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Rexam, Inc. v. United Steelworkers of America: US District Court : ERISA - only prevailing party gets fees; stipulated judgment not injunction; 'no agreement' isn't agreement;UNITED STATES DISTRICT COURTDISTRICT OF MINNESOTA REXAM INC., Plaintiff, v. UNITED STEELWORKERS OF AMERICA, AFL-CIO-CLC; and GERTRUDE HOTALEN, LARRY ALFORD, and FRANK KIESWETHER, individually, and as representatives of persons similarly situated, Defendants. Case No. 03-CV-2998 (PJS/JJG) ORDER DENYING MOTION FOR ATTORNEY’S FEES James P. McLoughlin, Jr., Alton L. Gwaltney, III, and Mark A. Nebrig, MOORE & VAN ALLEN; and Timothy E. Branson, DORSEY & WHITNEY LLP, for plaintiff. William T. Payne, Stephen M. Pincus, John Stember, Edward J. Feinstein, and Pamina Ewing, STEMBER FEINSTEIN DOYLE & PAYNE, LLC; and Mark W. Bay and John G. Engberg, PETERSON ENGBERG & PETERSON, for the ACC Class defendants. On August 29, 2007, the Court approved a settlement between plaintiff Rexam Inc. and a defendant subclass (“the ACC Class” or “the Class”). Docket No. 404. On the same day, the Court entered a stipulated judgment. Docket No. 405. That judgment was not appealed, but two objecting members of a different subclass appealed a related judgment that had been entered in this case. Last week, that appeal was dismissed by the United States Court of Appeals for the Eighth Circuit. The only matter left to be resolved in this case is the motion of the ACC Class for attorney’s fees. For the reasons set forth below, the motion is denied. 1In its original complaint, Rexam brought claims only under the Declaratory Judgment Act and ERISA, and the unions were not named as defendants. Docket No. 1. In an amended complaint filed shortly thereafter, Rexam added claims under the NLRA and named the unions as defendants. Rexam filed a second amended complaint in September 2006 in order to name additional defendant class representatives. See Docket No. 329; see also Docket No. 328 at 8 n.3. -2- I. BACKGROUND The central question in this litigation was whether Rexam, a can manufacturer, had the right to modify or discontinue the health and life-insurance benefits of its union retirees. In May 2003, Rexam filed this lawsuit, seeking declaratory relief under the Declaratory Judgment Act, 28 U.S.C. §§ 2201 et seq., the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001 et seq., and the National Labor Relations Act (“NLRA”), 29 U.S.C. §§ 151 et seq., against the United Steelworkers of America, the International Association of Machinists, and a number of individual retirees.1 Rexam asked for certification of a defendant class of union retirees and a declaration that Rexam has the right to modify the terms of its health and lifeinsurance benefit plans. The Court eventually sorted the retirees into several subclasses based on differences in applicable contractual and plan language. One of those subclasses is the ACC Class, which, roughly speaking, consists of retirees who either worked for Rexam’s predecessor American Can Company (“ACC”) or worked for Rexam at a plant that was originally owned by ACC. See Docket No. 361 at 2-3. According to the parties, there are approximately 263 members of the ACC Class. Last year, the Court denied Rexam’s motion for summary judgment with respect to the ACC Class and set the case for trial. In November 2006, shortly before the case was scheduled 2Rexam ultimately decided not to ask the Court for an award of fees. -3- to be tried, the parties participated in a private mediation and reached a settlement, which, as noted, the Court later approved. The parties could not reach an agreement regarding attorney’s fees, however. The parties instead simply acknowledged that each side intended to petition the Court for an award of fees2 and agreed that the dispute over fees would not affect the settlement. Docket No. 360 ¶ 2.12. As also noted, the Court entered judgment in the form agreed to by the parties. Among many other things, that judgment dismissed the parties’ claims against each other with prejudice and directed the parties to perform in accordance with the terms of the settlement. See Docket No. 405 ¶¶ 5-6, 9. The judgment also provided that the Court reserved exclusive and continuing jurisdiction to supervise the implementation, enforcement, construction, administration, and interpretation of the settlement and the judgment. Id. ¶ 11. II. ANALYSIS The Class moves for an award of fees under ERISA, 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.” 