Opinion
02 Civ. 2415 (RWS)
October 2, 2002
Attorney for Plaintiffs, KENNETH MaCULLOCH, ESQ., BALLARD, ROSENBERG, GOLPER SAVITT, New York, N.Y.
Attorneys for Defendants, WILLIAM E. WEBER, ESQ., WAXMAN WINCOTT, Woodbury, N.Y.
MARC A. TENENBAUM, ESQ., SLEVIN HART, Washington, DC
RICHARD BROOKS, ESQ., PATRICIA McCONNELL, ESQ., MEYER, SUOZZI, ENGLISH KLEIN, New York, N.Y.
OPINION
Plaintiffs TM Meat Fair, Inc. ("TM"), Michael Milano ("Milano"), Anthony Maurino ("Maurino") and Thomas Ventrone ("Ventrone") (collectively the "plaintiffs") and defendants Board of Trustees of the United Food and Commercial Workers ("UFCW") Local 174 Commercial Health Care Fund (the "Health Fund") and Board of Trustees of the UFCW Local 174 Commercial Pension Fund (the "Pension Fund") (collectively the "Funds") have moved separately for an award of attorney's fees.
For the following reasons, the plaintiffs' motion is granted, and the Funds' motion is denied.
Facts
Plaintiffs commenced this action in state court on March 8, 2002 alleging, inter alia, a violation of the Employee Retirement Income Security Act, 29 U.S.C. § 1132. The defendants included the Funds in addition to the UFCW International Union, the UFCW Local 174 and various individuals or entities employed by or affiliated with those entities. On March 28 and 29, 2002, all defendants removed the case to this Court. On July 10, 2002, this Court denied plaintiffs' motion to remand.
On September 12, 2002, pursuant to a settlement agreement, this case was dismissed with prejudice, subject to each party's right to request an award of attorney's fees. Pursuant to the settlement, the Pension Fund agreed to refund $4,460 in contributions to TM. The three individual plaintiffs waived any right to a pension benefit. The Health Fund agreed to pay Milano's claim for health benefits, in accordance with the governing plan documents, up to a maximum of $5,357.34. Milano agreed to make certain contributions to the Health Fund. All other claims were dismissed with prejudice.
The plaintiffs and defendants moved by letters dated September 26, 2002 for the award of attorney's fees. The motions were considered fully submitted at that time.
Discussion
I. Standard of Review
Pursuant to § 502(g)(1) of ERISA, 29 U.S.C. § 1132(g)(1), courts have discretion whether to award attorney's fees. E.g., Chambless v. Masters, Mates Pilots Pension Plan, 815 F.2d 869, 871 (2d Cir. 1987). "ERISA's attorney's fee provisions must be liberally construed to protect the statutory purpose of vindicating retirement rights even when small amounts are involved." Id. at 872. In determining whether to award attorney's fees in ERISA cases, courts consider five factors: (1) the degree of the offending party's culpability or bad faith; (2) the ability of the offending party to satisfy an award of attorney's fees; (3) whether an award of attorney's fees would deter other persons from acting similarly under like circumstances; (4) the relative merits of the parties' positions, and (5) whether the action conferred a common benefit on a group of pension plan participants. Chambless, 815 F.2d at 871; see also Lauder v. First Unum Life Ins. Co., 284 F.3d 375, 383 (2d Cir. 2002).
While such fees may be assessed against any party, "courts have cautioned that the five factors `very frequently suggest that attorney's fees should not be charged against ERISA plaintiffs.'" Salovaara v. Eckert, 222 F.3d 19, 28 (2d Cir. 2000) (citation omitted). Further, the Circuit Court has generally limited awards to a prevailing party, even though the statute does not so provide. E.g., Weil v. Retirement Plan Admin. Committee of Terson Co., 913 F.2d 1045, 1052 (2d Cir. 1990) (noting that three of five Chambless factors are affected by success on the merits)
The Funds rely on authority from other districts for the proposition that attorneys may also be liable for fees. E.g., Ghorbani v. Pacific Gas Elec. Co. Group Life Ins., 100 F. Supp.2d 1165, 1167-68 (N.D. Cal. 2000); Loving v. Pirelli Cable Corp., 11 F. Supp.2d 480, 495 (D. Del. 1998); Baker v. Greater Kansas City Laborers Welfare Fund, 716 F. Supp. 1229, 1231 (W.D. Mo. 1989) Because it is determined that the Funds are not entitled to fees, there is no need to address the question of whether plaintiffs' counsel could or should be responsible for fees.
