Adler et al v. Raynor et al

Filing 169

MEMORANDUM OPINION AND ORDER: For the reasons set forth, Plaintiffs' motion for attorneys' fees is denied. (Signed by Magistrate Judge Theodore H. Katz on 10/20/2011) (rdz)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

-------x
Aaron Adler, et al.,
Plaintiffs,
09 Civ. 08877 (DLC) (THK)
againstMEMORANDUM OPINION
AND ORDER

Bruce Raynor, et al.,

Defendants.

x
THEODORE H. KATZ, UNITED STATES MAGISTRATE JUDGE.

This case is one of several brought in this Court

ing out

of the long and contentious power struggle between the members and
leadership of various successor unions to the International Ladies
Garment Workers Union
formed

and

then

( \\ ILGWU

disbanded,

ff
)

.1

As various successor unions

ownership

of

the

assets,

and

responsibility for the obligations, of the union were disputed.

Plaintiffs in this case were members and officials of the
International Ladies Garment Workers' Union ("ILGWU
to which
UNITE was the successor union, formed when
ILGWU merged with
the Amalgamated Clothing and Textile Union
1995. (See First
Amended Complaint ~~ 11, 32.) In 2004, UNITE, led by Defendant
Bruce Raynor, joined with the Hotel Employees International Union
("HERE") to create UNITE HERE.
The arrangement did not last
long, and in 2005, a large portion of UNITE HERE's membership
left to form Workers United. Defendant Edgar Romney, who had
been an official with UNITE HERE, became pres
nt of Workers
United. One of the contentious issues in Workers United's split
th UNITE HERE was control over Amalgamated Bank, one of the
Defendants in this case.
ff

),

The

Complaint

in

the

instant

matter,

brought

under

the

Employee Retirement Income Security Act ("ERISA"), alleged that the
administrators
Retirement

of

Plan,

breached their
investments

two
and

pension

the

fiduciary

with

other

plans,

the

UNITE

ILGWU Death Benefit
dut

s

to

the

Defendants.

Plans

Plan

HERE

Staff

("Plans"),

through unlawful

Specifically,

Plaintiffs

alleged that Defendants Bruce Raynor, formerly President of UNITE
HERE and Chairman of the Board

the Amalgamated Life Insurance

Company ("ALICO"), and Edgar Romney, formerly Secretary-Treasurer
of

UNITE

HERE

and

Board

and

Secre

Treasure

of

ALICO,2

controlled several Defendant corporations,

including Amalgamated

Bank 3

these corporations to

("Amalgamated" or "Bank"),

and

transactions prohibited under ERISA.
al

that Herbert Ricklin,

Plans,

was

Plaintiffs further

the independent fiduciary of the

in fact under the aegis

of Raynor and Romney,

"rubber stamped" their self-dealing transactions,
ions

large
funds.

of

the

Plans'

and

which invested

capital with various Amalgamated

Plaintiffs alleged that some of

se investments were

ALICO is itself a subsidiary of the ALICO Services
Corporation ("ASC"), which is also the holding company for United
Fund Administrators, Alicare Medical Management, and Alicare.
Ownership of the Bank is disputed between UNITE HERE and
Workers United.
suora at n.l.
Plaintiffs alleged that
Raynor and Romney, with Workers United exercised effective
control over the Bank.
3

t

2

prohibited, and all were imprudent.
The Complaint also alleged that Raynor and Romney created a
facto single entity," consisting of Workers United, the Bank,
the Plans, and ASC. This single entity, according to Plaintiffs,
had the

goal

of maximizing the

Bank's and ASC's profit.

The

Complaint further alleged that by choosing Herbert Ricklin as the
independent fiduciary,

Raynor and Romney effectively caused the

Plans to sign disadvantageous contracts with the Bank and ASC,
which

led

to

excessive

reports

a

about

variety of
their

payments

and

non-diversified

Plaintiffs also alleged that Raynor and

holdings for the Plans.
Romney made

st

false

statements

relationship

to

the

in

required annual

Bank,

that

Defendant

Michael Hirsch refused to turn over documents concerning these
links,

and

that

Mr.

