Willard Bender v. Newell Window Furnishings, Inc , 560 F. App'x 469 ( 2014 )

NOT RECOMMENDED FOR PUBLICATION
FILED
Mar 17, 2014
File Name: 14a0203n.06
DEBORAH S. HUNT, Clerk
No. 12-2059
UNITED STATES COURTS OF APPEALS
FOR THE SIXTH CIRCUIT
WILLARD BENDER; DON LAMPE; CAROLYN )
CONNER; JAMES TAYLOR; ROGER SMOKER; )
ROSE ANN ROHR, individually and on behalf of )
themselves and all persons similarly situated, )
)
Plaintiffs-Appellees, )
)
and )
)
INTERNATIONAL UNION UNITED )
AUTOMOBILE AEROSPACE AND )
AGRICULTURAL IMPLEMENT WORKERS OF ) ON APPEAL FROM THE
AMERICA (UAW), ) UNITED STATES DISTRICT
) COURT FOR THE WESTERN
Plaintiff, ) DISTRICT OF MICHIGAN
)
v. )
)
NEWELL WINDOW FURNISHINGS, INC., )
KIRSCH DIVISION; NEWELL OPERATING )
COMPANY, INC.; NEWELL RUBBERMAID )
HEALTH AND WELFARE PROGRAM 560, )
)
Defendants-Appellants. )
)
)
BEFORE: ROGERS, McKEAGUE, and WHITE, Circuit Judges.
ROGERS, Circuit Judge. Newell Window Furnishings, an employer that lost a court case
in the Western District of Michigan involving retirement benefits, appeals an order of the district
court awarding attorney’s fees and costs to the plaintiff-retirees under the Employee Retirement
Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(1)(B). The district court awarded
No. 12-2059
Bender, et al. v. Newell Window Furnishings, Inc., et al.
fees, including fees incurred by the plaintiff-retirees in defending a closely related suit in the
Northern District of Illinois that was dismissed in their favor on forum shopping grounds. The
plaintiffs’ union was a party to the Illinois case, but was dismissed from the case below. The
district court did not abuse its discretion in awarding fees to plaintiffs for costs incurred in both
the Illinois and Michigan actions, and properly denied Newell’s subpoena duces tecum for
information that the court concluded was not relevant to the instant litigation.
In 2005, Newell notified its retired hourly union members, including plaintiff Willard
Bender, “that it was reducing their health benefits by changing the premiums and co-pays
provided in the Plan.” Newell then filed suit in the Northern District of Illinois against all
potentially affected Plan participants and their union, the International Union, United
Automobile, Aerospace and Agricultural Workers of America (UAW). Newell sought a
declaratory judgment to the effect that Newell had not breached its collective bargaining
agreements under the Labor-Management Relations Act (LMRA), or ERISA. Bender (and a
class of retirees), along with the UAW, filed a class action suit in the Western District of
Michigan, alleging that Newell’s reduction of the Plan violated the LMRA and ERISA. The
Illinois district court subsequently dismissed Newell’s case without reaching the merits, finding
that Newell’s action was an example of improper forum shopping, and the Seventh Circuit
affirmed. Newell Operating Co., Inc. v. U.A.W., No. 06-cv-50010 (N.D. Ill. Mar. 27, 2007),
aff’d, 532 F.3d 583 (7th Cir. 2008), overruled, New Page Wis. Sys. v. United Steel, Paper, &
Forestry, Rubber, Mfg., Energy Allied Indus. & Serv. Workers Int’l Union, 651 F.3d 775 (7th
Cir. 2011).1
1
In overruling Newell, the Seventh Circuit held: “Newell’s incomplete analysis was a consequence of a deficient
presentation by the litigants. The briefs in Newell focused on whether the fiduciary’s complaint asked for
2
No. 12-2059
Bender, et al. v. Newell Window Furnishings, Inc., et al.
