Opinion
Civil Action No. AMD 96-2355
July 10, 2001
MEMORANDUM
Plaintiffs, Howard Johannssen, Marvin Long and Donna Fisher, instituted this suit pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1053(a), claiming that they were entitled to past service credits under the pension plan operated by their former employer, District No. 1-Pacific Coast District, Marine Engineers Beneficial Association. In a Memorandum and Order filed on March 29, 2001, as later amended, I granted plaintiffs all of the relief they sought. Johannssen v. District No. 1 — Pacific Coast District, MEBA, Pension Plan, 136 F. Supp.2d 480 (D.Md. 2001).
Now pending are plaintiffs' motion for attorney's fees and costs. See 29 U.S.C. § 1132(g). The motion is fully briefed and no hearing is necessary. For the reasons stated below, I shall award plaintiffs $217, 810.00 in attorney's fees and 25,979.98 in costs.
I
"ERISA allows courts to award, at their discretion, reasonable attorney's fees." Denzler v. Questech, 80 F.3d 97, 103-04 (4th Cir. 1996). See 29 U.S.C. § 1132(g)(1) ("In any action under this subchapter . . . 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."). The Fourth Circuit has established a five-factor test to determine whether attorney's fees should be awarded in ERISA cases. See Quesinberry v. Life Ins. Co. of North Am., 987 F.2d 1017, 1028-29 (4th Cir. 1993) (en banc); Reinking v. Philadelphia American Life Ins. Co., 910 F.2d 1210, 1217-18 (4th Cir. 1990). These factors are:
(1) degree of opposing parties' culpability or bad faith;
(2) ability of opposing parties to satisfy an award of attorney's fees;
(3) whether an award of attorney's fees against the opposing parties would deter other persons acting under similar circumstances;
(4) whether the parties requesting attorney's fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA itself; and
(5) the relative merits of the parties' positions.
Metropolitan Life Ins. Co. v. Pettit, 164 F.3d 857, 865-66 (4th Cir. 1998). "This five factor approach is not a rigid test, but rather provides general guidelines for the district court." Id. at 866 (quoting Quesinberry, 987 F.2d at 1029). Some of the factors may not even be appropriate in a given case. Id.
II
I shall consider the above factors in turn. First, it is clear that once I determined that the 1992 Amendment to the pension plan was valid and remanded the case to the Plan Administrator to apply that Amendment to the plaintiffs' requests for past service credit, the Plan exercised bad faith in denying past service credit to Fisher and in greatly reducing past service credit as to Johannssen and Long. As I found in my opinion on the merits, Plan Administrator "Szymczak viewed his determination of past service credit under the 1992 Amendment, as an arm of the on-going litigation between the Plan and the plaintiffs, and by extension, between the PCD and the admittedly corrupt leadership of the former merged union, MEBA/NMU." 136 F. Supp.2d at 502. I further found that "given the lack of concern for the lack of underlying record, Szymczak's disregard for key words of the Amendment, and his apparent lack of concern for the drafters' intent, I can only conclude that denying or greatly reducing the plaintiffs' past service credit requests was a foregone conclusion heavily influenced by adversarial defense counsel." Id. at 508. Thus, the Plan exercised bad faith in applying the 1992 Amendment.
In the course of this litigation I "expressed a robust skepticism that the 1992 Amendment was valid," id. at 483, however, in hindsight, the Plan's bias against plaintiffs was also evident prior to my finding that the Amendment was valid. Without ultimately being able to substantiate the allegation with evidence, the Plan contended that the Amendment was invalid because it was a quid pro quo for Long's and Johannssen's support of corrupt union leadership. While it is clear that the validity of the Amendment was a justiciable legal issue worthy of litigation, it is also clear that Johannssen's and Long's loyalty to the losing faction in an internal union power struggle worked to their disfavor in the determination of pension benefits, and that Fisher was also hurt as a by-product of this power struggle. As I found, "the 1992 Amendment was the result of promises which had been made to plaintiffs beginning in 1976, in consideration for their faithful performance of union organizing and administration services." Id. at 496. To fulfill these promises, the District Executive Committee ("DEC") adopted the 1992 Amendment to grant the plaintiffs additional pension credits. On several prior occasions the Plan Administrator gave immediate unchallenged effect to DEC decisions to add new classes of employees to the pension plan and/or to grant past credit for years of work performed prior to coverage under the Plan. See id. at 488, 494.
