Opinion ID: 767322
Heading Depth: 2
Heading Rank: 5

Heading: misplaced reliance on regs. s 2510.3-2

Text: 30 Appellants urge reversal because the District Court misquoted a part of Regs. S 2510.3-2(a) and should not have relied upon S 2510.3-2(d) as providing the exclusion from Parts 2 and 3 of Title I of ERISA. Although the language of the district court was not flawless, it is clear that the District Court reached the proper conclusions with respect to the applicability of the relevant provisions of ERISA. The District Court clearly understood the structure of ERISA -some IRAs are completely excluded from coverage and some IRAs (such as the Plan at issue here) are covered by Title I of ERISA but excluded from Parts 2 and 3. 31 The District Court correctly determined that Appellants had failed to create a genuine issue of material fact as to the IRA status of the Plan under I.R.C. S 408. The Court also properly found that the Plan was an employee pension benefit plan subject to Title I of ERISA and that according to the language of SS 1051 and 1081 the Plan was not subject to Parts 2 and 3. 32 Having concluded that the Plan is covered by Title I of ERISA but excluded from Parts 2 and 3, the analysis can turn to the Appellants' particular claims for relief. BREACH OF FIDUCIARY DUTY 33 Appellants' First Claim for Relief alleges that Defendants violated their fiduciary duties by failing to comply with various sections of ERISA. As the foregoing discussion shows, the Plan is not subject to Parts 2 and 3 of Title I of ERISA, 29 U.S.C. SS 1051-86. Therefore, all of Appellants' claims with regard to the minimum participation and vesting requirements, specified reporting and disclosure requirements and minimum funding requirements contained in these sections are without merit. 34 Appellants' claim that a trust document is required under S 1103 is belied by the exclusionary language of S 1103(b)(3)(B) which excludes plans which consists of one or more individual retirement accounts described in section 408 of Title 26 . . . . Appellants failed to counter this contention in their opposition to summary judgment. The District Court did not err in granting summary judgment on this claim. 35 As to the remaining assertions of the First Claim for Relief, we agree with the District Court that Appellants failed to present any detailed statement of what actions occurred and how such actions violated the law. PROHIBITED TRANSACTIONS 36 In their Second Claim for Relief, Appellants argued that Appellees' failure to contribute adequately to the Plan constituted prohibited transactions. 37 Because Appellants have failed to produce evidence to support the applicability of Parts 2 and 3 of Title I of ERISA and the minimum participation and vesting requirements therein, they have not established a duty to contribute sums greater than those acknowledged by Appellees. They fail to allege that funds are owing on account of those employees which Appellees concede are covered under the Plan. 38 Furthermore, even assuming that Appellees had failed adequately to contribute to the Plan, Appellants' prohibited transaction argument fails because such funds have not become plan assets. Until the employer pays the employer contributions over to the plan, the contributions do not become plan assets over which fiduciaries of the plan have a fiduciary obligation; this is true even where the employer is also a fiduciary of the plan. See Local Union 2134, United Mine Workers v. Powhatan Fuel, Inc., 828 F.2d 710 714 (11th Cir. 1987); Professional Helicopter Pilots Ass'n v. Denison, 804 F.Supp. 1447, 1453-54 (M.D. Ala. 1992). Appellants' allegation that employer contributions were withheld cannot provide the basis for a prohibited transaction claim because no plan assets are involved. ACCOUNTING 39 Appellants' Third Claim for Relief alleges that monies are owed and that an accounting is necessary. Outside of the monies which Appellants erroneously believe are owed because of requirements contained in Parts 2 and 3 of Title I of ERISA, no specific allegation nor evidence has been presented to show what monies may be owed to Appellants. The District Court correctly granted summary judgment on this claim. FAILURE TO DISCLOSE DOCUMENTS 40 In their Fourth Claim for Relief, Appellants sought statutory penalties for Appellees' failure to provide certain plan documents as required by ERISA, 29 U.S.C. SS 1024(b)(4) and 1025. Under 29 U.S.C. S 1132(c), only the plan administrator can be held liable for failing to comply with the reporting and disclosure requirements. See Moran v. Aetna Life Ins. Co., 872 F.2d 296, 299 (9th Cir. 1989). 