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United States District Court, S.D. New York

June 17, 2004.


The opinion of the court was delivered by: GERARD E. LYNCH, District Judge


This is a motion for an award of attorneys fees following the settlement of plaintiff's underlying ERISA claims. The motion will be granted, albeit for less than the full amount requested.

  Plaintiff filed an ERISA action against defendant Metropolitan Life Insurance Company ("Met Life"), claiming it had erroneously deducted from his benefits under Met Life's long-term disability benefit plan ("LTD Plan") amounts he had received from pension distributions. Shortly after the case was filed, the parties reached a settlement for 100% of the claim, but were unable to reach agreement over the appropriate attorneys' fee award. Defendant disputes plaintiff's calculation of the fees, essentially arguing that the fee demand is excessive because the plaintiff only received $13,000 under the settlement, but is seeking $22,000 in fees. In an ERISA action, a district court has discretion to award "a reasonable attorney's fee and costs of action to either party." 29 U.S.C. § 1132(g)(1). The Second Circuit has set forth a five-factor test for determining whether a fee award is appropriate in an ERISA action:

(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 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 v. Masters, Mates & Pilots Pension Plan, 815 F.2d 869, 871 (2d Cir. 1987); accord Krizek v. Cigna, 345 F.3d 91, 102 (2d Cir. 2003); Lauder v. First Unum Life Ins. Co., 284 F.3d 375, 383 (2d Cir. 2002). Each of these factors must be weighed, but it is not necessary for a party to prevail on each in order for an award to be granted. See Ford v. New York Central Teamsters Pension Fund, 506 F. Supp. 180, 183 (W.D.N.Y. 1980), aff'd, 642 F.2d 664 (2d Cir. 1981). In addition, "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." Chambless, 815 F.2d at 872.

  It is logical to begin with the merits of the case, which is one of the Chambless factors in its own right, and also bears on the factors of bad faith and deterrence. In assessing this factor, the fact that the defendant settled immediately upon the filing of the lawsuit limits the Court's knowledge of the case. Defendant is to be commended for prompt settlement, and is correct that settlement cannot be taken as a concession of the merits. Nor should the Court take any action that would deter parties from engaging in prompt settlement. Nonetheless, it cannot be ignored that this settlement does not represent a "splitting of the difference," as is usual in settlements, but instead, in effect, amounts to a total capitulation by the defendant.

  Moreover, so far as can be determined on the limited record, the merits of the plaintiff's case appear strong. The SPD sets forth examples of other benefits that might be deducted from LTD benefits, and does not include pension distributions among them. (Silverman Aff. Ex. A at 11.) The underlying LTD Plan enumerates the specific types of retirement benefits that might be deducted. (Id. Ex. B at 10.) Plaintiff claims that under these terms, the pension distributions in question did not qualify for deduction. Defendant argues that the list of examples in the SPD is non-exclusive, and that it therefore does not preclude deduction of the contested benefits. However, defendant does not challenge plaintiff's interpretation of the Plan, but states only that "the Summary Plan Description (`SPD') and the underlying Plan contained different provisions regarding the offset of [LTD] benefits, and the SPD contains language which, on its face, appears to authorize the offset of the LTD benefits at issue." (D. Br. 2.) Thus, even assuming some tension between the SPD and the LTD Plan terms, the defendant in effect concedes that the LTD Plan itself does not authorize deduction of pension benefits.*fn1 The fourth factor thus weighs in plaintiff's favor. This determination is also relevant to first and third factors. With respect to "bad faith," it is true that defendant capitulated immediately once litigation was filed. However, the record shows that defendant had many opportunities to do so prior to the suit's filing. First, defendant denied plaintiff's claim administratively, both in the first instance and once again on appeal, necessitating the filing of the present lawsuit. Second, plaintiff attempted to settle the matter before filing the complaint, sending a demand letter on May 30, 2003, and placing a phone call to the defendant in mid-June. Although the parties disagree as to what transpired during the relevant telephone conversation (plaintiff's attorney claims, and defendant denies, that a Met Life lawyer arrogantly dismissed his arguments and invited a lawsuit), the Court assumes for purposes of this motion that both parties in good faith have different recollections of the conversation, and will not endeavor to resolve this factual dispute. But whether or not defendant was rude, it is undisputed that the plaintiff did make such a call, and plaintiff's counsel's time records, which reflect the call, indicate that plaintiff began preparing the complaint immediately afterwards. (Silverman Aff. Ex. G.) Documentary evidence also shows that defendant did not invite further discussions until September, by which time the complaint had been filed. Ultimately, then, even if defendant is correct about the tone of the conversation, the evidence supports the conclusion that defendant was unresponsive to the pre-litigation settlement effort, and in effect made the suit necessary. This, coupled with plaintiff's strong case on the merits, points the first factor in plaintiff's direction. The finding that the defendant acted with less than good faith also weighs in favor or the plaintiff on the third factor, deterrence. The award of fees may encourage defendant and other similarly situated parties to be more responsive to accepting meritorious positions during the administrative review process, or at least prior to the filing of a complaint, thus preventing unnecessary effort and expense on the part of deserving claimants and avoiding needless litigation.

