my

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Craig Gilbert, Michael Frey, Mathilda Murdock, Benjamin Lutz, Drive This Entertainment! LLC,
Drive This! LLC, Eleventeen Enterprises LLC, and Trifecta Partners, LLC (“the Principals”).
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Bos v. Board of Trustees, 795 F.3d 1006 (9th Cir. 2015).

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Cline v. Indust. Maint. Engr. & Contracting Co., 200 F.3d 1223 (9th Cir. 2000).

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ECF No. 60.

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ECF No. 62.

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discretion to decline an award and deny the motion.6

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Discussion
A.

Attorney’s fees under 29 U.S.C. § 1132(g)(1)
The American Rule recognizes that each party in litigation must bear its own attorney’s fees

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in the absence of a rule, statute, or contract authorizing an award of fees.7 ERISA is a fee-shifting

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statute; it allows a court to award “a reasonable attorney’s fee and costs of the action”8 to a party that

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has achieved some degree of success on the merits of the claim.9 Once a court makes the threshold

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determination that the moving party has achieved some success on the merits, it must consider the

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five factors outlined by the Ninth Circuit in Hummel v. S.E. Rykoff & Co. to determine whether an

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award of fees is warranted:

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(1) the degree of the opposing parties’ culpability or bad faith; (2) the
ability of the opposing parties to satisfy an award of fees; (3) whether
an award of fees against opposing parties would deter others from
acting under similar circumstances; (4) whether the parties requesting
fees sought to benefit all participants and beneficiaries of an ERISA
plan or to resolve a significant legal question regarding ERISA; and (5)
the relative merits of the parties’ positions.10

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The Ninth Circuit has recognized that, although § 1332(g)(1) allows defendant-employers to recover

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attorney’s fees, these factors very frequently counsel against awarding attorney’s fees against ERISA

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plaintiffs.11

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B.

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The Hummel factors weigh against an award of fees.

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Because the Principals have achieved some degree of success on the merits by virtue of my

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order granting their motion for summary judgment, I consider whether the Hummel factors warrant

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an award of fees.

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I find this motion suitable for disposition without oral argument. L.R. 78-2.

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MRO Commc’n Inc. v. Tel. & Co., 197 F.3d 1276, 1281 (9th Cir. 1999).

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29 U.S.C. § 1332(g)(1).

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Hardt v. Reliance Standard Ins. Co., 560 U.S. 242, 244–45 (2010).

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Hummell v. S.E. Rykoff & Co., 634 F.2d 446, 453 (9th Cir. 1980).

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Carpenters S. Cal. Admin. Corp. v. Russel, 726 F.2d 1410, 1416 (9th Cir. 1983).

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Page 2 of 4

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1. The degree of the Trusts’ culpability or bad faith, relative merits of the parties’
positions, and deterrent effect of a fee award

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I do not find that the Trusts acted in bad faith in bringing or maintaining this action. A

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plaintiff acts in good faith if he has a reasonable belief that he could prove an actionable ERISA

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claim.12 The Trusts’ claim was not patently frivolous, and there is no evidence in the record that the

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Trusts brought this suit to harass the Principals.

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The relative strength of the parties’ positions weighs slightly in favor of awarding fees.

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Though the Principals’ arguments ultimately prevailed, the Trusts made a good-faith argument to

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adopt an exception to the Cline rule that had been recognized in other circuits. And while the

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Principals’ summary-judgment motion was pending, a Ninth Circuit panel in Bos v. Board of

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Trustees refused to adopt an exception to the Cline rule in the bankruptcy context, which bolstered

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my conclusion that the Ninth Circuit would likely decline to apply the exception to the Cline rule

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urged by the Trusts. When the Trusts brought this action, they did not have the benefit of the Bos

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decision.
Finally, because I find that the Trusts did not act in bad faith and raised reasonably

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meritorious arguments to support their claim, an award of fees would likely have small, if any,

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deterrent effect. Accordingly, the first and third factors weigh strongly against awarding fees, and

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the fifth factor weighs slightly in favor of awarding fees.

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2. The ability of the Trusts to satisfy an award of fees and whether the parties requesting
fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a
significant legal question regarding ERISA

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The Principals argue that, as “two of the largest union trust funds in the state, controlling

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hundreds of millions of dollars in assets,” the Trusts can easily afford the requested fees.13 The

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Trusts respond that they are non-profit employee-benefit trusts that exist for the exclusive purpose of

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providing pension and health benefits to their beneficiaries and that any recoveries for unpaid

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contributions for work performed at the now-defunct Lynyrd Skynyrd restaurant can only be used for

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Cline, 200 F.3d at 1236.

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ECF No. 62 at 5.
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the benefit of the Trusts’ beneficiaries, not legal fees.14 The Trusts’ ability to satisfy the requested

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award of fees cannot be determined from the record before me because the exhibits the Principals

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cite do not adequately address the current financial status of the Trusts.15 This leaves the fourth

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Hummel factor: whether the parties requesting fees sought to benefit all participants and beneficiaries

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of an ERISA plan or sought to resolve a significant legal question about ERISA, which does not

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apply in this case.16 The second and fourth factors are therefore neutral and do not factor into my

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analysis. In total and on balance, I find that the Hummel factors counsel against awarding attorney’s

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fees, so I deny the Principals’ motion.

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Conclusion

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Accordingly, IT IS HEREBY ORDERED that defendants’ motion for attorney’s fees [ECF
No. 62] is DENIED.

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Dated this 22nd day of July, 2016.

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_________________________________
_______________________
__ _____ _____ _
Jennifer A. Dorsey
ennifer A Dorsey
i
s
United States District Judge
nited States
ed tate
d
ct Judge
t ud
d

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ECF No. 64 at 13–14.

The Principals cite to a one-page payment accounting summary sheet, but the most recent balance
shown is from April 2015, six months before their motion for fees was filed. Principals also
generally cite to a 60-page document from Nuthin’ Fancy, LLC’s bankruptcy proceeding. The
Principals do not explain how they derive the figures they throw out in their motion from these
documents, and I decline to comb through them to find out.

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Tingey v. Pixley-Richards W., Inc., 958 F.2d 908, 910 (9th Cir. 1992) (stating that the fourth
Hummel factor is generally considered only when a prevailing plaintiff seeks an award of fees).
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