ERISA, Civil Code Section, And Derivative Statute Could Not Support Fee Award.
When it comes to a successful fee petition, first and foremost one generally must have a statutory or a contractual basis for fee entitlement. Failure to surmount this fundamental step means that a fee recovery will be reversed, as it was in the case we now discuss.
In Fleming v. J. Victor Construction Profit Sharing Pension Plan, Case No. G051251 (4th Dist., Div. 3 Sept. 20, 2016) (unpublished), defendant Profit Sharing Pension Plan successfully demurred to a third amended cross-complaint by a party (Fleming Sr.) and later garnered $44,500 when the lower court granted a “prevailing party” fee motion based on numerous grounds. Fleming Sr. did well to appeal because the fee award was reversed.
The problem here was the lack of a basis for fee entitlement, in a 3-0 opinion authored by Justice Ikola.
First, ERISA, 29 U.S.C. § 1145, allows a discretionary award to parties in a multi-employer plan if the action involves “a participant, beneficiary, or fiduciary.” The problem was that Fleming Sr. did not assert any ERISA claims under his cross-complaint, and he was not a participant or beneficiary under the Plan.
Second, Civil Code section 1717 did not aid the Plan because the fee clause related to a very narrow contract which happened to not encompass the cross-claims, plus the alter ego allegations never implicated the Plan such that fee-shifting should ever occur.
Third, the corporate derivative basis for fees—Corporations Code section 17709.02—did not provide a fee anchor either. Although there was some ambiguity on whether Fleming Sr.’s claims were derivative in nature, section 17709.02 was determined not to be a statute authorizing attorney’s fees. The appellate court determined that “[t]he evident intent of the statute is to relieve a limited liability company of the necessity of incurring attorney fees in the event a derivative action is filed, unless and until the plaintiff posts court-ordered security to cover any attorney fees that may subsequently be awarded.” (Slip Op., p. 18.) So, no bond, no fee entitlement.