Fase v. Seafarers Welfare and Pension Plan, 326

• Decision Date: 22 December 1978
• Docket Number: D,No. 326,326
• Parties: 100 L.R.R.M. (BNA) 2221, 85 Lab.Cas. P 11,148, 1 Employee Benefits Ca 1474 Adrian FASE, Individually and on behalf of all others similarly situated, Plaintiff-Appellant, v. SEAFARERS WELFARE AND PENSION PLAN, Joseph DiGiorgio, Individually and in his capacity as the Secretary-Treasurer of the Seafarers Welfare and Pension Plan, Price C. Spivey, Individually and in his capacity as the Administrator of the Seafarers Welfare and Pension Plan, and Fred Farnen, Lindsey Williams, Joseph DiGiorgio, Frank Drozak, E. Aubusson, Capt. Joseph Cecire, James Hayes, C. J. Bracco, William Crippen, Irving M. Saunders, in their capacity as Trustees of the Seafarers Pension Plan, Defendants-Appellees. ocket 78-7368.
• Court: U.S. Court of Appeals — Second Circuit

Page 112

589 F.2d 112

100 L.R.R.M. (BNA) 2221, 85 Lab.Cas. P 11,148,

1 Employee Benefits Ca 1474

Adrian FASE, Individually and on behalf of all others similarly situated, Plaintiff-Appellant, v. SEAFARERS WELFARE AND PENSION PLAN, Joseph DiGiorgio Individually and in his capacity as the Secretary-Treasurer of the Seafarers Welfare and Pension Plan, Price C. Spivey Individually and in his capacity as the Administrator of the Seafarers Welfare and Pension Plan, and Fred Farnen, Lindsey Williams, Joseph DiGiorgio, Frank Drozak, E. Aubusson, Capt Joseph Cecire, James Hayes, C. J. Bracco, William Crippen Irving M. Saunders, in their capacity as Trustees of the Seafarers Pension Plan, Defendants-Appellees.

No. 326, Docket 78-7368.

United States Court of Appeals, Second Circuit.

Argued Nov. 8, 1978.

Decided Dec. 22, 1978.

David S. Preminger, New York City (Legal Services for the Elderly Poor, New York City), for plaintiff-appellant.

Carolyn Gentile, Brooklyn, N.Y., for defendants-appellees.

Before FRIENDLY, MANSFIELD and MESKILL, Circuit Judges.

FRIENDLY, Circuit Judge:

This is an appeal from an order of the District Court for the Eastern District of New York denying a motion by plaintiff's attorney for the award of counsel fees for his successful prosecution of an action for disability pension benefits by plaintiff Fase against defendant Seafarers Welfare and Pension Plan (SWPP). Fase claimed that a provision of the Plan which required an applicant for a disability benefit who was covered by the Social Security Act or the Railroad Retirement Act to apply for the disability benefits provided by such acts and await the determination of the Social Security Administration or the Railroad Retirement Board before becoming entitled to disability benefits under the Plan violated § 302(c)(5) of the Taft-Hartley Act, 29 U.S.C. § 186(c)(5), and unspecified provisions of ERISA, 29 U.S.C. §§ 1001 Et seq. Fase did not contend that it was illegitimate for the Plan to defer to the decisions of these agencies in determining eligibility. Rather he argued that the Plan was invalid insofar as it refused retroactive payment of benefits where the agency had taken an unreasonably long time in determining that he had indeed been eligible.

The action was brought as a class action but the late Judge Judd denied certification under F.R.Civ.P. 23(a). In an opinion reported in 432 F.Supp. 1037 (1977), familiarity with which is assumed, Judge Platt granted plaintiff's motion for summary judgment with respect to the claim under the Taft-Hartley Act ¹ and consequently did not reach what he characterized as "the more difficult question of jurisdiction under ERISA." Id. at 1039. Although the complaint had sought "costs and interests, and attorneys fees", the judgment, entered by the clerk on June 15, 1977, recited only that it is

Ordered and Adjudged that plaintiffs' motions for summary judgment as to pension benefits from August 1, 1972 to February 1, 1975 and on the defendants' counter claim, are granted.

On July 13, 1977, SWPP filed a concededly untimely notice of appeal and moved for an extension of time under F.R.A.P. 4(a); Judge Platt granted the motion on September 12. Plaintiff contended on appeal that the district court had erred in granting the extension since there was no sufficient showing of excusable neglect. We sustained this contention and dismissed the appeal, 574 F.2d 72 (1978).

