The Employee Stock Ownership Plan (ESOP) Association recently criticised the Ninth Circuit for an opinion that allows the Labor Department to dodge attorneys’ fees, pointing out profound, persistent issues with how the government utilises litigation to regulate employee stock ownership plans. The association articulated its concerns via a newly submitted brief.
The ESOP Association implored the US Court of Appeals for the Ninth Circuit to review its October ruling that opted not to present attorneys’ fees to Hawaiian architectural firm, Bowers & Kubota Consulting Inc. This firm had successfully combated a Labor Department challenge to its stock plan and had accordingly requested that the case be reexamined as they believe there was a misapplication in the standard for awarding fees as per a federal law designed to halt abusive lawsuits involving the government.
The firm holds the view that the court erroneously swapped standards used by the Equal Access to Justice Act—which denies attorneys’ fees when the government’s litigation position was “substantially justified”—for a less rigid standard questioning whether the government “reasonably believed” its stance was justified.
The ESOP Association took the critique one step further, referring to the lawsuit against Bowers & Kubota as an attempt to hold the firm accountable for failing to abide by the Labor Department’s “idiosyncratic interpretation” of the Employee Retirement Income Security Act provision. They argued that this provision was intended to be cast into a formal regulation rather than left to the discretion of the Labor department.
The association pointed out that for nearly half a century, the DOL has neglected to create such a rule, instead it has accused ESOP stakeholders for not complying with DOL’s subjective view of what the provision should require.
Faegre Drinker Biddle & Reath LLP represents the association and the Labor Department represents itself in the case named Su v. Bowers.