II. Plaintiffs' Claims
The plaintiffs seek attorney's fees in the amount of $39,975.
A. The Chambless Test
The Chambless test tips in favor of awarding fees to the plaintiffs.
As an initial matter, the plaintiffs may be considered the "prevailing party" in this case because, although a settlement was reached, the plaintiffs' rights were vindicated in that Milano received health benefits that he claimed had been illegally denied to him and TM received a reimbursement of pension funds that it claimed were illegally paid to the defendants. As a result, the fourth Chambless factor weighs in favor of an award of fees.
With regard to the first factor, the plaintiffs argue that the Funds at the very least showed culpability. "A losing party may be culpable . . . without having acted with an ulterior motive. . . . Such conduct normally involves something more than simple negligence. [It] implies that the act or conduct spoken of is reprehensible or wrong, but not that it involves malice or a guilty purpose." Algie v. RCA Global Communication, Inc., 891 F. Supp. 875, 891 (S.D.N.Y. 1994) (quoting McPherson v. Employees' Pension Plan of American Re-Insurance Co., 33 F.3d 253, 256-57 (3d Cir. 1994)). The timing of the events leading up to the termination of the plaintiffs' benefits supports a finding that the defendants engaged in conduct that was wrong, even if not malicious. The defendants terminated plaintiffs' benefits with one day's notice, rendering it difficult, if not impossible, for the plaintiffs to obtain alternative coverage. In fact, Milano could not obtain coverage, leading to the lapse in coverage that led to part of the dispute in this case. Further, the defendants appeared to alter their reasons for terminating coverage. By letter dated October 29, 2001, the defendants claimed that the benefits were being terminated because they had failed to pay Union dues. Almost three months later, by letter dated December 21, 2001, the defendants stated that the benefits had been terminated because the plaintiffs were "owners" and thus could not be bargaining unit employees and could not participate in the Funds. Finally, by letter dated May 1, 2002, Local 174's counsel stated that the plaintiffs could be reinstated to the Funds by making back contributions. Although there was no final disposition as to the defendants' culpability, the above events suggest a degree of culpability and thus support an award of fees.
The Funds argue in opposition to the plaintiffs' motion that these letters were in fact consistent. It argues that the May letter was an offer of settlement, permitting the owners to receive benefits if the plaintiffs in turn provided benefits for all of their employees. However, it is unclear how the ruling that owners could not obtain benefits was all of a sudden lifted as a result of the settlement: either the owners could obtain benefits and should have continued to receive them, or they could not, and could not have received a settlement offer to that effect. In addition, while the October and December letters may not be expressly contradictory, the December letter presents a different and more complex rationale than the October letter — suggesting that the intervening months were used to come up with a better explanation.
In support of a showing that the defendants can satisfy an award of approximately $40,000 in attorney's fees, plaintiffs submitted the Annual Report of Local 174 for the year 2000. That report showed that Local 174 had $1,374,557 in total assets and $738,037 in net assets. In addition, the defendants have not represented that they could not pay the attorney's fees requested. Therefore, this factor supports an award of fees.
The Funds, in fact, in their opposition papers stated that they did have the ability to pay the fees. It is unclear whether they were also speaking for the other defendants.
The union summarily terminated the benefits of three paying beneficiaries and their families. An award of attorney's fees will certainly make this and other unions contemplate whether they should act similarly in the future. Therefore, the third element supports an award of attorney's fees.