Moreover, despite the fact that the name of the union was not changed in the Plan Document to reflect the union merger, employees of the new merged entity were not denied pension credit during 1988-1993. The Plan Administrator understood this to be a scrivener's error and accorded full pension credit. Id. at 508. Notwithstanding this history, plaintiffs were forced to litigate for five years to obtain the benefit of the DEC's enhancement of their pensions. Through two rounds of summary judgment motions and a trial, informed by ample discovery, no evidence emerged of plaintiffs' bad faith or wrongdoing. Clearly, the factor of "culpability or bad faith" favors the plaintiffs.
The second factor guiding a court's exercise of discretion in determining ERISA fee awards is the ability of opposing parties to satisfy an award of attorney's fees. The Plan's most recent financial report indicates that Plan assets totaled more than $11 million as of December 31, 1999. As a defined benefit plan, as specified in the Plan Document, the Plan can require participating employers to pay money, annually, sufficient to cover the Plan's costs, including attorney's fees. Indeed, the Plan has levied contributions of close to $1 million in prior years without difficulty. Id. at 499. Thus, the Plan has now and has always had the ability to pay attorney's fees arising from litigation intended to preserve or protect Plan assets.
In contrast, plaintiffs' ability to finance this litigation was limited, and all three apparently fell into arrears in their agreement to pay their litigation expenses on a monthly basis. All evidence in the record indicates that plaintiffs' financial resources were relatively modest. According to the evidence in the record, after a lifetime of working for the union movement, Johannssen "was eligible for a monthly benefit of $5,326.26 . . . at Normal Retirement Age." Letter from Plan Administrator to Cyril Smith, Esq., Nov. 19, 1999, at 6-7. After a similar work history, Long was "eligible for a monthly benefit of $2,894.31 . . . payable at Normal Retirement Age." Id. at 11. Fisher retired in July 2000, at which time she was "eligible for a monthly benefit of $2,221.79." Id. at 15. This is not a case like American Medical Security, Inc. v. Larsen, 31 F. Supp.2d 502 (D.Md. 1998), in which a large corporate entity had agreed at the outset of litigation to pay plaintiffs' attorney's fees. The fact that plaintiffs prevailed in this litigation and obtained additional pension credits (to be awarded as a lump sum), does not alter the analysis, since even with these additional pension credits, their resources are still vastly outstripped by those of defendant. Moreover, the case law indicates that the relevant inquiry is the parties' resources at the outset of the litigation. See id. at 506.