29 U.S.C. § 1132(g)(1). Rexam opposes the motion, arguing that only a prevailing party can recover fees under ERISA and that, given the nature of the settlement and the resulting judgment, the Class cannot be considered a prevailing party. Rexam relies heavily on two cases defining “prevailing party” — Buckhannon Board & Care Home, Inc. v. West Virginia Department of Health & Human Resources, 532 U.S. 598 (2001) and Christina A. ex rel. Jennifer A. v. Bloomberg, 315 F.3d 990 (8th Cir. 2003). -4- Nothing in the text of ERISA requires that a party prevail in order to be eligible for an award of fees. See Antolik v. Saks Inc., 463 F.3d 796, 803 (8th Cir. 2006) (noting that whether prevailing-party status is a prerequisite to an award of fees under ERISA is an open question). To the contrary, the statute merely provides that, in any action brought under ERISA, “the court in its discretion” may award fees to either party. 29 U.S.C. § 1132(g)(1). Nevertheless, the Court agrees with Rexam that only a party who prevails may recover fees under ERISA. As the Supreme Court has noted, “Congress legislates against the strong background of the American Rule” that a party must bear its own attorney’s fees. Fogerty v. Fantasy, Inc., 510 U.S. 517, 533 (1994). It would be a rare and quite extraordinary departure from the American Rule to authorize a party who does not prevail to recover its fees from another party. If that were Congress’s intent, one would expect ERISA to be much more explicit. One would also expect ERISA to give courts some hint as to when non-prevailing parties should recover fees and when they should not. No such hint appears in ERISA. In addition, although the Eighth Circuit has thus far declined to rule definitively on the issue, the Court has strongly suggested that prevailing-party status is necessary to recover fees under ERISA. See Rittenhouse v. UnitedHealth Group Long Term Disability Ins. Plan, 476 F.3d 626, 633 (8th Cir. 2007) (reversing fee award to claimant who lost on appeal because “‘attorney’s fees are normally awarded only to prevailing parties’”) (quoting Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 89 n.14 (1982)). The Eighth Circuit has also indicated that, even if prevailing-party status is not always necessary, a non-prevailing party may be awarded fees only in a “rare case” involving flagrantly abusive or illegal conduct by the other party. See Antolik, 463 F.3d at 803 (noting that the defendant’s deceptive behavior and flagrant disregard of its -5- ERISA disclosure duties “may make this the rare case where some modest award is appropriate” to a non-prevailing party). Rexam engaged in no such conduct here. The Court therefore holds that, to be entitled to fees from Rexam, the Class must establish that it is a prevailing party. In order to “prevail” for fee-shifting purposes, a party must be awarded some relief by a court; a voluntary change in the opposing party’s conduct is not enough. Buckhannon, 532 U.S. at 603. Thus, a party who obtains no court-ordered relief through a settlement does not prevail, even if the court approves the settlement under Rule 23(e) of the Federal Rules of Civil Procedure. Christina A., 315 F.3d at 992-93. But a party who, through a settlement, obtains an injunction may be considered a prevailing party. Buckhannon, 532 U.S. at 604; Maher v. Gagne, 448 U.S. 122, 129-30 (1980); Christina A., 315 F.3d at 993. Rexam contends that the settlement in this case does not differ in any material respect from the settlement that was found insufficient to support an award of fees in Christina A. In Christina A., the district court approved a class-action settlement, dismissed the action without prejudice, and retained jurisdiction for the purpose of enforcing the settlement agreement. Christina A., 315 F.3d at 991, 993. The district court’s order did not incorporate the terms of the settlement agreement, however. Id. at 991. In other words, the district court did not order any of the parties to do or not to do anything. In finding that the plaintiff did not prevail and thus was not entitled to an award of fees, the Eighth Circuit gave controlling weight to the fact that the order did not give the district court the power to enforce the terms of the settlement agreement through contempt. Id. at 993. Because the district court lacked the power to enforce the settlement agreement through contempt, the Eighth Circuit held that the settling plaintiff class -6- had not obtained the requisite “‘judicially sanctioned change in the legal relationship of the parties.’” Id. at 992 (quoting Buckhannon, 532 U.S. at 605). Rexam argues that this Court similarly lacks the power to enforce the settlement of this action through contempt. To support its argument, Rexam points to a “term sheet” that outlined the terms of the settlement that the parties reached at the mediation. In that term sheet, the parties agreed