Gill et al v. Bausch & Lomb Supplemental Retirement Income Plan I et al
Filing
91
ORDER granting 86 Plaintiffs' Motion for Attorney Fees and related expenses in its entirety. The Court orders that no portion of the ultimate award of attorneys fees and expenses shall be paid with assets held by SERP I. Defendant B&L shall be required to pay the full amount requested to date of $730,106.30, which represents the fees and expenses incurred up to the filing of Plaintiffs motion. The Court grants Plaintiffs request to submit a supplemental affidavit as to the calculatio n of interest and additional attorneys fees and related expenses incurred after the filing of the motion. Plaintiffs supplemental affidavit is due fourteen (14) days from the date of entry of this Decision and Order. Signed by Hon. Michael A. Telesca on 4/13/15. (JMC)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
DANIEL E. GILL, THOMAS C.
McDERMOTT, and JAY T. HOLMES,
DECISION AND ORDER
No. 6:09-CV-6043(MAT)
Plaintiffs,
-vsBAUSCH & LOMB SUPPLEMENTAL
RETIREMENT INCOME PLAN I, BAUSCH &
LOMB INCORPORATED, and COMPENSATION
COMMITTEE OF THE BAUSCH & LOMB
BOARD OF DIRECTORS,
Defendants.
I.
Introduction
This
action
arises
under
the
Employee
Retirement
Income
Security Act of 1974, as amended, 29 U.S.C. § 1001, et seq.
(“ERISA”). Daniel E. Gill, Thomas C. McDermott, and Jay T. Holmes
(collectively, “Plaintiffs”), following the affirmance on appeal of
this Court’s grant of summary judgment in their favor, have filed
a motion for attorney’s fees and related expenses (Dkt #86).
II.
Procedural Status
On January 29, 2009, Plaintiffs filed suit in this Court
pursuant
to
Section
502(a)(1)(B)
of
ERISA,
29
U.S.C.
§ 1132(a)(1)(B), alleging that Defendants wrongfully terminated
their
monthly
SERP
I
benefit
payments
pursuant
to
SERP
I’s
change-in-control provision, by distributing lump-sum payments to
Plaintiffs. On March 3, 2014, this Court granted Plaintiffs’ motion
for summary judgment and denied Defendants’ motion for summary
judgment. The Court held that in calculating Plaintiffs’ damages,
Defendants were entitled to a credit for the lump-sum payments
already paid to Plaintiffs. The Court dismissed without prejudice
Plaintiffs’ previously filed motion for attorneys’ fees pending the
disposition of any appeal.
Defendants timely appealed to the United States Court of
Appeals
for
the
Second
Circuit,
which
affirmed
the
Court’s
judgment. The Second Circuit construed this Court’s remedy as
“order[ing]
reinstatement
of
Bausch
&
Lomb’s
monthly
benefit
obligation, while allowing for a one-time ‘credit’ in the amount of
the (unlawful) lump-sum that Bausch & Lomb already paid.” Summary
Order
at 4-5 (Dkt. #84). On January 7, 2015, Plaintiffs again
moved reimbursement of attorney’s fees and related expenses in the
total amount of $730,106.30. Bausch & Lomb Supplemental Retirement
Income Plan I (“SERP I” or “the Plan”), Bausch & Lomb Incorporated
(“B&L”), and the Compensation Committee of the Bausch & Lomb Board
of Directors (collectively, “Defendants”) have partially opposed
the
motion
(Dkt
#88).
Defendants
do
not
challenge
whether
Plaintiffs are entitled to an award of attorney’s fees under ERISA,
or the reasonableness of the amounts requested. Rather, Defendants
oppose Plaintiffs’ motion only with respect to their request to
have this Court (1) require Defendant B&L to pay any award for
attorney’s fees and expenses out of its own assets rather than from
the assets of SERP I; and (2) preclude Defendants from using assets
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held by SERP I to pay the attorney’s fee award, or to hold back the
attorney’s
fees
against
the
balance
of
Plaintiffs’
lump-sum
payments.
The motion is now fully submitted. For the reasons discussed
below, Plaintiffs’ motion is granted in its entirety.
III. Discussion
ERISA
gives
courts
the
discretion
to
award
reasonable
attorney’s fees. See 29 U.S.C. § 1132(g)(1)(“In any action under
this subchapter . . . 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.”). As noted above, Defendants
do not dispute Plaintiffs’ entitlement to a reasonable attorney’s
fee. The sole dispute here is who should be responsible for payment
of this fee.
