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United States District Court, S.D. New York

December 3, 2004.

ALFRED PERRECA, et al., Plaintiffs,
MICHAEL GLUCK, et al., Defendants.

The opinion of the court was delivered by: RONALD ELLIS, Magistrate Judge



Before this Court is a motion by plaintiffs Alfred and Marie Perreca seeking attorney's fees and costs pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"). 29 U.S.C.A. § 1132. For the following reasons, the motion is DENIED.


  The facts of this case have been set forth in Perreca v. Gluck, 295 F.3d 215, 218-20 (2d Cir. 2002). Following that decision, a jury trial was held on February 24-28, 2003. The first question on the Special Verdict Form asked whether Alfred Perreca had been promoted to the job of night manager before January 1, 1965. The second question asked whether he should be credited with service back to his original start date of 1959. The jury answered "Yes" to the first question and "No" to the second. Judgment was thereupon entered for defendant. Plaintiffs moved to amend the judgment pursuant to Federal Rule of Civil Procedure 59, asking this Court to order that Perreca recover benefits from January 1, 1965, because the jury had found that he had been promoted before that date. The Court granted the motion, and this application followed. III. DISCUSSION

  A. General Standard For Fees Under ERISA

  ERISA provides that "[i]n any action under this subchapter (other than an action described in paragraph (2)) by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney's fee and costs of action to either party." 29 U.S.C. § 1132(g); see also Jones v. Unum Life Ins. Co. of America, 223 F.3d 130, 138 (2d Cir. 2000); Miller v. United Welfare Fund, 72 F.3d 1066, 1074 (2d Cir. 1995); Chambless v. Masters, Mates & Pilots Pension Plan, 815 F.2d 869, 871 (2d Cir. 1987) ("Chambless"). Although the Court has discretion, "this circuit strongly favors awarding reasonable attorney's fees and costs to a prevailing plaintiff absent a `particular justification' or `special circumstances [which] would make it unjust.'" Zervos v. Verizon New York, Inc., 2002 WL 31553484, at *2 (S.D.N.Y. Nov. 13, 2002) (citations omitted).

  Defendants assert that special circumstances exist in this case which warrant denial of the application for fees and costs. They argue that the jury's negative response on the credited service date, as well as the narrow issue presented to it, constitute such circumstances. See Defendants' Memorandum of Points and Authorities in Opposition to Plaintiffs' Motion for Attorney's Fees ("Def. Mem.") at 8. They maintain that Perreca raised numerous claims that were not considered by the jury, and the jury found against him on the central issue presented for its consideration, that is, whether he was entitled to pension benefits from his 1959 hire date. This fact alone does not preclude recovery. "Litigants in good faith may raise alternative legal grounds for a desired outcome" without being penalized in attorney's fees and costs. Hensley v. Eckerhart, 461 U.S. 424, 435 (1983). In addition, the jury verdict was returned with a finding that a promotion had occurred earlier than defendants had claimed, and Perreca received some relief with the amended judgment. From the record, this Court finds no special circumstances warranting a dismissal of plaintiffs' motion.

  B. Was Perreca a Prevailing Party?

  A plaintiff must be a prevailing party to recover an attorney's fee under ERISA. Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 89 (1982). Defendants argue that the plaintiffs are not the prevailing party because of the original judgment for defendants. "An altogether sufficient support for the court's decision not to award attorney's fees under ERISA is that the attorney obtained no relief under that statute." Fase v. Seafarers Welfare and Pension Plan, 589 F.2d 112, 116 (2d Cir. 1978). However, that judgment was later amended to grant partial relief. As in Hensley, which involved a § 1988 award, "a district court considering a motion for attorney's fees under ERISA should apply its discretion consistent with the purposes of ERISA, those purposes being to protect employee rights and to secure effective access to federal courts." Smith v. CMTA-IAM Pension Trust, 746 F.2d 587, 589 (9th Cir. 1984). Defendants argue nevertheless that the jury was only asked by plaintiffs to decide a very narrow issue of fact. However, plaintiffs may meet the standard for a prevailing party if they win on a significant issue. See, e.g., Smith, 746 F.2d at 589-90.

