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Smith v. Contini

August 21, 2003

STANLEY SMITH, PLAINTIFF,
v.
ROBERT CONTINI, JOHN BARNES, RICHARD MUELLER, LAWRENCE MCDERMOTT, JOHN DOE (NAME BEING FICTITIOUS), TEAMSTERS LOCAL 641: PENSION FUND, ROBERT CIRONE, AND THOMAS FLANNERY, DEFENDANTS.



The opinion of the court was delivered by: Walls, District Judge

OPINION

Plaintiff Stanley Smith ("Plaintiff"), having prevailed on the merits, now moves for recovery of attorneys' fees. Defendants oppose the motion. Pursuant to Fed. R. Civ P. 78, the motion is decided without oral argument. The motion is granted, and fees are awarded in the amount of $104,632.17.

Plaintiff filed a complaint in this Court in May 1997, after the defendants denied him retirement benefits. Plaintiff had been employed as a truck driver and earned service credits that could be used towards applying for pension benefits with three separate pension funds in the 1960s and 1970s. Plaintiff earned two quarters of service credits with the Local 202 Fund, 26 quarters of service credits with the Local 816 Fund, and 16 quarters of service credits with the Local 641 Fund. The Local 641 Fund had reciprocal agreements with the other two funds whereby it accepted service credits earned at the other funds in calculating whether an employee earned enough credits to receive a pension benefit. If the employee qualified for a benefit, the Local 641 Fund paid the pro-rata share, or percentage, of the pension benefit to the employee that equaled the percentage of the combined pension credits earned by the employee with the Local 641 Fund. In other words, a employee who qualified for a benefit by accumulating service credits earned under several funds, and who earned 40 percent of his service credits with the Local 641 Fund, would received 40 percent of his total pension benefit from the Local 641 Fund. The Local 641 Fund called this benefit a "Pro-Rata Pension," distinct from a "Deferred Pension" earned by employees who qualified using only service credits accumulated with the Local 641 Fund.

This dispute arose out of the qualifying rules for the Local 641 Fund pension plan. Those rules provided that an employee seeking a "Pro-Rata Pension" qualified upon the accumulation of 15 years of service credits. By contrast, employees seeking a "Deferred Pension" qualified with ten years of service credits. Plaintiff had accumulated a total of 11 years of service credits at the three funds. He challenged the qualifying rules as a violation of 29 U.S.C. § 1132 (a)(3), alleging that the defendants' adherence to the 15-year service credit requirement was contrary to ERISA and constituted a breach of fiduciary duty. The alleged breach of fiduciary duty arose from ERISA's minimum vesting requirements, which require benefits to vest with an employee upon ten years of service. 29 U.S.C. § 1053(a).

On April 8, 1999, this Court granted summary judgment in favor of the defendants, holding that ERISA's 10-year vesting requirement did not apply to the Pro-Rata Pension because the ERISA definition of "years of service" permitted the Local 641 Fund plan to disregard service with other employers. On appeal, the Third Circuit reversed, ruling that the Local 641 Fund plan was governed by ERISA, including the 10-year vesting requirement. The Court of Appeals remanded to this Court with instructions to enter judgment for Plaintiff and to fashion appropriate relief.

By opinion and order dated November 19, 2002, this Court entered judgment for Plaintiff, ordering that he was entitled to pro-rata pension benefit payments from the Local 641 Fund. Consistent with the Third Circuit's ruling, the Court found that the Local 641 Fund was not responsible for pension payments based on the periods of time during which Plaintiff worked for other employers, but rather only for its pro rata share. Plaintiff, however, was entitled to seek payments from the appropriate pension funds for those times when he worked for other employers. Plaintiff's counsel, in an affidavit submitted with this motion, estimates that the total monthly pension payment Plaintiff will receive will be approximately $800. He further estimates that the total present-day value of Plaintiff's pension benefits is $82,560. Those estimates, however, are based only on Plaintiff's representations, and Plaintiff's counsel does not explain how he arrived at those figures. They will not be accepted as true for purposes of this motion; however, the Court will consider, as discussed at greater length later, the generally positive results obtained by Plaintiff in this litigation.

