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LABARBERA v. J.E.T. RESOURCES

November 4, 2005.

GARY LABARBERA, LAWRENCE KUDLA, THOMAS GESUALDI, PAUL GATTUS, THEADORE KING, CHESTER BROMAN, FRANK FINKEL, and JOSEPH FERRARA, as Trustees and Fiduciaries of the Local 282 Welfare Pension, Annuity, Job Training and Vacation and Sick Leave Trust Funds, Plaintiff,
v.
J.E.T. RESOURCES, INC., Defendant.



The opinion of the court was delivered by: ARTHUR SPATT, District Judge

MEMORANDUM OF DECISION AND ORDER

Before the Court is a disturbing application for attorneys' fees. After having unsuccessfully moved for modest attorneys' fees of $7,033 before this Court, the plaintiffs successfully appealed that decision and now seek an additional sum of more than $90,000 in attorneys' fees. As set forth below, the Court is unwilling to approve such a large sum in attorneys' fees for a relatively straightforward and single issue appeal. Looking into the future, it is conceivable that there may be a motion filed for attorneys' fees for the appeal of the reduction of attorneys' fees on the appeal of the decision not to grant attorneys fees. This invariably leads to the question, when will these multiplicitous requests for attorneys' fees come to an end?

I. BACKGROUND

  The background of this case is set forth in this Court's Order dated January 15, 2003, familiarity with which is assumed. For purposes of clarity, some relevant facts and procedural history will be restated. On June 13, 2001, the plaintiffs, who are the trustees of the Local 282 benefit funds, commenced this action against J.E.T. Resources, Inc. ("JET" or the "defendant"), under the provisions of the Employee Retirement Income and Security Act ("ERISA") to compel JET to post a surety bond or its equivalent pursuant to a collective bargaining agreement (the "agreement"). According to the plaintiffs, JET previously posted bonds for the benefit of the union. However, in May of 2000, a bond expired and was never renewed, in violation of the agreement.

  On May 8, 2002, JET appeared before United States Magistrate Judge E. Thomas Boyle and indicated that it would not be posting a bond because it was no longer in business. On August 5, 2002, the parties appeared before this Court for a bench trial. During the trial, the Court stated that it would grant a judgment by default in favor of the plaintiffs by directing JET to file a bond or its equivalent. Following the trial, counsel for the plaintiffs moved for attorneys' fees in the amount of $7,033.00 and costs in the amount of $285.86 under 29 U.S.C. § 1132(g)(1), which provides that "[i]n any action under this subchapter . . . by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney's fee and costs of action to either party." On January 15, 2003, the Court concluded that section 1132(g) did not support an award of attorneys' fees and costs for an action on a surety bond and denied the plaintiffs' request. The plaintiffs appealed from that decision.

  On May 20, 2004, the Second Circuit vacated the judgment and remanded the case for the Court to consider anew plaintiffs' application for attorneys' fees. The Second Circuit found that § 1132(g)(1) unambiguously authorizes the district court, in its discretion, to award attorneys fees. The Second Circuit instructed that the Court should, in exercising its discretion under § 1132(g)(1), "undertake the five-factor inquiry set forth in Chambless v. Masters, Mates & Pilots Pension Plan, 815 F.2d 869, 871 (2d Cir. 1987), and to be mindful that `ERISA's attorney's fee provisions must be liberally construed to protect the statutory purpose of vindicating retirement rights, even when small amounts are involved,' id. at 872." Labarbera v. Clestra Hauserman, Inc., 369 F.3d 224, 227 (2d Cir. 2004). On March 18, 2005, the plaintiffs filed their application for attorneys' fees and costs pursuant to 29 U.S.C. § 1132(g)(1). The plaintiffs now seek fees in the amount of $100,448.00 and costs in the amount of $4,913.14. The Court notes that counsel for the plaintiffs expended an additional 371.25 hours totaling $93,415.00 in attorneys' fees during the appeal in this case. However, the Court notes that it is only able to identify a total of 342.5 hours spent on the appeal from the time slips attached as an exhibit to the attorney's declaration.

  II. DISCUSSION

  A. WHETHER TO AWARD ATTORNEYS' FEES

  Under ERISA, an award of attorneys' fees and costs is within the sound discretion of the trial court. Peterson v. Continental Cas. Co., 282 F.3d 112, 122 (2d Cir. 2002). In making the determination, the Court ordinarily looks to five factors:
(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 conferred a common benefit on a group of pension plan participants.
Locher v. UNUM Life Ins. Co. of Am., 389 F.3d 288, 298 (2d Cir. 2004); Salovaara v. Eckert, 222 F.3d 19, 27-28 (2d Cir. 2000); Chambless v. Masters, Mates & Pilots Pension Plan, 815 F.2d 869, 871 (2d Cir. 1987). In arguing that the Court should award attorneys' fees, the plaintiffs rely on the factors that district courts consider in exercising its discretion under 29 U.S.C. § 1132(g)(1) that were set forth in Chambless. In response, JET ignored the plaintiffs' reliance on the five Chambless factors and renewed its argument — one rejected by the Second Circuit — that because this case involves an action for a surety bond the plaintiffs are not entitled to attorneys' fees under Section 1132(g)(1). JET apparently does not contest the reasonableness of the hours spent by plaintiffs' counsel or the fees charged. In addition, although at the trial its counsel stated that it was no longer in business, JET did not submit any evidence to support a contention that it has insufficient funds to pay the fees.

  In addressing the first and fourth factors set forth in Chambless, the plaintiffs noted the degree of the defendant's bad faith and the lack of merit in its position in this litigation. Prior to this lawsuit, the defendant failed to respond to the plaintiffs' numerous attempts to obtain a surety bond or a settlement of the issue. After commencement of the action, the defendant repeatedly indicated its intention to comply with the bond provision of the collective bargaining agreement, but nevertheless continually refused to post a surety bond or settle the action and the case proceeded to trial. At the trial, the merits of the action were essentially uncontested. JET was a party to a collective bargaining agreement with Local 282 that required it to post a surety bond in favor of the Fund. In fact, JET failed to renew a previously-posted surety bond. After a one day trial, judgment was entered against the defendant in the amount of $10,000, which was the amount of the bond.

  However, viewing this case as a whole, on appeal, the defendant's position had merit. After examining the issue, this Court determined that section 1132(g) does not support an award of attorneys' fees and costs in an action to compel a surety bond because it "does not involve the hiring of labor or the payment of benefits." Id. Therefore, the defendant's position on appeal was meritorious in that it was supported by the Court's decision under what appeared to be the plain meaning of the statute. In addition, there is no way to characterize JET's defense of the Court's position during the course of the appeal as "bad faith litigation."

  The second factor also weighs in favor of not awarding attorneys' fees to the plaintiffs. Although the defendant does not submit evidence as to their financial condition in this motion, from the record it is clear that JET was no longer in business prior to the trial. With reasonable certainty, it appears that JET has no ability to post a bond or satisfy an award of attorneys' fees, and in particular, an award of more than $100,000.

  With regard to the third factor, the Court notes that an award of $100,000 in attorneys' fees on an action to compel the posting of a bond for $10,000 "would deter" other persons from not only acting similarly, but possibly from entering into business in the first place. The Court declines to endorse the use of attorney-fee shifting statutes as a remedial measure in a punitive manner.

  As to the fifth factor in Chambless, the plaintiffs noted that enforcement of the surety bond provision of the collective bargaining agreement ensures the collection of contributions to the Local 282 Trust ...


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