Finally, plaintiffs' counsel concedes that the fifth element is not present here. The failure to prove this factor does not necessarily preclude an award of attorney's fees, however. Mendez v. Teachers Ins. and Annuity Ass'n, 982 F.2d 783, 789 (2d Cir. 1992) (citing Ford v. New York Central Teamsters Pension Fund,
In any case, these arguments do not address the one-day notice of termination of benefits which in itself is suspect.
642 F.2d 664, 665 (2d Cir. 1981) (per curiam)). It should not do so here.
The plaintiffs' motion is granted, and attorney's fees shall be awarded to the plaintiffs.
B. The Amount to Be Awarded
The ordinary process for determining an award of fees involves calculation of the so-called "lodestar" figure. E.g., Blanchard v. Bergeron, 489 U.S. 87, 94 (1989). "Under this approach, the number of hours reasonably expended on the litigation is multiplied by a reasonably hourly rate for attorneys and paraprofessionals." Grant v. Martinez, 973 F.2d 96, 99 (2d Cir. 1992).
To determine the number of hours that are properly compensable, the court must initially look to the amount of time spent on each category of tasks, as documented by contemporaneous time records of moving parties. E.g., T.E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 528 (2d Cir. 1990); Miele v. New York State Teamsters Conf. Pension Retirement Fund, 831 F.2d 407, 408 (2d Cir. 1987). The court must then determine how much of that time was reasonably spent. If the court concludes that portions of the expended time were not reasonably necessary to achieve the successful result obtained by the movant, it should reduce the time for which compensation is awarded. See Cowan v. Prudential Ins. Co. of America, 935 F.2d 522, 524 (2d Cir. 1991). Such reductions are appropriate to account for work on claims unrelated to those on which the movant ultimately prevailed, e.g., Pennsylvania v. Delaware Valley Citizens' Council, 478 U.S. 546, 558-61 (1986); Chambless v. Masters, Mates Pilots Pension Plane, 697 F. Supp. 642, 648 (S.D.N.Y. 1988), or for plainly inefficient or duplicative labor. E.g., City of Riverside v. Rivera, 477 U.S. 561, 578 n. 9 (1986).
In making its findings with respect to the proper hourly rate, the court should look to the fees charged by attorneys comparably situated to those representing the movant. Chambless v. Masters, Mates Pilots Pension Plane, 885 F.2d 1053, 1058-59 (2d Cir. 1989).
Of the 159.9 hours, 19.6 were expressly related to the class complaint and amendment of the complaint to be a class action. Because plaintiffs withdrew these claims and were therefore unsuccessful on them, these hours shall be discounted completely. In addition, 34.5 hours were spent on a motion for declaratory judgment and injunctive relief which was also withdrawn as a result of the settlement and shall also therefore be disregarded.
The remaining time can be roughly divided into four categories, and each category shall be reduced as duplicative or unrelated to the claims on which the plaintiffs were successful:
19.6 hours of preliminary research in February 2002 on the case shall be reduced to 3 hours.
34 hours in preparing the complaint and order to show cause shall be reduced to 8 hours.
25 hours in various other activities, including the settlement conference, shall be reduced to 7 hours. approximately 27.2 hours spent on research and work related to the instant motion shall be reduced to 2 hours.
It is unclear how much more time was spent on this motion because plaintiffs' counsel represented that he worked for six hours on September 11, 2002, including work on this motion and attendance at a settlement conference. It will be assumed, given the length of the settlement conference before the Court, that two hours were spent at the settlement conference and four hours working on the motion.
Therefore, 20 hours shall be compensable.
Plaintiffs' counsel's hourly rate of $250 is reasonable in comparison to attorneys comparably situation to him. Therefore, applying this rate to the twenty compensable hours, plaintiffs are entitled to $5,000 in attorney's fees. Plaintiff's counsel has represented that this amount is all that he will be receiving for his work on this portion of the case according to an agreement with his clients.
It is true that $5,000 is a fraction of the $40,000 in fees that plaintiffs seek in this motion, but it is close to the amount that plaintiffs' counsel actually sought in settlement. Plaintiffs' counsel sought as part of the settlement just $10,000 in attorney's fees. The defendants rejected this condition, and the parties determined to submit these applications to the Court.
