EMPLOYER TRUSTEES OF WESTERN PENNSYLVANIA TEAMSTERS AND EMPLOYERS WELFARE FUND v. UNION TRUSTEES OF WESTERN PENNSYLVANIA TEAMSTERS AND EMPLOYERS WELFARE FUND

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

EMPLOYER TRUSTEES OF ) CIVIL ACTION NO. 19-388

WESTERN PENNSYLVANIA ) CIVIL ACTION NO. 18-1112

TEAMSTERS AND EMPLOYERS )

WELFARE FUND, WILLIAM J. ) SENIOR JUDGE JOY FLOWERS CONTI

DILLNER, M. E. DOUTT, ROBERT )

JACKSON, DOUGLAS )

LONGENETTE, RAYMOND MILLER, )

ROBERT J. PERKINS )

)

Plaintiffs, )

)

)

)

)

)

v. )

)

UNION TRUSTEES OF WESTERN )

PENNSYLVANIA TEAMSTERS AND )

EMPLOYERS WELFARE FUND, )

KEITH FRANK, CHARLES GASTON, )

JOSEPH A. MOLINERO, KEVIN )

SCHMITT, SCOTT STANLEY, )

)

)

Defendants. )

)

OPINION

I. Introduction

Pending before the court are two civil actions between identical parties, premised on

substantially the same series of underlying facts. Plaintiffs are the employer representatives

serving on the Board of Trustees of the Western Pennsylvania Teamsters and Employers Welfare

Fund (the “Employer Trustees”) and defendants are the union representatives also serving on that

board (the “Union Trustees”). 1 Cross-motions for summary judgment were filed in both cases.

The cross-motions for summary judgment are fully briefed and are ripe for decision. To explain

the overlapping background of both cases and in the interest of efficiency, the court will address

the cross-motions for summary judgment filed in both cases in a single opinion. First, the court

will address the cross-motions for summary judgment in civil action number 19-388, and,

second, will address the cross-motions for summary judgment in civil action number 18-1112,

which were addressed by a magistrate judge in a report and recommendation dated April 22,

2020 (the “R&R”). (ECF No. 68.)

II. Civil Action Number 19-388

A. Procedural History

On April 5, 2019, the Employer Trustees filed a complaint asking the court to vacate

partially an arbitration award and to issue a declaratory judgment with respect to an alleged

breach of fiduciary duty. (ECF No. 1.) The Union Trustees filed their answer and asserted a

counterclaim requesting that the court issue an order enforcing the arbitration award at issue.

(ECF No. 13.) On September 20, 2019, both parties filed motions for summary judgment. The

cross-motions for summary judgment are fully briefed and are ripe for decision by this court.

B. Factual Background2

The Western Pennsylvania Teamsters and Employers Welfare Fund (the “Fund”) is a

multi-employer welfare benefit plan, created pursuant to Section 302(c)(5) of the Labor

1 The current Employer Trustees are M.E. Doutt, Robert Jackson, Douglas Longenette,

Raymond Miller, and Robert J. Perkins. William J Dillner is a former Employer Trustee who

resigned his position as of December 1, 2018. The current Union Trustees are Keith Frank, Charles

Gaston, Joseph A. Molinero, Kevin Schmitt, and Scott Stanley.

2 In all material respects, the factual background in this case is not disputed.

Management Relations Act (“LMRA”) of 1947, 29 U.S.C. § 186(c)(5), and an “employee welfare

plan” within the meaning of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C.

§§ 1002(1), 1002(37). (ECF No. 54 ¶ 4.) The Fund provides certain health, welfare, and other

employee benefits and does not provide pension benefits.

The Fund operates pursuant to the Agreement and Declaration of Trust (the “Trust

Agreement”) that was established on June 12, 1950, and most recently amended on January 1,

2000. (Id. ¶ 5.) The Trust Agreement provides for the appointment of 5 employer trustees and 5

union trustees (collectively the “Trustees”) and sets forth the governing procedures for

management of the Fund. In particular, the Trust Agreement provides that any action taken by the

Trustees must be approved by a majority of the votes cast at a Trustee meeting. (ECF No. 1-2 at

24-25.) The Trustees have equal voting strength at all Trustee meetings and each Trustee is

permitted one vote. (ECF No. 54 ¶ 17.) Due to the equal number of potential votes held by the

Employer Trustees and Union Trustees, a vote on any given motion may result in a deadlock. In

the event of a deadlock, the Trust Agreement provides the following procedure:

In the event of a deadlock arising, the Trustees may agree upon an impartial umpire

to break such deadlock by deciding the dispute in question. In the event of the

inability of the Trustees to agree upon the selection of such impartial umpire within

a reasonable period of time, then, either group of Trustees, or, in their failure to act,

any Trustee, may petition the United States District Court for the Western District

of Pennsylvania to appoint such impartial umpire. Such impartial umpire shall

immediately proceed to hear the dispute between the Trustees and decide such

dispute, and the decision and award of such umpire shall be final and binding

upon the parties.

(ECF No. 54 ¶ 18 (emphasis added).)

If an impartial umpire is selected or appointed to resolve a deadlock, the Trust Agreement

defines the scope of the umpire’s authority. Section 3.15 of the Trust Agreement provides:

The scope of any such proceeding before such impartial umpire shall be limited to

the provisions of this Trust Agreement and to the provisions of the rules, regulations

and bylaws adopted by the Trustees and to the plan of benefits established by them.

The impartial umpire shall have no jurisdiction or authority to change or

modify the provisions of this Trust Agreement … and such impartial umpire’s

review shall be limited to the issues out of which the deadlock arose.

(Id. ¶ 19 (emphasis added).)

1. The Compensation Deadlock

During the Executive Session of the Trustees held on December 3, 2014, an Employer

Trustee presented a motion that the Fund compensate those Trustees who legally qualify for

compensation for attendance at Trustee meetings at a rate of $600 per Trustee Sub-Committee

Meeting and monthly Trustee Meeting. The motion resulted in a deadlock (the “Compensation

Deadlock”). (ECF No. 54 ¶ 39.) The Employer Trustees requested that the Compensation

Deadlock be resolved in arbitration, i.e. by an impartial umpire. The Union Trustees refused to

arbitrate, asserting that two of the Employer Trustees were invalidly appointed because they were

not contributing employers or employed by a contributing employer. (Id. ¶ 44.) The Union Trustees

contended that the Compensation Deadlock was not arbitrable under the Trust Agreement. (Id. ¶

48.) The Employer Trustees filed a lawsuit to compel arbitration, and the district court held that

the Trust Agreement could not be interpreted in a way that supports the Employer Trustees’

position and found that it had no basis to appoint an arbitrator. Emp’r Trustees of W. Pa. Teamsters

and Emp’rs Welfare Fund v. Union Trustees of W. Pa. Teamsters, 149 F. Supp. 3d 544, 550 (W.D.

Pa. 2016). On appeal, the Third Circuit Court of Appeals held that the Compensation Deadlock

was arbitrable and ordered arbitration. Emp’r Trustees of W. Pa. Teamsters v. Union Trustees of

W. Pa. Teamsters, 870 F.3d 235 (3d Cir. 2017).

Michael E. Zobrak (“Zobrak”)3 was selected as impartial umpire to resolve the

Compensation Deadlock, and a hearing was held on July 26, 2018. At the hearing, the parties’

arguments concerning the Compensation Deadlock centered around a particular provision in the

Trust Agreement, Section 4.2(a). In the current, operative version of the Trust Agreement, Section

4.2(a) provides:

The Trustees shall have the power and authority to use and apply the Trust Fund

for the following purposes: (a) To pay or provide for the payment of all reasonable

and necessary expenses (i) of collecting the Employer and Employee contributions

and payments and other monies and property to which they may be entitled; (ii) of

administering the affairs of this Health and Welfare Fund, including the

employment of such administrative, legal, expert and clerical assistance, the

purchase or lease of such premises, materials, supplies and equipment and the

performance of such other acts, as the Trustees, in their sole discretion, find

necessary or appropriate in the performance of their duties; and (iii) of

reimbursement for expenses and the payment of allowances properly and actually

incurred in the performance of their duties with the Health and Welfare Fund, as

permitted by law, including, without limitation, attendance at meetings and other

functions of the Board of Trustees or its committees or while on business of the

Board of Trustees, attendance at institutes, seminars, conferences or workshops for

or on behalf of the Health and Welfare Fund.

(ECF No. 54 ¶ 29.) The operative language in Section 4.2(a) was incorporated into the Trust

Agreement by an amendment enacted in 1977. (Id. ¶ 29.) During the hearing, the Employer

Trustees presented evidence that the Trust Agreement was amended several times since its

creation. The original Trust Agreement provided only for reimbursement of expenses to the

Trustees and did not permit compensation for meeting attendance. (Id. ¶ 24.) The Trust Agreement

was amended in 1957 to include language stating that “the trustees shall serve without

compensation[.]” (Id. ¶ 25.) The Trust Agreement was again amended in 1960 to state that “the

3 Michael E. Zobrak was initially named as a defendant in Civil Action No. 19-388. On

July 28, 2020, the court granted Michael E. Zobrak’s motion to dismiss for failure to state a

claim, pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF Nos. 55, 56).

Trustees shall have received no compensation as such for their services.” (ECF No. 54 ¶ 26.) In

1967, however, the Trust Agreement was amended to authorize “fees paid to the Trustees for

attendance at meetings[.]” (Id. ¶ 28.)

During the hearing, the Employer Trustees presented the testimony of Charles Streiff

(“Streiff”), former Fund counsel, who drafted the 1977 version of the Trust Agreement. (ECF No.

54 ¶ 30.) Streiff testified that the Trust Agreement was amended in 1977 to comply with the

ERISA, which prohibits certain payments to full-time employees of participating employers. (Id.

¶¶ 31, 32.) With respect to Section 4.2(a), Streiff testified that he had no intent to alter the Trust

Agreement, except to comply with the ERISA requirements. (Id. ¶ 33.) Streiff did not recall any

issue being raised about the working of Section 4.2(a) at the time the Trust Agreement was

amended in 1977. (Id.) The Employer Trustees also presented evidence that payment for

attendance at Trustee meetings was unanimously approved by the Trustees on three separate

occasions after the current operative language was incorporated into the Trust Agreement via the

1977 amendment. (ECF No. 54 ¶ 36.)

After hearing the evidence presented by both parties, Zobrak issued an award (the “Zobrak

Award”) finding that the Trust Agreement does not permit compensation for attendance at Trustee

meetings. The Employer Trustees now seek to vacate the Zobrak Award with respect to the

Compensation Deadlock and ask that the court issue a declaratory judgment stating that the

authorization of past payments made for attendance at Trustee meetings does not constitute a

breach of fiduciary duty. The Union Trustees seek to enforce that award.

2. The Appointment Deadlock

On April 8, 2015, a Union Trustee moved to amend the Trust Agreement to require

Employer Trustees to be full-time employees of participating employers. (ECF No. 54 ¶ 52.) The

Employer Trustees opposed the motion, which resulted in a deadlock. (Id. ¶ 54.) The Employer

Trustees declined the request of the Union Trustees to proceed to arbitration. The Union Trustees

made a subsequent motion on December 2, 2015 “to clarify and confirm that the trust document

requires that all Employer Trustees must be a full-time employee of a contributing employer to the

Fund.” (ECF No. 54 ¶ 56.) This motion also resulted in a deadlock (the “Appointment Deadlock”).

The Union Trustees filed a lawsuit to compel arbitration, and the district court held that the

Trust Agreement could not be interpreted in a way that supported the Union Trustees’ position and

that it had no basis to appoint an arbitrator. Heider v. Dillner, 195 F. Supp. 3d 762, 767 (W.D. Pa.

2016). On appeal, the United States Court of Appeals for the Third Circuit—in the same decision

which resolved the Compensation Deadlock appeal—ordered arbitration on the Appointment

Deadlock. Emp’r Trustees of W. Pa. Teamsters, 870 F.3d at 243–44. The issues pertaining to the

Appointment Deadlock were addressed at the arbitration hearing held by Zobrak on July 26, 2018,

which also concerned the Compensation Deadlock. (Id. ¶ 59.) Zobrak decided the Appointment

Deadlock in favor of the Employer Trustees; neither party to the instant case seeks to vacate the

Zobrak Award with respect to the Appointment Deadlock.

C. Standard of Review

Rule 56 of the Federal Rules of Civil Procedure “mandates the entry

of summary judgment, after adequate time for discovery and upon

motion, against a party who fails to make a showing sufficient to

establish the existence of an element essential to that party's case,

and on which that party will bear the burden of proof at trial.”

Marten v. Godwin, 499 F.3d 290, 295 (3d Cir. 2007) (quoting Celotex Corp. v. Catrett, 477 U.S.

317, 322-23 (1986)).

An issue of material fact is in genuine dispute if the evidence is such that a reasonable

jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 248 (1986); see Doe v. Abington Friends Sch., 480 F.3d 252, 256 (3d Cir. 2007) (“A

genuine issue is present when a reasonable trier of fact, viewing all of the record evidence, could

rationally find in favor of the non-moving party in light of his burden of proof.”) (citing

Anderson, 477 U.S. at 248; Celotex Corp., 477 U.S. at 322-23).

“[W]hen the moving party has carried its burden under Rule 56(c), its opponent

must do more than simply show that there is some metaphysical doubt as to the

material facts . . . . Where the record taken as a whole could not lead a rational trier

of fact to find for the nonmoving party, there is no genuine issue for trial.”

Scott v. Harris, 550 U.S. 372, 380 (2007) (quoting Matsushita, 475 U.S. at 586-87).

