Juan RODRIGUEZ, Maria A. Rodriguez, Plaintiffs-Appellants, v. MEBA PENSION TRUST, Lucille Hart, Administrator, Defendants-Appellees.
Nos. 91-2336, 91-2358
United States Court of Appeals, Fourth Circuit
Feb. 10, 1992
956 F.2d 468
Within the inflexible confines of the Sentencing Guidelines system, the preponderance of the evidence standard here creates an undue risk of an erroneous deprivation of a criminal defendant‘s liberty. As I mentioned previously, we characterized the twelve-fold upward departure in Kikumura as “a tail which wags the dog of the substantive offense,” opining that “[i]n this extreme context, we believe, a court cannot reflexively apply the truncated procedures that are perfectly adequate for all of the more mundane, familiar sentencing determinations.” 918 F.2d at 1101. I would adopt the same reasoning in cases where the government chooses to pursue an equivalent sentence by operation of the Guidelines, rather than seeking a formal conviction for the same conduct.
III.
Because I believe that Mobley‘s due process rights are violated by the sentence here I respectfully dissent.
Juan RODRIGUEZ, Maria A. Rodriguez, Plaintiffs-Appellants, v. MEBA PENSION TRUST, Lucille Hart, Administrator, Defendants-Appellees. (Two Cases)
Nos. 91-2336, 91-2358.
United States Court of Appeals, Fourth Circuit.
Argued Oct. 1, 1991.
Decided Feb. 10, 1992.
Laura H. Hamilton, Dickstein, Shapiro & Morin, Washington, D.C., argued (Angelo V. Arcadipane, Joseph E. Kolick, Jr., Laura A. Vikander, Marcus C. Migliore, on brief), for defendants-appellees.
Before ERVIN, Chief Judge, and PHILLIPS and WILKINSON, Circuit Judges.
OPINION
PHILLIPS, Circuit Judge:
Juan Rodriguez appeals the district court‘s denial of his application for attorney‘s fees pursuant to
I
Rodriguez retired from his employment as a marine engineer in 1965, whereupon he received a monthly pension of $300 stemming from negotiations between MEBA and his former employer. In 1967, he began working as a port engineer for Sea-Land Services, Inc. At first, his position was non-unionized, but, in June of 1968, Sea-Land entered into a collective bargaining agreement with MEBA which covered Rodriguez‘s position. Rodriguez wrote a letter to I.A. Lamy, Vice President of MEBA and Trustee of MEBA trust, notifying Lamy that Rodriguez was drawing a pension as a retired marine engineer and asking Lamy how this affected his “present status in the organization.” Lamy told Rodriguez that he must apply for reinstatement to union membership but that “membership will not interfere with your pension.”
Approximately six weeks later, on October 16, 1968, the MEBA Pension Trust Regulations were amended to afford persons in Rodriguez‘s position “the option of suspending their pension checks and accruing further benefits or continuing to receive pension checks but foregoing further accruals.” This option was deemed so important that MEBA Vice Presidents personally delivered copies of the option to each port engineer affected, explained it to them, and received their written decisions. However, no copy of the option was delivered to Rodriguez, and Lamy never wrote
Rodriguez did not question his right to exercise the option at any time during the next twelve years. However, MEBA‘s records indicate that the trust knew or should have known Rodriguez had not filed a written determination on the option, and trust administrators made no attempt to contact him. In 1975 and 1976, the trust reached agreement with three port engineers in Rodriguez‘s position. Trust administrators allowed these three to exercise their options contingent upon the return of all pension benefits they had received. Two of the three, like Rodriguez, had never received notice of the option. The other had decided against exercising his option previously, but he was permitted to change his mind.
On January 25, 1985, upon contemplating retirement, Rodriguez wrote the trust administrator to request information about receiving a lump sum payment of his benefits. He was told such a payment was unavailable because of his failure to suspend pension payments under the 1968 option. Rodriguez asked for a formal review of the denial of benefits. MEBA reviewed Rodriguez‘s case three times and denied benefits on each occasion. In 1989, we ruled in Rodriguez I that the MEBA trust had breached its fiduciary duty by failing, in 1968 and 1973, to notify Rodriguez of his option to suspend benefits. The parties ultimately settled for a pension benefit of $225,194.89, but they could not agree on attorneys’ fees.