B.
SERP I, § 9
In support of their argument that B&L is the appropriate
entity to pay the attorney’s fee, Plaintiffs rely on Section 9 of
SERP I, which provides in part that
[t]he Company [B&L] shall establish an irrevocable
secular trust for each Participant for the purpose of
holding assets used to provide the vested benefits
required by this Plan. The assets of the secular trust
shall at no time be available to creditors of the
Company, even in the event of the Company’s bankruptcy or
insolvency. . . .
SERP I, § 9 (Dkt # 56-4, p. 11). Plaintiffs argue that Section 9’s
plain language “prohibits trust assets from being used to satisfy
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any debts owed to creditors [of B&L], including debts owed to
[P]laintiffs upon an award of attorney’s fees. . . .” Plaintiff’s
Memorandum (“Pls’ Mem.”) at 13 (Dkt #86-4). Defendants argue that
if this Court were to order that the attorney’s fees be paid with
Plan assets, then Plaintiffs would be “creditors” of SERP I, not of
B&L. Dkt #88, p. 8. However, as discussed further below, B&L
properly was named as a defendant in this action, and Plaintiffs
obtained a judgment against B&L and SERP I. Therefore, Plaintiffs
are creditors of both SERP I and B&L. Although Section 9 of SERP I
provides some support for Plaintiffs’ argument, the Court does not
find it dispositive.
B.
ERISA’s Anti-Inurement Provision
Plaintiffs also rely on ERISA’s “anti-inurement” provision
which, with exceptions not here material, states that
the assets of a plan shall never inure to the benefit of
any employer and shall be held for the exclusive purposes
of providing benefits to participants in the plan and
their beneficiaries and defraying reasonable expenses of
administering the plan.
29 U.S.C. § 1103(c)(1). Plaintiffs assert that awarding attorney’s
fees to plan sponsor from ERISA plan funds conflicts with ERISA’s
anti-inurement provision. See Plaintiffs’ Memorandum of Law (“Pls’
Mem.”) at 13 (citing Alvan Motor Freight, Inc. v. Trustees of the
Cent. States, Se. and Sw. Areas Pension Fund, Nos. 4:05 CV 125,
1:06 CV 809, 2008 WL 2004307, at *6-*7, (W.D. Mich. May 7, 2008)
(“Alvan”); Johannssen v. District No. 1, No. AMD 96–2355, 2001 WL
-4-
770987, at *1 (D. Md. July 10, 2001).
These cases do not stand for
the proposition urged by Plaintiffs, however.
For instance, Alvan was a delinquent contributions case in
which
the
plan
sponsor
was
the
prevailing
party
and
sought
attorney’s fees pursuant to both 29 U.S.C. § 1132(g)(1) and the
parties’ collective bargaining agreement.
The district court
declined to award fees under Section 1132(g)(1), finding that the
applicable factors did not weigh in the plan sponsor’s favor.
See 2008 WL 2004307, at *5-*6. The district court went on to
consider whether
the
parties’
collective
bargaining
agreement
permitted the award of attorney’s fees, and “note[d] that holding
the [plan] liable for [the plan sponsor]’s attorney fees could
conflict with the [collective bargaining agreement] and, more
importantly,
ERISA.”
Alvan,
2008
WL
2004307,
at
*7
(citing
29 U.S.C. § 1103(c)(1); emphasis supplied). The district court
found that “[t]hese efforts [in ERISA and the collective bargaining
agreement] to protect trusts from being used for any purpose other
than to benefit beneficiaries [we]re not dispositive, but [we]re
persuasive
to
an
application
of
the
[collective
bargaining
agreement].” Id. (citing Whitworth Bros. Storage Co. v. Central
States, Se. and Sw. Area Pension Fund, 982 F.2d 1006, 1019 (6th Cir.
1993) (holding “the anti-inurement policy of ERISA bars an award of
interest on any amount that is refunded”); Airco Indus. Gases, Inc.
Div. of the BOC Group, Inc. v. Teamsters Health and Welfare Pension
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Fund of Philadelphia and Vicinity, 850 F.2d 1028, 1037 (3d Cir.
