Carpenters Southern California Administrative Corp. v. Russell

• Decision Date: 28 February 1984
• Docket Number: No. 82-6107,82-6107
• Citation: 726 F.2d 1410
• Parties: 5 Employee Benefits Ca 1611 CARPENTERS SOUTHERN CALIFORNIA ADMINISTRATIVE CORPORATION, Plaintiff-Appellant, v. Larry RUSSELL, Sr., an individual doing business under the fictitious name of Larry Russell Construction, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1410

726 F.2d 1410

5 Employee Benefits Ca 1611

CARPENTERS SOUTHERN CALIFORNIA ADMINISTRATIVE CORPORATION, Plaintiff-Appellant, v. Larry RUSSELL, Sr., an individual doing business under the

fictitious name of Larry Russell Construction,

Defendant-Appellee.

No. 82-6107.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 9, 1983.

Decided Feb. 28, 1984.

Colin M. Long, Richard A. Brownstein, Los Angeles, Cal., for plaintiff-appellant.

Eugene F. McMenamin, Atkinson, Andelson, Loya, Ruud & Romo, Long Beach, Cal., for defendant-appellee.

Appeal from the United States District Court for the Central District of California.

Before SNEED, NELSON, and REINHARDT, Circuit Judges.

SNEED, Circuit Judge:

Carpenters Southern California Administrative Corporation, Inc., an administrator of employee benefit plans for construction workers in southern California, sued Larry D. Russell, Sr., pursuant to section 502 of the Employee Retirement Income Security We affirm the order granting summary judgment, and we remand this case for reconsideration of the fee award in the light of this opinion.

Act of 1974, 29 U.S.C. Sec. 1132, for failure to make benefit contributions. The district court granted summary judgment in favor of Russell and awarded him attorney's fees.

I. FACTS

In 1969, appellee Larry D. Russell, Sr. (Russell) established a contracting business as a sole proprietor under the name Larry Russell Construction. Because he did not possess his own California contractor's license, Russell qualified and operated his business by associating it with a license held by Hulen Darby. ¹ In order to obtain union contracts, Larry Russell Construction in 1969 entered into a "prehire" agreement pursuant to section 8(f) of the National Labor Relations Act, 29 U.S.C. Sec. 158(f), with the United Brotherhood of Carpenters and Joiners of America, AFL-CIO, and affiliated locals (Union). ² The prehire agreement required that Larry Russell Construction make benefit contributions on behalf of its employees.

Russell terminated his contracting business in 1971. As a consequence, Larry Russell Construction ceased to exist at the same time. Union records of a meeting in August 1971 indicate that Russell informed the Union that Larry Russell Construction was no longer in business. In November 1971, Darby disassociated his license from Russell. Thereafter Russell could not legally continue his contracting business and he earned his living by working as a carpenter until August 1977.

In August 1977 Russell established a second contracting business. This time he obtained his own contractor's license which had the same number as the one he operated under when associated with Darby. The name on the license was that of Russell Construction, not Larry Russell Construction. Since its inception in 1977, Russell Construction has operated openly as a nonunion business.

The Union contacted Russell in 1981 and claimed that Russell Construction remained bound by the 1969 prehire agreement. Russell rejected this claim and responded by filing a representation petition with the National Labor Relations Board (NLRB). The Union countered by filing an unfair labor practice charge. At an NLRB hearing on July 1, 1981, the Union withdrew its charge and disclaimed interest in representing the employees of Russell Construction.

In the weeks following the NLRB hearing, Carpenters Southern California Administrative Corporation, Inc. (Carpenters Southern) recorded mechanics liens against jobsites at which Russell Construction had been employed. These liens were based on claims for alleged delinquencies in fringe benefit contributions for the employees of Russell Construction.

On December 30, 1981, Carpenters Southern filed this action against Russell seeking damages pursuant to section 502 of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Sec. 1132. As already noted, the district court granted Russell's motion for summary judgment on November 16, 1982 and awarded Russell attorney's fees pursuant to 29 U.S.C. Sec. 1132(g)(1).

II. ISSUES

The principal issue in this case is whether the district court correctly held that Russell is not bound by the 1969 prehire agreement. Inasmuch as we hold that the district court did not err, it then becomes necessary to determine if the district court acted properly in awarding Russell attorney's fees pursuant to 29 U.S.C. Sec. 1132(g)(1), and whether Russell is entitled to an award of fees for costs incurred in this appeal.