As to the third factor, it is clear that an award of fees to plaintiffs would act as a deterrent. Without a fee award, the message this litigation would transmit to the Plan and other employee benefit plans is that stonewalling is costless: the sponsoring employer and its captive plan can deny employees benefits to which they are entitled, and the plan will only be required to pay what it would otherwise originally have had to pay when it is compelled by a court to do so. In addition, the record is undisputed that the disfavor Szymczak evinced toward the plaintiffs in this action was also accorded to other union employees who were perceived to be loyal to the vanquished former union leadership in the aftermath of the dissolution of the contested union merger. See Petition for Attorneys' Fees, Ex. 2, Smith Aff. ¶ 3 (describing representation of employees or union officials who were denied medical insurance or terminated from their benefit plan as part of the political infighting in the MEBA/NMU dissolution). Thus, the other deterrent effect a fee award can exact is to communicate that employees must be accorded benefits according to the terms of written plans and that benefits decisions cannot be tainted by misguided political vendettas. The fourth factor inquires whether the plaintiffs sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA itself. Metropolitan Life Ins. Co., 164 F.3d at 866. While plaintiffs' primary motivation in this litigation was to obtain pension credits for themselves, there is no requirement that litigation be altruistic in order to merit an award of fees. See Reinking, 910 F.2d at 1219. Here, the plaintiffs' efforts resulted in legal rulings that will redound to the benefit of ERISA plan participants beyond themselves. Plaintiffs obtained a ruling that the 1992 Amendment is valid, a determination which benefitted themselves and also at least, Abby Bernstein, another union employee. Johannssen, 136 F. Supp.2d at 507. In addition, the plaintiffs obtained a ruling clarifying that under ERISA, free-standing equitable principles cannot justify a failure or refusal to enforce the terms of a written plan provision. And as explained above, the plaintiffs established that benefit allocations cannot properly be used as fodder in union power struggles, but that written documents will govern.
Defendant argues that it has the power to amend the Plan Document to rescind the 1992 Amendment, but there is no evidence that it will do so, and it is obvious that even if it should do so, it may not reduce vested benefits in the process. Johannssen, 136 F. Supp.2d at 498.
The fifth factor, the relative merits of the parties' positions, clearly favors plaintiffs, who obtained one hundred percent of the relief they requested. Accordingly, I shall exercise my discretion and order defendant to pay plaintiffs' reasonable attorney's fees and costs.
III
In the determination of what attorney's fee award would be "reasonable," the Fourth Circuit has long held that a district court's discretion must be guided by the factors enumerated by the Fifth Circuit in Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir. 1974). Barber v. Kimbrell's, Inc., 577 F.2d 216, 226 (4th Cir.), cert. denied, 439 U.S. 93 (1978); see Trimper v. City of Norfolk, 58 F.3d 68, 73 (4th Cir.), cert. denied, 516 U.S. 997 (1995). See also Daly v. Hill, 790 F.2d 1071, 1076 n. 2 (4th Cir. 1986). The 12 Johnson factors are:
(1) the time and labor required to litigate the suit; (2) the novelty and difficulty of the questions presented by the lawsuit; (3) the skill required properly to perform the legal service; (4) the preclusion of other employment opportunities for the attorney due to the attorney's acceptance of the case; (5) the customary fee for such services; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount in controversy involved and the results obtained; (9) the experience, reputation, and ability of the attorney; (10) the "undesirability" of the case; (11) the nature and length of the attorney's professional relationship with the client; and (12) awards in similar cases.
Daly, 790 F.2d at 1076 n. 2 (noting that the Johnson approach has been approved by Congress and by the Supreme Court in Hensley v. Eckerhart, 461 U.S. 424, 434 n. 9 (1983)). Applying these factors to determine a reasonable hourly rate and the reasonable number of hours expended by the attorney is "`presumed to be fully compensatory without producing a windfall.'" Trimper, 58 F.3d at 74 (quoting Daly, 790 F.2d at 1078).
IV
Applying the Johnson factors to this case, I determine that $217,810.00 is a reasonable award for attorney's fees, together with costs of $25,979.98.
Plaintiffs' counsel meticulously document that they put a total of 1,221.1 hours into this litigation, which spanned five years. The case included two separate phases of litigation, each of which involved intense factual investigation and complex questions of law. Plaintiffs' lead counsel, Cyril Smith, Esq., brought a high degree of experience and skill to the case as he has extensive ERISA practice experience and he has handled several other matters emanating from the dissolution of the formerly merged union. The extensive time spent on this case could certainly have been spent handling other cases; thus, involvement in this litigation carried with it significant opportunity costs.
