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
OPINION AND ORDER
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
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)
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
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
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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