Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...
March 24 — An employer that used bankruptcy law to avoid paying more than $500,000 to a group of union benefit funds can't recover attorneys' fees under ERISA, the U.S. Court of Appeals for the Ninth Circuit held.
According to the court, the employer's bankruptcy proceedings—in which its ability to discharge the debt rested on the court's conclusion that it wasn't a fiduciary under the Employee Retirement Income Security Act—wasn't an action brought under ERISA that would allow the statute's fee-shifting provision to apply.
The court said that although the meaning of an ERISA term “came to assume a central role” in the underlying bankruptcy proceeding, the statutory text wasn't flexible enough to allow a fee award in a bankruptcy case. Further, the court expressed concern about the “mischief” that would arise if it created an incentive for litigants to “plead non-ERISA causes of action that incorporate ingredients drawn from ERISA, if for no other reason than to render themselves eligible to recover attorney's fees.”
The employer also sought attorneys' fees under a California state law provision, but this, too, failed to persuade the court.
Circuit Judges Diarmuid F. O'Scannlain and Sandra S. Ikuta joined the March 24 decision, along with District Judge Larry A. Burns of the U.S. District Court for the Southern District of California.
The employer's underlying action led the Ninth Circuit to an important ruling on the bankruptcy code's defalcation exception, which prohibits fiduciaries from receiving bankruptcy discharges for debts incurred through fraudulent conduct. In July 2015, the Ninth Circuit joined two other federal circuits—the Sixth and Tenth—in declining to carve out an exception to the general rule that an employer can't be an ERISA fiduciary with respect to unpaid contributions owed to a benefit fund .
Conversely, the Second and Eleventh circuits have recognized such an exception when the plan documents expressly define the fund to include future payments.
On March 21, the U.S. Supreme Court declined to resolve this circuit split .
Desmond Nolan Livaich & Cunningham represented the employer. Weinberg Roger & Rosenfeld represented the benefit funds.
To contact the reporter on this story: Jacklyn Wille in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Text of the decision is at http://www.bloomberglaw.com/public/document/GREGORY_BOS_Appellant_v_BOARD_OF_TRUSTEES_in_their_capacities_as_.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)