In deciding a summary judgment motion, a court must view the facts in the light most

favorable to the nonmoving party, must draw all reasonable inferences in favor of the non-

moving party, and resolve all doubts in favor of the nonmoving party. Doe v. Cty. of Centre,

Pa., 242 F.3d 437, 446 (3d Cir. 2001); Woodside v. Sch. Dist. of Phila. Bd. of Educ., 248 F.3d

129, 130 (3d Cir. 2001); Heller v. Shaw Indus., Inc., 167 F.3d 146, 151 (3d Cir. 1999). A court

must not engage in credibility determinations at the summary judgment stage. Simpson v. Kay

Jewelers, Div. of Sterling, Inc., 142 F.3d 639, 643 n.3 (3d Cir. 1998).

D. Discussion

Here, there are no issues of material fact in genuine dispute. The Employer Trustees raise

five claims against the Union Trustees, which are ripe for resolution via the motions for

summary judgment filed by the parties. Each claim will be addressed in turn.

1. Count I: Whether Zobrak had Authority to Issue the Arbitration Award

concerning the Compensation Deadlock

a. Legal Principles

“[A]n arbitrator may not venture beyond the bounds of his or her authority.” Matteson v.

Ryder Sys., Inc., 99 F.2d 108, 112 (3d Cir. 1996) (citing United Steelworkers of Am. v.

Enterprise Wheel & Car Corp., 363 U.S. 593, 597-98 (1950)). An arbitrator’s authority “is

defined not only by the terms of the [agreement], but also by the scope of the issues submitted by

the parties. Thus ‘it is the responsibility of the arbitrator in the first instance to interpret the scope

of the parties’ submission, but it is within the courts’ province to review an arbitrator’s

interpretation.’” Major League Umpires Ass’n v. Am. League of Prof’l Baseball Clubs, 357 F.3d

272, 279 (3d Cir. 2004) (quoting Matteson, 99 F.2d at 112-13). “[O]ur review of the

interpretation of a submission is highly deferential.” Id. at 113. “[T]he touchstone for interpreting

a submission must be the intention of the parties.” Id. at 114. “A mere ambiguity in the opinion

accompanying an award, which permits the inference that the arbitrator may have exceeded his

authority, is not a reason for refusing to enforce the award.” Enter. Wheel, 363 U.S. at 598

(finding no indication that the arbitrator “went beyond the submission” in rendering the

arbitration award).

b. Application

At Count I of their complaint, the Employer Trustees assert that Zobrak did not have

jurisdiction to render the portion of the Zobrak Award that resolved the Compensation Deadlock.

Specifically, the Employer Trustees argue that the Zobrak Award is invalid with respect to the

Compensation Deadlock because it exceeds the scope of the issues submitted for arbitration and

impermissibly modifies the Trust Agreement. The Employer Trustees point to the “Question to

be Resolved” set forth in the Zobrak Award, which states:

The parties each presented a deadlocked position related to additions/changes in the

controlling Health and Welfare Trust. The issues in this case are weather [sic] the

deadlocked position submitted by the parties should be resolved in favor of the

party advancing the addition/change to the Trust Agreement?

(ECF No. 34-6.) The Employer Trustees assert that they did not request any addition or change

to the Trust Agreement, and that the Trust Agreement specifically provides that an arbitrator

does not have authority to modify its provisions.

The Union Trustees respond that, despite the wording of the “Question to be Resolved,”

Zobrak did not analyze the issue to be decided in the manner asserted by the Employer Trustees.

To the contrary, they assert that the analysis supporting Zobrak’s decision on the Compensation

Deadlock shows that Zobrak interpreted the language of the Trust Agreement and applied his

interpretation to the underlying dispute and did not change or modify the Trust Agreement.

The parties do not dispute that the issue submitted for arbitration with respect to the

Compensation Deadlock was whether the Trust Agreement permits payment to eligible Trustees

for attendance at Trustee meetings. The parties also do not dispute that Zobrak, acting as an

impartial umpire, had no authority to change or modify the terms of the Trust Agreement. The

parties dispute whether Zobrak exceeded his authority by modifying the Trust Agreement. The

inclusion of the words “addition” and “change” in Zobrak’s statement of the “Question to be

Resolved” does, at first glance, create some ambiguity with respect to the manner in which

Zobrak framed the parties’ submission. It is clear from this court’s review of the Zobrak Award,

however, that Zobrak did not change or modify any provision of the Trust Agreement.

To resolve the Compensation Deadlock, Zobrak was asked to interpret Section 4.2(a)(iii)

of the Trust Agreement to determine whether it permits compensation to eligible Trustees for

meeting attendance. Section 4.2(a)(iii) provides:

The Trustees shall have the power and authority to use and apply the Trust Fund

for the following purposes: (a) To pay or provide for the payment of all reasonable

and necessary expenses… (iii) of reimbursement for expenses and the payment of

allowances properly and actually incurred in the performance of their duties with

the Health and Welfare Fund, as permitted by law including, without limitation,

attendance at meetings and other functions of the Board of Trustees or its

committees….

(ECF No. 1-2 at 27-28). Zobrak made two conclusions with respect to Section 4.2(a)(iii). First,

Zobrak interpreted the term “reimbursement” in a way that does not authorize payment for

meeting attendance. Specifically, Zobrak explained:

Reimbursement indicates that an expenditure was incurred and that the cost of the

expenditure is subject to payment, in this case by the Trust. Compensation for

attendance at meeting[s] does not fall under the classification as

“reimbursement[”]. There is no evidence that the simple act of presence at a

meeting, in and of itself, is an expenditure.

(ECF No. 34-6 at 12). Zobrak next considered the 1967 iteration of the Trust Agreement, which

included language that specifically authorized payment for meeting attendance. In his opinion,

Zobrak emphasized that the express language permitting compensation was removed from the

Trust Agreement by the 1977 amendment. The decision to remove this language, Zobrak

explained, indicates that the “controlling Trust Agreement does not allow for payment for

attendance at Trust meetings.” (Id. at 13.)

In resolving the Compensation Deadlock, Zobrak interpreted the provision at issue and

applied it to the underlying dispute. In issuing the Award, Zobrak did not venture beyond the

issue submitted by the parties for resolution. While Zobrak’s phrasing of the “Question to be

Resolved” may generate a slight ambiguity, the phrasing is not determinative. Enter. Wheel, 363

U.S. at 598 (stating that “[a] mere ambiguity in the opinion accompanying an award, which

permits the inference that the arbitrator may have exceeded his authority, is not a reason for

refusing to enforce the award”). Zobrak did not exceed the scope of his authority under the Trust

Agreement. In resolving the Compensation Deadlock, Zobrak interpreted the language of the

Trust Agreement and applied his interpretation to the underlying dispute. It cannot be genuinely

disputed that Zobrak, in making his decision, was well within the jurisdiction and authority

defined by Section 3.15 of the Trust Agreement. Because there is no genuine dispute of material

fact with respect to Zobrak’s jurisdiction and authority, the Union Trustees’ motion for summary

judgment will be granted with respect to Count I of the complaint, and the Employer Trustees’

cross-motion for summary judgment will be denied with respect to Count I.

2. Counts II and III: Whether the Zobrak Award Draws its Essence from

the Trust Agreement

a. Legal Principles

The Court of Appeals for the Third Circuit has explained that courts play an “extremely

limited role” in reviewing an arbitrator’s award. Tanoma Mining Co., Inc. v. Local Union No.

1269, United Mine Workers of Am. and District 2, United Mine Workers of Am., 896 F.2d 745,

747 (3d Cir. 1990). “This high level of deference is compelled by the preference for private

resolution of labor disputes expressed in the federal statutes governing labor-management

relations.” Id. (citing United Paperworkers Int’l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29

(1987)). An award may be vacated, however, “if it does not draw its essence from the

[underlying agreement], but instead represents the arbitrator’s ‘own brand of industrial justice’”

Id. at 747-48 (quoting Enter. Wheel, 363 U.S. at 597). This exception is narrow. “An arbitration

award draws its essence from the [underlying] agreement if ‘the interpretation can in any

rational way be derived from the agreement, viewed in the light of its language, its context, and

any other indicia of the parties intention.’” Id. (quoting Ludwig Honold Mfg. Co. v. Fletcher,

405 F.2d 1123, 1128 (3d Cir. 1969) (emphasis in original)); United States Steel and Carnegie

Pension Fund v. McSkimming, 759 F.2d 269 (3d Cir. 1985) (finding that an arbitration award

did not draw its essence from the underlying agreement where the decision was based entirely on

an interpretation of the ERISA, without giving any consideration to the provisions of the

agreement). “Our review of the arbitrator’s factual findings is not whether those findings were

supported by the weight of the evidence or even whether they were clearly erroneous. All that is

required is some support in the record.” Tanoma, 896 F.2d at 748 (citing NF&M Corp. v. United

Steelworkers of Am., 524 F.2d 756, 760 (3d Cir. 1975)) (finding that the existence of even

“slender” support in the record for the arbitrator’s finding was sufficient for the award to be

upheld).

In Sun Petroleum, the plaintiff union argued that the defendant employer breached a

collective bargaining agreement by contracting with a third party to repair the concrete floors of

a factory. Sun Petroleum, 681 F.2d at 926. The dispute was submitted to arbitration to determine

whether the agreement required the employer to hire union workers to conduct the repairs.

Interpreting the agreement, the arbitrator adopted a “reasonable man” standard and decided that a

provision requiring that union workers be used for indoor painting applied to a portion, but not

the entirety, of the repair process. Key to the award was the arbitrator’s interpretation of the term

“painting.” The employer argued that the award did not draw its essence from the agreement

because the agreement did not provide for the application of a “reasonable man” standard. The

Third Circuit Court of Appeals concluded that the award did draw its essence from the

agreement, despite the application of the “reasonable man” standard, because the arbitrator did

nothing more than interpret the language of the agreement and apply that interpretation to the

dispute at hand. Id. at 927.

In CITGO, the plaintiff employer implemented a zero-tolerance substance abuse policy

for all its petroleum refining facilities. CITGO Asphalt Refining Co. v. The Paper Allied-Indus.,

Chem., and Energy Workers Int’l Union Local No. 2-991, 385 F.3d 809 (3d Cir. 2004). The

defendant union argued that implementation of the policy was unreasonable and violated a

collective bargaining agreement. The dispute was submitted to arbitration. The underlying

agreement provided that the arbitrator could only conclude that the zero-tolerance policy was

unreasonable if he also found that the employer committed a clear abuse of discretion in

implementing it. The arbitrator did not find an abuse of discretion and the record did not support

such a finding; the arbitrator simply found that the employer’s policy was unreasonable. The

arbitrator opined that giving employees a second chance with respect to substance abuse would

not be inconsistent with the employer’s safety goals and accordingly modified the policy. The

Third Circuit Court of Appeals found that the award did not derive its essence from the

agreement because, contrary to the terms of the agreement, the arbitrator did not conclude that

the employer abused its discretion before finding that the zero tolerance policy was unreasonable

and there was no evidence in the record to support such a finding. To the contrary, the award was

based solely on the arbitrator’s own sense of fairness and equity. Id. at 819-20.

b. Application

In Count II of their complaint, the Employer Trustees assert that the Zobrak Award

ignores “the undisputed and uncontradicted testimony of the individual who drafted the provision

of the Trust Agreement in dispute.” (ECF No. 1 at 9.) The Employer Trustees argue that Zobrak

did not give sufficient weight to the evidence they presented at the arbitration hearing, and,

therefore, the Zobrak Award does not draw its essence from the Trust Agreement. The Union

Trustees respond that: (a) Zobrak was not required to consider extrinsic evidence at all; and (b)

the weight given by Zobrak to the Employer Trustees’ evidence does not indicate that the

essence of the Trust Agreement was violated. The Union Trustees emphasize that Zobrak relied

primarily on the language of Trust Agreement to resolve the Compensation Deadlock, and the

Zobrak Award, therefore, does draw its essence from the Trust Agreement.

In Count III of the complaint, the Employer Trustees argue that Zobrak erroneously

viewed himself as authorized to make changes to the Trust Agreement and imposed his “own

notion of an equitable balance of interests under the Trust Agreement.” (ECF No. 35 at 12.) The

Employer Trustees argue that, by deciding one issue in favor of each party, Zobrak implemented

his own brand of justice. The Union Trustees again respond that the Zobrak Award is based

solely on an interpretation of the Trust Agreement. In essence, Count III is a restatement of

Count II. Both counts raise the issue whether the Zobrak Award draws its essence from the Trust

Agreement.

With respect to Count II of the complaint, the Zobrak Award cannot be vacated simply by

the insufficiency of the weight afforded by the arbitrator to the evidence presented. Here, the

Employer Trustees submitted evidence that compensation for meeting attendance is permissible

under the operative Trust Agreement. This court’s review of Zobrak’s factual findings, however,

is “not whether those findings were supported by the weight of the evidence, or even whether

they were clearly erroneous.” Tanoma, 896 F.2d at 748. An award, like the Zobrak Award, must

be upheld if there is some support for it in the record. Id. As discussed above, Zobrak based his

decision, in part, on the undisputed fact that the language authorizing compensation in the 1967

version of the Trust Agreement was removed by the 1977 amendment. In addition, Zobrak based

his decision on the language of the operative Trust Agreement. This record reflects that there was

support for Zobrak’s conclusion about the Compensation Deadlock. Under those circumstances,

Zobrak’s decision about the weight afforded to the Employer Trustees’ evidence is not a basis

for vacating the Zobrak Award.