Rodriguez applied for a fee award of $627,647.98 for legal services rendered through May 14, 1990. In a brief Memorandum and Order, the district court applied the five-factor ERISA attorney‘s fees test that had been adopted by this court in Tenneco, Inc. v. First Virginia Bank of Tidewater, No. 82–1158, 4 E.B.C. 1344 (4th Cir. Apr. 5, 1983) (per curiam) (unpublished),1 and ruled that Rodriguez was not entitled to receive attorneys’ fees. This appeal followed.
II
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.
(1) The degree of the opposing party‘s culpability or bad faith;
(2) The ability of the opposing party to satisfy an award of attorney‘s fees;
(3) Whether an award of attorney‘s fees against the opposing party would deter other persons acting under similar circumstances;
(4) Whether the party requesting attorney‘s fees sought to benefit all participants and beneficiaries of an ERISA Plan or sought to resolve a significant legal question regarding ERISA; and
(5) The relative merits of the parties’ positions.
Tenneco, slip op. at 4, 4 E.B.C. at 1345. Applying this test to the instant case, the district court found that factors two and
Reinking, decided by this court since Tenneco, expressly adopted the five-factor test from Bowen, but with a twist not expressed in Tenneco, hence not taken into account by the district court in its application of the Tenneco test.
Specifically, the Reinking court, considering an application by an ERISA plan participant for attorneys fees, adopted the view now held by three other circuits2 that while the five-factor test should be used “as a guide, ... [the district court] must also bear in mind the remedial purposes of ERISA to protect employee rights and to secure effective access to federal courts.” Reinking, 910 F.2d at 1218. Looking to these remedial purposes, as found in ERISA‘s preamble,
Reinking thus effectively mandated a presumption favoring prevailing ERISA plaintiffs which the district court, presumably unaware of the recent case, failed to take into account. As applied in this case, it requires a re-assessment of the fee award application under the five-factor test that is more disposed toward an award of fees. In particular, it requires a re-evaluation of factors one (defendant‘s culpability), two (defendant‘s ability to pay), and three (likely deterrent effect of an award) in ways more favorable to the fee applicant than the district court thought proper.
We take these in order.4
Contrary to the dissent‘s ominous characterizations, we do not—by drawing on Reinking—somehow convert
The district court ruled that neither party was favored by the first factor, MEBA‘s culpability or bad faith. In doing so, the lower court relied on language from Rodriguez I that MEBA‘s error was merely a “mistake,” and indicated that it thought bad faith was necessary to tip the scale in claimant‘s favor on this factor.
Assessed more carefully and with Reinking‘s general presumption favoring prevailing claimant in mind, we believe that this fact should be considered to favor Rodriguez rather than being a neutral factor. It is true that in Rodriguez I we characterized the initial failure to notify as merely a mistake; but we characterized the continuing treatment of Rodriguez‘s inquiries over the next twelve years as a breach of fiduciary duty. See Rodriguez I, 872 F.2d at 74. Such a breach of duty, even if it does not amount to bad faith, surely constitutes “culpability” within contemplation of the five-factor test. Cf. Werner v. Upjohn Co., 628 F.2d 848, 856-57 (4th Cir.1980) (“culpable conduct” defined as something “more than negligence“; as “blamable” or “wrong” conduct, but not necessarily conduct involving “malice or guilty purpose“).
Assessed in light of Reinking‘s general presumption, we believe MEBA‘s overall conduct in dealing with Rodriguez‘s inquiries and claims must be assessed as sufficiently “culpable” to tip factor one in Rodriguez‘s favor.
B
Although the district court thought that factor two (opposing party‘s ability to pay) favored Rodriguez, recognizing that MEBA was able to satisfy a fee award, we believe the court underrated its force as properly assessed under Reinking. For, as noted in the Ninth Circuit decision upon which Reinking principally relied, “Based on this factor alone, absent special circumstances, a prevailing ERISA employee plaintiff should ordinarily receive attorneys’ fees from the defendant.” Smith v. CMTA-IAM Pension Trust, 746 F.2d 587, 590 (9th Cir.1984); see also Reinking, 910 F.2d at 1218 (noting that denying fees to a beneficiary who prevails against a large plan would “significantly undermine the ability of potential beneficiaries to protect their rights in federal court“).
The district court obviously gave this factor no such near-dispositive force in its assessment. Under Reinking, it should be given that force in the absence of special circumstances, a matter to which we will turn at the end of our re-evaluation of the Tenneco factors.