The eighth factor of the Johnson analysis, termed "the most critical factor," Thomas v. Peacock, 39 F.3d 493, 506 (4th Cir. 1994) (internal quotes omitted), rev'd on other grounds sub nom. Peacock v. Thomas, 516 U.S. 349 (1996), requires consideration of the amount in controversy and the results obtained. The plaintiffs here obtained 100% of their requested recovery, a sum of more than two million dollars. Thus, the fee awarded in this case is not at all disproportionately large as it represents less than 10% of the total value of the award to plaintiffs. See id.
Plaintiffs' attorneys document both the rate they charged for their services on the dates those services were rendered, as well as their current billing rates. They argue that their fee award should be calculated applying their current rates in order to compensate them for the delay in receiving payment (they began working on this case in 1995). They argue that such a "current rate" award would compensate for inflation and for the interest that money could have earned had the attorneys been paid when services were rendered. Daly, 790 F.2d at 1081. I am constrained to reject this argument, however, for several reasons. First, the cause of the delay in the payment of fees to plaintiffs' attorneys is not attributable principally to the Plan. The Plan may be responsible for a portion of any delay in the progress of the case once I found in March 1999 that the 1992 Amendment was valid and remanded the matter to the Administrator to apply the Amendment. However, prior to mid-1999, the duration of the litigation resulted solely from its complexity. In addition, plaintiffs' attorneys had a retainer agreement pursuant to which the plaintiffs were to pay, collectively, $26,000 in fees, and all costs and expenses, on an ongoing, monthly basis. While this retainer agreement did not anticipate it would cover the entirety of the attorney's fees necessary to conclude the case, it was not insignificant that the clients agreed to support the litigation to the extent they did, and to pay costs. Apparently, the plaintiffs fell into arrears in these payments, but that delay in payment is certainly not attributable to the defendant.
In addition, as the Fourth Circuit has held, different policies undergird the fee shifting provisions of ERISA, on the one hand, and those of federal civil rights statutes, on the other hand. Peacock, 39 F.3d at 506. Those differences are particularly salient in this case and they militate against calculating fees at current rates. As the Fourth Circuit held in Peacock,
Plaintiffs suing under the civil rights laws are "private attorneys general" in the sense that they seek injunctive relief to vindicate important public rights. If such plaintiffs were routinely forced to bear their own attorneys' fees, few aggrieved parties would be in a position to advance the public interest by invoking the injunctive powers of the federal courts. . . . Plaintiffs under Title 1 of ERISA may be seeking injunctive relief for the benefit of all the participants and beneficiaries of a particular plan, but they may also be seeking damages on behalf of their plan or simply the recovery of benefits from the plan that are due them alone. . . . Thus, incentives in the form of attorney's fees are, on the whole, less necessary to insure that the statute is enforced.39 F.3d at 506 (internal quotations omitted). Clearly, as noted above, the plaintiffs' primary purpose in bringing suit was to recover benefits for themselves, and they needed little incentive to do so.
Indeed, such differential need for incentives is a weighty factor in this case, not merely in the orbit of the public policies at issue, but also in the circumstances of the plaintiffs themselves. Plaintiffs in cases brought under 42 U.S.C. § 1983 and other civil rights statutes, such as anti-discrimination statutes covering employees, are often unemployed, indigent and/or disabled or injured. The plaintiffs in this case were all gainfully employed during the pendency of the suit, and (at least as to Johannssen and Long) the fact that they would receive pension benefits was never in doubt; the dispute hinged on the amount of those benefits. Moreover, Johannssen and Long received generous severance payments when they ceased their employment with the union in 1994; Johannssen received $108,687.63 and Long received $43,012.72. 136 F. Supp.2d at 484-85. Although, as discussed above, the defendant's resources vastly outstripped the plaintiffs' at all times during the litigation, these plaintiffs were not incapable of securing highly-qualified counsel (and at a an extraordinarily modest cost to themselves). Accordingly, in this case, a reasonable fee is one calculated according to the rates plaintiffs' counsel would have charged at the time that services were rendered.