With respect to Count III of the complaint, the Zobrak Award must be upheld if it can “in

any rational way be derived from the agreement[.]” Tanoma, 896 F.2d at 748. The instant case is

easily distinguishable from other instances where it was appropriate to vacate an arbitration

award. In CITGO, the arbitrator issued an award that contradicted an express term of the

underlying agreement. In McSkimming, the arbitrator based his entire decision on an

interpretation of the ERISA and did not consider the underlying agreement. In the instant case,

Zobrak interpreted the applicable provision of the Trust Agreement and applied that

interpretation to the Compensation Deadlock. The language of the Trust Agreement is consistent

with the Zobrak Award. Viewed in light of the language and context of prior amendments, the

Zobrak Award is rationally derived from the Trust Agreement. No reasonable factfinder could

find to the contrary.

The Union Trustees’ motion for summary judgment will, therefore, be granted with

respect to Counts II and III, and the Employer Trustees’ cross-motion for summary judgment

will be denied with respect to Counts II and III.

3. Count IV: Whether Zobrak Breached a Fiduciary Duty

In Count IV of the complaint, the Employer Trustees assert that Zobrak acted as a

fiduciary in deciding the Compensation Deadlock and that he violated his fiduciary duty by

modifying the terms of the Trust Agreement without having authority to do so. The Union

Trustees respond that Zobrak is shielded from liability by the doctrine of arbitral immunity. To

the extent that the Employer Trustees sought relief against Zobrak, in the form of liability or

injunctive relief, this court dismissed the claim asserted at Count IV for the reasons set forth in

the opinion and order granting Zobrak’s motion to dismiss for failure to state a claim. (ECF Nos.

55, 56.) Here, the court already concluded as a matter of law that Zobrak did not modify the

Trust Agreement. The Employer Trustees did not assert, and the court cannot discern, any other

form of relief that could be granted with respect to Count IV. The Union Trustees’ cross-motion

for summary judgment, therefore, will be granted with respect to Count IV, and the Employer

Trustees motion for summary judgment will be denied with respect to Count IV.

4. Count V: Whether Authorizing Prior Payments to Certain Trustees for

Meeting Attendance Constituted a Breach of Fiduciary Duty

a. Legal Principles

28 U.S.C. § 2201 provides that “[i]n a case of actual controversy within its jurisdiction,

… any court of the United States … may declare the rights and other legal relations of any

interested party seeking such declaration[.]” 28 U.S.C. § 2201(a). “Declaratory judgments are

‘inappropriate solely to adjudicate past conduct’ and are not ‘meant simply to proclaim that one

party is liable to another.’” Meyer v. Delaware Valley Lift Truck, Inc., 392 F. Supp. 3d 483, 493

(E.D. Pa. 2019) (quoting Warren v. Lehigh Cty. Ct. of Common Pleas, 351 F. Supp. 3d 835, 839

(E.D. Pa. 2019); Corliss v. O’Brien, 200 F. App’x 80, 84 (3d Cir. 2006) (finding that defendant’s

request for judgment declaring that his constitutional rights had been violated was not a request

for declaratory judgment in the “true legal sense”).

b. Application

The Employer Trustees request a declaratory judgment under 28 U.S.C. § 2201(a), stating

that the Trustees did not breach their fiduciary duty to the Fund by authorizing payments to

eligible Trustees for meeting attendance after the current operative language was inserted into

the Trust Agreement in 1977. The Employer Trustees seek to adjudicate past conduct and their

request for a declaratory judgment is, therefore, inappropriate as a matter of law. The Union

Trustees’ motion for summary judgment, therefore, will be granted—albeit not on the merits of

the underlying dispute4—with respect to Count V, and the Employer Trustees’ cross-motion for

summary judgment will be denied with respect to Count V.

5. Counterclaim: Enforcement of the Zobrak Award

a. Legal Principles

“District courts have very little authority to upset arbitrators’ awards.” United Transp.

Union Local 1589 v. Suburban Transit Corp., 51 F.3d 376, 379 (3d Cir. 1995). An arbitration

award must be enforced “as long as the arbitrator has arguably construed or applied the

contract.” Id. (citing News Am. Publications, Inc. v. Newark Typographical Union, Local

103, 918 F.2d 21 (3d Cir.1990)). An arbitration award may be vacated, however, if it violates

public policy. W.R. Grace & Co. v. Local Union 759, 461 U.S. 757, 766 (1983). To set aside an

award on public policy grounds, the “public policy must be ‘well defined and dominant’ before it

may be used to upset an arbitrator’s award.” Id. at 381 (quoting Exxon Shipping Co. v. Exxon

Seamen's Union, 11 F.3d 1189, 1192, 1194 (3d Cir.1993)). “In determining whether a public

policy exists, federal courts must use common sense, keeping in mind that ‘a formulation of

public policy based only on general considerations of supposed public interests is not the sort

that permits a court to set aside an arbitration award that was entered in accordance with a valid

collective bargaining agreement.’” Id. at 381-82 (quoting United Paperworkers Int'l Union,

AFL–CIO v. Misco, Inc., 484 U.S. 29, 44 (1987)).

b. Application

The Union Trustees asserted a counterclaim seeking to enforce the Zobrak Award. As

discussed above, summary judgment is being granted in favor of the Union Trustees with respect

4 The court is not resolving the merits of the underlying dispute, i.e., whether there was a

breach of a fiduciary duty. The court is determining that the dispute is inappropriate for

resolution via a declaratory judgment action.

to the Employer Trustees’ claim to vacate the Zobrak Award. The Union Trustees did not assert

or present any evidence suggesting that the Employer Trustees violated the Zobrak Award. The

Union Trustees did not allege any injury for which enforcement of the Zobrak Award would

provide a remedy. The Employer Trustees’ motion for summary judgment, therefore, will be

granted with respect to the counterclaim asserted by the Union Trustees, and the Union Trustees’

cross-motion for summary judgment will be denied with respect to that counterclaim.

E. Conclusion with respect to civil action number 19-388

For the reasons set forth in this opinion, the Employer Trustees’ motion for summary

judgment will be denied with respect to Counts I, II, III, IV, and V of the complaint, and granted

with respect to the counterclaim asserted by the Union Trustees. The Union Trustees’ motion for

summary judgment will be granted with respect to Counts I, II, III, IV, and V5 of the complaint,

and denied with respect to the counterclaim. Judgment will be entered in favor of the Union

Trustees and against the Employer Trustees with respect to Counts I through V and judgment

will be entered in favor of the Employer Trustees and against the Union Trustees with respect to

the Union Trustees’ counterclaim. There being no other claims to adjudicate in Civil Action 19-

388, the case at that number will be closed.

III. Civil Action 18-1112

A. Procedural History

On November 13, 2018, the Employer Trustees filed an amended complaint seeking

enforcement of an arbitration award and asserting a claim for breach of fiduciary duty under

Section 404(a)(1)(D) of the ERISA, 29 U.S.C. § 1104(a)(1)(D). (ECF No. 17.) The case was

5 As previously noted with respect to Count V, the grant of summary judgment is not on

the merits of the underlying dispute; rather, summary judgment is appropriate because the claim

cannot be resolved via a declaratory judgment action.

referred to a magistrate judge, in accordance with 28 U.S.C. § 636(c)(1). The Union Trustees

filed their answer to the amended complaint on November 29, 2018, and raised a counterclaim

for breach of fiduciary duty, under § 1104(a)(1)(D), against the Employer Trustees. (ECF No.

22.) On October 1, 2019, both parties filed motions for summary judgment. (ECF Nos. 46, 48.)

On April 22, 2020, the magistrate judge issued a R&R on the cross-motions for summary

judgment. (ECF No. 68.) The Union Trustees filed timely objections to the R&R, and the

Employer Trustees filed their response. (ECF Nos. 69, 70.)

B. Factual Background6

At a meeting of the Trustees, held on December 2, 2015, a Union Trustee presented a

motion

that any fees paid to attorneys pursuant to Section 3.15 of the trust document which

allows for the Health and Welfare Fund to pay attorney’s [sic] fees incidental to

proceedings instituted to break a deadlock be limited to an amount not to exceed

$250.00 per billable hour.

(ECF No. 45-4.) The motion resulted in a deadlock, with the 5 Union Trustees voting in favor of

the motion, and the 5 Employer Trustees voting against it (the “Fees Deadlock”). In accordance

with Section 3.15 of the Trust Agreement, the Trustees appointed Joseph Fagan (“Fagan”) as

impartial umpire. A hearing was held before Fagan on September 14, 2016. (ECF No. 44 ¶ 36.)

In the award (the “Fagan Award”), Fagan interpreted the relevant provision of the Trust

Agreement, Section 4.2, to determine whether attorneys’ fees can be limited in the manner

proposed by the Union Trustees. (ECF No. 17-4.) The pertinent provision of the Trust Agreement

states:

The Trustees shall have the power and authority to use and apply the Trust Fund

for the following purposes: (a) To pay or provide for the payment of all

reasonable and necessary expenses … (ii) of administering the affairs of this

6 In all material respects, the facts in this case are not disputed.

Health and Welfare Fund, including the employment of such administrative,

legal, expert and clerical assistance, the purchase or lease of such premises,

materials, supplies and equipment and the performance of such other acts, as the

Trustees, in their sole discretion, find necessary or appropriate in the

performance of their duties[.]

(ECF No. 45-1 (emphasis added).) Fagan’s interpretation of Section 4.2 addressed the operative

meaning of the word “reasonable.” Fagan concluded that whether attorneys’ fees are reasonable

in any circumstance is open to interpretation and may vary based on the circumstances. Fagan also

concluded that the legal fees incurred by opposing parties need not be equal to be reasonable. The

Fagan Award provides:

Before proceeding to the questions of reasonability of the $250/hr.

limitation on payment for Employer Trustee legal fees, payable from the Fund, the

question of arbitrator authority must be addressed.

Section 3.15 limits that authority to “the provisions of the Trust

Agreement”. This restriction is further emphasized by the additional statement

“have no jurisdiction or authority to change or modify the provisions of this Trust

Agreement”.

Reference is made in this same provision in regard to the issue before the

Arbitrator. It is clear that this provision and the language “reasonable

compensation” and “attorney fees” are related to the deadlock or arbitration case.

On the other hand Section 4.12 clearly indicates the “trustees shall have the

power and authority to use and apply the Trust Fund for the following

purposes…(a) To pay or provide for the payment of all reasonable and necessary

expenses…” of administering the affairs of this Health and Welfare Fund, including

the employment of such…legal…assistance…as the Trustees, in their sole

discretion, find necessary and appropriate in the performance of their duties”.

This latter language applies to the deadlocked Union proposal now before

the arbitrator.

Whether the fees charged by the Employer Trustees are, as the Union would

indicate, “unreasonable”, may be open to question and both parties have provided

data which would indicate how you obtain the data and services used result in

greatly varying results as to “reasonable”.

There can also be a question of reasonableness in the Employer taking more

from the Welfare Fund that the Union is removing for a similar purpose.

On the other hand the Arbitrator cannot ignore the fact the parties (Union

and Employer) agreed sixteen years ago on the Fund Agreement which currently

exists and which the Arbitrator is bound to adhere to.

There is no suggestion or claim that monies withdrawn from the Fund, by

the Union [T]rustees and Employer Trustees, for similar legal expenses, were ever

equal in amount during this period. Yet the thrust of this complaint or grievance is,

in effect, asking the Arbitrator to supply language to require that result.

This is not to suggest that such a result would not be equitable either by

equal amounts being paid for such legal expenditure on equal amounts withdrawn

from the Fund no matter what the respective legal payments were.

Saying that, the Arbitrator has no authority to add language to the January

1, 2000 Trust Agreement which provide the result the Union Trustees are

requesting.

(ECF No. 45-11 at 5-6.) Accordingly, Fagan denied the Union Trustees’ motion to limit the

Trustees’ legal fees to a maximum rate of $250 per hour.

Following Fagan’s resolution of the Fees Deadlock, the Union Trustees repeatedly voted

to authorize payment of the Employer Trustees’ attorneys bills and expenses, except for those

related to the Compensation Deadlock. The Employer Trustees’ legal expenses were reimbursed

in full because certain Union Trustees abstained from voting, giving the Employer Trustees a

majority of votes. On January 10, 2018, after the appointment of 2 new Union Trustees, a motion

to authorize payment of the Employer Trustees’ legal expenses resulted in a deadlock. (ECF No.

45-28.) On March 7, 2018, the Union Trustees presented a motion that future legal expenses be

approved up to a maximum rate of $260 per hour. (ECF No. 45-31.) The motion deadlocked. (ECF

No. 45-33.) A similar motion was made and resulted in a deadlock on three subsequent occasions.

(ECF Nos. 45-36, 45-38, 45-40.)

On February 2, 2019, a Union Trustee made the following motion:

I move to approve payment of the [E]mployers legal expenses incurred up

to September 4, 2018 at the hourly rate charge [sic] for all legal expenses not

attributable to the compensation of the Employer Trustee Deadlock.

I further move that all charges for Employer Trustees legal expenses

incurred subsequent to September 4, 2018, which are not attributable to the

compensation of the Employer Trustee deadlock, be paid at a rate no greater than

$300.00 per hour. I further move that once the Trustees agree upon a proper rate

for legal services provided to attorneys representing Trustees in legal proceedings

that agreed upon rate will be retroactive to September 5, 2018. In the event the

Trustees agreed upon rate is greater than $300.00, the Fund will compensate the

attorney for the difference between $300.00 and the amount agreed upon for hours

subsequent to September 4, 2018. In the event the Trustees agree to a rate less than

$300.00 per hour, there shall be no requirement that the attorney refund any amount

for services paid at the $300.00 per hour rate.

The Employer Trustees will continue to seek payment on the remaining

unpaid amounts through its currently pending federal lawsuit. The Union Trustees

will continue to assert in that lawsuit that they owe no further amounts other than

what is stated in this Motion.

