Board of Trustees of the Automobile Mechanics' Local No. 701 Union and Industry Welfare Fund v. Brown
Filing
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MEMORANDUM Opinion and Order. Signed by the Honorable John W. Darrah on 4/23/2015. Mailed notice (sxw)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
BOARD OF TRUSTEES OF THE
AUTOMOBILE MECHANICS’ LOCAL
NO. 701 UNION AND INDUSTRY
WELFARE FUND,
Plaintiff,
v.
ROBERT LEE BROWN and
CASSANDRA SORENSEN,
Defendants.
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Case No. 12-cv-10268
Judge John W. Darrah
MEMORANDUM OPINION AND ORDER
On October 8, 2014, this Court entered a Stipulated Judgment Order, whereby the parties
agreed to an entry of Judgment in favor of Plaintiff and against Defendant Robert Lee Brown in
the amount of $28, 881.44. Plaintiff has filed a Motion for Attorney’s Fees, pursuant to
Section 502(g)(1) of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C.
§ 1132(g)(1). Brown has filed a Cross-Motion for Attorney’s Fees, which seeks only to offset
any fees awarded to Plaintiff and does not independently seek fees if none are awarded to
Plaintiff.
BACKGROUND
In September 2004, Brown suffered a work-related injury. (Compl. ¶ 7.) His welfare
benefit plan, the Automobile Mechanics’ Local No. 701 Union and Industry Welfare Fund (“the
Plan”), expended $28,881.44 in medical expenses and $6,847.11 in disability benefits, for a total
of $35,728.55, on his behalf. (Id. ¶¶ 7-8.) Brown subsequently initiated a worker’s
compensation claim based on his injuries and received a settlement payment. In December 2012,
Plaintiff, acting on behalf of the Plan, filed this action for reimbursement of the benefits paid to
Brown. Plaintiff alleged that, pursuant to the subrogation and reimbursement provision of the
Plan’s contract, Brown was required to reimburse the Plan in the event that Brown recovered
money for his injuries from another source. (Id. ¶¶ 10-12.)
On April 16, 2013, the Court granted Brown’s motion for leave to proceed in forma
pauperis and appointed counsel to represent Brown. On October 30, 2013, upon Brown’s
motion, the Court dismissed the unjust enrichment and affirmative injunction claims from the
Complaint. Following exchange of discovery, Brown made a Rule 68 Offer of Judgment to
Plaintiff, representing the $28,881.44 in medical benefits the Plan expended but not the disability
benefits, which Plaintiff accepted. 1 The parties, however, could not agree on the issue of
attorney’s fees to be awarded.
LEGAL STANDARD
Pursuant to 29 U.S.C. § 1132(g)(1) of ERISA, “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). Under
ERISA, “there is a ‘modest presumption’ in favor of awarding fees to the prevailing party, but
that presumption may be rebutted.” Senese v. Chicago Area I.B. of T. Pension Fund, 237 F.3d
819, 826 (7th Cir. 2001); see also Jackman Fin. Corp. v. Humana Ins. Co., 641 F.3d 860, 866
(7th Cir. 2011). In Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 255 (2010), the
Supreme Court held that ERISA’s provision is not limited only to the prevailing party; rather, the
court may award fees to any party that has achieved “some degree of success on the merits.” Id.
1
Defendant Cassandra Sorensen was dismissed, pursuant to the parties’ stipulation, on
November 18, 2014.
2
Once a party has demonstrated “some degree of success on the merits,” courts then “must
determine whether fees are appropriate.” Pakovich v. Verizon Ltd. Plan, 653 F.3d 488, 494 (7th
Cir. 2011) (citing Huss v. IBM Med. & Dental Plan, 418 F. App’x 498, 511-12 (7th Cir. 2011)).
The Seventh Circuit has articulated two tests for analyzing the propriety of a fee request.
Quinn v. Blue Cross and Blue Shield Ass’n, 161 F.3d 472, 478 (7th Cir. 1998). Under the first
test, the following five factors are considered:
(1) the degree of the offending parties’ culpability or bad faith; (2) the degree of
the ability of the offending parties to satisfy personally an award of attorneys'
fees; (3) whether or not an award of attorneys’ fees would deter other persons
acting under similar circumstances; (4) the amount of benefit conferred on
members of the pension plan as a whole; and (5) the relative merits of the parties'
positions.