In the Western District of Michigan, the district court dismissed the UAW’s claims,
finding that they directly violated a 2000 Shutdown Agreement between the UAW and Newell,
in which the UAW agreed not to “initiate, solicit, encourage, or finance civil actions or
litigations of any type against Newell other than for the enforcement of the Shutdown
Agreement’s terms.” However, the court granted summary judgment to Bender and the
remaining plaintiffs, who are not parties to the Shutdown Agreement, finding that plaintiffs were
entitled to vested lifetime healthcare benefits under the Plan. The Sixth Circuit affirmed the
decision. Plaintiffs (referred to here collectively as “Bender”) then brought this action to recover
attorney’s fees under ERISA, seeking reimbursement for the work done in both the Michigan
and the Illinois litigation.
In response to Bender’s application for attorney’s fees, the magistrate judge concluded
that Bender was entitled to attorney’s fees, and that the amount of time Bender’s counsel claimed
was reasonable. As part of his assessment, the magistrate judge examined the five “King
factors,” which are no longer mandatory, but which may guide a court in deciding whether to
award fees.2 However, the magistrate judge reduced the hourly rate requested by Bender’s two
attorneys to a blended rate based on the prevailing market rate in effect over the five-plus years
of litigation. In addition, the magistrate judge concluded that Bender’s counsel was entitled to
attorney’s fees for work done in the Illinois litigation because “both cases, the Illinois litigation
and the present Michigan litigation, were so intertwined that plaintiffs’ counsel in the present
‘appropriate equitable relief’; the parties assumed that a negative answer would imply the absence of jurisdiction….
[W]e conclude that Newell—which no other circuit has followed—cannot be treated as authoritative on the question
of subject-matter jurisdiction in declaratory-judgment actions about plans covered by ERISA.” NewPage Wis. Sys.,
651 F.3d at 779.
2
The King factors are (1) the degree of the opposing party’s culpability or bad faith; (2) the opposing party’s ability
to satisfy an award of attorney’s fees; (3) the deterrent effect of an award on other persons under similar
circumstances; (4) whether the party requesting fees sought to confer a common benefit on all participants and
beneficiaries of an ERISA plan or resolve significant legal questions regarding ERISA; and (5) the relative merits of
the parties’ positions. Wells v. United States Steel, 76 F.3d 731, 736 (6th Cir. 1996).
3
No. 12-2059
Bender, et al. v. Newell Window Furnishings, Inc., et al.
case had no choice but to travel to the Northern District of Illinois and resist the forum-shopped
lawsuit defendants filed there, if plaintiffs were going to prevail here.” The magistrate judge
opined:
One is left to speculate as to why defendants elected to initiate this litigation since
their opposition was so clearly without merit…. Newell filed a preemptive law
suit in Illinois in anticipation of the Michigan action, which was dismissed due to
forum shopping and took a position in the Michigan litigation contrary to its own
lawyer’s due diligence findings. Newell maintained this position notwithstanding
that it was unsupported by the language of the collective bargaining contract or
the uncontradicted testimony of those at the bargaining table, even those who had
negotiated on behalf of the management. The mass of evidence presented to the
court was consistent with plaintiffs’ position. While Newell was free to engage in
this course of action, it must bear the consequences of doing so.
However, “to reflect the time apportioned to the Union’s claims,” the magistrate judge reduced
the attorney’s fee award by 50% in both the Illinois litigation and the early stages of the
Michigan lawsuit, when the UAW was still a party to the action.
Prior to the hearing on attorney’s fees, “[b]oth parties also subpoenaed opposing counsel
to produce testimony and records at the hearing on plaintiffs’ application for attorneys’ fees.”
The subpoena served on Bender’s attorney “was intended to establish the relationship he and his
law firm had with the Union, their fee-reimbursement arrangement, and whether the relationship
violated the Shutdown Agreement.” Because the subpoenas required counsel “to appear and
testify at an improper time and place, i.e., during a non-evidentiary motion hearing scheduled in
the federal court,” the magistrate judge quashed both subpoenas for noncompliance with Fed. R.
