Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


June 16, 2000


The opinion of the court was delivered by: Walker, District Judge.


In this action under section 502(a) of the Employee Retirement Income Security Act, 29 U.S.C. § 1132(a), a disability plan beneficiary challenged a denial of benefits. On January 28, 2000, the court granted summary judgment in favor of defendant. (Doc 27). Defendant now moves for an award of attorney fees pursuant to section 502(g) of the Act, 29 U.S.C. § 1132(g). Upon consideration of the arguments of the parties in their initial and supplemental briefs and at oral argument, and for the reasons stated below, defendant's motion is GRANTED.

Section 502(g) of the Act provides, in relevant part:

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.

29 U.S.C. § 1132(g)(1).

Plaintiff raises the threshold issue whether, under this provision, attorney fee awards to defendants in unsuccessful cases brought by individual plan participants are disfavored. The Ninth Circuit has given mixed signals on the point. In Corder v. Howard Johnson & Co., 53 F.3d 225 (9th Cir. 1994), the court stated: "We have frequently expressed our disfavor of awards of attorney's fees against individual ERISA plaintiffs who seek pension benefits to which they believe they are entitled." Id. at 231. More recently, however, in reviewing a district court's attorney fee award, the court wrote: "We first disabuse the district court of the suggestion that we favor one side or the other in ERISA fee cases. The statute is clear on its face — the playing field is level." Estate of Shockley v. Alyeska Pipeline Service Co., 130 F.3d 403, 408 (9th Cir. 1997).

Despite the conflicting attitudes expressed by the panels in these cases, both adhered to application of the five-factor test set forth in Hummell v. S.E. Rykoff & Co., 634 F.2d 446, 452-53 (9th Cir. 1980). Under Hummell, the court's discretion to award attorney fees under ERISA is guided by

(1) the degree of the opposing party's culpability or bad faith; (2) the ability of the opposing party to satisfy an award of fees; (3) whether an award of fees against the opposing party would deter others from acting in similar circumstances; (4) 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 and (5) the relative merits of the parties' positions.

Corder, 53 F.3d at 231.

In cases predating Shockley, several courts noted that these equitable factors "very frequently suggest that attorney's fees should not be charged against ERISA plaintiffs." Id; Credit Managers Ass'n v. Kennesaw Life & Acc. Ins., 25 F.3d 743, 748 (9th Cir. 1994); Tingey v. Pixley-Richards West, Inc., 958 F.2d 908, 909 (9th Cir. 1992) (citations omitted). An individual plaintiffs ability to pay, for example, will often be limited. Perhaps most significantly, courts have expressed concern that fee awards against individual plaintiffs may frustrate the purpose of ERISA by chilling meritorious suits. See Corder, 53 F.3d at 232. Often this point arises in discussion of the third Hummell factor, i.e., "whether an award of fees against the opposing party would deter others from acting in similar circumstances." Courts have interpreted this factor to require a focus not only on groundless lawsuits or defense of clear ERISA violations, but on the tendency of an award to deter "marginal but meritorious [claims]." Id. Whether or not this is a proper reading of the third Hummell factor, it is reasonable to conclude that imposing liability on plan participants for unsuccessful ERISA lawsuits could erect a barrier to enforcement of the statute. Given this, it would seem that the "level playing field" metaphor of Shockley is problematic.

The above assumes that a fee award is contemplated against an individual plaintiff/plan participant, for which that plaintiff will be solely responsible. But an action brought by a contingent fee lawyer on behalf of a plan beneficiary requires a different analysis. In particular, two questions arise: (1) Should contingent fee counsel be subject to liability for a prevailing defendant's fees and costs? and (2) To what extent does participation of a contingent fee lawyer influence the Hummell analysis?

With respect to the first question, the court concludes that potential liability of contingent fee counsel for fees and costs is appropriate under section 502(g). By virtue of the contingent fee contract, plaintiffs counsel is, for all practical purposes, a party in interest. When a contingent fee attorney brings a case under a statute with a bilateral fee-shifting provision, such as section 502(g), he acquires a stake in a claim which, by statute, has both an upside and a downside. The latter is the possible claim for fees and costs of a prevailing defendant, counsel's liability for which must be viewed as part of the contingent fee bargain.

In addition, the dominant role of counsel in the decision to bring a contingent fee case and in management of the case supports potential liability under section 502(g). Potential liability will, of course, affect the decision of the attorney to pursue the claim. But that is as it should be. A bilateral fee shifting provision signals legislative concern for prudent pursuit of litigation. An adverse fee award against unsuccessful contingent fee counsel, insofar as it promotes such prudence, is in keeping with the mandate of section 502(g). And to the extent that Corder and other cases reflect judicial reluctance to award fees against individual plan participants due to concern about frustrating the purpose of ERISA by intimidating or penalizing plaintiffs, this concern should not extend to awards against contingent fee counsel. Such lawyers require no added incentive, beyond the contingent fee arrangement, to file meritorious lawsuits.

Plaintiffs counsel acknowledged at oral argument that the fee agreement in this case includes a provision indemnifying counsel from liability for an award of fees or costs in the action. The court finds this troubling. It is inconsistent with counsel's duty to accept the risks of litigating a claim on a contingent fee basis; it also provides some evidence of counsel's lack of faith in the merits of the claim. Nevertheless, an indemnification provision in the fee agreement only applies as between plaintiff and plaintiffs counsel, the parties to the agreement. It does not affect defendant's ability directly to enforce a judgment against either one. Bearing this in mind, and having concluded that both plaintiff and contingent fee counsel can be liable for fees and costs under section 502(g), the court concludes that the correct approach is to determine liability of each via separate Hummell analyses. See Loving v. Pirelli Cable Corp., 11 F. Supp.2d 480, 495-97 (Del. 1998) (considering plaintiff and counsel in applying five-factor test and awarding fees against counsel only). Insofar as Hummell directs the court to examine the conduct (bad faith) or status (ability ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.