Opinion
Case No. 99 C 5059.
February 8, 2001.
Joel H. Spitz, Michael Ross Philips, Ross Hardies, Ronald Hanley Balson, Helen K. Pope, Tara Anne Gerard Moran, Hill, Gilstrap Balson, Chicago, IL., for the plaintiff.
Margery Newman, Bell, Boyd Lloyd, Jeffery R. Brodek, DeMark, Kolbe Brodek, Racine, WI., for defendant.
MEMORANDUM OPINION AND ORDER
BACKGROUND
The court entered judgment in favor of plaintiff on September 27, 2000, in the amount of $41,672.00 on Count I of plaintiff's complaint. Count II (promissory estoppel) and Count III (breach of fiduciary duty were dismissed. Plaintiff has now moved to amend the judgment to include prejudgment interest and attorney's fees. The defendant objects on several grounds: that plaintiff was only partially successful in that he won only one of three counts; that judgment amount was substantially lower than his demand which originally was $383,513.00 but was later reduced to $187,006.00; and that there was no evidence that defendant's position was not substantially justified and not taken in good faith. Defendant also contends that the amount requested for attorneys' fees ($72,414.00) is unreasonable.
DISCUSSION
Prejudgment Interest
The purpose of prejudgment interest is to compensate the victim and prevent unjust enrichment and is appropriate in ERISA cases and, although the court retains discretion concerning the matter, the plaintiff is presumptively entitled. Lorenzen v. Employees' Retirement Plan of Sperry Hutchinson Co., 896 F.2d 228. 236-37 (7th Cir. 2000). Here the only reasons given by defendant are that the evidence did not show that it acted in bad faith and that, since the plan was unfunded there is no unjust enrichment. However, the main reason for awarding prejudgment interest is to give a plaintiff full compensation for the time value of the money that was wrongfully withheld and that applies in this case. Plaintiff claims that he should receive interest from the date that the $41,672.00 payment was wrongfully withheld from his account, which was December 31, 1995. However the court has perused the agreement and finds that there was no provision for payment of interest on the accrued credits in plaintiff's account. consequently, the prejudgment interest would commence on the date his payment was due, i.e., his termination date, November 13, 1998. Interest is due at the rate represented by the short-term prime rate, as directed by the Seventh Circuit. Gorenstein v. Quality Care-USA, 874 F.2d 431 (7th Cir. 1989).
Attorneys' Fees and Costs
The question of attorneys' fees is a more difficult subject. As both sides point out, under ERISA, the court may award a prevailing party reasonable attorney's fees and costs in enforcing a benefit plan pursuant to Section 502. Filipowicz v. American Stores Benefit Plans Committee, 56 F.3d 807, 816 (7th Cir. 1995). Whether to award fees and costs depends, according to the latest word on the subject, on the answer to the "general question" whether "the losing party's position was substantially justified and taken in good faith, or was the party simply out to harass its opponent?" Trustmark Life Ins. Co. v. University of Chicago Hospitals, 207 F.3d 876, 884 (7th Cir. 2000). The tests "substantially justified" and in "good faith, " indicate both an objective and subjective component. However the court finds that in this case the defendant has met the good faith subjective component but has not satisfied the substantial justification objective component. The court also finds that the defendant did not but its actions in denying the claim seek merely to harass the plaintiff. Thus this case lies between the two extremes of objective and subjective reasonableness and deliberate harassment. Does this require denial of attorneys' fees? The court believes that it still has discretion to award fees based on the "modest presumption" that a successful ERISA plaintiff is entitled to fees. The defendant was definitely proceeding without a road map. First, it did not establish an account for plaintiff as promised in the agreement. Second, it did not have information available to him as promised. Third, it had no claim procedure in place at the time plaintiff's claim arose. Fourth, it objectively decided plaintiff's claim in error. The time in which the claim was under consideration was needlessly complicated and prolonged. The court therefore finds that its exercise of discretion based on the "modest presumption" justifies the awarding of an attorney's fee and non-taxable costs.
Plaintiff requests a "lodestar" amount of $72,414.00 for attorney's fees and $4,259.04 for non-taxable costs of the figure, $65,369.50 is for fees incurred through trial and the balance for post-trial matters. Defendant contends that this amount is unreasonable considering the limited success of plaintiff ($41,672.00 recovery out of an original claim of $383,513.00) and that he did not prevail on two of the three counts of his complaint. While the case law does not interpose an absolute prohibition against awarding fees in excess of the amount recovered ( City of Riverside v. Rivera, 477 U.S. 561, 577 (1986))) because many legitimate cases could not be brought because the amount in controversy would not justify an attorney's time billed on a lodestar basis. Nevertheless it is certainly a consideration in determining a reasonable fee, because a defendant should not be frightened into settling an inflated claim to avoid a huge attorney's fee award.
The court finds the defendant's suggestion that a fee measured by percentage of recovery is a reasonable way to set plaintiff's fee in a case where there is a large disparity between the claim and the ultimate judgment amount. An attorney for a claimant who believes that the recovery will be large will take the case to earn the contingent fee so that obtaining an attorney will not be a problem. A normal contingent fee agreement specifies that a plaintiff's attorney receives one-third of the amount recovered. Defendant suggests that the fee should on this basis be $13,890.67. But defendant's math is wrong. One-third of the amount recovered would be 50% of the judgment or $20,836.00 in this case.
Plaintiff also requests non-taxable costs in the amount of $4704.64. of this $3,700.00 was the fee of an expert witness who was not allowed to testify. Defendant objects to this and two-thirds of a Westlaw search charge of $428.32 because it was incurred in seeking authority to support Count III which was dismissed. Plaintiff contends that the expert was also retained as a consultant and this should be reimbursable. The court agrees with the defendant and excludes both sums and awards the plaintiff the sum of $719.09 in costs.
CONCLUSION
In sum, the plaintiff is awarded prejudgment interest from November 13, 1998, attorneys' fee in the amount of $20,836.00 and costs in the amount of $719.09.
IT IS SO ORDERED.