Gregory Bos v. Board of Trustees

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

GREGORY BOS, No. 13-15604

Appellant,

D.C. No.

v. 2:12-cv-02026-

MCE

BOARD OF TRUSTEES, in their

capacities as Trustees of the

Carpenters Health and Welfare Fund ORDER

of California; Carpenters Vacation-

Holiday Trust Fund for Northern

California; Carpenters Pension Trust

Fund for Northern California;

Carpenters Annuity Trust for

Northern California; Carpenters

Training Trust Fund for Northern

California; Northern California

Carpenters Regional Council,

Appellee.

Filed March 24, 2016

Before: Diarmuid F. O’Scannlain and Sandra S. Ikuta,

Circuit Judges and Larry A. Burns,* District Judge.

*

The Honorable Larry A. Burns, District Judge for the U.S. District

Court for the Southern District of California, sitting by designation.

2 BOS V. BOARD OF TRUSTEES

SUMMARY**

Bankruptcy / Attorney’s Fees

The panel denied a bankruptcy debtor’s motion to recover

attorney’s fees after he prevailed on the merits on appeal in

a nondischargeability proceeding.

In its opinion on appeal from the district court’s

affirmance of the bankruptcy court, the panel held that the

debtor was not a fiduciary under the Employee Retirement

Income Security Act, and thus the Bankruptcy Code’s

“fiduciary” exception to discharge could not be applied to

him. Accordingly, his judgment debt for failure to make

payments to employee pension funds could be discharged in

bankruptcy.

Denying the debtor’s motion for attorney’s fees, the panel

held that the debtor was not entitled to fees under the fee-

shifting provision of California Civil Code § 1717, which

makes reciprocal an otherwise unilateral contractual

obligation to pay attorney’s fees. Adopting the Bankruptcy

Appellate Panel’s construction of section 1717, the panel held

that the dischargeability claim was not an action “on a

contract,” but rather was collateral to a contract.

The panel held that the debtor also was not eligible to

recover fees under ERISA because the nondischargeability

proceeding did not meet the test for “arising under”

jurisdiction set forth in 29 U.S.C. § 1132(e).

**

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

BOS V. BOARD OF TRUSTEES 3

ORDER

We consider Gregory Bos’s motion to recover attorney’s

fees under California Civil Code § 1717, and the fee-shifting

provisions of the Employee Retirement Income Security Act

of 1974.

I

The facts giving rise to the present request for attorney’s

fees are more fully set forth in our underlying opinion on the

merits. See Bos v. Bd. of Trs., 795 F.3d 1006 (9th Cir. 2015).

We offer a brief summary here.

Bos was an employer who was bound by a handful of

Trust Agreements to make payments to certain employee

pension Funds, which were administered by the Board of

Trustees. Id. at 1007. Bos struggled to meet his obligation,

and in March 2009 he signed a Promissory Note pledging to

make monthly contributions and personally guaranteeing

payment to the Funds of $359,592.09. He mostly fell short.

In August 2009 the Board brought a grievance against Bos,

and an arbitrator ruled that he had violated such obligations,

awarding the Funds $504,282.59. A California Superior

Court confirmed the Board’s arbitration award and later

entered a judgment against Bos in the same amount.1

Around the same time, Bos filed for Chapter 7

bankruptcy. Id. at 1008. When Bos tried to discharge the

half-million-dollar debt he owed the Funds, the Board

objected, and brought an adversary proceeding in bankruptcy

1

We grant the Board’s unopposed request and supplemental request for

judicial notice.

4 BOS V. BOARD OF TRUSTEES

court in an effort to have Bos’s debt declared

nondischargeable under the Bankruptcy Code. Id. The Board

sought relief under three different provisions of the Code.

One of those provisions, 11 U.S.C. § 523(a)(4), provides that

a debtor may not discharge a debt he incurred through “fraud

or defalcation while acting in a fiduciary capacity,

embezzlement, or larceny.”

Bos conceded that the Trust Agreements and the

Promissory Note were fully enforceable, conceded that he

had breached them, and conceded that his debt to the Funds

was valid. Bos argued, however, that the Bankruptcy Code’s

exceptions to discharge simply did not apply to him.

The bankruptcy court sided with the Board, ultimately

ruling that Bos’s debt could not be discharged because he was

a “fiduciary” within the meaning of 11 U.S.C. § 523(a)(4).

The district court affirmed. Both courts decided that Bos was

a fiduciary under the Bankruptcy Code because they

determined that he was a fiduciary under the Employee

Retirement Income Security Act (“ERISA”), 29 U.S.C.

§ 1002.