I note that beginning in May 1999, Smith began billing at a rate of $240 per hour, and in February 2001, at a rate of $275 per hour. These rates exceed the rates suggested in this District's Fees Guidelines, which suggest the maximum rate for an attorney admitted for more than eight years to be $225. (The fees requested for work by Smith's associates all fall within the current Guidelines.) I am persuaded, however, that plaintiffs' requested rates are reasonable. The Guidelines are intended "solely to provide practical guidance." Rules of the United States District Court for the District of Maryland, Appendix B, p. 107 n. 5 (July 1999). Plaintiffs provide survey evidence demonstrating that these requested attorney's fees are in line with fees charged by partners in Baltimore area firms handling similar work. Plaintiffs' Petition for Attorneys' Fees, Ex. 3 (Baltimore Business Journal-Book of Lists 2001). In fact, the Local Guidelines have been revised upward, effective July 1, 2001, to reflect the increase in prevailing attorney's fees in this region. The new Guideline maximum hourly rate for an attorney with more than eight years of experience is $275. Thus, I am satisfied that under the fifth Johnson factor, plaintiffs' requested historical fees are in line with "the customary fee for like work." Daly, 790 F.2d at 1076 n. 2.
Plaintiffs seek fees for time devoted to the internal appeals process challenging the Plan's initial refusal to recognize the validity of the 1992 Amendment. They also request fees and costs incurred in connection with the administrative process following my March 1999 order remanding the matter to the Plan Administrator for application to plaintiffs' claims of the 1992 Amendment. The Fourth Circuit has not yet addressed whether the ERISA fee-shifting provision applies to fees for administrative proceedings. The ERISA fees provision provides that the district court in its discretion may award a reasonable fee "in any action under this subchapter." 29 U.S.C. § 1132(g)(1). Defendant argues that because the statute does not state that fees can be awarded in any action or proceeding it does not grant discretion to the court to award fees in administrative proceedings. The Supreme Court declined to adopt defendant's interpretation of the similarly worded fee-shifting provision of the Clean Water Act in Pennsylvania v. Delaware Valley Citizens' Council, 478 U.S. 546 (1986) (interpreting 42 U.S.C. § 7604(d)). Rather, the Court held in Delaware Valley that the Clean Water Act's fee provision, authorizing a court to issue an order for fees and costs "in any action brought under this subsection," allowed the district court to award fees for time devoted in administrative proceedings. Id. at 561. Accordingly, I am persuaded that the wording of the ERISA fee shifting provision does not constrain my discretion to award fees in administrative proceedings.
Nevertheless, as the Sixth and Ninth Circuits have held, the congressional purpose underlying the ERISA fee shifting provision is quite different from those of the Clean Water Act and the civil rights acts. Anderson v. Proctor Gamble Co., 220 F.3d 449, 455 (6th Cir. 2000); Cann v. Carpenters' Pension Trust Fund, 989 F.2d 313, 317 (9th Cir. 1993). This difference in purpose informs my exercise of discretion. The Supreme Court held that the "common purpose of [the fee shifting provisions of the Clean Water Act and the civil rights statutes fee shifting provision, 42 U.S.C. § 1988,] to promote citizen enforcement of important federal policies" favored treating fee awards similarly under both statutes. Id. In contrast, "`the congressional purpose [of ERISA] emphasized promotion of the soundness and stability of plans with respect to adequate funds to pay promised benefits.'" Anderson, 220 F.3d at 455 (quoting Cann, 989 F.2d at 317); see 29 U.S.C. § 1001(a).While exhaustion of administrative remedies is a prerequisite to seeking judicial review of ERISA claims, 220 F.3d at 454, the ERISA "administrative remedies" were not, in this case, proceedings before an agency, but involved informal internal review procedures before the Plan Administrator, a nonlawyer. See Id. at 455; Cann, 989 F.2d at 317.