  As to the remaining factors, while the second (ability to pay) weighs in plaintiff's favor (D. Br. 3, 14), the fifth factor (common benefit to a class of persons similarly situated) does not. This is a garden variety review of an individual's claim, and as such, there is no real benefit to any class, except to the extent of the deterrence mentioned above. However, it is well established that the fifth factor is not mandatory for fee shifting, see Ford, 506 F. Supp. at 183, and as plaintiff correctly points out, he should not be penalized simply because the defendant's actions did not harm enough individuals for the suit to benefit anyone but himself. Taken together, the balance of factors points strongly toward a discretionary award of fees.

  Having found that an award is appropriate, the Court must determine a reasonable fee amount. See Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). Defendant argues that the amount requested is "unreasonable and excessive in light of both the amount recovered and the extremely limited proceedings in this matter." (D. Opp. 8-10.) To the extent that this implies that the amount sought or recovered by the plaintiff constitutes a limitation on the fee that can be awarded, defendant is incorrect. First, it is likely that the dollar amount received in this case understates the claim's true value, as the settlement also provided other future considerations for plaintiff. (See Silverman Aff. ¶ 22 & n. 2.) Second, while it is true that the degree of success may be considered in an award of fees under ERISA, see Chambless, 815 U.S. at 872-73; Fase v. Seafarers Welfare and Pension Plan, 589 F.2d 112, 116 (2d Cir. 1978), the entire purpose of the fee-shifting provision is to enable plaintiffs to pursue benefits to which they are entitled, even where the amount claimed is relatively low. It costs money to litigate claims, however small, and unless plaintiffs were able to recover the entirety of their reasonable fees, defendants could ignore small but meritorious claims because plaintiffs would be unable to pursue them effectively. See Chambless, 815 F.2d at 872. The amount of damages received therefore does not serve as a cap on the fee award.