Bos then appealed to this Court and we concluded that he

was not a fiduciary under ERISA, and thus the Bankruptcy

Code’s “fiduciary” exception to discharge could not be

applied to him. Bos, 795 F.3d at 1008–12. Having prevailed

on the merits, Bos now seeks to recover attorney’s fees

expended litigating the nondischargeability action from the

bankruptcy court up through our court on appeal.

BOS V. BOARD OF TRUSTEES 5

II

Bos’s motion rests on two bases. First, he invokes a

certain fee-shifting provision under California law, California

Civil Code § 1717. Alternatively, he argues that ERISA

authorizes us to award him fees in our discretion, see

29 U.S.C. § 1132(g)(1), and he asks us to do so.

A

Section 1717 provides, in relevant part:

In any action on a contract, where the contract

specifically provides that attorney’s fees and

costs, which are incurred to enforce that

contract, shall be awarded either to one of the

parties or to the prevailing party, then the

party who is determined to be the party

prevailing on the contract, whether he or she

is the party specified in the contract or not,

shall be entitled to reasonable attorney’s fees

in addition to other costs.

Cal. Civ. Code § 1717(a). The effect of section 1717 is to

make reciprocal an otherwise unilateral contractual obligation

to pay attorney’s fees. Santisas v. Goodin, 17 Cal. 4th 599,

610–11 (1998).

As we recently explained, “[t]hree conditions must be met

before [section 1717] applies.” In re Penrod, 802 F.3d 1084,

1087 (9th Cir. 2015). First, the action generating the fees

must have been an action “on a contract.” Id. Second, the

contract must provide that attorney’s fees incurred to enforce

it shall be awarded either to one of the parties or to the

6 BOS V. BOARD OF TRUSTEES

prevailing party. Id. And third, the party seeking fees must

have prevailed in the underlying action. Id. at 1087–88.

The California Supreme Court has explained that “section

1717 applies only to actions that contain at least one contract

claim,” and that “[i]f an action asserts both contract and tort

or other noncontract claims, section 1717 applies only to

attorney fees incurred to litigate the contract claims.”

Santisas, 17 Cal. 4th at 615. Consistent with Santisas, we

have previously held that a nondischargeability action is “on

a contract” within section 1717 if “the bankruptcy court

needed to determine the enforceability of the . . . agreement

to determine dischargeability.” In re Baroff, 105 F.3d 439,

442 (9th Cir. 1997).

The Bankruptcy Appellate Panel of the Ninth Circuit has

held that Santisas and relevant Ninth Circuit cases establish

not just a rule of inclusion, but also a rule of exclusion: that

“if the bankruptcy court did not need to determine whether

the contract was enforceable, then the dischargeability claim

is not an action on the contract within the meaning of

[California Civil Code] § 1717.” In re Davison, 289 B.R.

716, 723 (B.A.P. 9th Cir. 2003) (emphasis added).

1

We adopt the BAP’s construction of section 1717. It

accords with the common sense meaning of the phrase “on a

contract” and finds ample support in our precedents. For

instance, we have held that an adversary proceeding in

bankruptcy court was not “on a contract” within the meaning

of section 1717 where the action neither litigated the validity

of the contract nor required the bankruptcy court to consider

“the state law governing contractual relationships.” In re

BOS V. BOARD OF TRUSTEES 7

Johnson, 756 F.2d 738, 740 (9th Cir. 1985). More broadly,

we instructed that when “federal and not state law govern[s]

the substantive issues involved in the [adversary

proceeding],” we may not “award[] attorney’s fees pursuant

to a state statute.” Id. at 741.

Likewise, in In re Fulwiler, 624 F.2d 908 (9th Cir. 1980),

we held that a non-dischargeability action in bankruptcy was

not “on a contract” under an Oregon fee-shifting statute

identical to section 1717. Id. at 909 (citing Or. Rev. Stat.

§ 20.096). The reason, we later explained, was that “the

bankruptcy court did not adjudicate the validity of the note in

determining whether the debt was dischargeable,” and so the

note was merely “collateral to the non-dischargeability

proceeding.” Baroff, 105 F.3d at 442 (citing Fulwiler,

624 F.2d at 909–10).

Similarly, in In re Hashemi, 104 F.3d 1122 (9th Cir.

1996), we cited Baroff in holding that a creditor’s

“dischargeability claim [was] not an action on the contract,”

within the meaning of the contract itself, because “the

bankruptcy court did not need to ‘determine the enforceability

of the . . . agreement to determine dischargeability.’” Id. at

1126 (quoting Baroff, 105 F.3d at 442).

