Board of Trustees of Hotel and Restaurant Employees Local 25 v. JPR, Inc.

• Decision Date: 27 April 1998
• Docket Number: No. 97-7040,97-7040
• Citation: 136 F.3d 794
• Parties: , 21 Employee Benefits Cas. 2665 BOARD OF TRUSTEES OF THE HOTEL AND RESTAURANT EMPLOYEES LOCAL 25 and Employers' Health and Welfare Fund, et al., Appellants, v. JPR, INC., Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 794

136 F.3d 794

329 U.S.App.D.C. 54, 21 Employee Benefits Cas. 2665

BOARD OF TRUSTEES OF THE HOTEL AND RESTAURANT EMPLOYEES LOCAL 25 and Employers' Health and Welfare Fund et al., Appellants, v. JPR, INC., Appellee.

No. 97-7040.

United States Court of Appeals District of Columbia Circuit.

Argued Nov. 18, 1997.

Decided Feb. 27, 1998.

Rehearing Denied April 27, 1998.

Daniel M. Katz, Washington, DC, argued the cause and filed the briefs for appellants. Ellen G. Ranzman, Washington, DC, entered an appearance.

Malcolm L. Pritzker, Washington, DC, argued the cause and filed the brief for appellee. Steven R. Semler, Washington, DC, entered an appearance.

Before: EDWARDS, Chief Judge, WALD and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

Opinion concurring in part and dissenting in part filed by Circuit Judge RANDOLPH.

WALD, Circuit Judge:

This appeal is brought by the Boards of Trustees of two employee benefit plans, (1) the Hotel and Restaurant Employees Local 25 and Employers' Health and Welfare Fund, and (2) the Hotel and Restaurant Employees Local 25 and Hotel Association, Cafeteria and Other Subscribing Employers Group Legal Services Fund. (We will refer to the two plans as "the Funds," and to their Boards of Trustees collectively as "the Trustees.") The Trustees prevailed in an action in the district court in which they sought to collect underpayments to the Funds by JPR, Inc. ("JPR"), the entity that operates the Washington, D.C. restaurant La Colline. In addition to recovering the shortfall in payments, they collected interest, liquidated damages, litigation expenses, and attorney's fees. The district court declined, however, to award the Trustees auditing fees, and awarded attorney's fees only at the rate actually charged, rather than at market rates. The Trustees appeal these two rulings. We affirm the first, but reverse the second, finding that the district court must consider whether the fees charged by the Trustees' attorney incorporated a public-spirited discount, and, if so, award fees at market rates.

I. BACKGROUND

The Funds were established by agreement between Local 25 of the Hotel & Restaurant Employees Union ("the Union") and the Hotel Association of Washington, D.C. (the "Hotel Association"); the Trustees who administer the Funds are drawn from representatives of both parties. The Union represents a bargaining unit of employees of La Colline, and JPR is a member of the Hotel Association. The collective bargaining agreement between the Union and JPR requires JPR to make a specified contribution to the Funds for every hour worked by an employee.

The documents establishing the Funds are called the "Dental and Optical Care Plan Trust Agreement" ¹ and the "Group Legal Services Plan Trust Agreement." Each of these agreements requires participating employers to make contributions to the appropriate Fund, and permits the Trustees of that Fund to audit employers' records in order to ensure that the correct contributions have been made. The Trustees periodically conduct routine audits of participating employers to assure that they are making the appropriate contributions.

This case arises out of such a routine audit, that of JPR's contributions to the Funds from 1992 to 1994. The audit revealed a total shortfall of $36,162.88. The Trustees attempted to persuade JPR to pay this sum voluntarily, and then filed suit to compel JPR to do so, bringing claims under the Employee Retirement Income Security Act ("ERISA") and the National Labor Relations Act. JPR raised three affirmative defenses: first, that no payments were due for employees in their first three months of employment; second, that some of the employees were covered by other insurance and that no contributions were needed on their behalf; and third, (in a variation of the second argument) that it need not make contributions for dental insurance which it asserted was duplicative. The Trustees moved for summary judgment, and the district court granted the motion, finding none of JPR's defenses to be meritorious. JPR did not appeal this ruling.

ERISA provides that "in any action under this subchapter by a fiduciary for or on behalf of a plan to enforce section 1145 of this title in which a judgment in favor of the plan is awarded, the court shall award the plan" an enumerated list of elements of damages. 29 U.S.C. § 1132(g)(2) (1994). The Trustees' action was within this section, as it was brought, inter alia, to enforce 29 U.S.C. § 1145, a provision that relates to delinquent contributions. ² Accordingly, in addition to recovering the overdue amount, the Trustees sought, and the district court awarded, (1) interest (at 18%), (2) duplicate interest in lieu of liquidated damages, (3) litigation expenses, and (4) attorney's fees.

