United States District Court, S.D. New York
August 12, 2005.
MARK ROSENTHAL, as President of Local 983, District Council 37, American Federation of State, County and Municipal Employees, as a Participant or on behalf of the Class of Participants in the District Council 37 Health & Security Plan Trust; FAYE MOORE, EDDIE RODRIGUEZ; PATRICK BAHNKEN; RALPH CARBONE; LEONARD DAVIDMAN; GENE DEMARTINO; VICTOR EMANEULSON; JUAN FERNANDEZ; BARBARA HENDERSON; MICHAEL HOOD; ED HYSYK; RAYMOND MARKEY; MICKEY McFARLAND; ALEX PARKER; LOUIS SBAR; JOHN SOCHA; and ENDA WILLIAMS; on behalf of the District Council 37 Health & Security Plan Trust, Plaintiffs,
LILLIAN ROBERTS & OLIVER GRAY, Defendants.
The opinion of the court was delivered by: DENISE COTE, District Judge
MEMORANDUM OPINION AND ORDER
This case, which settled on the eve of trial, concerns the
governance of District Council 37 ("DC 37"), American Federation
of State, County, and Municipal Employees, and that of DC 37's
Health and Security Plan Trust (the "Trust"). Specifically,
plaintiffs claimed that the defendants, Lillian Roberts
("Roberts") and Oliver Gray ("Gray") breached their fiduciary
duties under New York law by amending the Agreement and
Declaration of Trust on June 7, 2004 ("June 7 Amendment"),
refusing to implement a July 14, 2004 resolution of the DC 37
Executive Board appointing seven new trustees ("July 14 Resolution"), and by their subsequent actions.
Plaintiffs also claimed, pursuant to Section 301 of the Labor
Management Relations Act, that the defendants' behavior violated
the DC 37 Constitution.
At the final pretrial conference for this action, defendants'
counsel informed this Court that the defendants would consent to
the entry of a permanent injunction, thereby eliminating the need
for a trial. Therefore, on July 20, 2005, judgment was entered
permanently enjoining the defendants from acting in any manner
pursuant to the June 7 Amendment and voiding such amendment and
from failing to recognize the July 14 Resolution or any
appointments of trustees by the Executive Board thereafter; and
voiding the July 28, 2004 amendment to the Trust Agreement as
well as the appointment of trustees made that day. Through a
corresponding Order of July 20, a schedule for plaintiffs' motion
for attorneys' fees was established.
The plaintiffs' memorandum of law in support of their
application for attorneys' fees does not claim any statutory
basis for such an award. Instead, plaintiffs argue that that they
are entitled to receive attorneys' fees from the Trust on the
ground that this litigation "conferred a substantial benefit on
the members of DC 37 and on the participants in the Trust."
Specifically, the plaintiffs credit this litigation with
"stay[ing] an imprudent takeover of the Trust by one of the
trustees; reestablish[ing] authority over the Trust by DC 37's
governing body, its Executive Board; and br[inging] about the appointment of
trustees who were chosen by DC 37's governing body and who remain
subject to recall by that governing body." In support of their
argument, the plaintiffs cite Trustees v. Greenough,
105 U.S. 527 (1881), in which the Supreme Court provided that
where one of many parties having a common interest in
a trust fund, at its own expense takes proper
proceedings to save it from destruction and to
restore it to the purposes of the trust, he is
entitled to reimbursement, either out of the fund
itself, or by proportional contribution from those
who accept the benefit of his efforts.
Id. at 532-33. In addition, the plaintiffs cite a handful of
other cases, including two derivative actions, in which
plaintiffs, having conferred a substantial benefit on an
identifiable class by virtue of successful litigation, were
awarded attorneys' fees.
In all of the cases plaintiffs cite, the entity against which
attorneys' fees were awarded was a party to the underlying
litigation. For example, the Greenough case was brought not
only against certain current and former trustees of the trust in
question but also named as a defendant "the board itself as a
corporation." 105 U.S. at 528. In Mills v. Electric Auto-Lite
Co., 396 U.S. 375 (1970), the corporation against whom fees were
awarded was the primary defendant in the litigation, which sought
to have a merger involving that corporation set aside. Id. at
378. Similarly, in Hall v. Cole, 412 U.S. 1 (1973), there was
no question that the union from which the plaintiff sought fees
after succeeding on his claim to be reinstated to the union under
Section 102 of the Labor Management Reporting and Disclosure Act was a
party to the underlying litigation. See Cole v. Hall,
462 F.2d 777, 778 (2d Cir. 1972) (referring to union as appellant).
The sole Second Circuit case cited by the plaintiffs,
Amalgamated Clothing and Textile Workers v. Wal-Mart Stores,
54 F.3d 69 (2d Cir. 1995), functioned no differently. Finding that
the plaintiffs' action had "conferred a substantial benefit on
the shareholders of Wal-Mart," the court affirmed the district
court's decision to award attorneys' fees as against Wal-Mart,
which was the sole defendant and is collectively owned by its
shareholders. Id. at 72.
Even if the plaintiffs in this action can demonstrate that this
litigation benefitted all participants of the Trust, the
plaintiffs have not shown how Roberts and Gray, who, at most,
constitute two out of nine trustees, are in a position to make a
decision as to the Trust's responsibility for plaintiffs'
attorneys fees. Nor have they addressed whether each of the
parties necessary to impose an award of attorneys' fees on the
Trust have been made parties to this litigation. For this reason,
it is hereby
ORDERED that the plaintiffs shall submit by August 26, 2005 a
supplemental brief specifically addressing whether the Trust can
be forced to pay attorneys' fees in this litigation when neither
the Trust nor the Board of Trustees have been made parties to
this action; defendants' opposition brief shall be due on September 9,
2005; and plaintiffs' reply shall be due on September 16, 2005.
IT IS FURTHER ORDERED that at the time the reply is served,
plaintiffs shall supply two courtesy copies of all motion papers
delivered to Chambers by delivering them to the Courthouse
Mailroom, 8th Floor, United States Courthouse, 500 Pearl Street,
New York, New York.
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