Ri

failed

to

properly

research

the

investments made with the Bank.
Plaintiffs
investment

in

claimed

that

poorly-researched

purposes was to reduce
below 80%,
ERISA.

the

effect

of

investments

the
for

over

self dealing

funded percentage of one of the Plans to

which was therefore

"endangered" under the terms of

Plaintiffs also characterized the fees paid to Ricklin for

his service as independent fiduciary as improper, s
fees

alleged

Union

from

permitted

to

market

the

Pension
Bank's
3

Pi;

Plans,

and was

offerings

to

he received
refore
all

of

not
them

simultaneously.

There were also allegations that Defendant Hirsch

did not disclose his relationship to the Bank.
On April 25,

2011,

the District Court

(Hon. Denise L. Cote)

approved a settlement agreement between the parties.

By the terms

of that agreement, Mr. Ricklin resigned as independent fiduciary
and

was

replaced

independent

by

Jonathan Axelrod.

fiduciary

agreed

to

In

"maintain

addition,
such

the

documents

new
as

required by law," and to adhere to various reporting requirements
about

the

Finally,

Bank

and

the

fiduciary's

investments

in

the

Bank.

the parties agreed to submit the issue of Plaintiffs!

claim to attorneys! fees to this Court.
Plaintiffs

now

seek

attorneys'

fees

in

the

$1,735,442.82, for 2483.79 hours of work, under ERISA
29 U.S.C.

§

1132(g) (1).

§

amount

of

502 (g) (1),

For the reasons set forth in this Opinion,

Plaintiffs' request for attorneys' fees is denied.
DISCUSSION
ERISA states that:

"[i] n any action under this subchapter

(other than an action described in paragraph (2)) by a participant,
beneficiary, or fiduciary, the court in its discretion may allow a
reasonable attorney's fee and costs of action to either party.H
U.S.C.

§

1132(g) (1).

29

The Supreme Court has ruled that attorneys'

fees may be awarded "as long as the fee claimant has achieved some
degree of success on the merits.H
4

Ins.

Co.,

560

U. S.

130

S.Ct.

quotation and citation omitted).
removal

of

reporting
success

Ricklin

as

requirements

on

the

merits,

the

2152

Plaintiffs

independent
of

2149,

fiduciary,

(2010) (internal

contend that
as

well

settlement agreement,

while

Defendants

contend

as

the
the

constitute
that

these

represent a ntrivial success."
As the Supreme Court stated:
"[a] claimant does not satisfy [the some
degree of success] requirement by achieving
trivial success on the merits or a purely
procedural victory, but does sat fy it if the
court can fairly call the outcome of the
litigation a success without conducting a
lengthy inquiry into the question of whether a
particular party's success was substantial, or
occurred on a central issue."
Id.

at

2158

(internal

quotations,

citations,

and

alterations

omitted)
Since the

decision was issued, the Second Circuit has

not given further definition to what minimum amount of success
constitutes "some degree of success on the merits."

The cases that

have come before the Circuit have been relatively easy decisions
under the Hardt standard, insofar as they addressed instances where
it was obvious whether the side seeking fees had been successful.
~~~~~,

2011)

Toussaint v. JJ Weiser, Inc., 648 F.3d 108, 110 (2d Cir.

(" [i) n

any

event,

there

is

no

dispute

that

Defendants

achieved both prevailing party status and some degree of success on
5

the merits in this case because the district court granted summary
judgment in their favor and we affirmed. I/} (emphasis added).

4

Plaintiffs claim that they "obtained a settlement achieving
virtually
Mem.

at

2),

I of the relief they sought in this action,
yet even a

suggests otherwise.
breached their

cursory examination of

/I

(PIs.'

their Complaint

The thrust of the Complaint is that Defendants

fiduciary

duties

by engaging

in prohibited and

In another Second Circuit case, the court found no success
on the merits when the party seeking attorneys' fees had lost his
case. See Katzenberg v. Lazzari, 406 Fed. App'x 559, 563 (2d Cir.
2011). Accord Kelly v. Handy & Harman, 406 Fed. App'x 538 (2d
Cir. 2011). Other circuits have issued similar decisions. As in
~~~====' the Fourth Circuit found some degree of success when
the district court had granted a motion for summary judgment. See
Williams v. Metropolitan Life Ins. Co., 609 F.3d 622, 634-35 (4th
Cir. 2010);
Lincoln Financial Co. v. Metropolitan Life
Ins. Co., 2011 WL 2391602 at *5 (5th Cir. June 15, 2011) (same)
The Seventh Circuit found that "a reversal of the administrative
denial of benef s, a remand for further proceedings involving a
different controlling document, and the imposition of a statutory
penalty against the Defendants" met the standard. Huss v. IBM
Medical and Dental Plan, 418 Fed. App'x 498, 512 (7th Cir. 2011).
See also Wagner v. Ciba Corp., 743 F. Supp. 2d 701, 718 (S.D.
Ohio 2010) (denying attorneys' fees where plaintiff had failed to
succeed on any claims) .
. McQueary v. Conway, 614 F.3d 591,
601 (6th
r. 2010) (citing Hardt as support for denying
prevailing-party status to a party who obtained a preliminary
injunction). Similarly, the one case in the Southern District of
New York that most squarely addresses the question of what level
of success meets the threshold standard is inapposite, as the
plaintiff in that case recovered damages. See Taafe v. Life Ins.
Co. of North America, 769 F. Supp. 2d 530, 538 (S.D.N.Y. 2011).
The
decision did, however, contain some discussion of what
constituted the "merits" of the case, deciding that the plaintiff
had achieved success on the merits when it obtained the relief it
sought in the complaint. Id. at 542.
4