III. THE REACH OF THE 1969 PREHIRE AGREEMENT

Carpenters Southern's case rests on its understanding of the reach of the prehire agreement Russell signed in 1969 on behalf of his previous business. For him to be obligated to make benefit contributions for the employees of his present business, Russell Construction, there must exist a binding labor agreement between the Union and Russell that extends to the business being conducted under the name of Russell Construction. See Washington Area Carpenters' Welfare Fund v. Overhead Door Co., 681 F.2d 1, 9 (D.C.Cir.1982), cert. denied, --- U.S. ----, 103 S.Ct. 2085, 77 L.Ed.2d 296 (1983); Seymour v. Coughlin Co., 609 F.2d 346 (9th Cir.1979), cert. denied, 446 U.S. 957, 100 S.Ct. 2929, 64 L.Ed.2d 816 (1980).

The district court relied on the principle that a bona fide and actual discontinuance of a business by an employer, who previously had entered into a collective bargaining agreement, precludes the binding of a successor employer to the substantive terms of that earlier agreement. See Brick Masons Pension Trust v. Wallace, 106 L.R.R.M. 2375, 2377 (C.D.Cal.1980), aff'd mem. in relevant part, 672 F.2d 921 (9th Cir.1982). The business conducted as Larry Russell Construction, the court found, was terminated in good faith and without antiunion animus. Invoking the principle stated above, the district court held that Russell, doing business as Russell Construction, is not bound by the 1969 agreement as either an "alter ego" of or a "successor employer" to Larry Russell Construction. ³

Carpenters Southern argues that the district court ignored the actual provisions of the prehire agreement. That agreement, appellant claims, applies to Russell personally in whatever business he operates, until he terminates the agreement according to its terms. ⁴ Section 8 of the prehire agreement provides that the agreement is renewed each year on May 1, unless either party gives written notice of a desire to change or cancel it at least sixty days before May 1. Because Russell never provided written notice of his intent to terminate the 1969 agreement, Carpenters Southern argues that he remained obligated to make benefit contributions when he established his second contracting business in 1977. ⁵

The district court rejected these arguments and we affirm. In cases of this sort we should proceed cautiously and on a case-by-case basis. Cf. Zinser-Furby, Inc. v. San Diego County Dist. Council of Carpenters, 681 F.2d 1171, 1172 (9th Cir.1982) (case-by-case adjudication is appropriate method for interpreting short-form labor agreements). The unusual, but simple, circumstances of this case, considered together, persuade us that Russell's obligations under the 1969 agreement terminated and he is not obligated to make benefit contributions for the employees of Russell Construction.

The facts influencing our conclusion include the 1971 meeting at which Russell expressly told the Union that he was no longer in business. Union records preserved this statement in writing. We also note that Larry Russell Construction was terminated in good faith and Russell subsequently earned his living for six years by working as a carpenter. When he reentered the contracting business in 1977, he operated openly as a nonunion company. ⁶ Four years elapsed before Carpenters Southern asserted its claim for benefit contributions based on the 1969 prehire agreement. The totality of these circumstances make unconvincing the argument that Russell remains bound because he did not provide written notice of his intent to terminate the 1969 agreement.

While perhaps the promise to make benefit contributions should not be viewed entirely as a simple promise enforceable only under ordinary contract principles, it is true that the obligation such a promise imposes does not possess eternal life. Here that life was effectively snuffed out prior to Russell's 1977 reentry into the construction business.

IV.

THE AWARD OF ATTORNEY'S FEES UNDER 29 U.S.C. Sec. 1132(g)(1)

The district court's award of attorney's fees was made pursuant to 29 U.S.C. Sec. 1132(g)(1). Carpenters Southern argues that the statute does not allow the award of fees to prevailing defendant employers in suits brought to enforce section 515 of ERISA, 29 U.S.C. Sec. 1145. ⁷ Carpenters Southern further contends that even if the statute does allow fee awards to defendants in such cases, the award in this case was improper.

We first consider the language of the statute. In pertinent part, section 502(g) of ERISA provides:

(1) In 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.

(2) 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--

* * * (D) reasonable attorney's fees and costs of the action, to be paid by the defendant,

* * *

29 U.S.C. Sec. 1132(g).

Subsections (g)(1) and (g)(2) indicate that the court in all situations save one has discretion to make fee awards to either party, but that fees must be awarded to the plan if a fiduciary prevails in an action to recover delinquent contributions. See Sapper v. Lenco Blade, Inc., 704 F.2d 1069, 1072-73 (9th Cir.1983). Carpenters...