Civ. P. 45(a)(1)(A)(iii). During the hearing on the fee application, counsel for Bender and
counsel for the UAW conceded that the UAW was paying counsel for Bender a reduced rate to
help fund the litigation, and Bender and the UAW’s counsel had an agreement to repay the UAW
4
No. 12-2059
Bender, et al. v. Newell Window Furnishings, Inc., et al.
for its reduced rate if granted a fee award. (“Our arrangement has always been that we repay
them so they have neither a gain nor a loss.”). If awarded more than the reduced rate provided
by the UAW, counsel for Bender would retain the remainder. Newell appealed the magistrate
judge’s order to the district court, contesting the order quashing the subpoena of Bender’s
attorney. Both Newell and Bender appealed different aspects of the magistrate judge’s fee
award.
The district court affirmed the magistrate judge’s order quashing the subpoena, and
affirmed in part and modified in part the magistrate judge’s fee award.3 Newell argued that the
magistrate judge erred in awarding Bender attorney’s fees because 1) the UAW would “benefit
from any fee award based on the UAW’s financing of this action or any other action in violation
of a Shutdown Agreement”; 2) “to the extent that fees and expenses have been paid by the UAW,
they are not subject to reimbursement and may not be awarded”; 3) any fees incurred in the
Illinois suit (at both the district court and appellate levels) may not be awarded under ERISA
§ 502(g); and 4) the UAW is not entitled to a fee award under ERISA § 502(g). The district
court accurately characterized Newell’s objections as “primarily based on the relationship
between the Union and Plaintiffs, which Newell alleges is in direct violation of the Shutdown
Agreement the parties executed when the Sturgis facility was closed back in 2000.” As the court
noted, this challenge overlaps with another independent lawsuit currently pending before the
district court, which alleges that the UAW breached the Shutdown Agreement by funding
Bender’s counsel in the litigation now before this court. Newell Window Furnishings, Inc. v.
UAW, No. 1:11-cv-1080 (“Newell II”). As to the fee award, the district court agreed with the
3
Newell filed a motion to strike three of Bender’s objections as untimely under Fed. R. Civ. P. 72(b)(2). The
district court found Newell’s argument unpersuasive, and denied the motion. Newell does not challenge these
determinations on appeal.
5
No. 12-2059
Bender, et al. v. Newell Window Furnishings, Inc., et al.
magistrate judge that Bender was entitled to attorney’s fees for both the Michigan and the Illinois
suits, because
[t]he fact that the Illinois case was dismissed in favor of the Michigan case, rather
than transferred to this Court, does not preclude the Court from awarding
attorney’s fees arising out of the Illinois action, particularly in the ERISA context,
where success ‘on the merits’—not on procedural rules—is required to trigger the
attorney fee-shifting provision of the statute.
The district court also affirmed the magistrate judge’s use of a blended hourly rate to calculate
Bender’s attorney’s fees because “[t]he blended rates are towards the top of the market average
for all years relevant in this litigation, whereas Plaintiff’s proposed rate methodology would
award Plaintiffs fees near the 100th percentiles for all five years of litigation.”
However, the district court disagreed with the magistrate judge’s conclusion that the fee
award should be reduced by 50% for work done on behalf of UAW, reasoning that the UAW was
not made a party to the Illinois action by choice, and in any event, the UAW retained separate
counsel, which represented the UAW’s interests throughout the Illinois proceedings. The district
court therefore declined to adopt the $66,989.63 reduction in attorney’s fees.
Finally, the district court affirmed the magistrate judge’s grant of Bender’s motion to
quash the subpoena duces tecum that Newell served on Bender’s attorney, because the reason for
the subpoena (to establish the relationship between Bender’s attorney and the UAW, their fee-
reimbursement arrangement, and whether the relationship violated the Shutdown Agreement)
“may be germane to the issues presented in Newell II, [but] they are not required to address the
attorney fee application in this case.”
The district court did not abuse its discretion in awarding fees to Bender that will
ultimately go to the UAW, in awarding fees for the related litigation in a different federal court,
6
No. 12-2059
Bender, et al. v. Newell Window Furnishings, Inc., et al.
or in denying the subpoena duces tecum. See First Trust Corp. v. Bryant, 410 F.3d 842, 851 (6th
Cir. 2005) (review of attorney’s fees awarded pursuant to 29 U.S.C. § 1132(g) is for abuse of
discretion); U.S. v. 691.81 Acres of Land, 443 F.2d 461, 463 (6th Cir. 1971) (per curiam)
(applying abuse of discretion standard to grant of a motion to quash).