41 We do not concur in the District Court's holding that there was no ERISA liability for failure to furnish nonexistent documents. We read Jackson v. E.J. Brach Corp. to require production and disclosure of current documents, but not to require the wasteful creation of historical documents. 937 F. Supp. 735 (N.D. Ill. 1996). This court agrees that with respect to current documents, [i]f any of these documents do not exist at the time of a request, it is consistent with the aims of ERISA to impose a penalty on the plan administrator . . . [because t]here is nothing keeping the administrator from preparing a mandatory document where none previously existed, and it is his burden upon threat of penalty to do so. Id., at 740 n.6. 42 Nonetheless, the District Court correctly granted summary judgment in favor of Appellees because the Appellants failed to create a genuine issue of material fact as to the administrator status of any of the Appellees. The Appellants employed a scatter gun approach and simply sued multiple defendants alleging that each was the administrator of the Plan. In opposition to the summary judgment motion, Appellants failed to provide evidence that any one or more particular Appellee was an administrator. Even if the Appellant is right that at least one of the Appellees must be a plan administrator, this group guilt theory alone will not survive summary judgment. Each Appellee denies that it is the administrator of the plan; and Rule 56 permits each and every party who believes there is no genuine dispute as to a specific fact essential to the other side's case to demand at least one sworn averment of that fact before the lengthy process of litigation continues. Lujan v. National Wildlife Fed'n, 497 U.S. 871, 888-89 (1990). Therefore, Appellants were required to go beyond their mere allegations and raise a genuine issue of material fact about whether one or more of the defendants was an administrator. See Celotex Corp. v. Catrett, at 325; Anderson v. Liberty Lobby, Inc., at 257. 43 Finally, Appellants argue that Appellees' failure to create the documents is the cause of Appellants' lack of evidence. However, when opposing summary judgment, Appellants failed to indicate that further discovery was needed or to allege the facts that such discovery was likely to uncover. Federal Rule of Civil Procedure 56(f) provides that if further discovery is required to oppose a summary judgment motion, the plaintiff must identify the facts and specific discovery that will create a genuine issue of material fact. See Terrell v. Brewer, 935 F.2d 1015, 1018 (9th Cir. 1991). Appellants failed to identify such facts and therefore could not survive a summary judgment motion. DECLARATORY AND INJUNCTIVE RELIEF 44 In their Fifth Claim for Relief, Appellants sought declaratory and injunctive relief. The District Court was correct in denying this relief. Appellants failed to produce any genuine issue of material fact with regard to the existence of any substantive ERISA violations. ATTORNEY FEES AND SANCTIONS A. STANDARD OF REVIEW 45 This court reviews for abuse of discretion a District Court's decision on a motion for attorney fees. Estate of Shockley v. Alyeska Pipeline, 130 F.3d 403, 407-08 (9th Cir. 1997); Corder v. Gates, 104 F.3d 247, 248 (9th Cir. 1996). This court reviews the District Court's analysis of the law de novo and its factual determinations for clear error. Corder, at 248 (citing Kilgour v. City of Pasadena, 53 F.3d 1007, 1010 (9th Cir. 1995) and Sablan v. Dept. of Fin. Of N. Mariana Islands, 856 F.2d 1317, 1324 (9th cir. 1988)). B. ATTORNEY FEES UNDER ERISA 46 ERISA provides for attorney fees at 29 U.S.C. S 1132(g)(1). 8 In making its decision the District Court must analyze the five Hummell factors: 47
48