  Here, the central issue at trial, as well as in the original complaint, was the date of Perreca's promotion to night manager. Defendants maintained that the promotion occurred in 1966, but conceded that, if Perreca had been promoted before 1966, he would be entitled to benefits from 1965. See Defendants' Reply Affirmation to Plaintiffs' Opposition to Defendants' Motion for Summary Judgment ("Def. Repl. Aff.") at 7. The jury found for Perreca on this issue. The jury's finding was a significant victory for plaintiffs, and established Perreca's entitlement to coverage based on the earlier promotion date. Therefore, this Court finds plaintiffs to be the prevailing party for ERISA purposes.

  C. Application of the Chambless Factors

  In order to determine whether a prevailing party in an ERISA action can recover attorney's fees, the Second Circuit relies on a five-pronged test: "(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, 815 F.2d at 871. "No one of these factors is necessarily decisive, and some may not be apropos in a given case, but together they are the nuclei of concerns that a court should address in applying section 502(g)." Iron Workers Local No. 272 v. Bowen, 624 F.2d 1255, 1266 (5th Cir. 1980). Additionally, the balancing of these five factors allows the Court sufficient flexibility to review a fee request by considering which party requests fees, the relative culpability of the parties and the potential harmful effect of a fee award. Anita Foundations, Inc. v. ILGWU Nat'l Retirement Fund, 902 F.2d 185, 188 (2d Cir. 1990).

  1. Factor One — Culpable Conduct and Bad Faith

  A party is only culpable when its conduct is intentional, blameworthy, and results in the breach of a legal duty. See Priority Solutions, Inc. v. Cigna and Price Waterhouse Health Plan, 1999 WL 1057202, at *4 n. 4 (S.D.N.Y. Dec. 20, 1999); Algie v. RCA Communications, Inc., 891 F.Supp. 875, 891 (S.D.N.Y. 1994). Although this Circuit has not always required a showing of malice or bad faith, a plaintiff must show "something more than an ERISA plan administrator's determination that benefits are not to be allowed in a particular case." DeFelice v. American Int'l Life Assurance Co. of New York, 1996 WL 304542, at *1 (S.D.N.Y. June 5, 1996). Additionally, this factor requires "conduct [that] 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, 891 F. Supp. at 891 (quoting McPherson v. Employees' Pension Plan of American Re-Insurance Co., 33 F.3d 253, 256-57 (3d Cir. 1994)).

  Although plaintiffs allege that defendants' position on the start date was culpable, the trial record does not support this contention. The jury did not find bad faith, nor was it asked to consider the issue. While it did not agree with the date claimed by defendants, it also rejected Perreca's claimed start date of 1959. The cases cited by plaintiffs are inapposite. In Priority Solutions, the issue was the payment of health care services at wholesale prices. 1999 WL 1057202, at *4. There, the court found that since the health plan included a retail price payment provision, the plan was unambiguous and the plain meaning was clear. The court reasoned that when the defendant violated the plain meaning of an agreement, it was culpable because of the arbitrary and caprious nature of the violation. Id. at *4. Here, the dispute arose as a result of differing recollections of an employee start date. Conflicting evidence was placed in the record, some supporting plaintiffs' position, some defendants' position. Unlike Priority Solutions, this case did not present a situation where a definite written document was violated.

  Plaintiffs' position is also not supported by Juliano v. HMO of N.J., Inc., 2001 U.S. Dist. LEXIS 17066, at *3 (S.D.N.Y. Sept. 24, 2001). In that case, the issue was the denial of home care benefits. The defendant had told the plaintiff that a benefit was not covered, but later asserted that coverage was within the company's discretion. Id. at *5-6. While the court considered this inconsistency in information, it deliberately identified the second factor to be the most crucial, which was the hindrance of the case's resolution by delay and failure to inform. Id. at *6-7. Here, Gluck did not hinder resolution of the case, nor fail to inform Perreca. Indeed, Gluck informed Perreca of the conflicting dates before benefits were even due. See Plaintiffs' Notice of Cross-Motion Affidavit and Exhibits at Exhibit 26 ("Pl. Exh."). Even if the records relied on by defendants were erroneous, an "honest, if mistaken, assumption" about the benefit date is not an indication of bad faith. Algie, 891 F.Supp. at 891. Based on the record in this case, the date relied on by defendants was such a mistake.