6

unsound financial transactions because,

for example, Amalgamated

Bank had been selected as a service provider to the benefit plans;
Amalgamated

Bank

investment

products

had

been

impermissibly

selected by the fiduciary Defendants; the Bank received excessive
and unreasonable fees; and there had been a failure to diversify
the

investments of the Plans.

asserted only against
provide
ERISA.

A much less significant claim,

rsch and ALICO, is that they had failed to

Plaintiffs with documents

they were

entitled to under

(See Am. Compl. Second Cause of Action.)

Plaintiffs sought

a declaratory judgment against numerous parties, including Herbert
Ricklin; "[a]n Injunction and Order compelling Defendants to make
good ... all losses"; the impos

ion of a constructive trust; an

injunction against Defendant Workers United from exercising control
of the Plans; an injunction to appoint an independent fiduciary to
manage the Plans; an audit of all contracts between the Plans and
Amalgamated Bank; restitution for unjust enrichment; disgorgement
of Defendants' profits; injunctions against various Defendants from
further violations of ERISA's provisions; the removal of Herbert
Ricklin as fiduciary of the Staff Retirement Plan; and monetary
damages.
The

Settlement

substantive

terms:

however,

Agreement,
the

independent fiduciary;

resignation
a

of

includes

Herbert

only

Ricklin

three
as

the

commitment to comply with the record­
7

keeping

requirements

of

the

Prohibited

("PTE"); and a commitment to make certa
Plan participants.

Transaction

Exemption

documents available to

As to the removal of Mr. Ricklin, he confirms

that the lawsuit was the reason for his resignation, although he
denies that his resignation was due to the merits of Plaintiffs'
allegations.
Rather

I

he

litigation

(See Defs.'
contends

Mem.

that

being

jeopardized his

fiduciary for other funds,
threatened

his

at 6

n.3j

named

ability

to

as

a

serve

which he does

livelihood.

Ricklin Decl.

Regardless

defendant
as

an

his

16.)

in

this

independent

regularly,
of

,

and thus,

reasons

for

resigning, in the context of this case, this is a trivial victory.
The Complaint alleges that Mr.

cklin was not truly independent,

but this only matters to the extent that he engaged in prohibited,
disadvantageous, or otherwise improper transactions.

And there has

been no showing of prohibited transactions, no agreement to alter
any investments, and no admission of non independence.
words,

In other

Plaintiffs' actionable reasons for wanting to remove Mr.

Ricklin have not been demonstrated.
Plaintiffs'

The Court doe s not doubt

sincerity in wanting to replace Mr. Ricklin,

but it

cannot conclude that merely doing so constitutes more than trivial
success.
The evidence that Plaintiffs' counsel marshals in their Reply
Memorandum does not support a contrary conclusion.
8

;:

For instance,

Plaintiffs

have

submitted

several

Plaintiffs' motivation for the lawsuit.

declarations

regarding

(See Sigman Decl. Ex. A.)