Newell argues primarily that the district court should not have awarded fees that will
ultimately go to the UAW, arguing that the UAW was precluded from bringing this suit under
the Shutdown Agreement. First, none of the fees were awarded by the district court to the UAW,
so that Newell technically has no basis for challenging, as it does, an award of “attorney’s fees
and expenses to the UAW.” Second, we know of no independent principle that prohibits a court
from awarding fees that are otherwise proper because the fees may be used to reimburse a third
party who has fronted the services or fees.
ERISA’s attorney fee provision, 29 U.S.C. § 1132(g)(1),4 provides, “In any action under
this subchapter (other than an action described in paragraph (2)) 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.” Such an award is proper so long as the party to whom the fees are awarded “had
some degree of success on the merits.” Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242,
245 (2010). The party awarded fees, Bender, indisputably qualifies as “a participant,
beneficiary, or fiduciary” under the plan, and Bender won the underlying lawsuit against Newell
on the merits.
Newell alleges that the relationship between Bender and the UAW, under which some of
the fee award may be reimbursed to the UAW, is a direct violation of the Shutdown Agreement.
4
In its opinion, the district court quotes this provision as 29 U.S.C. § 1132(a)(1)(B). However, it appears as 29
U.S.C. § 1132(g)(1) in the current version of the statute.
7
No. 12-2059
Bender, et al. v. Newell Window Furnishings, Inc., et al.
However, the nature and propriety of the fee arrangement between Bender and the UAW is the
subject of a separate litigation, Newell II. More to the point, we have explicitly rejected the
argument that remitting advanced attorney’s fees to a union constitutes a prohibited transfer of
funds under ERISA where no provision of ERISA prohibits such a transaction. See Jordan v.
Michigan Conference of Teamsters Welfare Fund, 207 F.3d 854, 860 (6th Cir. 2000).
Newell argues that it is impermissible to award Bender attorney’s fees for work done in
the Illinois action that, in Newell’s words, “furthered the interests of the UAW,” but this is not
reason enough to deny the fee award. The question of whether work done “furthered the
interests” of a third party is irrelevant. The crux of Newell’s claim is that Bender’s attorney was
working on behalf of the UAW in the Illinois action and part of the Michigan action before the
UAW was dismissed, and that the magistrate judge’s original reduction of fees should be
reinstated to reflect this reality. The district court reviewed the record and found that the UAW
retained separate counsel, who represented the UAW’s interests throughout the Illinois
proceedings, and that any pleadings filed on behalf of the UAW were completed by counsel
other than Bender’s attorney or his law firm. The court noted, “Certainly the billing records
indicate collaboration and coordinated strategy between the retiree-plaintiffs and the Union, but
this is to be expected in a multi-defendant case, particularly this one, where Defendants decided
to sue both the individual Plaintiffs and the Union that represented them at the time.” This
conclusion is supported by Welton v. Osborn, 124 F. Supp. 2d 1114, 1120-21 (S.D. Ohio 2000),
in which the district court awarded full attorney’s fees for work that jointly benefited another
plaintiff where several of the issues in the two cases were inextricably linked. Similarly, the
Third Circuit in Gulfstream III Assocs., Inc. v. Gulfstream Aerospace Corp., 995 F.2d 414, 420
(3d Cir. 1993), reasoned that “if the plaintiff can prove that the fees and expenses incurred in the
8
No. 12-2059
Bender, et al. v. Newell Window Furnishings, Inc., et al.
other litigation resulted in work product that was actually utilized in the instant litigation, that the
time spent on the other litigation was inextricably linked to the issues raised in the present
litigation, and the plaintiff had not previously been compensated for those fees and expenses,
then the district court may include those fees and expenses in its fee award.”
