Actors' Equity Ass'n v. American Dinner Theatre Institute

• Decision Date: 07 November 1986
• Docket Number: 85-2368,Nos. 85-2334,s. 85-2334
• Parties: 123 L.R.R.M. (BNA) 2872, 105 Lab.Cas. P 12,065 ACTORS' EQUITY ASSOCIATION, Appellee, v. AMERICAN DINNER THEATRE INSTITUTE; Firehouse Dinner Theatre; and Richard Mueller, Appellants. ACTORS' EQUITY ASSOCIATION, Appellant, v. AMERICAN DINNER THEATRE INSTITUTE; Firehouse Dinner Theatre; and Richard Mueller, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1038

802 F.2d 1038

123 L.R.R.M. (BNA) 2872, 105 Lab.Cas. P 12,065

ACTORS' EQUITY ASSOCIATION, Appellee, v. AMERICAN DINNER THEATRE INSTITUTE; Firehouse Dinner

Theatre; and Richard Mueller, Appellants.

ACTORS' EQUITY ASSOCIATION, Appellant, v. AMERICAN DINNER THEATRE INSTITUTE; Firehouse Dinner

Theatre; and Richard Mueller, Appellees.

Nos. 85-2334, 85-2368.

United States Court of Appeals,

Eighth Circuit.

Submitted June 10, 1986.

Decided Oct. 7, 1986.

Rehearing Denied Nov. 7, 1986.

Warren S. Zweiback, Omaha, Neb., for appellants.

Peter R. Meyers, Chicago, Ill., for appellees.

Before JOHN R. GIBSON and MAGILL, Circuit Judges; and REGAN, Senior District Judge. ^*

MAGILL, Circuit Judge.

This is an appeal from an order of the district court, granting attorneys' fees to Actors' Equity Association in an action to compel arbitration of a wrongful discharge. The action was based upon Sec. 301 of the Labor-Management Relations Act, 29 U.S.C. Sec. 185. We reverse.

I. BACKGROUND.

On February 1, 1982, appellee, Actors' Equity Association ("Actors") and appellant, American Dinner Theatre Institute ("Theatre") entered into a national collective bargaining agreement ("Agreement"). Actors is the national bargaining agent for all acting and performing employees of many dinner theatres throughout the country, maintaining its midwest office in Chicago, Illinois. Theatre is an unincorporated trade association from Sarasota, Florida, which acts on behalf of its members, including the appellants Firehouse Dinner Theatre ("Firehouse") and Richard Mueller. ¹ Firehouse is a Nebraska limited partnership with its sole place of business in Omaha, Nebraska. Mueller is the producer of Firehouse and a resident of Omaha, Nebraska. Neither Firehouse nor Mueller has had any substantial contacts with Illinois.

On December 23, 1983, Mueller terminated the services of actress Wysandria Woolsey at Firehouse. Ms. Woolsey was terminated because she allegedly did not "play her role with sufficient believability," which affected her performance and that of the remainder of the cast.

Rule 67E of the Agreement permitted termination only for "just cause." Any challenge under Rule 67E by Actors was required to go to mandatory arbitration under Rule 4 of the Agreement. Rule 67E also called for arbitration at "the site of the Dinner Theatre" (Omaha, Nebraska).

On January 27, 1984, Actors filed a demand for arbitration with the American Arbitration Association at Actors' regional office in Chicago and requested a hearing in Chicago. On March 22, 1984, the appellants responded by asserting that venue was proper only in Omaha, pursuant to Rules 4 and 67E of the Agreement. On April 3, 1984, the American Arbitration Association in Chicago advised all parties that the appellants were correct and that the arbitration proceeding was to be held in Omaha.

On June 4, 1984, the appellants informed Actors, by letter, that pre-dispute mandatory arbitration agreements were illegal under Nebraska state law. In the letter, the appellants also asserted that pursuant to Rule 34 of the Agreement, the parties had contracted to render nugatory any provision of the Agreement that violated state law. Rule 34 provided:

To the extent that any rule or provision contained herein is illegal or unenforceable in any state or governmental subdivision thereof, county or city, such rule or provision shall be deemed not to be binding upon the parties therein. Any such illegality or unenforceability of any rule, provision or agreement hereunder shall not affect any other rule, provision or agreement herein. (Emphasis added).

Irrespective of the general principles of federal arbitration law, the appellants thus contended that the parties, in Rule 34 of the Agreement, freely and willingly contracted to limit the scope of arbitration to matters which were legal and enforceable under Nebraska law. Actors thereafter contacted the appellants on several occasions, notifying them that, according to the law, binding arbitration was required.

On September 25, 1984, Actors instituted an action against the appellants in the United States District Court for the Northern District of Illinois, Eastern Division, seeking to compel arbitration under section 301 of the Labor-Management Relations Act, 29 U.S.C. Sec. 185. Actors also sought a declaratory judgment under 28 U.S.C. Secs. 2201 and 2202, along with attorneys' fees and costs.