(ECF No. 45-51.) The Trustees voted on this motion on March 5, 2019, which resulted in a

deadlock. (ECF No. 45-53.) On April 7, 2019, the Union Trustees presented the following three

motions:

Motion 1: Union Trustees move to approve all payments of legal fees incurred at

the rate charged by the Employer Trustees attorney on or before September 4, 2018,

which are related to the Employer's advancement or defending the issue of whether

an Employer Trustee must be an "Employer" as defined in the Trust Agreement.

Motion 2: The Union Trustees move that for any work that either the Union or the

Employer Trustees' attorney performs connected with or in relation to the Employer

Trustees advancement or defending whether an Employer Trustee must be an

"Employer" occurring subsequent to September 5, 2018, be paid $300.00 per hour

unless and until the Trustees mutually agree upon an appropriate rate of

compensation for attorneys performing such work. Once that decision is made, in

the event the rate agreed upon is greater than $300.00 per hour, the attorney shall

be reimbursed the difference on a retroactive basis. In the event it is less than $300.

00 per hour, the attorney shall not be required to refund any of the fees.

Motion 3: The Union Trustees move that under no circumstances will the Trust pay

for any legal fees incurred by Employer Trustees in any attempt to pay for legal

services attributable to the Employer Trustees attempt to receive from the Trust

Fund $600.00 per meeting, including any fees attributable to the current lawsuit in

which the Employer Trustees allege the Union Trustees have failed to abide by

Arbitrator Fagan's award. It is the Union Trustees position that to pay attorney's

fees to advance a motion requiring the payment of $600.00 is clearly a violation of

Landrum-Griffin and to pay an attorney to defend or advance that position is

likewise a violation of the law subjecting Trustees to both criminal and civil pen-

alties.

(ECF No. 45-55.) At the Trustee meeting on May 7, 2019, the Trustees unanimously approved the

first motion and postponed voting on the second and third motions. (ECF No. 45-57.)

The instant civil action was initiated on August 22, 2018. At Count I of their complaint,

the Employer Trustees seek enforcement of the Fagan Award. At Count II, the Employer Trustees

assert a claim for breach of fiduciary duty for failure to comply with the Fagan Award. The Union

Trustees asserted a counterclaim for breach of fiduciary duty based on the Employer Trustees’

pursuit of compensation for Trustee meetings.

As mentioned, the cross-motions for summary judgment filed in this case were referred to

a magistrate judge. There were no issues of material fact in genuine dispute, and the motions were

ripe for consideration. The magistrate judge recommended that the court: (1) grant the Employer

Trustees’ motion for summary judgment with respect to Counts I and II of the amended complaint;

(2) deny without prejudice the Employer Trustees’ motion for summary judgment with respect to

the Union Trustees’ counterclaim; and (3) deny the Union Trustees’ partial motion for summary

judgment. With respect to Count I, the magistrate judge concluded that the Union Trustees violated

the Fagan Award by refusing to authorize the reimbursement of the Employer Trustees’ legal

expenses related to the Appointment Deadlock and this litigation unless those legal expenses were

subject to an hourly fee rate cap selected by the Union Trustees. The magistrate judge found that

the Union Trustees waived the right to object to the Fagan Award because they did not attempt to

vacate, modify, or correct the Fagan Award within the applicable statute of limitations. The

magistrate judge also found that use of Fund assets to pay the Employer Trustees’ legal expenses

related to the Compensation Deadlock did not violate the ERISA and that the Union Trustees

asserted that issue as a pretext. With respect to Count II, the magistrate judge found that the Union

Trustees breached their fiduciary duty under the ERISA by violating the Fagan Award. With

respect to the Union Trustees’ counterclaim, the magistrate judge declined to address the merits of

the claim pending the resolution of civil action number 19-388.

This court will now address each of the Union Trustees’ objections in turn and consider

whether summary judgment is warranted with respect to the Union Trustees’ counterclaim based

upon the Employer Trustees’ alleged breach of fiduciary duty to the Fund.

C. Objections to Report and Recommendation

The Union Trustees raised ten objections to the R&R (ECF No. 69), and the Employer

Trustees filed a brief in opposition to the objections. (ECF No.70.) The court will address each

objection in turn.

1. Standard of Review

When objections to a report and recommendation have been filed, under 28 U.S.C. §

636(b)(1), the court must make a de novo determination of those portions of the report to which

objections are made. See Sample v. Diecks, 885 F.2d 1099, 1106 n. 3 (3d Cir.1989); FED. R. CIV.

P. 72(b)(3). The court may accept, reject, or modify, in whole or in part, the findings or

recommendations made by the magistrate judge. 28 U.S.C. § 636(b)(1).

2. Objections 1 and 2

“‘Where objections do not respond to the Magistrate's recommendation, but rather restate

conclusory statements from the original petition, the objections should be overruled.’” In re

Spectrum Alliance, LP, 609 B.R. 11, 15 (E.D. Pa. 2019) (quoting Prout v. Giroux, Civ. A. No. 14-

3816, 2016 WL 17200414 (E.D. Pa. Apr. 29, 2016)). The Union Trustees object to the magistrate

judge’s recommendation that the Employer Trustees’ motion for summary judgment be granted

and the Union Trustees’ motion for summary judgment be denied. Objections 1 and 2 each consist

of a single sentence, neither of which sets forth any argument or analysis. These objections are

nothing more than conclusory statements, were previously raised in the Union Trustees’ motion

for summary judgment and were discussed at length in the R&R. Accordingly, the Union Trustees’

first and second objections will be denied.

3. Objection 3

a. The Report and Recommendation

The magistrate judge recommended that the Employer Trustees’ motion for summary

judgment be granted with respect to Count I of the amended complaint, i.e., the Employer Trustees’

action to enforce the Fagan Award. The magistrate judge explained that this court should

summarily enforce the Fagan Award because the Union Trustees—by failing to attempt to modify,

vacate or correct the Fagan Award within the applicable statute of limitations—waived any

argument that challenges the validity of the Fagan Award. (ECF No. 68 at 13-15.) The magistrate

judge’s recommendation is based upon the following findings:

i. the Union Trustees requested that Fagan alter the Trust Agreement by “set[ting]

a maximum hourly rate for the attorneys’ fees of the Employer Trustees” that

were payable by the Fund (ECF No. 68 at 19);

ii. Fagan ruled that “[h]e had no authority under the Trust Agreement to set a

maximum hourly rate for the attorneys’ fees of the Employer Trustees[,]” i.e.,

he “clearly and unequivocally ruled that the Union Trustees could not put a cap

on the hourly rate paid to attorneys for the Employer Trustees” (id.); and

iii. the Union Trustees violated the Fagan Award by “fail[ing] to pay certain of the

attorneys’ fees of the Employer Trustees” (id. at 15).

The magistrate judge also explained that even if the court could entertain the Union

Trustees’ argument that the Fagan Award violates the ERISA, it should grant summary judgment

with respect to Count I and enforce the Fagan Award. According to the magistrate judge, the Union

Trustees’ argument that the Fagan Award violates the ERISA is “a pretextual argument to block

enforcement of the Fagan Award” and “there is no ERISA violation that precludes enforcement of

the Fagan Award relative to the payment of the Employer Trustees relative to any deadlocked

matter….” (ECF No. 68 at 19-20.)

b. The Union Trustees’ Objection and the Employer Trustees’ Response

The Union Trustees do not dispute that at this stage they are unable to challenge the validity

of the Fagan Award; indeed, their motion for summary judgment provides that the Union Trustees

“do not dispute the validity of the Fagan Award, nor do they dispute that the Board of Trustees is

bound by the Fagan Award.” (ECF No. 52 at 6.) The Union Trustees argue that the magistrate

judge committed an error of law because she “misconstrued the Fagan Award and greatly expanded

its scope beyond the actual text of the award….” (ECF No. 69 at 2.) According to the Union

Trustees, Fagan denied their motion to impose a blanket limitation on attorneys’ fees of $250 per

hour because he did not have jurisdiction to decide the issue. (Id. at 5.) They argue that the

magistrate judge expanded the scope of that award and that in effect the magistrate judge precluded

the Union Trustees from challenging the reasonableness or impropriety of all legal expenses

incurred by the Employer Trustees. (Id. at 3.) The Union Trustees argue that the Fagan Award

does not prohibit them from determining whether attorneys’ fees submitted for reimbursement by

the Employers Trustees are necessary and reasonable or from refusing to reimburse legal expenses

improperly incurred by any Trustees in pursuit of personal compensation. (Id. at 5.) The Union

Trustees assert that their various motions to place a cap on the legal fees payable by the Fund were

“attempt[s]…to establish parameters for determining whether attorneys’ fees incurred in

connection with a deadlock are ‘reasonable’ and ‘necessary’ as required by Section 4.2 of the trust

Agreement[.]” (ECF No. 69 at 9.)

The Employer Trustees argue that the magistrate judge properly interpreted the Fagan

Award. (ECF No. 71 at 5-11.) According to the Employer Trustees, Fagan properly decided the

issue before him within the bounds of his authority and that the “Trust Agreement did not authorize

him to put an hourly rate cap on legal fees.” (Id. at 5.) Based upon that understanding of the Fagan

Award, the Employer Trustees argue that the Union Trustees violated the Fagan Award by

unilaterally refusing to authorize the payment of their legal fees unless they were subject to hourly

fee rate caps selected by the Union Trustees with respect to: (1) the Compensation Deadlock; (2)

the Appointment Deadlock; and (3) the instant lawsuit. (Id. at 7.)

c. The issues presented

First, this court finds that the Union Trustees do not challenge the validity of the Fagan

Award, (ECF No. 69 at 10); indeed, they never properly challenged the validity of the Fagan

Award after it was issued, and, thus, it is considered final and binding under Pennsylvania law.

(ECF No. 45-1 at 56 (the Trust Agreement is governed by Pennsylvania law, except for matters

governed by federal law); Novinger Grp., Inc. v. Hartford Life & Annuity Ins. Co., No. CIV.A.

1:06-CV-0188, 2008 WL 5378288, at *11 (M.D. Pa. Dec. 23, 2008) (explaining that under

Pennsylvania law an arbitration award from which no appeal is taken is considered final and

binding) (citing Ottaviano v. Se. Pa. Transp. Auth., 361 A.2d 810, 814 (Pa. 1976)). The Union

Trustees challenge the scope of the Fagan Award and argue that they did not violate the Fagan

Award.

To resolve the motions for summary judgment with respect to the Employer Trustees’

request for enforcement of the Fagan Award, this court must decide whether the Fagan Award

prohibited the Union Trustees from unilaterally: (i) refusing to authorize the reimbursement of the

Employer Trustees’ legal expenses related to the Appointment Deadlock and this litigation unless

those expenses were subject to hourly fee rate caps selected or required to be approved7 by the

Union Trustees; and (ii) refusing to authorize the reimbursement of any legal expenses incurred

by the Employer Trustees related to the Compensation Deadlock. If the Fagan Award

prospectively prohibited that conduct, this court may issue an order enforcing the Fagan Award

and finding that the Union Trustees violated the award. If, however, the Fagan Award did not

prohibit the Union Trustees’ conduct, the Employer Trustees must present their grievances about

the Union Trustees’ conduct in the first instance to an arbitrator, per the Trust Agreement. The

central issues with respect to Count I of the complaint, therefore, are: (i) whether this court may

enforce the Fagan Award with respect to all or any part of the Union Trustees’ conduct; and (ii) if

not, whether the parties’ disputes about the Union Trustees’ conduct are subject to arbitration.

d. The applicable law with respect to the judicial enforcement of an

arbitration award

“‘[A]rbitration is clearly the preferred method for resolving disputes between the union

and the employer[.]’” Local 827, Int'l Bhd. of Elec. Workers, AFL-CIO v. Verizon New Jersey,

Inc., 458 F.3d 305, 309 (3d Cir. 2006) (quoting Butler Armco Indep. Union v. Armco, Inc., 701

F.2d 253, 255 (3d Cir.1983)). Thus, there is a well-recognized presumption of arbitrability. Id.

(citing AT & T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 648 (1986)). The

Supreme Court of the United States has explained:

[W]here the contract contains an arbitration clause, there is a presumption of

arbitrability in the sense that “[a]n order to arbitrate the particular grievance should

not be denied unless it may be said with positive assurance that the arbitration

7 The Union Trustees repeatedly selected a maximum fee rate cap of $260 per hour that

would apply to limit future legal expenses reimbursed by the Fund to the Employer Trustees and

later increased that amount to $300 per hour, subject to any increase in that hourly fee rate cap

agreed to by the Trustees. Under those circumstances, the Union Trustees maintained the

unilateral power to approve the hourly fee rate cap because one of their votes would be needed

for a majority of the Trustees to approve any increase in the hourly fee rate cap above $300 per

hour.

clause is not susceptible of an interpretation that covers the asserted dispute. Doubts

should be resolved in favor of coverage.” Warrior & Gulf, 363 U.S., at 582–583,

80 S.Ct., at 1352–1353. See also Gateway Coal Co. v. Mine Workers, supra, 414

U.S., at 377–378, 94 S.Ct., at 636–637.

AT & T, 475 U.S. at 650.

“[T]he question of arbitrability—whether a collective-bargaining agreement creates a

duty for the parties to arbitrate the particular grievance—is undeniably an issue for judicial

determination. Unless the parties clearly and unmistakably provide otherwise, the question of

whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator.” Id.; see

Emp’r Trustees of W. Pa. Teamsters, 870 F.3d at 240-41. “[I]n deciding whether the parties have

agreed to submit a particular grievance to arbitration, a court is not to rule on the potential merits

of the underlying claims.” Id. at 649-50 (citing United Steelworkers of Am. v. American Mfg.

Co., 363 U.S. 564, 567 (1960)).