Meanwhile plaintiff had moved, on July 14, 1977, for the award of attorney's fees of $20,175 ² "on the theory that he has secured a common benefit accruing to other Plan beneficiaries" and also because such an award was authorized by § 502(g) of ERISA, 29 U.S.C. § 1132(g), in any action arising under that statute. Expressing some doubt whether he had authority to entertain the motion in light of F.R.Civ.P. 59(e), which requires that

A motion to alter or amend the judgment shall be served not later than 10 days after entry of the Judgment

the judge denied the motion on the merits. ³

The judge was clearly justified in concluding that the attorney's efforts had not produced such financial benefits to persons other than Fase as would warrant the imposition of an attorney's fee upon SWPP. In denying the motion for class certification, Judge Judd had found that there were only twenty-four other members of the Plan who had encountered some delays as a result of the requirement of obtaining a determination from the Social Security Administration and only two who had experienced such long delays as plaintiff. Under the peculiar circumstances of this case, where defendant's appeal was dismissed as untimely, it is at least doubtful whether Fase's unreviewed judgment would work as a collateral estoppel in favor of another similarly situated plaintiff under Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971), even though inability to obtain review was the result of SWPP's neglect, see Restatement of Judgments 2d § 88 (Tent.Draft No. 2, April 15, 1975). ⁴ The doubt is particularly acute in view of the questions concerning the applicability of § 302(c)(5) of the Taft-Hartley Act to a case like this which were raised in Lugo v. Employees Retirement Fund of Illumination Products Industry, 529 F.2d 251, 254-55 (2 Cir.), Cert. denied, 429 U.S. 826, 97 S.Ct. 81, 50 L.Ed.2d 88 (1976), and Riley v. MEBA Pension Trust, 570 F.2d 406, 412-13 (2 Cir. 1977). Even if Blonder-Tongue should be applicable, the financial benefit of Fase's success would accrue to a relatively few members of the Plan, which provides pension as well as disability benefits, and any fee payable to counsel other than by his client should be paid by them. Cf. Nolte v. Hudson Nav. Co., 47 F.2d 166 (2 Cir. 1931); Abbott, Puller & Myers v. Peyser, 75 U.S.App.D.C. 162, 124 F.2d 524 (1941); United States v. ASCAP, 466 F.2d 917, 918 (2 Cir. 1972); Dawson, Supra, 87 Harv.L.Rev. 1597, 1628-29, 1633-34 (1974). The case is thus quite unlike Van Gemert v. The Boeing Company, decided December 21, 1978 (en banc), where we held that counsel fees may be awarded against the total judgment recovered in a class action and not merely against the share claimed by the members of the class.

To overcome this obstacle plaintiff's attorney invokes Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970), and Hall v. Cole, 412 U.S. 1, 93 S.Ct. 1943, 36 L.Ed.2d 702 (1973).

The Mills case concerned a corporate merger of Electric Auto-Lite Company with its controlling stockholder, Mergenthaler Linotype Company. Some minority shareholders of Auto-Lite, complaining both derivatively on behalf of the corporation and as representatives of all minority shareholders, had shown that the proxy statement soliciting their assent to the merger was materially misleading in that it did not disclose that all of Auto-Lite's directors were nominees of or controlled by Mergenthaler. In allowing them attorney's fees in the absence of any monetary recovery, the Court reasoned that plaintiffs had furnished "a benefit to all shareholders by providing an important means of enforcement of the proxy statute," Mills, supra at 396, 90 S.Ct. at 628. Hall v. Cole applied the Mills principle to sustain an award of counsel fees to a union member who had secured reinstatement after being expelled in violation of the "Labor Bill of Rights" contained in § 101(a)(2) of the Labor-Management Reporting and Disclosure Act of 1959, 29 U.S.C. § 411(a)(2). Counsel alleges that he performed a similar service in bringing the Plan into conformity with the Taft-Hartley Act, thereby shielding the Plan from possible loss of tax exemption under 26 U.S.C. §§ 401 and 501(a).

While the contention is ingenious, the district court was justified in dismissing it as pressing Mills and Hall v. Cole beyond the breaking point, especially in light of the admonitions of Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 263-71, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). Apart from the limited effect of the unreviewed district court opinion, 432 F.Supp. 1037, as collateral estoppel or even as precedent which we have noted above, Fase was not vindicating any broad national policy such as truth in securities ⁵ or union free speech. The point at issue was SWPP's having adopted a method for determining eligibility for disability benefits which would ease its administrative burdens and apparently worked satisfactorily in most instances but which the district court found to have caused undercompensation to Fase because of the long delays he had encountered and the absence of any provision for retroactive payment. Although I.R.C. § 401 requires that in order to be qualified a trust must be for the exclusive benefit of employees or their beneficiaries, the Internal Revenue Service makes its own determination of eligibility and we have been cited to no authority that the I.R.S. regards itself as bound by court decisions finding plans violative of § 302(c) of Taft-Hartley because of being structurally unfair. We were told at argument that the Internal Revenue Service had never questioned the eligibility of the Plan for tax exemption and that it has renewed its approval despite the Plan's having retained the provision found objectionable as applied to Fase. Appellant has not argued that his fees should be allowed by analogy to the principle that the lawyer for the beneficiary of an estate or trust being administered by a fiduciary can recover from the fund for participating in litigation that helps to resolve uncertainty over the meaning or validity of a provision in the governing instrument, see Dawson, Supra, 87 Harv.L.Rev. at 1629-30; in any event such cases rest on the conclusive effect of the litigation, which Fase's lacked. The district court thus acted well within the bounds of its discretion in concluding that any benefit conferred by plaintiff's attorney on anyone other...