1988) (agreeing “that the anti-inurement policy of ERISA bars an
award of interest on any refund, regardless of the fund’s financial
stability”)). Alvan simply did not hold that requiring an ERISA
plan to pay the plan sponsor’s attorney fees could conflict with
ERISA’s anti-inurement provision. Alvan, 2008 WL 2004307, at *7.
Furthermore, the main dispute in Alvan was not the source from
which the attorney’s fee would be paid, but whether the plan
sponsor, as prevailing party, should be awarded attorney’s fees at
all. Plaintiffs’ mischaracterization of Alvan aside, the Court
finds that ERISA’s anti-inurement provision is relevant to the
question presented here and that Alvan does provide support for
Plaintiffs’ position.
Turning to the cases cited by Defendants, the Court finds that
they likewise do not strongly support the proposition Defendants
urge, namely, that it is improper for B&L, the employer and plan
sponsor, who also is a named defendant against which a judgment has
been obtained, to be required to pay Plaintiffs’ attorney’s fees
directly. For instance, Defendants cite
Bio-Medical Applications
of Ky., Inc. v. Coal Exclusive Co., Civil No. 08–80–ART, 2011 WL
3568249, at *4 (E.D. Ky. Aug. 15, 2011) (“Bio-Med”), for the
proposition that “despite any potential ‘conflict,’ courts have
awarded payment of attorneys’ fees from plan assets. . . .”
Defendants’ Memorandum of Law (“Defs’ Mem.”) at 5 (Dkt #88).
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Bio-Med did not mention the word “conflict”; nor did it address
ERISA’s anti-inurement provision. Bio-Med principally involved an
analysis of whether an attorney’s fee award against the defendant
insurance company was warranted. The defendant in Bio-Med argued
that the “ability to pay” factor cut in its favor, asserting it had
no assets independent of the employers’ contributions to the plan,
and that an award of attorney’s fees would significantly decrease
the plan assets available to pay other participants’ benefits and
costs. See 2011 WL 3568249, at *4. Noting that the exact financial
impact of such an award the defendant was unclear, the district
court declined to weigh the “ability to pay” factor in either
party’s favor. Id.; see also id. at *7 (stating that even if the
defendant’s ability to satisfy an award would have an impact on
plan assets, the other relevant factors for granting attorney’s
fees weighed in the plaintiff’s favor). The case provides some, but
not conclusive, support for Defendants’ position.
C.
ERISA’s Anti-Alienation Provision
ERISA contains an “anti-alienation” or “spendthrift” clause
which states that “[e]ach pension plan shall provide that benefits
provided
under
the
plan
29 U.S.C. § 1056(d)(1);
may
not
be
assigned
or
alienated.”
see also Boggs v. Boggs, 89 F.3d 1169,
(5th Cir. 1996) (“ERISA’s spendthrift provision unequivocally and
unconditionally commands that “‘benefits provided under the plan
may not be assigned or alienated.’”) (quotation and footnote
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omitted). Although neither Plaintiffs nor Defendants referenced the
anti-alienation provision in their papers, it is relevant to the
present matter.
In AT&T Mgmt. Pension Plan v. Tucker, 902 F. Supp. 1168 (C.D.
Cal. 1995) (“Tucker”), fiduciaries of an ERISA pension plan sought
injunctive and declaratory relief to restrain a state family court
from enforcing orders that the fiduciaries pay, out of plan funds,
attorney’s fees incurred by the defendants (plan beneficiaries)
during a dispute over the plan. Tucker, 902 F. Supp. at 1170. The
defendants sought to enforce the attorney’s fee award. Id. at 1171.
Without analysis, the district court agreed with the plaintiffs
that the state court’s orders were not qualified domestic relations
orders,1 and they accordingly constituted a prohibited assignment
or alienation of moneys held by the plan and its trust to provide
pension benefits to its participants and beneficiaries, including
the defendants. Id. at 1176. The Court recognizes that Tucker is
not binding authority and is not entirely apposite here. However,
its
application
of
the
anti-alienation
provision
supplies
additional perspective on the parties’ arguments and supports
Plaintiffs’ position.
1
ERISA’s anti-alienation provision is not applicable to a qualified domestic
relations order.
See Ablamis v. Roper, 937 F.2d 1450, 1454 (9th Cir. 1991)
(noting that Congress passed the Retirement Equity Act of 1984 to amend ERISA so
as to create “an express statutory exception to the prohibition on assignment and
alienation in the case of distributions made pursuant to . . . a ‘qualified
domestic relations order. . . .’”) (quotation omitted).
