US Supreme Court Rules That Fund’s Appeal of Merits Ruling Is Untimely

US Supreme Court Rules That Fund’s Appeal of Merits Ruling Is Untimely

 WASHINGTON, D.C. — (Mealey’s) A unanimous U.S. Supreme Court today ruled that a federal district court’s decision on the merits that left unresolved a multiemployer pension fund’s request for contractual attorney fees is a final decision subject to immediate appeal under 28 U.S. Code Section 1291 [an annotated version of this statute is available to subscribers], reversing a ruling by the First Circuit U.S. Court of Appeals (Ray Haluch Gravel Co., et al. v. Central Pension Fund of the International Union of Operating Engineers and Participating Employers, et al., No. 12-992, U.S. Sup.; See December 2013, Page 27).

Justice Anthony Kennedy wrote for the unanimous court that Budinich v. Becton Dickinson & Co., 486 U. S. 196 (1988) [an enhanced version of this opinion is available to subscribers], in which the Supreme Court held that a decision on the merits is a “final decision” under Section 1291 even if the award or amount of attorney fees remained to be determined, applies whether the claim for attorney fees is based on a statute and/or a contract.

Collective Bargaining Agreement

Central Pension Fund of the International Union of Operating Engineers, a multiemployer fund governed by the Employee Retirement Income Security Act, sued Ray Haluch Gravel Co., alleging that Haluch violated ERISA and the Labor Management Relations Act by failing to make contributions for previously unreported work allegedly covered by a collective bargaining agreement (CBA). In addition to unpaid remittances, the fund sought attorney fees and auditor’s fees and costs under ERISA Section 502(g)(2)(D) and the CBA itself.

The U.S. District Court for the District of Massachusetts gave the fund the option to offer a submission regarding fees with its proposed findings of fact and conclusions of law or to wait to submit its fee petition until after the court made its findings. The fund chose the latter option.

On June 17, 2011, the District Court issued a judgment for Haluch, awarding more than $26,897 referable to covered work performed by a specific employee but denying recovery for any other work. On July 25, 2011, the District Court awarded the fund $34,688 in attorney fees and costs.

On Aug. 15, 2011, the funds appealed both decisions, and, a week later, Haluch filed a cross-appeal. The fund’s notice of appeal was within 30 days of the District Court’s entry of judgment with respect to the claim for attorney fees but was more than 30 days from the decision on the merits.

‘Element Of Damages’

On Sept. 12, 2012, the First Circuit ruled that the first judgment was not a final judgment pursuant to Section 1291, which confers on the courts of appeals jurisdiction over “final decisions of the district courts.”

The appeals panel distinguished Budinich, saying that “[w]here, as here, an entitlement to attorneys’ fees derives from a contract rather than from a statute, the critical question is whether the claim for attorneys’ fees is part of the merits. In this instance, the plaintiffs brought suit, at least in part, to enforce certain provisions of the CBA. That agreement provided for the payment of attorneys’ fees as an element of damages in the event of a breach. Throughout the litigation, the plaintiffs, pursuant to the terms of the CBA, sought to recoup the attorneys' fees incurred as part of their collection efforts. These included fees for legal services rendered prior to suit. Viewed through this prism, the attorneys’ fees must be considered an element of the plaintiffs’ contractual damages. It follows that when the district court entered judgment only for the unpaid remittances and explicitly left open the claim for attorneys' fees, the damages award was incomplete and the judgment was not final,” the First Circuit said.

The appeals panel went on to vacate both the remittance and fee awards, concluding that the District Court failed to apply the presumption that the defendant is liable “for all hours worked . . . in which [employees] were shown to have performed some covered work.”

The Supreme Court granted Haluch’s petition for a writ of certiorari on June 17.

‘Piecemeal Litigation’

In reversing and ruling that there was no timely appeal of the District Court’s June 17 order, the Supreme Court rejected the fund’s argument that unresolved claims for attorney fees authorized by contract, unlike those authorized by statute, are not collateral for finality purposes. The fund had argued that contractual provisions for attorney fees or costs of collection are liquidated-damages provisions intended to remedy the injury giving rise to the action.

The Supreme Court said that Budinich rejected that distinction, “ma[king] clear that the uniform rule there announced did not depend on whether the statutory or decisional law authorizing a particular fee claim treated the fees as part of the merits.”

Moreover, “the Funds’ concern over piecemeal litigation, though starting from a legitimate principle, is counterbalanced by the interest in determining with promptness and clarity whether the ruling on the merits will be appealed,” the Supreme Court said.

In addition, the Federal Rules of Civil Procedure “provide a means to avoid a piecemeal approach in the ordinary run of cases where circumstances warrant delaying the time to appeal. Rule 54(d)(2) provides for motions claiming attorney’s fees and related nontaxable expenses. Rule 58(e), in turn, provides that the entry of judgment ordinarily may not be delayed, nor may the time for appeal be extended, in order to tax costs or award fees,” the court said.

‘Preliminary Steps’

The Supreme Court also rejected the fund’s argument that the claim left unresolved as of June 17 included auditor and attorney fees incurred prior to the commencement of formal litigation and that those fees, at least, fall beyond the scope of the rule announced in Budinich.

“The fact that some of the claimed fees accrued before the complaint was filed is inconsequential. As this Court has observed, ‘some of the services performed before a lawsuit is formally commenced by the filing of a complaint are performed “on the litigation,”’” the court said, adding that “[t]he fees in this case fit that description. Investigation, preliminary legal research, drafting of demand letters, and working on the initial complaint are standard preliminary steps toward litigation.”

“To be sure, the situation would differ if a party brought a freestanding contract action asserting an entitlement to fees incurred in an effort to collect payments that were not themselves the subject of the litigation. But that is not this case. Here the unresolved issue left open by the June17 order was a claim for fees for the case being resolved on the merits,” the court said.


Haluch is represented by Dan Himmelfarb, Charles A. Rothfeld, Michael B. Kimberly and Scott M. Noveck of Mayer Brown in Washington and Michael K. Callan and Jose A. Aguiar of Doherty, Wallace, Pillsbury & Murphy in Springfield, Mass.

The fund is represented by James A. Feldman, Stephanos Bibas and Nancy Bregstein Gordon of the University of Pennsylvania Law School Supreme Court Clinic in Philadelphia and Kenneth L. Wagner of Blitman & King in Syracuse, N.Y.

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