Plaintiff's counsel now seeks $100,000 in attorney's fees and $4,632.17 in costs.

An award of attorneys' fees to a prevailing plaintiff in an ERISA case is within the discretion of the district court. McPherson v. Employees' Pension Plan of American Re-Insurance Co., 33 F.3d 253, 256 (3d Cir. 1994), citing Schake v. Colt Indus. Operating Corp. Severance Plan, 960 F.2d 1187, 1190 (3d Cir. 1992). There is no presumption that a successful plaintiff in an ERISA suit should receive an award. McPherson, 33 F.3d at 254, citing Ellison v. Shenango, Inc. Pension Bd., 956 F.2d 1268, 1273 (3d Cir. 1992). Five factors must be considered in deciding an application for attorneys fees: (1) the offending parties' culpability or bad faith; (2) the ability of the offending parties to satisfy an award of attorneys' fees; (3) the deterrent effect of an award of attorneys' fees against the offending parties; (4) the benefit conferred on members of the pension plan as a whole; and (5) the relative merits of the parties' position. McPherson, 33 F.3d at 254, citing Ursic v. Bethlehem Mines, 719 F.2d 670, 673 (3d Cir. 1983).

1. Culpability or bad faith. Although "bad faith" normally connotes an ulterior motive or sinister purpose, a losing party may be culpable without having acted with an ulterior motive. McPherson, 33 F.3d at 256 (citation omitted). "In a civil context, culpable conduct is commonly understood to mean conduct that is `blamable; censurable; ... at fault; involving the breach of a legal duty or the commission of a fault.... Such conduct normally involves something more than simple negligence.... [On the other hand, it] implies that the act or conduct spoken of is reprehensible or wrong, but not that it involves malice or a guilty purpose.'" Id. at 256-57, quoting Black's Law Dictionary (6th ed. 1990). Accordingly, a defendant need not have acted with an ulterior or sinister purpose for a prevailing plaintiff to be entitled to a fee award. Id. at 257. However, a party is not culpable merely because it has taken a position that did not prevail in litigation. Id.

Here, the Third Circuit concluded that the Defendants' 15-year vesting requirement violated ERISA. In other words, the Defendants breached their legal duty as established by the statute. It is true, as Defendants note, that there is no evidence that they acted with sinister purpose or ulterior motive. Such showing is not required; a defendant is "culpable," in the words of the McPherson court, if its conduct "involv[ed] the breach of a legal duty." As fiduciaries under ERISA, defendants breached their legal duty to plaintiff when they improperly denied his claim for pension benefits. That they did not act with malice does not, under McPherson, mean that they did not act culpably.

This factor weighs in favor of giving an award.

2. Ability to pay. Defendants concede that the Local 641 Fund has the ability to pay an award of attorney's fees. Defendants claim that this means that the factor "does not inform the analysis in any particularly meaningful way." Apparently, Defendants interpret this factor as pertinent only if it makes an award less appropriate. That is, if the defendant cannot pay, then the factor weighs against an award, but if the defendant can pay, then the factor has no impact on the analysis. In fact, however, that a defendant has the financial resources to pay makes an award for attorneys' fees more appropriate. See Ellison v. Shenango Inc. Pension Bd., 956 F.2d 1268, 1277 (3d Cir. 1992) ("Since Shenango does not dispute the sufficiency of the Plan's assets to cover an award of fees in this case, the district court should have resolved the second Ursic factor in favor of an award of fees to Ellison.").

This factor weighs in favor of giving an award.

3. Deterrent effect. The Third Circuit has held that "it will further the objectives of ERISA if fee awards are employed to deter behavior that falls short of bad faith conduct." McPherson, 33 F.3d at 258, citing Kann v. Keystone Resources, Inc. Profit Sharing Plan, 575 F.Supp. 1084, 1096-97 (W.D.Pa. 1983). Even if a defendant does not act in bad faith, a district court should consider "whether it would serve the objectives of ...


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