Arbitrability, however, “is a matter of contract and a party cannot be required to submit

to arbitration any dispute which he has not agreed so to submit.” AT & T, 475 U.S. at 648 (citing

United Steelworkers of America v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582 (1960)). It is

well recognized that federal courts may enforce final and binding arbitration awards and

settlement agreements entered into by parties to a collective bargaining agreement without first

compelling the parties to arbitrate the relevant dispute. Trenton Metro. Area Local of Am. Postal

Workers Union, AFL-CIO v. U.S. Postal Serv., 636 F.3d 45, 53 (3d Cir. 2011) (citing United

Mine Workers of Am. Dist. No. 5 v. Consolidation Coal Co., 666 F.2d 806, 809 (3d Cir. 1981)).

In other words, an arbitration clause does not preclude a federal court from enforcing a final and

binding arbitration award or settlement agreement. Id. “In the presence of a ‘final and binding’

clause, once an arbitrator makes an award it becomes a part of the contract.” Wilbur

Chocolate Co., Inc. v. Bakery, Confectionary and Tobacco Workers' Intern. Union, Local 464,

Civ. A. 86-5479, 1988 WL 33881, at *3–4 (E.D. Pa. 1988) (emphasis added); see Local 616,

Int’l Union of Electrical, Radio and Machine Workers v. Byrd Plastics, Inc., 428 F.2d 23, 26 (3d

Cir. 1970) (“[A] clause stating that a decision of an arbitrator is ‘final and binding’ is no doubt

intended to establish a principle similar to that of res judicata, and to bar reconsideration of the

disputes fully decided on the merits”).

To be judicially enforceable, the settlement agreement or arbitration award must be “final

and binding” and “sufficiently specific as to be capable of implementation[.]” United Mine, 666

F.2d at 809-10. Federal courts, however, must “‘exercise the utmost restraint to avoid intruding

on the bargained-for method of dispute resolution, and when enforcement of an arbitration award

or settlement agreement is sought under section 301, the court must be able to say ‘with positive

assurance’ that the award or settlement was intended to cover the dispute.’” Trenton, 636 F.3d at

53 (quoting United Mine, 666 F.2d at 811). In other words, “[i]f the court has any doubt, the

parties should be returned to their grievance procedure and arbitration, for it is an arbitrator, and

not the court, who is to decide whether the same issue has already been resolved in an earlier

proceeding.” United Mine, 666 F.2d at 811 (emphasis added).

Based upon the foregoing principles, there are three requirements8 for a district court to

enforce a settlement agreement or arbitration award “that is otherwise governed by a binding

arbitration provision:”

(1) the agreement or award must be final and binding;

(2) the agreement or award must be sufficiently specific to be capable of

implementation; and

8 Because the parties did not present to the magistrate judge the applicable law with respect

to the enforcement of an arbitration award, the magistrate judge did not address it. The parties

also did not present the pertinent case law to this court.

(3) there must be ‘positive assurance’ that the agreement or award is intended to

cover the relevant dispute.

Trenton, 636 F.3d at 53 n.7; Butler, 701 F.2d at 256 n.1.9

9 Here, the Employer Trustees seek the enforcement of a prior arbitration award. Thus, the

court must follow Trenton and apply the three-part test to the facts of this case to determine

whether the court can enforce the award. The Union Trustees argue, however, that the Employer

Trustees’ grievances about the Union Trustees’ conduct are not governed by the Fagan Award.

The Union Trustees argue that under those circumstances, those grievances must be arbitrated.

As discussed above, however, a district court has the authority to enforce an arbitration award if

it is positively assured that the award, which is final and binding and sufficiently specific to be

implemented, was intended to have prospective effect on the parties’ relationship.

The procedural posture of this case stands in contrast to a case in which the defense of res

judicata is raised as a defense to arbitration. The Third Circuit Court of Appeals has instructed

that under those circumstances, the court must determine whether the res judicata defense is

based upon an arbitration award or a prior federal judgment, e.g., an arbitration award that was

confirmed by a federal district court. John Hancock Mut. Life Ins. Co. v. Olick, 151 F.3d 132,

137-40 (3d Cir. 1998). If the res judicata defense to arbitrability is based upon a judgment

entered by a court, the court must decide the preclusive effects of the judgment on the present

dispute. Id. at 139. If, however, the res judicata defense to arbitrability is based upon an

arbitration award, an arbitrator in the first instance must decide the preclusive effects of the

arbitration award. Id. at 139.

For example, in Steris Corp. v. International Union, 489 F.Supp.2d 501 (W.D. Pa. 2007),

the court recognized that when preclusion is raised as a defense to arbitrability, an arbitrator—

and not the court—must decide the preclusive effect of the arbitration award (as opposed to a

court judgment) on the subsequent arbitration. The plaintiff in Steris requested, among other

things, for the court: (1) to confirm the prior arbitration award (count one); and (2) to enjoin a

second arbitration because the issue to be decided in the second arbitration was identical to the

issue decided in the prior arbitration award (count two). Id. at 505. The court first addressed

count two and held that injunctive relief was not available to the plaintiff under the relevant labor

laws, and, therefore, it dismissed the plaintiff’s request to enjoin the second arbitration. Id. at

510. The court also agreed with the defendants’ alternative argument that count two should be

dismissed because the preclusive effect of the prior arbitration award on the subsequent

arbitration was an issue to be decided by an arbitrator and not the court. Id. at 510, 514. The

court relied upon, among other things, Supreme Court precedent that arbitrators should decide

defenses to arbitrability and other procedural questions that “‘grow out of the dispute and bear on

its final disposition[.]’” Id. at 511 (quoting Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79,

84 (2002)). The court considered the arbitration provision in the parties’ collective bargaining

agreement, found the presumption of arbitration applied in the case, and held the parties intended

the dispute raised in the subsequent arbitration—which was identical to the issue decided in the

prior arbitration award—to be arbitrable, albeit with the arbitrator to resolve the res judicata

defense. Id. at 514. Under those circumstances, the res judicata effect of the prior arbitration

award on the parties’ subsequent arbitration was itself a matter for the arbitrator to resolve. Id.

The court dismissed count one because the court lacked jurisdiction under Article III of

the United States Constitution to confirm the arbitration award. Steris, 489 F.Supp.2d at 514-515.

e. Application

The court will first address the Union Trustees’ unilateral refusal to authorize the

reimbursement of the Employer Trustees’ legal expenses related to the Appointment Deadlock

and this litigation unless the legal expenses were subject to hourly fee rate caps selected or

required to be approved by the Union Trustees. Second, the court will address the Union

Trustees’ failure to cause the reimbursement of any legal fees incurred by the Employer Trustees

related to the Compensation Deadlock.

i. Legal Fees related to the Appointment Deadlock and this Litigation

With respect to the Union Trustees’ unilateral refusal to authorize the reimbursement of

the Employer Trustees’ legal expenses related to the Appointment Deadlock and this litigation

unless those legal expenses were subject to hourly fee rate caps selected or required to be

approved by the Union Trustees, the issue before the court is whether the Fagan Award

prospectively applies to prohibit that conduct. In the Third Circuit, district courts must apply a

three-part test to determine whether an arbitration award may be enforced by the court or the

parties must present their grievance to an arbitrator. Trenton, 636 F.3d at 53. For this court to

The court explained that the defendants did not attack the validity of the arbitration award and

the plaintiff did not allege that defendants failed to comply with the award. Id. Under those

circumstances, the plaintiff did not sufficiently allege it suffered an injury as required to have

standing under Article III. Id. at 515.

As explained above, the Employer Trustees are seeking the enforcement of the Fagan

Award. They seek a determination that the Union Trustees’ refusal to authorize the

reimbursement of the Employer Trustees’ legal expenses related to the Appointment Deadlock

and this litigation unless those legal expenses were subject to an hourly fee rate cap selected or

required to be approved by the Union Trustees violated the Fagan Award. The Employer

Trustees—unlike the plaintiff in Steris—do not seek injunctive relief, and an arbitration

proceeding about the instant dispute was not commenced. Res judicata is not asserted as a

defense to arbitration. Under those circumstances, the court will apply the three-part test set forth

in Trenton to determine whether the court may enforce the Fagan Award and find that the Union

Trustees violated that award.

grant summary judgment to the Employer Trustees with respect to Count I and enforce the Fagan

Award, it must find that the undisputed evidence of record shows: (1) the Fagan Award was final

and binding; (2) the Fagan Award is sufficiently specific to be capable of implementation; and

(3) there is positive assurance that the Fagan Award prohibited the Union Trustees from

unilaterally refusing to authorize the reimbursement of the Employer Trustees’ legal expenses

related to the Appointment Deadlock and this litigation unless those legal expenses were subject

to hourly fee rate caps selected or required to be approved by the Union Trustees.

The undisputed evidence of record shows that the Fagan Award was final and binding;

indeed, the Trust Agreement provides that decisions by the arbitrators are final and binding,

(ECF No. 54 ¶ 18), and, under Pennsylvania law, arbitration awards from which no appeals are

taken are final and binding, Novinger, 2008 WL 5378288, at *11. The undisputed record of

evidence also shows that the Fagan Award is sufficiently specific to be capable of

implementation. Fagan interpreted Section 4.2 of the Trust Agreement to mean that hourly fee

rates for legal expenses incurred by the Employer Trustees do not have to be equal to or the same

as the hourly fee rates incurred for legal expenses by the Union Trustees to be reasonable. The

Fagan Award clearly provided that Fagan did not have the authority to provide the Union

Trustees the relief they sought, i.e., the addition of language to the Trust Agreement that would

equate the reasonableness of legal fees payable by the Fund to a fee cap on the rate of those fees.

With respect to the third requirement set forth in Trenton, the court is positively assured

that the Fagan Award was intended to prohibit the Union Trustees’ unilateral refusal to authorize

the reimbursement of the Employer Trustees’ legal expenses related to the Appointment

Deadlock and this litigation unless those legal expenses were subject to hourly fee rate caps

selected or required to be approved by the Union Trustees. The Trust Agreement provided that

the decision of the arbitrator would be final and binding on the parties and the Union Trustees

did not appeal or otherwise challenge the findings of the Fagan Award. (ECF No. 54 ¶ 18.) Thus,

the Fagan Award became a part of the Trust Agreement, which the parties knew governed their

relationship. See Wilbur Chocolate, 1988 WL 33881, at *3–4.

In the Fagan Award, the arbitrator explained that the Trust Agreement must be modified,

i.e., words added to the agreement, for him to grant the Union Trustees’ request to impose an

hourly fee rate cap on the legal fees. He rejected the argument that the legal fees incurred by the

Employer Trustees and the Union Trustees had to be equal to be reasonable. Yet, the Union

Trustees on several occasions after the issuance of the Fagan Award, and without the parties

agreeing to any relevant modification of the Trust Agreement, attempted to impose caps on the

hourly rates of the legal fees incurred by the Employer Trustees and payable by the Fund. Based

upon the foregoing, the court is positively assured that the Fagan Award was intended to and did

prohibit the Union Trustees’ unilateral refusal to authorize the reimbursement of the Employer

Trustees’ legal expenses related to the Appointment Deadlock and this litigation unless those

legal expenses were subject to hourly fee rate caps selected or required to be approved by the

Union Trustees.

The Union Trustees argue, however, that the Fagan Award does not cover their

subsequent unilateral refusal to authorize the reimbursement of the Employer Trustees’ legal

expenses related to the Appointment Deadlock and this litigation unless those legal expenses

were subject to hourly fee rate caps selected or required to be approved by the Union Trustees

because the dispute resolved by the Fagan Award concerned a $250 cap on the hourly rates, and

their subsequent motions concerned $260 and $300 caps on the hourly rates of the legal fees. The

court agrees with the magistrate judge on this issue. The magistrate judge explained that

“Fagan’s holding, which was based entirely on the authority of the impartial umpire to make the

requested changes, would not change with an altered fee limit of $260 per hour, $300 per hour or

any other cap that the Union Trustees unilaterally attempted to impose.” (ECF No. 68 at 19.) The

facts of the dispute presently before the court are materially10 the same as the facts of the dispute

presented to Fagan, i.e., the Union Trustees attempted unilaterally to impose caps upon the

hourly rates of the legal fees incurred by the Employer Trustees without any showing of how or

why legal fees incurred above those caps were unreasonable or unnecessary. Under those

circumstances, the court is positively assured that the Fagan Award was intended to prohibit the

Union Trustees’ subsequent unilateral refusal to authorize the reimbursement of the Employer

Trustees’ legal expenses related to the Appointment Deadlock and this litigation unless those

legal expenses were subjected to a $260 and $300 cap selected by the Union Trustees.

The court finds that the undisputed evidence of record shows that: (1) the Fagan Award

was final and binding on the parties; (2) the Fagan Award was sufficiently specific for

implementation; and (3) there is no doubt that the Fagan Award was intended to cover the Union

Trustees’ unilateral refusal to authorize the reimbursement of the Employer Trustees’ legal

expenses related to the Appointment Deadlock and this litigation unless those legal expenses

10 The First Circuit Court of Appeals has explained that an arbitration award may be

enforced where it “is both clearly intended to have a prospective effect and there is no colorable

basis for denying the applicability of the existing award to a dispute at hand….” Derwin v. Gen.

Dynamics Corp., 719 F.3d 484, 491 (1st Cir. 1983). If the court finds “no material factual

difference between the new dispute and the one decided in the prior arbitration that would

justify an arbitrator’s reaching a different conclusion” the court may enforce the arbitral award.

Id. (emphasis added). Here, the court is positively assured that the Fagan Award was intended to

have a prospective effect and prohibit the Union Trustees’ subsequent refusal to authorize the

reimbursement of the Employer Trustees’ legal expenses related to the Appointment Deadlock

and this litigation unless those legal expenses were subject to an hourly fee rate cap selected or

required to be approved by the Union Trustees.

were subject to a $260 or $300 fee rate cap. Under those circumstances, the court may judicially

enforce the Fagan Award without compelling the parties to arbitrate the matter.