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D.
Propriety of Requiring B&L to Pay Fee Award
As Plaintiffs note, Defendants have cited no authority that it
is improper for B&L itself be required to pay an attorney’s fee
award under the present circumstances. B&L properly was named as a
defendant,
this
Court
granted
summary
judgment
against
all
defendants, including B&L; and judgment was entered against all
defendants, including B&L. Subsequently, that judgment was affirmed
by the Second Circuit, issued as a mandate, and made a judgment of
this Court.
The Court agrees with Plaintiffs that it was appropriate to
name B&L as a defendant because SERP I does not specifically name
any “plan administrator”. See 29 U.S.C. § 1002(16)(A)(ii). Indeed,
B&L filed reports with the United States Department of Labor
(“DOL”) identifying itself as plan administrator and filed Forms
5500 with the DOL designating itself as Plan Administrator. See
Plaintiffs’ Reply (“Reply”) at 3 (citations to record omitted).2
2
As Plaintiffs argue, Crocco v. Xerox Corp., 137 F.3d 105 (2d Cir. 1998),
fails to support Defendants’ argument that B&L should not be liable for the
attorney’s fee award. The issue in Crocco was whether the plaintiff-beneficiary
could maintain suit against the defendant-employer, Xerox, in addition to her
suit naming the plan administrator as a defendant. The Second Circuit held that
because it was clear from the plan documents that Xerox was neither the
designated plan administrator nor a plan trustee, and because it could not be a
de facto co-administrator for purposes of ERISA § 502(a)(1), it could not be held
liable for benefits due to the plaintiff under the plan. See Crocco, 137 F.3d at
107-08 & n. 3. In contrast to Crocco, here the Plan did not specifically name a
plan administrator.
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E.
SERP I Trusts’ Ability to Pay
Defendants argue that payment of an attorney’s fee award out
of
the
SERP
I trusts
would
not
prejudice
Plaintiffs because
Defendants are financially able to pay the award out of the trusts,
which Defendants state are presently overfunded. See Defs’ Mem. at
5-6 (citations omitted).3 Even if that is the case, the fact
remains that the SERP I trusts indisputably are for the sole
benefit of Plaintiffs. The Court cannot help but note some degree
of inequity in Defendants’ request to extract the penalty imposed
against them, as losing parties, from the monies held in trust to
benefit the winning parties. Unlike Defendants, the Court has
difficulty characterizing the attorney’s fees and expenses sought
by Plaintiffs as “reasonable expenses” of administering SERP I.
Clearly, the fees and expenses were not directly incurred by the
SERP I plan trustee. Nor were the monies expended in the provision
of services to the trusts or Plaintiffs as beneficiaries. Rather,
they were incurred by Plaintiffs in seeking redress of Defendants’
ERISA violations.
After carefully weighing the equities in this case, the Court
concludes that B&L should be liable for paying the full amount of
an award of attorney’s fees and expenses. Defendants do not dispute
the reasonableness of the amount claimed by Plaintiffs (i.e.,
3
Notably, Defendants have not argued that B&L lacks the ability to pay an
attorney’s fee award.
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attorney’s fees of $665,329.08; expenses of $25,327.22; and expert
fees of $39,450.00, for a total amount of $730,106.30). The Court
finds that the full amount of the award of attorney’s fees and
expenses should be paid directly and entirely by B&L.
IV.
Conclusion
For the foregoing reasons, Plaintiffs’ motion for attorney’s
fees and related expenses is granted in its entirety. The Court
orders that no portion of the ultimate award of attorney’s fees and
expenses shall be paid with assets held by SERP I. Defendant B&L
shall be required to pay the full amount requested to date of
$730,106.30, which represents the fees and expenses incurred up to
the filing of Plaintiffs’ motion.
The Court grants Plaintiffs’ request to submit a supplemental
affidavit
as
to
the
calculation
of
interest
and
additional
attorney’s fees and related expenses incurred after the filing of
the motion. Plaintiffs’ supplemental affidavit is due fourteen
(14) days from the date of entry of this Decision and Order.
IT IS SO ORDERED.
S/Michael A. Telesca
HONORABLE MICHAEL A. TELESCA
United States District Judge
DATED:
April 13, 2015
Rochester, New York
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