C
The district court considered that factor three (the deterrent effect of an award) did not favor the claimant here. In the first place, the court again relied on its perception that MEBA‘s conduct only represented an unavoidable “mistake” not amenable to deterrence. Based on this, the court opined that this court‘s finding of liability in Rodriguez I, in conjunction with the notice provisions of ERISA should prove to be sufficient deterrence.
We earlier have noted the error in the court‘s belief that our decision in Rodriguez I had established as the law of the case that MEBA‘s conduct overall reflected nothing more than mistake. With this premise undercut, the court‘s conclusion that mere mistakes of this sort are not amenable to deterrence obviously falls. Where, as here, the degree of culpability was such as to constitute a breach of fiduciary duty, as was concluded in Rodriguez I, it is obvious that monetary sanctions may well operate to deter repetitions of the conduct. See Reinking, 910 F.2d at 1218.
D
Properly assessed in light of Reinking‘s general presumption in favor of prevailing plaintiffs in these cases, only factor four of the Tenneco test (whether the claimant‘s action was brought primarily for his own benefit) favors MEBA. With the overall balance of factors so heavily struck in Rodriguez‘s favor, there remains only the question, recognized as integral to the test in both Tenneco and Reinking, whether “special circumstances” may nevertheless make an otherwise indicated award of fees unjust. No such special circumstances are suggested here, and we conclude that, accordingly, the district court erred in denying any award.
That leaves the question of the appropriate amount of the award, an issue of course not addressed by the district court, but one that should be determined by that court in the first instance.
III
For the above reasons, we vacate the judgment of the district court denying Rodriguez‘s application for attorney fees, and remand the cause to the district court with instructions to award attorney fees in an amount determined by that court to be proper under the totality of circumstances. In remanding, we express no opinion as to the proper amount, whether that requested by Rodriguez or some other.
VACATED AND REMANDED WITH INSTRUCTIONS.
WILKINSON, Circuit Judge, dissenting:
The ERISA fees provision at issue in this case explicitly leaves the decision whether to award attorneys’ fees to the discretion of the district court.
I am troubled also by the practical consequences that will flow from the majority‘s policy choice. Since, as the majority appears to acknowledge, the attorneys’ fees will be paid from pension plan assets, the real losers from the result here will be the plan‘s intended beneficiaries. Indeed, the very prospect of automatic fee shifting in favor of prevailing plaintiffs (but not prevailing defendants) is likely to create many more lawsuits under ERISA and cause many more trust assets to be consumed in litigation costs.1
I.
The majority works a fundamental transformation of the statutory grant of discretion. The statutory language is clear: “In any action under this subchapter ... the court in its discretion may allow a reasonable attorney‘s fee and costs of action to either party.”
A.
Under the guise of “re-evaluating” the factors outlined in Tenneco, Inc. v. First Virginia Bank of Tidewater, No. 82-1158, 4 E.B.C. 1344 (4th Cir. Apr. 5, 1983) (per curiam), the majority transforms a case-by-case factual inquiry into an absolute appellate rule. In Tenneco this court outlined five factors for district courts to consider in exercising their discretion to award fees under ERISA. Under the majority‘s analysis, three of the five Tenneco factors now automatically direct fee shifting in favor of prevailing plaintiffs: the defendant‘s culpability or bad faith; whether a fee award would deter others acting under similar circumstances; and the relative merits of the parties’ positions. First, under the majority‘s analysis, every prevailing plaintiff will automatically establish “culpability” on the part of the defendant. A plaintiff can prevail on an ERISA claim only if a defendant breached some legal duty, so that every successful ERISA action necessarily involves the same sort of “culpable conduct” that the majority finds here. Second, the majority ties the hands of the district courts on the factor of whether a fee award will deter future violations. Based on the economic truism that “monetary sanctions may well operate to deter repetitions of the conduct,” the majority concludes that the district court abused its discretion in finding that this factor favors the fund. Once again, the majority‘s analysis would favor fee shifting to all prevailing plaintiffs, because monetary sanctions will always have at least a marginal deterrent effect on the sanctioned behavior by increasing its expected cost. Third, the “relative merits” inquiry would also appear to favor automatic fee shifting to prevailing plaintiffs: the merits of the prevailing plaintiff‘s position are by definition superior to the merits of the losing defendant‘s position.
