Brytus v. Spang & Co.

• Citation: 203 F.3d 238
• Decision Date: 30 July 1999
• Docket Number: AFL-CIO-CLC
• Parties: (3rd Cir. 2000) JEAN E. BRYTUS; JOHN LAZOR; WHEAT GIACOBBE; JOHN STANKO; STEVE KOTYK; ALEX WARCHOLAK, and others similarly situated; JOHN KOTYK; SAM BORIELLE, JR., and others similarly situated; EDWARD J. GOLONKA, and others similarly situated v. SPANG & COMPANY; UNION NATIONAL BANK; PENSION PLAN, for Former Bargaining Unit Employees of Fort Pitt Bridge and Electric Weld Divisions at Cannonsburg, PA Plant; UNITED STEELWORKERS OF AMERICA,, a labor organization EDWARD J. GOLONKA, and others similarly situated v. SPANG & COMPANY; PENSION PLAN, for Former Bargaining Unit Employees of Fort Pitt Bridge and Electric Weld Divisions at Cannonsburg, PA Plant; UNITED STEELWORKERS OF AMERICA DANIEL P. MCINTYRE, ESQ. and SCHWARTZ, STEINSAPIR, DOHRMANN & SOMMERS, LLP, <A HREF="#fr1-*" name="fn1-*">* Appellants NO. 98-3627 Argued:
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 238

203 F.3d 238 (3rd Cir. 2000)

JEAN E. BRYTUS; JOHN LAZOR; WHEAT GIACOBBE; JOHN STANKO; STEVE KOTYK; ALEX WARCHOLAK, and others similarly situated; JOHN KOTYK; SAM BORIELLE, JR., and others similarly situated; EDWARD J. GOLONKA, and others similarly situated v. SPANG & COMPANY; UNION NATIONAL BANK; PENSION PLAN, for Former Bargaining Unit Employees of Fort Pitt Bridge and Electric Weld Divisions at Cannonsburg, PA Plant; UNITED STEELWORKERS OF AMERICA, AFL-CIO-CLC., a labor organization EDWARD J. GOLONKA, and others similarly situated v. SPANG & COMPANY; PENSION PLAN, for Former Bargaining Unit Employees of Fort Pitt Bridge and Electric Weld Divisions at Cannonsburg, PA Plant; UNITED STEELWORKERS OF AMERICA

DANIEL P. MCINTYRE, ESQ. and SCHWARTZ, STEINSAPIR, DOHRMANN & SOMMERS, LLP,^* Appellants

NO. 98-3627

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued: July 30, 1999

Filed February 7, 2000

Amended Feburary 10, 2000

On Appeal from the United States District Court for the Western District of Pennsylvania, (D.C. Civil No. 88-cv-02548, 91-01041) (District Judge: Hon. Donald J. Lee)

Daniel P. McIntyre (ARGUED) Miami Beach, Florida 33119, William T. Payne Schwartz, Steinsapir, Dohrmann & Sommers, LLP Pittsburgh, PA 15223, Attorneys for Appellants

Carl B. Frankel General Counsel United Steelworkers of America Pittsburgh, PA 15222, Jeremiah A. Collins (ARGUED) Bredhoff & Kaiser, P.L.L.C. Washington, D.C. 20036, Attorneys for Appellee, United Steelworkers of America

Before: SLOVITER, NYGAARD and STAPLETON, Circuit Judges

OPINION OF THE COURT

SLOVITER, Circuit Judge.

Counsel for a class of plaintiffs who were successful in their suit under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. SS 1001-1461, against the sponsor of a pension plan who had terminated the plan and seized the surplus plan assets sought counsel fees, both under the statutory fee shifting provision and from the fund recovered on behalf of the class. The employer/plan sponsor agreed to pay the successful plaintiffs $460,000 in attorney's fees and expenses, pursuant to ERISA's statutory fee provision. The union representing the employees, which opposed payment of any additional fee from the participants' fund, intervened and objected to any additional fees from the fund awarded on behalf of the plan participants and beneficiaries. The District Court denied counsel's application for recovery of fees from the common fund, a position it reaffirmed on reconsideration. Counsel appeals. In reviewing the award of counsel fee, this court determines whether the District Court abused its discretion, see Silberman v. Bogle, 683 F.2d 62, 64-65 (3d Cir. 1982), although in this case the scope of review will be discussed in more detail hereafter.

I.

In 1988 and 1989, counsel initiated two lawsuits on behalf of eight individual plaintiffs against plaintiffs' former employer Spang & Company ("Spang"), alleging that Spang violated ERISA by failing to distribute surplus pension plan assets to retired workers and violated the Labor Management Relations Act ("LMRA"), 29 U.S.C. S 185, by breaching a labor agreement. At the inception of the litigation, the individual plaintiffs assigned their right to a fee award under ERISA to counsel in exchange for counsel's services. Those two lawsuits were later consolidated with a similar lawsuit filed by other plaintiffs and all three suits ultimately were certified as a class action.

