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Einhorn v. M.L. Ruberton Construction Co.

Citations: 720 F. Supp. 2d 639; 2010 U.S. Dist. LEXIS 64537Docket: Civil Action 06-2511

Court: District Court, D. New Jersey; June 28, 2010; Federal District Court

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Defendant M.L. Ruberton Construction Company filed a Motion for Attorneys' Fees and Costs following a previous court decision that granted them summary judgment in a case brought by Plaintiff William Einhorn regarding successor liability for delinquent pension fund payments. The case stems from a series of related lawsuits involving Teamster Local Union No. 676 and Statewide Hi-Way Safety, Inc. In the initial Injunction Suit, Local 676 sought to block Statewide's asset sale to Ruberton, which was settled quickly. The subsequent Delinquency Suit aimed to recover unpaid contributions from Statewide, which also settled but resulted in Statewide failing to meet its obligations, leading to the current Successor Suit against Ruberton. The court had previously rejected Einhorn's successor liability claim and ruled in favor of Ruberton.

Ruberton's Motion for Attorneys' Fees cites Section 502(g)(1) of ERISA, allowing for attorney's fees at the court's discretion. The court will evaluate several factors: the culpability or bad faith of the offending parties, their ability to pay, the deterrent effect of granting fees, the benefit to the pension plan members, and the relative merits of each party's position. Ultimately, the court denied Ruberton's Motion for Attorneys' Fees and Costs.

The Court must evaluate all relevant factors in determining the appropriateness of awarding attorneys' fees, noting that the absence of any single factor is not determinative. Plaintiff Einhorn argues that Ruberton improperly sought fees under ERISA’s provisions rather than under 29 U.S.C. 1451(e), which pertains to the Multiemployer Pension Plan Amendments Act (MPPAA) and allows for an award of costs and reasonable attorneys' fees to the prevailing party. Einhorn claims that the Third Circuit applies different standards under these provisions, asserting that fees should only be granted if a claim is found to be 'frivolous, unreasonable, or without foundation.' However, the Court disagrees, stating that Einhorn's claims do not invoke 1451, as Einhorn only pursued claims under 29 U.S.C. 1132 and 1145 against Statewide and thereafter against Ruberton based on successor liability. Consequently, the Court finds that Ruberton is entitled to seek fees under 1132(g)(1).

The Court then considers the five Ursic factors relevant to awarding attorneys' fees. The second factor, concerning the Funds' ability to satisfy a fee award, favors Ruberton, as the Funds hold approximately $1.4 billion in assets. The fourth factor weighs against an award since Ruberton acknowledges that any fee award would not benefit pension plan members. 

Regarding the first factor, which addresses bad faith or culpability, the Court references that culpable conduct involves actions that are 'reprehensible or wrong.' While Ruberton contends that Einhorn acted culpably by aggressively pursuing this litigation, the Court clarifies that merely losing a case does not equate to culpability. Ruberton alleges that Einhorn's motives included establishing legal precedent for successor liability, prematurely appealing decisions, and avoiding settlement discussions, but the Court will assess these claims in the broader evaluation of the Ursic factors.

Einhorn's pursuit of the lawsuit, aimed at benefiting the Funds, was not deemed culpable or in bad faith, countering Ruberton's claims. Ruberton's argument that Einhorn's immediate appeal of the summary judgment decision was inappropriate fails, as it was Ruberton who filed for certification of the decision, expediting the appeal process. Einhorn had no obligation to settle, and Ruberton's increased attorney fees do not indicate culpability on Einhorn's part. The deterrent effect of awarding attorney fees under ERISA also weighs against such an award, as it could discourage fund managers from pursuing valid claims, potentially undermining ERISA's objectives. Despite Ruberton's victory in summary judgment, the merits of the parties' positions do not automatically favor Ruberton for an award. Einhorn's reliance on established authority for his arguments indicates that his position was not without merit. The Court considered five factors regarding the award of attorney fees: 1) Einhorn acted without culpability; 2) he can afford legal fees; 3) no deterrent effect is warranted; 4) no benefit to plan members arises; and 5) the relative merits do not favor an award. Only the second factor supported an award, leading to the conclusion that Ruberton did not meet the criteria established by the Ursic test. Consequently, Ruberton's Motion for Attorneys' Fees and Costs was denied. An official order reflecting this decision was issued on June 28, 2010.

The Court possesses federal question subject matter jurisdiction under 28 U.S.C. § 1331, as established in Einhorn v. M.L. Ruberton Constr. Co. Although a summary judgment order has been certified for appeal under Fed. R. Civ. P. 54(b) and Einhorn has filed a notice of appeal, the Court maintains jurisdiction to rule on the Motion for Attorneys' Fees, as clarified in West v. Keve, which indicates that jurisdiction is not lost during a pending appeal regarding the underlying case. 

Einhorn represents the Teamsters' Pension Trust Fund and the Teamsters' Health and Welfare Fund, both classified as multiemployer plans under ERISA. Einhorn's lawsuit against Statewide is based on ERISA sections and federal common law. Einhorn has voluntarily dismissed his claim against Ruberton, whose legal malpractice claims against third parties have been stayed during the appeal of the Successor Suit. Ruberton seeks $259,571.77 in attorneys' fees and $2,297.49 in costs.

The Court determines that § 1132(g)(1) is the relevant statute for fee assessment, applying the Ursic factors, but notes that Ruberton would not meet the frivolity test established in Dorn. While Einhorn acknowledges that his claim to compel payment of withdrawal liability aligns with treating it as a delinquent contribution under § 1145, he incorrectly assumes the reverse is true. Ruberton acknowledges that Einhorn acted without bad faith, although Einhorn has not disclosed his motivations. The Court finds it challenging to envision how a prevailing employer could demonstrate deterrence without evidence of culpability or bad faith, and Ruberton has approached the argument as if the Artistic Furniture standard is applicable.