The Trust Agreement, which included the final and binding Fagan Award, prohibited the

Union Trustees from unilaterally refusing to authorize the reimbursement of the Employer

Trustees’ legal expenses related to the Appointment Deadlock and this litigation unless those

legal expenses were subject to hourly fee rate caps selected or required to be approved by the

Union Trustees. The only bases to challenge legal fees provided by the Trust Agreement are

reasonableness and necessity. The court rejects the Union Trustees’ argument that enforcement

of the Fagan Award in this case forecloses them from challenging the reasonableness or

necessity of any legal fees incurred by the Employer Trustees. The $250, $260, and $300 hourly

fee rate caps unilaterally sought to be imposed by the Union Trustees—without more—did not

show the Employer Trustees’ legal fees were unreasonable or unnecessary. As Fagan explained,

the hourly rates of the attorneys representing the Employer Trustees and the Union Trustees do

not have to be equal to be reasonable. Under those circumstances, the Union Trustees violated

the Trust Agreement when they unilaterally refused to authorize the reimbursement of the legal

fees incurred by the Employer Trustees solely because the hourly rates for the attorneys’ fees

related to the Appointment Deadlock and this litigation were not capped at a rate (whether $260,

$300, etc.) selected or required to be approved by the Union Trustees. The Union Trustees

would read into the R&R a blanket prohibition on their ability to challenge the legal fees of the

Employer Trustees. There is no such recommendation in the R&R. The Union Trustees are free

to challenge the Employer Trustees’ legal fees based upon the fees’ reasonableness or the

necessity for those fees. What the Union Trustees cannot do under the Fagan Award is

unilaterally to pick an hourly fee rate cap for attorneys’ fees and assert any legal fees presented

by the Employer Trustees for reimbursement in excess of that amount are per se unreasonable or

unnecessary.

ii. Legal Fees related to the Compensation Deadlock

The parties’ dispute with respect to the Compensation Deadlock requires a different

analysis. The court finds that the Fagan Award did not address the Union Trustees’ unilateral

refusal to authorize any payment of the Employer Trustees’ legal fees and expenses related to the

Compensation Deadlock because the ERISA would preclude any such payment. At this stage,

the parties have not yet submitted that deadlock issue to arbitration.

While the court agrees with the legal analysis set forth in the R&R with respect to the

ERISA issue raised by the Union Trustees, (ECF No. 68 at 20), the court is constrained by the

provision in the Trust Agreement, and the corresponding provision in the ERISA, requiring that

deadlocks be resolved in arbitration. As the Third Circuit Court of Appeals has explained:

Section 302(c)(5)(B) of the LMRA, 29 U.S.C. § 186(c)(5)(B), serves the important

function of ensuring that a mechanism is available to break any deadlocks that arise

between competing factions of trustees in the course of administering an employee

benefit trust fund. As we have explained, the boards that oversee these trust funds

must maintain equal representation of employers and employees, and frequent

deadlocks between the two factions are a foreseeable result. To address potential

stalemates, § 302 requires the two groups to agree on an impartial umpire to decide

such dispute. 29 U.S.C. § 186(c)(5)(B). If they fail to agree within a reasonable

period of time, either party may petition a federal district court for the appointment

of such an impartial umpire.

Emp’r Trustees of W. Pa. Teamsters, 870 F.3d at 240.

The Trustees expressly agreed to submit deadlocked motions to arbitration; the Trust

Agreement at issue in this case incorporates the requirements set forth in Section 302(c)(5)(B).

The Union Trustees’ motion to deny reimbursement for the Employer Trustees’ legal fees

incurred in relation to the Compensation Deadlock resulted in a new deadlock which was not

subject to the Fagan Award; the issue raised was not presented to Fagan. Neither party petitioned

the court to appoint an arbitrator to address the issue. Because the parties agreed to submit

deadlocked motions to arbitration and this dispute is not covered by the Fagan Award, the court

cannot address the merits of the deadlock over the Employer Trustees’ legal fees incurred in

relation to the Compensation Deadlock at this time. Accordingly, the dispute about the Union

Trustees’ authority to refuse to reimburse the Employer Trustees for all the legal fees incurred by

the Employer Trustees related to the Compensation Deadlock will need to be first brought before

an arbitrator. The court, therefore, rejects the R&R to the extent the magistrate judge did not find

that issue must first be submitted to an arbitrator.

f. Conclusion with respect to Objection 3 with respect to the

enforcement of the Fagan Award (Count I)

The court will adopt the R&R of the magistrate judge to the extent she recommended the

motion for summary judgment filed by the Employer Trustees be granted and the Fagan Award

enforced with respect to the Union Trustees’ unilateral refusal to authorize the payment of the

Employer Trustees’ legal expenses related to the Appointment Deadlock and this litigation

unless those legal expenses were subject to hourly fee rate caps selected or required to be

approved by the Union Trustees, and the motion for summary judgment filed by the Union

Trustees with respect to the same issue be denied. The court rejects the R&R to the extent the

magistrate judge found the Fagan Award prohibited the Union Trustees from refusing to

authorize the reimbursement of any legal fees incurred by the Employer Trustees with respect to

the Compensation Deadlock. That dispute must in the first instance be arbitrated. Summary

judgment on that discrete issue will be granted in favor of the Union Trustees without prejudice

for that issue to be submitted to arbitration under the provisions of the Trust Agreement.

Judgment will be entered in favor of the Employer Trustees on Count I with respect to the Union

Trustees’ unilateral refusal to authorize the reimbursement of the Employer Trustees’ legal

expenses related to the Appointment Deadlock and this litigation unless those legal expenses

were subject to hourly fee rate caps selected or required to be approved by the Union Trustees.

The court will enter an order enforcing the Fagan Award to the extent the Union Trustees

violated the award by unilaterally refusing to reimburse the Employer Trustees for legal fees they

incurred related to the Appointment Deadlock and this litigation unless those fees were subject to

a $260 or $300 hourly fee rate cap or a higher hourly fee rate cap that had to be approved by the

Union Trustees.

4. Objection 4

In their fourth objection, the Union Trustees assert that the magistrate judge did not

consider the Union Trustees’ argument that they fully complied with the Fagan Award. The

magistrate judge did, in fact, take note of the Union Trustees’ compliance defense in the R&R.

As discussed above, the magistrate judge properly found that the Union Trustees did not comply

with the Fagan Award with respect to their unilateral refusal to authorize the reimbursement of

the Employer Trustees’ legal expenses related to the Appointment Deadlock and this litigation

unless those legal expenses were subject to hourly fee rate caps selected or required to be

approved by the Union Trustees. Accordingly, the Union Trustees’ fourth objection will be

denied.

5. Objection 5

In the R&R, the magistrate judge stated that the Union Trustees “assert that ERISA

privileges them to ignore the Fagan Award[.]” (ECF No. 68 at 16.) In their fifth objection, the

Union Trustees argue that they did not make such an assertion. In their motion for partial

summary judgment, the Union Trustees assert that their resistance to “unreasonable expenditure

of excessive trust fund assets on legal expenses…are completely consistent with the Union

Trustees’ fiduciary duties under ERISA and in no way, shape, or form constitute a violation of

the Fagan Award.” (ECF No. 52 at 7.) The Union Trustees, however, did not present any

evidence to show that the hourly fee rates charged by the Employer Trustees’ attorneys were

unreasonable. The Union Trustees did, in fact, ignore the Fagan Award by unilaterally refusing

to authorize the reimbursement of the Employer Trustees’ legal expenses related to the

Appointment Deadlock and this litigation unless those legal expenses were subject to hourly fee

rate caps selected or required to be approved by the Union Trustees. Under those circumstances,

the magistrate judge was correct that there is no ERISA-based argument that would justify the

Union Trustees’ unilateral refusal to authorize the reimbursement of the Employer Trustees’

legal fees related to the Appointment Deadlock and this litigation unless those legal fees were

subject to hourly fee rate caps selected or required to be approved by the Union Trustees. As

noted above, whether the ERISA precludes the reimbursement of any of the Employer Trustees’

legal fees incurred in connection with the Compensation Deadlock was not addressed by Fagan

and, while this court would agree with the magistrate judge’s analysis about the ERISA with

respect to that argument, an arbitrator must address it in the first instance. Accordingly, the

Union Trustees’ fifth objection will be granted in part and denied in part.

6. Objection 6

The Union Trustees argue that authorizing payment for legal expenses related to the

Compensation Deadlock would violate the ERISA. In the R&R, the magistrate judge found that

enforcement of the Fagan Award would not violate the ERISA and that the Union Trustees

asserted their ERISA-based argument as a pretext for avoiding enforcement of the Fagan Award.

In their sixth objection, the Union Trustees assert that their ERISA-based argument was not

asserted as a pretext.

As mentioned above, the Union Trustees’ unilateral refusal to authorize the

reimbursement of the Employer Trustees’ legal expenses related to the Compensation Deadlock

on the basis that the ERISA precluded payment was not considered by Fagan; that dispute has

not yet been submitted to arbitration. Whether the Union Trustees asserted their ERISA-based

argument regarding the Compensation Deadlock in good faith or as a pretext is, therefore, a

premature issue. The Union Trustees’ sixth objection will be granted, albeit for different reasons

than those set forth by the Union Trustees, and summary judgment will be entered in favor of the

Union Trustees without prejudice for this issue related to the Compensation Deadlock to be

submitted to arbitration.

7. Objection 7

The Union Trustees assert that their refusal to authorize payment of certain legal fees

incurred by the Employer Trustees is justified because Fund assets may only be used for

reasonable and necessary expenses. They assert that using Fund assets to reimburse legal

expenses related to the Compensation Deadlock would violate the ERISA. The magistrate judge

found that reimbursing the Employer Trustees’ legal expenses related to the Compensation

Deadlock would not violate the ERISA. The Union Trustees object that the magistrate judge

misstated the law.

As discussed above, the court will not consider the dispute over legal expenses related to

the Compensation Deadlock because that dispute is the subject of a deadlock that has not yet

been submitted to arbitration. Though, as discussed previously, the court finds no error in the

magistrate judge’s analysis on the matter, the court cannot adopt that aspect of the R&R and

must reject it because that specific dispute must be submitted to arbitration. Accordingly, the

Union Trustees’ seventh objection will be granted, albeit for different reasons than those argued

by the Union Trustees. As noted previously, summary judgment on that discrete issue will be

granted in favor of the Union Trustees without prejudice for that specific dispute to be submitted

to arbitration.

8. Objections 8, 9, and 10

The Employer Trustees in Count II of the amended complaint allege that the Union

Trustees breached their fiduciary duty11 to the Fund by unilaterally refusing to authorize the

reimbursement of the Employer Trustees’ legal expenses related to the Appointment Deadlock and

this litigation unless those legal expenses were subject to hourly fee rate caps selected or required

to be approved by the Union Trustees and refusing to authorize the reimbursement of any of their

legal fees with respect to the Compensation Deadlock. The magistrate judge in the R&R

determined as a matter of law that the Union Trustees breached a fiduciary duty under the ERISA

by violating the Fagan Award, the breach caused a loss to the Fund, and judgment should be

entered in favor of the Employer Trustees with respect to Count II. The Union Trustees raise three

objections, i.e., objections 8, 9, and, and 10, with respect to the breach of fiduciary duty claim.

To establish a breach of fiduciary duty under the ERISA, a claimant must show that “(1) a

plan fiduciary (2) breache[d] an ERISA-imposed duty (3) causing a loss to the plan.” Leckey v.

Stefano, 501 F.3d 212, 225-26 (3d Cir. 2007); Sweda v. Univ. of Pa., 923 F.3d 320, 328 (3d Cir.

2019). Section 404(a)(1)(D) of the ERISA requires fiduciaries to act “in accordance with the

11 Here, the Employer Trustees in their breach of fiduciary duty claim asserted under § 1104

seek equitable relief, i.e., for the Union Trustees to restore the loss they caused to the Fund. The

Employer Trustees, therefore, do not have a right to a jury trial under the Seventh Amendment to

the United States Constitution with respect to their breach of fiduciary duty claim. Scalia v.

WPN Corp., 417 F.Supp.3d 658, 667 (W.D. Pa. 2019) (holding that damages available under §

1104 of the ERISA for breach of fiduciary duty claims are equitable in nature, and, therefore,

there is no right to a jury trial for those claims). The court may, therefore, dispose of the claim

after consideration of the parties’ summary judgment submissions.

documents and instruments governing the plan.” 29 U.S.C. § 1104(a)(1)(D). Where a plan subject

to the provisions of the ERISA requires compliance with an arbitrator’s decision, refusal to comply

with an arbitrator’s decision constitutes a breach of fiduciary duty. See Ironworkers Local No. 272

v. Bowen, 695 F.2d 531, 535 (11th Cir. 1983) (finding that “refusal to comply with an arbitrator’s

decision is automatically a breach of fiduciary duty” under §1104(a)(1)(D)).

In objection 8, the Union Trustees argue the undisputed evidence of record does not show

that they breached their fiduciary duty to the plan by violating the Fagan Award. In objection 9,

they argue that they did not cause a loss to the Fund. In objection 10, they argue that the Employer

Trustees are improperly seeking damages in the breach of fiduciary duty claim. Each of these

objections will be addressed below.

a. Objection 8 with respect to breach

In their eighth objection, the Union Trustees assert that they complied with the Fagan

Award and that the Employer Trustees, therefore, did not establish a necessary element for a claim

of fiduciary duty. As discussed above, the magistrate judge correctly applied the law governing

breach of fiduciary duty under the ERISA and concluded as a matter of law that the Union Trustees

violated the Fagan Award by unilaterally refusing to authorize payment of the Employer Trustees’

legal fees unless they were capped at hourly rates acceptable to the Union Trustees. Whether the

Union Trustees breached their fiduciary duty to the Fund with respect to the reimbursement of fees

for the Compensation Deadlock, however, is a premature issue that is not properly before this court

because that issue is not addressed in the Fagan Award and it has not been submitted to arbitration

in accordance with the Trust Agreement.