In 1995, the District Court, relying on our prior decision in Delgrosso v. Spang & Co., 769 F.2d 928 (3d Cir. 1985) (relating to a similar pension fund at a different Spang plant), found that Spang had wrongfully acquired the surplus assets of an ERISA-protected retirement fund instead of distributing the surplus proportionately to the retirees as required by the pension plan. The court ordered Spang to pay the entire amount of the reversion which Spang had taken when the pension plan terminated, plus interest since August 31, 1988. As a result, the class received approximately $12,500,000. We affirmed the judgment of the District Court. See Brytus v. Spang & Co., 79 F.3d 1137 (3d Cir.) (unpublished table decision), cert. denied, 519 U.S. 818 (1996).

After the District Court had completed the merits phase, the litigating plaintiffs sought reasonable attorney's fees under the statutory fee provision of ERISA, 29 U.S.C. S 1132(g)(1); in the same motion, two of the counsel for the plaintiff class,¹ Daniel P. McIntyre and William T. Payne (referred to herein as "counsel"), "also invoke[d] the common fund doctrine as warranting a recovery of fees out of the fund they have recovered on behalf of the class." App. at 224. Spang did not contest the right of the litigating plaintiffs to recover from it reasonable attorney's fees under the fee provision of ERISA, objecting only as to the hourly rates and costs claimed. The United Steelworkers Association (the "Union") intervened to oppose counsel's motion for the recovery of fees from the common fund.

In its first Memorandum Order on this issue, dated July 14, 1997, the District Court distinguished between counsel's entitlement to reasonable statutory fees and expenses under ERISA and under a common-fund theory. It noted the Union's position that because the action was litigated to judgment under the fee-shifting provision of ERISA, counsel cannot also recover fees under a common fund theory. However, the District Court did not make such a determination as a matter of law, but held that "under the facts and circumstances of this case," counsel were not entitled to recover fees pursuant to a common fund theory. In re Spang & Co. Litig., Nos. 88-1548, 91-1041, slip op. at 2 (W.D. Pa. July 14, 1997) (hereafter "July 14 slip op.").

Counsel moved for reconsideration of that order, asserting that they had not had an opportunity to file a brief in response to the Union's opposition to a common fund fee. Counsel argued that they should be awarded a fee of 20 to 30 percent of the then-$11,500,000 dollar common fund, or approximately $2,300,000 to $3,450,000. Upon reconsideration, the District Court affirmed its earlier order, holding that in its discretion a reasonable fee to be paid by Spang pursuant to the ERISA fee provision was warranted, but that an additional fee award to be paid from the common fund was not. See In re Spang & Co. Litig., Nos. 88-2548, 91-1041, slip op. at 5-6 (W.D. Pa. August 15, 1997) (hereafter "August 15 slip op.").

Counsel appealed from that order. However, because the District Court had not yet quantified the amount of statutory fees, we held the order was not final and dismissed the appeal for lack of jurisdiction. See Brytus v. Spang & Co., 151 F.3d 112 (3d Cir. 1998). Now that the statutory fee award has been quantified, we have jurisdiction pursuant to 28 U.S.C. S 1291 over counsel's renewed appeal from the final order denying additional fees from the common fund.

II.

Under what has been denominated the "American Rule" for payment of fees, "the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys' fee from the loser." Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 247 (1975). Instead, attorneys are paid pursuant to contract with their clients. Over the years, a widespread exception has grown as an increasing number of statutes have authorized payment of attorney's fees by one party to the party that prevailed. The ERISA statutory fee provision is such a congressional enactment. It provides that "the court in its discretion may allow a reasonable attorney's fee and costs of action to either party." 29 U.S.C. S 1132(g)(1).

Pursuant to that statute, the defendant in an ERISA action usually bears the burden of attorney's fees for the prevailing plaintiff or plaintiff class, thus "encourag[ing] private enforcement of the statutory substantive rights, whether they be economic or noneconomic, through the judicial process." Report of the Third Circuit Task Force, Court Awarded Attorney Fees 15 (Oct. 8, 1985), reprinted at 108 F.R.D. 237, 250. Although the statutory fee belongs to the litigating party, often, as in this case, plaintiffs will assign their right to any statutory fee to their counsel at the outset of the litigation, thus making payment of fees to counsel contingent on successful litigation and attainment of the statutory fee from the losing party.

Another well-recognized exception to the general principle that an attorney must look to his or her own client for payment of attorney's fees is the common fund doctrine. Since the decisions in Trustees of the Internal Improvement Fund v. Greenough, 105 U.S. 527, 26 L.Ed. 1157 (1882), and Central Railroad & Banking Co. of Ga. v. Pettus, 113 U.S. 116 (1885), the Supreme Court has consistently recognized "that a litigant or a lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney's fee from the fund as a whole." Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980). The doctrine reflects the traditional practice in equity, and "rests on the perception that persons who obtain the benefit of a lawsuit without contributing to its cost are unjustly enriched at the successful litigant's expense." Id. Parties as well as counsel can seek fees under the common fund doctrine, for the doctrine rests on a theory of unjust enrichment on the part of beneficiaries of a successful lawsuit at the expense of the litigants. See id.

The distinction between the fee in these two types of cases, statutory fee and common fund fee, has practical relevance. First, it determines who pays the awarded fee. Under the common fund doctrine the plaintiff class as a whole rather than the defendant bears the burden of attorney's fees. Second, it affects how the fee is calculated, as the "lodestar" method applied to set a reasonable attorney's fee under a statutory fee provision, see Hensley...