that “[t]he final judgment ending the Litigation . . . shall be in the form of a stipulated class action judgment and not an injunction.” Docket No. 416 Ex. A ¶ 6. Unfortunately for Rexam, however, this provision did not make it into the final settlement agreement that the parties submitted and this Court approved. See Docket No. 360. Moreover, the final settlement agreement approved by the Court contains an integration clause explicitly providing that the agreement sets forth all of the terms and conditions of the parties’ settlement. Docket No. 360 ¶¶ 1.35, 2.11.8. Thus the clause in the term sheet cited by Rexam is not controlling. That said, Rexam nevertheless appears to be correct that this Court has not entered an injunction that can be enforced through contempt. As noted, the judgment does three things with respect to the parties’ legal relationship: It reserves continuing jurisdiction for the purpose of enforcing the parties’ settlement; it dismisses the parties’ claims with prejudice; and it directs the parties to perform in accordance with the terms set forth in the settlement. None of these provisions appears to be sufficient to confer prevailing-party status within the meaning of Buckhannon and Christina A. The fact that the judgment reserves jurisdiction to enforce the settlement does not distinguish this case from Christina A., in which the Eighth Circuit found that an identical 3The Court recognizes that, in Kokkonen, the Supreme Court suggested that a provision retaining jurisdiction over the settlement agreement would give the court the jurisdiction to enforce the agreement. Kokkonen, 511 U.S. at 380-81. The Court did not discuss the nature or extent of that jurisdiction, however, and the Eighth Circuit has since held, in Christina A., that a retention of jurisdiction does not give a court the power to enforce a settlement through contempt. Christina A., 315 F.3d at 993. -7- provision did not make the settlement enforceable through contempt. Christina A., 315 F.3d at 993. It is true, as the Class points out, that the judgment in this case dismissed the claims with prejudice, while the judgment in Christina A. dismissed the claims without prejudice. But that fact does not turn the dismissal into an injunction, nor does it give this Court the power to enforce any of the terms of the settlement through contempt. Cf. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 376-77, 380-81 (1994) (order dismissing claims with prejudice did not give the district court the power to enforce the settlement).3 The court in Christina A. mentioned that the dismissal was without prejudice only to point out that a party alleging a breach of the settlement agreement might be able to seek reinstatement of the dismissed action. Christina A., 315 F.3d at 993-94. In other words, the fact that the dismissal was without prejudice might affect the remedies that would be available in a breach-of-contract action. But the point remains that the settlement agreement in Christina A. could be enforced only through a breach-ofcontract action, and not through a contempt proceeding, and thus could not support an award of attorney’s fees. In trying to distinguish Christina A., the Class primarily argues that the judgment entered in this case, unlike the judgment entered in Christina A., specifically provides that “[t]he Settling Parties are directed to perform in accordance with the terms set forth in the Stipulation.” Docket No. 405 ¶ 5. This language, according to the Class, converts the judgment into an injunction. -8- Distinguishing between an injunction and a “non-injunction” is not always easy. After all, a provision reserving jurisdiction to enforce a settlement — such as the provision in Christina A. — carries with it a strong implication that the parties must comply with the settlement, and yet, according to the Eighth Circuit, the inclusion of such a provision in an order does not make the order an injunction. The question in this case is whether this Court, by making explicit what is implicit in any retention-of-jurisdiction clause, entered an injunction that can be enforced through contempt. Rule 65(d) of the Federal Rules of Civil Procedure imposes a number of requirements on injunctions, including the requirement that an injunction “describe in reasonable detail — and not by referring to the complaint or other document — the act or acts restrained or required.” Fed. R. Civ. P. 65(d)(1)(C). This is an important provision; it is intended to ensure that those who have been enjoined know that they have been enjoined, and know precisely what it is they must do or must not do if they are to avoid being held in contempt. See F.T.C. v. Kuykendall, 371 F.3d 745, 755 (10th