Kolbe & Kolbe Health & Welfare Benefit Plan v. Med. Coll. of Wisconsin, Inc., 657 F.3d 496,
505-06 (7th Cir. 2011) (quoting Quinn, 161 F.3d at 478).
Under the second test, the court looks to whether “the losing party’s position was
‘substantially justified.’” Kolbe & Kolbe, 657 F.3d at 506 (quoting Quinn, 161 F.3d at 478).
This test looks at “a party’s posture during the case as a whole” and the “entire litigation
background.” Temme v. Bemis Co., 762 F.3d 544, 551 (7th Cir. 2014). However, both tests
essentially ask the same question: “was the losing party’s position substantially justified and
taken in good faith, or was that party simply out to harass its opponent?” Bowerman v.
Wal-Mart Stores, Inc., 226 F.3d 574, 593 (7th Cir. 2000) (citation omitted); see also
Kolbe & Kolbe, 657 F.3d at 505-06 (describing both tests and observing that they seek the same
information); see also Pakovich, 653 F.3d at 494 (“To award fees, ‘court[s] must find the nonprevailing party’s litigation position was not substantially justified.’”) (quoting Huss, 418 F.
App’x at 512). For this reason, the five-factor test is used to “structure or implement, rather than
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to contradict” the substantially justified test. Lowe v. McGraw-Hill Co., 361 F.3d 335, 339 (7th
Cir. 2004). 2
ANALYSIS
Brown concedes that Plaintiff has achieved success on the merits because the parties
agreed to the Stipulated Judgment Order. Brown argues, however, that an award of attorney’s
fees is not appropriate under either test outlined above. In his Cross-Motion, Brown contends
that if fees are awarded, they should be offset by his attorney’s fees because he also achieved
some success on the merits. The Court will utilize the five-factor test in determining whether
Plaintiff is entitled to an award of fees.
Culpability and Bad Faith
Plaintiff contends that Brown acted in bad faith because he knowingly failed to reimburse
the Plan for his medical expenses, had no legitimate defense to his contractual obligations to
reimburse the Plan, and absconded with the money by moving to Montana. Plaintiff faults
2
The Seventh Circuit has thus far declined to directly address whether Hardt invalidated
these two tests, except to state that a showing of bad faith is no longer essential to a fees award.
See Raybourne v. Cigna Life Ins. Co. of New York, 700 F.3d 1076, 1089 (7th Cir. 2012). In
Temme, the court acknowledged the ambiguity caused by Hardt but also noted that both tests
have been used since Hardt:
Two approaches have developed . . . to incorporate Hardt’s “some degree of
success” principle into the jurisprudential landscape. One holds that Hardt defines
a threshold for eligibility for a fee award, but that the district court still must
consider the five factors to determine whether an award is appropriate. The
second approach holds that assessing whether a party achieved some degree of
success on the merits of its claim is the only factor a district court must account
for, though a district court may still consider the other factors, as before. But,
even under the second approach, if a district court proceeds to analyze the five
factors, a court of appeals reviews that analysis for abuse of discretion, just as it
would before Hardt. We have affirmed the use of both tests post-Hardt.
Temme, 762 F.3d at 550 (internal citations omitted).
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Brown for filing a Motion to Dismiss and by seeking, unsuccessfully, to transfer the matter to the
District of Montana, where he lives.
Brown responds that he reasonably believed that the obligation to Plaintiff had already
been satisfied through a lien and that Plaintiff had delayed producing documentary evidence
showing its lien was not satisfied. Brown also states that his failure to immediately reimburse
Plaintiff was a product of financial hardships, which had necessitated his move to Montana,
where his cost of living is significantly reduced. To that point, Brown was proceeding pro se
when the lawsuit was originally filed and initially lacked the assistance of counsel until counsel
was appointed for him. Brown further points out that, once he received documents establishing
his obligation, he offered a judgment to Plaintiff.