In Murray Kaner's declaration, however, Mr. Kaner does not mention
removal of Mr. Ricklin as a concern, let alone as a primary goal of
the litigation.

The same is true for the other declarations filed

by Plaintiffs.

These affidavits provide scant support for the

arguments made in Plaintiffs'

original memorandum in support of

their request for attorneys' fees.
The other terms of the settlement, requiring compliance with
document retention and production policies,5 are best characterized
as procedural devices.

They add no duty beyond what is already

required by law,

except

for a

somewhat modest

requirement

for

written reports.6

In other words, they achieve no real substantive

5 The parties disagree about the extent to which the PTE
requirements in particular should be considered success on the
merits. Defendants insist that they have been in compliance
throughout the relevant period.
, Defs.' Mem. at 12.)
As a technical matter, the dispute is that Plaintiffs claim that
Defendants failed to report prohibited transactions, while
Defendants claim that there were no prohibited transactions, and
thus, there was nothing to report.
In any event, without a
finding of culpability, this Court cannot state that Defendants
were not in compliance with the PTE reporting requirements, and
thus, this provision of the settlement does not meet the Hardt
success standard.
6 The Settlement Agreement requires that the Bank create a
"Periodic Report" on at least a quarterly schedule, and provide
that to the Independent Fiduciary, as well as provide that report
at least annually to the Boards of Trustees of the retirement
plans. (See Settlement Agreement at 4 5.)

9

success,

but

instead merely

through

which

Plaintiffs

improprieties.
prayer for

rel

add

might

a

minor

affix

procedural
liability

mechanism

for

future

Given the expansive nature of Plaintiffs' initial
f,

the acceptance of

these

terms,

without any

monetary damages, permanent inj unctions, divestiture of purportedly
improper investments, admissions of culpability, or rescission of
contracts, can hardly be described as the kind of success necessary
to meet the standard in Hardt.
The Court finds that the terms of the Settlement Agreement do
not meet the standard of "some degree of success on the merits.

u

Based on what

is

was

alleged and

apparent that this action was

what

has

been achieved,

it

less about purported breaches of

fiduciary duty and primarily a continuation of the turf war between
various

factions of the unions.

Therefore,

Plaintiffs are not

entitled to attorneys' fees.
But even if Plaintiffs had met the Hardt threshold, this Court
would, in its discretion, still deny their request for fees.

Using

the approach to attorneys' fees sanctioned in Hardt, a court may,

7 Plaintiffs do cite a Northen District of Illinois case for
the proposition that recovery of monetary damages is not a
necessary condition of the Hardt standard.
Young v.
Verizon's Bell Atlantic Cash Balance Plan,748 F. Supp. 2d 903,
910 (N.D. Ill. 2010).
In this action, however, Plaintiffs not
only failed to secure monetary damages, but also failed to
realize the vast majority of their initial demands.

lO

at its discretion, apply the five-prong test provided in Chambless
v.

Masters, Mates,

& Pilots Pension Plan, 815 F.2d 869, 871 (2d

Cir. 1987). See Hardt, 130 S.Ct. at 2150 n.S; Toussaint, 648 F.3d
at 110 ("[a] court may apply

but is not required to apply

the

Chambless factors in channeling [its] discretion when awarding fees
under

§

1132(g) (1) ./1) (internal quotations omitted,

original)

8

alteration in

The five factors are:

(1)
the degree of the offending party's
culpability or bad faith, (2) the ability of
the offending party to satisfy an award of
attorney's fees, (3) whether an award of fees
would
deter
other
persons
from
acting
similarly under like circumstances, (4) the
relative merits of the parties' positions, and
(5) whether the action conferred a common
benefit
on
a
group
of
pension
plan
participants.

Chambless,

815 F.2d at 871.

Considering each of these in turn,

this Court does not find adequate grounds upon which to predicate
attorneys' fees.
Plaintiffs, discussing the first factor, state that "[a]s for

B Even in circuits that have read Hardt's requirement of
"some degree of success on the merits" extremely liberally,
district courts still retain discretion on the ultimate question
of whether or not to award fees.
, Loomis v. Exelon
Corp, --- F.3d
2011 WL 3890453 at *7 (7th Cir. Sept. 6,
2011) ("[E]ven the ultimate loser could receive ... attorneys'
fees and costs, if on the way to defeat the litigant won a
skirmish that conferred some legal benefit .. , Both the rule and
the statute give the district court judge discretion to decide
whether an award of costs is appropriate./I)
---I

11

bad faith on the part of the Defendants
worst

neutral

(PIs.'