In light of our precedents, we are persuaded that the

action underlying Bos’s fee request—the nondischargeability

proceeding that began in bankruptcy court—was not an action

“on a contract” within the meaning of section 1717. As the

parties agree, “[t]here was no ‘breach of contract’ claim in the

Trust Funds’ adversary complaint.” The nondischargeability

proceeding arose entirely under the federal Bankruptcy Code,

and in no way required the bankruptcy court to determine

whether or to what extent the Trust Agreements or the Note

8 BOS V. BOARD OF TRUSTEES

were enforceable against Bos, or whether Bos had violated

their terms. Those questions had been answered in

arbitration, and confirmed by a State Court; indeed, in the

nondischargeability action Bos conceded that such contracts

were valid and that he had breached them. The litigation

from that point forward asked only whether federal

bankruptcy law forbade Bos from discharging the debts

everyone agreed he owed to the Funds. Such litigation is

collateral to a contract rather than “on a contract,” and as a

consequence Bos may not use section 1717 to recover the

fees he incurred in pursuing it.

2

Bos’s principal counterargument relies on our recent

decision in Penrod, 802 F.3d 1084. There, Penrod incurred

her attorney’s fees in an action that sought “to enforce, or

avoid enforcement of, the provisions of the contract” between

herself and one of her creditors. Id. at 1088. Specifically, the

action underlying Penrod’s motion for fees had asked

“whether [a] provision of the contract should be enforced

according to its terms, or whether its enforceability was

limited by bankruptcy law to exclude [a particular] portion of

the loan. By prevailing in that litigation, Penrod obtained a

ruling that precluded [her creditor] from fully enforcing the

terms of the contract.” Id. (internal citations omitted).

Penrod’s action, in other words, required “the bankruptcy

court . . . to determine the enforceability of the . . .

agreement,” and so it was comfortably an action “on a

contract” within section 1717’s previously recognized reach.

Baroff, 105 F.3d at 442. In Bos’s case, by contrast, the

relevant action did not raise any question about the

enforceability of the Trust Agreements or the Note. Such

BOS V. BOARD OF TRUSTEES 9

action was therefore not “on a contract,” and the attorney’s

fees Bos incurred are not recoverable under section 1717.2

B

Nor is Bos entitled to attorney’s fees under ERISA.

ERISA’s fee-shifting provision provides that “[i]n any action

under this subchapter . . . by a participant, beneficiary, or

fiduciary, the court in its discretion may allow a reasonable

attorney’s fee and costs of action to either party.” 29 U.S.C.

§ 1132(g)(1). Bos’s attempt to invoke ERISA fails because

the nondischargeability action—the action giving rise to his

fee request—was not an “action under” ERISA, and therefore

§ 1132(g)(1) does not make Bos eligible to recover fees.

1

Indeed, a party is eligible to recover fees under ERISA

only if the action giving rise to his fee request meets the test

for “arising under” jurisdiction set forth in ERISA’s

jurisdictional provision, 29 U.S.C. § 1132(e). Such rule

should not be surprising; it comes directly from the

straightforward language of the statute itself. In particular,

§ 1132(g)(1) follows immediately after ERISA’s

jurisdictional provisions, §§ 1132(e)(1) and (2), and the

statute uses the same operative language to define both the

scope of ERISA’s jurisdiction and the scope of ERISA’s fee

2

The Board argues in the alternative that Bos cannot recover fees under

section 1717 because in this case section 1717 is preempted by § 301 of

the Labor Management Relations Act, 29 U.S.C. § 185, and even if not,

in this case section 1717 is preempted by ERISA, 29 U.S.C. § 1144(a).

Because we conclude that Bos’s fee request fails under section 1717, we

express no view on the Board’s preemption arguments.

10 BOS V. BOARD OF TRUSTEES

shifting. That is, § 1132(e)(1) allocates federal and state

court jurisdiction over “actions under subsection (a)(1)(B) of

this section,” “actions under this subchapter,” and “actions

under paragraphs (1)(B) and (7) of subsection (a),” while

§ 1132(e)(2) specifies venue and related requirements for

“action[s] under this subchapter.” Id. §§ 1132(e)(1)–(2)

(emphases added). Immediately thereafter, § 1132(g)(1)

opens the door to fee shifting in “action[s] under this

subchapter.” Id. § 1132(g)(1) (emphasis added).

ERISA’s statutory structure and “[l]inguistic consistency”

make plain that ERISA’s jurisdictional and fee-shifting

provisions are inextricably linked: the scope of the statute’s

jurisdictional reach sets the outer bound of the scope of its fee

shifting. Cf. Christianson v. Colt Indus. Operating Corp.,

486 U.S. 800, 808 (1988). Thus, § 1132(g)(1) makes a party

eligible to recover fees if and only if the action that generated

his fees meets the test for “arising under” jurisdiction

incorporated into § 1132(e).

