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UNITED PAPERMAKERS v. PENNTECH PAPERS CO.

June 13, 1973

United Papermakers and Paperworkers et al., Plaintiffs
v.
Penntech Papers Company, Inc., Defendants


Knox, District Judge


The opinion of the court was delivered by: KNOX

KNOX, District Judge:

 The only issue remaining before the court for decision in this suit by a union against its employer under Section 301 of the Labor Management Relations Act (29 U.S.C. ยง 185) is a petition for Counsel Fees presented by counsel for the union.

 The union, contending that the employer was attempting to violate the provisions for payments to the plan contained in the union agreement, brought this suit for an injunction against the company in this court. Soon after suit was brought, the parties entered into lengthy negotiations the result of which was that the company eventually withdrew its demands for the excess assets in the fund or rather agreed to postpone them until June 10, 1973, when the present collective bargaining agreement is open for renegotiation. It was agreed between the parties that the court could enter an order dismissing the case without prejudice, subject however to the right of plaintiff's counsel to petition for allowance of counsel fees in connection with the suit. Liability for such counsel fees was denied and is being contested by the company. A petition for allowance of fees was thereupon filed, hearings have been held and the matter is now before the court for disposition.

 The plant of the company is located at Johnsonburg, Elk County, Pennsylvania, within this judicial district and it appears that the local and its trustee ad litem are likewise located in Elk County and thus we would ordinarily look to the Law of Pennsylvania for resolution of this controversy were it not for the fact that we are dealing here with a collective bargaining agreement which is subject to the enforcement by the Federal Courts under Section 301 of the Labor Management Relations Act (29 U.S.C. 185 (a)). *fn2"

 There seems little doubt that if we were governed entirely by Pennsylvania Law, the petition for counsel fees would clearly have to be denied. Pennsylvania Law assesses counsel fees in legal proceedings in two situations only: (1) where a statute provides for counsel fees to the winning party and (2) where counsel have, by their labors, preserved or created a fund and it is just that the other persons interested in the fund contribute to the counsel fees and not get a free ride. See Trimble's Estate, 392 Pa. 277, 140 A. 2d 609 (1958). Hempstead v. Meadville Theological Seminary, 286 Pa. 493, 134 A. 103 (1926). The basis for this exception to the general rule that a party must assume the burden of its own counsel fees and expenses is to prevent unjust enrichment.

 Pennsylvania Law, however, is not controlling, this being a suit in Federal Court pursuant to an Act of Congress. It is true that the Act of Congress in question being the Labor Management Relations Act does not specifically provide for an award of counsel fees in a suit under Section 301. But, on the other hand, it does not forbid it.

 We have very recent guidance from the United States Supreme Court in this situation in the decision in Hall v. Cole, 41 U.S. 1, 36 L. Ed. 2d 702, 93 S. Ct. 1943 (1973). There the court upheld an award of counsel fees in a suit under Section 102 of the Labor Management Reporting and Disclosure Act (LMRDA) where a suit was brought by a union member to vindicate his own rights of free speech and those of others as well when he was expelled from the union. The court per Mr. Justice Brennan expounded at length on the two situations where Federal Courts, in the exercise of their equitable powers, award attorney's fees when the interests of justice so require:

 
"Although the traditional American rule ordinarily disfavors the allowance of attorneys' fees in the absence of statutory or contractual authorization, federal courts, in the exercise of their equitable powers, may award attorneys' fees when the interests of justice so require. Indeed, the power to award such fees 'is part of the original authority of the chancellor to do equity in a particular situation,' Sprague v. Ticonic National Bank, 307 U.S. 161, 83 L. Ed. 1184, 59 S. Ct. 777 (1939), and federal courts do not hesitate to exercise this inherent equitable power whenever 'overriding considerations indicate the need for such a recovery.' Mills v. Electric Auto-Lite Co., 396 U.S. 375, 24 L. Ed. 2d 593, 90 S. Ct. 616 (1970); see Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 18 L. Ed. 2d 475, 87 S. Ct. 1404 (1967).
 
"Thus, it is unquestioned that a federal court may award counsel fees to a successful party when his opponent has acted 'in bad faith, vexatiously, wantonly, or for oppressive reasons.' 6 Moore's Federal Practice 1352 (1966 ed.); see, e.g., Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400, 402, 19 L. Ed. 2d 1263, 88 S. Ct. 964 n. 4 (1968); Vaughan v. Atkinson, 369 U.S. 527, 8 L. Ed. 2d 88, 82 S. Ct. 997 (1962); Bell v. School Bd. of Powhatan County, 321 F.2d 494 (CA4 1963); Rolax v. Atlantic Coast Line R. Co., 186 F.2d 473 (CA4 1951). In this class of cases, the underlying rationale of 'fee shifting' is, of course, punitive, and the essential element in triggering the award of fees is therefore the existence of 'bad faith' on the part of the unsuccessful litigant.
 
"Another established exception involves cases in which the plaintiff's successful litigation confers 'a substantial benefit on the members of an ascertainable class, and where the court's jurisdiction over the subject matter of the suit makes possible an award that will operate to spread the costs proportionately among them.' Mills v. Electric Auto-Lite, supra, at 396 U.S. 375 at 393-394. 'Fee-shifting' is justified in these cases, not because of any 'bad faith' of the defendant but, rather, because 'to allow the others to obtain full benefit from the plaintiff's efforts without contributing equally to the litigation expenses would be to enrich the others unjustly at the plaintiff's expense.'"

 It is still true that an award of attorney's fees against an adverse party is "highly unusual" and is "clearly reserved for exceptional cases". Kahan v. Rosenstiel, 424 F.2d 161 (3d cir. 1970). As previously pointed out, the preservation or creation of the common fund doctrine is not applicable to this case. This leaves us only the "bad faith" exception to the rule against allowance of counsel fees. This was the basis upon which such fees were awarded and the award sustained in Hall v. Cole, supra. On the one hand, numerous courts have denied counsel fees where no bad faith was found. See Local 149 v. American Brake Shoe Company, 298 F.2d 212 (4th Cir. 1962); International Union District 50 v. James Julian Inc., 341 FS 503 (M.D. Pa. 1972). On the other hand, where the contractual obligations are clear and the employer perversely refuses to comply bad faith was found and attorneys fees awarded. United Steelworkers v. Butler Manufacturing Co., 439 F.2d 1110 (8th ...


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