The district court declined, however, to award $9,066 in audit fees sought by the Trustees. The Trustees also argued that the amount of attorney's fees charged by their counsel, $17,775, reflected a large charitable discount from market rates, and that they should receive an award at the market value of their counsel's legal services, which they claimed was $43,068.75. The district court did not accept this argument, and awarded only the actual amount of fees charged. These two decisions are now before us on appeal.

II. ANALYSIS

We have often been warned that "[a] request for attorney's fees should not result in a second major litigation." Hensley v. Eckerhart, 461 U.S. 424, 437, 103 S.Ct. 1933, 1941, 76 L.Ed.2d 40 (1983). Clearly, the district court is most familiar with the interstices of the litigation, and we accord its decisions considerable deference. See id. at 437, 103 S.Ct. at 1941. Our review of its fee awards is confined to correcting errors of law and remedying abuses of discretion. See Covington v. District of Columbia, 57 F.3d 1101, 1110 (D.C.Cir.1995); see also Pierce v. Underwood, 487 U.S. 552, 571, 108 S.Ct. 2541, 2553, 101 L.Ed.2d 490 (1988) (stating that "it is well established that the abuse-of- discretion standard applies" to review of a district court's award of fees).

A. Audit Fees

The Trustees sought two types of audit fees in the district court: (1) the costs of the routine audit that discovered JPR's shortfall in payments, and (2) fees for 24 hours of work performed in connection with the merits of the delinquency litigation before the district court. The district court denied both categories of audit fee, for reasons that we conclude were correct.

1. Costs of the Routine Audit

The Trust Agreement establishing the Health and Welfare Fund contains a provision entitled "Default and Payment" which provides that, in the event of "failure to pay such monthly contributions in full within the time above provided,"

any person in default may be required at the discretion of the Trustees to pay as liquidated damages such amounts as the Trustees may determine, including interest up to the maximum permitted by law, together with all expenses of collection incurred by the Trustees, including, but not limited to reasonable counsel fees, auditing fees, and court costs, and any other lawful charges for late payment as the Trustees may determine.

The Trust Agreement establishing the Legal Services Fund contains a provision that is, for our purposes, identical (it contains minor differences of wording). Because the two provisions are equivalent, we will refer to them together as "the" Default and Payment Clause.

ERISA requires that "[e]very employer who is obliged to make contributions to a multiemployer plan ... make such contributions in accordance with the terms and conditions of such plan ...," 29 U.S.C. § 1145 (1994), and permits Plan fiduciaries to bring suit to "enforce ... the terms of the plan." 29 U.S.C. § 1132(a)(3) (1994). Thus, if the Default and Payment Clause requires employers who are in default to pay routine auditing fees, ERISA empowers the Trustees to enforce that requirement. See Iron Workers District Council v. Hudson Steel Fabricators & Erectors, Inc., 68 F.3d 1502, 1507 (2d Cir.1995). The district court concluded that the Default and Payment Clause did not include such a requirement, and hence declined to award routine auditing fees.

We review questions of the proper interpretation of ERISA plans de novo. See Carey Canada, Inc. v. Columbia Cas. Co., 940 F.2d 1548, 1554 (D.C.Cir.1991). The Trustees point to the Default and Payment Clause's statement that they may collect "all expenses of collection incurred by the Trustees, including, but not limited to reasonable counsel fees, auditing fees, and court costs," and argue that this allows them to collect all auditing fees, including the costs of the routine audit that discovered an underpayment. We do not think so. This passage only permits the Trustees to recoup those "auditing fees" that qualify as "expenses of collection." An "expense of collection," as that phrase is usually understood, is an expense that results from collection efforts. The Trustees have pointed to no evidence that this phrase means something different here. The fact that the Default and Payment Clause also lists "reasonable counsel fees" and "court costs" as types of "expenses of collection" confirms our reading; both are costs that are only incurred as a result of collection efforts. (This is an application of ejusdem generis, the canon of construction that states that "a general statutory term should be understood in light of the specific terms that surround it." Hughey v. United States, 495 U.S. 411, 419, 110 S.Ct. 1979, 1984, 109 L.Ed.2d 408 (1990).)

This is not to say that auditing fees may never qualify as "expenses of collection." Fees for non-routine follow-up audits performed as a part of the collection process are clearly included in the term. An audit that began as routine might also abruptly change its stripes and become a non-routine audit, if auditors discovered inconsistencies during their...