A recent Law 360 story by Katryna Perera, “Firm Says DOL Must Pay Atty Fees After Losing ERISA Suit” reports that an architecture firm urged the Ninth Circuit to force the U.S. Department of Labor to pay its attorney fees and costs after the agency lost its suit claiming the firm broke federal benefits law, saying the case should not have been filed to begin with since it was not based in fact or law.  Attorneys for Bowers + Kubota Consulting Inc. and its former owners filed a brief saying the DOL's suit, which claimed the firm overcharged for its employee stock ownership plan in violation of the Employee Retirement Income Security Act, was meritless and that the district court abused its discretion in finding the DOL secretary had not acted in bad faith.

"The absence of any credible evidence of the alleged ERISA violations at trial merits the conclusion that there was no substantial justification for the [DOL] Secretary's complaint and litigating this case in the first instance," the brief said.  According to B+K, the DOL secretary has the power to build an entire case and obtain expert advice and opinions before filing a complaint to ensure that the claims "meet the hurdle of substantial justification."  Therefore, the DOL acted in bad faith by filing the complaint and for "knowingly or recklessly" raising "frivolous arguments," the firm said.

The brief also stated that while the DOL's investigation into the firm may have been warranted, that does not justify the initiation of the suit.  "The fact that the Secretary's investigation was justified has no bearing under the law on the lack of substantial justification and bad faith of the secretary filing a complaint after the investigation concluded and prosecuting that complaint for more than three additional years," the brief stated.

The firm further argued that it is entitled to attorney fees and costs under the Equal Access to Justice Act and that the district court erred by not awarding approximately $28,000 to B+K to cover nine depositions of Labor Department officials.  "The district court's ruling in that regard was clearly based upon the mistaken and clearly erroneous belief that those deposition costs were incurred after the district court's March 12, 2021, order denying appellants' motion for summary judgment on limitations grounds," the brief stated.  "At the time each deposition was taken … appellants reasonably expected that each deposition would be used for purposes of trial and were used as evidence in the summary judgment motions."

B+K had asked a Hawaii trial court for more than $78,300 in taxable costs in addition to attorney fees and non-taxable costs.  Under the EAJA, courts can award fees to parties that win lawsuits against the government — unless the court decides the government's position "was substantially justified."  Because the trial court decided the Labor Department had legitimate reasons to be suspicious of the B+K transaction, the court awarded the defendants a reduced taxable costs award — but no attorney fees or non-taxable costs — after a five-day bench trial.

B+K's brief is in response to a brief the DOL filed in September, claiming it should not have to cover the firm's attorney fees.  The DOL pushed back against B+K's argument that the trial court should have awarded it fees because the found "absolutely no proof of wrongdoing" on B+K's part.  This is not true, the Labor Department said, arguing that the trial court decided the department brought its lawsuit in good faith based on evidence provided during the trial.  The trial court also denied B+K's motion for summary judgment on the merits, the department added.