"

Mem.

at

[this] factor [is] at
14),

and

make

no

other

substantiated, affirmative arguments for a finding of bad faith.
Instead,

they merely assert

that

Defendants

must

have

settled

because of the merits of Plaintiffs' case and that Plaintiffs had
to seek redress

court because Defendants did not comply with an

earlier document request.
sufficient

for

a

id. at 14-15.)

showing

of

bad

faith.

Neither of these is
Defendants

have

not

admitted any wrong-doing, and there is no basis for the Court to
speculate

on

their

motivation

for

settlement ;

given

the

very

limited terms of the settlement, however, which for the most part,
require

them

to

comply

with

the

reporting

and

record-keeping

sting regulations, it is reasonable to surmise that

mandates of

there was no reason to continue a prolonged and costly litigation.
The second Chambless factor is "the ability of the offending
party to satisfy an award of attorney's fees." Chambless, 815 F.2d
at 871.

Plaintiffs assert that Defendants would have no trouble

satisfying the award (see PIs.' Mem. at 14), and while they make no
affirmative

showing

of

this

fact,

Defendants

do

not

make

any

serious effort to deny that they could afford to pay attorneys'
fees.

Therefore, the Court finds that the second factor slightly

favors Plaintiffs.
F.3d 38, 47 (2d

Slupinski v. First Unum Life Ins. Co., 554
r. 2009)

(affirming the district court's finding
12

that the second factor favored a plaintiff when defendant had not
denied its ability to pay) .
The third factor, deterrence, does not favor either Plaintiffs
or

Defendants.

discourage

Imposition

potent

future

of

attorneys'

defendants

fees

from

is

certain

likely

to

kinds

of

behavior, and refusal to award them might discourage plaintiffs'
firms from bringing ERISA suits.

But there are two significant

limitations on how much weight to accord the possible deterrent
value in the instant case.

First, there has been no admission or

showing of wrong doing, either generally or as to specific acts by
any of the Defendants, so it is unclear exactly what behavior would
be deterred. See Lauder v. First Unum Life Ins. Co., 284 F.3d 375,
383

(2d Cir. 2002) ("The findings on the second and third factors

seem unremarkable, and therefore neutral, to us, especially because
the district court did not specify what conduct it thought would be
deterred by the award.

H

).

Second,

the major victory claimed by

Plaintiffs is Mr. Ricklin's resignation as independent fiduciary.
There has been no finding of wrong-doing against Mr. Ricklin, and
according to him, the litigation was interfering with his ability
to serve as an independent fiduciary for other trust funds.

Thus,

being subject to litigation might discourage qualified people from
serving as

fiduciaries,

or might discourage them from settling

cases of this type.

, No.
13

96

Civ.

0177 (JSM) ,

1998

1998) (" [A] n award of

WL

fees

80199

at

*4

(S.D.N.Y.

Feb.

24,

may encourage insurance companies

to

cooperate more fully with claimants, but it also might deter them
from settling as UNUM has here." ), aff'd, 165 F.3d 14, 14 (2d Cir.
1998) ("The district court found the third factor, deterrence, to be
neutral. On the one hand, an award of fees might encourage UNUM to
grant benefits more expeditiously in the future, but on the other
hand, it might discourage it from settling cases as it did here.").
Under the fourth factor,

the relative merits of the parties'

positions, this Court finds Defendants' position somewhat stronger
than Plaintiffs'.

With respect to the major issues in this case,

there is no requirement for divestiture of the investments with the
Bank, nor any disgorgement of fees from the independent fiduciary.
The express terms
or concession [s]
doing.

