Anita Foundations, Inc. v. ILGWU Nat. Retirement Fund, s. 737

• Citation: 902 F.2d 185
• Decision Date: 25 April 1990
• Docket Number: 738,D,Nos. 737,s. 737
• Parties: , 12 Employee Benefits Ca 1393 ANITA FOUNDATIONS, INC., Fifth Seasons, Ltd., The Jackfin Company, Inc., Jack Wasserman Company, Inc., Lady Match Mates Corp., Les Belles Ent., Nassau Miss, Inc., Offspring Industries, Inc., Preferred Fashions, Inc., Sig Heller Co., Solvent Finishers, Inc., Plaintiffs-Appellees, v. ILGWU NATIONAL RETIREMENT FUND, Jay Mazur and Joseph Moore, Defendants-Appellants. FASHION AFFILIATES, INC., Plaintiff-Appellee, v. ILGWU NATIONAL RETIREMENT FUND, Defendant-Appellant. ockets 89-7956, 89-7958.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 185

902 F.2d 185

58 USLW 2676, 12 Employee Benefits Ca 1393

ANITA FOUNDATIONS, INC., Fifth Seasons, Ltd., The Jackfin

Company, Inc., Jack Wasserman Company, Inc., Lady Match

Mates Corp., Les Belles Ent., Nassau Miss, Inc., Offspring

Industries, Inc., Preferred Fashions, Inc., Sig Heller Co., Solvent Finishers, Inc., Plaintiffs-Appellees, v. ILGWU NATIONAL RETIREMENT FUND, Jay Mazur and Joseph Moore,

Defendants-Appellants.

FASHION AFFILIATES, INC., Plaintiff-Appellee, v. ILGWU NATIONAL RETIREMENT FUND, Defendant-Appellant.

Nos. 737, 738, Dockets 89-7956, 89-7958.

United States Court of Appeals Second Circuit.

Argued Jan. 25, 1990.

Decided April 25, 1990.

K. Peter Schmidt, Washington, D.C. (Philip W. Horton, Arnold & Porter, Washington, D.C., and Kenneth V. Handal, Michael D. Schissel, Arnold & Porter, New York City, of counsel), for defendants-appellants.

Norman Solovay, New York City (Joan Ruby, Steven Post, Stanley D. Halperin, Phillips, Nizer, Benjamin, Krim & Ballon, of counsel), for plaintiffs-appellees Anita Foundations, Inc., et al.

Louis T. Urbanczyk, New York City (Lester M. Bridgeman, Miller, Hamilton, Snider, Odom & Bridgeman, of counsel), for plaintiff-appellee Fashion Affiliates.

Before VAN GRAAFEILAND, MINER and WALKER, Circuit Judges.

MINER, Circuit Judge:

Defendants-appellants ILGWU National Retirement Fund, Jay Mazur and Joseph Moore (collectively the "Fund") appeal from judgments of the United States District Court for the Southern District of New York (Conboy, J.) awarding attorney's fees to plaintiffs-appellees Anita Foundations, Inc., et al. and Fashion Affiliates, Inc. (collectively the "Employers") under the fee-shifting provision of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Secs. 1001-1461 (1982 & Supp. V 1987), as amended by the Multiemployer Pension Plan Amendments Act (MPPAA), 29 U.S.C. Secs. 1381-1453 (1982 & Supp. V 1987). The district court determined that the Fund's claims for payment of withdrawal liability from the Employers was barred by prior settlement agreements. It awarded attorney's fees to the Employers pursuant to the fee-shifting provision of the MPPAA, 29 U.S.C. Sec. 1451(e), as prevailing parties in these declaratory actions brought to determine their withdrawal liability.

On appeal, the Fund contends that the fiduciary duty it owed to employees/beneficiaries required it to pursue claims for additional withdrawal liability payments as the consequence of a decision in the Ninth Circuit, despite the settlement agreements entered into earlier. However, the Fund does not appeal from so much of the judgment as rejects this contention. It asserts only that the fee awards were an improper exercise of the district court's discretionary powers under section 1451(e). It also maintains that the fee award in the Anita Foundations action was excessive. We find that the Fund asserted its claims in defiance of the public policy favoring settlement agreements and therefore conclude that the district court did not abuse its discretion by assessing attorney's fees against it. We also determine that the fee award in the Anita Foundations action was not excessive. Accordingly, we affirm.

BACKGROUND

This appeal follows the imposition of attorney's fees against the Fund after summary judgment was entered in favor of the Employers. The Fund is a multiemployer plan as defined by ERISA, 29 U.S.C. Secs. 1002(37), 1301(a)(3). The Employers are former contributors that withdrew from the Fund and liquidated their respective business operations between 1982 and 1985. As a result of withdrawal from the Fund, the Employers were notified of a demand for withdrawal liability payments under the MPPAA. ¹ The Employers protested the amounts of liability payments demanded, informing the Fund that they were entitled to an adjustment of liability as liquidating employers under MPPAA section 4225(a), 29 U.S.C. Sec. 1405(a). At the time of the demand, section 4225(a) had not yet been subject to judicial scrutiny, and there were unresolved issues regarding its application.