  Defendant raises a number of issues regarding the types of legal work that are compensable under ERISA. First, defendant correctly points out that under the case law, plaintiff may receive fees only for time expended on the litigation itself, and may not recover for fees incurred in connection with administrative appeals. See Peterson v. Continental Casualty Co., 282 F.3d 112, 119 (2d Cir. 2002). However, defendant is incorrect in arguing that ERISA does not authorize any "work done pre-filing." (D. Br. 1.) Plaintiff does not seek reimbursement for legal work on his administrative appeals; rather, he seeks only fees expended after the plaintiff had exhausted the administrative appeals process and was preparing to file suit. The case law is clear that once it has been determined that a fee award is appropriate, the party to whom it is awarded is entitled to compensation for "all hours reasonably expended on the litigation." Hensley, 461 U.S. at 465. This includes not only such preparatory work as meeting with the client and drafting the complaint, Peterson, 282 F.3d at 120 n. 5, but also such normal incidents of litigation as sending a demand letter and attempting the type of reasonable pre-complaint negotiating efforts that occurred here. Nor is defendant correct that due to its early capitulation, "the only affirmative action taken by Plaintiff's counsel in this action was the service and filing of the complaint." (D. Br. 1.) Negotiations were involved; plaintiff requested an accounting of the amount of funds that had been withheld, which defendant took some time to provide; this in turn necessitated further correspondence; once provided, the amounts had to be reviewed and reconciled. (Silverman Reply Decl. Exs. A, B, C.) All of the attorney work incident to these tasks is fully compensable. Finally, defendant complains that a disproportionate amount of time was spent on the application for fees. But case law is clear that time spent compiling an application for fees is itself compensable. See Reed v. A.W. Lawrence & Co., Inc., 95 F.3d 1170, 1184 (2d Cir. 1996).

  On the other hand, it is equally well-established that while plaintiffs may recover fees for successful claims as well as those claims that are "inextricably intertwined and involve a common core of facts or [are] based on related legal theories," id. at 1183, they may not receive fees for unsuccessful or abandoned claims that are unrelated to the underlying violation for which the fee shifting is authorized. Cf. Hensley, 461 U.S. at 434-35. On these grounds, defendant challenges plaintiff's claim of entitlement to fees expended in researching potential claims, not ultimately pursued, under the Age Discrimination in Employment Act ("ADEA") and state law. (D. Br. 4.) Defendant is correct that fees may not be awarded under ERISA for work on such claims. To the extent that any state law claims shared common facts and legal issues with the ERISA benefit claims, they would be preempted. Devlin v. Transportation Communications Int'l Union, 173 F.3d 94, 101 (2d Cir. 1999). To the extent that any claims concerned age discrimination, they would not share "a common core of facts or . . . related legal theories" with the ERISA claims. Reed, 95 F.3d at 1183. Age discrimination claims entail distinct legal elements and a distinct set of factual circumstances. Research conducted into these issues is thus not compensable under ERISA.*fn2 Although the billing documentation plaintiff has provided does specifically identify some non-ERISA related work, the records do not in every instance indicate precisely how much time was devoted to those subjects. However, on the rough assumption that when a number of items were listed together under a block of hours, the plaintiff spent an equal amount of time on each item, the time spent on non-ERISA related work amounted to only roughly $1,225 in fees. (See Silverman Aff. Ex. G.) Therefore, plaintiff's fee request will be reduced by that amount.

  Finally, the amount of time that plaintiff's counsel spent on the case must be reasonable. Although plaintiff claims that this case involved unique legal issues, what resulted was a fairly simple and straightforward benefits claim. Between 40 and 50 hours were devoted to preparatory research, conferences on various potential legal issues, and complaint drafting. This seems a great deal of effort, especially given that plaintiff's counsel's rate of $350 per hour is predicated in part on his being an experienced employment lawyer. In addition, the assignment of three lawyers to the case, while perhaps reasonable in the abstract, is less so given the size and level of complexity of the case. It is impossible to tell from the billing records how many conferences and conversations were necessary, or what the extent of the research really was. But it is clear that some effort was spent on issues that did not bear fruit, and that some degree of unnecessary labor was expended.

  Taking the complaint preparation process as a benchmark, it therefore seems reasonable to conclude that a reduction of approximately 25% across the board is appropriate. The fee request of $26,636 will therefore be reduced by the estimated amount incurred researching non-ERISA claims, or $1,225. The balance of $25,411 will be reduced by 25%, or $6,352.75, resulting in a final award of $19,058.25. Plaintiff is also entitled to costs and disbursements in the amount of $1,267.02.


  Consistent with the calculation above, plaintiff's motion for attorneys' fees and costs is granted. The Court awards plaintiff $19,058.25 in fees and $1,267.02 in costs.


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