Cir. 2004) (because the defendants agreed to a permanent injunction, they were on notice that they were subject to the lowered procedural protections applicable in contempt proceedings). Not surprisingly, failure to comply with this provision renders an injunction invalid. See E.W. Bliss Co. v. Struthers-Dunn, Inc., 408 F.2d 1108, 1117 (8th Cir. 1969). In Christina A., the Eighth Circuit explained that the district court’s dismissal order could not be enforced through contempt because “no specifically enumerated contract terms were incorporated into the court’s order.” Christina A., 315 at 993. The same is true about the judgment entered in this case. It does not “describe in reasonable detail — and not by referring -9- to the complaint or other document — the act or acts restrained or required.” Fed. R. Civ. P. 65(d)(1)(C) (emphasis added). To the contrary, in a single sentence buried in the middle of a four-page judgment, it “direct[s]” the parties “to perform in accordance with the terms set forth in the Stipulation.” Docket No. 405 ¶ 5 (emphasis added). The order issued by this Court thus cannot be deemed to be an injunction. Without an injunction reflecting the terms of the settlement, the Court lacks the power to enforce the settlement through contempt. Just as in Christina A., the parties are limited to enforcing their contractual rights through a breach-of-contract action. As Christina A. makes clear, that is not enough to render the Class a prevailing party. Christina A., 315 F.3d at 993-94; see also Sierra Club v. City of Little Rock, 351 F.3d 840, 845 (8th Cir. 2003) (plaintiff was not a prevailing party, even where it obtained a declaratory judgment in its favor, because the district court declined to order any relief and thus the plaintiff did not have an enforceable judgment). The Court therefore concludes that the Class is not a “prevailing party” within the meaning of Buckhannon and Christina A. The Class also argues that the parties agreed that the Court may award fees in this case, and moves for leave to file notice of a new judicial opinion in support of this argument. See Fulmore v. Home Depot U.S.A., Inc., No. 03-797, 2007 WL 2746882 (S.D. Ind. Sept. 19, 2007). The motion is granted. The reasoning in Fulmore is inapplicable to this case, however. In Fulmore, the court held that Buckhannon did not bar an award of fees because the parties’ settlement agreement expressly contemplated an award of fees. Id. at *1-2. Specifically, the parties agreed “to be bound by the Court’s determination on the appropriate amount of reasonable attorney’s fees to be paid to resolve this matter.” Id. at *2. Whether or not the -10- Fulmore court was correct in construing this provision as an agreement that some award of fees was appropriate (and this Court has its doubts), no such interpretation of the settlement agreement between Rexam and the ACC Class is possible. Unlike Fulmore, the parties here did not agree to be bound by the Court’s determination of the “appropriate amount of reasonable attorney’s fees.” Nor can anything in the settlement agreement be construed as a waiver of Rexam’s right to argue that fees may not be awarded at all. To the contrary, the agreement clearly states that the parties “have reached no agreement relating to the recovery of costs and attorneys’ fees.” Docket No. 360 ¶¶ 2.12. A settlement that explicitly provides that the parties have reached “no agreement” regarding fees cannot be interpreted as an agreement that fees in some amount should be granted. Class counsel performed ably and greatly assisted the Court in this complex and difficult case. (The same is true of Rexam’s attorneys.) It is unfortunate that the parties were unable to come to an agreement on fees, particularly because it was in Rexam’s own interests for the Class to receive high-quality legal representation. (Rexam sought to have its right to terminate benefits finally determined with respect to a large nationwide class of retirees, which would have been impossible without adequate representation for the Class.) But the parties left the matter to the Court, and the Court concludes that only prevailing parties may recover attorney’s fees under ERISA and that the Class is not a prevailing party. The Class’s motion for attorney’s fees is therefore denied. ORDER Based on all of the files, records, and proceedings herein, IT IS HEREBY ORDERED that: -11- 1. The ACC Class’s motion for leave to file notice of new case law [Docket No. 428] is GRANTED. 2. The ACC Class’s motion for attorney’s fees [Docket No. 367] is DENIED. Dated: February 6 , 2008 s/Patrick J. Schiltz Patrick J. Schiltz United States District Judge |
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