Section 3.15 of the Trust Agreement, which provides the mechanism for resolving a

deadlock, states that “the decision and award of such umpire shall be final and binding upon the

parties.” (ECF No. 45-1 at 25.) As discussed above, the Union Trustees violated the Fagan Award

by unilaterally refusing to authorize the reimbursement of the Employer Trustees’ legal fees unless

those fees were subject to hourly fee rate caps selected or required to be approved by the Union

Trustees, rather than addressing the reasonableness or necessity of those fees. The Union Trustees,

therefore, failed to act in accordance with Section 3.15 of the Trust Agreement; thereby violating

their fiduciary duty set forth in §1104(a)(1)(D). Under those circumstances, the eighth objection

will be overruled because the magistrate judge correctly concluded that the Union Trustees

breached their fiduciary duty by violating the Fagan Award. The eighth objection will be sustained

to the extent the magistrate judge found that the Union Trustees breached their fiduciary duty to

the Fund by unilaterally refusing to authorize reimbursement of any of the Employer Trustees’

legal fees related to the Compensation Deadlock on the basis of a violation of the ERISA, an issue

which is not properly before this court because it is not covered by the Fagan Award and has not

yet been submitted to arbitration pursuant to the Trust Agreement.

b. Objection 9 with respect to causing a loss

The magistrate judge found that the Union Trustees caused a loss to the Fund by

instigating the dispute underlying the instant litigation and thereby necessitating the use of Fund

assets for related legal expenses. The Union Trustees object that they did not cause a loss to the

Fund. Instead, the Union Trustees assert that they sought to save Fund assets by avoiding

litigation and limiting legal expenses. The Union Trustees again assert that they did not violate

the Fagan Award and that the instant litigation was unnecessary.

“To determine whether there has been a loss to the plan…‘a comparison must be made

between the value of the plan assets before and after the breach’” Leckey, 501 F.3d at 226

(quoting Roth v. Sawyer-Cleator Lumber Co., 61 F.3d 599, 602 (8th Cir. 1995)); see Kay, 780 F.

Supp. at 1461-62; Leventhal v. M and Marblestone Grp. LLC, Civil Action No. 18-cv-2727,

2019 WL 1953247, at *6 (E.D. Pa. May 2, 2019). The Employer Trustees initiated this litigation

because the Union Trustees breached their fiduciary duty to the fund by violating the Fagan

Award and the Trust Agreement. As a result of that breach, the Fund reimbursed the legal

expenses of the Union Trustees with respect to that aspect of this litigation. (ECF No. 59 ¶ 10.)

The Union Trustees, therefore, caused a loss to the Fund in the amount of the legal expenses they

were reimbursed by the Fund in connection with this litigation and with respect to the

Appointment Deadlock. The overall loss to the Fund is expected to increase to the extent the

Fund assets are used to reimburse the legal expenses incurred by the Employer Trustees with

respect to the Union Trustees’ unilateral refusal to authorize the reimbursement of their legal fees

related to the Appointment Deadlock and this litigation unless those fees were subject to an

hourly fee rate cap selected or required to be approved by the Union Trustees.

Based upon the foregoing, the magistrate judge correctly found that the Union Trustees

caused a loss to the Fund by violating the Fagan Award. The Union Trustees’ ninth objection

will be denied with respect to legal expenses incurred because of their violations of the Fagan

Award. The objection, however, will be sustained with respect to the legal fees incurred by the

Employer Trustees with respect to the Compensation Deadlock because, as discussed above, that

issue is premature.

c. Objection 10 with respect to damages

In their tenth objection, the Union Trustees assert that the magistrate judge failed to

consider the argument that the Employer Trustees are seeking to recover losses incurred by a third

party. The Union Trustees argue that an action for breach of fiduciary duty under 29 U.S.C. §

1132(a)(2) may only be brought on behalf of the Fund and may not be used to recover payments

owed to a third party.

Section 502(a)(2) of the ERISA provides that “[a] civil action may be brought … by the

Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under section 1109

of this title[.]” 29 U.S.C. § 1132(a)(2). 29 U.S.C. § 1109(a) provides:

Any person who is a fiduciary with respect to a plan who breaches any of the

responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter

shall be personally liable to make good to such plan any losses to the plan resulting

from each such breach, and to restore to such plan any profits of such fiduciary

which have been made through use of assets of the plan by the fiduciary, and shall

be subject to such other equitable or remedial relief as the court may deem

appropriate, including removal of such fiduciary. A fiduciary may also be removed

for a violation of section 1111 of this title.

29 U.S.C. § 1109(a). See Leckey, 501 F.3d at 228 (finding that the proper remedy for a violation

of 29 U.S.C. § 1132(a)(2) is to restore the assets removed from the plan, pursuant to 29 U.S.C.

§1109). “Fiduciaries are personally liable for losses due to breach.” Sweda, 923 F.3d at 328

(citing 29 U.S.C. § 1109)). Under § 1132(a)(2), “the plaintiff must assert a loss to the ERISA

plan itself (not merely an individual claim for extracontractual damages)” and that “the plan

takes legal title to any recovery, which then inures to the benefit of the participants and

beneficiaries who were injured.” Leckey, 501 F.3d at 217 (citing Mass. Mut. Life Ins. Co. v.

Russell, 473 U.S. 134, 147 (1985)).

Here, the Employer Trustees do not assert individual claims for damages or seek damages

to be paid directly to their legal counsel. The Employer Trustees assert that the Fund itself has

suffered losses related to the legal expenses incurred because of this litigation. Any damages in

this case will be paid by the Union Trustees to the Fund itself to make good any losses caused by

the Union Trustees’ breach of fiduciary duty with respect to the Union Trustees’ unilateral

refusal to authorize payment from the Fund of the Employer Trustees’ attorneys’ fees unless

those fees were subject to hourly fee rate caps selected or required to be approved by the Union

Trustees. Accordingly, the Union Trustees’ tenth objection will be denied with respect to that

conduct, but will be granted with respect to the Union Trustees’ conduct relating to their refusal

to authorize reimbursement of any of the Employer Trustees’ legal fees for the Compensation

Deadlock, an issue which first must be submitted to arbitration.

d. Conclusion with respect to Objections 8, 9, and 10 with respect to the

breach of fiduciary duty claim (Count II)

The undisputed evidence of record establishes each of the elements necessary to support

a claim for breach of fiduciary duty under ERISA with respect to the Union Trustees’ unilateral

refusal to authorize reimbursement of the legal expenses of the Employer Trustees unless the

hourly rates of the attorneys retained by the Employer Trustees were subject to hourly fee rate

caps selected or required to be approved by the Union Trustees. The Union Trustees, therefore,

must pay the Fund the amount of all losses resulting from those violations of the Fagan Award,

i.e., the legal fees and expenses for which the Union Trustees were reimbursed by the Fund or

which are reimbursed by the Fund to the Employer Trustees for legal fees and expenses they

incurred in connection with the Union Trustees’ unilateral refusal to authorize reimbursement

unless those fees were subject to hourly fee rate caps selected or required to be approved by the

Union Trustees.

The Employer Trustees seek additional relief in the form of an order removing the Union

Trustees as fiduciaries. The court, in its discretion, may grant such relief under 29 U.S.C. § 1109.

The court finds, however, that removal of the Union Trustees is not warranted in this case.

Though the Union Trustees breached their fiduciary duties by violating the Fagan Award, the

dispute underlying this action is a product of mutual infighting among the Trustees over the

proper use of Fund assets. The Union Trustees did not demonstrate that they are incapable of

appropriately discharging their duties to the Fund. If the Trustees are truly concerned about the

proper use of Fund assets, it is incumbent on both parties to cooperate and administer the Fund in

a prudent and cost-effective manner.

9. The Union Trustees’ Counterclaim with respect to the Employer Trustees’ alleged

breach of fiduciary duty

The magistrate judge recommended that the court deny the Union Trustees’ counterclaim

without prejudice because the issues raised in the counterclaim relate to matters at issue in civil

action number 19-388. As set forth above, the issues pending in civil action number 19-388 are

now resolved, and the court will address the Employer Trustees’ motion for summary judgment

with respect to the Union Trustees’ counterclaim.

The Union Trustees assert that the Employer Trustees committed a breach of the

fiduciary duty imposed by Section 404 of ERISA, 29 U.S.C. § 1104(a)(1)(B). The Union

Trustees argue that the Employer Trustees’ effort to seek compensation for meeting attendance

constitutes a breach of fiduciary duty as a matter of law. Section 1104(a)(1)(B) provides:

(a) Prudent man standard of care (1) Subject to sections 1103(c) and (d), 1342,

and 1344 of this title, a fiduciary shall discharge his duties with respect to a plan

solely in the interest of the participants and beneficiaries and … (B) with the care,

skill, prudence, and diligence under the circumstances then prevailing that a prudent

man acting in a like capacity and familiar with such matters would use in the

conduct of an enterprise of a like character and with like aims[.]

29 U.S.C. § 1104(a)(1)(B). The Union Trustees assert that the Employer Trustees did not act

with prudence in pursing litigation to resolve the Compensation Deadlock because authorizing

such compensation is not permitted under the Trust Agreement and would constitute self-dealing

in violation of Section 406 of ERISA, 29 U.S.C. § 1106. Section 1106 provides:

a) Transactions between plan and party in interest: Except as provided in

section 1108 of this title: (1) A fiduciary with respect to a plan shall not cause the

plan to engage in a transaction, if he knows or should know that such transaction

constitutes a direct or indirect-- (D) transfer to, or use by or for the benefit of a party

in interest, of any assets of the plan[.]

29 U.S.C. § 1106. The Union Trustees assert that payment to Trustees for attendance at Trustee

meetings constitutes the type of self-dealing prohibited by § 1106 and that legal fees incurred in

attempt to obtain such payments are also prohibited.

The Employer Trustees respond that compensation to certain eligible Trustees is

specifically permitted under 29 U.S.C. § 1108(c)(2), which provides:

(c) Fiduciary benefits and compensation not prohibited by section 1106

Nothing in section 1106 of this title shall be construed to prohibit any fiduciary

from-- (2) receiving any reasonable compensation for services rendered, or for the

reimbursement of expenses properly and actually incurred, in the performance of

his duties with the plan; except that no person so serving who already receives full

time pay from an employer or an association of employers, whose employees are

participants in the plan, or from an employee organization whose members are

participants in such plan shall receive compensation from such plan, except for

reimbursement of expenses properly and actually incurred[.]

29 U.S.C. § 1108. In the motion that resulted in the Compensation Deadlock, the Employer

Trustees sought compensation for eligible Trustees that is consistent with and permissible under

§ 1108(c). When the Trustees considered authorizing compensation for meeting attendance in

1989, the Fund’s counsel submitted a request for guidance to the Department of Labor (the

“DOL”). The DOL responded with an information letter stating that reasonable compensation to

Trustees who are not full-time employees of participating employers is permissible under § 1108.

(ECF No. 51-2 at 200-202.) The DOL did not opine on the permissibility of that kind of

compensation under the Trust Agreement, but stated that compensation does not violate the

ERISA.

The reimbursement of the Employment Trustees’ legal fees clearly would not be

prohibited. 29 U.S.C. § 1108(b)(2) provides:

(b) Enumeration of transactions exempted from section 1106 prohibitions

The prohibitions provided in section 1106 of this title shall not apply to any of the

following transactions: (2) Contracting or making reasonable arrangements with a

party in interest for office space, or legal, accounting, or other services necessary

for the establishment or operation of the plan, if no more than reasonable

compensation is paid therefor.

29 U.S.C. § 1108. The introductory clause to § 1108 specifically permits the payment of legal

fees notwithstanding the prohibitions set forth in § 1106. The ERISA itself does not bar the kind

of compensation at issue here or the related legal expenses incurred by the Employer Trustees.

The Union Trustees also contend that the Employer Trustees violated their duty to act

prudently by incurring legal expenses related to the Compensation Deadlock because the Trust

Agreement clearly prohibits payment of compensation to Trustees. Although Zobrak concluded

that the Trust Agreement does not permit that kind of compensation, counsel who drafted the text

of the Trust Agreement testified that when he drafted that agreement he did not intend to change

the provision of the Trust Agreement that authorized those kind of payments and the Union

Trustees and Employer Trustees had continued to make those payments for a period of time. The

Trustees’ past practice, which the Union Trustees participated in, indicated that kind of

compensation was permissible under the Trust Agreement. The Union Trustees did not present,

and the court did not find, any authority suggesting that the Employer Trustees’ effort to clarify

the Trust Agreement via arbitration and subsequent litigation constitutes a violation of the duty

of prudence imposed by the ERISA. No reasonable factfinder could find to the contrary. The

Employer Trustees’ motion for summary judgment, therefore, will be granted with respect to the

counterclaim asserted by the Union Trustees.

10. Attorneys’ Fees

Both parties request attorneys’ fees in this case. (ECF No. 17 at 5; ECF No. 22 at 8.) The

magistrate judge recommended that the court award attorneys’ fees to the Employer Trustees.

(ECF No. 68 at 26.) Pursuant to 29 U.S.C. § 1132(g), a district court has discretion in a case filed

under the ERISA to “allow a reasonable attorney’s fee and costs of action to either party.” See

Hahnemann Univ. Hosp. v. All Shore, Inc., 514 F.3d 300, 310 (3d Cir. 2008). “A party seeking

attorney’s fees under [the] ERISA must show ‘some success’ on the merits.” Templin v. Indep.

