Opinion ID: 411806
Heading Depth: 1
Heading Rank: 1

Heading: Attorneys' Fees For This Suit

Text: 4 The primary contention 3 of all three defendants is that because there was no breach of fiduciary duty or showing of bad faith, the court erred in awarding attorneys' fees. In the prior appeal, the Court remanded the issue of attorneys' fees, explaining: [W]e are remanding on the merits, and different decisions on the merits may warrant a revised decision on attorneys' fees. 624 F.2d at 1266. The Court also set out guidelines to aid the district court in exercising its discretion, stating that it should consider the following factors in deciding whether to award attorneys' fees under Section 502(g) of ERISA, 29 U.S.C.A. Sec. 1132(g): 5 (1) the degree of the opposing parties' culpability or bad faith; (2) the ability of the opposing parties to satisfy an award of attorneys' fees; (3) whether an award of attorneys' fees against the opposing parties would deter other persons acting under similar circumstances; (4) whether the parties requesting attorneys' fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA itself; and (5) the relative merits of the parties' positions. No one of these factors is necessarily decisive, and some may not be apropos in a given case, but together they are the nuclei of concerns that a court should address in applying section 502(g). 6 624 F.2d at 1266 (footnote and citations omitted). In addition, [w]here plaintiffs are fiduciaries, for example, as in the present case, a court should consider whether those parties would have violated their fiduciary duties by not bringing suit. Id. Although all three defendants were held liable for plaintiffs' attorneys' fees for this suit, the basis of liability for Beck and Phagan differed from that of Bowen, and will be discussed separately. 7 a. The Liability of Beck and Phagan 8 The district court held Beck and Phagan liable for attorneys' fees because it concluded that they had breached their fiduciary duties by refusing to authorize a suit containing charges of willful misconduct after the arbitrator's decision. It noted that Beck's and Phagan's refusal occurred even after their own attorney, Mr. Weksler, had advised them that a suit without allegations of fraud or conspiracy would be a nullity due to the indemnity provisions of the trust agreement. 4 It concluded that because there was no justification for their refusal, R. 1014, Beck and Phagan acted in bad faith. 9 Beck and Phagan present numerous challenges to the district court's holding on this issue, none of which are persuasive. Many of their objections concern reasons why it was prudent for them to refuse to include fraud or willful misconduct charges in the proposed suit. However, none of these objections are even relevant if the arbitrator's clarifying letter 5 clearly directed the trustees to include all charges in the suit. As the Court pointed out in the prior appeal, under the fund's Agreement and Declaration Trust trustees must comply with an arbitrator's decision. 624 F.2d at 1259 & n. 6, 1261 n. 9. Further, Section 404(a)(1)(D) of ERISA, 29 U.S.C.A. Sec. 1104(a)(1)(D), requires fiduciaries to act in accordance with the documents and instruments governing the plan. Therefore, the refusal to comply with an arbitrator's decision is automatically a breach of fiduciary duty. 10 The threshold issue that Beck and Phagan must prove, therefore, is that the arbitrator's letter of clarification was ambiguous. However, they did not even raise this argument until after remand, and after the court had already issued its supplemental findings and opinion as well as an order on motions for reconsideration. Nevertheless, the district court made our task easier by addressing this argument in yet another written order and noting that it is inconsistent with defendants' previous arguments that they never saw the letter of clarification. 6 The court went on to conclude: The arbitrator's ruling clearly supports the plaintiffs' position that the suit should be filed with allegations of willful misconduct. R. 1356. Even if we agree with defendants that the arbitrator's ruling is susceptible to more than one interpretation, the district court's factual finding is supported by the evidence and therefore is not clearly erroneous. A finding is 'clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 541, 92 L.Ed. 746 (1948); North River Energy Corp. v. United Mine Workers, 664 F.2d 1184, 1189 (11th Cir.1981). 11 Plaintiffs also emphasize that the order on remand reversed the district court's previous determination that Beck and Phagan did not breach their fiduciary duties. However, in the previous appeal the Court noted that the district court's prior decision was seemingly inconsistent. 624 F.2d at 1261 & n. 9. Because the district court had enforced the arbitrator's decision by directing the trustees to file suit on all charges, it had implicitly found that the management trustees should have complied with the arbitrator's direction. Yet it had also found that Beck and Phagan had not breached their fiduciary duties. As discussed above, a failure to comply with the arbitrator's direction is automatically a breach of fiduciary duty under the fund's Agreement and Section 404(a)(1)(D) of ERISA, 29 U.S.C.A. Sec. 1104(a)(1)(D). The Court remanded because of its uncertainty as to the grounds for the district court's decision. By reversing its earlier conclusion, the district court resolved the inconsistency noted in the prior opinion. 12 b. The Liability of Bowen 13 In its original order the court ordered Bowen removed as a trustee to avoid the appearance of impropriety. The former Fifth Circuit remanded because it was unclear whether a removal solely to avoid the appearance of impropriety could stand, directing the lower court to decide whether Bowen actively participated in the decision whether to sue the former trustees. 624 F.2d at 1261. On remand, the court found Bowen liable for attorneys' fees for this suit because he breached his fiduciary duties by participating in the meetings concerning the motion to file a suit that would have included himself as a defendant and because if he had resigned this suit could have been avoided. 14 Bowen's only challenge to the court's finding of liability is that he did not participate in any post arbitration matters, and attorneys' fees were not awarded for arbitration. However, one of the purposes of this suit was to force Bowen's removal as a trustee. Therefore, Bowen's non-participation in post arbitration discussions is irrelevant; the court held that the costs of this suit are at least in part attributable to Bowen's refusal to step down while litigation against him was being considered.