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Boland v. Thermal Specialties, Inc.

United States District Court, District Circuit

September 5, 2013

JAMES BOLAND, as Trustee of, and on behalf of, the Bricklayers & Trowel Trades International Pension Fund, et al., Plaintiffs,


JAMES E. BOASBERG, District Judge.

When Thermal Specialties Acquisition Company, LLC, acquired Thermal Specialties, Inc., an industrial-services company, TSAC refused to fulfill TSI's collective-bargaining obligations to its union members. In particular, TSAC chose to cease contributions to employee pension funds. Plaintiffs, who are Trustees of several funds, then sued both companies, arguing that TSAC was merely TSI's "alter ego" and that it was thus bound by the collective-bargaining agreements between TSI and a local union. This Court rejected the Trustees' claim, however, finding that because TSAC's ownership was "decidedly different" from TSI's, alter-ego doctrine did not apply. See Boland v. Thermal Specialties, Inc., & Thermal Specialties Acquisition Co. (Boland I), 2013 WL 3043407 (D.D.C. June 19, 2013), at *1. As a result, the Court granted TSI's and TSAC's Motions for Summary Judgment, holding that Defendants were not liable for delinquent fringe-benefit contributions owed under the agreements.

TSI and TSAC have now filed separate Motions asking this Court to award them attorney fees pursuant to § 502(g)(1) of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1132(g)(1). TSI requests fees of almost $140, 000, and TSAC asks for more than $60, 000. The Trustees oppose those requests. Because the Court concludes that neither TSI nor TSAC is entitled to fees, it will deny the Motions.

I. Procedural Background

The facts of this case are largely set forth in Boland I. See 2013 WL 3043407, at *1-3. In brief, Robert and Paula Caffey sold their family company, TSI, to Mitchell Myers, sole proprietor of TSAC and a former employee of TSI. Upon acquiring the company, Myers decided that TSAC would no longer be bound by TSI's union obligations. Of particular interest here, this meant that TSAC would no longer contribute to employee pension funds.

Just weeks after the sale, the Union filed suit with the National Labor Relations Board, alleging that TSAC's decision constituted an unfair labor practice because TSAC was an alter ego of TSI and therefore bound by TSI's existing collective-bargaining agreements. See TSI MSJ, Exh. 31 (NLRB Charge No. 17-CA-61737 (July 27, 2011)). Both the Acting Regional Director of NLRB Region 17 and NLRB's General Counsel ruled against the Union. See Pls. MSJ, Exh. R (Letter from Naomi L. Stuart, Acting Reg'l Dir., NLRB Region 17, to Thomas F. Birmingham (Sept. 28, 2011)); id., Exh. S (Letter from Lafe E. Solomon, Acting Gen. Counsel, NLRB, to Birmingham (Dec. 22, 2011)). Plaintiff Trustees then filed suit with this Court based on the same alter-ego theory, seeking to hold the companies jointly and severally liable for deficient pension contributions since July 1, 2011. Although Plaintiffs, who were not parties to the NLRB case, argued that discovery had unearthed new and damning evidence of TSI's and TSAC's wrongdoing, this Court granted Defendants' Motions for Summary Judgment. TSI and TSAC have now moved for attorney fees.

II. Legal Standard

ERISA includes several attorney-fee provisions. For example, an award of attorney fees is mandatory for certain plaintiffs prevailing on an ERISA delinquent-contribution claim. See 29 U.S.C. § 1132(g)(2) (In any action "by a fiduciary for or on behalf of a plan to enforce [the delinquent-contribution provision, 29 U.S.C. § 1145] in which a judgment in favor of the plan is awarded, the court shall award the plan... reasonable attorney's fees and costs of the action."). When it is the defendant (or a plaintiff not covered by paragraph (g)(2)) that prevails on the merits, on the other hand, its motion for attorney fees is governed by a different - and discretionary - provision: § 502(g)(1) of ERISA. That provision allows, but does not require, the Court to award attorney fees to either party. See 29 U.S.C. § 1132(g)(1) ("In any action... other than [one brought under paragraph (g)(2)]... the court in its discretion may allow a reasonable attorney's fee and costs of action to either party."). As Defendants have successfully defended the suit here, therefore, the Court may award fees if it sees fit to do so.

In making such a determination, under the prevailing standard in this Circuit, the Court must consider the five so-called Eddy factors, including: (1) the losing party's culpability or bad faith; (2) the losing party's ability to satisfy an award; (3) the deterrent effect of the award; (4) the value of the victory and the significance of the legal issue involved; and (5) the relative merits of the parties' positions. Eddy v. Colonial Life Ins. Co. of America , 59 F.3d 201, 206 (D.C. Cir. 1995). None of these factors is dispositive: they "are neither exclusive nor quantitative, thereby affording leeway to the district courts to evaluate and augment them on a case-by-case basis." Id.

Nonetheless, "[a]lthough the five factors... do not explicitly differentiate between plaintiffs and defendants, consideration of these factors will seldom dictate an assessment of attorneys' fees against ERISA plaintiffs." Marquardt v. North American Car Corp. , 652 F.2d 715, 719-20 (7th Cir. 1981). This is because the "culpability" of a losing plaintiff "significantly differs" from that of a losing defendant: "A losing defendant must have violated ERISA, thereby depriving plaintiffs of rights under a pension plan and violating a Congressional mandate. A losing plaintiff, on the other hand, will not necessarily be found culpable, but may be only in error or unable to prove his case." Id. at 720 (internal quotation marks omitted). As a result, Plaintiff benefit plans are "more likely than employers to recover [attorney fees]" in an ERISA dispute. Carpenters So. Cal. Admin. Corp. v. Russell , 726 F.2d 1410, 1416 (9th Cir. 1984).

Far from thwarting Congress's purpose in enacting § 502(g)(1), this bias toward ERISA plaintiffs is necessary to prevent the chilling of suits brought in good faith and to thus promote the interests of plan beneficiaries and allow them to enforce their statutory rights. See Meredith v. Navistar Int'l Transp. Corp. , 935 F.2d 124, 128-129 (7th Cir. 1991) ("[W]e must keep in mind ERISA's essential remedial purpose: to protect beneficiaries of pension plans. Adherence to this policy often counsels against charging fees against ERISA beneficiaries since private actions by beneficiaries seeking in good faith to secure their rights under employee benefit plans are important mechanisms for furthering ERISA's remedial purpose.") (internal quotation marks omitted).

Bearing these caveats in mind, the Court may now turn to an analysis of the aforementioned factors.

III. Analysis

A. Bad Faith or ...

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