11

the settlement itself include no "admission [s]
concerning the merits,

(Settlement Agreement at 3-4.)

liabilities,

or wrong­

While both Plaintiffs and

Defendants make numerous assertions about both the strengths of
their respective positions and the weaknesses of their adversaries'
positions, the parties themselves have agreed not to litigate this
point,

and,

Court

to

Defendants.

accordingly,

find

that

But,

to

there is no compelling reason for this

this
the

factor
extent

favors
that

Defendants have the stronger claim,
14

it

either
does

Plaintiffs

favor

one

or

side,

as Plaintiffs have abandoned

the vast majority of their demands to achieve an extremely modest
settlement.
The fifth factor, whether or not the decision confers a group
benefit on the beneficiaries of the Plan, is met here.
include many members of the group,

Plaintiffs

and to the extent that this

settlement can be considered a benefit, it does benefit the group.
But the benefits to the group at large, namely, the resignation of
an independent fiduciary who was displeasing to Plaintiffs, and the
record-keeping and inspection terms of the Settlement, are not such
substantial benefits that this Court is prepared to award fees
solely because of them.

Even more importantly, at least some part

of the payment of the fees would come out of union funds or pension
benefits from

plan funds; the group that would purportedly rece
the settlement would

so be the group paying the

fees.

Defs.' Mem. at 15-16.)
In

examining

these

factors,

this

Court

finds

that

the

Plaintiffs have demonstrated that Defendants have the ability to
pay, and that there is some, albeit minor, group benefit from the
settlement.

While no one Chambless

factor is dispositive,

the

first and fourth are particularly important. See Slupinski v. First
Unum Life Ins. Co., 554 F.3d 38, 48 (2d Cir. 2009) (\\ [a]nd while the
degree of culpability and the relative merits 'are not dispositive
under the [Chambless] five-factor test,' they do 'weigh heavily.'"
15

(quoting Anita Foundations, Inc. v. ILGWU National Retirement Fund,
902 F.2d 185, 189 (2d Cir.1990) (alteration in original)).
Balancing the group benefit and ability to pay against the
absence of culpability or bad faith, the lack of deterrent value to
an award, and Defendants' advantage on the relative merits of the
parties' positions, the Court concludes, in its discretion, that an
award of attorneys' fees would be inappropriate here.

Leyda v.

AlliedSignal, Inc., 322 F.3d 199, 210-11 (2d Cir. 2003) (affirming
a district court's refusal to award fees where the plaintiff had
demonstrated that the defendant could pay and that there had been
"a minimal

common benefit,"

unreasonable

and

the

but

defendant's

resolution

of

the

actions
case

"were

was

not

close.")

(quoting the district court decision) .
Finally, even if the Court had concluded that Plaintiffs are
entitled to attorneys' fees,
of the fee application.
excessive

in

the

action,

The fees the Plaintiffs' counsel seeks are

extreme.

2483.79 hours of work.
Levin et al.

it would not grant them on the basis

Plaintiffs

seek

$1,735,442.82

As Defendants point out,

v. Raynor et al.,

03 Civ.

for

in the Levin

4697

(GBD) (THK),

where the plaintiffs were represented by the same counsel that
represents Plaintiffs in this action,
upon were $1,350,000.00.

the attorneys'

In that matter,

fees agreed

the plaintiffs secured

approximately $4,000,000.00 as part of the settlement, which took
16

over seven years of litigation to accomplish.

Here, Plaintiffs are

receiving no damages, after less than two years of litigation, and
are

seeking

admission,

more

substantial

many

of

the

compensation rates well

attorneys'

lawyers

for

fees.

Plaintiffs

purportedly

is

expended

are

own

seeking

The normal rates for

their work are between $250 and $600 per hour,
average

their

excess of their typical hourly rates.

(Compare PIs.' Mem. at 2 with id. at 23 24.)

blended

By

$699

per

hour.

is

nothing

short

yet their total

Furthermore,
of

the

time

breathtaking.

For

example, between the various attorneys, they claim to have spent
764

hours

on

researching

and

drafting

the

Complaint.

After

Defendants filed a Motion to Dismiss, Plaintiffs counsel spent 145
addi tional hours amending the Complaint.

This claim

simply

unreasonable.
CONCLUSION
For

the

reasons

set

forth

above,

Plaintiffs'

motion

attorneys' fees is denied.
SO ORDERED.

THEODORE H. KATZ
UNITED STATES MAGISTRATE JUDGE
Dated: October 20 2011
New York, New York
1

17

for