Beginning in 1984, the Fund and the individual employers entered into various out-of-court settlement agreements providing for adjusted withdrawal liability payments under section 4225(a). In 1986, after the settlements were finalized, the Ninth Circuit adopted an interpretation of section 4225(a) which differed markedly from the interpretation applied by the Fund and the Employers in reaching their settlements. See Trustees of the Amalgamated Ins. Fund v. Geltman Indus. Inc, 784 F.2d 926 (9th Cir.), cert. denied, 479 U.S. 822, 107 S.Ct. 90, 93 L.Ed.2d 42 (1986). It is not disputed that application of the Ninth Circuit's interpretation of section 4225(a) would result in additional withdrawal liability on the part of the Employers here.

In the wake of Geltman, the Fund received three opinion letters from counsel discussing various aspects of the Ninth Circuit decision, including its effect on the settlement agreements previously negotiated. Over two years after the settlements, and long after the Employers had been liquidated, the Fund served the Employers with a notice of demand for additional withdrawal liability payments. The Employers' response, a memorandum advising that the claims were unfounded, was rejected peremptorily by the Fund. Confronted with the possibility of substantial additional liability, liquidated damages and the pay-first-question-later system prescribed by 29 U.S.C. Sec. 1401(d), the Employers commenced these declaratory actions to determine their rights under the settlement agreements.

After finding for the Employers and entering summary judgment in their favor, the district court allowed the Employers to submit a fee request under 29 U.S.C. Sec. 1451(e). Anita Foundations, Inc. v. ILGWU Nat'l Retirement Fund, 710 F.Supp. 983, 988 (S.D.N.Y.1989). The court reviewed submissions from the Employers and held a hearing on the fee application. It awarded $131,738.25 to Anita Foundations, Inc., et al. and $24,300 to Fashion Affiliates. Anita Foundations, Inc. v. ILGWU Nat'l Retirement Fund, 718 F.Supp. 244, 249 (S.D.N.Y.1989).

DISCUSSION

The MPPAA authorizes an employer, beneficiary, plan fiduciary or plan participant who is "adversely affected" by the actions of any party with respect to a multiemployer plan to bring suit for equitable or legal relief. 29 U.S.C. Sec. 1451(a)(1). In addition, the prevailing party in such a suit may be awarded attorney's fees and other expenses pursuant to the fee-shifting provision of the MPPAA. Id. Sec. 1451(e). When the prevailing party in a withdrawal liability suit is the employer, courts exercise cautiously the discretionary power to award fees. See Cuyamaca Meats, Inc. v. San Diego and Imperial Counties Butchers' and Food Employers' Pension Trust Fund, 827 F.2d 491, 500 (9th Cir.1987), cert. denied, 485 U.S. 1008, 108 S.Ct. 1474, 99 L.Ed.2d 703 (1988); Central States, Southeast and Southwest Areas Pension Fund v. 888 Corp., 813 F.2d 760, 767 (6th Cir.1987); Dorn's Transp., Inc. v. Teamsters Pension Trust Fund, 799 F.2d 45, 49-51 (3d Cir.1986).

1. The Appropriate Standard

The Fund raises a threshold question concerning the appropriate standard for a fee award to a prevailing employer in a withdrawal liability suit. Two tests have been considered by the circuits addressing this issue. The first test, which is usually applied to fee applications under the ERISA fee-shifting provision, 29 U.S.C. Sec. 1132(g)(1), entails the examination of five factors. Under this five-factor test a court will consider:

(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 sought to confer a common benefit on a group of pension plan participants.

Miles v. New York State Teamsters Conference, Pension and Retirement Fund Employee Pension Benefit Plan, 698 F.2d 593, 602 n. 9 (2d Cir.), cert. denied, 464 U.S. 829, 104 S.Ct. 105, 78 L.Ed.2d 108 (1983); see also 888 Corp., 813 F.2d at 767. The Fund, however, urges this court to reject the Miles five-factor test in favor of the narrower path followed by the Third Circuit in Dorn's Transportation, Inc. v. Teamsters Pension Trust Fund, 799 F.2d 45 (3d Cir.1986). The Dorn's test allows a prevailing employer to receive attorney's fees "only if the underlying claim against it was frivolous, unreasonable, or without foundation." Id. at 46; accord Park South Hotel Corp. v. New York Hotel Trades Council and Hotel Ass'n of New York City, Inc., Pension Fund, 715 F.Supp. 596, 597 (S.D.N.Y.1989).

With the exception of the Third Circuit, the five-factor test originally adopted for fee requests under section 1132(g)(1) has been applied universally in situations where employers have requested fees under the MPPAA. See, e.g., Rootberg v. Central States, Southeast and Southwest Areas Pension Fund, 856 F.2d 796, 798 (7th Cir.1988); Cuyamaca Meats, 827 F.2d at 500; 888 Corp., 813 F.2d at 767. Choosing an appropriate test for adjudging an employer's fee request under section 1451(e) presents an issue of first impression for this court. We recognize, however, that as an appellate court sitting in review of an award of attorney's fees, our ultimate concern is whether granting the Employers' fee request constituted an abuse of discretion by the district court. See, e.g., Chambless v. Masters, Mates & Pilots Pension Plan, 815 F.2d 869, 871 (2d Cir.1987); Rosario v. Amalgamated Ladies' Garment Cutters' Union, 749 F.2d 1000, 1004 (2d Cir.1984).

As an amendment to ERISA, the MPPAA was designed to strengthen the financial security of multi-employer pension plans. See H.R.Rep. No. 869, 96th Cong., 2d Sess., pt. 1, at 67, reprinted in 1980 U.S.Code Cong. & Admin.News 2918,...