Exposure to liability for attorney's fees in this informal internal review process could undermine the "soundness and stability" of a plan by encouraging it to pay questionable claims in order to avoid liability for attorney's fees. Id. Correspondingly, exposure to liability for such fees could impel a plan to seek its own legal representation for internal appeals, greatly increasing the expense of such proceedings. Although a plan administrator's decision is usually entitled to deference in the course of subsequent judicial review, internal administrative proceedings do not have preclusive effect on the issues or defenses that may be available in litigation; thus, there is no necessity for legal representation at this stage. Accordingly, I shall exercise my discretion to decline to award fees for the administrative work plaintiffs' attorneys performed prior to filing suit in July 1996. On the other hand, I shall allow fees for the approximately 40 hours plaintiffs' counsel expended in May and June 1996, as reasonable preparation time to investigate and to prepare the suit for filing and to file the federal court complaint.
I will also award fees for the administrative work plaintiffs' counsel performed following my remand in March 1999. This work was absolutely essential as plaintiffs attempted to secure enforcement of my order that the 1992 Amendment was valid. In Delaware Valley the Supreme Court affirmed the district court's exercise of discretion to allow fees for work before administrative agencies related to enforcing that district court's consent decree, because the administrative work was "`useful and of a type ordinarily necessary' to secure the final result obtained from the litigation." 478 U.S. at 561(quoting Webb v. Board of Ed. of Dyer County, 471 U.S. 234, 243-44 (1985)). Similarly here, counsels' efforts to convince the Plan to apply the 1992 Amendment to accord full pension credit to plaintiffs was "`useful . . . and necessary' to secure the final result obtained from the litigation." Id. It would have served no purpose for plaintiffs' counsel to bow out of the proceedings at that point, only to renew the federal suit once the Plan failed to accord plaintiffs full benefits. Unfortunately, as I have found, the involvement of plaintiffs' counsel did not result in an appropriate application of the 1992 Amendment, necessitating a new round of litigation in this court. Accordingly, the award of fees should certainly encompass counsels' efforts before the Plan Administrator to resolve the dispute without resort to further judicial intervention. I shall award plaintiffs the full $25,979.98 they request and document for costs. None of the costs they request were incurred prior to July 1996 when the federal complaint was filed. The expenses of computerized legal research are specifically delineated as "reimbursable expenses" under the Local Guidelines for determining fee awards in ERISA cases. Local Rules, United States District Court for the District of Maryland, Appendix B, Rule 4(a), p. 107 (July 1999). See also Daly, 790 F.2d at 1082-83.
The Supreme Court also earlier affirmed a district court's exercise of discretion under 42 U.S.C. § 1988 to disallow fees for optional administrative work prior to suit. Webb, 471 U.S. at 244.
V
For the foregoing reasons, I shall grant the Plaintiffs' Petition for Attorneys' Fees and make an award in the total amount of $243,789.98. A separate order follows.
ORDER
In accordance with the foregoing Memorandum, it is this 10th day of July, 2001, by the United States District Court for the District of Maryland ORDERED
(1) That the plaintiffs' motion for attorney's fees is GRANTED; and it is further ORDERED
(2) That plaintiffs Howard E. Johannssen, Marvin E. Long and Donna C. Fisher are AWARDED attorney's fees and costs in the amount of $243,789.98, AND JUDGMENT FOR THAT AMOUNT, TWO HUNDRED FORTY-THREE THOUSAND, SEVEN HUNDRED EIGHTY-NINE DOLLARS AND NINETY-EIGHT CENTS, IS HEREBY ENTERED IN FAVOR OF PLAINTIFFS AND AGAINST DEFENDANT DISTRICT NO. 1 — PACIFIC COAST DISTRICT, MEBA PENSION PLAN.; and it is further ORDERED
(3) That the Clerk TRANSMIT copies of the foregoing Memorandum and this Order to all counsel of record.