It is therefore in the client's interest to have assurance of
a lawyer's solvency before agreeing to entrust a claim to him
under a contingent fee contract. Such assurance is not required
by regulatory enactment applicable to lawyers as in the case of
many other fiduciaries (such as banks and other financial
institutions, insurance companies and the like). Rather, this
assurance rests implicitly in the lawyer's ethical obligation to
subrogate his own interest to that of his client.
It follows that a lawyer may bring a case on a contingent fee
basis consistent with ethical obligations only if able fully to
finance the case, including satisfying any liability for fees
and expenses reasonably likely to result from the litigation.
This ethical principle underlies the rule that the court applies
today with respect to the second Hummell factor: contingent
fee counsel shall be conclusively presumed able to pay a fee
award to the adverse party. A contrary rule would exacerbate the
problem of cases in which financial straits present a powerful
incentive to contingent fee counsel to settle early, with their
own interests clouding those of clients. Attorneys willing to
proceed on a contingent fee basis must be presumed to have the
financial wherewithal to satisfy not just the obligation of
faithful performance of the attorney's duty to the client, but
any obligation to third parties — in this case the defendant —
that arises as a result of the attorney's decision to bring the
case. Counsel's affidavit notwithstanding, the court finds
therefore that the second Hummell factor supports a fee award
As noted above, courts assessing the third Hummell factor
have focused on two types of deterrence. Some courts query
whether an award of fees would tend to chill meritorious claims,
Corder, 53 F.3d at 232, while others ask whether an award will
have the positive effect of "discourag[ing plaintiffs] from
asserting, and possibly fabricating, claims with no basis in law
or fact." Paddack v. Morris, 783 F.2d 844, 847 (9th Cir.
The court has already concluded that a fee award against
individual plaintiffs is in tension with the goal of ERISA to
protect plan beneficiaries, but that with respect to contingent
fee counsel, the deterrent effect of an award is offset by the
contingent fee incentive and serves the statutory purpose of
channeling resources to meritorious cases. The court must also
bear in mind the value to plan participants flowing from fee
awards to plan defendants. The costs of defending challenges to
plan administration, in the end, are borne at least in part by
the plan itself and thus indirectly by plan participants.
Insofar as fee awards deter meritless claims and render less
costly the plan's defense, plan participants reap advantage. For
these reasons the court concludes that the third Hummell
factor supports a fee award against plaintiffs counsel but not
The fourth factor asks whether the party requesting fees
sought to benefit all participants and beneficiaries of an ERISA
plan or to resolve a significant legal question regarding ERISA.
In this case the "party requesting fees" is the defendant; the
court is inclined to agree with the observation that the factor
is "more appropriate to a determination of whether to award fees
to a plaintiff than to a defendant." Tingey, 958 F.2d at 909
(quoting Marquardt v. North Am. Car Corp., 652 F.2d 715, 719
(7th Cir. 1981)).
In any event, this case involved no question not easily
resolved by reference to the terms of the plan and well-settled
law; indeed, for the reasons discussed in the court's summary
judgment order, plaintiffs claim was particularly anemic on the
merits. Thus the fourth Hummell factor weighs against a fee
award, whereas the fifth factor, which considers the merits,
supports an award. But here again, plaintiffs counsel is more
strongly implicated than plaintiff due to his enhanced ability
to evaluate the merits of the claim.
In sum, after consideration of the Hummell factors
separately with respect to plaintiff and plaintiffs counsel, the
court concludes that defendant is entitled to recover its fees
and costs under section 502(g) from plaintiffs counsel only.
This result is consistent with the goal of the fee-shifting
provision to improve the quality of ERISA litigation, while
respecting the statutory purpose of protecting plan participants
and targeting the individual most responsible for the fees and
costs incurred. The court has reviewed the materials documenting
fees incurred by defendant in this litigation and concludes that
the requested amount is reasonable. The clerk shall enter an
award in favor of defendants pursuant to 29 U.S.C. § 1132(g) in
the amount of $7,200, representing compensation for 40 attorney
hours at the rate of $180 per hour, for which plaintiffs counsel
shall be liable.
IT IS SO ORDERED.
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