Brown clearly was contractually obligated to reimburse Plaintiff for the money that he
recovered under his worker’s compensation claim. However, there is no evidence that Brown
acted in bad faith in not immediately paying Plaintiff and requesting, instead, documents to
support Plaintiff’s claim. As this Court found, Brown has limited financial resources. Although
Plaintiff attempts to paint Brown as moving to Montana solely to escape his obligations to the
Plan, it is more believable that Brown moved there for a lower cost of living. Furthermore,
Brown’s partial Motion to Dismiss was meritorious; the Court agreed with Brown and dismissed
two of Plaintiff’s counts. With respect to Brown’s Motion to Transfer, this Court found that a
transfer was not warranted based on all the relevant factors. However, Brown’s filing of the
Motion does not appear to be in bad faith, as he is a resident of the District of Montana and has a
basis for requesting the transfer. In sum, although Brown is culpable in the sense that he was
clearly obligated to reimburse the Plan according to documents he executed, there is no evidence
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that he acted in bad faith in refusing to do so initially. Consequently, this factor weighs only
slightly in favor of awarding attorney’s fees.
Personal Ability to Satisfy an Award of Attorney’s Fees
As indicated by his in forma pauperis application, Brown lives on a limited, fixed income
of $1,600 per month in Social Security Disability benefits. (Dkt. No. 22.) Based on this
information, the Court appointed counsel to represent Brown. Plaintiff argues that Brown owns
land that could be used to pay an award of fees. However, when Brown offered to transfer title
of this land to Plaintiff, Plaintiff refused because of the difficulty in converting land to cash.
Clearly, Brown lacks financial resources to satisfy a large award of attorney’s fees.
Imposing fees would create a crippling financial hardship on him. This factor weighs against
attorney’s fees.
Deterrent Effect
An award of fees would have some deterrent effect in that it would encourage individual
participants to reimburse the Plan as required by their contracts, instead of requiring Plaintiff to
initiate a lawsuit. However, as discussed above, Brown’s position in the litigation as a whole
was not taken in bad faith. Therefore, this factor weighs only slightly in favor of awarding
attorney’s fees.
Amount of Benefit Conferred on Plan’s Participants
The Plan is a self-funded welfare benefits plan. Therefore, any money recovered will go
to benefit the participants of the Plan. This factor weighs in favor of an award of attorney’s fees.
Relative Merits of Parties’ Positions
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“In determining whether the losing party’s position was ‘substantially justified,’ the
Supreme Court has stated that a party’s position is ‘justified to a degree that could satisfy a
reasonable person.’” Trustmark Life Ins. Co. v. University of Chicago Hospitals, 207 F.3d 876,
884 (7th Cir. 2000) (quoting Pierce v. Underwood, 487 U.S. 552, 565 (1988)). Although Brown
was not the prevailing party, he achieved more than a procedural victory in the litigation. As
noted above, he successfully dismissed two of Plaintiff’s counts. Brown also asserted
affirmative defenses of unclean hands and laches that were reasonably based. His unclean hands
defense arose from Plaintiff’s original demand for $6,847.11 in disability benefits. This was a
reasonable defense because the subrogation clause required reimbursement for medical benefits
and is silent as to disability benefits. Brown’s laches was based on the reasonable belief that
Plaintiff failed to properly secure its lien against Brown’s worker’s compensation settlement.
Looking at Brown’s stance as a whole throughout the case, the Court finds that Brown’s
litigation position was substantially justified and taken in good faith, and not merely taken to
harass his opponent. See Bowerman, 226 F .3d at 593; Pakovich, 653 F.3d at 494 (“To award
fees, ‘court[s] must find the non-prevailing party’s litigation position was not substantially
justified.) Guided by this finding and the five-factor test, the Court holds that attorney’s fees are
not justified.
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CONCLUSION
For the reasons set forth above, the Court denies Plaintiff’s Motion for Attorney’s Fees
[69]. The Court denies Brown’s Cross-Motion for Attorney’s Fees [74] as moot, on the basis
that Brown sought fees only if Plaintiff’s Motion was granted.
Date:
April 23, 2015
______________________________
JOHN W. DARRAH
United States District Court Judge
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