Scarangella & Sons, Inc. v. Group Health, Inc.
731 F.3d 146
| 2d Cir. | 2013Background
- Scarangella, a Village Fuel employee, sued GHI under ERISA after GHI denied benefits for his wife and sought to rescind or reform coverage; GHI counterclaimed against Village Fuel for rescission/reformation and restitution.
- District court dismissed both parties’ restitution claims as not-equitable (money damages not available under ERISA) and denied Village Fuel summary judgment on remaining claims due to disputed facts.
- GHI and Scarangella later settled; GHI voluntarily dismissed its remaining claims against Village Fuel; the district court dismissed the action with prejudice but denied Village Fuel attorney’s fees.
- Village Fuel moved for fees under 29 U.S.C. § 1132(g)(1); a magistrate judge recommended a partial fee award applying Chambless factors, but the district court found Village Fuel ineligible, concluding it lacked success on the merits or judicial imprimatur.
- Village Fuel appealed, arguing Hardt’s “some degree of success on the merits” standard permits fee eligibility without a traditional prevailing-party judgment; the Second Circuit vacated and remanded for application of the correct standard and discretionary determination of fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Village Fuel met ERISA threshold for fee eligibility | Village Fuel: Hardt lowers the threshold to "some degree of success on the merits," which can include dismissal of claims and settlement-influenced outcomes | GHI: Village Fuel lacked any success on the merits; settlement dismissals without judicial imprimatur do not confer eligibility | Court: Village Fuel obtained some success by defeating GHI’s restitution claim; remanded to assess whether settlement-related dismissals were caused by court action and thus confer eligibility |
| Whether dismissal of GHI’s restitution claim was merely procedural or on the merits | Village Fuel: Dismissal for seeking non-equitable money damages is a merits disposition supporting fees | GHI: Characterized the dismissal as procedural and noted mutual failures on restitution claims | Held: Dismissal for failure to state an ERISA-available claim is an adjudication on the merits; counts as some success under Hardt |
| Whether voluntary dismissal/settlement that excludes Village Fuel can establish fee eligibility (catalyst theory) | Village Fuel: Hardt and Ruckelshaus permit awards when court action spurs voluntary defendant conduct; judicial imprimatur not required | GHI: Dismissals lacked court order or consent decree; thus no judicial imprimatur and no fee eligibility | Held: Judicial imprimatur is not required under ERISA/Hardt; factual question whether court’s summary-judgment treatment spurred GHI’s dismissals — remanded to determine causation |
| Whether district court should apply Chambless factors now or on remand | Village Fuel: Magistrate already applied Chambless; no remand needed | GHI: Chambless factors matter and must be weighed by district court | Held: Remand for district court to evaluate Chambless factors and set any reasonable fee in the first instance |
Key Cases Cited
- Hardt v. Reliance Standard Life Ins. Co., 130 S. Ct. 2149 (Sup. Ct.) (ERISA fee eligibility requires "some degree of success on the merits")
- Buckhannon Bd. & Care Home, Inc. v. West Virginia Dep’t of Health & Human Res., 532 U.S. 598 (Sup. Ct.) (prevailing-party statutes require judicial imprimatur for fee awards)
- Ruckelshaus v. Sierra Club, 463 U.S. 680 (Sup. Ct.) (some success on the merits can permit fee awards even without formal relief)
- Chambless v. Masters, Mates & Pilots Pension Plan, 815 F.2d 869 (2d Cir.) (five non-exhaustive factors to guide ERISA fee awards)
- Hensley v. Eckerhart, 461 U.S. 424 (Sup. Ct.) (fee awards may be reduced for partial success but not by purely mathematical claim-counting)