Such test is well established. Decades ago, in Franchise

Tax Board v. Construction Laborers Vacation Trust, 463 U.S.

1 (1983), the Supreme Court held that an action “arises

under” a particular federal law—there, the law was in fact

ERISA—only if such law “creates the [plaintiff’s] cause of

action” or, potentially at least, if “the plaintiff’s right to relief

necessarily depends on resolution of a substantial question”

under such law. Id. at 27–28.

Here, there is no dispute that the Bankruptcy Code, not

ERISA, grounds the Board’s cause of action. See 28 U.S.C.

§§ 157(b)(2)(I)–(J). Indeed, the Board’s adversary complaint

neither cited ERISA nor alleged any violation of an ERISA

BOS V. BOARD OF TRUSTEES 11

plan; instead, the Board sought relief exclusively under the

Bankruptcy Code.

2

Furthermore, because the nondischargeability claim in the

Board’s adversary complaint did not “necessarily depend[]”

upon resolution of any question under ERISA, let alone a

“substantial” question, no relief is available under such

theory. The Board’s nondischargeability complaint invoked

three different provisions of the Bankruptcy Code, any one of

which would have been sufficient to render Bos’s debts

nondischargeable. See Bos, 795 F.3d at 1012 (noting “the

other nondischargeability exceptions put forth by the Board”).

Only § 523(a)(4) potentially implicated ERISA, but even then

not necessarily, because the bankruptcy court could have

found Bos’s debts to be nondischargeable under that section’s

“embezzlement” or “larceny” exceptions rather than its

“fiduciary” exception, 11 U.S.C. § 523(a)(4), or the court

could have found Bos to be a fiduciary due to some statute

other than ERISA, see In re Hemmeter, 242 F.3d 1186, 1190

(9th Cir. 2001). In other words, the Board could have won

the relief it sought without any court ever needing to invoke

ERISA. Such was also the case in Franchise Tax Board,

where “on the face of a well-pleaded complaint there are

many reasons completely unrelated to the provisions and

purposes of ERISA why the State may or may not be entitled

to the relief it seeks.” 463 U.S. at 26. As in that case, so too

in this one: the relevant proceeding did not arise under

ERISA. See id. at 25–26.

Of course, Bos is right that, as this litigation unfolded, the

meaning of an ERISA term came to assume a central role.

After all, the only question we reviewed on appeal was

12 BOS V. BOARD OF TRUSTEES

whether Bos qualified as a “fiduciary” under the Bankruptcy

Code, on the specific theory that Bos was a “fiduciary” under

ERISA. Bos, 795 F.3d at 1008–09. But the Board’s well-

pleaded complaint did not require us to construe an ERISA

term; that we wound up doing so is not enough to make the

nondischargeability proceeding an “action under” ERISA for

jurisdictional purposes. Indeed, in Franchise Tax Board the

Supreme Court explicitly rejected the proposition that “any

. . . action which would require the interpretation or

application of ERISA to a plan document ‘arises under’”

ERISA. 463 U.S. at 24. The Court also made clear that

ERISA “does not purport to reach every question relating to

plans covered by ERISA.” Id. at 25. Hence, the mere fact

that the parties spent time debating the meaning of an ERISA

term is not enough to make the nondischargeability

proceeding an “action under” ERISA for fee-shifting

purposes.

We reject Bos’s invitation to take a more liberal approach

to fee-shifting under ERISA. First, and most important, the

text of the statute is simply not flexible enough to allow the

interpretation Bos proposes. Second, we are concerned about

the mischief that would result if we were to allow fee shifting

under ERISA even for actions that cannot be said to arise

specifically under that statute. Doing so would “undermine

the clarity and ease of administration” that § 1132(g)(1)

would enjoy insofar as its application is tied to the

jurisdictional requirements of the “well-pleaded-complaint

doctrine.” See Holmes Grp. v. Vornado Air Circulation Sys.,

535 U.S. 826, 832 (2002) (citing Franchise Tax Bd., 463 U.S.

at 11). Additionally, Bos’s more expansive interpretation

would incentivize plaintiffs to plead non-ERISA causes of

action that incorporate ingredients drawn from ERISA, if for

no other reason than to render themselves eligible to recover

BOS V. BOARD OF TRUSTEES 13

attorney’s fees under § 1132(g)(1). We think neither

consequence is desirable.

In sum, the Board’s nondischargeability proceeding was

not an “action under” ERISA within the meaning of

§ 1132(g)(1), and therefore ERISA does not provide Bos

grounds to recover the attorney’s fees he generated litigating

it.

III

Bos’s application for attorney’s fees is DENIED.