On October 18, 1984, the appellants filed a motion to dismiss, based on the ground that the Illinois court had no personal jurisdiction over the appellants. On March 1, 1985, Judge George N. Leighton granted the Illinois dismissal holding:

It is clear from the parties' submissions that the entirety of this action was concentrated in Omaha, Nebraska. Any alleged injury occurred in Nebraska. The allegedly injured party Wysandria Woolsey, is a resident of either Nebraska or Colorado. Defendant Mueller resides in Omaha, and defendant Firehouse is also located in Omaha. Consequently, the court concludes that defendants' conduct is too remote from Illinois to justify the assertion of personal jurisdiction over them.

* * * Accordingly, in the interest of justice, it is ordered that this suit is transferred to the United States District Court for the District of Nebraska (Omaha), where this action should have been brought. (Emphasis added).

The transfer to Omaha was completed on March 13, 1985. On May 3, 1985, Actors filed a motion for summary judgment. On July 1, 1985, the district court granted Actors' motion and ordered the appellants to proceed to arbitration of the dispute. Thereafter, neither party resisted arbitration.

In the July 1 ruling, the district court also ordered a hearing to determine whether an award of attorneys' fees to Actors would be appropriate. This hearing was held in late July. On August 13, 1985, the district court found the award "proper," citing Lackawanna Leather Co. v. United Food & Commercial Workers International Union, 706 F.2d 228, 232 (8th Cir.1983) (en banc), and asked Actors to submit an itemization of fees.

On October 2, 1985, the district court entered an award of attorneys' fees and expenses in favor of Actors in the amount of $5,484.45, which included only those fees and expenses incurred after the transfer to Nebraska. The appellants appeal the award of attorneys' fees. Actors cross-appeals for additional attorneys' fees and costs incurred prior to the transfer from Illinois to Nebraska in the sum of $7,571.95.

II. "AMERICAN RULE" ON ATTORNEYS' FEES.

A. The Bad Faith Exception.

The appellants contend that the district court erred in awarding attorneys' fees to Actors based on the court's findings of bad faith. The appellants assert that at all times they defended and argued against arbitration in good faith.

The well-settled "American rule" on the payment of attorneys' fees in federal litigation is that, in the absence of a statute or an enforceable contract, each party is responsible for his or her own fees. Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 247, 257, 95 S.Ct. 1612, 1616, 1621, 44 L.Ed.2d 141 (1975). Over the years, however, courts have established limited exceptions to the rule. One such exception authorizes a federal court to award attorneys' fees to the prevailing party "when the losing party has 'acted in bad faith, vexatiously, wantonly, or for oppressive reasons.' " Id. at 258-59, 95 S.Ct. at 1622 (quoting F.D. Rich Co. v. United States ex rel. Industrial Lumber Co., 417 U.S. 116, 129, 94 S.Ct. 2157, 2165, 40 L.Ed.2d 703 (1974)); see Lackawanna Leather Co. v. United Food & Commercial Workers International Union, 706 F.2d 228, 232 (8th Cir.1983) (en banc); General Drivers, Helpers and Truck Terminal Employees, Local No. 120 v. Sears, Roebuck & Co., 535 F.2d 1072, 1076-77 (8th Cir.1976).

Crucial to the evaluation of the bad faith exception is the Supreme Court's admonition that the underlying rationale of fee-shifting is punishment of the wrongdoer rather than compensation of the victim. Hall v. Cole, 412 U.S. 1, 5, 93 S.Ct. 1943, 1946, 36 L.Ed.2d 702 (1973); accord Nepera Chemical, Inc. v. Sea-Land Service, Inc., 794 F.2d 688, 702 (D.C.Cir.1986). This rationale accounts for the stringency of the bad faith standard. See Nepera, 794 F.2d at 702 & n. 108. Accordingly, fee-shifting should occur "only when extraordinary circumstances or dominating reasons of fairness so demand." Id. at 702 & nn. 109-10.

Since Alyeska, this court has recognized that attorneys' fees may be awarded in an action brought under section 301, but only where the losing party clearly acted in bad faith. International Brotherhood of Electrical Workers, Local No. 265 v. O.K. Electric Co., 793 F.2d 214, 216-17 (8th Cir.1986) (per curiam) (affirmance of no award of attorneys' fees in action to enforce arbitration award); Industrial Ass'n of Heat and Frost Insulators and Asbestos Workers, Local Union 34 v. General Pipe Covering, Inc., 792 F.2d 96, 102 (8th Cir.1986) (reversal of attorneys' fees in action to enforce arbitration award); International Union, United Automobile, Aerospace & Agriculture Implement Workers v. United Farm Tools, Inc., 762 F.2d 76, 77 (8th Cir.1985) (per curiam) (affirmance of attorneys' fees in action to enforce arbitration award); Cronin v. Sears, Roebuck & Co., 588 F.2d 616, 620 (8th Cir.1978) (reversal of attorneys' fees in action for breach of collective bargaining agreement); General Drivers, 535 F.2d 1072, 1076-77 (no attorneys' fees in action to enforce arbitration award); Richardson v. Communications Workers, 530 F.2d 126, 132-33 (8th Cir.) (affirmance of attorneys' fees for unions' intentional failure to discharge its fiduciary duty), cert. denied, 429 U.S. 824, 97 S.Ct. 77, 50 L.Ed.2d 86 (1976).

B. Standards of Review.

A finding of bad faith or lack thereof is a factual determination for the trial court and may be reversed only if clearly erroneous. See Fed.R.Civ.P. 52(a); ...