San Jose Healthcare System v. Stationary Engineers Local 39 Pension Trust Fund

Background

San Jose Healthcare System, LP, doing business as Regional Medical Center of San Jose (RMC), moved for attorney’s fees after the court granted RMC’s motion to vacate an arbitration award and denied the Pension Fund’s motion to confirm that award. The court entered judgment in RMC’s favor on June 23, 2022. The underlying dispute concerned pension contributions allegedly owed under a collective bargaining agreement and a separate Trust Agreement.

RMC sought fees under section 502 of the Employee Retirement Income Security Act (ERISA), the Labor Management Relations Act (LMRA), and California Civil Code section 1717. The Stationary Engineers Local 39 Pension Trust Fund opposed the motion.

Evidentiary objections

The Pension Fund objected to several exhibits supporting RMC’s fee request, arguing that they concerned a different collective bargaining agreement and were immaterial, impertinent, hearsay, or otherwise irrelevant. The court overruled the objections because the evidence was relevant and admissible for the limited purposes for which RMC offered it. The court denied the Pension Fund’s request to strike the exhibits.

ERISA fee request

Under ERISA section 502(g)(1), a court may award reasonable attorney’s fees and costs to either party in an action brought under the statute. A fee applicant must first show some degree of success on the merits, after which the court considers five factors: bad faith or culpability, the opposing party’s ability to pay, deterrence, whether the case benefits plan participants or resolves an important ERISA question, and the relative merits of the parties’ positions.

The Pension Fund argued that RMC’s success was only procedural because RMC obtained the arbitration award’s cancellation rather than a ruling that pension contributions were never owed for the employees at issue. The court rejected that argument, explaining that the issue in this case was whether the award should be vacated or confirmed and that RMC won on that issue.

The court nevertheless declined to award fees after considering the five factors. It found that the Pension Fund’s position was based on a nonfrivolous, though ultimately incorrect, interpretation of the Trust Agreement and therefore was not taken in bad faith. The Pension Fund did not dispute that it could pay a fee award, but the court gave that factor only some, not significant, weight. The court found RMC’s claims of undue delay speculative and concluded that deterrence did not support an award. It also concluded that the case did not present a significant ERISA legal question because it turned on the unique terms of the collective bargaining agreement and Trust Agreement. Finally, although RMC prevailed on the arbitration issue, the Pension Fund had nonfrivolous arguments, so the relative-merits factor did not strongly favor either side.

The court exercised its discretion to deny RMC’s fee request under ERISA.

LMRA and California Civil Code section 1717

The court held that attorney’s fees were not available under California Civil Code section 1717 because the LMRA preempts that provision in this context. Fees under the LMRA would require a showing that the Pension Fund acted in bad faith or engaged in similar conduct. For the same reasons discussed under the ERISA bad-faith analysis, the court found that RMC had not shown the required bad faith or that the Pension Fund’s position was frivolous.

Because the court denied fees on those grounds, it did not reach the Pension Fund’s arguments that RMC could not recover fees incurred during the underlying arbitration or had provided insufficient billing information.

Disposition

The court denied RMC’s motion for attorney’s fees. It also denied the Pension Fund’s request to strike the challenged exhibits. Judge Susan Van Keulen signed the order.