Attorney's fees in the amount of $5,000 shall be awarded to the plaintiffs.
III. Defendants' Claims
The Funds seek approximately $40,000 in attorney's fees, claiming that all five factors counsel in favor of this award. As noted above, however, the plaintiffs may be considered the "prevailing party" and thus the general rule in this Circuit is that the Funds should not receive fees pursuant to § 502(g)(1). In any case, an inquiry into the five Chambless factors reveals that the Funds are not entitled to attorney's fees.
First, the Funds assert that the suit was brought in bad faith because "[t]here was no legitimate reason for plaintiffs or their counsel to bring this lawsuit." They point to the fact that the plaintiffs accepted less than $9,000 in settlement of more than $9 million in claims. There is no requirement, however, that a settlement be a large portion of the amounts alleged, nor that plaintiffs be successful on every cause of action — or even one claim — in order to avoid a finding of bad faith. E.g., Salovaar, 222 F.3d at 30 ("[I]n order to avoid a finding of bad faith . . . plaintiffs must have a reasonable belief that they could prove an actionable ERISA claim. While [the plaintiffs] failed to prove any of their claims, . . . a reasonable basis existed for [them] to make their claims." (quoting Cline v. Industrial Maintenance Eng'g Contracting Co., 200 F.3d 1223, 1236 (9th Cir. 2000)); Algie, 891 F. Supp. at 890 ("whether they prevailed on some or all of their theories is inconsequential for the question of fee entitlement") Further, the Funds claim that the plaintiffs did not seek to obtain the amount they accepted in settlement without resorting to litigation. Again, there is no requirement that parties attempt to negotiate prior to filing suit. Therefore, these facts alone do not show that the plaintiffs filed this lawsuit in bad faith. Finally, while it may be true, as the Funds argue, that Milano commenced this action prior to exhausting administrative remedies, such an action is as equally likely to be a mistake as evidence of bad faith.
As for the second Chambless factor, the defendants summarily assert that "a $40,000 fee award presumably can be satisfied" by the plaintiffs and/or their attorney. Such conclusory assertions are insufficient, particularly given the fact that the plaintiffs brought suit over what amounted to less than $9,000 in health care costs and pension benefits. Further, plaintiffs' counsel represented before the Court on September 12, 2002, that his clients would have difficulty paying the defense counsel's attorney's fees.
The defendants next argue that attorney's fees should be awarded to deter other parties from bringing what they deem a frivolous lawsuit. However, the case cited by the defendants notes that an adverse fee award is appropriate against "unsuccessful" contingent fee counsel in keeping with the legislative concern for "prudent pursuit of litigation." Ghorbani, 100 F. Supp. at 1167. Plaintiffs' counsel was not, however, unsuccessful. He obtained for his clients a settlement. The fact that it was a relatively small recovery does not make him unsuccessful, just less successful. In fact, it is arguable that an award of attorney's fees against plaintiffs would, in fact, have a chilling effect on meritorious lawsuits for small claims. Id. at 1167. The third factor therefore also argues against an award of fees.
In terms of the relative merits of the parties' positions, the Funds again point to the disparity between the amount of settlement as opposed to the total claims asserted. This argument is rejected for the reasons discussed above. In addition, the Funds argue that the only motion that was decided in this Court — the motion to remand — was decided in the Funds' favor. The fact that the Funds were successful on a motion to remand does not, however, go the ultimate issue of the merits of their positions. As discussed above, the relative merits of the parties' positions falls in favor of the plaintiffs.
In any case, the defendants sought attorney's fees as part of their motion to remand. That request was denied at the time, and the ERISA provisions are an inappropriate means of attempting to obtain fees that have already been denied.
Finally, it is true that this action did not benefit a group of plan participants. However, this factor alone is insufficient to support an award of attorney's fees against the plaintiffs.
The Funds' motion for attorney's fees is denied.
Conclusion
For the foregoing reasons, the plaintiffs' motion for attorney's fees is granted in the amount of $5,000, and the Funds' motion for attorney's fees is denied.
It is so ordered.