It understates the matter, therefore, when the majority acknowledges that it has “mandated a presumption favoring prevailing ERISA plaintiffs.” With three of the five factors automatically favoring a fee award to a prevailing plaintiff, the majority‘s analysis would seem to render unnecessary any consideration of the specific facts and circumstances that counsel against fee shifting. As interpreted by the majority, the Tenneco factors no longer guide the district court in exercising its discretion under the statute; they predetermine its decision.
B.
The majority finds another means of mandating fee awards in the “ability to pay” factor. It simply announces that an ERISA defendant‘s ability to pay is the decisive factor, requiring a fee award in the absence of “special circumstances.” Little attempt is made to justify the newfound supremacy of this factor or to reconcile this approach with the five-factored inquiry that heretofore had guided the exercise of district court discretion in this and other circuits. The majority fails even to acknowledge the cases holding expressly that none of the five factors is dispositive in the decision whether to award a fee. See Dixon v. Seafarers’ Welfare Plan, 878 F.2d 1411, 1412 (11th Cir.1989); Gray v. New England Tel. & Tel. Co., 792 F.2d 251, 258 (1st Cir.1986);
Instead, the majority proceeds to inquire whether there are any “special circumstances” that might justify a denial of fees in this case. Not surprisingly, it finds none. The relationship the majority‘s “special circumstances” test bears to any language in
II.
In holding that prevailing plaintiffs are entitled to fees absent “special circumstances,” the majority opinion imports into ERISA the
The Civil Rights Attorney‘s Fees Awards Act permits fee shifting for a “prevailing party, other than the United States.”
Two justifications have been offered for the virtually mandatory standard under
Neither of these arguments applies to the ERISA provision at issue here. Nothing in the text or legislative history of ERISA provides any indication that Congress intended to graft the prevailing party presumption onto the statutory framework of ERISA. See Bittner, 728 F.2d at 829. To the contrary, the language and structure of the statute belie any such conclusion. The ERISA statute provides for mandatory fee-shifting only for those plaintiffs who prevail in actions brought to enforce
Nor does the “private attorney general” rationale support the majority‘s decision. Unlike the civil rights statutes, ERISA does not depend primarily on fee shifting to private plaintiffs to ensure its enforcement. First, fiduciaries have a statutory duty to bring ERISA enforcement actions under certain circumstances. Iron Workers, 624 F.2d at 1265-66 (citing
Some courts have pointed to the special nature of our civil rights laws as a justification for mandatory fee shifting, and have expressly declined to extend that special status to other statutes such as ERISA. See id. (“policies underlying ERISA are certainly important ones, but they simply do not rise to the level of assuring that all citizens are accorded their civil rights“); Bittner, 728 F.2d at 829 (“nor do pension plan participants and beneficiaries constitute a vulnerable group whose members need special encouragement to exercise their legal rights, like a racial minority“). Apparently, the majority takes issue with these expressions, opining that a presumptive award of fees to prevailing plaintiffs is essential to the protection of “employee‘s rights” and the securing of “effective access to federal courts.” I do not believe, however, that the weighing of statutory purposes and judicial assessments of the relative importance of this or that Act can be the dispositive point. The majority‘s view of the importance of the “remedial purposes of ERISA” is simply an insufficient justification for its usurpation of the prerogatives of Congress:
[T]he rule suggested here and adopted by the Court of Appeals would make major inroads on a policy matter that Congress has reserved for itself.... [The] courts are not free to fashion drastic new rules with respect to the allowance of attorneys’ fees to the prevailing party in federal litigation ... depending on the courts’ assessment of the impor-
tance of the public policies involved in particular cases.
Alyeska Pipeline Service Co. v. Wilderness Soc., 421 U.S. 240, 269, 95 S.Ct. 1612, 1627, 44 L.Ed.2d 141 (1975). Here a statute that Congress “intended to trod a middle ground in the award of attorney‘s fees,” Gray, 792 F.2d at 259, has been transformed by this court into an almost absolute rule directing one-way fee shifting.
III.