In addition, the district court reasonably determined that Bender should be fully
compensated for work done on the Michigan case while the UAW was still a party: “The Union
had little practical choice but to join the Michigan case as long as the forum fight remained
unresolved,” since “[s]taying out of the fray in Michigan would potentially impact the forum
analysis in a way that favored Illinois as having all arguably necessary parties in the case.”
Finally, the court concluded that even though Bender’s attorney also represented the UAW in the
early stages of the Michigan suit, “all work counsel undertook directly benefitted Plaintiffs and
was necessary to pursue Plaintiffs’ claims, particularly given Defendants’ repeated attempts to
get the entire case dismissed based on the Union’s involvement and alleged breach of the
Shutdown Agreement.” These determinations do not constitute an abuse of discretion.
The district court also did not abuse its discretion, or act beyond the law, in compensating
Bender for the hours counsel spent defending Bender against the initial suit brought by Newell in
the Northern District of Illinois. The district court agreed with the magistrate judge that “[t]he
fees incurred in [the Illinois litigation] were directly related to the Michigan case. To come to a
contrary conclusion would ignore the reality of the situation. Defendants chose to commence the
Illinois action by serving the retirees of a Michigan plan (plaintiffs here) individually and
requiring them and their attorneys to defend in Illinois.”
9
No. 12-2059
Bender, et al. v. Newell Window Furnishings, Inc., et al.
This court’s decision in Anderson v. Procter & Gamble Co., 220 F.3d 449 (6th Cir.
2000), is not to the contrary. In that case, we decided “the sole issue . . . of whether the district
court has discretion under ERISA to award attorney’s fees for legal services rendered during
administrative proceedings for disability benefits.” Id. at 451. We gave a negative answer to
this question because no civil action was filed except for the fees sought for the administrative
claims proceeding. We recognized that in interpreting a statutory provision authorizing
attorney’s fees, the Supreme Court has held that “reference to an ‘action,’ rather than an ‘action
or proceeding’ is ‘not a sufficient indication that Congress intended [the fee-shifting provision]
to apply only to judicial, and not administrative, proceedings.” Id. at 453 (quoting Pennsylvania
v. Delaware Valley Citizens’ Council, 478 U.S. 546, 559 (1986)). Indeed, “administrative
proceedings may be so intimately connected with judicial proceedings as to be considered part of
[a] civil action for purposes of a fee award.” Id. at 453 (quoting Sullivan v. Hudson, 490 U.S.
877, 892 (1989)). Nevertheless, we denied Anderson’s claim for attorney’s fees, concluding that
“it is clear from the [Supreme] Court’s reasoning that fees for administrative proceedings under
29 U.S.C. § 1132(g) should be recoverable only when the final judgment (or enforcement
thereof) in the prevailing party’s suit depends on the administrative proceedings for which fees
are being claimed.” Anderson, 220 F.3d at 453. In ruling against Anderson, we focused on the
fact that “the Supreme Court’s policy rationale for allowing the prevailing party in Sullivan to
recover attorneys’ fees for administrative proceedings does not apply here,” because the Court’s
decision in Sullivan was based on the “‘mandatory nature of the administrative proceedings’ and
their ‘close relation in law and fact to the issues before the District Court on judicial review.’” Id.
at 454 (quoting Sullivan, 490 U.S. at 890). The Court in Sullivan was concerned that “denying
fees for administrative proceedings subsequent to litigation would create an incentive for
10
No. 12-2059
Bender, et al. v. Newell Window Furnishings, Inc., et al.
‘attorneys to abandon claimants after judicial remand,’ a result that ‘runs directly counter to long
established ethical canons of the legal profession.’” Id. Therefore, “it is within the court’s
discretion to conclude that representation on remand was necessary to the effectuation of [the
Equal Access to Justice Act’s] mandate and to the ultimate vindication of the claimant’s rights,
and that an award of fees for work performed in the administrative proceedings is therefore
proper.” Sullivan, 490 U.S. at 890. The Anderson court found that “[d]enying fees for pre-
litigation exhaustion of administrative remedies would not present any such difficulty.”