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50 4. whether the party requesting fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA, and 51 5. the relative merits of the parties' positions. 52 Hummell v. S.E. Rykoff & Co., 634 F.2d 446, 453 (9th Cir. 1980). See Estate of Shockley v. Alyeska Pipeline, 130 F.3d 403 (9th Cir. 1997); Corder v. Howard Johnson & Co., 53 F.3d 225 (9th Cir. 1995). 53 Both Appellants' and Appellees' briefs recite at length the various arguments favoring their positions on each of the outlined factors. The record indicates that the judge evaluated each of the claims under the Hummell factors and based on that evaluation denied the post-judgment motion for attorney fees. The Court's conclusions find ample support in the record. This court need only look for an abuse-of discretion and neither the record nor the briefs reveal such an abuse. 54 Appellees argue that the Court applied too high a threshold to Appellees' motion for fees. This inordinately high standard, they contend, is evidenced in the Court's stated hesitancy to award fees against individual plaintiffs in these circumstances. This court's decision in Alyeska Pipeline held that the playing field is level under the Hummell factors and therefore the Court should not favor[ ] one side or the other. 130 F.3d, at 408. The Court's concession of hesitancy, however, does not indicate that it had abandoned these principles. In fact the Court cited the Alyeska language before embarking on its analysis of the Hummell factors. The statement of hesitancy in the context of a detailed analysis which describes and applies the appropriate standard demonstrates a natural caution in declaring bad faith on the part of lawyers rather than an error in its application of the law. 55 Appellees also argue that no reasonable basis existed for the Court's conclusion that the Appellants acted in good faith in prosecuting this claim. In Credit Managers Ass'n v. Kennesaw Life & Accident Ins. Co., 25 F.3d 743, 749 (9th Cir. 1994), we held that in order to avoid a finding of bad faith under the Hummell factors, plaintiffs must have a reasonable belief that they could prove an actionable ERISA claim. While Appellants failed to prove any of their claims, the Record contains enough documentary material to support the Court's conclusion that a reasonable basis existed for Appellants to make their claims. 56 Appellees assert that at least one of the Named-Appellants never authorized the Appellants' lawyers to name him as a plaintiff and that counsel prosecuted the claims at the bidding of a rival union. Appellants' lawyers attack this allegation as unsupported by evidence. While this dispute is serious and disturbing, Appellees have failed to create a record upon which this court could find that the District Court either abused its discretion or made a clearly erroneous finding of fact. Although Appellees did try to depose Named-Appellant Cline on numerous occasions, it is not apparent that his failure to appear at the scheduled depositions indicates that he and the other named-plaintiffs did not authorize the suit. At any rate, if Cline truly did not authorize the suit, Appellees should have developed the record more thoroughly before making general demands for fees. The Record as it stands does not indicate that the Court abused its discretion when it denied attorney fees under S 1132(g)(1). C. ATTORNEY FEES UNDER 28 U.S.C. S 1927 57 Appellees also contend that the Court erred in denying sanctions against the Appellants' lawyers under 28 U.S.C. S 1927. That statute provides that a court may impose sanctions on any attorney who unreasonably and vexaciously multiplies legal proceedings. Recklessness or bad faith is required to support a fee award under S 1927. U.S. v. Blodgett, 709 F.2d 608, 610 (9th Cir. 1983). Bad faith is present when an attorney knowingly or recklessly raises a frivolous argument, or argues a meritorious claim for the purpose of harassing an opponent. Estate of Blas v. Winkler, 792 F.2d 858, 860 (9th Cir. 1986). 58 While Appellants' claims were unable to survive summary judgment, the record does contain evidence in the form of correspondence between the parties which discusses the concern among Appellees that employer contributions might invoke the applicability of ERISA provisions. The Court did not make a clearly erroneous finding when it refused to find Appellants' lawyers had acted in bad faith. Therefore, the Court's denial of sanctions under 28 U.S.C. S 1927 will not be disturbed. D. ATTORNEY FEES ON APPEAL 59 Finally, each party requests an award of attorney fees on appeal. We are satisfied that the appeal and cross-appeals are all non-frivolous and present arguable legal theories. Therefore, all requests for fees on this appeal are denied, but the Appellees are entitled to their costs upon timely presentation of a cost bill.