For these reasons, I would join the circuits that have refused to import a mandatory fee shifting presumption into ERISA. Although the majority fails to cite any contrary authority,3 its decision conflicts with the approach of many other circuits. See Gordon v. United States Steel Corp., 724 F.2d 106, 108 (10th Cir.1983); Ursic v. Bethlehem Mines, 719 F.2d 670, 673 (3rd Cir.1983); Janowski v. International Bhd. of Teamsters, 673 F.2d 931, 941 (7th Cir.1982), vacated on other grounds, 463 U.S. 1222, 103 S.Ct. 3565, 77 L.Ed.2d 1406 (1983); Iron Workers, 624 F.2d at 1265. But see Smith v. CMTA-IAM Pension Trust, 746 F.2d 587, 590 (9th Cir.1984); Landro v. Glendenning Motorways, Inc., 625 F.2d 1344, 1356 (8th Cir.1980). The Fifth Circuit has held that any analogy between the ERISA fees provision and the civil rights fees provisions is “unsound.” Iron Workers, 624 F.2d at 1265. The Seventh Circuit agrees, expressly rejecting the “virtually mandatory”
IV.
Finally, I think it important to explain just why the district court acted within its statutory grant of discretion in denying plaintiffs’ fee application. That decision may not have been the only result the district court could have reached, but it was without question a defensible exercise of discretion—which the statute requires that we affirm. The five factors outlined in Tenneco do not constitute a “rigid test,” but are meant only as “general guidelines for the district court judge‘s exercise of discretion.” Gray, 792 F.2d at 258. Fairly applied, the Tenneco factors preserve the discretionary standard in the statutory text. After reviewing the district court‘s findings and examining the record, I think that there is substantial support for the district court‘s decision under the general guidelines of Tenneco.
At least three of the Tenneco factors fairly favor a denial of fees. First, the district court noted that although this court in Rodriguez I held that MEBA breached its fiduciary duty to Rodriguez, that holding “did not involve a finding of bad faith or culpable conduct.” Under Tenneco, the district court is to consider the “degree of the opposing party‘s culpability or bad faith.” The record in this case indicates that although MEBA breached its duty to notify Rodriguez of options under the pension plan, the degree of culpability or bad faith was low. The district court in Rodriguez I had even held that MEBA was justified in its decision to deny benefits to Rodriguez, suggesting that the wrongfulness of MEBA‘s conduct was an issue on which reasonable minds can differ. This court reversed the district judge on the denial of benefits, but it did not suggest that the trust had acted in bad faith; instead, we characterized MEBA‘s actions as “mis-
Second, the district court found that an award of attorneys’ fees was not necessary as a deterrent given the notice provisions of ERISA and this court‘s opinion in Rodriguez I. Under ERISA, a district court may hold plan administrators personally liable for failing to comply with statutory notice provisions.
Third, the district court found, and the majority apparently agrees, that the plaintiffs’ purpose in bringing this lawsuit was not to benefit other participants or to resolve a significant legal question. Rather, the district court held that plaintiffs “had their own economic interests at heart when they brought this action“—that they brought the lawsuit to recover pension benefits due as a result of MEBA‘s failure to provide notice of Rodriguez‘s options under the pension plan. Plaintiffs have made no showing that there are any similarly situated plan participants who will benefit from the lawsuit. Although the case decided an important jurisdictional question, that issue was raised by the defendants. The district court thus concluded that “[t]here are few, if any, real benefactors of this litigation other than this plaintiff.” Economic self-interest legitimately fuels vast amounts of litigation, and the district court was within its discretion in concluding that it would spur this kind of litigation without the added incentive of a fee award.
Finally, I note that although the district court found that two of the Tenneco factors favored a fee award, it found that there were countervailing circumstances in each instance. As to the merits of the parties’ positions, the district court found that there was room for “honest disagreement as to the issues and the balance does not overwhelmingly favor plaintiff.” With regard to the defendant‘s ability to pay, the district court apparently thought that a fee award from funds held in trust would only draw upon plan assets available to other plan participants.
In light of the above, I cannot concur in overturning the district court‘s decision as an abuse of discretion. The majority has asked, in effect, whether it agrees with the trial court, not whether the trial judge might reasonably have made the discretionary judgment that it did. Standards of review exist to rein in such appellate tendencies. “An appellate court ... cannot quarrel with varying results among independently-minded trial judges that merely reflect differences in their individual judgments.” Ballard v. Schweiker, 724 F.2d 1094, 1098 (4th Cir.1984). We may reverse the district court‘s decision only if we have the “definite conviction that the court made a clear error of judgment in its conclusion upon weighing the relevant factors.” Hummell, 634 F.2d at 452. The district court properly considered each of the concerns outlined in Tenneco and made findings that are logically sound and supported by the record. The court then exercised the discretion conferred on it by statute, weighing and balancing the relevant