Blue Cross, 785 F.3d 861, 863 (3d Cir. 2015). The Third Circuit Court of Appeals has explained:

A party satisfies this requirement if a “court can fairly call the outcome of the

litigation some success on the merits without conducting a ‘lengthy inquir[y] into

the question whether a particular party's success was ‘substantial’ or occurred on a

‘central issue’.” Id. Conversely, “[a] claimant does not satisfy that requirement by

achieving trivial success on the merits or a purely procedural victory....” Id.

(internal quotation marks omitted).

Id. (quoting Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 255 (2010)). Even if a fees

claimant can show it obtained “some success on the merits,” the district court has the discretion to

grant or deny its request for attorneys’ fees. Id. at 867. The court must consider the following

factors to determine whether to exercise its discretion to grant a request for attorneys’ fees:

“(1) the offending parties’ culpability or bad faith;

(2) the ability of the offending parties to satisfy an award of attorney’s fees;

(3) the deterrent effect of an award of attorney’s fees;

(4) the benefit conferred upon members of the pension plan as a whole; and

(5) the relative merits of the parties' positions.”

Id. (quoting Ursic v. Bethlehem Mines, 719 F.2d 670, 673 (3d Cir. 1983)). One district court has

explained:

Commonly referred to as the Ursic factors, no single one is dispositive. Einhorn v.

M.L. Ruberton Constr. Co., 720 F. Supp. 2d 639, 642 (D.N.J. 2010). Rather, the

Ursic factors serve as flexible guidelines, which must be considered before a court,

in an exercise of discretion, grants a fee applicant's request for attorney's fees and

costs. Unisys Corp. Retiree Med. Benefits ERISA Litig. v. Unisys Corp., 579 F.3d

220, 239 (3d Cir. 2009). Moreover, such an award may be warranted, even when a

fee applicant is unable to satisfy the totality of the Ursic factors. Fields v. Thompson

Printing Co., 363 F.3d 259, 275 (3d Cir. 2004) (explaining that “the Ursic factors

are not requirements in the sense that a party must demonstrate all of them in order

to warrant an award of attorney's fees ....”).

Atl. Plastic & Hand Surgery, PA v. Anthem Blue Cross Life & Health Ins. Co., No. CV 17-4600,

2019 WL 4635482, at *2 (D.N.J. Sept. 24, 2019).

While each party in this case achieved some success on the merits, the court—as discussed

below—after consideration of the Ursic factors, declines to exercise its discretion to award

attorneys’ fees to either party.

a. The offending parties’ culpability or bad faith

In this court’s view, both parties are equally responsible for this litigation. The parties’

penchant for litigation and seeming inability to cooperate in a constructive manner stands in stark

contrast to their professed desire to conserve Fund assets. If the Trustees are truly concerned about

the welfare of the Fund, they would be well served to try to resolve future disagreements in a less

expensive and more prudent, constructive, and cost-efficient manner. This factor, therefore, is

neutral in the court’s assessment about whether either party is entitled to attorneys’ fees in this

case.

b. The ability of the offending parties to satisfy an award of attorney’s fees

The court is not aware of any evidence that shows either party is unable to satisfy an award

of attorneys’ fees.

c. The deterrent effect of an award of attorney’s fees

An award of attorneys’ fees may have a deterrent effect on the parties’ penchant for

litigation. The court does not find, however, that either party acted in bad faith in pursuing this

case. This factor is, therefore, neutral in the court’s decision whether to grant an award of

attorneys’ fees to either party.

d. The benefit conferred upon members of the pension plan as a whole

The Employer Trustees’ success in this case confers a benefit upon the Fund because the

Union Trustees must reimburse the Fund for losses caused by the Union Trustees’ fiduciary breach.

The Union Trustees succeeded on the issue whether the ERISA precludes the reimbursement of

any of the Employer Trustees’ legal fees incurred with respect to the Compensation Deadlock,

although that issue may still be arbitrated. The court, therefore, finds this factor neutral in

consideration of the parties’ requests for attorneys’ fees.

e. The relative merits of the parties’ positions

The Employer Trustees successfully proved that certain of the Union Trustees’ conduct

violated the Fagan Award and they breached their fiduciary duty to the Fund. The Union Trustees

were successful in this litigation to the extent this court found—albeit for reasons other than the

reasons set forth by the Union Trustees—that the Fagan Award did not address the issue whether

the ERISA precludes the reimbursement of any of the Employer Trustees’ legal fees incurred in

connection with the Compensation Deadlock.12 This factor, therefore, weighs against the court

award attorneys’ fees to either party in these cases.

f. Conclusion with respect to Attorneys’ Fees

Based upon the foregoing consideration of the Ursic factors, the court declines to exercise

its discretion to award attorneys’ fees to either party in this case. Most importantly, the court

concludes that it is prudent and cost-effective for the parties to follow the procedures set forth in

the Trust Agreement with respect to obtaining the reimbursement of attorneys’ fees incurred in

12 The court in this opinion explained that the parties’ dispute with respect to the Union

Trustees’ unilateral refusal under the ERISA to authorize the reimbursement of any of the

Employer Trustees’ legal fees incurred in connection with the Compensation Deadlock must in

the first instance be submitted to arbitration.

litigating deadlocks. The court determined that the Union Trustees breached their fiduciary duty

to the Fund by violating the Fagan Award and the damages are measured by the loss to the Fund,

i.e., the dollar amount paid by the Fund to reimburse the Union Trustees for their attorneys’ fees

incurred in connection with their unilateral refusal to authorize reimbursement of the Employer

Trustees’ legal fees unless those fees were limited by hourly fee rate caps selected or required to

be approved by the Union Trustees. The loss to the Fund is likely to increase because the Employer

Trustees may seek reimbursement from the Fund for their attorneys’ fees incurred in connection

with the Appointment Deadlock and this litigation. The Union Trustees may challenge the

Employer Trustees’ attorneys’ fees based upon their reasonableness and necessity, pursuant to the

Trust Agreement. Any deadlock with respect to the reasonableness or necessity of those fees (other

than a challenge that the fees should be subject to an hourly fee rate cap selected or required to be

approved by the Union Trustees, which is precluded by the Fagan Award) must be submitted to an

arbitrator, pursuant to the Trust Agreement. Once the Fund reimburses the Employer Trustees for

those attorneys’ fees, the Union Trustees must forthwith reimburse the Fund. Under those

circumstances and in consideration of the Ursic factors, the court declines to award attorneys’ fees

to the Employer Trustees because it is prudent and cost-effective for the procedure set forth in the

Trust Agreement to be followed by the Trustees

D. Conclusion with respect to civil action number 18-1112

For the reasons set forth in the magistrate judge’s report and recommendation, as

supplemented and modified by this opinion, the Employer Trustees’ motion for summary

judgment will be granted in part with respect to Counts I and II of the amended complaint

relating to the Union Trustees’ unilateral refusal to authorize reimbursement of the Employer

Trustees for their attorneys’ fees incurred in connection with the Appointment Deadlock and this

litigation unless those fees are subject to hourly fee rate caps selected or required to be approved

by the Union Trustees, and will be denied without prejudice with respect to the Union Trustees’

conduct relating to reimbursement of any of the Employer Trustees’ fees incurred in connection

with the Compensation Deadlock. The Employer Trustees’ motion for summary judgment will

be granted with respect to the counterclaim asserted by the Union Trustees.

The Union Trustees’ partial motion for summary judgment will be denied in part with

respect to Counts I and II of the amended complaint relating to the Union Trustees’ unilateral

refusal to authorize reimbursement of the Employer Trustees for their attorneys’ fees incurred in

connection with the Appointment Deadlock and this litigation unless those fees are subject to

hourly fee rate caps selected or required to be approved by the Union Trustees. The Union

Trustees’ partial motion for summary judgment will be granted with respect to the Union

Trustees’ refusal to authorize the reimbursement of any of the Employer Trustees’ fees incurred

in connection with the Compensation Deadlock.

IV. Federal Rule of Civil Procedure 11 Sanctions

Federal Rule of Civil Procedure 11(b)(1) provides:

(b) Representations to the Court. By presenting to the court a pleading, written motion, or

other paper--whether by signing, filing, submitting, or later advocating it--an attorney or

unrepresented party certifies that to the best of the person's knowledge, information, and

belief, formed after an inquiry reasonable under the circumstances:

(1) it is not being presented for any improper purpose, such as to harass, cause

unnecessary delay, or needlessly increase the cost of litigation;

(2) the claims, defenses, and other legal contentions are warranted by existing

law or by a nonfrivolous argument for extending, modifying, or reversing

existing law or for establishing new law;

(3) the factual contentions have evidentiary support or, if specifically so

identified, will likely have evidentiary support after a reasonable

opportunity for further investigation or discovery….

FED. R. CIV. P. 11(b)(1)-(3). One district court has explained:

Rule 11 authorizes imposition of sanctions where any pleading, motion or other

paper was presented for an improper purpose, e.g., “to harass or to cause

unnecessary delay or needless increase in the cost of litigation.” Landon v. Hunt,

938 F.2d 450, 452 (3d Cir.1991). Rule 11 sanctions are based on “ ‘an objective

standard of reasonableness under the circumstances.’ “ Id. at 453 n. 3 (quoting Mary

Ann Pensiero, Inc. v. Lingle, 847 F.2d 90, 94 (3d Cir.1988)); Ford Motor Co. v.

Summit Motor Prod., Inc., 930 F.2d 277, 289 (3d Cir.1991) (“The legal standard to

be applied when evaluating conduct allegedly in violation of Rule 11 is

reasonableness under the circumstances”).

“Rule 11 is intended for only exceptional circumstances.” Gaiardo v. Ethyl Corp.,

835 F.2d 479, 483 (3d Cir.1987). A “district court must exercise discretion and

sound judgment in dealing with the myriad methods with which lawyers may abuse

the judicial process.” Eavenson, Auchmuty & Greenwald v. Holtzman, 775 F,2d

535, 540 (3d Cir.1985).

Kuznyetsov v. W. Penn Allegheny Health Sys., Inc., No. CIV.A .10-948, 2011 WL 284620, at

*2 (W.D. Pa. Jan. 25, 2011). Rule 11(c)(2) provides that a request for sanctions must be made as

a separate motion, “i.e., not simply included as an additional prayer for relief contained in

another motion.” FED. R. CIV. P. 11, advisory committee notes to 1993 amendment.

In their summary judgment briefings in each case, the Union Trustees threaten to move

for sanctions against the Employer Trustees, pursuant to Federal Rule of Civil Procedure 11.

There is no separate motion for sanctions currently pending before this court, and, therefore, the

court cannot consider whether sanctions are appropriate in this case. FED. R. CIV. P. 11(c)(2); see

Morning Sun Books, Inc. v. Div. Point Models, Inc., 826 F.App’x 127, 171 (3d Cir. 2020);

Unimaven, Inc. v. Texas TR, LLC, Civ. A. No. 17-12008, 2020 WL 5406162, at *14 n.20

(D.N.J. Sept. 8, 2020).

In any event, upon review of the record, the Union Trustees did not present evidence of

misconduct by the Employer Trustees that would warrant sanctions. Instead, both parties

aggressively defended uncompromising positions, attempting to characterize the conduct of the

other as unreasonable. Each party has accused the other of pursuing unnecessary litigation and

both parties lament that they have been forced by the other to waste Fund assets as a result. As

discussed above, both parties are equally responsible for the instant cases. The Trustees should

focus their efforts on the preservation of Fund assets and work collaboratively to avoid timely

and expensive litigation.

V. Conclusion

For the reasons set forth in this opinion, with respect to civil action number 19-388:

− the Employer Trustees’ motion for summary judgment (ECF No. 32) will be

granted in part and denied in part;

− the Union Trustees’ motion for summary judgment (ECF No. 28) will be granted

in part and denied in part;

− judgment will be entered in favor of the Union Trustees and against the Employer

Trustees with respect to counts I through IV of the complaint and count V to the

extent it seeks a declaratory judgment; and

− judgment will be entered in favor of the Employer Trustees and against the Union

Trustees with respect to the Union Trustees’ counterclaim; and

− civil action 19-388 will be closed.

For the reasons set forth in this opinion, the magistrate judge’s R&R will be adopted in

part, rejected in part, and supplemented as provided in this opinion and:

− the Employer Trustees’ motion for summary judgment (ECF No. 46) will be

granted in part and denied in part;

− the Union Trustees’ partial motion for summary judgment (ECF No. 48) will be

granted in part and denied in part;

− judgment will be entered in favor of the Employer Trustees with respect to Counts

I and II (limited to the Union Trustees’ unilateral refusal to authorize the

reimbursement to the Employer Trustees of their legal fees related to the

Appointment Deadlock and this litigation unless those legal fees are subject to

hourly fee rate caps selected or required to be approved by the Union Trustees)

and;

− the parties may submit to arbitration their deadlock dispute with respect to

whether the ERISA precludes the Fund’s reimbursement of any of the Employer

Trustees’ attorneys’ fees and expenses related to the Compensation Deadlock;

− the Fagan Award will be enforced with respect to the Union Trustees’ unilateral

refusal to authorize the reimbursement of legal fees to the Employer Trustees

related to the Appointment Deadlock and this litigation unless the legal fees were

subject to hourly fee rate caps selected or required to be approved by the Union

Trustees;

− judgment will be entered in favor the Employer Trustees with respect to the

Union Trustees’ counterclaim; and

− civil action number 18-1112 shall be closed.

An appropriate order and judgments will follow.

By the court,

Date: February 2, 2021 /s/Joy Flowers Conti

Joy Flowers Conti

Senior United States District Judge