  Perreca asks the Court to find bad faith essentially because the jury found in his favor on one element of the start date issue. This finding alone does not support a determination of bad faith. Defendants offered reasonable evidence to support their position. While some of the evidence was testimonial, it was also undisputed that there were written records supporting defendants' position, including company documents showing a start date in 1966 and union documents showing payments on Perreca's behalf until the end of April 1966. At best, the record shows there was some conflicting information, not bad faith. This factor favors defendants.

  2. Factor Two — Ability to Satisfy Fee

  Perreca asserts that the ability to satisfy the fee here is met. See Plaintiffs' Reply Memorandum of Points and Authorities ("Pl. Repl.") at 13. Although defendants state that their insurance company has refused to cover an award, they offered no evidence that the award could be met in another fashion. See Def. Mem. at 10. This factor narrowly favors plaintiffs.

  3. Factor Three — Deterring Others from Acting Similarly

  This factor "looks to whether an award would tend to deter others from engaging in similar behavior." Juliano, 2001 U.S. Dist. LEXIS 17066 at *8. Although misconduct is not necessary in applying this factor, it will be considered by courts. Id. Perreca argues that this factor favors him by deterring "other employers in similar kinds of cases from concocting phony claims to deprive their employees of their full pension benefits." See Plaintiffs' Memorandum of Points and Authorities in Support of Plaintiffs' Motion for Award of Attorney's Fees and Costs ("Pl. Mem.") at 8-9. However, Perreca did not show that defendants' position was "concocted." Indeed, as noted above, defendants produced documentary evidence to support the date claimed. Moreover, the evidence was not recently manufactured. In Juliano, the court required a showing of intransigence on the part of defendants, noting particularly the failure of the insurance company to provide information to the plaintiffs during the claims process. Id. Here, plaintiffs offer no evidence that Gluck's action constituted intransigence, or resulted from a phony claim.

  Plaintiffs have offered no evidence on the possible occurrence of a similar factual dispute in an ERISA lawsuit. Algie, 891 F. Supp. at 893. Witnesses relied on memory in recalling the start date. While most ERISA cases involve a denial of benefits, they are generally not factually specific to a single employee and do not rely on competing memories. Absent misconduct and a common behavior to be deterred, I find that this factor favors defendants. 4. Factor Four — Relative Merits of the Parties' Positions

  This factor "looks to the relative merits of the parties' respective positions." Algie, 891 F. Supp. at 893. In Zervos v. Verizon New York, 2002 WL 31553484 at *3, the court found that even when a plaintiff succeeded on the merits, "in very close cases, courts have found that this factor should favor defendants." Furthermore, in Schachner v. Connecticut General Life Ins. Co., 1994 WL 132143, at *1 (S.D.N.Y. Nov. 13, 2002), the court rejected a request for fees where plaintiff had narrowly succeeded. Additionally, courts will consider that the opposing claim was "sufficiently factually grounded to force a trial." Algie, 891 F. Supp. at 893.

  Here, as in Algie, defendants had a non-frivolous claim, sufficiently based in fact to force a jury trial. Id. The jury rejected the plaintiffs' contention that the promotion occurred in 1959, and judgment was entered for defendants. Although the judgment was amended later to grant partial relief to the plaintiffs, Perreca received an additional thirteen months of coverage, not the extra seven years he sought. Moreover, plaintiffs have not shown defendants' position to be frivolous. "In fact, awarding attorney's fees simply because benefits denied in good faith should have been granted would undermine ERISA's goal of encouraging soundness and stability of employee benefit plans." Schachner, 1994 WL 132143, at *1. Absent a showing that defendants' position was frivolous or not grounded in fact, this Court finds that this factor favors defendants.

  5. Factor Five — Common Benefit

  The final factor is to examine whether the plaintiff's victory in the ERISA claim will have a beneficial effect on other insured employees. Zervos, 2002 WL 31553484 at *4. Perreca concedes that this element favors defendants. See Pl. Mem. at 10 and Pl. Repl. at 15. IV. CONCLUSION

  Nearly all the Chambless factors here favor Gluck, with the exception of the financial ability to meet an award. Balancing the factors, the Court easily concludes that an award of attorney's fees would be unfair to Gluck and would not further ERISA's goals. Perreca's motion is therefore DENIED.

  The Clerk of Court is directed to close this case file.



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