Anderson, 220 F.3d at 454.
This precedent is not directly on point because the initial litigation in Illinois was a
judicial proceeding, and not an administrative action. However, the principles underlying the
decision are instructive. Unlike the plaintiff in Anderson, who sought attorney’s fees for an
administrative proceeding she brought against her employer, here Bender was forced to defend
itself in an Illinois court from Newell’s preemptive suit (the merits of which were ultimately
resolved Bender’s favor in a Michigan court), which was dismissed, then affirmed, as pure forum
shopping. The issues in the Illinois litigation were not just “related” to the Michigan case, they
were identical. The retirees had to resolve the Illinois action in order to proceed with their
Michigan action. As the district court noted,
The fact that the Illinois case was dismissed in favor of the Michigan case, rather
than transferred to this Court, does not preclude the Court from awarding
attorney’s fees arising out of the Illinois action, particularly in the ERISA context,
where success ‘on the merits’—not on procedural rules—is required to trigger the
attorney fee-shifting provisions of the statute.
The Court in Sullivan was concerned that denying a party attorney’s fees in some situations
could create perverse incentives for litigants and their attorneys. There, the concern was
11
No. 12-2059
Bender, et al. v. Newell Window Furnishings, Inc., et al.
attorneys abandoning their clients; here, the concern is forum shopping. Requiring Bender and
the retirees to bear the costs of defending themselves against a company that brought suit
preemptively in an improper forum to gain an advantage would sanction forum shopping and run
counter to the interests of justice. It is clear that the district court did not abuse its discretion in
concluding that representation in the Illinois suit was, like the administrative proceeding in
Sullivan, necessary to the ultimate vindication of the claimant’s rights.
Finally, the district court did not abuse its discretion in affirming the magistrate judge’s
order quashing Newell’s subpoena duces tecum of Bender’s attorney. The subpoena request was
intended to establish the relationship between Bender’s attorney and the UAW, their fee-
reimbursement arrangement, and whether the relationship violated the Shutdown Agreement.
The district court reasoned,
While all of these areas of inquest may be germane to the issues presented in
Newell II, they are not required to address the attorney fee application in this case,
and the Court sees no need to reverse the Magistrate Judge and grant the subpoena
request, even if the request had conformed with Fed. R. Civ. P. 45(a)(1)(A)(iii),
which it did not.
Newell’s argument that the district court’s decision “resulted in material, prejudicial, and
grievous harm to Appellants” because it “effectively denied Appellants the opportunity to
discovery that would have provided the District Court with a developed record on which it could
issue an informed decision regarding Appellees’ Fee Application” is unpersuasive. Newell will
have the opportunity to complete that discovery in Newell II, which addresses the relationship
between Bender’s attorney and the UAW. As we explained in Surles ex rel Johnson v.
Greyhound Lines, Inc., 474 F.3d 288, 305 (6th Cir. 2007), “the Federal Rules of Civil Procedure
instruct district courts to limit discovery where its ‘burden or expense … outweighs its likely
12
No. 12-2059
Bender, et al. v. Newell Window Furnishings, Inc., et al.
benefit, taking into account the needs of the case, the amount in controversy, the parties’
resources, the importance of the issues at stake in the litigation, and the importance of the
proposed discovery in resolving the issues.’” At the time the magistrate judge ruled on the
motion to quash, Newell II had not yet been filed. Instead, the magistrate judge based his
decision to quash the subpoena on his assessment that the request failed to comply with Fed. R.
Civ. P. 45(a)(1)(A)(iii), which requires that a subpoena “command each person to whom it is
directed to do the following at a specified time and place: attend and testify; produce designated
documents. . . .” Since the hearing on attorney’s fees was not evidentiary in nature, the subpoena
required Bender’s attorney to appear and testify at an improper time and place. In addition to
this basis for quashing the subpoena, there is now no basis for reversing the quashing of the
subpoena. The material that the subpoena sought, though relevant to the issues subsequently
raised in Newell II, is not relevant to the issues in this case.
The judgment of the district court is affirmed.
13